Economic growth and labour rights: the case of the Employment Rights Act 2025

Ewan McGaughey

LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library

Abstract: How do labour rights affect economic growth, and what may we predict from the Employment Rights Act 2025? The UK government says its first mission is ‘growth’, and improving workers’ rights is part of this. However, the government chose to define its ‘growth’ mission solely in terms of Gross Domestic Product (GDP). GDP often conflicts directly with growth in real wages, valuable production, equality, or improving the environment, because it accurately measures market prices alone. It ignores market failures. It ignores inequality. It discounts public services, voluntary work, and leisure. Yet to grow GDP, Labour’s leadership dropped its original pledges to create ‘a national goal for well-being’ and a New Deal for Working People. This article evaluates the Act’s new rules on zero hours contracts, day one rights, equality action plans, fire and rehire, collective bargaining, collective action, and the Fair Work Agency, using comparative data. It shows the UK will still have among the worst labour rights in the OECD on virtually every front, and its position barely moves even if all rules are implemented. This reveals the folly of defining a ‘growth’ mission around contradictory GDP metrics. Real economic growth is growth in household wealth, not growth in corporate profit by redistributing wealth away from workers, rent-seeking, or externalising damage. The UK’s experience shows that labour rights are unsafe while GDP is in use. The solutions are to define growth, in law, to focus on real household wealth within an Inequality-adjusted Human Development Index, and to pass a new Employment Rights Act to match international standards. This must include a single worker status, fair pay agreements across all sectors, worker directors on company boards and in control of pension money, and statutory duties for full employment for the Treasury and Bank of England. The text of draft legislation is proposed.

JEL-codes: J01 N0 R14 (search for similar items in EconPapers)
Pages: 43 pages
Date: 2026-07-16
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Published in Industrial Law Journal, 16, July, 2026. ISSN: 0305-9332

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