Increase business regulations to stimulate growth - Prof. Samel

Contrary to prevailing wisdom, regulation is an under-used mechanism for encouraging economic growth argues Associate Professor of International Business at Sa'd Business School, University of Oxford, Hiram Samel, calling upon industry regulators to take a more proactive role in using regulation to promote economic growth.

"Too often we think that liberal markets with their associated labour flexibility, are the best mechanism for supporting companies and encouraging growth," says Samel, "but the reality is that too much labour market flexibility can actually have a dampening effect on productivity and economic growth, because it instils long-term management practices that, intentionally or not, promote worker turnover, rather than learning."

Professor Samel urges policy makers to explore regulatory mechanisms to encourage companies to overhaul outdated management structures and practices to drive growth. "Clever regulation can be a powerful tool in encouraging industries to engage in specific practices which can have economically positive outcomes for the firm and the wider economy. Regulation can help shape the way in which companies are managed, for example, and can encourage greater development of the workforce, build skills and learn from which we all benefit."

"In the UK, zero hour contracts have been championed as a means of giving companies much needed labour flexibility but its advantages are often outweighed by the tendency to reinforce low productivity, especially during the past few years when GDP growth has been positive," says Samel.

"Instead of firms addressing low worker productivity through new practices or training, their inclination now is simply to hire and fire workers as needed, rather than address the underlying issues.

The new workers are no more productive than their predecessors, and worse still, switching workers reinforces management's belief that investment will not pay off and so the cycle repeats. Regulation and incentives designed to encourage firms to retain their workers and to develop them, would pay back to the bottom line."

Prof. Samel concedes that such regulation is not a quick or easy fix. "We need clever, nuanced regulation through a thorough knowledge of the particular industry and a clear sense of which levers can be pulled to bring about beneficial change to existing practices.

I see this as the outcome of a collaborative process between the industry and regulator, rather than something which a regulator would impose upon an industry. We need exceptional regulators who are capable of stepping outside the mindset of regulation and to operate as an agent of change to bring about economic growth. At its best, regulation can create a system which advances the industry it serves. Even small changes at the margins of these sectors and organisations can have large-scale, demonstrable and valuable impacts."