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Employment Protection Legislation and the Growth of the Service Sector in the European Union

"In modern developed economies it is the service sector that generates jobs. In Anglo-Saxon economies, where employment protection legislation is low and unions comparatively weak, services account for three-quarters of income and four-fifths of jobs. Yet in France, Germany and Italy, where the reverse is true, the service sector accounts for much less of the economy in terms of income and jobs. This article shows that employment protection legislation - defended by trade unions still dominating manufacturing in continental Europe - results in higher unemployment rates and also negatively affects the growth of services." Copyright (c) Institute of Economic Affairs 2006.