The report said: “Countries with stronger employment protection tend to see greater use of temporary workers.
“This suggests that if the UK is to significantly strengthen employment protection for regular workers, it might either have to accept greater use of temporary contracts, or consider limiting their use.
“The former scenario might end up looking much like today’s labour market in terms of overall hiring and security, but it would arguably be less desirable, as there is evidence that in ‘two-tier’ labour markets workers struggle to bridge the gap between insecure temporary jobs and secure permanent jobs, posing a threat to progression and social mobility.”
Currently only around one worker in every 20 in Britain is employed on a temporary contract.
By contrast in the Netherlands, more than one in four are in temporary positions.
“The Netherlands has very strong employment protection for regular workers but places few limitations on the use of temporary contracts and, unsurprisingly, they are widespread,” said the Resolution Foundation.
As a result the Government might have to follow one set of new regulations with another to try to restrict the use of temporary contracts as well, it added.
The study also found that countries with more restrictive workers’ rights have lower hiring rates, as companies take on fewer staff.
This harms individual workers’ prospects and the strength of the economy overall.
“A negative relationship between employment protection and hiring is to be expected – stronger employment protection raises the cost of dismissals, which raises the cost to a firm of making a bad hire, and so makes them a little more reluctant to take on new people – and has been confirmed in many studies,” the Resolution Foundation said.
“This is potentially a concern because lower rates of dismissal and hiring can slow down the ‘reallocation’ of workers from less to more productive parts of the economy.”
Britain has a relatively low rate of unemployment, at 4.2pc, as well as low levels of temporary work.
