Weak growth. Expensive housing and electricity. Failing public services. Unsustainable public finances. The UK’s biggest economic challenges are well known to us all. It’s therefore somewhat perplexing that one of Labour’s big economic reform priorities remains an area where the UK has excelled since 2010 — our resilient labour market.

Despite prevailing pessimism, the Conservatives’ tenure has had one area of obvious success: jobs. Employment among under-65s has risen from its peak of 73.2 per cent under New Labour to 74.5 per cent, while the over-65s have experienced a staggering 60 per cent jump in their employment rate. Worklessness has therefore declined, with economic inactivity falling and headline unemployment dropping from well above 5 per cent in 2007 to just above 4 per cent today.

The picture isn’t all rosy, of course. Wage growth has certainly been slow because of stagnant productivity since 2010. Some people hate their job’s insecurity or lack of flexibility. Yet, overall, the liberal labour market has been our safety valve. It has helped to get hundreds of thousands more people into work.

What’s clear is that Labour takes this success for granted. Its “new deal for working people” just assumes that “better” jobs with more economic security can be mandated from Westminster. It’s as if the party thinks that employer power is just an obstinate barrier to more worker security, flexibility, and higher pay, rather than remuneration and workplace amenities reflecting underlying market dynamics.

The party is therefore promising a significant increase in the minimum wage, the abolition of lower minimums for under-21s, immediate flexible working rights for new employees, a crackdown on zero-hours contracts and “bogus” self-employment, and new trade union laws to strengthen collective bargaining.

The problem is: these policies bring clear trade-offs. By scrapping lower wage floors for under-21s, firms are incentivised to substitute young employees for more seasoned workers, reducing entry-level positions and risking prolonged joblessness for people aged 16–21.

Headline minimum wage rises under the Conservatives since 2010 didn’t cause serious job losses, in part because flexible labour laws allowed firms to adapt to rising costs creatively. They could adjust schedules in sectors with unpredictable demand (hello, zero-hours contracts), plump for self-employed contractors, trim non-wage perks, or change their workforce composition. Smother these options, as Labour wants to, and you’ll see more job losses as wage floors rise.

That, really, is the problem. Labour’s agenda for more employment protection, new rights and forcing higher pay would make our labour market more European. In reality, that means higher structural joblessness and “risky” employee demographics getting locked out of jobs altogether.

Employment levels here surpass those in the more highly regulated EU across all age groups, except for people aged 55–59, according to the OECD. Yet the difference is especially large in demographics less attached to the labour market. Employment rates for people aged 15–24 and the over-65s are 50 per cent and 76 per cent higher here compared with the EU average, for example.

Again, many of those workers grapple with low pay. The promise of enhanced rights, more economic security, and higher pay from Labour will appeal to them. What’s naive is to assume that this can be mandated without consequence.

Cross-country studies find that when hiring and firing becomes more difficult, when employment protection is beefed up, and when laws grant trade unions greater power, the labour market bifurcates between employed “insiders” and unemployed “outsiders”. It’s the young and the unskilled that get left behind most often.

This is the significant yet overlooked risk of Labour’s employment agenda. Whether driven by trade union preferences or a sincere belief that flexible labour laws are inherently exploitative, the party’s policies risk higher unemployment. Despite Sir Keir Starmer’s stated ambition to increase the employment rate to 80 per cent, Labour’s New Deal threatens the one silver lining we’ve seen amid the economic storm clouds.