2015-06 Business and Labor Freedom

EuCham lists the European countries according to their Business and Labor Freedom, in order to identify the countries with the least restrictive environments to conduct a business.

Denmark tops the general ranking, achieving a score of 94.8 out of 100, and remains one of the European most efficient and transparent regulatory environments. Georgia (2nd) catches up the United Kingdom (3rd) and they are now rubbing shoulders. Flexible and modern employment regulations sustain their labor markets, as their competitive and efficient regulatory framework definitely facilitates entrepreneurial activities.

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EuCham Research June 2015 Business and Labor Freedom Index   1 Denmark 94.8 2 Georgia 84.3 3 United Kingdom 83.4 4 Ireland 79.2 5 Austria 77.4 …     47 Croatia 49.3 EuCham data based on “2015 Index of Economic Freedom” 47 European countries were considered

Denmark offers the least binding business environment, performing an overall score of 94.8 (out of 100). Georgia has experienced a decade of economic and social changes. Its economy has been boosted by policies, especially labor market reforms, which enable the employment system to be much more flexible. Despite improvements thanks to recent policies, Croatian labor market remains rigid. Source: eucham.eu/charts

Detailed Information

European governments have set many business regulations in place to protect employees’ rights and supervise the business environment. Administrative burden can yet be a drag on growth and a barrier to market entry. The efficiency of the regulatory framework is thus crucial in business development.

EuCham lists the European countries according to their business and labor freedom, in order to identify the countries with the least restrictive environments to conduct a business. Denmark tops the general ranking, achieving a score of 94.8, and remains one of the most efficient and transparent regulatory environments. Georgia (2nd) catches up the United Kingdom (3rd) and they are now rubbing shoulders. Flexible and modern employment regulations sustain their labor markets. Their competitive and efficient regulatory framework definitely facilitates entrepreneurial activities.

Ukraine, Moldova and Croatia are the three last ranking countries. Despite a business start-up process which has been streamlined and reform measures on the labor market, the overall regulatory environment remains burdensome and inefficient. Eastern Europe countries have undergone a fast-change in their regulatory frameworks and embrace now a larger business and labor freedom. Individual’s rights to establish and run an enterprise, as well as companies’ rights to contract freely and dismiss workers without undue intervention of the state, have been significantly enhanced.
However, the ranking reveals performing results as 34 European countries out of 47 considered are ranked above the world average (62.7).

 

Methodology

All the data are derived from the Index of Economic Freedom of the Heritage Foundation and The Wall Street Journal. The index was measured according to 10 quantitative and qualitative factors. Factors are divided into four main categories: rule of law, limited government, regulatory efficiency, open markets.
Among these 10 factors, EuCham Research Department considered:

(1/10) Business Freedom: starting a business – opening a license and closing of business, each in  (time, cost, % of income per capita).

(1/10) Labor Freedom: ratio of minimum wage to the average value added per worker, hindrance to hiring additional workers, rigidity of hours, difficulty of firing redundant employees, legally mandated notice period, and mandatory severance pay.
All the data is extracted from the Index of Economic Freedom 2015.

Figure 1: Business and Labor Freedom Map

 

 Figure 2: Business and Labor Freedom Index

Table 1: Business and Labor Freedom Index

No data: Andorra, Azerbaijan, Kazakhstan, Liechtenstein, Monaco, San Marino

Source: The Index of Economic Freedom (2015)
EuCham Research Department – Compiled by Soazik Lijour 2015-05-26