Zero hours contracts – nasty, brutish and unfair?
Authors: Ian Brinkley
13 June 2013
Yesterday's (12 June) labour market statistics show employment holding up, consistent with some signs of economic recovery. But beneath the surface of the aggregate employment numbers there is also a lot of interest in what sort of jobs we are creating.
Zero hours contracts have become the most high profile example of what some see as ushering in a new era of even greater job insecurity for some. Ed Miliband in his recent speech on welfare reform said, “For too many people in Britain the workplace is nasty, brutish and unfair” and then listed a number of factors, with top of the list “The exploitation of zero hours contracts to keep people insecure.”
Others see it as a logical extension of the UK’s labour market great strengths, the flexibility and diversity of employment. It is this flexibility, some argue, that has allowed the UK to create so many jobs despite the weakest economic recovery on record.
Fear in the workplace of losing a job or being exploited are indeed at unusually high levels, as my recent blog on the findings from the 2012 Skills and Employment Survey showed. Zero hours contracts are very likely to be one driver of that anxiety. But the share of employees who report being fearful of being treated unfairly is so much bigger – around one in four - than the share on zero hours contracts (less than 1%), that it can only be one of many factors. Nor is it safe to assume that everyone on a zero hours contract is fearful.
My guess at the moment is that when considered against some of the bigger changes in the labour market, zero hours may be more significant in replacing existing forms of flexibility rather than leading a dramatic shift towards insecure working. But we always have to be careful about assuming associations between zero hours contracts and wider measures of flexible working. For example, people on zero hours contracts may not report their job as temporary. Moreover, there are significant caveats with the Labour Force Survey statistics identified in my earlier blog .
However, we can say there is no obvious strong link between zero hours and an upsurge in temporary work. The share of employees who said they were in temporary employment has barely changed since 2010 and is still well below its previous peak in 1997. Nor is there much evidence that people are taking zero hours in order to supplement their main job – the share of people in second jobs has been falling.
If my hunch is right that zero hours are mainly substituting for other flexible employment forms, it is proving hard to pin down the exact nature of that change. The obvious candidate would be agency workers, as employers switched from agency to zero hours contracts to avoid the impact of the Agency Workers Directive. However, there is no statistical evidence that this has so far happened. Both have increased since 2010 and in 2013 levels of employment of agency workers were the highest since the statistics were first collected.
Though somewhat challenging, we think it is important to find out what is really going on around zero hours contracts and the reasons behind the trends. That’s why we are holding an event on 4th July see if we can start to come up with some better answers – and ask what if anything should we do about zero hours. Alongside myself on the panel will be Alison McGovern, MP for Wirral South; Kevin Green, chief executive of the Recruitment and Employment Confederation; Nicola Smith, head of economic and social affairs at the TUC and our chair will be Siobhan Kennedy, the business correspondent at Channel 4 News.
An outright ban would be a radical step and departure from previous practice by successive governments which has preferred to look to legislation and regulation to curb the worst excesses. If we wanted to go down the legal or regulatory route, we would need to identify which aspects of the contract it was desirable and realistic to change.
And as with all forms of employment contracts, practice and workplace relationships matter as much as legal status. Some people in permanent jobs can feel just as insecure and vulnerable to exploitation as those on zero hours contracts. And some people on zero hours may be content with the arrangement if it suits their own needs and there is a trust based relationship with the employer. Can we identify “best practices” and encourage all employers who use zero hours contracts to adopt them?
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