Where next for zero hours contracts?
03 July 2013
Zero hours contracts have become something of thorny issue of late. For many they embody the worst aspects of the UK labour market, granting employers complete flexibility and leaving workers facing insecurity, falling wages, and worsening conditions. Moreover, in recent years they have been on the rise, expanding into new sectors and professions.
The trend has now attracted the interest of politicians. Vince Cable recently announced a review of zero hours contracts, Andy Burnham called for them to be banned , and now another Labour MP has tabled a Private Member’s Bill aimed at doing just that.
At this stage it is worth making a few observations, particularly as the picture is much more nuanced than much of the current debate would suggest.
Firstly, and surprisingly, it appears that many workers are content with working on a zero hours contract. According to the government’s Labour Force Survey, only 18% of workers on such contracts are looking for a different job, and only 26% would like longer hours.
Of course, these figures still represent substantial dissatisfaction: the numbers that want more hours or a new job are about 2.5 times greater than those not on zero hours contracts. Moreover, the questions used by the survey may not reveal the whole truth. Some people are very dissatisfied with their job but still choose not to seek another – perhaps because they feel they have no alternative.
Nevertheless, it seems that there is less dissatisfaction with these contracts than would be expected if they are as exploitative as has been suggested.
So what about the arguments in favour of such contracts?
One of the key arguments for zero hours contracts is that the flexibility of the UK’s labour market during the recession has benefited both workers (a zero hours contract job being better than nothing) and businesses (which use such contracts to respond quickly to demand and to avoid cash flow risks).
To begin with the second element - the case for avoiding cash flow risks - the 2011 Workplace Employment Relations Survey (WERS) actually shows that such contracts are much more common among larger businesses, which are less likely to suffer the cash flow problems that can threaten small businesses. The use of these contracts did rise among small firms between 2004 and 2011 (the two most recent WERS surveys) but rose much more sharply among large businesses. It therefore does not seem that the use of zero hours contracts is being driven by small businesses turning to such flexible contracts to stay afloat.
As regards the benefits to workers, similar arguments apply here as were used against Adrian Beecroft’s call for greater labour market flexibility, and in earlier times in favour of the National Minimum Wage. In short, there is very little evidence that reducing labour market regulation benefits anyone other than employers.
Yet it is likely that different workers have very differing experiences of these contracts. Zero hours contracts are used in a fairly wide variety of industries (most common in hotels and restaurants, health and education) and at both the lower and upper ends of the professional scale. Vulnerability for some may be freedom for others, most likely depending on how highly employers value the worker’s skills. Those wishing to ban these contracts should first seek to understand in what situations zero hours contracts confer benefits for both employer and worker, and in what situations they more closely resemble exploitation.
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At this stage therefore, Vince Cable’s review would seem to be the most sensible next step forward.