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Ian Brinkley
Economic Advisor
Ian Brinkley

Zero hours contracts consultation - a missed opportunity

Authors: Ian Brinkley Ian Brinkley, chief economist, The Work Foundation

09 January 2014

Just before Christmas, BIS launched the long awaited formal consultation on zero hours contracts. Progress is always welcome, but this is a minimalist response to calls for a more systematic and in depth inquiry advocated by The Work Foundation. It is not clear what new evidence will be unearthed through this process that is not already in the public domain.

What is needed is effective synthesis and insight and here the consultation document comes up short.  Rather confusingly, the analysis and commentary provided by BIS is split between the accompanying impact assessment document and the consultative document proper (the former tells us the fascinating but irrelevant detail that Christians are less likely to be on  zero hours contacts (ZHCs) than those with no religion). What is entirely missing is any analysis of how zero hours contracts fit into the bigger picture of labour market change.  This job will remain incomplete unless BIS undertakes  it as part of the follow up to the consultation process – or if a Select Committee of the House of Commons is prepared to take it on.

BIS is in a difficult position. It has severely limited and declining resources to undertake this sort of work, whether in-house or as an external commission. The Department might well feel it cannot devote significant resources to something which covers between one  to three per cent of the workforce, when there are equally pressing issues – such as low pay, labour market disadvantage,  and stagnant productivity - that affect many more people in work and will have much bigger impacts on aggregate employment, social welfare and economic growth.

The consultation document rather skates over the serious misgivings many  – including ourselves - have about the Labour Force Survey  estimates on the number of ZHCs. Returns from public sector organisations alone tell us there has been a significant under-estimate. Moreover, there is no recognition of how small the Labour Force Survey sample is – in any one quarter no more than 300 individuals. This means big margins of error and places severe constraints on how we can slice the data up and still retain statistical credibility.  The recent CIPD special survey covered nearly 500 people on ZHCs, so has some claim to being more reliable than analyses derived from the LFS.

New estimates from the ONS will not be published until March 2014, so very close to or even after the consultation has closed. The new ONS estimates will address design flaws in the original survey and may generate a bigger sample. But general sample surveys, no matter how well designed,  are not best equipped to allow the study of relatively small groups on the edge of the labour market. This has to be done through more targeted special surveys (as the CIPD has done). 

We will of course be responding to the consultation more fully.  The government’s proposals are reasonable  but limited and surprisingly tentative. The Government could have just said it is committed to improving information and introducing Codes of Practice and pushed the discussion more firmly on to means, content, and implementation – and set a clear timetable so business knows what to expect and when. It could have, as we have consistently argued, adopted a much more sector specific approach. And it could have looked to other levers than the often blunt approach of national guidelines such as public procurement practices, especially in social care.

Read more from  Ian Brinkley about zero hours contracts on the blog

View our infographic 'Key facts about zero hours contracts'


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