Workers can't pay the costs of zero-hour contracts

It's naive to pretend there are no benefits, but too often only the employers get them.

There are two opposing positions on zero-hours contracts. For some, these contracts represent the unacceptable face of a flexible labour market. By offering work only when the employers needs them, they are a new form of exploitation, taking advantage of workers in a difficult labour market. Yet for others, zero hours contracts are a necessary part of the economy, providing flexibility for workers to balance work with study, caring or their home life.

Labour are in the former category, with Andy Burnham suggesting they should be banned. Many recruiters are in the latter, arguing that without zero hours contracts, unemployment would be much higher. We are yet to see what Vince Cable – who today announced a review of these contracts – thinks, and there is still discussion about the extent to which they are a problem (The Work Foundation is holding an event on this topic in July).

But what is striking about the zero hours debate is how little we know about them. We do know that they are a small part of the labour market – but one which is growing and spreading. In 2007, around 130,000 people were employed on them. This has risen to 200,000 according to the latest figures. This figure is small (less than 1 per cent of the labour market) but probably an underestimate (many do not realise they are on zero-hours contracts). We also know that zero hours contracts are more prevalent in sectors like hospitality and care, but that they are potentially spreading into middle-class professions such as university teaching.

The rest of the evidence is anecdotal. While zero hours contracts can be practical for students looking for some cash on the side, they can be extremely difficult for workers reliant on an erratic income. This uncertainty has other consequences, with anecdotal evidence that they lead to some “sharp” employment practices. For example, without fixed hours, workers are less likely to speak up for their rights or join a union. A lack of training and a "casual labour" attitude can restrict progression, leaving people stuck in dead-end jobs.

And there is one important question we are yet to find an answer to: whether the recent rise in zero-hours contracts is a short-term effect of the recession, or a long-term change in the labour market.

So zero-hours contracts are a mixed bag. But what can Vince do about it? Given that these contracts are important for so many people, banning them seems draconian. So measures are probably needed in two areas. First, we need to intensify efforts to ensure that employers who abuse these contracts don’t get away with it. Yet, given our poor record on enforcing the minimum wage, it is hard to be confident that this will happen.

Second, efforts are needed to provide support for people on the sharp end of zero hours contracts. New tax credits to help them achieve a reasonable income are an important potential solution. And the design of the (increasingly) long-awaited Universal Credit will also be important.

The UK has – relative to most countries – an extremely flexible labour market. For the most part, this is a good thing, keeping employment relatively high. But it does come with costs, and we haven’t always been good at managing these. Zero hours contracts are the latest such labour market problem, with both costs and benefits. The challenge for Vince is to keep the benefits, but make sure workers don’t pay the cost.

Photograph: Getty Images

Neil is the Senior Economist at The Work Foundation

 

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How the mantra of centrism gave populism its big break

A Labour insider reflects on the forces behind the march of populism. 

For just under a quarter of a century, British politics has been dominated by what might be called, paradoxically, a “theology of centrism” - the belief that most people were more concerned with what works than ideology, and that politics should principally be the art of improving the delivery of public goods. It was a theology that, for all their policy differences, united Tony Blair and David Cameron. Anyone who thought electoral success could be won anywhere but from the centre was either naïve or fanatical, or both... but definitely wrong.

Now, populism is on the march across the West. In Britain, as elsewhere, the political class is unnerved and baffled.

So what happened? Partly, as with all revolutions in politics, the answer is: “events”. Unsuccessful wars, economic crashes and political scandals all played their part. But that isn’t enough of an explanation. In fact, the rise of populist politics has also been a direct result of the era of centrism. Here is what has taken place:

1. A hollow left and right

First, the theology of centrism was the culmination of a decades-long hollowing out of mainstream politics on the left and right.

In the mid-20th century, Conservatism was a rich tapestry of values – tradition, localism, social conservatism, paternalism and fiscal modesty, to name but a few. By 1979, this tapestry had been replaced by a single overriding principle - faith in free-market liberalism. One of Margaret Thatcher's great achievements was to turn a fundamentalist faith in free markets into the hallmark of moderate centrism for the next generation of leaders.

It is a similar story on the left. In the mid-20th century, the left was committed to the transformation of workplace relations, the collectivisation of economic power, strong civic life in communities, internationalism, and protection of family life. By the turn of the 21st century, the left’s offer had narrowed significantly – accepting economic liberalism and using the proceeds of growth to support public investment and redistribution. It was an approach committed to managing the existing economy, not transforming the structure of it or of society.

And it was an approach that relied on good economic times to work. So when those good times disappeared after the financial crash, the centrism of both parties was left high and dry. The political economic model of New Labour disappeared in the first days of October 2008. And when a return to Tory austerity merely compounded the problem of stagnant living standards, public faith in the economic liberalism of the centre-ground was mortally wounded.

2. Fatalism about globalisation

Second, Labour and Tory politics-as-usual contained a fatalism about globalisation. The right, obsessed with economic liberalism, welcomed globalisation readily. The left under Bill Clinton in the US and Blair in the UK made their parties’ peace with it. But globalisation was not a force to be managed or mitigated. It was to be accepted wholesale. In fact, in his 2005 Conference speech, PM Tony Blair chastised those who even wanted to discuss it. “I hear people say we have to stop and debate globalisation," he said. “You might as well debate whether autumn should follow summer. They're not debating it in China and India.” (I bet they were, and still are.) The signal to voters was that it was not legitimate to fret about the pace and consequences of change. No wonder, when the fretting began, people turned away from these same politicians.

3. A narrowing policy gap

Third, the modernising projects of Blair and Cameron ended up producing a politics that was, to use Peter Mair’s term, “cartelised”. The backgrounds, worldviews and character of party elites began to converge significantly. Both parties’ leaderships accepted the same external conditions under which British politics operated – globalisation, economic liberalism, sceptical acceptance of the EU, enthusiasm for closeness to the US on security issues. The policy space between both main parties narrowed like never before. As a result, economic and class divisions in the country were less and less reflected in political divisions in Westminster.

The impression arose, with good reason, of an intellectual, cultural and financial affinity between politicians across the main divide, and between the political class and big business. This affinity in turn gave rise to a perception of “groupthink” across the elite, on issues from expenses to Europe, and one that came with a tin ear to the concerns of struggling families. It may be misleading it is to depict all politicians as snug and smug members of a remote Establishment. Nevertheless, social and economic convergence inside Westminster party politics gave populists an opportunity to present themselves as the antidote not just to Labour or the Tories, but to conventional politics as a whole.

4. New political divides

Lastly, the populist moment was created by the way in which new electoral cleavages opened up, but were ignored by the main political parties. The last decade has seen a global financial crash that has restored economic insecurity to frontline politics. But at the same time, we are witnessing a terminal decline of normal party politics based fundamentally on the division between a centre-left and centre-right offering competing economic policies. 

Of course economics and class still matter to voting. But a new cleavage has emerged that rivals and threatens to eclipse it - globalism vs nationalism. Globalists are economically liberal, positive about trade, culturally cosmopolitan, socially progressive, with a benign view of globalisation and faith in international law and cooperation. Nationalists are hostile to both social and economic liberalism, want more regulation and protection, are sceptical of trade, see immigration as an economic and cultural threat, and have little time for the liberal international order.

The factors that drive this new electoral divide are not just about voters’ economic situation. Age, geography and education levels matter – a lot. Initially both main parties were tectonically slow to respond to this new world. But populism – whether Ukip, the SNP or Theresa May's Tories – has thrived on the erosion of the traditional class divide, and sown seeds of panic into the Labour party as it faces the prospect of sections of its traditional core vote peeling away.

Centrists thought their politics was moderate, pragmatic, not ideological. But signing up to free market liberalism, globalisation and an economistic view of politics turned out to be seen as a curious kind of fundamentalism, one which was derailed by the 2008 crisis. The exhaustion of the theology of centrism did not create populism – but it did allow it a chance to appeal and succeed.

Those on the left and right watching the march of populism with trepidation need to understand this if they are to respond to it successfully. The answer to the rise of populist politics is not to mimic it, but to challenge it with a politics that wears its values proudly, and develops a vision of Britain’s future (not just its economy) on the foundation of those values. Populists need to be challenged for having the wrong values, as well as for having anger instead of solutions.

But calling for a return to centrism simply won’t work. It plays precisely to what has become an unfair but embedded caricature of New Labour and Notting Hill conservatism – power-hungry, valueless, a professional political class. It suggests a faith in moderate managerialism at a time when that has been rejected by events and the public. And it tells voters to reconcile themselves to globalisation, when they want politicians to wrestle a better deal out of it.

Stewart Wood, Lord Wood of Anfield, was a special adviser to No. 10 Downing Street from 2007 to 2010 and an adviser to former Labour leader Ed Miliband.