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

 

Getty
Show Hide image

In your 30s? You missed out on £26,000 and you're not even protesting

The 1980s kids seem resigned to their fate - for now. 

Imagine you’re in your thirties, and you’re renting in a shared house, on roughly the same pay you earned five years ago. Now imagine you have a friend, also in their thirties. This friend owns their own home, gets pay rises every year and has a more generous pension to beat. In fact, they are twice as rich as you. 

When you try to talk about how worried you are about your financial situation, the friend shrugs and says: “I was in that situation too.”

Un-friend, right? But this is, in fact, reality. A study from the Institute for Fiscal Studies found that Brits in their early thirties have a median wealth of £27,000. But ten years ago, a thirty something had £53,000. In other words, that unbearable friend is just someone exactly the same as you, who is now in their forties. 

Not only do Brits born in the early 1980s have half the wealth they would have had if they were born in the 1970s, but they are the first generation to be in this position since World War II.  According to the IFS study, each cohort has got progressively richer. But then, just as the 1980s kids were reaching adulthood, a couple of things happened at once.

House prices raced ahead of wages. Employers made pensions less generous. And, at the crucial point that the 1980s kids were finding their feet in the jobs market, the recession struck. The 1980s kids didn’t manage to buy homes in time to take advantage of low mortgage rates. Instead, they are stuck paying increasing amounts of rent. 

If the wealth distribution between someone in their 30s and someone in their 40s is stark, this is only the starting point in intergenerational inequality. The IFS expects pensioners’ incomes to race ahead of workers in the coming decade. 

So why, given this unprecedented reversal in fortunes, are Brits in their early thirties not marching in the streets? Why are they not burning tyres outside the Treasury while shouting: “Give us out £26k back?” 

The obvious fact that no one is going to be protesting their granny’s good fortune aside, it seems one reason for the 1980s kids’ resignation is they are still in denial. One thirty something wrote to The Staggers that the idea of being able to buy a house had become too abstract to worry about. Instead:

“You just try and get through this month and then worry about next month, which is probably self-defeating, but I think it's quite tough to get in the mindset that you're going to put something by so maybe in 10 years you can buy a shoebox a two-hour train ride from where you actually want to be.”

Another reflected that “people keep saying ‘something will turn up’”.

The Staggers turned to our resident thirty something, Yo Zushi, for his thoughts. He agreed with the IFS analysis that the recession mattered:

"We were spoiled by an artificially inflated balloon of cheap credit and growing up was something you did… later. Then the crash came in 2007-2008, and it became something we couldn’t afford to do. 

I would have got round to becoming comfortably off, I tell myself, had I been given another ten years of amoral capitalist boom to do so. Many of those who were born in the early 1970s drifted along, took a nap and woke up in possession of a house, all mod cons and a decent-paying job. But we slightly younger Gen X-ers followed in their slipstream and somehow fell off the edge. Oh well. "

Will the inertia of the1980s kids last? Perhaps – but Zushi sees in the support for Jeremy Corbyn, a swell of feeling at last. “Our lack of access to the life we were promised in our teens has woken many of us up to why things suck. That’s a good thing. 

“And now we have Corbyn to help sort it all out. That’s not meant sarcastically – I really think he’ll do it.”