The ‘epidemic’ of zero hour contracts

Well, I did warn you.

Today Ed Miliband promised that a future Labour government would end the “epidemic of zero-hours contracts” which are “undermining hard work, undermining living standards, undermining family life” in Britain. But the Office of National Statistics, workers on zero hours contracts account for 2.3% of the workforce. Is that really an ‘epidemic’?

I’ll admit, I wouldn’t want to be on a zero hours contract (though it might have been useful when I was studying). You might not want to be on a zero hours contract. But, surely, what matters is whether the people on zero hours contracts want to be on them?

In 2013 the Chartered Institute of Personnel and Development produced a study of zero hours contracted workers. It found that

  • “Almost half of zero-hours contract workers (47%) report they are satisfied with having no minimum contracted hours, with 27% saying they are dissatisfied and almost a quarter (23%) neither satisfied nor dissatisfied.”
  • “Almost two-thirds of employers surveyed that use zero-hours contracts (61%) report that zerohours staff are not contractually obliged to accept work and are free to turn it down. However, 15% of employers say zero-hours staff are contractually required to be available for work, and a further 17% report that in some circumstances zerohours contract staff are expected to be available for work.”
  • “In all, 80% say they are never penalised for not being available for work, a further 17% say they are sometimes penalised and 3% say they are always penalised if they are not available.”
  • “Most zero-hours contract workers (52%) don’t want to work more hours than they typically receive in an average week. However, 38% say they would like to work more hours, with 10% undecided.”
  • “About a third of employers that employ zero-hours workers say they have a contractual provision or policy outlining their approach to arranging work with zero-hours workers or cancelling work that had been offered. However, about four in ten employers say they don’t have such provisions or policies and a quarter say they don’t know.”
  • “In all, 46% of zero-hours contract workers say they either receive no notice at all (40%) or they find out at the start of a shift that work is no longer available (6%).”
  • “Six in ten zero-hours workers report they are allowed to work for another employer when their primary employer has no work available. A further 15% say they are able to sometimes. Just 9% say they are never able to work for another employer and a sizeable 17% don’t know.”
  • “Almost two-thirds (64%) of employers who use zero-hours workers report that hourly rates for these staff are about the same as an employee doing the same role on a permanent contract. Nearly a fifth (18%) report that hourly rates for zero-hours staff are higher than permanent employees. Around one in ten employers report (11%) that they are lower.”

So, a mixed picture. Or maybe that doesn’t matter. Maybe whether people like them or not is immaterial to whether the government permits them or not. That’s a political question and this is an economics blog.

So, take a look at the chart below

Picture1

Source: OECD

Unemployment has been one of the relative British economic success stories in recent years. And, in large part, this is down to its relative labour market flexibility – the ease with which workers can be hired and fired, in other words. Indeed, as the graph below shows, countries with less regulation of temporary employment see more employment.

Picture2

Source: OECD

But maybe those unemployed Greeks and Spaniards are, actually, better off than British workers on zero hour contracts? Actually, the evidence shows that it’s better to have a temporary job than no job.

It’s early days in the campaign so there will be more of this stuff, no doubt, from all parties. But it would be a mistake to let a part of a labour market which has weathered recession remarkably well fall victim to political posturing.

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