Con-tracts? The Rise of ‘Zero-hour’ Employment

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Daniel Pryor examines the costs and benefits of ‘zero-hour’ contracts.

Alcohol and academic books are expensive. I’m due to start university this October (results permitting), and am eager to shore up my finances by finding some form of work over the summer. The hours and times don’t fuss me. I couldn’t care less about non-monetary considerations, joining a union, or earning sick pay. In fact, I’d be perfectly happy to take a job with a ‘zero-hour contract’, joining other UK workers who operate with the same arrangement.

However, Green Party Leader Natalie Bennett would prefer me not to earn some extra cash for university in this manner:

“Zero-hours contracts should be banned, and I’d urge every shopper to consider the list of companies that use them, and consider whether they want to give their shopping cash to them…”

Why ban this particular type of work? The arguments against such contracts, both economic and moral, deserve serious consideration. Opponents of zero-hour contracts often claim that they are ‘exploitative’. The typical response of most libertarians to any Marxist overtones is a pair of raised eyebrows and a patronising smile, but public perception is as important as reality. In the wake of vocal campaigns such as UK Uncut’s anti-tax avoidance backlash, companies with entrepreneurial nous will be wary of being viewed as ‘unethical’: supposedly crushing and impoverishing the proletariat by offering flexible labour contracts. Some (though not all) zero-hour workers receive no sick pay or holiday pay. They may also earn less than their fixed-hour comrades, according to Resolution Foundation research. Moreover, it has been argued that employers themselves can often be put at a disadvantage from consequent reductions in productivity. Sectors that pride themselves on enthusiastic personal service  ̶  for example, hotels and restaurants  ̶  may face difficulties in keeping zero-hour employees motivated (and therefore productive) when they are confronted with unpredictable, erratic working hours. Yet the hotel and restaurant sectors remain at the forefront of utilising zero-hour contract work! Rather than there being an entrepreneurial deficit in the professions of hotel and restaurant managers, it seems more likely that the costs to firms of zero-hour contracting, accrued by loss of motivation, are counterbalanced by a plethora of benefits.

Some of these benefits are briefly alluded to by none other than The Guardian’s economics editor, Larry Elliott:

“It’s only fair to say that some employees are content to be on zero-hours contracts. Some students [this author included], for example, want to combine work with study and are willing to turn up when summoned. That’s also true of older workers topping up their pensions with a bit of irregular, part-time work.”

A considerable proportion of UK jobseekers welcome flexibility as a part of their work, and zero-hour contracts provide this. Furthermore, as the seemingly ubiquitous Katie Hopkins points out, a certain degree of job insecurity is a great motivator; when good performance directly impacts the amount of hours you’re asked to work, productivity will increase significantly. Sports Direct and JD Wetherspoon both utilise zero-hour contracts for the majority of their workforces, and return extremely healthy profits. Extrapolating from two successful companies would be erroneous in the extreme, but the cases of these two firms provide empirical proof that zero-hour labour can be effective under certain circumstances. Of course, most libertarians will also respond positively to ideological defences of zero-hour contracts, such as this tweet from Dylan Morris:

https://twitter.com/TorySwing/status/364409531377647616

Enacting certain policies, such as introducing Universal Credit, would facilitate a better environment in which zero-hour contracts could exist. Introducing a system of Universal Credit would also solve many of the woes of those who currently work on zero-hour contracts. In the words of Gillian Guy, Chief Executive of the Citizens Advice charity:

“Zero-hours contracts can…mean fluctuating incomes that cause havoc with people’s benefit claims, denying them much-needed income when the hours dry up.  Universal Credit will make an important difference to help stabilise the income of people in this sort of precarious work.”

Honest Chuka
Chuka Umunna has stated that zero-hour contracts must be the “exception”. This is already the case, so quite what the Shadow Business Secretary is trying to argue escapes this website.

Evidence shows that the marginal tax rates are excessive, erratic and confusing: especially for those who work zero-hour contract jobs. A single welfare payment with a lower uniform ‘taper rate’  ̶  making every hour worked pay more than under the current system  ̶  would make life far easier for zero-hour workers.

Yesterday, it was announced that Labour would hold a summit on zero-hour contracts. Shadow Business Secretary Chuka Umunna commented:

“Labour believes zero hours contracts should be the exception, not the rule.”

They are the exception. Even using the latest (and greatest) estimates, only around 3% of workers in the UK are involved to this sort of work. Using Labour’s rationale, everything is exactly as it should be! Meanwhile, Vince Cable has ordered a government review in order to gain a greater appreciation of the effects of zero-hour contracts. One hopes he will rightly conclude that they have a legitimate place in the British labour market.

We have seen that zero-hour contracts are, in many cases, beneficial to both employers and employees. There may be circumstances in which they are ineffective and, as any good free-marketeer will be aware, firms which fail to utilise them effectively will be penalised with dwindling profits and potential losses. An examination of zero-hour contracts also yields the conclusion that there is a need for radical welfare reform in this country, as I have previously argued. And of course, being the apotheosis of ‘selfish, mean, horrible’ libertarianism, I’d quite like zero-hour contracts to remain for my own sake. Anything that means I can afford a pint at the student bar.

6 COMMENTS

  1. Well written despite not being a fan of Zero-hour contracts, I’m also a student and to some extent this does benefit me. However, it’s easy to make exceptions when you’re privileged enough to be able to, job insecurity can lead to the inability to cope with stress management, financial turmoil and loss of creative motivation. I know many who have found themselves spending time to try and replace their zero-hour contract for something with a bit more substance and I know many who have indeed had their freedom to enjoy life and enhance their creativity damaged by these contracts. It seems odd that freedom is achieved through disconnecting the state from our lives and then connecting with a network of corporations who also serve to undermine our freedom, corporations will act just as state monopolies did.

    • Thank you, Elijah. Zero-hour contracts are no good to people who already struggle on low wages and uncertainty. Libertarianism seems to be solely intent on beating down the lower order rather than lifting them up. Sad state of affairs.

      A part-time job offer with possible addition hours would be better. We won’t build a stronger economy with a layer of people who have no disposable income, or those that or forced to struggle on in this bastardised corporatocracy on the scraps.

      Daniel, you write well. Just try and find the centre-ground.

      And, for the money issue, do a clinical trial; pays ridiculous money for very little ‘work’. 🙂

  2. If the past you would have got a “part time job.” Nothing particularly wrong with a zero hour contract if you are at least paid a retainer and allowed to have several contracts with numerous employers. Suspect they will become the norm not the exception in “race to the bottom” economics. Doesn’t bode well for a high rent, high house price economy which requires a high degree of economic certainty to pay the monthly bills.

    • Yep. But you can’t blame this – as a non interventionist economics – on our socialised house market. If the government plans how many houses are to be built – and therefore do not create enough – house prices will always be high. I’m pretty sure this website wants to have a privatised house market – which would actually see house prices AND rents fall. But, without sounding cliche, there are genuine special interests who would not want to see house prices fall – better to let those struggling continue to struggle, rather than have my house prices drop 10%.

      • Rentiers and landlords do not want to prices and rents falls because the leverage in reverse would wipe many (all) of them out. I have no objection to Zero Hour contracts per se, but it begs the question as to why you can’t hire employee’s on a self employed/contractor basis, and the reason is the employer wants the employee bound to them under an exclusivity agreement. As they are currently written zero hour contracts are uncompetitive and anti-capitalist, In effect the State has to subsidise the employer by providing Housing Benefit and tax credits for the employee, when he is not working.

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