Why zero-hours contracts are a good thing
20 February 2020
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The news that the number of people working on zero-hours contracts has risen to a record high has prompted fresh calls for a ban. If you’re employed on one of these contracts and like it, tough. How on earth did we come to this?
To recap, a “zero-hours contract” is simply a form of employment that does not guarantee a certain amount of work every week. Casual labour is of course nothing new, and at least part of the longer-term growth in the number of people saying they are on “zero-hours contracts” probably reflects increased familiarity with the new term.
This flexibility is good for employers because it allows them to match supply to fluctuating demand, especially in sectors such as health and social work, education, hospitality, or delivery driving, where demand can be erratic.
However, this flexibility is also welcomed by many employees. People do not have to take any work that they are offered, nor can they be prevented from working for more than one employer. People on zero-hours contracts also have the same legal rights, including entitlement to the national minimum wage and paid holidays.
Consistent with this, the ONS data show that zero-hours contracts are most common among young people (9.1% of employees aged 16-24 are on a ZHC) and older workers (5.7% of those aged 65+). These groups are less likely to want to commit to full-time employment. Indeed, 19% of those on a zero-hours contracts are in full-time education.
In contrast, the prevalence of zero-hours contracts among other age groups (25-64) is much lower (around 2%) and has been flat or falling as the labour market has strengthened.
The proportion of employees on zero-hours contracts is also higher for women (3.6%) than for men (2.4%). This is at least consistent with the idea that this form of flexible employment suits those who are more likely to have to fit work around family responsibilities (though it might also be explained by the fact that more women are employed in the occupations, notably education and care work, where ZHCs are more common).
It is therefore simply not true to claim, as many do, that “zero hours” means “zero security” and “zero rights”. Indeed, it doesn’t even mean “zero hours”: while the number of hours may be less predictable, in practice those people on a “zero-hours” contract typically work an average of around 24 hours a week in their main job – which is similar to other forms of part-time employment.
It is true that about a quarter of people (26.1%) on a zero-hours contract would like an additional or replacement job, or longer hours, which is the usual definition of “under-employment”. That proportion is higher than in other forms of employment (7.0%), but it is still a minority. What’s more, if zero-hours contracts were banned, it’s likely that more people wouldn’t have jobs at all, full-time or otherwise.
It is also true that people working on zero-hours contracts tend to be lower paid than the population as whole, but this is because the type of jobs where zero-hours contracts are more common also tend to be lower paid. Put another way, those jobs would still be lower paid, even if the employees were on more traditional contracts.
So what are we left with? There are doubtless hard cases where people working on zero-hours contracts feel insecure and exploited. But an outright ban on these contracts would be a completely disproportionate response to this problem. If unpredictability of income is the main concern, why pick on zero-hours contracts? Why not seek a ban on all forms of self-employment too?
It is worth noting that even the relatively interventionist Taylor Review of modern working practices opposed a ban, recommending instead that there should be a higher national minimum wage for any hours that are not guaranteed. (This is a bad idea too, because there are good economic reasons why both employers and employees would rather use zero-hours contracts, and anything that raises the cost of labour will reduce job opportunities.)
Where other countries have “banned” zero-hours contracts, they have usually done so by setting a minimum number of guaranteed hours that is sufficiently low (e.g. 10 per week) that it doesn’t make much difference in practice (other than preventing people who only want to work a few hours from doing so).
Above all, rather than pontificating about what forms of employment should be allowed, it might be more helpful if opponents of zero-hours contracts actually listened to some of the people who like them. It certainly seems odd for the TUC or the Labour Party to advocate restricting a worker’s right to choose.
This article was originally published on Julian Jessop’s blog.
To recap, a “zero-hours contract” is simply a form of employment that does not guarantee a certain amount of work every week. Casual labour is of course nothing new, and at least part of the longer-term growth in the number of people saying they are on “zero-hours contracts” probably reflects increased familiarity with the new term.
This flexibility is good for employers because it allows them to match supply to fluctuating demand, especially in sectors such as health and social work, education, hospitality, or delivery driving, where demand can be erratic.
However, this flexibility is also welcomed by many employees. People do not have to take any work that they are offered, nor can they be prevented from working for more than one employer. People on zero-hours contracts also have the same legal rights, including entitlement to the national minimum wage and paid holidays.
Consistent with this, the ONS data show that zero-hours contracts are most common among young people (9.1% of employees aged 16-24 are on a ZHC) and older workers (5.7% of those aged 65+). These groups are less likely to want to commit to full-time employment. Indeed, 19% of those on a zero-hours contracts are in full-time education.
In contrast, the prevalence of zero-hours contracts among other age groups (25-64) is much lower (around 2%) and has been flat or falling as the labour market has strengthened.
The proportion of employees on zero-hours contracts is also higher for women (3.6%) than for men (2.4%). This is at least consistent with the idea that this form of flexible employment suits those who are more likely to have to fit work around family responsibilities (though it might also be explained by the fact that more women are employed in the occupations, notably education and care work, where ZHCs are more common).
It is therefore simply not true to claim, as many do, that “zero hours” means “zero security” and “zero rights”. Indeed, it doesn’t even mean “zero hours”: while the number of hours may be less predictable, in practice those people on a “zero-hours” contract typically work an average of around 24 hours a week in their main job – which is similar to other forms of part-time employment.
It is true that about a quarter of people (26.1%) on a zero-hours contract would like an additional or replacement job, or longer hours, which is the usual definition of “under-employment”. That proportion is higher than in other forms of employment (7.0%), but it is still a minority. What’s more, if zero-hours contracts were banned, it’s likely that more people wouldn’t have jobs at all, full-time or otherwise.
It is also true that people working on zero-hours contracts tend to be lower paid than the population as whole, but this is because the type of jobs where zero-hours contracts are more common also tend to be lower paid. Put another way, those jobs would still be lower paid, even if the employees were on more traditional contracts.
So what are we left with? There are doubtless hard cases where people working on zero-hours contracts feel insecure and exploited. But an outright ban on these contracts would be a completely disproportionate response to this problem. If unpredictability of income is the main concern, why pick on zero-hours contracts? Why not seek a ban on all forms of self-employment too?
It is worth noting that even the relatively interventionist Taylor Review of modern working practices opposed a ban, recommending instead that there should be a higher national minimum wage for any hours that are not guaranteed. (This is a bad idea too, because there are good economic reasons why both employers and employees would rather use zero-hours contracts, and anything that raises the cost of labour will reduce job opportunities.)
Where other countries have “banned” zero-hours contracts, they have usually done so by setting a minimum number of guaranteed hours that is sufficiently low (e.g. 10 per week) that it doesn’t make much difference in practice (other than preventing people who only want to work a few hours from doing so).
Above all, rather than pontificating about what forms of employment should be allowed, it might be more helpful if opponents of zero-hours contracts actually listened to some of the people who like them. It certainly seems odd for the TUC or the Labour Party to advocate restricting a worker’s right to choose.
This article was originally published on Julian Jessop’s blog.
3 thoughts on “Why zero-hours contracts are a good thing”
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Many opportunities where people are employed on ‘zero hours contracts’ either could not be offered at all or would have to be on a casual labour basis if such contracts were banned.
My daughter, for example, was on two ZHCs when she was a student and this provided her with some holiday employment work, for example, as event staff during Royal Ascot and HRR and even private parties. As neither of these events are more than a week in duration it is not clear how she could have been on a supposedly more favourable type of contract, especially as she didn’t want to work during her whole university holidays.
Zero hours makes sense and employers should offer workers equity participation too. They are now part of the workforce and deserve some of the wages of capital as well as the wages of their labour
The writer is completely wrong:
His claim: ‘It is therefore simply not true to claim, as many do, that “zero hours” means “zero security” and “zero rights”. Indeed, it doesn’t even mean “zero hours”: ‘
This conclusion is a fallacy. A zero hour contract often means no contract at all. A person can offer all the flexibility of the world, but be at the mercy of the employer from one moment to the next. A zero hour contract means exactly that – no hours unless told otherwise. As there is no contractual obligation for the employer to give any hours – the amount of hours given can change at all times.
Imagine I’m looking for staff. I advertise that I want a bank of people that need to be flexible. People apply and I ask them in for interview. Next step – I issue zero hour contracts. There is no need to reject anyone, because no-one is guaranteed hours. It’s not necessarily any contract at all.