The disturbing rise in zero hours contracts

The Office for National Statistics (ONS) this morning published its latest estimates on zero hours contracts (contracts with no guaranteed hours). Responses to the Labour Force Survey (LFS) indicate that almost 700,000 people in the UK were employed on such a contract in the final quarter of 2014 (over 100,000 more than the year before). Responses to a separate business survey meanwhile finds organisations employed 1.8 million people on such contracts in August 2014, up from the previous estimate of 1.4 million for January 2014, though the increase could be due in part to seasonal factors. The LFS and business survey estimates aren’t directly comparable but in general terms the discrepancy between number of contracts and people employed on contracts is due to the fact that some people have more than one contract.

The latest estimates of the number of people employed on zero hours contracts is disturbing not only because the share of jobs without guaranteed hours of work is increasing (up from 1.9% of total employment to 2.3% in the year to Q1 2014) but also because we were told that the economic recovery was likely to see their use diminish. On the contrary, it looks as though zero hours contracts are becoming a more ingrained feature of the UK’s employment landscape, which is likely to buttress poor pay and working conditions in the lower reaches of the labour market. 

Although the ONS is uncertain how much of the 19% annual increase from 586,000 to 697,000 in the number of people employed on zero hours contracts is due to increased reporting by people previously unsure of how to define their contractual status, the big leap in public awareness of zero hours contracts was in 2012 and 2013 which suggests that most of the rise between 2013 and 2014 is probably due to a greater number being employed in this way. But any rise is disappointing given the expectation that a tightening labour market would diminish use of these contracts.

It can of course be argued that, despite the apparent increase, the share of zero hours contracts in total employment remains relatively small and that some people (especially students and older workers) like the flexibility they provide. What this ignores, however, is that the ability of employers to hire people in this way undermines the bargaining ability of other workers, thereby dampening pressure for improved pay and conditions at the bottom end of the labour market. The practice also undermines the spirit of the statutory National Minimum Wage, since although people employed on zero hours contracts are entitled to the minimum wage for the hours they work the lack of guaranteed hours is a source of income insecurity. Consequently, what appears to be a gradual structural shift toward use of zero hours contracts in our economy is therefore disturbing. 

When it comes to judging the Common Good at Work the Church should not rely on Living Wage alone

The Wages of Sin.  So read the front page splash on yesterday’s issue of The Sun newspaper whose reporters found the Church of England doesn’t always practice what it preaches when it comes to paying staff the hourly Living Wage. The headline is obviously a bit rich coming from a red top tabloid that for almost half a century has profited as a purveyor of insidious soft porn. But the story highlights one of many issues that stem from advocacy of this particular change in employer practice.

I have no problem whatsoever in church people calling for higher wages for the working poor. On the contrary, Catholic Social Teaching provides a central plank of my own personal ideology and I’ve always tried my best to apply such principles as the Common Good or The Just Wage whenever considering public policy issues. However, it’s important to put specific calls in their complete economic, social and moral context so as to avoid being tripped up by the law of unintended consequences.

It’s inevitable that some cash strapped church organisations will struggle to pay workers the Living Wage right away, despite the best of intentions. But more to the point before deciding if this is something they or similarly placed organisations in all sectors of the economy should be told to aspire to we need to know how they will foot the bill.

Although it’s often asserted that the Living Wage in effect pays for itself because the workers who benefit from it will somehow become more productive there is little or no evidence to support this. Ultimately therefore something has to give. The common implicit assumption is that the cost of paying the Living Wage is met out of organisational profit or surplus. If not, which is likely to be the case in organisations operating on very tight margins where low pay is most prevalent, the news is less good for workers. The outcome could be fewer jobs albeit research on the effects of big minimum wage hikes indicates that employers tend instead to cut hours of work or if possible trim other parts of the overall reward package. Either way, a substantial increase in the hourly pay rate runs a substantial risk of being offset by a reduction in workers weekly income, especially if the result is lower employment which leaves some people with no income at all.

Payment of the Living Wage is therefore only a very partial guide to whether a Living Wage employer is a ‘good employer’ or whether a general shift of employer practice in this direction furthers the Common Good. One can see why the Church of England and others wish to see better terms and conditions for working people but when it comes to the realm of work the test of the Common Good does not rest on the Living Wage alone.  

UK jobs recovery accelerates but underlying pay growth weakens

The Office for National Statistics (ONS) has this morning released the latest set of UK labour market data, mostly covering the three months October to December 2014.

The UK labour market recovery is continuing to bring good news to jobseekers but also continuing to disappoint wage earners.

The quarterly 103,000 rise in employment represents acceleration in the pace of job creation at the end of last year, helping to cut unemployment by 97,000 to a rate of 5.7%. With the number of people in work now close to 31 million the working age employment has risen to 73.2%, a joint record

But although the December bonus season pushed growth in total average weekly earnings above 2%, underlying pay pressure as measured by regular average weekly earnings (i.e. excluding bonuses and a better guide to the state of the labour market) fell slightly. Economy wide the underlying rate of growth of average earnings dipped from 1.8% to 1.7%. In the private sector the dip was from 2.2% to 2.1% and in the public sector from 0.8% to 0.6%. This suggests that the jobs rich economic recovery is still failing to boost labour productivity, which does not bode well for long-term improvement in UK living standards even if very low price inflation is at present helping to raise real incomes.

The odd politics of business

Politics is a funny old business. What used to be the populist wing of Britain’s Conservative Party, often appealing to the working and lower middle classes and now at the core of Ukip, don’t want David Cameron to remain as prime minister after the General Election on May 7. The former ultra Blairite wing of the Labour Party – as voiced by Messrs Mandelson, Hutton and Milburn – don’t appear to want Ed Miliband to become prime minister. And almost nobody wants Liberal Democrat Party leader Nick Clegg to be anywhere near the next prime minister, although he says he doesn’t mind who is prime minister as long as they give him an important job in the Cabinet.

Meanwhile the politics of business is itself becoming funnier as polling day approaches. All the main business lobby groups claim to be politically neutral but have a default bias toward centre right parties and only favour centre left parties that seek office by claiming to be business friendly. Sometimes the mask slips, as it did last week when the head of the Institute of Directors made clear that his nightmare scenario is a Labour led government in coalition with the Greens and SNP. Despite this the big corporations usually try to keep their heads down – realpolitik requiring them to be prepared for every political eventuality – albeit individual business figures, especially those who provide financial backing for one party or another, tend to come out in open support of those they favour.

Yesterday, however, saw an exception to the rule when Stefano Pessina, active chief executive of high street retailer Boots (‘the chemist’) told a leading Sunday newspaper that the Labour Party’s current policy agenda was “not helpful to business, not helpful for the country and in the end it probably won’t be helpful for them.” “If they acted as they speak”, Mr Pessina went on, “it would be a catastrophe.” If one were being generous it might be possible to view Mr Pessina’s comments as well intentioned advice to Mr Miliband to change his policy stance ahead of the Election so as to gain business support which might help win votes. But given that Mr Pessina does not criticise any specific Labour Party policy, nor offer Mr Miliband a clear new prescription (no joke intended!) it’s hard to interpret the comments as anything other than an attempt to undermine Labour's chances at the ballot box. Indeed Conservative figures immediately took advantage of the situation by branding Labour the 'anti-business party', and there is talk of other top business leaders also preparing to put the boot in. 

This is interesting in part because it appears that Mr Pessina is using a position of potential influence to attempt to exert political influence regardless of what might or might not be the views of the various stakeholders in his business. Should we view the comments of a boss who neither lives or pays tax in Britain as representative of Boots employees or customers, as if to suggest that the next time we pop into one of Mr Pessina’s stores to purchase a seasonal flu remedy this might come with additional medicine to treat this or that public policy ailment. But more important is the widespread response to Mr Pessina’s words which seems to be that they must be sensible simple because he is an important business figure.

Mr Pessina is presumably very good at this job, as presumably are others in similar positions. But this does not necessarily make him an expert on public policy or well informed about the evidence upon which good policy is best based. The likelihood is that Mr Pessina’s view, and that of other business people and their representative bodies, is a reflection of vested interest, even if also based in part on a mix of personal experience, personal ideology, or evidence. Such views deserve to be given no more or less weight than those of any other vested interest, including trade unionists, environmentalists or church leaders who may well be equally vociferous in the coming months, and insofar as they are listened to should always be subject to the acid test of hard evidence to support them.

Political debate is all too often conducted as if the only economically sound policy mix is that deemed to be business friendly, on the unwritten assumption that this always equates with what is in the national interest or that most likely to maximise the common good. It might be at times but experience suggests that this is rarely the case, as is likely to hold true for any policy mix designed to pander too heavily toward one vested interest or another.

Seldom in British history have successive governments, centre right and centre left, been more business friendly than those in office in the past three and a half decades. The resulting predominant policy mix has been one of extremely light business regulation, with taxation kept low enough to just about fund the key public infrastructure firms need to underpin the profit making process. Has this helped make our economy more stable or productive, our society happier and less unequal? It’s up to each of us as individuals to decide how to answer these questions, which should at the top of our shared policy objectives. But at the very least, when it comes to assessing how beneficial uncritical acceptance of the odd politics of business is to the common good of British society the jury must surely be out.