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.