Zero-hour economy is holding back recovery

Matthew Whittley looks at the problems with zero-hour contracts and what they tell us about our economy.

Matthew Whittley is a recent graduate, Labour party member and works as a researcher for a Midlands-based housing association

Last Monday, the Chartered Institute of Personnel and Development revealed that up to one million workers could be employed on zero-hours contracts – four times the official estimate provided by the Office for National Statistics a week earlier. One in five companies are utilising these contracts, including large employers such as McDonalds and Sports Direct, both of whom employ over 90% of their workers on these terms. It’s not hard to see why. They relieve businesses of basic duties to employees, such as guaranteeing a minimum amount of hours and providing holiday and sick pay, enabling them to select from a pool of staff kept on standby.

Some defend the use of zero-hours contracts by arguing that we need a flexible workforce if we are to compete in the ‘global race’. But, according to the OECD, out of 40 developed economies, the UK already has the third most lightly regulated labour market.

For the workers themselves, this ‘flexibility’ is more likely to be experienced as a lack of freedom and choice. Being permanently on-call makes it difficult to fulfil family commitments and enjoy any kind of a life outside of work, and it’s almost impossible to manage a household budget when you have no idea how many hours will be available from one week to the next. Research from the Resolution Foundation has also found evidence of these contracts being used as a stick, with employees feeling unable to complain about unfair treatment or turn down unsociable hours for fear that hours will be withdrawn the following week as punishment.

The prevalence of zero-hours contracts serves as a reminder of the scale of neoliberalism’s reach; that it acts not only as a system of economic management, but also as one of social control.

These contracts are yet another symptom of the insecure, low-wage, hand-to-mouth economy that has developed. The government regularly cites the creation of a million private sector jobs as one of its major achievements. But almost four in five of these have been in low-paid industries, where the average wage is less than £8 an hour. There are now more people in poverty and in work than there are who are poor and unemployed. And while 2.5 million are out of work, a further 3 million aren’t working as many hours as they would like, and another 1.5 million are in temporary jobs. More than 60% of jobs created since the third quarter of 2009 have been part-time or temporary positions.

The economy grew by 0.6% in the three months to June, though it’s unlikely that ordinary working folk, who have seen their wages fall in real terms for forty consecutive months, will have noticed. After adjusting for inflation, wages are forecast to be over £1500 a year less in 2015 than in 2010. Meanwhile,  the cost of energy and food has increased by 39% and 24% respectively since the recession hit, and a third of people are worried they won’t be able to pay their rent or mortgage next year. Poverty pay means people have to eat into their savings or borrow to stay afloat, with many turning to payday lenders in the absence of access to affordable credit. (Wonga’s latest TV ad proudly states ‘no hidden charges’. The fact they feel the need to clarify this tells you all you need to know about this industry.)

Clearly, falling wages are troubling for low and middle-income households struggling to keep pace with the rising cost of living. But it’s also worrying at a macro level; low wages are a drag on the economy and an obstacle to economic recovery. In a vicious spiral of economic decline, depressed wages stunt consumer demand, leading to less investment. Low wages also cost the Exchequer in the form of reduced tax receipts and higher tax credit and housing benefit bills.

As Ed Balls has recognised, we need to pursue inclusive, wage-led growth that increases living standards for the many, not the few. We should end exploitative zero-hours contracts. If McDonalds know how many burgers they need to be delivered, they should know how many people they will need to cook and serve them. We should continue to make the case for a living wage to ensure work pays. Increased wages will put more money in the economy, giving business the confidence to invest and create the desperately needed jobs that pay enough for workers to be able to support their families. This is the alternative to neoliberal austerity and is what those of us keen to build a fairer society should be making the case for.

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