THE BLOG
08/08/2013 13:03 BST | Updated 08/10/2013 06:12 BST

Zero Hour Contracts Reflect A Weak Economy

Recent outrage concerning 'zero-hour' contracts has dominated the headlines this past week.

Revising their estimate up from 25,000 to around one million, the Office of National Statistics has admitted that the number of UK workers on these contracts - which don't guarantee work hours, standard rates of pay or security - are probably far greater than was once believed. Furthermore, it's not just your typical high street chain cutting their overheads through this measure. In fact, even Her Majesty is getting a piece of the action.

I am surprised at what elements have been focused on throughout this investigation. Yes, hacks, pundits and even Vince Cable have voiced their concerns, suggesting that these contracts are exploiting workers, particularly new entrants to the labour market and the most vulnerable. That's because for the most part, they to be implemented for low-skilled work, where labour can easily be removed and replaced. A report from the Work Foundation states:

Those on zero hour contracts are more likely to be women (56 %). Zero hours as a share of the workforce are most common in the arts, entertainment, and recreation services (2.5 % of the workforce); in accommodation and food services (2.2 % of the workforce); and healthcare services (1.2 %). Not surprisingly, they are most common in caring and leisure occupations (1.7 per cent) and also among the less skilled (1.4 %)

Those defending these contracts rejoice in its ability to 'empower' employers to take advantage of a 'vibrant, flexible labour market'. No better is this argument articulated than by Katie Hopkins, who when she isn't being the best in real life troll ever, apparently is a businesswoman. Writing for the Huffington Post a few days ago, she says:

Zero hour contracts create an innate sense of competition (found in all self employed people that I work with) that makes people hungry for work. People perform better on a zero hour contract. Every hour they deliver for that business is another hours work they may gain later in the week.

Beyond the fact that the entire piece is based purely on anecdotal evidence (I'm yet to see any empirical data proving that these contracts actually increase productivity), Hopkins' language is important here; essentially as she suggests that it's fear that motivates workers. Fear that they might lose a source of income necessary to look after their families.

To me, the last sentence is even more chilling- implying that workers without stability need to comply with their employers if they wish to retain their jobs. Hopkins can sugar-coat it with as much Ayn Rand inspired rhetoric as she likes, but she's pretty much glorifying the ability to legally exploit the vulnerability of employees, all for the good of "free enterprise".

I'm not completely against the use of these contracts. Having interviewed a number of people in the course of researching this, I will readily admit that they can be of use- in particular to students working part-time, for such arrangements can provide both income and experience without the need to sacrifice other activity.

However, I'd argue that such benefit is limited to particular groups; the biggest problem with working under vulnerable terms and conditions is that it also provides little opportunity to move up the ladder, especially in low-paid, low-skilled work.

A recent post on the Freakonomics blog deals with this issue quite well- it argues that traditionally low-paying employers would find difficulty in implementing any form of 'living wage' or stable contract, simply because historically they were never designed to do so. Drawing on John Suroweiki's piece in The New Yorker, it argues that this issue should be seen in a wider context, concerning the nature of Western economies themselves.

Suroweiki offers a structural suggestion- that federal policies aren't doing particularly well in creating higher-wage 'middle class' jobs that would provide both the income support and the career scope sought out by most graduates and medium income wage earners. In comparison, a Trade Union Congress report suggests that 4 in 5 jobs created since June 2010 are low paid.

Why is this the case? Historically, the nature of the labour market has changed, as indicated by Oxford University's Avner Offer (pdf), who notes that where the majority of workers in the mid-20th century worked in manual labour, having the ability to negotiate salary and conditions through collective bargaining, consumer driven economies do not accommodate such conditions. In part, this is also because of the nature of the retail industry itself. Where companies like Apple, McDonalds and Sports Direct rely on selling cheap products as a means of turning over profit, low wages are a necessary part of the equation. Without drastically reducing the wages of employees, it might be the case that hiring people on a short term basis is not just easier for managers- it's also more cost-effective.

So Zero-Hour contracts aren't necessarily a new instrument of consumer capitalism designed to oppress the working man, nor are they a godsend for business. Rather, they are far more useful in indicating just how poor the state of the economy actually is; While failing to produce tangible, long-term growth through middle-class/professional jobs, hiring people on short term contracts simply only increases levels of underemployment. More worrying, it suggests that the root of current growth now rests in industries where low pay is essential to survival.

Surely, that can't be a great message for anyone.