The flaws of zero-hours contracts are becoming clearer

Almost three in 10 of all those on the contracts are looking to work more hours.

(Photo By McDonald's is one of the companies that uses zero-hours contracts in the UK. Photograph: Getty Images.)

Today’s new figures from the ONS shed further light on the recent lively debate on zero-hours contracts (ZHCs). Sort of. Back in 2012, around the time that the zero-hours debate began to capture the attention of politicians and commentators, it was reported that there were around a quarter of a million workers on a ZHC in the UK, although many thought this sounded low. By the end of 2013, the number had more than doubled to 580,000, in part because of greater, media-fuelled awareness of the existence of ZHCs, but also because the numbers genuinely had gone up.

Today’s figures have led to reports that the number is closer to 1.4 million (or even 2.7 million if you include 1.3 million contracts that did not provide work over a two-week period). So, the number of zero-hours workers is no lower than 580,000 and could be as high as 1.4 million or even 2.7 million (and you could even add a further 100,000 or so on due to sampling uncertainty). That’s a long way from where we were, right?

Not quite. We have to be pretty careful in interpreting these new estimates and comparing them to previous figures. Today’s estimate is of 1.4 million contracts without guaranteed hours, which does not equate to 1.4 million workers on these contracts. This is because some people will hold multiple employment contracts at the same time – we can’t be sure of quite how many. In addition, the ONS has highlighted that it has broadened its definition from the narrower ZHC one used previously. Finally, the new figures actually refer to a smaller area than previous ones: Great Britain only, whereas previous zero-hours estimates covered the whole of the UK.

Nonetheless, while much uncertainty remains about recent growth in zero-hours working and the best ways to measure it, what we can conclude is that ZHCs are an important part of today’s labour market. Indeed, we also learned today that more than one in ten businesses (13 per cent) make some use of contracts without guaranteed hours, rising to nearly half (47 per cent) of large employers.

So what do we know about these zero-hours workers? The Resolution Foundation’s analysis finds that ZHCs are concentrated among younger workers (more than half of ZHC workers are aged under 30), those with GCSEs or A-levels (although one in five ZHC workers has a degree), and people working in the hospitality, arts and leisure, administration and health and social work sectors. Although the estimated number of ZHC workers has swelled in recent years, these characteristics have remained fairly constant.

There is also evidence that zero-hours workers occupy a less desirable and more precarious place in the labour market than other workers: they are much more likely to be underemployed or looking for a new job (although the majority aren’t), and much less likely to be a member of a union. For example, almost three in 10 of all those on zero-hours contracts (29 per cent) are looking to work more hours, compared to just over one in 10 (11 per cent) of those with fixed-hours work. And while some might assume that this simply reflects the fact that ZHC workers are younger, lower-skilled and concentrated in sectors with lower rates of job satisfaction, our analysis finds that differences remain when controlling for these factors. In other words, the different composition of the ZHC workforce does not explain all of the overall difference in unionisation, underemployment and job search between ZHC and non-ZHC workers.

The Bank of England has estimated that total labour market slack equates to as much as 1.5 per cent of GDP, with up to half of this being accounted for by underemployment (rather than just unemployment). And the Monetary Policy Committee considered the extent of underemployment among the growing number of self-employed workers at its interest rate policy meeting earlier this month. With today’s new estimates confirming the important role of zero-hours contracts within the workforce, the prevalence of underemployment among ZHC workers becomes increasingly significant to these wider debates about the level of spare capacity in the labour market.