Free Market Fundamentalist Opinion

Labour’s Proposal to Restrict Zero-Hours Contracts Misguided

Most Britons on zero-hours contracts are happy with their flexible jobs.

Britain’s Labour Party’s proposal on Wednesday to clamp down on zero-hours contracts is misguided. Putting this plan at the heart of its election campaign only serves to highlight how little economic sense Labour’s platform makes.

Party leader Ed Miliband said he would entitle workers to a regular job after twelve weeks on a zero-hours contract and insisted the issue represents the “key question” of the May election.

Who does our country work for? Does it work just for the rich and the powerful? Or does it work for working people?

He had prominently raised the “problem” of zero-hours contracts in a television appearance last week when Prime Minister David Cameron, the Conservative Party leader, was forced to admit he wouldn’t be able to live off a zero-hours contract either.

Most Britons on zero-hours contracts, however, aren’t on such contracts to make a living.

Exactly how many workers are on zero-hours contracts is unclear. The Office for National Statistics (ONS) says the number has risen 100,000 in the last year and now represents 2.3 percent of the workforce. The Chartered Institute of Personnel and Development (CIPD) last year put the figure closer to 3 percent.

Either way, this hardly qualifies as an “epidemic” in job insecurity, as Labour claims.

It is also disputable that these workers are “miserable” and “insecure,” as an ally of Miliband put it.

A CIPD surveys last year showed that 65 percent of workers on zero-hours contracts is satisfied with their jobs and 58 percent is happy with their work-life balance.

The Center for Policy Studies’ Adam Memon points out that a third of those on zero-hours contracts is under the age of 24. Most of them are students working part-time. The number of pensioners on zero-hours contracts is rising too, suggesting “they are supplementing their income in retirement.” Women make up another third. Many are working mothers making some money on the side. It’s not difficult to imagine these groups overlapping with the 66 percent of people on zero-hours contracts who told the ONS last year they don’t want to work more hours.

That still leaves a sizable minority of mostly working-age men on zero-hours contracts who would rather have a secure job. But Labour’s policy won’t help all of them.

The expansion in zero-hours contracts has helped bring down unemployment from 8 percent when David Cameron took power in 2010 to 5.7 percent last month. Restricting zero-hours contracts risks pushing unemployment up again.

According to Memon, companies could start terminating workers on zero-hours contracts as a precautionary measure.

It is not always easy to forecast demand and for some firms whose work is variable or seasonal, zero-hours contracts make more financial sense. If this flexibility is that important for businesses, they will simply fire and then rehire.

Miliband, who hasn’t worked a day in the private sector in his life, might not understand this but surely there must be someone left in his party who knows how business works?