Zero-hours contracts bad for economy warns Warwick academic

A MIDLANDS academic has said that in the long run, zero-hours contracts will prove bad for the UK economy.

A recent survey by the Chartered Institute of Personnel and Development (CIPD) found there were one million people in the UK on zero-hours contracts, which do not guarantee workers shifts or work patterns and they are expected to be available when the company or organisation needs them.

Research by the Recruitment and Employment Confederation of 600 employers found that more than one in four companies employs somebody on a zero-hours contract.

Professor Kim Hoque, who tutors in Human Resource Management at Warwick Business School, said zero-hours contracts were a drag on the UK economy.

Professor Hoque said: “Zero-hours contracts could represent a drag on consumer spending and hence economic recovery. People on insecure zero-hours contracts are less likely to have the confidence to spend than people with more stable incomes.

“The flexibility they provide may well have enabled the UK to avoid higher levels of unemployment during the economic downturn. They may also have enabled some people to maintain an attachment to the labour market who would otherwise not have been able to do so. That said such contracts could also be seen as part of the wider underemployment problem that has affected the UK economy in recent times, with large numbers of workers on part-time or casual contracts wanting to work more hours but being unable to do so.

“Hence, while unemployment has remained lower than many economists predicted would be the case, underemployment has been high – and zero-hours contracts may be a significant part of this picture, and so impacting on consumer confidence and spending.”

He said more research on zero-hours contracts was needed, especially as they are becoming more prevalent in the public sector.

“There is a need for a more detailed review of the extent and impact of such contracts,” said Professor Hoque, who has undertaken consultancy projects for the CIPD, Shell UK, NHS Scotland plus the UK Commission for Employment and Skills and is currently a project adviser to the Japan Institute of Labour Policy and Training.

“What is notable is that the CIPD’s figures showed that zero-hours contracts are becoming even more widespread in the public sector than the private sector. While 17% of private sector organisations in the CIPD’s research stated that they used such contracts, the figures were 34% for organisations in the voluntary sector and 24% in the public sector.”

This is likely a reflection of the increasing pressure local authorities are under to respond to budget cuts, requiring even tighter tenders for outsourced contracts, he added.

Official figures analysed by the Resolution Foundation showed that zero-hours workers earned an average of £9 an hour, compared with £15 for other employees.
Professor Hoque said he believed the contracts would eventually affect a company’s productivity and performance.

“From the employer’s point of view zero-hours contracts provide ultimate labour flexibility, enabling them to keep labour costs down by matching staffing to demand as closely as possible.

“While this clearly has significant cost saving potential in the short-term, it is difficult to see how businesses can build motivated workforces that are committed to the goals of the business when they are employing staff in such a manner,” he added.