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  • Lucas Wieringa-Diaz

The economics of zero-hours contracts

Let's be honest here, a lot of us have worked a job where we were asked how many hours a week we could do and we have all said full time hours (knowing full well we won’t be able to), probably to make sure we get the job. Then, when it comes to seeing your rota you find each week varies in the hours you are working. You, my friend, are on a zero hours contract; a contract in which the number of hours and responsibilities are not specified, only the pay rate is. This is probably why they are so common for students!

In 2012, nearly 1% were on these contracts (CIPD, august 2022) and the rates sky-rockted immediately with recent estimates finding that in 2021, approximately 3% of employed people were working a ZHC; roughly 935,000 people! The mentions in parliament of such contracts drastically increased 4500% from 2012-2013, yes you’re reading that right - it’s not a typo. ‘Why?’ I hear you ask. Well, there's no real definition of these contracts, only a generally agreed understanding that these contracts give you hours when you are needed, or if they can (I'm sure those who have been told ‘It's empty, do you want to go home now?’ are starting to see things click into place here about the sort of contracts they were on). For that reason, more people are becoming aware of the contract type they are on and reporting it in the labour force surveys. It raises the question; did these contracts exist before? Unfortunately, surveys such as the labour force survey rely upon the awareness of participants and their honesty, so estimates before the public debate of zero hour contract employment are most likely inaccurate and must be treated with caution.

Now we turn to the question of who is most likely to be on these contracts. These contracts are concentrated mostly among 16-24 year olds. In fact, Farnia, Green and Mcvicar (2019) found that this age group is 2.9 percentage points more likely to be on these contracts than those ages 35-49. This sounds about right once you realise that 8% of employed students are on a zero hour contract (Adams and Prassl, 2018). They also found that women comprise the majority of these employment types, making up 52% of zero hour contracts. There are clear implications here for policy intervention here to promote higher equality in other contract types. It comes at no surprise that these contracts are also concentrated in industries such as hospitality and other routine industries, where the aforementioned employee characteristics may be more prevalent.

Fear not! I come bearing good news. While you may think this is an attack on these contracts, it is in fact far from it. These contracts are highly beneficial to most, providing the flexibility that those more likely to be on these contracts require. Students, for example, can benefit from the flexible hours working around their schedules. Secondary earners can also benefit from the variable hours to gain that extra bit of money to help out. Even firms benefit, with zero hour contracts typically lowering work costs. But, like all economic decisions, there are trade offs. Ironically, the main one is the insecurity these contracts bring, with a lot of people reporting social relationship curtailments, financial instability (Wood and Burchell, 2014) and hours taken away if unable to work asked shifts (ACAS, 2014). So, while the majority of these employees can benefit from working when they want, it is clear there is some instability to these contracts. It appears, however, that a lot of these employees self select into these contracts (e.g. students) due to the benefits they provide; maybe the costs are willing to be endured since they will only be there a short time.

Lucas Wieringa Diaz is in his third year at University of Sussex studying BA Economics. He is 22 years old and originally from London.

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