Zero-hours contracts and labour market policy

Abstract

SUMMARY The evolving nature of atypical work arrangements is studied. A particular focus is placed on one such form of work relation: zero-hours contracts (ZHCs). The paper uses existing secondary data and new survey data collected for the specific purpose of studying alternative work arrangements to describe the nature of ZHC work in the UK labour market. The interaction with labour market policy is explored, in the context of the 2016 introduction of the UK’s National Living Wage. ZHC work is shown to be an important feature of today’s work arrangements, and the wage cost shock induced by the new, higher minimum wage resulted in an increased use of ZHCs in the UK social care sector, and in low wage sectors more generally.

Zero Hours Contracts and Their Growth

“…The largest source of ZHC workers at time t+4 is part-time non-ZHC workers at time t, followed by full-time workers at time t. That is not to say that ZHCs do not act as entry-level (or re-entry) jobs, but taken together, just over half of those on a ZHC in any given year were in either full-time or part-time non-ZHC employment one year earlier. Datta et al (2018) also note this pattern in the data. In the Appendix (Table A2) we repeat this exercise separately for those with tenure with their current employer of less than / more than one year.…”

“…Imposing a minimum wage premium on non-guaranteed hours could avoid such 'change in name only' displacement effects, but perhaps with uncertain employment effects again concentrated among disadvantaged groups. Indeed, if minimum wage increases more generally have been leading to increased use of ZHCs, as suggested by Datta et al (2018), then would making this employer response option more costly increase the likelihood of negative employment or hours impacts of future minimum wage increases? Finally, a right to convert could improve worker options, and could potentially help to change expectations on both sides of the labour market, even if lack of employment protection for ZHC workers mean such rights could perhaps be circumvented by some employers in practice.…”

“…Finland collects LFS data on ZHC workers, who accounted for 4% of those in employment in 2014). For further detail on these points see O'Sullivan et al 2015and Datta et al (2018). For the US, Katz and Krueger (2016) show that the proportion of those in employment who have on-call contracts grew from 1.7% in 2005 to 2.8% in 2015.…”

“…Consequently, ONS estimates of the number of people who are on a ZHC in their main job focus on Q4 of each year until 2013, after which both Q2 and Q4 estimates are comparable. Other sources of survey data on ZHCs (or NGHCs) with national or near-national coverage include biannual ONS business surveys from 2014-2017 (see ONS, 2018), ad hoc additions to Chartered Institute of Personnel and Development (CIPD) Labour Market Outlook and Employee Outlook surveys in 2013 and 2015 (see CIPD, 2013; CIPD, 2015), the 2018 LSE-CEP Survey of Alternative Work Arrangements (see Datta et al, 2018) and a question in the British Household Panel Survey (BHPS) from wave 9-18 (1999-2008) but not beyond 2008 (see Koumenta and Williams, 2015). There are some limited additional data available for specific sectors and occupations (e.g.…”

“…The transition matrix presented in Table 4, similar to that presented by Datta et al (2018), distinguishes flows from the following mutually exclusive labour market states: inactive;…”