The Zero-Hour Scam

Over one million workers in Britain are now on zero-hour contracts. Their proliferation has never been about 'flexibility' – it's about keeping workers insecure and wages low.

The Resolution Foundation recently found that 33 percent of young people returning to the labour force returned to an ‘atypical’ contract. (Kobus Louw / Getty Images)

Over one million UK workers are now employed on zero-hour contracts (ZHCs)—contracts that do not stipulate a minimum number of hours work for an employee. That’s about three percent of the entire workforce. In low-paid sectors, the proportion of the workforce on ZHCs is even higher, at around 4.6 percent.

Such a system has obvious appeal to management. If demand is lower than expected, managers can simply reduce their employees’ hours. In effect, ZHCs allow employers to offload the costs of dealing with economic uncertainty onto their workers.

According to their proponents, ZHCs have benefits for workers too. Some argue that ZHCs are used for students and other ‘casual’ workers who benefit from the flexibility of the contract structure.

But many employees on ZHCs are not ‘casual’ workers; their wages from their insecure job may be their only source of income. Many of these workers will be forced to take on multiple sources of employment simply to pay the bills.

What’s more, as anyone who has ever been subject to a ZHC knows, the power over a worker’s time is ultimately in the hands of managers. While workers are supposed to be able to accept or reject the hours assigned by managers, they only have a certain amount of flexibility in practice.

In many cases, this system actually ends up providing workers with less flexibility. As they don’t know their hours in advance, workers will be unable to plan ahead, often creating significant strains on their lives. If they reject too many shifts, they’re likely to be disciplined.

If you’re on a ZHC, your boss can decide to change your hours at late notice, but it’s much harder for you to change your own hours at late notice. The ‘flexibility’ introduced into labour markets by decades of erosion of workers’ rights once again ends up benefitting capital rather than labour.

The prevalence of ZHCs in the UK—alongside other forms of insecure employment, such as the false self-employment prevalent in the gig economy—goes some way to explaining why we have experienced such a low-wage recovery from the financial crisis of 2008.

Mainstream economists would usually posit that higher employment leads to higher wages. When the supply of workers falls (because most of them are already employed), wages should increase. We’ve seen examples of this effect in particular sectors with acute labour shortages, such as logistics, over the course of the pandemic.

In the decade following 2008, however, wages stagnated even while employment reached record highs. The Conservative government went so far as to increase the National Minimum Wage to combat the problem of low wages.

But when this shift took place, many firms simply moved workers from secure contracts onto ZHCs to lower their costs, meaning workers’ take-home pay often remained the same even after the NMW increase.

In practice, as this case should make clear, one missing factor in mainstream economic analysis of wages is workers’ bargaining power relative to bosses.

The reason for the post-2008 high-employment low-wage equilibrium was that workers had little bargaining power with respect to their employers, even when unemployment was low. Zero-hour contracts—as well as other forms of precarious employment—allowed firms to employ lots of precarious workers while keeping costs low. Most of them were not represented by unions, which put them in a far weaker bargaining position.

To make matters worse, the extraordinarily harsh cuts to social security—and the introduction of sanctions to cripple claimants even further—meant that workers were so scared of unemployment they were willing (or forced) to accept almost any job. Management didn’t have to offer pay rises because in many cases workers didn’t feel powerful enough to ask for them.

Some might argue that the only other option would be higher unemployment. But there is no reason to accept this as inevitable. Rather than cutting jobs in the public sector, the government could have invested in creating much-needed new jobs in sectors like healthcare, social care, and education to absorb any increase in unemployment.

Creating secure and well-paid jobs in the public sector would have given us more resilient public services in the run up to the pandemic, as well as encouraging private sector employers to improve pay and conditions themselves.

Instead, the cuts made public sector workers weaker and more expensive. Many frontline public sector workers were laid off or left due to the conditions created by the cuts, only to take insecure but better paid jobs as agency workers, which cost the public sector more.

Now, in the wake of the pandemic, we are seeing a similar transformation in the labour market as that which took place after 2008. Younger workers who left work during the pandemic are more likely to be returning to an insecure job. The Resolution Foundation recently found that 33 percent of young people returning to the labour force returned to an ‘atypical’ contract.

In an economy in which the balance of power is tipped so heavily against workers, every new crisis will be used as a means to deepen their exploitation. There’s no two ways about it: zero-hour contracts must be banned.

But in the long run, only an organised workforce can resist further attacks on their wages and conditions. Thankfully, there is evidence that union membership is increasing after several decades of decline—though membership is still concentrated in the public sector, and many low-paid workers aren’t yet unionised.

If you haven’t already, join a union now. If your workplace is already organised, ask your colleagues who represents them. If you’re interested in organising, join a union that represents your sector and get in touch—the TUC has a list of UK unions here.