Zero-hours contracts are a vital path to working

August 6, 2013

Labour MP Tom Watson has tweeted that zero-hours contracts should be outlawed. His party will be hosting a “summit” on the issue in the autumn. Labour clearly views zero hours as a way of showcasing how Government austerity policies have widened the divide between rich and poor.

The problem is that banning zero-hours contracts would be damaging to both the economy and to the employees on them. The contracts mean that firms do not have to offer employees a given number of hours each week and, in turn, workers can turn down any hours offered. This can come with advantages to both employer and employee.

For businesses, the contracts can reduce the risk of taking on new staff and provide flexibility if demand is growing or unstable. The period since the financial crisis has shown the value of such flexibility. Employment held up remarkably well in the face of significant falls in economic output. Now, as the economy takes fragile steps towards sustained growth, firms looking to expand production can increase their workforce in a way that minimises the risk of investment.

On the worker’s side, family or caring commitments and other jobs or courses can be juggled in way that is flexible and responsive to their needs. For instance, students can manage time pressures around exams or term-time-only employment. We should also remember that, in a time of heightened unemployment, having recent employment experience is a vital part of finding work. More than a third of people currently on these contracts are under 25: this can act as a vital stepping stone into full-time, permanent work, should they want it.

It is also clear that such contracts can come with problems. The Chartered Institute of Personnel and Development suggested yesterday that about a third of employees on these contracts would like more hours. Some 14 per cent felt the hours they were offered were often insufficient for them to achieve a basic standard of living. With the cost of living rising, this is a real concern that government should be looking to tackle.

To do this, ministers should focus on helping people to increase their hours and earnings once they have found work. For instance, Jobcentres are currently focused on moving people off benefits as quickly as possible, meaning the prospect of low-paid and insecure work is often the norm for those on benefits.

Instead, Jobcentres should be incentivised to help people find full-time, permanent employment and to improve their skills so that they can earn more. Doing so would mean that those with zero-hours contracts could have the help they need to take steps into permanent employment if they wanted it and, as earnings increased, fewer people would be relying on the state to top up their incomes.

For this to work, the economy needs to keep growing. This means support  for businesses and workers who are driving the economy forward. Banning zero-hours contracts would do the opposite: it would increase costs to businesses looking to grow and would reduce opportunities for those seeking to take their first steps into work. We need support and investment to help people into sustained employment, not more legislation.”

This article originally appeared on the Evening Standard website.

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