Fact Check: would banning zero-hours contracts harm more people than it would help?

Theresa May: not bowing to pressure to ban zero-hours contracts. Matt Dunham/PA Wire

So while Matthew’s report is clear that many workers value the flexibility that zero-hours contracts offer them, and that banning such contracts altogether would harm more people than it would help, it is important that we continue to ensure that employers do not use these contracts to exploit people.

Theresa May, speaking at the launch of a report by Matthew Taylor on working practices in the UK on July 11.

Zero-hours contracts allow employers to hire workers ad hoc without guaranteeing them a minimum number of hours a week. There were 905,000 people on zero-hours contract between October to December 2016, but they remain controversial. The Labour Party has promised to ban them, but the government remains committed to keeping the rules that allow this kind of casual employment.

In her comments, the prime minister was referring to a section in the Taylor Report on zero-hours contracts, which states: “To ban zero-hours contracts in their totality would negatively impact many more people than it helped.”

The Department for Business, Energy and Industrial Strategy confirmed to The Conversation that this statement was based on a Labour Force Survey published in March 2017 – also mentioned in the Taylor Report – which found that “68% of those on zero-hours contracts do not want more hours”.

Scant evidence

Apart from this 68% figure, the Taylor Report provides few other clues to the assumptions underpinning the claim. Yet how many would prefer to work the same number of hours but with contracts that offered them greater certainty? If employers were required to provide a guaranteed minimum number of hours, what impact would that have on overall employment and the employment opportunities open to workers with different circumstances? These questions have received insufficient attention.

One in seven care workers were employed on zero-hours contracts in 2016. via shutterstock.com

The Taylor Report mentions that almost a fifth of people on zero-hours contracts are in full-time education. A ban on zero-hours contracts might make it more difficult for some of these individuals to combine paid work and studying, but we do not know what percentage would simply seek a more regular part-time job.

A similar issue arises in relation to those with caring responsibilities: for some, zero-hours contracts might provide a good means of fitting work around care commitments, but what percentage would prefer a contract that offered greater certainty? Evidence relating to these issues is lacking.

How to measure cost and benefits

The lack of detailed, regularly collected and nationally representative data about the consequences of zero-hours contracts for workers, and employers, limits our ability to debate the pros and cons of a complete ban. Respondents to the Labour Force Survey are asked whether they are employed on a zero-hours contract, but are not asked about the consequences for their well-being, job satisfaction and quality of life. The Understanding Society Survey, which does examine issues such as well-being and quality of life, does not explicitly ask respondents whether they are employed on a zero-hours contract.

The costs and benefits associated with zero-hours contracts potentially extend beyond those who are employed under such contracts. For workers with families, the uncertainty associated with zero-hours contracts may have implications for the well-being and standard of living of all household members. These wider consequences would presumably need to be taken into account in any assessment of whether a ban would harm more people than it would benefit.

To fully assess the claim we would also need to define what we mean by negative and positive impacts. And to consider whether the nature and scale of harmful and beneficial effects resulting from a ban might vary between different groups. For example, might the potential “harm” to a student resulting from a loss of flexibility be outweighed by the potential benefit – in terms of increased financial security and reduced anxiety – to an older individual from having a more reliable income? And might that potential benefit be considered even greater if that individual has children?

Even if it were true that a ban on zero-hours contracts would hurt more people than it would help, that would not necessarily be sufficient grounds for retaining zero-hours contracts. We would also need to consider the nature and consequences of the gains and losses in order to assess the overall impact on society.

Verdict

In the absence of evidence that would enable us to more accurately assess the potential positive and negative impacts of a ban on zero-hours contracts, the claim that a ban would hurt many more people than it would help surely amounts to speculation rather than hard fact.

Review

Keith Bender, SIRE chair in economics, University of Aberdeen

Overall, I agree with the verdict. There is little data in the Taylor Report to support the government’s claim. The key question when looking at costs and benefits is “compared to what?” The 68% figure mentioned in the report can be contrasted with further data from the March 2017 report from the Office for National Statistics showing that over 90% of those not on zero-hours contracts do not want more hours – a sizeable difference.

The graph below shows that zero-hours workers are much more likely to want an additional job, a replacement job with more hours or more hours on the current job. It may be that a zero-hours jobs are better than no job, but in terms of hours, these ONS statistics suggest that they do not compare favourably with other types of contracts.

I agree with the author that more research needs to be done in this area to draw any conclusions. Key to that will be understanding the “voluntariness” of zero-hours contracts – understanding who wants them because of desired flexibility and who are forced into them because of a lack of other types of contracts.

The Conversation is checking claims made by public figures and prominent in public debates. Statements are checked by an academic with expertise in the area. A second academic expert then reviews an anonymous copy of the article. Please get in touch if you spot a claim you would like us to check by emailing us at uk-factcheck@theconversation.com. Please include the statement you would like us to check, the date it was made, and a link if possible.