A first glance at the latest commentary from the Office for National Statistics (ONS) on the UK labour market in the last quarter of 2019, and everything looks rosy: employment is up 1%, unemployment is down 5.4% on the same period in 2018, and regular average weekly earnings finally exceed the peak earnings before the financial crash of 2008. But is it all really as good as it seems?
The leader of the House of Commons, Jacob Rees-Mogg, thinks so – tweeting about the effect of the “Boris bounce” on wages. But the Trades Union Congress (TUC) asserts that working people have experienced 12 years of lost wages and are facing record levels of work insecurity. If current trends continue, it says, around a million working people will be on zero-hours contracts by the end of this year. The TUC also claims for a political party that has been in power for 10 of the 12 years since the financial crash, the current state of the labour market is not something to be proud of.
A zero-hours contract means an employer does not have to offer the employee fixed hours. According to the Advisory, Conciliation and Arbitration Service (ACAS), it is a “flexible” option if work is not constant, or the work can be “as and when”. Under law, an employee has the same rights as a standard employee including the national minimum wage and holiday pay. But the supply of work is very much in the hands of the employer. The flow of employment can be cut off at any time and shifts can be cancelled with very little notice, leading to financial insecurity.
In a speech at the Labour Party conference in 1995, the then leader of the opposition, Tony Blair, highlighted “the need to end zero-hours contracts” in his bid to stop part-time workers being treated like “second-class citizens”. But 20 years later the number of people on zero-hours contracts was almost 700,000 and growing. Today that figure stands at 974,000.
Wage growth and zero-hours contracts
The bad news continues for wage growth as well as the numbers of workers on zero-hours contracts. According to the ONS, “for the first time since March 2008, real regular average weekly earnings exceeded the highest level reached before the economic downturn”. The real average weekly wage – which the ONS uses to work out average earnings based on information collected for the Monthly Wages and Salaries Survey – has increased to £474. But the highest wage recorded before the 2008 financial downturn was £473, meaning wages for October to December 2019 have grown just £1 since the spring of 2008.
The TUC even casts doubt on the idea that wages have returned to pre-recession levels. “Real” wages do consider inflation – but there are several different methods of measuring it: the Consumer Prices Index including occupiers’ housing costs (CPIH); the Consumer Price Index (CPI); and the Retail Price Index (RPI).
The ONS uses CPIH with 2015 as a base year to calculate real wages – which gives the most favourable reading of wage levels in comparison to March 2008. If CPI is used, wages are £10 per week less than at their peak in 2008 and using RPI it is a staggering £49 lower. The Resolution Foundation, an independent think-tank which focuses on improving living standards for low and middle earners, calculates that if wages had continued to rise at the rate of 2.1% from 2008 levels – which was the pre-recession average growth rate using CPIH, earnings would be £141 higher per week than they are now.
The use of zero-hours contracts has exploded over the past decade. In the figures published by the ONS, just under one million working people are on zero-hours contracts in their “main job”. That accounts for 3% of employed people in the UK. Although employment figures seem positive in general, to be classed as employed in the UK you need only work just one hour per week.
In the latest ONS figures, one-third of people on zero-hours contracts are aged between 16 and 24, and 100,000 more women are working this way than in 2018. This could have negative effects on families and young people early on in their career, including financial insecurity and poor mental health.
In academia, increasing casualisation of academic work has been cited as a factor in a dispute taking place at universities across the UK. And zero-hours contracts have been the trigger for industrial action in the hospitality sector in recent years.
Good for business?
Zero-hours contracts are often touted by businesses as being flexible for the likes of students, which might be the case for some employees. But similar flexibility can be achieved with part-time contracts, which would provide the employee with job and financial security.
The Chartered Institute for Personnel Development (CIPD) highlights the importance of providing quality jobs for positive employee well-being. But job quality can also increase workforce productivity, innovation and employee engagement. It can also be linked to reducing absence levels and employee turnover. And, as numerous academics have suggested, job security is a fundamental component of job quality. Zero-hours contracts are not only exploitative but they may also make very little business sense in the long term.
In January 2020, Andy Burnham – the Labour mayor of Greater Manchester – launched the Good Employment Charter, an informal pledge that commits businesses to paying employees more than the minimum wage and banning the use of zero-hours contracts in Manchester. Burnham said the programme was set up to help lift workers out of in-work poverty and provide secure employment.
Unfortunately the Greater Manchester Combined Authority, which is headed by Burnham, does not have the necessary legal powers to force employers to ditch zero-hours contracts. So the informal pledge remains an agreement which could be reneged on.
For an outright ban on zero-hours contracts to take place across the UK, legislation would have to be passed at Westminster. In December 2019, a poll showed that two-thirds of voters supported banning them. But the prime minister, Boris Johnson, has not signalled any intent to do so. And with the Conservatives’ 80 seat majority in the House of Commons, much-needed regulation looks unlikely in the near future.
The UK urgently needs to address the growing casualisation and insecurity that exists in Britain’s labour market – besides the issue of low wages. It is time for the UK government to honestly confront the darker issues lurking beneath the veneer of “positive” employment stats and seemingly impressive wage growth.