Michael Fry: Zero hour contracts

Ed Miliband, not a fan of zero hour contracts. Picture: TSPL
Ed Miliband, not a fan of zero hour contracts. Picture: TSPL
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THE MOST interesting thing about zero-hours contracts is that their appearance has been completely spontaneous. Nobody planned them. Nobody regulates them – not yet anyway. Nobody can say exactly when and where they started, or when and where they will end (if they ever do).

But, suddenly, over the last year or so, they have become quite a hot topic of public debate. How can this be, in a country more and more run by control freaks, where sometimes it appears nothing can be done without the preceding solemn deliberations and pronouncements of the great and good?

Given that these contracts are spontaneous, they must be fulfilling some real need in our society among the real people who have gone ahead and entered into them without ever asking politicians or experts.

It is not hard to think what the origins of this spontaneous development might be. On the one hand, we are only just picking ourselves up from a great financial crash during which many workers who had done nothing but be in the wrong job at the wrong time lost a living they thought was secure, and perhaps lost savings and pensions as well.

Joining these in the ranks of the jobless is a generation of students whose personal investment in higher education has not, at least not so far, paid off. They are highly qualified for something, but can find nothing that either satisfies their hopes or reflects their abilities.

On the other hand, there are a lot of employers who have had enough trouble just to keep going through the recession, what with consumers refusing to spend and bankers refusing to lend.

If they have got this far without going bust they may be able to look forward to better days ahead, but they are bound to be super-cautious in taking on any more definite commitments than they need to. This includes taking on any more employees, with their regular wage-packets, national insurance and other forms of social protection.

In short, the terms and conditions under which people expected to employ and to be employed up to 2007 can in many cases no longer be fulfilled, because economic uncertainty just forbids their being fulfilled.

Given a blockage like this, human ingenuity will usually find a way round. Zero-hours contracts are one result of this need.

In the case of the employers, the reason they like these contracts is fairly clear. They 
are by no means out of the financial woods yet and, before a greater degree of confidence returns, they would be foolish to make commitments to employees they might not be able to keep.

To this end, they come to arrangements with people who are, in principle, employable but who they cannot guarantee enough work to keep them busy at any given time.

Employers want such people to be available, of course, but only to perform tasks that are actually there to be performed.

When they do so they get paid, otherwise they do not get paid: that is a zero-hours contract.

It may seem a system heavily weighted in favour of the employer, but there are advantages for the worker too. One of the reasons going on the dole is such a disaster lies in the fact that it is so hard to get off again. Some measures have been taken in recent years to make things easier, but a man or woman who manages the transition from the dole to a full wage-packet will at once find their earnings so reduced by taxes (which may be levied at a punitive emergency rate) that the real difference compared to when they received benefits in terms of money in the pocket is hard to see. So why work?

In the unregulated world of zero-hours contracts this is not a question that need be asked.

There are advantages too for those we should be most concerned about, the young people trying to enter the world of work.

The experience of passing from school or university to a job in real life with, for the first time, your own money in your own pocket, should be an exciting one. Yet all over the western world it is the young that suffer the highest rates of unemployment, merely as a result of being at the back of the queue, unable to push past the older generations that got into jobs earlier and will not give them up now.

There could hardly be a more demoralising entry into adulthood.

Yet zero-hours contracts offer hope just here, where it is most needed. A handicap the young suffer compared to older workers is that they have no track record, so that employers cannot be sure they will be able to do what they are asked to do and will, as a result, be more reluctant to employ them. Zero-hours contracts at least allow young workers to show what they are capable of and to prove their value for regular employment.

On grounds of flexibility, these contracts are just as useful to students needing to work their way through university.

It is a sad commentary on modern Britain that the first instinct among certain politicians, a pack led in this instance by Ed Miliband, is to regulate and for preference to ban such spontaneous development in the world of work: if it is not controlled by the state, then it must be undesirable. But all that a ban on zero-hours working will do is create more unemployment.

There are few admirers in Scotland of the Austrian-born economist and philosopher Friedrich von Hayek, but I happen to be one of them, not least because spontaneity was, for him, always the mark of a great virtue in human nature: the ability to organise the world for itself, without being told to do so by some theory or theorist.