Skip to content

Flexibility or insecurity: Are jobs with no or few guaranteed hours really desirable for workers?

This year the UK employment rate reached 75.6%, the joint highest figure on record (ONS, 2019). Strong employment growth occurred partly on the back of self-employment and ‘atypical’ jobs that lack the worker rights and security that were the norm in the past. The gig economy and zero hours contracts have received the most attention in public debate. However, insecure employment is much more widespread and can take many forms. A study by the Resolution Foundation estimates that over 70% of employees do not receive the same pay each month (Tomlinson, 2018)

Ttlv silvia pay insecurity

Are zero hours jobs and other ‘atypical’ jobs with highly fluctuating pay ‘bad jobs’? Business organisations such as the British Chamber of Commerce have strongly argued against such a view, claiming that they are a vital part of a successful labour market. From the employer’s side, the benefits are obvious. Zero hours contracts and other forms of atypical employment allow employers to reduce their staffing cost and to avoid paying their workers during periods when demand is weak. But public arguments in favour of zero hours jobs have often focused on workers rather than employers. The claim is that these jobs offer flexibility not just to employers but also to workers, allowing them to combine work with other commitments such as parenthood, study or semi-retirement. Yet, in practice, the worker’s flexibility needs are unlikely to exactly match those of the employer. As the employer usually holds more bargaining power in an employment relationship, flexibility can easily become one-sided.

When zero hours jobs are a way to top up household incomes, their flexibility might be welcome. But when they are a major income source, the lack of a guaranteed level of pay is likely to generate significant income instability. We know from previous research that unstable income is associated with many negative outcomes such as clinical depression (Prause et al., 2009), poor health (Halliday, 2007), food insecurity (Dahl et al., 2014, Leete and Bania, 2010), and problem behaviour in adolescents and children (Gennetian et al., 2015, Hill et al., 2013).

So, how can we tell whether zero hours jobs are really desirable or not? One way is to ask workers on zero hours whether they would prefer a different type of contract. Nikhil Datta, Giulia Giupponi and Stephen Manchin (2018) have done precisely that. In an online survey of the UK working age population, they found that 45% of workers on zero hours contracts would prefer to work more regular hours.

A different, indirect, approach is to look at the extent to which workers avoid taking up zero hours jobs. In a study funded by the Nuffield Foundation, I examined the links between pay insecurity and labour supply and found that individuals in local labour markets (measured by occupation and region) with a higher share of jobs with variable pay have, on average, significantly longer unemployment spells.

It could be argued that workers avoid variable pay jobs because they tend to be lower paid. A Resolution Foundation study found that zero hours workers earn on average around £1,000 less per year compared to workers on regular contracts doing the same type of work.

My research has similarly shown that workers in jobs with variable pay earn less than the rest and that the gap widened considerably between 2009 and 2017. However, low pay and worker characteristics are not enough to explain patterns in the data. Using Understanding Society, a large-scale panel survey of the UK population, I found that women facing a local labour market with a higher share of jobs with variable pay are less likely to move from non-employment into paid work, even when controlling for differences in wages, demand and worker characteristics such as age, education, number of children, health status, household income and previous non-employment spells. These findings suggest that pay variability is potentially a significant cost for workers that they try to avoid by waiting for jobs with more stable pay.

The UK labour market’s flexibility has long been considered a major strength and a crucial feature underpinning high employment levels. However, it is important to recognise that this flexibility not only has advantages but also costs and these tend to fall disproportionately on workers, especially the low-paid. Whether by direct regulation or by imposing a higher minimum wage for zero hours work as the Taylor Review has suggested, policy makers need to address the power imbalance at the heart of insecure and precarious employment.

References:

CLEGG, R. 2019. Employment in the UK: May 2019. Employment and labour marker. Office for National Statistics.
DAHL, M., DELEIRE, T. & MOK, S. 2014. Food Insufficiency and Income Volatility in US Households: The Effects of Imputed Income in the Survey of Income and Program Participation._ Applied Economic Perspectives and Policy, 36, 416-437.
DATTA, N., GIUPPONI, G. & MACHIN, S. 2018. Zero Hours Contracts and Labour Market Policy. _68th Economic Policy Panel Meeting. Vienna: Austrian National Bank
.
GENNETIAN, L. A., WOLF, S., HILL, H. D. & MORRIS, P. 2015. Intrayear Household Income Dynamics and Adolescent School Behavior. Demography, 52, 455-583.
HALLIDAY, T. J. 2007. Income Volatility and Health.IZA. Discussion Paper Series, 3234.
HILL, H. D., MORRIS, P., GENNETIAN, L. A., WOLF, S. & TUBBS, C. 2013. The Consequences of Income Instability for Children’s Well-being. Child Development Perspectives, 7, 85-90.
LEETE, L. & BANIA, N. 2010. The Effect of Income Shocks on Food Insufficiency. Review of Economics of the Household, 8, 505-526.
PRAUSE, J., DOOLEY, D. & HUH, J. 2009. Income Volatility and Psychological Depression. American Journal of Community Psychology, 43, 57-70.
TOMLINSON, D. 2018. Irregular payments. Assessing the breadth and depth of month to month earnings volatility. London: Resolution Foundation

Photo credit: Anthony Cullen