Miliband's flawed swipe at zero-hours contracts

Flexible labour markets have been good for the UK. Fears that the recession would leave three million unemployed proved groundless, and since the recovery gained steam the increasing number in work has been nothing short of astonishing.

British workers deserve much of the credit for reacting to the slowdown by accepting less pay and hours. But labour market rules gave them little choice. In the UK, when there is less work to go around, it is the boss who decides how it is shared out. Collective bargaining has largely retreated to the public sector. Elsewhere, employers can easily vary conditions, lay off staff, and hire them again when the economy picks up.

Greater peace of mind for the boss comes at the expense of job security. This includes the widespread use of contracts that guarantee no work at all. Ed Miliband, the Labour party leader, this week vowed to fight the apparent growth in this phenomenon by giving zero-hours workers the right to permanent work after just three months.

Mr Miliband's vow should be seen for what it is - a campaign announcement designed to position Labour on the side of the beleaguered worker. While the Tories were proclaiming their endorsement from corporate Britain, Mr Miliband was taking up arms for cleaners and shop staff unsure of their next pay packet. He was no doubt emboldened by the prime minister's recent televised confession that he could not live on a zero-hours contract.

Electoral opportunism aside, Labour has good cause to focus on what has become an emblem of Britain's low-wage economy. Lighter rules around hire and fire may have kept a lid on unemployment, but have done nothing to shift British workers into more productive occupations. Indeed, some economists charge Britain's flexible labour market with making a crisis in productivity worse. Staff that can be easily picked up and discarded provide companies with little reason to invest in making them more effective.

But this attempt to regulate against job insecurity is unlikely to succeed. Far too little is known about zero-hours work. It is hard to distinguish greater awareness of the phrase from increased use of the contract. The best guess is that just 2 per cent of all staff work on such terms. Most such workers report being happy with how they are treated. Indeed, zero-hours contracts ease the path to much work that is beneficial to all concerned, such as students or retirees looking to earn a little more on the side.

There are bound to be practical difficulties, given that what Labour proposes is effectively to force employers to offer permanent contracts against their will. The more unscrupulous would wiggle around any new restriction, for example by ceasing to employ staff after 10 weeks, or keeping them on minimal rather than zero hours. Labour market enforcement relies on staff taking their chances in court; few such workers could stomach the risk. The state cannot legislate against employers simply refusing to hire staff on anything but the company's terms.

There is nothing inherently unfair about a zero-hours contract. But it is clearly unfair to treat as temporary a worker who is effectively committed permanently to one employer. Even ineffective changes to the rules can shift behaviour when they reflect a moral consensus. Mr Miliband's intervention will not fix low-wage Britain: only a sustained rise in productivity can do that. But it could signal the limits of what is acceptable treatment of those struggling at the bottom of the labour market. For an election campaign that may be good enough.

© The Financial Times Limited 2015. All rights reserved.
FT and Financial Times are trademarks of the Financial Times Ltd.
Not to be redistributed, copied or modified in any way.
Euro2day.gr is solely responsible for providing this translation and the Financial Times Limited does not accept any liability for the accuracy or quality of the translation