New study shows significant numbers of zero-hours staff want more work

Workers on zero-hours contracts are much more likely to be underemployed, to be looking for another job, and to be without union membership than staff on conventional contracts, shows new analysis published today by the Resolution Foundation, an independent think-tank.

The research shows that almost three in 10 of all those on zero-hours contracts (29 per cent) are looking to work more hours – either in their current job or by taking on new employment. This compares to just one in 10 (11 per cent) of those with fixed-hours work.

The findings reinforce the importance of the debate over spare capacity in the labour market. The Bank of England has estimated that total labour market slack equates to as much as 1.5 per cent of GDP, with up to half of this being accounted for by underemployment (rather than just unemployment). And the Monetary Policy Committee considered the extent of underemployment among the growing number of self-employed workers at its interest rate policy meeting earlier this month. While zero-hours workers make up a much smaller share of the workforce, high underemployment among them could prove important if their numbers continue to soar.

The Resolution Foundation analysis is published just ahead of a new official estimate of the number of workers on zero-hours contracts due from the Office for National Statistics today (Weds 30). It is expected to substantially raise the estimate from its current figure of 580,000. Others have suggested the true figure is nearer 1 million.

As well as highlighting the prevalence of underemployment, the Resolution Foundation findings, which come from analysis of the most recent Labour Force Survey published last month (March), present fresh evidence that zero-hours contract (ZHC) workers occupy a highly precarious place in the labour market

Almost a quarter (23 per cent) of those on ZHC are looking for a different or additional job, compared to only 7 per cent of those in non-ZHC work. And while fewer than one in 10 ZHC workers (9 per cent) are union members, this rises to almost one in four (23 per cent) of those with regular-hours contracts.

Importantly, the research finds that the differences between ZHC and non-ZHC workers remain significant even when the analysis takes of account of age, qualification levels and job sectors – suggesting that greater job insecurity is connected to zero-hours work in general, and not just to particular parts of the labour market that have a high incidence of zero-hours work.

For example, looking at the number of workers overall who are in a union shows that those not on ZHC are more likely than those on ZHC to be union members by a ratio of 2.6 to 1. This gap remains broadly constant, or becomes even larger, when looking at different sectors and ages, even those with very low union membership overall.

Despite these differences between the two types of contract, the analysis suggests the pay ‘penalty’ associated with being a ZHC worker is lower than might appear at first glance. Overall, ZHC workers earn on average £5 less than their non-ZHC counterparts. But it is very likely that part of this gap is explained by the fact ZHC workers are more often found among the young, the lower-skilled and those working in low-paying sectors. By controlling for each of these factors in turn, the research confirms that the pay differential does shrink. However small sample sizes mean it is not possible to control for all of these factors at the same time in order to compare truly equivalent workers.

The study’s other findings include:

· The likelihood of being on a ZHC is higher for the youngest age groups with half of all ZHC workers aged under 30. And this is not just down to students fitting in work around studies – 18 per cent of zero-hours workers overall are students

· More than half of workers (53 per cent) on ZHCs have GCSEs or A Levels as their highest qualification

· More than one in five ZHC workers (21 per cent) have a degree, or equivalent qualification

· You are most likely to be on a ZHC if you work in hospitality (one in 12 of all workers in the sector), followed by arts and leisure (one in 20) and administration (one in 25)

· The sectors with the largest total number of ZHC workers are health and social work with 128,000 (22 per cent of the total), hospitality with 110,000 (19 per cent)) and both retail and administration with 58,000 (each 10 per cent).

Laura Gardiner, senior research analyst at the Resolution Foundation, said:

“We still need a much more accurate picture of the scale and spread of zero-hours contracts but even the partial data we have suggests growing concern about their use and the role they play in a labour market which remains very difficult for large numbers of workers.

“In particular, the significant minority of zero-hours staff who are looking to work more hours suggests a slack in the labour market which could have serious implications for the economy. If more people are on zero-hours contracts than is currently estimated, and if there proves to be widespread underemployment among the growing number of self-employed, this adds to the debate about the nature and extent of the slack in the jobs market.”

The government is conducting a review of zero-hours contracts which is expected to report by the summer.

The Resolution Foundation argues that the employment vulnerability associated with zero-hours contracts is a cause for concern and requires urgent examination, though it accepts that many employers, and some workers, welcome the flexibility they offer. The think tank has recommended a series of measures to strengthen the rights of workers’ on zhc without harming the flexibility valued by employers and some staff. Among these is a call for anyone who has been working on a zhc for at least a year to be given the right to switch to a fixed contract if they have worked regular hours.

Full details of today’s Resolution Foundation analysis are in this slidepack

ENDS

Notes

1. The quarterly Labour Force Survey is published by the Office for National Statistics. Zero-hours contract data is collected only in the final quarter each year. The version for the final quarter of 2013 was published on 3 March this year: http://discover.ukdataservice.ac.uk/catalogue/?sn=7468&type=Data%20catalogue

2. The Resolution Foundation report, Zeroing In, published on 24 March makes a series of recommendations for the reform of zero-hours contracts.

3. While the most recent ONS estimate of the number of workers on zero-hours contracts is 580,000, this is thought to be an under-estimate because it relies on self-declaration and not all workers realise the terms on which they are employed. In 2013 a survey of employers by the Chartered Institute of Personnel and Development suggested the number was around 1 million. The ONS will shortly publish an alternate estimate of the number of workers on zero-hours contracts based on a survey of businesses rather than worker self-declaration.

4. The minutes of the meeting of the 9^th April meeting of the Monetary Policy Committee, published on 23 April, include a discussion of possible underemployment among self-employed workers. http://www.bankofengland.co.uk/publications/minutes/Documents/mpc/pdf/2014/mpc1404.pdf