Home » Business » Economized: working towards the lowest common denominator

Economized: working towards the lowest common denominator


TTRP has been focusing on the impact of the financial crisis on employment and exploitation in the UK.  We have looked at its effect on young people obliged to take unpaid internships in the face of a rising inability to access the labour market and at the Government’s attempts to get those in receipt of job seekers allowance to take on unpaid work as a method of retaining this unemployment benefit.  The pressure on poorly paid workers in the UK is steadily increasing through a combination of a “race to the bottom” by businesses to reduce costs and the need by Government to reduce public spending.

For example, one approach has been to reduce public sector employment as the Institute for Fiscal Studies highlights, “The overall level of public sector employment fell by about 300,000, or 5%, between 2010 and 2012…” The National Health Service (NHS) has been particularly badly hit with 50,000 jobs to be cut between 2011-2015; research showed that “nearly every [NHS] trust in the country admitted that they planned to shed staff over the next four years, with some losing up to one in five employees”.  The impact of these cuts was examined in a recent report by Oxfam, which found that half a million people in the UK are now reliant on food banks.  The authors commented

Some of the increase in the number of people using food banks is caused by unemployment, increasing levels of underemployment, low and falling income, and rising food and fuel prices. The National Minimum Wage and benefits levels need to rise in line with inflation, in order to ensure that families retain the ability to live with dignity and can afford to feed and clothe themselves and stay warm.

The last two months have seen a number of changes in the shape of the job market which are pushing those who are most vulnerable, including women, those with dependents and those working in unstable sectors (such as construction), over the poverty threshold.  Firstly, the rise of the zero hour contract: a legal mechanism which exempts employers from guaranteeing a fixed number of hours to a worker, but for which a worker is required to be on call, ready to work, without substantial prior notice.  For example, a worker may only paid for the hours worked, not those spent waiting on standby.  Secondly, as part of the proposed Enterprise and Regulatory Reform Bill, which received Royal Assent on April 24th, the Agricultural Wages Board was abolished.  Deemed an obsolete institution by some, it regulated the pay of 153,000 workers in England and Wales, including the provision of tied accommodation (affordable housing provided by the employer).  These workers, previously on set wages differentiated by skill, will have these standards removed.  Though their wages are protected by National Minimum Wage legislation, there is no now legal requirement for farmers to pay their workers more money on the basis of skills.  The rationale for the removal of this aspect of the Board’s work is unclear though advocates of removal claim that there will not be a reduction in wages for skilled workers.

The zero hour contract has been around for several years, primarily in the retail and finance sectors, which require more flexible workforces.  However, as more employers seek to develop a workforce able to effectively respond to the challenges posed by a poor economy there has been a marked increase in the use of these contracts.  They are now pervasive in the private care sector, e.g. for home care assistants and in the National Health Service, with almost 100,000 such contracts in use.  Though, according to a series of Parliamentary Questions, Government Departments, such as Education, Treasury and Work and Pensions, do not seem to be using these contracts.

Why are zero hour contracts considered so damaging?  For those already on low incomes, the lack of guaranteed regular earning makes financial planning near impossible; this also impacts the ability of an individual to establish their eligibility for state benefits, such as tax credits, which are assessed on income.  Further, employees are ‘tied’ to an employer; meaning that they are expected to be available for work at all times and thus cannot take on alternative employment.  There is also a knock-on effect on individual eligibility for annual leave, a problematic approach for any kind of forward planning, and on sick pay and pensions.  For those with caring responsibilities, the short notice period for availability can make childcare scheduling difficult.   As a result, these contracts are having a disproportionate impact on women, who make up the majority of care workers, cleaners, etc.   A quick look at Mumsnet, the biggest online parents’ forum in the UK, highlights many of these issues with zero hour contracts, with concern raised about the fact that childcare often has to be paid in advance, that irregular hours will lead to their state benefits for housing being cut and that accessing credit, to apply for mortgages and loans, is impossible as one’s proof of earnings may be inconsistent.  A thread discussing zero hour contracts indicates high levels of stress and anxiety amongst those on zero hour contracts.  This has led the union Unison to advocate a potential legal challenge to be brought to these contracts under the Public Sector Equality Duty (the duty on public authorities to promote equality of opportunity and eliminate discrimination).

Workers are not the only ones opposed to these contracts.  For example, the Chairman of the British Medical Association was quoted in the British Medical Journal as saying, “An expansion of zero hour contracts in the NHS is of great concern… they are not conducive to planning coherent cohesive services which focuses on the care of patients.”  This also makes investing in staff highly problematic – how can the NHS establish and maintain a workforce with a specific standard of skills? How are they able to ensure that staff are gaining relevant experience, for example, when policies and practices change? How do they know when there is a skills shortage which needs to be addressed? These questions highlight the relative short-termism of this approach to employment.  Zero hour contracts also raise serious questions about the legal status of such individuals as employees and subsequently what rights they are afforded.  In the UK, an “employee” has particular rights granted under the law such as maternity leave and pay.  A “worker”, in contrast, still has core rights but less than those afforded to an employee, for example, to maternity pay but not maternity leave.  These legal distinctions are not helped by the use of, as at the start of this post, the generic term worker.

Zero hour contracts have recently been the subject of increased political discussion.  However, the Labour Party, the natural home for such political opposition, seems to be struggling with a defined position on this issue.  After Andy Burnham MP’s appearance on a political talkshow, in which he made much of his opposition to zero hour contracts, it appears that

According to sources …as soon as Burnham left the sofa, his mobile phone rang. Outlawing zero-hours contracts, Burnham was told unequivocally, is not Labour policy and he must not champion their abolition. The call was allegedly from Tim Livesey, Ed Miliband’s [Labour Party leader] chief of staff. Ooops! Burnham, apparently, gave Livesey short shrift while also garnering the support of many Labour backbenchers who aggressively wish Labour would be less timid.

While the unions will undoubtedly seek to push the Labour Party to establish (and stick to) a position on the issue, the use of zero hour contracts seems set to continue.  The contracts enable an “as and when” workforce, unencumbered by such niceties as a steady salary or benefits.  However, as long as such contracts are economically viable and indeed financially beneficial to the employer, there is little incentive to reduce their use.

The Government’s commitment to getting “more” value for money from employees can also be seen in the abolition of the Agricultural Wages Board.  Its demise was welcomed by the National Farmers Union (NFU), who have consistently argued that its removal would provide an opportunity for “individual farm businesses to recruit and retain workers without the restrictions of the inflexible AWB” and “the existence of a board that negotiates minimum wage rates for farming and horticulture is totally out of step with […] wider employment legislation (that applies to all workers), and the farming industry.”  Opponents to this abolition claimed that the removal of the cap on how much employers can charge employees for accommodation will reduce the quality and availability of accommodation for workers, who, due to the lack of rural housing and high rental/purchase costs, will be forced to live in sub-standard accommodation.  Further, not only did the Board set minimum rates of pay based on skills, it offered a set of protections unique to the agricultural sector, for example, the rate of sick pay; without this, new young workers will be disincentivised to enter the sector.  What vexed the unions, all unions that is apart from the NFU, was the lack of debate about the plan to abolish the Board.  By tucking it away in a broad ranging bill, there was little opportunity for discussion in either the House of Commons or Lords, meaning it passed with no objections.

All of these changes, combined with the cuts to the state benefit system, mean that there is  a greater percentage of the UK population sliding into poverty.  The lack of full time jobs shown by the rise of the zero hour contract and the changes to wage structures, such as the abolition of the AWB, are contributing to the pressures on an already economically vulnerable part of the population.  The Joseph Rowntree Foundation found, in its research into poverty, that “around 6.5 million people are underemployed, up by more than 2 million since the middle of the last decade” and that “6.1 million people in poverty are in working households”.  The Foundation’s analysis of part time work, for example, concluded that

Not only does part-time work offer fewer paid hours, those hours are, on average, less well-paid than full-time hours. On top of this one in five women and one in seven men are paid less than £7 per hour. A cut in hours and a potential cut in hourly pay means people have less money to spend. All of this is a drag on economic recovery.

In this respect the changes outlined in this post smack of short-termism; setting the UK on a course of increasing poverty and economic ineptitude.  Last week, there was the recognition of some of the limitations of zero hour contracts as Vince Cable, Secretary of State for Business, announced a review of such contracts and “will invite trade unions, major stores and fast food chains to see if the law needs to be tightened up”.


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