The Government has introduced its Employment Rights Bill with the promise of ‘the biggest upgrade to rights at work for a generation’ and is seeking to be both pro-worker and pro-business. While it is obviously important that people are free from being exploited at work and the measures are well-intentioned, the Government should be cautious about implementing many of them.
First, let’s take a look at zero-hours contracts (ZHCs). These have long been in the crosshairs of those on the Left who view them as forcing people into precarious working arrangements and so massively favour businesses at the expense of workers. I do have some sympathy for this view. I am currently writing a book on the welfare state and some of the people who I have interviewed have felt that they have had little choice but to accept such an arrangement even though they would prefer something with guaranteed hours. In his excellent book Great Britain, recently-elected MP and former Resolution Foundation chief Torsten Bell gives similar examples of people who have got up early and spent money on a train, only to get a call from their employer that there is no work for them that day. This is obviously a less than ideal situation for many people.
However, it turns out that ZHCs are actually wildly popular. For example, recent research by Nikhil Datta for the LSE reveals that these jobs get 25% more applicants for the otherwise same job at the same establishment in the same year. The study also shows that they appear to be particularly popular in areas with lots of young people – especially in areas with large student populations. Moreover, a recent report from the Centre for Social Justice has found that these arrangements are popular with workers as well as firms.
This is hardly surprising. Many businesses – especially in the hospitality industry – rely on people undertaking shift work, which is often at unsociable hours such as late at night or on weekends and some of these shifts can be difficult to fill. This is a great arrangement for many young people who cannot commit to full time work because of university, so are willing to work shifts which people with family or other caring responsibilities simply could not undertake.
As such, ZHCs clearly play an important role as they allow firms to get the staff they need while allowing workers to earn some extra money. Are ZHCs right for everyone? Obviously not. However, they are clearly ideal for lots of firms and workers – especially in the hospitality industry which is still trying to recover from the pandemic – and so it would be wrong of the Government to ban them.
The Government’s plans will also see a requirement for businesses to offer flexible working arrangements unless they can demonstrate a reasonable reason for why that should not be the case. This, again, is a bad policy. Working arrangements such as allowing people to work outside of core hours or spend a certain proportion of their time working from home rather than in the office can bring benefits. They might make workers feel more valued, increase productivity or encourage talented people to apply for roles when they might otherwise not do so. However, they also come with extra costs for businesses who may need to implement new policies, which in some cases may harm productivity.
The ‘working from home’ debate seems to have become politicised, with those on the Left tending to be more supportive than those on the Right. This should not be the case. It should be left to firms to decide what works best for them and set working arrangements as they see fit. If a business has found that in-office working at core hours is best for productivity, they should be able to insist on that and if they struggle to fill roles on that basis, then they will have to either change course and adapt or suffer the consequences. Chief executives know their business and industry better than any politician or civil servant and so should have the freedom to act that way.
This brings us onto a broader point about the dangers of politicians meddling in the labour market. The UK has experienced something of a ‘jobs miracle’ since the Great Recession. Economic history shows us that downturns tend to lead to job losses and we should have assumed that a recession as severe as the one which followed the Global Financial Crisis would have led to a period of mass unemployment with a scarring impact on the labour market. While the Great Recession has scarred the economy and we are still feeling its effects today, the labour market has remained tight even though the past 15 years have seen a massive recession and a global pandemic. Firms have not let workers go and have sought to hire new ones.
While many of these jobs have been low paid and the workers have experienced precarity, they are still jobs and they are better than the alternative. In short: a bad job is better than no job. Introducing measures which increase the burden on businesses or make it harder to get rid of unsuitable employees is likely to have an impact on the hiring practices of firms. For example, they might spend a much longer time during the recruitment process in order to ensure that they are certain they have found the right candidate. This will mean that people will be waiting longer to find a job while businesses go longer without having somebody in a role.
It could also mean that organisations are less likely to ‘take a chance’ on a candidate. Under the current system, a manager might interview someone who shows potential but doesn’t have all the skills and experience. This becomes much more risky if the probation period is shortened and it turns out they are not a good fit for the role. Young people are those who are most likely to be the ones who find themselves in this situation and so the proposals risk harming their career prospects.
Finally, not only do such reforms have the potential to increase unemployment, they could also exacerbate the country’s stagnant productivity. Forcing firms to keep people in positions for which they are ill-suited means that they have fewer resources to invest in their businesses and removes the incentive for these workers to find a role where their skills are a better match. This is bad for businesses, bad for workers and bad for economic growth.
While the Government’s proposed reforms may be well-meaning, they are fraught with danger. There is a real risk that they will harm businesses, place the livelihoods of low-paid workers in jeopardy, undermine the career prospects of young people and compound low productivity and economic growth.
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