Workers on zero-hour contracts (ZHC) face lower wages and significantly higher turnover rates, yet such jobs have 25 per cent more applicants than a permanent position for the same role, research from the London School of Economics (LSE) has found.
The study Why do flexible work arrangements exist? published by the LSE’s Centre for Economic Performance (CEP), uses data from more than 31,000 employees, to show that ZHC staff typically stay in their job for only a third as long as the same staff on fixed-hour contracts – with more than 10 per cent of those hired on ZHC leaving before they even work a single shift.
And an additional analysis of national data, shows ZHC wages are approximately 6 per cent lower than those for equivalent permanent jobs in the same occupation and industry.
Despite this, ZHC roles attract 25 per cent more job applicants than equivalent fixed-hour positions and very few ZHC workers apply for equivalent fixed-hour positions within the same firm when vacancies come up.
The research comes as zero-hours contracts, which do not guarantee a set number of working hours, are in line for tighter regulation under the new government. Critics argue that they create unstable income for workers and undermine job security, while supporters claim they offer two-sided flexibility for businesses and workers.
The study’s author Nikhil Datta, assistant professor of economics at University of Warwick and CEP associate, said: “Given there are some workers who show a strong preference for zero hours contracts, firms have a greater ability to mark down their wages compared to colleagues in fixed-hour jobs – targeting that discrepancy should be a priority.”
The study shows workers on ZHCs are more likely to be young, living in high student population areas and have higher education levels than those on other contracts - and that ZHCs are often used for temporary work.
Using detailed timesheet data, the research also uncovers new information on the volatility of hours and earnings experienced by ZHC workers. Many workers actually see very little week-on-week hours and earning volatility. But, there is a small proportion of workers who experience a lot of volatility. Around 10 per cent of workers see changes in their weekly earnings of £175 or more. Over the same period a full-time minimum wage worker would have expected to earn £318 a week.
From an employer’s perspective, ZHCs serve as an essential tool for managing staffing and demand fluctuations. The study demonstrates how firms rely on ZHC workers to cover for staff absences from issues like sickness, staff turnover and responding to sudden changes in consumer demand and thus why they are more prevalent in industries such as hospitality, leisure and retail.
“This new research is important for those in government,” added Dr Datta. “Many workers on ZHCs prefer them, and they play an important role for firms facing varying conditions. Policy makers should be cautious with how heavily the use of ZHCs is regulated. Outright bans would be counterproductive, but policies aimed at offering workers a right-to-request a fixed number of hours after some time in employment, are more reasonable. However, more attention should be paid to ensuring that ZHC staff get paid the same wage rate as their fixed-hour counterparts.”
Read the full discussion paper here: Why do flexible work arrangements exist?