by Kam Sandhu – @KamBass
We’ve been hearing a lot about the economic recovery, but for many of us, we have felt no effect and with further looming cuts and pay freezes, it seems the recovery is nowhere in sight. So we spoke to Giselle Cory from the Resolution Foundation to find out more.
The Resolution Foundation is an award winning social policy think tank, focusing on improving the living standards and conditions of those on lower to middle incomes. They have exposed the flaws of government policy for this section of society and are working on solutions that will make a difference. In the first part of our interview with Giselle Cory, senior research and policy analyst at the Foundation, we talk about what is happening to the economy and how employment is being affected by zero hour contracts and lower job security…
We have heard in the news that we have these green shoots of recovery and that the economy is picking up, but a lot of people are not this feeling at the moment, so what is happening? And how does it compare to what good growth should be?
“The signs that we’ve seen at the moment of improvement in employment rates and other various other very broad indicators are welcome. They are definitely things we want to see. But if we dig a little deeper, what’s quite clear is that a lot of people won’t be feeling like their situation is quite so rosy. One very indicative way to understand the situation of people on lower and middle incomes is to compare the growth in wages they’re likely to be seeing against the growth in prices that we’re experiencing.
“Prices are rising way higher than people’s wages, and that effectively means that they’re seeing a real terms decrease in their wages. It feels like a pay cut. So for that group, looking at the positive headlines, they might feel quite estranged from that reality.”
“So if we look at average weekly earnings and the change in that over the last year or so, we’re looking at 1% – so that’s very low growth in wages. In the past we’ve seen 2 or 3% and we’d expect 2-3% or more higher growth to ensure people feel that their earnings are rising to keep up with prices. What we see now is 1% earnings growth and about 3% inflation. So in effect, prices are rising way higher than people’s wages, and that effectively means that they’re seeing a real terms decrease in their wages, even for those people who haven’t seen their pay cheque get any smaller or have’t fallen out of work. It feels like a pay cut. So for that group, looking at the positive headlines, they might feel quite estranged from that reality.
“The other thing we’ve seen is a significant shift in the type of employment people are in. So obviously a lot of families will want to be in work rather than not be in work, yet many find themselves in work that is not secure, is not offering them opportunities for progression and is not paying them very well. So there we’ve talked a bit about average earnings growth. It’s important to focus on what people are getting towards the bottom of the earnings distribution, and we find that in the UK in particular, we don’t look like a best practice country – which is quite surprising considering our position globally. To look at low pay rates, they’re very, very high. We’ve got about one in five people on low pay and that’s comparable with the US, but far higher, than other similar, Western European countries. So we have got a big traunch of people stuck at the bottom of the pay spectrum.
“Now the concern here is that more traditional contracts of fixed hours are being replaced by these zero hour contracts in a lot of sectors where people don’t have other options. So you’re looking at sectors that are low paid, low levels of qualification required to get those types of jobs. So it’s really affecting that very particular group of people.”
“And then the other issue I mentioned briefly was precarious employment so, issues such as zero hour contracts, they’ve been in the press a lot lately. Though no one really knows the prevalence of zero hour contracts because the data’s not good enough, what we do know Is that there are a lot around and they’re increasing in number over the last 5-10 years or so. Now, labour market flexibility is on the one hand a very good thing, and for some people zero hour contracts will be perfect, but for a lot of people we know they’re not. So for people who perhaps have responsibilities at home, young children for example, and are on zero hour contracts where they need to be available for work all the time, but don’t know what hours they’re going to get that week, it’s very difficult to manage their lives – both manage their budget but also manage their childcare and make sure they can get to work if they’re needed. For those families, when they have no option but to take these zero hour contracts, they’re left in a quite miserable and precarious position because they have no security day-to-day or week-to-week.
“Now the concern here is that more traditional contracts of fixed hours are being replaced by these zero hour contracts in a lot of sectors where people don’t have other options. So you’re looking at sectors that are low paid, low levels of qualification required to get those types of jobs. So it’s really affecting that very particular group of people who can’t simply say, ‘well I don’t want that type of contract, I’m going to go elsewhere’ because everywhere they look that’s the only thing they’re being offered.”
What does it do to strength of economy? How does this presence of low job security affect growth?
“Unfortunately, it makes the employment figures seem a little less positive than we’ve seen because if we have a rise in employment which is due to things like a rise in the use of zero hour contracts, and a rise in contracts that aren’t great for a lot of people like temporary contracts, like short hours contracts when people want long hours contracts – because of course under-employment, where people want to work more but can’t get the hours, has been a massive and growing problem in the last couple of years – so when we have employment figures which look like they’re going up, but actually if you break them down are made up of rising chunks of people on these forms of insecure work or in under employment, then actually all we’re doing is creating a large constituency of people who either aren’t working enough or aren’t working securely. It’s not particularly robust in terms of maintaining long term growth for the nation, and it’s also not great for the living standards for the people involved.”
So do you think employer’s need to take greater responsibility in supplying better contracts?
“It’s tricky in a sense. I don’t think it’s black and white. In terms of the contracts that should be available to employers for their employees, what we have seen is, what looks on paper like a very good way to increase the flexibility of the labour market, in practice doesn’t work very well for the employee. So a zero hour contract, if used as intended, say that I will employ someone who doesn’t need to be guaranteed a constant source of income, they’re okay with the fluctuating income, maybe they want that, perhaps they’re a student and we can negotiate with them when they’ve got exams and they go on to less hours – that fits their lifestyle. Absolutely wonderful.
“So that’s in effect, using these contracts as a management tool, when that’s not what they’re intended for and that’s a great imbalance of power between the employer and the employee.”
But what we see actually, is that these contracts are being used to disempower the employee. So we’ve seen evidence of really bad management practice where someone is on a zero hour contract, their boss says ‘I want you to work Saturday.’ They might say ‘I can’t’ or ‘I can’t get childcare’ for example, or ‘I would simply rather not’, and they are zeroed down, which is effectively where they’re pushed to very few or no hours in the medium or longer term. So that’s in effect, using these contracts as a management tool, when that’s not what they’re intended for and that’s a great imbalance of power between the employer and the employee. So it’s a case of doing what we can to design these contracts better, and that’s partly legislation, but it’s also partly about how we try to moderate the relationship between the employer and the employee. But it’s doing that in a way which means we’re keeping all the great aspects of having a very flexible labour market for the employers and the employees that it benefits, but we’re not allowing these things to be abused.
“And we’ve seen that’s very tricky. We’ve seen very perverse consequences for trying to mitigate for that kind of abuse in the past when we’ve done things around agency staff and temporary contracts. None of this is straightforward, but what we do know is as it stands at the moment, employers do have a perhaps, undeserved upper hand in their ability to manipulate their employee.”