Precarious employment & the ‘recovery through regressive redistribution’

Proliferation of zero hours contracts is further entrenching Britain’s dysfunctional economic model

Scott Lavery
Scott Lavery

The UK’s economy has recently shown signs of modest recovery, with growth in the previous quarter up by 0.7%. Some have argued that this belatedly justifies the coalition government’s austerity programme. But, precisely because some economic indicators suggest that the UK might be stuttering out of its deep stagnation, it is crucial to examine the anatomy of this growth. Who is benefiting from this recovery? Who is not? And what are the long-term implications of these trends for the British political economy? In a recent contribution to this blog, Jeremy Green argued that we should view the Anglo-American response to the global economic downturn as involving a project of securing ‘recovery through regressive redistribution’. He outlined how loose monetary policy adopted by the Federal Reserve and the Bank of England – in particular the policy of ‘Quantitative Easing’ – has effectively resulted in the transfer of wealth upwards to those in the top income decile. This project is deepening income inequalities in our already highly unequal Anglo-liberal societies.

This notion of ‘recovery through regressive redistribution’ provides a useful lens through which to understand the re-structuring of the UK’s state and economy in the post-crisis period. The point is that the expansionary monetary policy pursued by central banks has not worked in isolation. It has been complemented by a politically sanctioned downward transfer of financial burdens and insecurities onto those lower down the income scale.

Both aspects of this process must be considered in order to account for the emerging ‘recovery through regressive redistribution’.

In the past five years, real wages have declined by 6.3% in the UK. This is the fourth worst drop in real wages of any economy in Europe.  What’s more, this trajectory is set to deepen in the years to come. The Resolution Foundation has shown that low-to-middle income households can expect to experience wage stagnation until at least 2020. This challenges the idea that GDP ‘growth’ is some universal arbiter of economic health and it re-affirms the view that the benefits and the burdens of this recovery are being distributed in a highly uneven manner.

As well as a ‘quantitative’ reduction in real wages, Britain’s crisis response has been characterised by a qualitative re-ordering of its labour market. In particular, precarious employment – the creation of part-time, ‘atypical’ and non-standard working arrangements – has rapidly increased since the 2008 recession.

This intensification of precarious employment is most potently symbolised by the escalation in the use of zero hour contracts as an employment practice throughout the UK. These contracts place employees on a company’s payroll but do not offer them any guaranteed minimum number of hours of work. Characterised by ‘flexibility’ (for the employer) and insecurity (for the employee), they are representative of the redistributive recovery as lived by an increasingly precarious labouring class.

Two recent trends relating to zero hours contracts can be usefully highlighted.

The first is that, during the years since the recession of 2008, the number of people employed on a zero hour contract has increased rapidly. In 2005, official figures estimated that 54,000 people in the UK were on one. Today, the Chartered Institute of Personnel and Development puts the figure at 1,000,000, which is as much as 3-4% of the UK workforce. Other reports have put the figure at closer to 5,500,000 people.

Moreover, these contracts are not located in some shady ‘informal’ sector of the labour market. On the contrary.  They are in fact increasingly used as an essential ingredient of corporate business strategy. Well-known companies which use them include Sports Direct, Cineworld, Tesco and Boots. Nine out of ten of McDonald’s employees work on a zero hour contract. In other words, throughout the labour market, zero hour contracts and precarious employment practices are on the increase – and show no sign of abating.

The second point to be made about zero hour contracts is that they are associated with low pay. As a recent report has shown, while someone on a standard contract is paid on average £482 gross weekly pay, a worker on a zero hours contract is paid £236 on the same measure. Pay for zero hour workers is therefore on average half that of those on standard contracts! In addition, zero hour contracts are associated almost universally with poorer working conditions.

In effect, therefore, the goal of the government’s economic policy is to achieve competitiveness through maintaining a downward pressure on wages while further undermining the terms and conditions of workers’ employment.

Such a project is unlikely to rejuvenate Britain’s economic fortunes.

After all, the UK has had one of the most flexible labour markets of any OECD country for many years now. Yet, in spite of this, it lags behind its closest comparator countries in terms of productivity and competitiveness. In addition, the further institutionalisation of a low-wage, low-skill sector within the UK labour market is likely to increase the previous unhealthy reliance on private debt as a source of consumption demand. What this again means is that, rather than learning from the lessons of 2007-8, policy-makers are attempting to resurrect the broken growth model which brought about the Great Recession in the first place.

The ‘economics’ of this redistributive recovery are bad. But they are underpinned by a disciplinary politics that should equally be resisted.

Although there may have been a modest return to growth, this ‘recovery through regressive redistribution’ is likely to aggravate and deepen the weaknesses at the heart of Britain’s economic model. Income inequality is rising. Regional disparities are deepening. Social insecurity is being ramped-up. The low-pay, low-wage nature of Britain’s labour market is becoming more widespread.

We may well be seeing a minimal rise in GDP growth today. But the spectre of the UK’s uneven development – the unequal distribution of its wealth and the highly financialised nature of its economy – will continue to haunt the stewards of the British state tomorrow.

This blog draws from research which Scott has been doing for a working paper for the Foundation for European Progressive Studies Young Academics Network on precarious employment.