What McDonald's and Buckingham Palace Have In Common

What do McDonald’s and Buckingham Palace have in common?

Both use zero-hour contracts, where employees need not be used at all, and therefore their monthly income may fluctuate significantly. Until this week, such contracts were common but ignored. Now, they have shot to the number one slot in the British left-wing press’ big chart of capitalist evils.

The story surfaced after it was revealed that over 1 million workers in the U.K. are zero-hour employees, and that companies such as McDonald’s employ up to 95% of their workers under such schemes. The Guardian, reading worryingly like Private Eye’s parody "The Grauniad," has led the sensationalist charge by describing the practice as “21st century serfdom,” and one Labour Party Shadow Cabinet member has called for them to be banned.

Many have legitimate concerns about the financial uncertainty that such contracts cause some workers. However, Chancellor George Osborne deserves credit for sticking to his guns on the importance of maintaining “a flexible labour market so people can get jobs, come out of unemployment and find work.”

What well-meaning opponents of zero-hour contracts need to understand is that they benefit society’s most disenfranchised members by reducing unemployment and allowing people who would be unable to enter the workplace to do so on terms that make sense for them. These people are being neglected by unions such as Unite who want to ban zero-hour contracts in the name of workers' rights.

Zero-hour contracts have emerged partially in response to tight labor laws imposed by previous governments and the European Union. To avoid the difficulty of laying off workers on regular contracts, firms have instead used zero-hour contracts to give themselves flexibility to alter the number of hours employees work in response to fluctuations in demand for their services. This makes firms more efficient, and, importantly, more willing to take on new workers, because they can do so without committing themselves to paying a salary to someone they may later not be able to employ productively full-time.

If zero-hour contracts were banned, firms would employ less readily, and would have to lay off more workers during tough times. Ironically, this means that a ban designed to end the financial uncertainty caused by fluctuating working hours would increase uncertainty for many workers who would end up more likely to get laid off when times get tough, instead of just taking a cut in income from working fewer hours.

Twenty-five percent of employees on zero-hours contracts are students, and those under age 24 or nearing retirement age are twice as likely to be on them as other workers. Is this exploitation of society’s most vulnerable workers? No. The young often need flexibility to fit work commitments around studies and get experience in order to gain more stable employment later, while workers nearing retirement are often looking to decrease their working hours.

Additionally, there are whole rafts of people for whom such contracts make a lot of sense, including those caring for children or other relatives, people such as actors or musicians who need flexibility to pursue other work when the opportunity arises, and those who need some income while hunting for more lucrative employment.

The results from the Chartered Institute of Personnel and Development survey support the idea that zero-hour workers are generally pleased with their arrangement. On average, such employees work 19.5 hours per week, and the survey indicates that most do not want to work more hours.

Understandably, people with financial uncertainty who fear a drop in income dislike zero-hour contracts. However, if the contracts were made illegal, at least some of these people would find themselves not in more regular employment but rather on government assistance.

Overall, the government is right to stand up against the unions and for the unemployed.