From precarious to prosperous

How we can build back a better labour market

27 October 2020

By Rosie Stock Jones

6 minute read

To prevent extreme insecurity, in-work poverty and exploitation arising from this pandemic, a new report from the Centre for Progressive Policy (CPP) is calling for urgent legal reform to the labour market.

This paper reviews the scale and nature of insecure work in the UK, identifying those most at risk of insecurity and recommending policy solutions based on legal guidance to help safeguard workers.

Why insecure work is a problem

The Covid-19 crisis has intensified labour market pressures amongst an increasingly insecure workforce. In spring 2020 the number of people on zero hours contracts in the UK rose to over a million, up 80% since 2013. An estimated 1 in 10 in Britain now also work in the gig economy, working on short-term or freelance contracts rather than as permanent employees. The rise of insecure work has coincided with rising poverty amongst those in work and CPP are concerned that the end of the furlough scheme and a second wave of Covid, will increase insecurity and open the door for poverty and exploitation.

Whilst some workers enjoy the flexibility of such contracts, qualitative research by Citizens UK’s Fair Work Campaign suggests it is a myth that most workers on zero hours feel this way. Instead, their analysis found that most people accepted zero hours, agency or self-employed contracts because they could not find a more secure option. The Living Wage Foundation’s finding that 40% of workers experiencing insecurity are parents similarly contradicts the image of the young student worker, whose agency or gig work is a lifestyle choice, leading us to question why mutually beneficial flexibility cannot be built into other, less precarious, contract types.

In early 2020, nearly a third of those on zero hours contracts were underemployed, 3.6 times more than in the wider working population, providing a strong signal that this employment model is not working. The Joseph Rowntree Foundation has identified underemployment as a driver of the rising levels of in-work poverty, and the high incidence amongst zero hours workers sends a strong signal that this employment model is not working.

Calls to ‘build back better’ following the pandemic suggest that there is public support for ending the poor pay and conditions experienced by essential workers such as carers and couriers. Maintaining a system that legitimises the exploitation of these workers and contributes to in-work poverty can no longer be acceptable.

CPP’s key recommendations

Labour market flexibility is important for supporting employment, particularly in times of structural change. However, the low levels of unemployment following the 2008 recession were accompanied by stagnant productivity and a rise in extreme insecurity, epitomised by the increasing demand for emergency food supplies for people in crisis.

Insecure jobs without full employment rights or regular hours are not the answer. Instead, people need to be supported into secure roles with opportunities for training and progression, not to be reliant on poor quality work with low productive potential. The recovery from the 2020 Covid-19 crisis must do better and must not legitimise exploitation.

CPP recommends that the government:

  • Clarify employment status in law to better reflect the modern economy, including by introducing a statutory presumption that a person is a worker unless it can be proved that they are self-employed.
  • Eliminate the use of zero hours contracts, reducing economic insecurity for those at the bottom end of the labour market. CPP’s recent survey found that a quarter of businesses, both large and small, would support such a measure.
  • Protect worker rights as the UK leaves the EU, including ensuring that rights derived from the Working Time Directive are preserved.
  • Implement a minimum wage for the self-employed to reduce low pay, expanding on the principle behind the current relaxation of Universal Credit’s ‘Minimum Income Floor’.
  • Collect more detailed information on employment status as part of the ONS Labour Force Survey, including to identify gig economy workers and whether people are workers or employees.
  • Set up a single labour market enforcement body as promised in the 2019 Conservative Party manifesto, which improves transparency and is designed to support the most vulnerable.

Rosie Stock Jones, Senior Research Analyst at CPP says:

Long before Covid, we saw the emergence of a labour market in which too many people depended on precarious jobs. But the current crisis has increased the risk of poverty to those working in them. At the same time, it has underlined the value of key workers such as carers, cleaners and couriers, many of whom are on insecure contracts.

Maintaining a system that legitimises the exploitation of society’s most important workers and contributes to rising levels of in-work poverty can no longer be acceptable. If the government truly wants to level up the country and empower more people to contribute to and benefit from increasing prosperity, they must deliver proper protections and improved conditions for our lowest paid workers.”

Paul Gregg, Professor of Economic and Social Policy at the University of Bath and member of the government’s Living Wage Commission says:

“The last recession saw sharp increases in the levels of insecure employment – zero hours contracts, agency working and low skilled contract workers designated as self employed. This never receded through the strong jobs recovery. This Covid recession will undoubtedly see this repeated.

CPP’s recommendation to set up a single labour market enforcement body which improves transparency and is designed to support the most vulnerable is a crucial step in the right direction. Millions of workers do not receive holiday, sickness and maternity pay protections or are paid less than the minimum wage through lack of enforcement. When unemployment is high, workers vulnerability to these abuses only rises.”