Utopia, you are standing in it!

My submission to the Transport and Industrial Relations Committee today on the Employment Standards Bill is there should be no regulation of zero hours contracts:

1. Workers sign these contracts because they are to their net advantage;

2. Always knowing your working hours in advance is known only to about 30% of shift workers; and

3. Workers command a wage premium when they sign zero hours contracts.

The obvious question is why do jobseekers sign a zero hours contract if it is not in their interests? Most of all, why would a worker who already has a job quit to work on a zero hours contract unless it is to their advantage?

If zero hours contracts are oppressive, the only workers hired on them would be the unemployed. Anyone who has a job would refuse such offers. Those unemployed that do sign a zero hours contract would quit as soon as a better offer comes along. 50% of job offers to British welfare beneficiaries to work on a zero hours contract are turned down.

This frequent refusal of zero hours contracts not only suggests there are options for jobseekers including the unemployed but there are costs to employers. The most likely employer response to reduce these costs of rejection is a offer to pay more to sign a zero hours contract. Everyone in this room knows contractors who work in much more than those in regular employment.

Unless labour markets are highly uncompetitive with employers having massive power over employees, employers should have to pay a wage premium if zero-hour contracts are a hassle for workers. It is standard for unusual, irregular or casual work to come with a wage premium. If you want regular hours, fixed hours, that comes at a price – a lower wage per hour.

Zero hours contracts is creative destruction in the labour market. Plenty of new ways of working have emerged in recent years: the proliferation of part-time work, temporary workers, leased workers, working from home, teleworking and contracting. Employment laws  rest on the now decaying assumption that workers have long, stable relationships with single employers.

At least a quarter of a million New Zealanders already work shifts often with little notice of changes. Work schedules are always known in advance only to 31% of temporary, seasonal and casual employees. Another quarter of these have about two weeks or more notice of shifts. Hundreds of thousands of New Zealand workers freely sign on for variable hours.

Source: Survey of Working Life December Quarter 2012, Statistics New Zealand, Table 13.

Something new and innovative such a zero hours contract should not be regulated because it is not well understood. Zero hours contracts don’t come cheap for employers because of the risk of job offer rejection. There must be offsetting advantages that allow this practice to survive in competition with other ways of hiring a cost competitive labour force.

The fixed costs of recruitment and training are such that one 40-hour worker is cheaper than hiring and training two 20-hour workers. Zero hour contracts would be most likely in jobs with low recruitment costs, few specialised training needs and highly variable customer flows.

This business variability can be borne by the employer with the worker on regular hours but paid less. The alternative is the employee shares this risk with a wage premium for their troubles.

Workers with low fixed costs of working at different times profit from a move onto zero-hours contracts. Those with higher fixed costs of changing their working hours will stay on lower hourly rates but more certain working times

To summarise my points today:

1. workers sign zero hours contracts because they are to their advantage to do so;

2. Advance notice of working hours is not as common as people think for shift workers; and

3. Irregular and unusual working arrangements usually command a wage premium.

Employers must pay a wage premium to induce in workers to sign zero hours contracts. This Bill undermines the right of workers to seek those higher wages. Thanks for your time and attention.