The Employment Rights Bill making its way through Parliament is a
big deal for low-paid workers, but will have a negligible impact
on the economy, contrary to what its supporters and critics
claim, according to new Resolution Foundation research published
today (Thursday).
With the share of (hourly) low paid workers across Britain having
fallen from a fifth of the workforce to just 3.5 per cent due to
the minimum wage being ramped up in recent decades, Low Pay
Britain 2025 explores an equally important but neglected
issue for low-paid workers – job insecurity.
The report notes that while the incidence of low pay has fallen,
the share of workers on zero-hours contracts (ZHCs) has risen,
from 2.4 per cent a decade ago to 3.4 per cent – or 1.1 million
workers – today. Furthermore, 2.4 million workers across Britain
report feeling very anxious about unexpected changes in their
shifts.
The Employment Rights Bill seeks to address these issues but has
got entangled in a wider debate about economic growth. Critics
say the proposals will hamper growth and cause job losses, while
proponents claim improving work conditions will boost
productivity.
Instead, the proposed changes will have a negligible impact on
growth, says the Foundation. Even the Government's upper estimate
of a £5 billion cost to businesses would translate into just
11,000 job losses, under the Office for Budget Responsibility's
standard modelling approach. This is tiny – cutting the
employment rate by just 0.02 per cent – in the context of changes
that will give millions of workers new protections at work.
The Foundation adds that even with new employment protections,
the UK's labour market will remain lightly regulated by
international standards. On the question of dismissals – where
the Government is making big changes with ‘day one' rights – the
strength of the UK's regulation will only rise from
34th to 21st out of 38 OECD countries.
The report says there are two important questions to answer on
jobs and hours insecurity as the Government moves from
legislation to implementation.
The first is how to tackle hours insecurity, where workers don't
know how much paid work they'll have from one week to the next.
The Government want to give workers a new right to guaranteed
hours reflecting the hours they regularly work, as well
as compensation when shifts are cancelled without reasonable
notice. As well as giving workers more certainty over their pay
packets, this would make it harder for rogue employers to
withhold work from those on zero-hours contracts for reasons
unrelated to business need.
These entitlements should be broadly applied, says the
Foundation, or they risk excluding too many workers facing hours
insecurity. The report recommends workers with contracts of up to
25 hours per week are eligible, to ensure that half of workers on
variable hours contracts are included. It notes that workers on
21-25 hours are more likely to be anxious about shift changes
than workers on lower hours.
The second big question is about enforcement.
The recent increase in Employer National Insurance Contributions
has raised the employment status tax gap between employees and
self-employed workers to 9 per cent for a typical earner. This
opportunity for tax arbitrage, combined with new employment
protection for employees, raises the risk of ‘bogus'
self-employment – where workers are misclassified as
self-employed to avoid tax and legal responsibilities.
The Government must therefore complement stronger rights with
stronger enforcement of the boundary between workers and the
genuine self-employed. This legal boundary should be clarified so
that workers know their rights, and so that it can be better
policed by state enforcement agencies.
Nye Cominetti, Principal Economist at the Resolution
Foundation, said:
“The Employment Rights Bill risks becoming the next legislative
battleground as proponents and critics argue over whether it's
good or bad for the economy. But this row risks missing the point
of the reforms, which is to tackle workers' anxiety about
insecurity at work.
“The Government should focus on making its reforms as effective
and focused as possible. With over two million workers anxious
about unexpected changes in their shifts, new rights to
guaranteed hours and reasonable notice of shifts should extend
well beyond those on zero-hours contracts.
“Having successfully reduced low pay over recent decades, now is
the time to tackle the next workplace scourge of hours insecurity
and anxiety. This can be done while retaining Britain's flexible
labour market, offering the chance to improve workers lives
without threatening their jobs.”
