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Zero hour contracts: another area where the busybodies have got it wrong

    I’ve been working in Westminster for close to three years now, and it feels like the longer I’ve been here, the more libertarian I become. Not necessarily because my views about the role of government have changed, but because more and more issues are being drawn into the realm of politics. There’s an incessant wave of new campaigns where groups demand government action, leading politicians to eventually oblige – be it in economics, public health or a myriad of other areas.

    This was the topic of my City AM column this morning. Conservatives have traditionally tried to resist these advances, but yesterday the Chancellor of the Exchequer buckled to the campaign for capping the cost of borrowing from payday lenders. In an ideal world, people wouldn’t feel the need to borrow from these sorts of lenders. But, for varying reasons, they do. This sort of lending is very risky and tends to be very short-term, which results in APR rates which look incredibly high.

    We don’t live in an ideal world, and so policy actions require that we consider the consequences of acting and not just the intentions. The evidence on interest rate capping is mixed to not good at all – and risks the unintended consequence of more people using illegal lenders.

    As with so many other things, today’s solutions become tomorrow’s problems. Yet the architects of bad regulations and law never face the consequences of their misguided interventions.

    This morning, we saw another example of how the “something must be done” crowd are so often wrong. A prominent cause championed by many in the trade union movement and their representatives in the House of Commons has been to “do something” about zero hours contracts (ZHCs). The usual anti-capitalist rhetoric of exploitation has been harnessed as part of a demand for more responsible capitalism. Of course trade union opposition to these sorts of working practices because of self-interest to protect their members’ own conditions has never been a consideration…. no, sir-ee.

    It turns out most of the people on ZHCs do not feel they are being exploited. In fact, the CIPD survey work shows those working on them are more likely to say they are satisfied with their job than other staff (60% vs. 59%). What’s more, they tend to be more happy with their work-life balance (65% vs 58%) and less likely to think they are treated unfairly by their organisation (27% vs 29%). They are nearly twice as likely to be satisfied with having no minimum set contracted hours as they are to be dissatisfied, and nearly half of those working on them cite the flexibility they offer as a reason for their use.

    So here we have an arrangement mutually agreed by employer and employee, where employees are as (if not more) happy than other types of staff. Why, exactly, do we need “action” on this issue? What is the great evil that needs to be addressed? Why are busybody campaigners appointing themselves voices of the oppressed, when the supposed oppressed don’t really think they are oppressed?

    One would think these survey results might lead to a change in outlook from the campaigners. I’m not holding my breath. 

    Ryan joined the Centre for Policy Studies in January 2011, having previously worked for a year at the economic consultancy firm Frontier Economics.

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