Can Britain still create enough jobs that aren’t zero-hours contracts?

Joe Wright, 1 April 2015

David Cameron has pledged to create two million extra jobs in the next parliament if re-elected, claiming in a round of interviews yesterday that ‘We are the jobs party’. The Conservatives believe they can repeat the job figures of the first parliament with more of the same: more competitive tax rates, cutting red tape and some investment in infrastructure.

Labour, keen to reinforce that job security and better wages are more important, have ramped up their attack on the prevalence of zero-hours contracts. A Conservative party spokesperson told the FT ‘Zero-contracts account for just 1 in 50 jobs… the fact is that three-quarters of the new jobs since this government came to office are full time’.

The original justification for zero-hours contracts – that greater flexibility in the labour market helped Britain through the worst of the recession by keeping unemployment down – is increasingly questionable. If the UK has turned a corner then it is time to question the necessity of their increasing presence; the Citizens Advice Bureau warned last week that ‘hyper-flexible forms of working have become entrenched in parts of the labour market’.

Whether Britain can produce enough good jobs in the future runs straight to the core of both Cameron and Ed Miliband’s arguments. Good jobs are created when big companies invest, when they want to employ and train new people. Despite the economy returning to pre-crisis levels, this investment is not yet happening. Former US Treasury Secretary Larry Summers referred to this post-recovery lack of confidence as secular stagnation – the term originally applied to the dismal performance of the US following the Great Depression.

This is all reflected in Britain’s faltering productivity figures released today: the ONS reports a ‘0.2% drop in labour productivity in Q4; overall 2014 little changed from 2013’. For perspective, this is well below the US, Japan and France.

Labour believes it can restore productivity and investment through a revival of industry, by forging a Harold Wilson-esque scientific revolution with the ‘white heat’ of technology. But as the economist Will Hutton points out in How Good We Can Be, there are fewer jobs to be found in the industries doing well, which we think will grow in the coming years. The tech industry, for example, where London has a growing stake, creates comparatively little employment to that of heavy industry. Whereas the car giant General Motors at its peak employed 800,000 people, tech giants like Apple and Google employ just 80,000 and 50,000 respectively. Facebook, worth a staggering $170 billion, employs just 5,000 people. Automation also means heavy industry itself will employ fewer people.

While there is a time limit on how long Mr Cameron can rejoice in higher GDP figures without finding ways of creating good jobs, it is difficult to see from where more new non zero-hours contract jobs will immediately come. So many British businesses have become so poor at investing in people it may take more than a parliament before we can do better than this.