Workers under the threshold

Germany: 4.5%; United Kingdom: 5.3%; Ireland: 9.4%; Spain: 21.6%. Guess what that is! The European Union says to be one but it is not. Unlike the United States (when in Texas the unemployment is high, thousands of people move to other places), unemployed people in Europe do not displace massively when labour market is much better in one area than in others. It is also true that many south-European young people have recently moved to Germany, Norway or the UK to find a better life, but due to the cultural/language diversity and some macroeconomic arguments, these migration movements seem not to be big enough in economic terms. Of course the social view would be another one since having to leave your own country for economic reasons is always a harsh decision to make.

In any case, how did some of the European labour markets react to the Great Recession started in 2008? Why has not the unemployment rate in the UK and Germany apparently increased whilst the Spanish employment has decreased that much? The intention of t

his work is basically to give some light to these differences and to learn more about what is the legal protection that some workers are given all over Europe.

Source: OECD

The economic crisis has affected not only the number of people employed but also their employment benefits. In other words, their legal protection, the wages earned and so on. In order not to be over-pessimistic, some elements should be pointed out before getting to the details: firstly, the labour situation is becoming slightly better since 2014 in Europe; secondly, most of the employees are still in long-term contracts. Notwithstanding, for obvious reasons we should make the position of the most vulnerable workers better off. What is their status, in the four cases studied?

Zero-hours workers in the UK and Ireland

The topic in question has been controversial from 2012 onwards, especially when it became a matter of the elections’ campaign in the United Kingdom this year. In a zero hours contract, the employer does not have the obligation to provide work to the worker, whereas the latter does not have to work if provided by the employer (there is some doctrinal confusion between actual and zero hours workers though[1]). What really makes a difference is that these workers will not be deemed as employees unless they comply with the condition established in the British case Nethermere v Taverna[2].(1984): in order to be an employee there has to be mutuality of obligation i.e. the employer has to provide work and theworker has to work when provided by the employer. Consequently, the “no-employee” worker will not be protected by much of the legislation. Furthermore, there is another key element that has to be pointed out: according to the case law both in Great Britain and Ireland, a zero-hours worker will be deemed as an employee only if dismissed during the active period (when working for the employer) but not otherwise.

In any case, the Irish and the British response to the issue has been remarkably different, as we will see next.

Source: ONS (government of United Kingdom)

On one hand, in Ireland the proportion of zero hours worker is lower than in UK. In addition, they are generally better protected by both the legislature and the case law. Firstly, according to section 18 of the Organization of Working Time Act 1997, as long as the workers are obliged to provide work if asked by the employer and the hours worked are less than the hours contracted, they will be entitled to either 25% of the contracted hours or 15 hours per week, whichever is less. “Truly” zero hours workers would not be therefore entitled to it, but in the real life the majority of them are protected by it. The problem arises when the employer tries to circumvent the Act e.g. if the contracted hours are 10 but the employee is actually working 15 hours per week. Secondly, the employees (that includes those zero hours workers who are dismissed during the active period of work) are entitled to the protection given by the Unfair Dismissal Act 1977. Notwithstanding, they must also comply with 6 additional conditions which are much easier to be complied by a normal worker than by a zero hours one!

On the other hand, the situation in UK is much different. Around 1 million people are under these contracts according to unofficial surveys, especially working for multinational companies like McDonald’s, Burger King, or Subway. They have no especial protection since they are only paid for the hours worked. Hence in the case of a worker under this contract who is at home waiting for the call but he or she is never provided work, nothing is paid. During the last elections campaign, Ed Miliband, the labour’s party leader, promised to change the law in a way that zero hours workers would be offered a “normal” contract after just three months. Anyways, Cameron is still in charge of the British government and they just approved the Small Business Employment Act where zero hours contracts were legally enacted.

Minijobs” in Germany

This case is slightly different but still related to the topic in question. They are generally employments of a maximum of 20 hours weekly and salaries lower than €450 monthly[3]. They were introduced in Germany in 2003 by the social democratic chancellor Gerhard Schröder as part of a wide-ranging labour market reform. The unemployment rate started to decrease in 2005[4], in part due to its effects, but since then part-time jobs with low wages became more popular. The maximum figures were in 2013, when more than 7 million contracts under this category were in course, which represented that a 20pc of the employees had at least one “minijob”. Others had more than one indeed. That means roughly 1.3 million more than in 2003 and half a million more than nowadays (6.6 million was the last official figure).

 “Contratos temporales” in Spain

Spain is one of the places (together with Greece) where the impact of the Great Recession on the unemployment rate has been especially harsh. Leaving the reasons aside, controversy has arisen in relation to the effects of the last Labour Reform made by the government of Mariano Rajoy in 2012. One of the main consequences of it has been that employers have been able to dismiss their employees more freely.

Proportion of part-time contracts signed out of the totality of contracts signed.

Source: Ministerio de Empleo y Seguridad Social

Moreover, since the unemployment rate started to decrease, during last year, a higher proportion of these new contracts have been part-time and temporary contracts (see the graphic attached above). Some riots, two general strikes during 2012 and much criticism occurred consequently. In spite of it, “contratos temporales” have to be distinguished from zero hours contracts or “minijobs”. None of these two categories are legal in Spain, where the social atmosphere is much more delicate. Perhaps in purely economic terms, the introduction of such modalities of contracts could make the situation better off, and they would have a positive effect in the long term. Notwithstanding, the Spanish response to the labour market issue is, in some way, similar to the one given in Greece or Portugal, where zero hours contracts (and other similar categories of labour contracts) are not legal either.

Conclusion

In the United Kingdom –and in less proportion in Ireland- zero hours workers has become more popular. Generally, under a zero hours contract, the employer will not be under the obligation to provide work to the employee at any moment, and the employee will not have to work if provided by the employer. Note the distinction of the legislation in UK and Ireland in relation to it i.e. the Irish jurisdiction is more protective on the worker’s side. Similar condition arose in Germany roughly ten years ago with contracts of less than 20 hours weekly and wages for less than €450 monthly under the category of “minijobs”. Notwithstanding, the amount of “minijobs” started to decrease again one year ago. Finally, and slightly different from the other categories, note that most of the decrease in the unemployment rate in Spain since 2013 is due to part-time jobs.

In other terms, what are the arguments in favour and against these types of contracts? For those who defend it, the mutual flexibility in the employee-employer relationship is the critical point. It makes it easier to combine the working time with the studying or free time. Up to 33pc of the people under zero hours contracts in the UK would not change his or her situation by one under a “normal” employment status, a national survey says. But what if you need to plan long-term investments (e.g. buying a car, signing a mortgage or raising your kids)? These contracts do not guarantee any stability. Moreover, the employer has no incentives to invest in your skills since most of these employments last only for some weeks or months. On the other hand, we have to bear in mind that the majority of people under these conditions are women under 25 or over 65 years old. Could it be said that letting employers hire under these circumstances lead to discrimination?

This brings us to ask ourselves whether or not the implementation or the permission of such contracts helped to maintain unemployment rates low in Germany and UK and in what extent. Once we get the response, what matters is if the welfare states should or should not accept that there are people out there working under these conditions.

Depending on where we draw the line, the life of many people may change.

References

[1] http://www.mcdowellpurcell.ie/news/zero-hour-contracts-zero-hassle/

[2] IRLR 240

[3] http://www.elmundo.es/economia/2015/08/24/55d9f2b822601d265b8b457d.html

[4] http://www.theguardian.com/commentisfree/2012/aug/21/mini-jobs-germany-britain

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