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A range of evidence suggests that non-standard jobs, including fixed-term and other temporary jobs such as casual jobs, pay lower wages than more standard, permanent jobs, even after controlling for differences in worker and job characteristics. A recent literature suggests this is also the case for zero hours contracts (ZHCs), a growing form of non-standard employment in several developed countries, including the UK. These studies typically rely on derived wage variables – derived from survey responses to questions on earnings and hours data – which are prone to various forms of measurement error, some of which may be correlated with employment contract. Many relevant surveys, however, also include stated-rate hourly wage questions which, although also likely measured with error, are not subject to the same measurement issues. This suggests potential for sensitivity in non-standard employment wage penalty estimates depending on the wage measure used. Using the example of ZHCs in the UK, we first use derived wages to replicate the ballpark conditional ZHC wage penalty typical of existing studies. We then show that there is no conditional ZHC wage penalty, on average, when using the stated-rate hourly wage measure. This also holds for other non-standard employment types, including casual and fixed-term employment. Further, whereas the derived wage measure suggests, in line with existing literature, that the ZHC wage penalty is largest at the bottom of the wage distribution, we show the opposite to be the case when using the stated-rate wage measure. We discuss implications for policy, our understanding of labour market behaviour, and also for the wider literature on non-standard work wage penalties.

The increasing numbers of workers in employment with little to no job security, so-called precarious employment, has led to a range of concerns over worker outcomes. A particular focus is the effect of instability on health in general, and particularly, mental health. We provide new evidence on this, focusing on an extreme form of precarious employment that has grown rapidly in the UK, zero-hours contracts (ZHCs). We demonstrate that workers employed on ZHCs are more likely to report a long-lasting health problem than workers employed on other types of contract. In particular, reported levels of mental ill health are higher (almost double) among ZHC workers than for other workers. These associations remain, and a positive association between ZHC employment and physical ill health emerges, after controlling for a rich set of observable characteristics. Estimated associations vary little between different demographic groups, although they are concentrated in parts of the economy where underlying job instability is likely to be higher. Finally, we exploit sectoral variation in the historical prevalence of ZHC-like employment, in an instrumental variables framework, to demonstrate large and potentially causal effects of ZHC employment on reporting a long-lasting health problem and on mental ill health, but no effect on physical health. It is unlikely that these effects are currently factored into short-term employment conditions or that they attract compensating wage differentials.

This paper studies the prevalence and nature of zero-hours contracts (ZHCs) in the UK labour market. The headline count of ZHC workers based on the Labour Force Survey has long underestimated and continues to underestimate the number of workers in ZHC or ZHC-like jobs. ZHC jobs and workers are heterogeneous, but ZHC jobs have become increasingly concentrated among young workers, full-time students, migrants, black and minority ethnic workers, in personal service and elementary occupations, and in the distribution, accommodation and restaurant sector over time. Compared to other forms of employment, median wages in ZHC jobs have also fallen over time. The most common prior labour market state for ZHC workers is non-ZHC employment, particularly part-time employment, and we cannot reject that part of the reported growth in ZHCs has been driven by reclassification of existing employment relationships. Similarly, we cannot reject that growth in public awareness of ZHCs contributed substantially to recent growth in reported ZHCs, particularly over the period 2013/14.