DP16843 Zero-hours Contracts in a Frictional Labor Market
|Author(s):||Juan J. Dolado, Etienne Lale, Hélène Turon|
|Publication Date:||December 2021|
|Keyword(s):||Flexibility, Gig economy, Working hours, Zero-hours contracts|
|JEL(s):||E24, J22, J23, J63, L84|
|Programme Areas:||Labour Economics|
|Link to this Page:||cepr.org/active/publications/discussion_papers/dp.php?dpno=16843|
We propose a model to evaluate the U.K.'s zero-hours contract (ZHC) â?? a contract that exempts employers from the requirement to provide any minimum working hours, and allows employees to decline any workload. We find quantitatively that ZHCs improve welfare by enabling firms with more volatile business conditions to create additional jobs. While weaker than job creation, substitution effects â?? some jobs that are otherwise viable under regular contracts are advertised as ZHCs â?? are sizable and likely explain negative reactions against ZHCs. Our model also assesses increased labor-force participation from ZHCs which appeal to individuals who prefer flexible work schedules.