Less (or more) than zero: Zero-hours contracts in the UK

Zero-hours contracts are the subject of heated debate in the UK. While some point to the benefits of flexible contracts under fluctuating demand, others have raised concerns about potential exploitation. This column uses a structural model to examine their equilibrium and welfare effects. The findings suggest that zero-hours contracts should be restricted to job matches where workers opt for such a contract when offered a choice; access to zero-hours contracts should be prioritised for workers employed in small rather than large firms; and the way flexibility over hours is shared between workers and firms should be regulated.