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Flexibility or certainty? The aggregate effects of casual jobs on labour markets

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  • Rachel Scarfe

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Abstract

There is much debate about the extent to which governments should regulate labour markets. One discussion concerns casual jobs, where firms do not need to guarantee workers certain, fixed, hours of work and instead "call-up" workers as and when needed. These jobs, sometimes known as "zero-hours", "contingent" or "on-demand", provide flexibility for firms to change the size of their workforce cheaply and quickly and for workers to choose whether to supply labour in every period. This flexibility comes at the expense of certainty for both firms and workers. In this paper I develop a search and matching model incorporating casual jobs, which I use to evaluate the effect of labour market policies on aggregate outcomes. I find that a ban on casual jobs leads to higher unemployment, but also to higher production and aggregate worker utility. I also consider the effect of a higher minimum wage for casual jobs. I find that the effects are limited. These results are due to an offsetting mechanism: although higher wages lead to higher unemployment, as firms offer more full-time jobs, the number of workers actually called-up to work increases.

Suggested Citation

  • Rachel Scarfe, 2019. "Flexibility or certainty? The aggregate effects of casual jobs on labour markets," ESE Discussion Papers 294, Edinburgh School of Economics, University of Edinburgh.
    • Handle: RePEc:edn:esedps:294
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    File URL: http://www.econ.ed.ac.uk/papers/id294_esedps.pdf
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    References listed on IDEAS

    as
    1. James Albrecht & Susan Vroman, 2002. "A Matching Model with Endogenous Skill Requirements," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 43(1), pages 283-305, February.
    2. Shutao Cao & Enchuan Shao & Pedro Silos, 2010. "Fixed-term and permanent employment contracts: theory and evidence," FRB Atlanta Working Paper 2010-13, Federal Reserve Bank of Atlanta.
    3. Egidio Farina & Colin Green & Duncan McVicar, 2020. "Zero Hours Contracts and Their Growth," British Journal of Industrial Relations, London School of Economics, vol. 58(3), pages 507-531, September.
    Full references (including those not matched with items on IDEAS)

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    Blog mentions

    As found by EconAcademics.org, the blog aggregator for Economics research:
    1. Flexibility or certainty? The aggregate effects of casual jobs on labour markets
      by Christian Zimmermann in NEP-DGE blog on 2020-01-08 17:40:20

    More about this item

    Keywords

    unemployment; welfare; minimum wages; contingent work; ondemand work; policy;

    JEL classification:

    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • J21 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Force and Employment, Size, and Structure
    • J48 - Labor and Demographic Economics - - Particular Labor Markets - - - Particular Labor Markets; Public Policy
    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search

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