The Political Economy of Employment Relations

Alternative theory and practice

Aslihan Aykac

• Publisher: Routledge
• Year: 2016
• Print ISBN: 9780367668174
• eBook ISBN: 9781317236788
• Edition: 1
• Topic: Business
• Subtopic: Business General
• Index: Business

Employment has changed dramatically in the last few decades with the onset of neoliberal globalization. This change has become the objective of inquiry from different perspectives, such as development studies, labour economics or industrial relations, focusing on different units of analysis.

The Political Economy of Employment Relations provides an exceptional contribution to existing literature by presenting alternative theory and practice on employment relations. It is within this critical theoretical intervention that solidarity economies emerge as a unique theoretical construct as well as a unit of analysis to expose the alternative paths that employment relations may resort to against the contemporary challenges of neoliberal globalization. This book analyses globalization, global economic crisis, and issues of work and labour from the point of view of the developing world, presenting local case studies from countries including the USA, India, Spain and Greece, and outlining alternative approaches to global challenges.

This volume has relevance to those with an interest in industrial relations, sociology of work and occupations, labour economics and development economics.

1 Reorganizing production

Analyzing a network of temporally and spatially dispersed production processes requires an extended conceptual framework. Such a framework can help expose the range of the division of labor, the dominant mode of production that characterizes the capitalist system, the major actors and the tasks they undertake, and the network relations that facilitate these production processes on a global scale. The global organization of production is based on flexible specialization, which is the dominant mode of production facilitated by multinational corporations. Globally dispersed production processes are interlinked in global value chains. Despite all its technical sophistication, the globalization of production is inefficient when it comes to avoiding yet another global economic crisis. This raises the following question: is there another way to produce, that is, to organize and facilitate production processes that may avoid the inescapable limitations of the capitalist system? This chapter tries to answer this important question.

The global organization of production

The transition from the Fordist mode of production to flexible specialization was essentially an effort to overcome declining profit rates following the postwar reconstruction period. Flexibility emerged as a solution to a capital accumulation crisis, and it basically enhanced the limits of surplus acquisition from labor. According to Appay, “this kind of analysis is developed from a managerial point of view and, from that perspective, flexibility is the means by which employment is adjusted to market uncertainties, changes in products, technology, skills and volume of labour” (Appay 2010: 27). The physical infrastructure of flexibility was based upon immense technological developments in transportation and communication systems which enabled the flow of capital to favorable and profitable geographies and the further relocation of capital once better circumstances emerged in new areas. The competition among entrepreneurs in the market reflected a parallel competition among governments that sought to attract capital and integrate their respective economic systems into the global economy. Labor faced a double burden within this new, highly integrated, and flexibly organized production context because it lost the social protection of the state and it came to be heavily exploited by capital.

The principle of flexibility can be applied in several different ways. Olmsted and Smith introduce four major categories regarding flexibility. Numerical or operational flexibility refers to the number of workers employed to optimize the production process and maximize profit. Businesses make use of optimal combinations of full-time and part-time workers to establish operational flexibility. Functional flexibility refers to skills development and the reorganization of tasks included in the production process. Cross-training and job enlargement are certain strategies mentioned by Olmsted and Smith that contribute to functional flexibility. Financial flexibility refers to cost-cutting strategies that are combined with the two aforementioned categories of flexibility. These may include the relocation of production sites, outsourcing and subcontracting, and temporary lay-offs with respect to volatility of demand in the global economy. Finally, structural flexibility is a systematic response to the increasing diversity in work-time and work-space arrangements (Olmsted and Smith 1994: 3).

Evaluating the impact of flexible specialization from the actors’ point of view, flexibility benefits capital while putting a heavy burden on labor. Flexibility brings a significant reduction in production costs for capital as less and less labor is employed and production schemes respond to demand changes in the market. Capital reduces risks, such as declining profit margins, falling demand, and market fluctuations through external flexibility, when businesses rely on outsourcing and subcontracting production tasks.

From a labor point of view, an increase in flexible work arrangements leads to the growth of the precariat (Standing 2009: 139). Appay underlines an important analytical distinction between flexibility and precarity, which differentiates the business perspective and the labor perspective toward globally organized production systems. Accordingly, “flexibility refers to the constraints of the markets, to management strategies of transferring risks to workers, whilst precarity refers to the resulting situation for the workers” (Appay 2010: 27). Workers in non-standard work arrangements have limited opportunities for skill formation in the workplace, and their chances of upward mobility diminish over time: “A few can even still look forward to having access to structured, more or less predictable opportunities for upward mobility, although in an era of flexible production networks, moving up, more often means changing jobs by moving from one company to another” (Harrison 1994: 197). Limited upward mobility generates a gendered impact, as feminization of the workforce accompanies flexibilization. Other structural aspects of the growing precariat include high turnover rates together with a gradual decline of full-time employment opportunities. The precariat face difficulty in maintaining their households due to the amount of work they get to perform – if not due to declining wages. Harrison stresses that the increasing flexibility of business networks in the global economy helps companies deal with the uncertainties of the market and competition among firms. Increasing vertical disintegration through outsourcing and subcontracting generates a polarization in the labor market between core workers who benefit from lifetime full employment and limited turnover rates, on the one hand, and a massive number of workers who are marginalized in non-standard forms of employment, on the other (Harrison 1994: 209–210).

From the state’s point of view, the growth of the precariat leads to a decline in the contribution of workers’ premiums to the welfare system. The lowering of taxes and non-wage labor costs to attract investment generates budgetary constraints, which then leads to governments having to cut unemployment benefits for those who are regarded as the free riders of the system: “The response by the state was to cut benefits by trying to cut the income replacement rate, to encourage the unemployed to take jobs. The trouble was that as the labour market was flexibilizing, fewer unemployed could expect to find jobs paying a wage as high as their former jobs” (Standing, 2009: 139). The lack of a decent job for those willing to work and the lack of sufficient welfare support for those not working resulted in what Standing calls the “unemployment trap,” which over time worsens to such an extent that it cannot be resolved by government intervention. The more governments deregulate labor markets by cutting down on work-related welfare provisions, the more they are compelled to spend on poverty-related social issues. Hence, flexibility is a double-edged sword for governments, which try to attract capital investments by weakening labor standards and economic costs and which are then forced to spend more on social policy for the marginalized segments of the workforce.

On top of the intriguing challenges from the actors’ point of view, the legal and the institutional mechanisms framing the flexible mode of production are insufficiently responsive to the socioeconomic consequences that it generates. Labor relations are consistently deteriorating due to weakening unionism, the disintegration of collective bargaining systems, declining welfare provisions and tightening austerity measures at the national level. Unions have been less adaptive to changing labor relations under flexible production systems, as their focus has remained on male blue-collar workers, whose main interests were working conditions, wages and other workplace issues. Social movement unionism, through the incorporation of non-work issues in union agendas and through alliances with other social movements, served to be an important venue of transformation in union organizations (Waterman 1993). The ILO has failed to respond to the flexibility debate, which began in the 1990s, at the international level (Standing 2009: 92). The changing definitions of work and labor relations rendered the ILO conventions useless or inapplicable, as they were initially formulated to cover full-time, regular employment patterns in the formal labor market. ILO Convention 177 on home-based work was criticized by many as being Western-oriented and neglecting the gender dimension of flexibility, as a major portion of home-based workers are women (Prugl 1999). ILO Convention 122 on employment policy is formulated in such a way that the issues of flexibility and competition in the global labor market are completely disregarded: it euphemistically supports policies toward “full, productive and freely chosen employment.”¹ The ILO can further be criticized for the weakness of its tripartite system (i.e. employer organizations, unions and the nation-state) and a lack of monitoring and enforcement around the world, especially in less developed regions. Such criticism is not limited to the current context of work and labor relations.

One can trace two major lines of argument, the liberal and the Marxist, criticizing the concept of flexibility down through the years, and both lines of argument can be used to form a theoretical analysis of the issue at a higher level of abstraction. The liberal perspective argues for the inevitability of the flexible mode of production, given the overproduction bottleneck and declining profit margins under Fordism. The rigidity of the Fordist mode of production, caused by the automated system of standard goods production based on lifetime full employment, became too costly following the postwar economic boom. Flexibility emerged as an option to overcome this rigidity by implementing cost-cutting measures, the most notable of which being the cutting of labor costs. Flexibility in production enabled the mobility of capital to labor-abundant parts of the world, which served to be new and cheap sources of labor and new markets. The liberal discourse generated a number of arguments. First, trade liberalization would gradually level the wage differentials among different labor markets to the advantage of areas with abundant low-skill labor. Second, the system would generate employment opportunities for people who would otherwise be unemployed through the outsourcing and subcontracting of production activities to less developed parts of the world. Third, the global expansion of production systems would generate skill-formation among labor and technological spillover effects for local producers. Therefore, globalization in general and global production in particular would lead to more competition, where firms, small and large, would seek a greater share of the pie through industrial upgrading. While this argument may have looked inspiring in the 1990s, the current course of the global economic crisis suggests that liberal political economy has lost empirical ground both in capitalist and labor-related terms (Milberg 2004).

The Marxist perspective contains criticisms of flexibility that range from structural critiques (based on the fact of global economic inequality) to issue-based evaluations in terms of flexibility’s labor, youth and gender implications, and its diverse impacts on less developed parts of the world. Coffey and Thornley go as far as to argue that the literature on post-Fordism in the 1970s and 1980s and (later) on lean production in the 1990s was in fact formulated by combining real developments with fiction to legitimize flexible production and precarious forms of employment. Therefore, “these conceptualizations and attendant derivations require careful evaluation for reasons of positive analysis both of production forms and of production ideologies, to inform collective responses to increasing precariousness of production and employment” (Coffey and Thornley 2010: 57).

Empirical studies on the flexible mode of production and non-standard employment expose in detail the repercussions of changing work and labor relations through micro-level analysis. Findings cluster around a number of issues. First, the time-space compression of the industrial era is radically altered with numerical and functional flexibility. Irregular working periods together with the growing services industry and home-based work blur the boundaries of work and non-work (Bianchi and Wight 2010). The distinction between time allocated to the production and time allocated to the reproduction of labor becomes redundant (Drago and Wooden 2010). The joint use of the household as workplace and living space further blurs the boundaries of work and non-work. Second, work and family issues intensify with the feminization of the global labor force and the replacement of the male breadwinner model with the dual-earner family (Moen and Huang 2010). Women remain the primary providers of domestic services in the household despite increasing rates of labor force participation and employment (Schneider 2011; Caprile and Krüger 2005). Several studies focus on the issue of multitasking and combining tasks in a gendered manner (Offer and Schneider 2010; Schneider 2011). The temporal and spatial challenges in work and labor relations that reflect upon non-work spheres are empirically analyzed in the work-life balance literature (Warhurst, Eikhof, and Haunschild 2008).

The third issue is the declining welfare benefits available for working families and their dependents. Non-standard employment patterns marginalize workers and their dependents, as welfare systems have traditionally catered to full-time workers in the formal labor market. Several countries have initiated social security reforms as a response to changing work and labor relations under the impact of globalization. Many of these reforms were geared toward overcoming the mismatch between flexible work systems and the social security systems of the previous era that were based on an understanding of lifetime full employment patterns. Usami’s edited volume includes a number of case studies from newly industrializing countries where social security reforms seek an equilibrium point between neoliberal labor market conditions and the provision of social security benefits to working families and their dependents (Usami 2010).

This brings us to flexicurity, which deserves particular attention as a systemic means of reaching a compromise between changing employment patterns and social security systems that is used as part of the European Union’s employment strategy. While flexible employment patterns continue to dominate the labor market, active labor market policies and lifelong learning programs aim to enhance employment rates; in addition, social security provision continues, albeit in a modified form. Barbieri draws attention to two major conclusions on the impact of flexible work schemes on the labor market (Barbieri 2009: 625). First, in most countries mid-career skilled male workers are not significantly affected by the spread of flexible work schemes, whereas newcomers, especially women, are more prone to precarity at work. Second, industrial unskilled workers and routine service workers are more affected by flexibility at work compared to service class workers, who have sustained job security. Flexibility at work results in the consolidation of existing inequalities, both economic and social. While there have been successful aspects to flexicurity, the global economic crisis and the resort to austerity measures in Europe suggest that it is far from being an optimal solution for labor reform.

Government responses to flexible employment are not limited to social security reforms. The Japanese context is unique in the way that flexibility intersects with demographic factors in light of an aging population and declining birth rates. The Japanese government intervenes by promoting less working hours, greater flexibility for women at work (to promote childbearing), and various legal, financial and educational measures that seek to mitigate the risks that come along with a declining population. Treating flexibility as a demographic policy rather than a profit-oriented economic policy is clearly a different take on the current practice of flexibility in the workplace (Iwao 2010). To what extent Japan will overcome its population crisis through flexibility policies remains to be seen. Two major conclusions can be drawn from the general discussion of government policies regarding flexibility. First, governments are compelled to generate effective policies to adjust social settings to flexible working conditions. Second, policies regarding flexibility have to take local factors into consideration in a longitudinal manner.

The consolidation of the flexible mode of production as the modus operandi of contemporary capitalism has brought about formal and institutional approaches toward unemployment, poverty and social exclusion in the form of workforce development programs targeting the flexible labor market. Active labor market policies implementing training programs, job placement programs, and self-employment support programs now help individuals get out of the unemployment trap (Bonoli 2010). Bonoli classifies active labor market policies with respect to investment in human capital and employment orientation toward the market, and comes up with four major policy categories: incentive reinforcement, occupation, employment assistance, and upskilling. Each category includes a number of different policies, and these policies are applied in different combinations depending on the local context, the nature of the labor market, and the industrial setting. As the historical evolution of labor policies indicates, flexible employment patterns have become a taken-for-granted aspect of labor relations to the extent that lifetime full employment patterns have ceased to exist.

Community-based approaches, in contradistinction to government programs, are geared toward counteracting the impact of flexible employment patterns that marginalize workers both economically and socially. Worker centers emerge in such marginalized segments of working class communities to fill in the gap left by declining unionism and weakening government regulation of the labor market (Fine 2006). Worker centers, whose structure differs from that of conventional unions, focus on work-related issues and various social issues ranging from immigration to inequality to political representation. Worker centers are organized in the community and are active in the workplace; they may qualify for Waterman’s concept of social movement unionism (Waterman 1993). Other workforce development programs include online training programs for the working poor that are designed to help them acquire skills and improve their credentials so that they can apply for better jobs (Gatta 2005) and benefit from information dissemination by public employment agencies and labor offices.

However, several issues remain to be explored with regard to the future of flexibility and its accompanying social arrangements. Peper and his colleagues underline the need for further international comparative research in “finding ways to achieve a better integration between work and care, or more broadly between work and life” (Peper et al. 2005: 325). The ultimate objective remains the reconciliation of work and non-work areas of life for the majority of people, especially the more vulnerable social segments of society such as young parents. The authors, very much in line with the research question posed in this study, conclude by asking a central organizational question: “How should we organise the work in a way that enables different groups of employees (with and without children, men and women) to make optimal use of their human capital?” (Peper et al. 2005: 326). The means toward this ultimate end range from social policy to new workplace practices, or from organizational change to external dynamics such as labor market demand. Gender will remain an important research dimension due to the persistence of the gendered nature of work and domestic life.

The globalization of production is facilitated by the overarching domination of multinational corporations (MNCs). The MNC as a mode of economic organization is not unique to the contemporary world economy. Prototypes of MNCs have been observed as early as the sixteenth century with colonial expansion and long-distance trade. In principle, MNCs can be described as corporate structures that operate in more than two countries, under which several subsidiaries are interconnected by way of production and trade. There are various ways in which MNCs expand globally: 1) through mergers and acquisitions with domestic companies; 2) through franchise agreements; 3) through direct investment; 4) or through outsourcing or subcontracting, where parts of the product are contra...

Table of contents

• Cover
• Half Title
• Title Page
• Copyright Page
• Dedication
• Table of Contents
• List of tables
• Preface
• Acknowledgments
• Introduction
• 1. Reorganizing production
• 2. Redistribution
• 3. Workplace democracy
• 4. Rethinking employment relations
• 5. Solidarity under focus
• 6. Solidarity economies: a conceptual exercise
• Conclusion
• Epilogue
• Bibliography
• Index