Working in the Service Sector

Gerhard Bosch, Steffen Lehndorff

• Publisher: Routledge
• Year: 2004
• Print ISBN: 9780415653398
• eBook ISBN: 9781134456437
• Edition: 1
• Topic: Business
• Subtopic: Business General
• Index: Business

The rise to prominence of the service sector - heralded over half a century ago as the great hope for the twenty-first century - has come to fruition. In many cases, employment in the service sector now outnumbers that in manufacturing sectors, and it is accepted that in all developed countries, the service sector is the only one in which employment will grow in future. The reasons for this is the subject of much controversy and debate, the outcomes of which are not merely of academic interest but of decisive importance for economic policy and the quality of working and living conditions in future.

In order to examine these various arguments, research teams from eight European countries worked together for three years on a comparative study of the evolution of service sector employment in EU member states. They also investigated working and employment conditions in five very different service industries (banking, retailing, hospitals, IT services and care of the elderly) in a number of countries, and the results of their research are presented in this informative new collection, of interest to students academics and researchers involved in all aspects of industrial economics.

1
Introduction
Service economies—high road or low road?

Gerhard Bosch and Steffen Lehndorff

Fourastié, writing in 1949, heralded the transition from the industrial to the service society as the great hope of the twentieth century. After a long period of economic crisis and social conflict, the advent of the service society would, he argued, usher in a period of economic, social and political stability. The ‘hunger for services’ was insatiable, so that all workers who lost their jobs as a result of structural change would find new and possibly even better employment. For many other observers as well, services were the better activities. They came to be associated with more pleasant working and employment conditions, such as higher pay, a clean work environment, fewer stresses and strains, greater opportunities for employee participation or higher qualification and skill requirements. Furthermore, they were said to offer women better employment opportunities and to be ‘intended to produce benefit or well-being for the recipient, either affectively or cognitively’ (Gartner and Riessman 1974:33). Daniel Bell (1973:15) made a distinction between conventional services, such as retailing, transport and banking and finance, and post-industrial services, such as health, education and research. He predicted that the latter would grow particularly strongly, and with them the qualifications and skills of the new technical elites.

The academic debate on working and employment conditions in service activities reflected the spirit of the times in the period following the Second World War. Many generations of industrial workers hoped that their children would have a better future and supported them as they moved into service occupations, which they saw as a form of upward social mobility. The image of service work has now become tarnished to some extent. That many service jobs are poorly paid and offer no promotion opportunities or security of employment are facts that cannot be ignored. The industrial age of mass production, which many industrial workers were all too keen to leave behind them, is now even glorified as a ‘golden age’ because of the full employment that then prevailed. This of course ignores other, less appealing characteristics of that period, such as the inherent rigidity of the Taylorist mode of work organisation, which offered workers virtually no scope to influence working practices, or the physical arduousness of manual work, which meant that many workers did not reach the normal retirement age.

Idealisation of the past makes it easier to dramatise the anticipated break in a previously continuous process of industrial development. Many authors today associate the transition to the service economy with the beginning of a period of uncertainty and instability arising out of the destandardisation of employment relationships. Such destandardisation seems almost to arise out of the vary nature of services and of a society organised around their production, which marks a profound break with the era of industrial mass production. Differentiated consumer expectations have made customer orientation the key element around which the successful organisation of service activities revolves. Personnel flexibility—not least with regard to working hours—is said to lie at the heart of this customer orientation. However, as a result of greater differentiation of personal situations, employees’ expectations of their working and employment conditions have also become considerably more individualised compared with the relatively homogeneous set of employee interests that were regarded as a typical feature of the large-scale factories of the twentieth century.

In the light of this differentiation, the standard forms of regulation governing employment and working conditions that emerged in the industrial age are assumed no longer to exist, or at least only in considerably attenuated forms. Full-time employment for life, with stable companies and regulated labour markets protecting workers from the risks of the market, is said to be a remnant of the long-lost ‘golden age’ of industrial capitalism in the decades after the Second World War, and one that is doomed to extinction. Castells, for example, forecasts that ‘the traditional form of work, based on full-time employment, clear-cut occupational assignment, and a career pattern over the lifecycle is being slowly but surely eroded away’ (Castells 1996:268). Carnoy et al. (1997) see traditional employment forms being replaced by ‘human capital portfolios’.

Ultimately, this raises the question of what place there will be in the world of work of the future for uniform labour standards, whose function is to take the establishment of basic employment and working conditions for all employees out of the sphere of competition and market processes, thereby ‘decommercialising’ (Briefs 1927) or ‘decommodifying’ (Polanyi 1957) labour. At the macroeconomic level, labour standards are regarded as virtually an obstacle to raising the employment rate to the USA level. The message of many mainstream examinations of the service society is that a highly developed service sector is not compatible with rigorous labour standards. Rather, such tertiarisation requires the acceptance not only of differentiation but also of a polarisation of employment and working conditions. The choice, it is argued, is between high unemployment in Europe or high inequality in the USA.

In this way, the demand for a stronger service sector is surreptitiously taking on the status of a programme with wide-ranging implications. It is becoming nothing less than a vehicle for a levelling of the institutional differences between the various forms of capitalism, which in turn suggests that the social compromises of the twentieth century are fragile. Ultimately it has to be decided whether structural change is forcing very different national employment models to converge towards a single competitive model characterised by high levels of inequality or whether service work, like industrial work before it, can be organised in different ways with similar levels of economic success. Both development paths bring into play the relationship between labour and product markets. On the so-called ‘high road’, there is a positive reciprocal relationship between the manufacture of quality products, high service quality and good employment conditions, such as reasonable pay, good social protection and high skill levels. This development path is underpinned by institutions that open up longer term investment prospects in both markets. On the ‘low road’, a vicious circle is created by the combination of short-termism in the markets, encouraged by a weak institutional

framework, and poor working and employment conditions (Sengenberger and Campbell 1994).

In order to break away from deterministic convergence theories and the associated ‘certainties’ about future development, it is necessary to examine the differences in the development of employment and work in services in different countries and in different industries, and to identify the causes of this diversity as well as any possible opportunities for alternative development paths. The aim of our EC-funded project on new forms of work in the service economy (NESY), the results of which are presented in this volume, was to contribute to this effort. The project was intended to provide answers to the following three questions:

1. Must we really accept greater social inequality in order to extend the service sector or is the so-called ‘high road’ development path a real option?
2. Does an increase in service activities necessarily go hand in hand with the destandardisation or even polarisation of employment and working conditions?
3. Are service societies and service work converging towards a single, uniform model?

Since the theories alluded to above concern both the macro and micro levels, analyses at both levels are required. Our project was in fact characterised by precisely this combination of macro- and micro-level analysis. The macro-level analyses will be found in Part I of the book. At the micro level, case studies on the organisation of service work were carried out in various industries. In order to obtain as broad a picture as possible of the reality of service work, a distinction was made between well- and poorly paid jobs in both old and new and public and private services. Case studies were carried out in five different industries in a total of ten countries, although not all the industries were investigated in all countries (see Box 1.1). Individual teams report on the results of the country studies in a total of five comparative industry studies in Part II of the book. Part III, finally, takes up several cross-cutting themes which emerged from the case studies in the five industries and that were addressed in the industry studies.

Box 1.1

The NESY case studies

• Home care for the elderly: Country reports on Finland (Timo Anttila and Jouko Nätti), Sweden (Dominique Anxo and Håkan Nyman), Denmark (Agi Csonka and Joachim Lynggaard Boll), the UK (Colette Fagan and Darren Nixon), the Netherlands (Janneke Plantenga, M. van Everdingen and Chantal Remery) and Italy (Petra Degasperi and Paola Villa). Two local organisations providing home care for the elderly were surveyed in each country. Dominique Anxo co-ordinated the research and compiled the summary report together with Colette Fagan.
• Hospitals: Country reports on Sweden (Dominique Anxo and Håkan Nyman), the UK (Jill Rubery, Mark Smith and Marilyn Carroll), the Netherlands (Janneke Plantenga and Chantal Remery) Belgium (Robert Plasman and Julie Lumen) France (David Piovesan) and Italy (Paola Villa and Elisabetta Zeni). The research teams in each country conducted surveys in two public hospitals and more specifically in two departments: gynaecology and obstetrics, and orthopaedics. The population surveyed was that of medical care staff other than doctors (i.e. nurses, nursing assistants and midwives). The summary report was compiled by Christophe Baret, who also coordinated the research.
• IT services: Country reports on Finland (Timo Anttila and Jouko Nätti), Denmark (Agi Csonka and Joachim Lynggaard Boll), the UK (Mark Smith), the Netherlands (Janneke Plantenga and Chantal Remery) and Germany (Dorothea Voss-Dahm). In each country, the IT companies studied all had their core business in the field of systems development, analysis and software services. The case studies included small as well as large IT firms. In four countries, we had access to the same global company. The summary report was compiled by Janneke Plantenga and Chantal Remery, who also co-ordinated the research.
• Retail trade: Country reports on Finland (Timo Anttila and Jouko Nätti), Sweden (Dominique Anxo and Håkan Nyman), Denmark (Joachim Lynggaard Boll), Germany (Thomas Haipeter), France (Florence Jany-Catrice and Martine Pernod-Lemattre) and Portugal (Alberto de Castro, Hugo Figueiredo and Pilar González). Two case studies were carried out for each country, one in a hypermarket and self-service supermarket and one in a clothing store; these included two European clothing chains. Steffen Lehndorff co-ordinated the research and compiled the summary report together with Florence Jany-Catrice.
• Banking: Country reports on Germany (Thomas Haipeter) and France (Martine Pernod-LeMattre, Frangois-Xavier Devetter and Florence Jany-Catrice). Thomas Haipeter and Martine PernodLemattre compiled the joint summary report. Two banks were examined in each country, each one represented by one high street branch and one telephone banking service.

The results of the case studies are documented in Mermet and Lehndorff (2001).

Our aim in this introduction is to outline the most important findings contained in the various contributions to the book and to explain how they help to answer the three questions that formed the starting point for the project.

Different service societies in Europe

‘Even in an optimistic forecast, it cannot be supposed that the tertiary sector will employ more than 85 per cent of the economically active population, which would leave only 5 per cent for agriculture and 10 per cent for manufacturing’, wrote Jean Fourastié in 1949 (2nd German edn 1969:113). True, more than half of all employees in European Union (EU) member states work in the service sector or in service occupations. However, Fourastié’s assumed upper limit for the evolution of service-sector employment has to date not been reached by any European country, although a few countries are rapidly approaching that level.

In their first chapter, Bosch and Wagner use a number of indicators to describe the various service societies of the EU, identifying the features they have in common and the differences between them. As might be expected, the degree of tertiarisation differs considerably, not only in sectoral but also in functional terms, although the differences are greater than anticipated. The rapid growth of functions such as design, research and development, marketing and customer services means that the volume of services produced within manufacturing industry is also increasing. However, the differences in the shares of service activities depending on whether a functional or sectoral viewpoint is adopted are greater in some countries than in others. This is due to differences in the industry and product mix, and in country-specific forms of the division of labour within and between firms.

The two indicators of tertiarisation mentioned so far take account solely of the number of employees. Yet similar employment rates may conceal different volumes of paid service work, since the shares of part-time employment in the service sector and full-timers’ working hours vary from country to country. In order to clarify these differences, Bosch and Wagner introduce a new indicator into the debate, namely the volume of service work per economically active person. This indicator makes clear the considerable differences among countries in the degree of tertiarisation. Thus in Denmark, the country with the highest value for this indicator, the volume of paid service work, analysed in sectoral terms, is around 50 per cent greater than in Italy, the country with the lowest value. Even within the EU, therefore, service societies differ considerably.

How can such differences between countries be explained? The theories advanced to date, which have tended to be universalistic in character, have adduced differences in levels of economic development as the main reason for national differences in service sector development. It is assumed in these theories that, as incomes rise, employment shifts towards services, due to both the positive demand and the productivity bias (Klodt et al. 1997; Anxo and Storrie 2001:27). The positive demand bias means that, as household incomes rise, a growing share of that income is spent on services, once basic needs have been met. Fourastié spoke of an ‘insatiable need for the tertiary’ (1969:112), which develops when the basic needs for food and manufactured goods have been satisfied. At the same time, since service activities are less easily rationalised than agriculture and manufacturing, the productivity bias works in favour of service employment. Those who take an optimistic view of economic growth have not tended to regard the lower productivity increases associated with increases in the relative cost of services as an impediment to growth. Finally, reductions in the price of food and manufactured goods free up purchasing power for services. Since demand for services really takes off when the other basic needs have been met, they are to some extent luxury items that cannot be afforded until a certain level of prosperity has been attained and which themselves help to improve well-being.

This optimistic view of the future evolution of services has now become considerably more troubled. At a very early stage, Baumol (1967) advanced the notion of a ‘cost disease’ afflicting services, which are labour-intensive and resistant to rationalisation, particularly when wage increases in the service sector keep pace with those in the more easily rationalised manufacturing sector. Since the services in question were primarily public services, which in the USA are provided by municipal and other local authorities, he forecast that city finances would enter a period of crisis, a prophecy that was later to come true. Apart from Baumol himself, many economists have subsequently suggested that this obstacle to growth could be overcome to some extent by greater wage differentiation, particularly low pay rises in labour-intensive services. Gershuny (1978), on the other hand, saw higher price rises for services as a reason to substitute industrial products for services and to develop a self-service economy.

Both the optimistic and pessimistic visions of the service society shared a universalistic approach that has only been challenged in recent years. Esping-Andersen (1990) identified various types of welfare state. Depending on the welfare state regime and household structures, personal and social services in advanced societies can be provided within the family, either via the market or by the state. The convergence that the universalists argued would take place as prosperity increased was thus called into question, with the co-existence of different types of service society being regarded as possible.

In their second chapter, Bosch and Wagner tap into these theoretical debates to develop a multi-dimensional explanatory model of the development of services that also makes it possible to go beyond the nature of the welfare state regime in interpreting national differences. To this end, they examine the influence of a wide range of factors on service employment by correlating the volume of work in services as a whole and in individual subgroups with various influencing factors. They show that the transition to knowledge-intensive, high-quality production in the manufacturing sector is one of the most significant forces driving the growth of business-oriented services, that shorter working times in service activities increase the employment intensity of growth and that many EU member states have specialised in the international division of labour and are exploiting their comparative advantages. Probably the most striking correlation is that between women’s employment and social services. The outsourcing of services from households is one of the most important sources of growth in social services. However, many of these social services suffer from cost disease because they are highly labour-intensive yet, because of their ...

Table of contents

• Cover Page
• Routledge studies in business organizations and networks
• Title Page
• Copyright Page
• Illustrations
• Contributors
• Acknowledgements
• 1: Introduction: Service economies—high road or low road?
• Part I: Different service societies in Europe
• Part II: The organisation of service work: An analysis of five sectors
• Part III: Common challenges