Post-industrial Labour Markets

Thomas Boje, Bengt Furåker, Thomas Boje, Bengt Furåker

• Publisher: Routledge
• Year: 2005
• ISBN:
  9781134602032
• Edition: 1
• Topic: Business
• Subtopic: Business General
• Index: Business

In nearly all OECD countries, the labour market has been in flux in recent decades. This book examines the labour markets and the institutional frameworks that condition their functioning in four different countries: Canada, the United States, Denmark and Sweden. Through a comparative study of these cases, the book discusses the nation-specific patterns that exist in a world that seems to become increasingly subject to common social and economic development.

1 Introduction

Thomas P. Boje and Bengt Furåker

This is a book about the labour markets and the institutional frameworks that condition how they function in four countries: Canada, the United States, Denmark and Sweden. In the last decades, the world economy has undergone significant social and economic transformations, and the four countries in our study have been profoundly affected by these. Since our examples represent rather different societal models, we may ask whether they have been affected in the same way. Their differing socio-economic institutions can be expected to have some impact on these changes. North America is generally characterised as liberal and market-directed and Scandinavia as social democratic and welfare state oriented. A crucial question is what this means for the development of their labour markets. However, there are also important differences between Canada and the United States on the one hand and between Denmark and Sweden on the other. We may therefore more carefully examine what nation-specific patterns exist or remain in a world that seems to become more and more subjected to a common social and economic development. What do different national traditions and institutions mean in such a world?

The purpose of this introduction is to spell out some ideas and questions about the changes taking place in the contemporary advanced economies and their labour markets. We will call attention to two general trends that are now often the focus of the economic and political debate: the intensification of competition related to the internationalisation of economies and the shift towards post-industrialism.

Labour markets under intensified competition

The process of globalisation (internationalisation is perhaps a better term) of modern economies is certainly not new, but it appears to have accelerated in the last decades (see Bélanger, Edwards and Haiven 1994; Castells 1996; Drache and Gertler 1991; Hall and Jacques 1989; Piore and Sabel 1984; Thurow 1996). It would be extreme to argue that there is only one global economy, but international trade has grown, markets have expanded, and firms have increasingly become transnational, that is to say they have also established themselves outside their nation of origin, often in a large number of countries. These changes have been promoted by the remarkable economic performance of the newly industrialised countries (NICs), the fall of state socialism in the Soviet Union and Eastern Europe, the shift towards market solutions in China, the development and enlargement of the European Union, and the birth of NAFTA (the North American Free Trade Agreement). Today, many national borders that used to be closed are open, trade tariffs are lower, customs restrictions have been weakened or eliminated, and capital, money, people, goods and services move more freely between countries than ever before.

Internationalisation has been facilitated by the development of new technologies, above all computer-based technologies (cf. Castells 1996; Thurow 1996). Compared to 25 years ago, it is now much easier for people and companies in different parts of the world to communicate with each other. In almost no time at all, they can exchange all kinds of information with each other. This does not mean that communication is of equal benefit for everyone. The new technologies create new inequalities by reshaping the division of labour. They make it possible for companies to locate the manufacturing of goods in areas with inexpensive labour, while at the same time keeping administrative headquarters in a few business centres.

With the internationalisation of economies, competition between firms has intensified (Castells 1996: ch. 2; Drache and Gertler 1991; Porter 1990; Thurow 1996). There are simply more competitors trying hard to increase their share of the markets. This means stronger pressure upon workplaces to reduce costs which in turn make managers demand more flexibility in terms of work organisation, number of employees, work hours, wages, etc. Flexibility can generally be defined as ‘the capacity to adapt to change’ (Meulders and Wilkin 1987: 5, italics removed), i.e., it refers to the ability and readiness of the firm or the individual worker to adjust to new conditions.

There is now a vast amount of literature contrasting ‘Fordist’ with ‘post-Fordist’ work organisation (see Boyer 1988; Hall and Jacques 1989; Piore and Sabel 1984; Sabel and Zeitlin 1997). The old Fordist type of industrial production is usually characterised as based on Tayloristic principles of management with a fragmentation of tasks and a hierarchical, vertically integrated division of labour. It is said to have been organised around standardised products for mass consumption. Cost reduction was accomplished by large-scale solutions. Post-Fordism implies that the traditional mass production regime has been abandoned and succeeded by ‘flexible specialisation’, vertical disintegration of the organisation, small batch production, more diversified products, and ‘just-in-time’ production. This reasoning has, however, been questioned by many researchers arguing that the transition from Fordism to post-Fordism has not really taken place or is too much of a simplification of the ongoing processes (see Kumar 1995: ch. 3; Sayer and Walker 1992: chs 4–5; Vallas 1999; Williams et al. 1987). A more reasonable hypothesis might be that different production regimes coexist.

Different forms of flexibility often have very different consequences for employers and employees. The introduction of a given type of flexibility may thus become a matter of conflict between the two parties. Generally speaking, it seems that the intensified competition in world markets has given employers an advantage over employees. In an internationalised economy, companies can move production or at least let new investments go to countries where wages are low and employment contracts insecure. Workers in the West, who are used to relatively high wages and stable employment conditions, may therefore have to lower their demands or risk losing their jobs. In the last few decades, it appears that the working class and its organisations, above all the trade unions, have been weakened in the economically advanced world. This process is far from uniform. Most dramatically, it can be observed in countries like the United States and New Zealand, while it is less noticeable in Denmark and Sweden – countries with a high degree of unionisation among workers and an institutionalised negotiation system in the labour market.

It has often been argued, but sometimes also contested, that North America, or at least the United States, has much more flexible labour markets than Western Europe (see Auer 1995; Freeman 1992; Graafland 1989; Lindbeck and Snower 1988; Korpi 1996; Schmid 1994b). The background to this discussion is that, after the recessions in the mid-1970s and the early 1980s, the United States quickly returned to its previous growth pattern with regard to both economic performance and jobs, while Europe was haunted by low economic growth and stagnating employment. Thus, the ‘American employment miracle’ has been contrasted with ‘Eurosclerosis’, a ‘disease’ referring to the alleged lack of labour market flexibility due to regulations imposed by governments or collective agreements and to supposedly rigid wage structures created by strong labour unions and welfare state arrangements. A trade-off has been assumed to exist between employment protection and small wage differentials on the one hand and insufficient job growth and high levels of unemployment on the other. From this point of view, Eurosclerosis can be cured only if employment relations become deregulated and higher wage differentials are allowed. These arguments have now become less persuasive with the current economic growth and the decreasing unemployment figures in Europe over the last few years. Moreover, Europe is far from a homogeneous continent. Since there is a great deal of variation across its countries, it would be very misleading to treat single cases as exponents of the same institutional pattern.

Employment protection has been subjected to several studies (see Buechtemann 1989, 1993; Emerson 1988; Mosley 1994; OECD 1993: ch. 3; OECD 1999b: ch. 2). The idea that restrictive legislation may lead to lower employment is that if it is difficult or costly for companies to make workers redundant, they become afraid of taking on more than a minimum of personnel. There are, of course, counterarguments. One is that if there is no or little employment protection and employers take advantage of this, then probably more people will also be fired. If more people are recruited to jobs but at the same time more people are dismissed, the effects on employment and unemployment rates may be rather insignificant. Furthermore, at least large companies need to have some management plans and these plans must include calculating the consequences of legislative measures or agreed-upon rules. The really small firms often have a very different situation, but in most countries there are also various exceptions for them.

The arguments concerning wage differentials are rather similar. If people lower the price of their labour enough, the chance presumably increases that someone becomes willing to employ them (see OECD 1994c: part II, ch. 5). The problem is often defined as ‘too high real wages and downward wage rigidity, too narrow wage differentials, and too high nonwage labour costs’ (Schmid and Schömann 1994: 26). Most often unions and governments are blamed for this state of affairs. Unions prevent wage flexibility by enforcing collective agreements making it impossible that anybody be employed without being paid a certain minimum. Governments keep up wages not only by legislated minimum wages but also, and perhaps more importantly, by generous welfare arrangements providing people with alternatives to carrying out paid work.

There is, however, another aspect to consider in relation to government programmes. So-called active labour market policies are aimed at preparing the unemployed for employment and providing them with jobs. Their underlying idea is the opposite of many other welfare state measures that instead offer people a chance to leave the labour market, such as early retirement programmes. Active labour market policies include public employment services, labour market training, job creation programmes, etc. The question is whether they help lower unemployment or not, and, if the answer is yes, whether they do this at reasonable costs (for overviews on these issues, see Calmfors 1994; Calmfors and Skedinger 1995; Martin 2000; OECD 1993: ch 2; Robinson 2000; Scarpetta 1996). There may, for example, be ‘dead-weight’, substitution or displacement effects, taking away much of the gross employment effect.

The discussion has also dealt with the consequences of the American model. It is often maintained that even if people are poorly paid, it is still better for them to have a job than to be on the dole. But if wages do not even reach the minimum standard level, is this still a good solution? Does this not imply that the government has to intervene anyway, providing the poor with supplementary resources? Moreover, some have suggested that not only are a lot of Americans unable to support themselves on the basis of full-time jobs, but the level of unemployment is not as related to the high wage differentials as is commonly believed (Mishel and Schmitt 1995). Instead, other factors must be emphasised, for example the size of the home market and the technological advantage.

Furthermore, there may be a specific ‘Euro-efficiency’. It has been argued that ‘short-term institutional inflexibilities – such as advanced notice of mass redundancies, generous unemployment compensation, further training obligations, the persistent linkage between wages and skill status – can in many cases serve as both a requirement and a stimulus for long-term adaptability’; i.e., ‘supposed cases of eurosclerosis prove to be a specific “euro-efficiency”’ (Schmid 1994a: 8). The functioning of the labour market is always a matter of the interplay between various actors within the framework of certain institutions. The welfare institutions at hand may promote co-operative relations and perceptions of ‘fairness’, thus creating better long-term conditions for flexibility and change than if the market mechanisms are allowed to operate in a more uncontrolled way.

The shift towards post-industrialism

It is often assumed today that we – the people in the economically advanced societies in the West – live in a post-industrial era, or at least at its dawning (Bell 1968, 1976; Block 1990; Toffler 1980; Touraine 1971). A common assumption is also that the people of the former state socialist societies in the East are following in our footsteps. And, of course, there are many other countries in the world allegedly moving in the same direction.

The hypotheses of the post-industrial trajectory may seem plausible at least in their more sophisticated versions. However, the economic and social development in Western economies as well as in other parts of the world are more diversified and contradictory than assumed in interpretations arguing that all countries are taking the same post-industrial route. If there were only one route to follow, it might be argued that history is more or less over. Although, in this book, we restrict ourselves to a small number of Western countries – Canada, the United States, Denmark and Sweden – we believe that there is more variety between these four countries than is recognised by many post-industrial theorists. One purpose of our book is thus to spell out various aspects of this diversity.

The author perhaps most often associated with post-industrialism is Daniel Bell. In particular, his book The Coming of Post-Industrial Society (1976) developed the main themes of this theory. Bell’s point of departure is that the concept of post-industrial society is an analytical construction aimed at catching ongoing changes in modern Western nations (Bell 1976: 483 ff.). It thus does not deal with any specific nation but with tendencies against which existing countries could be measured. In other words, post-industrialism can be understood as an ‘ideal type’. Bell is guided by a Weberian principle making him generalise certain features from reality to grasp the basic characteristics of a phenomenon.

Bell's analysis (1976: 9–10) strives to identify ‘axial principles’ within various societal spheres. It is not a matter of finding causal relationships but of determining ‘centrality’. The idea is to figure out how a given society is held together and through conceptual devices to identify the essential elements in its development. Bell makes a distinction between three social spheres: the social structure, the polity and the culture. The development of the post-industrial society is above all a matter of changes within the social structure, i.e., the economy, the occupational structure and the relationship between science and technology (Bell 1976: 12–13). Parenthetically, it could be asked why the latter relationship is not a part of the cultural sphere.

What, then, does Bell focus upon in his analysis? Allowing ourselves some simplification, we could summarise his ideas in the following way (Bell 1976: 14 ff.). First of all, the development towards post-industrial society is characterised by a transition from production of goods to production of services. Second, there is a restructuring of the class composition implying that occupations based upon professional and technical knowledge will expand and gain importance. Finally, Bell argues that theoretical knowledge becomes increasingly significant. Thus, the strategic aspect in society is the production and control of codified knowledge. An ‘intellectual technology’ will develop and universities will become key institutions.

The analysis is partly conducted by contrasting post-industrial society with its industrial and pre-industrial predecessors (Bell 1976: xii, 116 ff.). Characteristic of the pre-industrial world is that the economy is extractive, i.e., based upon agriculture, fishing, forestry, mining, etc. In contrast, industrial society means production of goods with the help of energy and machines. The key feature of post-industrialism is the ‘processing’ of knowledge and information. Bell describes the ideal-type ‘design’ of pre-industrial society as a ‘game against nature’, and the corresponding industrial and post-industrial designs are characterised as a ‘game against fabricated nature’ and a ‘game between persons’.

According to Bell (1976: 15), services are central to post-industrial development, but they also exist in pre-industrial and industrial societies. The context, however, is very different in the three systems. In pre-industrial society, services are above all a matter of work in private households. Industrialism brought with it an expansion of a service sector related to the production of goods, i.e., transportation, communication, financing, etc. Finally, in post-industrial society, services are a matter of education, health care, and other professional activities.

As has been said, the concept of post-industrial society is an analytical construction aimed at grasping tendencies of development. Thus, Bell (1976: xvi) emphasises that post-industrial society will not replace industrial society totally any more than the latter replaced pre-industrial society. Instead, the three types of systems coexist. Therefore, strictly speaking, we should talk about a pre-industrial, industrial and post-industrial sector rather than society.

For Bell, the post-industrial development is characterised by the decisive role given to knowledge and technology. Of course, knowledge has been important in all societies, but in post-industrial society there is a primacy of theoretical knowledge (Bell 1976: 20). Theory triumphs over empirical information and is codified in abstract systems of thought. Universities become crucial institutions. With the increasing role of knowledge, the possibilities for societal planning in various spheres expands, implying a greater role for the state.

The growing proportion of services and the strengthening of theoretical knowledge are accompanied by changes in the composition of occupations and in the class structure. Professional and technical occupations, based upon education and knowledge, have a key position. Therefore, power relations in society change. Those who were powerful previously due to their ownership of material resources have to make concessions to other groups. In post-industrial society, a new class of professionals and technical intelligentsia becomes dominant, which does not exclude internal ideological conflicts (Bell 1976: 358–9).

Although the concept of service is crucial in his book, Bell never explicitly tells the reader what he means by it. The word ‘service’ is not included in his index (but we find the words ‘service occupation’). This is no doubt a remarkable omission in the analysis. However, Bell implicitly departs from the distinction between ‘services’ and ‘goods’. The assumption is perhaps that our daily language provides a general...