Download TPP Week 14 G. Standing – The Renewed Growth of Labour

TPP Week 14
G. Standing – The Renewed Growth of Labour Flexibility
Summary
In the era of market regulation and globalisation, there has been a shift from large
enterprises and stable workforces with fixed wage rates towards flexible forms of
production, employment and payment systems. Governments create spaces for
these forms of flexibility by controlling unions, eroding protective regulations and by
introducing legislations that facilitate labour market flexibility. International lobbies
continue to promote flexibility, stating that it will lower unemployment, raise economic
growth, improve incomes and reduce inequality. However, flexible markets have
been linked to rising inequalities in the US, UK and New Zealand. Likewise,
unemployment rates have not fallen during the period of growing flexibility since the
1980s.
Different forms of flexibility:
Production or organisational flexibility
Until 1970s: large, stable enterprises and large-scale mass production
Since 1970s: decline of large-scale (in-house) mass production, growth of
multinationals, decentralisation regarded as essential for efficiency, tendency of
downsizing and outsourcing, of loose strategic alliances between smaller firms.
Large enterprises: Uncertainty increases with size and complexity of organisations
(increased control needed; higher transaction costs). Inefficiency due to fewer
incentives for employees, hence governments promote small firms, privatization,
outsourcing etc.
Division of labour (production chains): Large firms sub-contract smaller ones, save
labour and costs through bypassing regulations. This also makes it easier for firms to
alter production according to fluctuations in market demand etc.
Concentration of capital increased, concentration of labour and production
decreased, organisational flexibility increased.
Wage system flexibility
Unemployment is seen as evidence of lacking wage flexibility. Minimum wages,
measures to reduce wage inequalities, labour unions etc. are regarded as market
distortions. Hence, wage flexibility as essential for employment, economic growth,
low inflation etc.
Prescriptions: deregulation of formal labour sector, decentralisation of wage
bargaining to individual worker-employer level, erode minimum wages... (E.g. World
Bank, SAPs)
Social Income:
SI = W + CB + EB + SB + PB
Social Income = money wage + community (family, kin etc.) benefits + enterprise
benefits (non-wage benefits, insurance etc.) + state benefits (social welfare etc.) +
private income benefits (through investments etc.)
Relative shares of Social Income components in post-war era:
E.g. Africa: higher shares of wages and community benefits, absence of other
income sources; compared to Europe: medium shares of wages, enterprise and
private income benefits, high share of state benefits, low share of community
benefits.
Shifting trends in the relative distribution of components across the world, linked to
globalization and shifting economic and social policies: relative decline in share of
state benefits, relative growth in shares of wages, private income benefits (for those
able to save)  further international convergence likely
Decreased income security when people lose state and enterprise benefits, they fall
back more on money wages and informal support systems  monetisation of income
Rather than letting wages adjust to market forces (avoidance of so-called price
distortions), wage repressions were used in newly industrialised countries (NICs),
e.g. Singapore, South Korea.
Increased wage flexibility all over the world:
Erosion of minimum wages; decreased wage share of GDP; widened wage
differentials; turn from collective bargaining to concession bargaining;
decentralisation and individualisation of wage determination; erosion of unions, etc.
Labour cost flexibility
Distinction between wage and non-wage labour costs: non-wage labour costs have
risen faster than wages in industrialised countries.
Debate regarding reduction of non-wage labour costs, e.g. protection costs:
employment protection regulations may lower employment and raise unemployment.
Employment (numerical) flexibility
Employment flexibility refers to the ability of firms to hire and dismiss workers easily
and at low cost. This can be facilitated amongst others through legislative changes
that weaken employment protection.
During the post-war era, ‚easy hire easy fire’ practices were seen as unacceptable,
focus long-term macroeconomic advantages of slow employment fluctuations
(investment in on-job training etc.). In the era of globalisation, pressures to reduce
costs have risen. Higher unemployment rates have made it easier for firms to find
non-regular (e.g. part-time, migratory) workers, and there is a trend towards less
long-term commitments to workers. Also, the relative size of highly trained employee
core groups inside firms shrinks.
While the main advantage of employment flexibility for firms is costs reduction, there
are also disadvantages like less loyalty of the workforce to the firm (and hence
reduced quality). For the workers, retaining skills may be an advantage, but
employment flexibility usually means insecurity, less ability to financial
commitments…
Work process (functional) flexibility
Functional flexibility means that work organisation is adaptable to technological
innovations and market fluctuations. This includes working time, job mobility and
flexibility, and work organisation.
Examples for functional flexibility: teamworking, teleworking, working time flexibility
(e.g. shiftworking) (Germany as a leader in this sphere: ¾ of all firms have flexible
working time practices).
Job structure flexibility
First two thirds of the 20th century: ‘Fordism’ and Taylorist job structures: labour
control techniques involving highly developed technical divisions of labour, internally
less flexible, static job structures  high control and coordination costs, low training
and turnover costs
Since the 1970s: Emergence of federal job structures that are more flexible,
consisting of a core (coordination) unit with several ‘satellites’. The rapidity of
technological change and international diffusion have reduced the role of Taylorist
mass production, giving way to smaller batch production with higher machine and
system flexibility. Smaller firms (often sub-contractors) are concentrated on specific
products, markets or services and depend highly on fashion, technological change
etc., which results in less employment security. Also, new flexible structures have
emerged, such as distance working, teleworking and virtual organisations, linked by
information technology rather than one common workplace.