Repairing the Social Contract Repairing the Social Contract at Workat Work

Steven P. VallasDepartment of Sociology and

AnthropologyNortheastern University

An Overview

• Historical Background: The New Deal Social Contract at Work

• Signs of the Contract’s Demise

• The Aftermath:– Decay of Job Ladders

– Rise of Non-Standard Work Arrangements

• Some Solutions– Employee Free Choice Act?

Vallas --Repairing the Social Contract-- Open Classroom

Historical Background

• Seeds of Personnel Management after WW I • Democratic Party Mobilizes Urban Workers,

1920s• New Deal Legislation: Wagner Act, July 1935 • WW II: Labor militancy during war• Result:

– Growth of Labor Organization and Collective Bargaining;

– Inclusive, Wage-led Economic Growth, 1945-1975

Vallas --Repairing the Social Contract-- Open Classroom

Demise of the Social Contract

• Decline of Trade Unions: (See Table 1)

• Why? – Globalization

– Technology: Reduction of mass production workforce

– Growth of Labor Force in Service, White Collar Industries

• Partial truths –but some data:

Vallas --Repairing the Social Contract-- Open Classroom

Trends in Union Membership

Vallas --Repairing the Social Contract-- Open Classroom

Wage and salary earners in unions in selected countries

Vallas --Repairing the Social Contract-- Open Classroom

•General decline in union membership

•Most pronounced in USA, by far

Alternative Explanations

• US South Cordoned Off From Labor– Failure of Operation Dixie, 1946-1953

• Unfavorable Legal-Political Environment– Taft-Hartley Act of 1947

– McCarthyism Weakens Labor

• Rise of Employer Hostility, Post-1975

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Consequences?

• Most obvious: Deteriorating Job Rewards– Stagnant Wages, esp. post-1975

– Rising Hours of Employment

– Erosion of Defined Pensions

• Two Points to Stress:– Decay of Internal Labor Markets (Job or

Promotion Ladders)

– Rise of “Non-Standard Work Arrangements”

Vallas --Repairing the Social Contract-- Open Classroom

Hourly Earnings of Production & Non-Supervisory Workers, 1947-2005

Vallas --Repairing the Social Contract-- Open Classroom

Decay of Internal Labor Markets

• Previously: Firms “sheltered” workers from the external labor market

• ILMs established systems that governed promotion “from within”

• Provided incentives for acquiring “asset-specific” knowledge; • Helped in motivation, retention of workforce

• Now: An “implosion” of market forces into the firm

Vallas --Repairing the Social Contract-- Open Classroom

Decay of Internal Labor Markets

• Downsizing, Outsourcing: – Dismantling of ILMs for Many Workers

• A Shift in US Labor Market Structure: For educated and professional workers:

• Attachment to the firm grows weak; attachment to the occupation grows strong

– For less educated workers:• Attachment to firm weakens, with few occupational ties to

replace it

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Results?

• Declining motivation, commitment for important segments of the workforce– 1995 survey by the New York Times:

• 75 percent of respondents felt that “companies were less loyal to their workers than they used to be”;

• Similarly, 64 percent felt that “workers were less loyal to their companies” than previously

– Richard Sennett, others: Loss of meaning in one’s career

Vallas --Repairing the Social Contract-- Open Classroom

Rise of “Non-Standard” Work Arrangements

• Growth of “contingent” jobs far outstrips growth of the labor force– Temporary agency jobs grew at annual rate of

11% from 1972 to late1990s– Involuntary part-time employment too has grown

rapidly– Especially so in academia (the “last great job in

America”) –see table

• Result: growing sense of job insecurity (see table); erosion of benefits; “precarity”

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Trends in Perceived Job Security, 1977-2002

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Trends in Academic Employment, 1975-2005

Vallas --Repairing the Social Contract-- Open Classroom

Taking Stock

• US Employment relations system is showing stress and contradiction

• New forms of work organization: Can they suffice?– The Paradox of Team Systems:

• Higher commitment despite deteriorating job rewards and rising income inequality within the firm

– Result: • Growth of Suspicion and Distrust among workers; • Perception of Employer Hypocrisy

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Economic Consequences

• Weakened Employment Relations System– reduces workers’ willingness to share their

knowledge

– undermines firms’ ability to harness tacit skills

• Lost productivity, since innovation depends on much more than R & D spending

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Implications and Solutions

• Keynesian economic policy not enough– The structure of the employment relationship

needs to be addressed

• Ideas?– Revisit debate over economic democracy, e.g.,

extending equity rights to employees

– Institute incomes policy, limiting firm-level inequality (maximum wage!)

– Reform labor law: Employee Free Choice Act

Vallas --Repairing the Social Contract-- Open Classroom

Employee Free Choice Act

• Three Provisions:– Facilitates union formation, foregoing certification

elections using card check system

– Invoke arbitration where contract negotiation fails

– Put teeth into NLRB efforts to enforce labor law violations (strengthen fines, punitive damages)

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Effects of EFCA?

• Much debated

• One view –It would:– Level the playing field in private sector

– Reinvigorate union formation, especially in service industries

– Raise wages –and likely, productivity

– Reaffirm worker faith in US economic institutions

Vallas --Repairing the Social Contract-- Open Classroom