The vanishing employment relationship

Employment & Income,Inclusive Economy20 Aug 2014John Grahl

Specific policy is needed to respond to the loss of social control over employment.

The wide-ranging debate on employment at The Broker has covered most aspects of the global employment crisis. It is recognized that persistently high levels of unemployment have been accompanied by a widespread degradation of employment, in terms of wages, working conditions and job security. The employment crisis has been tied to rising inequality of income, wealth and opportunity. The heavy responsibility of public policies which prioritize market liberalization over social and employment objectives has been recognized by most, if not all, contributors to the discussion.

One factor which makes these problems even more difficult to address is that employment relations as generally understood in the past have begun to dissolve. More and more often it is hard to identify any stable relationship between a specific employer and a specific group of employees. This applies to both sides of the relationship. On the employees’ side we have agency labour, increasing levels of self-employment, both genuine and illusory, and often workers with several different employers either simultaneously or in rapid succession. Meanwhile big employers use outsourcing of all kinds to remove themselves from direct employment relations while takeovers and private equity destabilize the control and ownership of the enterprises where people are employed. Franchising of standardized service provision to legally separate businesses is another important aspect of this general trend.

The consequence is a general loss of social control over employment since many aspects of control, for example over social insurance or working conditions, have depended on a relatively stable and continuous relationship between the two parties to the employment relationship. At least in the immediate future there seems no prospect of restoring the stability of the past and therefore, additional steps are necessary to protect the many workers in situations where the employer is difficult to identify, where the immediate employer is unable to meet the standards required or where the self-employed status of the worker means that there is no formal employer.

Three types of policy will be suggested as responses to this situation. Firstly, it is sometimes possible to enforce worker rights without asserting a claim on an immediate employer. The rights, for example to holiday pay or for a limitation of working time, can be made the responsibility of all the employers in a given sector. There have been some experiments in this direction in the construction sector, where the problem of unstable employment relations is acute. Failing that, rights can be enforced against employers as a whole – for example by surcharging all employers for missing taxes and social insurance contributions, a step which would encourage good employers to police and identify bad ones. In the limit, some worker rights might be made the responsibility of the government; rights to training and retraining could be examples here.

Secondly, and as a reinforcement of these more widely enforceable labour rights, there needs to be a strong assertion of the supply-chain responsibilities of large enterprises. Many companies with huge turnovers are hollowed out, employing directly only a handful of the workers who produce their branded goods or services. Frequently they organize their supply chains so as to reduce labour costs to an absolute minimum. The ideology of corporate social responsibility (CSR) is often invoked to justify the legal and tax privileges which corporations enjoy. CSR is an empty promise, however, unless decent treatment of supply-chain workers is part of it. Legislation is almost certainly required to enforce genuine CSR: companies with substantial market power over supplier and customer businesses must be made responsible for the labour they use, not just for the labour they employ.

The need for a changed legislative framework leads to the third proposal – a much enhanced role for the state. Brent H. Wilton’s contribution to this dossier claims that “the private sector is the primary generator of sustainable employment”, but is this really the case? Public services and utilities continue to employ millions of workers and, in the past, provided the core of stable employment in many communities while also working to raise standards in employment conditions. It is true that governments today employ fewer workers directly but this is not because the tasks and responsibilities of government have been reduced. Rather it is because governments, like corporations, have sought to reduce costs at the expense of employees through outsourcing and privatization, sometimes using these devices just as ruthlessly as the corporations.

Particularly in the economically weaker regions public employment, and publicly financed ‘private’ employment, are at the heart of the entire employment system so that economic adjustments based on public spending cuts necessarily aggravate regional imbalances. Wilton argues that “governments need to work to ensure that the environment for growth is promoted and maintained.” This is certainly true but the growth must in large part be promoted directly by public investment and public service provision. To rely on private employers to sustain investment demand is to subject working people to a kind of blackmail – only when wealthy corporations feel ‘confident’ will such investment be forthcoming. That kind of logic is what has led to more than three decades of continuous degradation of employment terms and conditions.