Even before the “Great Recession” of the late 2000s, declining social mobility and the shrinking middle class were recognised problems. Despite a great deal of hand-wringing by pundits and policymakers, these trends show little sign of reversing: inequality continues to grow, as economic recovery is slow to translate into real wage growth. There is broad agreement that these are problems in want of a solution, but analyses of their causes vary.
Here, David Weil argues that an important contributing factor is the growth of the “fissured workplace”. His term captures changes in the organisation of employment, whereby large firms with recognised brands devolve responsibility for their workers to increasingly complex networks of suppliers and franchisees. These trends not only affect the lower-skilled or easily standardised jobs readily associated with outsourcing – cleaning, hotel housekeeping and manufacturing assembly – but have spread to higher skilled work and sectors such as law and the media.
Drawing on statistical sources, industry examples and company case studies, Weil describes a common trajectory of progressive fissuring in US workplaces – with remarkably similar employment effects. New organisational models became popular starting in the late 1980s, premised on large firms slimming down to “core competencies”. Pressure from capital markets to maximise “shareholder value” increased incentives to cut costs. Technological advances lowered the expense (and risks) of coordinating complex networks of suppliers. Turning over responsibility for large areas of work to third parties became a proven formula for generating increased profits, and higher returns for investors.
If systematic violations of basic labour standards are tolerated, workers will be increasingly reluctant to speak out against them
By now, we are used to hearing business leaders extol the virtues of replacing unwieldy bureaucracies with flexible market-based contracting. However, Weil convincingly argues that a major source of savings from these new organisational models comes from their success in cutting labour costs via downward pressure on pay and working conditions. The reasons may be complex, but they boil down to the ways in which workplace fissuring devolves responsibility for wage setting and compliance with labour laws and mandated employment benefits to companies and individuals operating in increasingly competitive environments.
Large firms are more likely to be unionised, or at least to have sophisticated human resource departments, and to devote resources to complying with health and safety rules and mandated social security benefits. They also tend to set wages above “market levels”, owing to concerns with maintaining equity between groups. As such firms turn over responsibility for setting pay and conditions to subcontractors and franchisees, they limit their liability for complying with employment regulation while transforming the social aspects of wage setting into a pricing problem. This drives wages closer to economists’ ideal market level, reflecting real differences in productivity and labour supply. However, it also generates externalities – expanding poverty, insecurity and unsafe working conditions.
The kinds of workplace fissuring discussed here – subcontracting, franchising and global supply chains – have been the subjects of a number of studies detailing the employment effects that Weil describes. The Fissured Workplace is unusual in bringing this research together into an integrated, detailed and decidedly policy-oriented analysis. Through linking organisational strategies that share an underlying logic, it makes a compelling case that workplace fissuring should be given a more prominent place in analyses of the causes of growing inequality. Along the way, Weil shows that fissuring constitutes a fundamental and formidable challenge to existing employment regulations.
One of this book’s greatest strengths is in exploring how and why “fissuring” occurs in diverse settings, as well as the complex ways that lead firms affect choices made by suppliers or franchisees. In case studies ranging from the building and maintenance of mobile communications towers to chocolate distribution, Weil shows how wages and employment conditions are subject to increasingly competitive market-based considerations. This increases incentives to pursue competitive advantage through breaking even the basic (by European standards) minimum wage, overtime and health and safety laws that exist in the US. Lead firms seek to limit their exposure to liability for violations, even while implementing very detailed quality standards and monitoring processes in other areas. Meanwhile, suppliers and franchisees in particularly competitive industries are faced with pricing schedules that cannot be met without violating minimum wage laws. In one example, Weil analyses prevailing market prices and costs in the janitorial franchise market to show that franchisees could not break even while complying with labour standards, much less turn a profit.
Weil’s analysis of the scale and source of these problems informs a detailed discussion of how to solve them. This book is clearly rooted in the US context – very little research from elsewhere is cited, and discussion of legal problems and policy solutions focuses on the US regulatory environment. However, the challenges associated with adjusting institutions designed to regulate large, vertically integrated firms to vertically disintegrated production networks will be familiar to European readers. A basic principle behind many of Weil’s recommendations is that lead firms should be encouraged to establish the same degree of oversight of employment standards as they apply to ensuring compliance with service and product quality standards. He argues that accomplishing this shift would require changing definitions of employment and how responsibility for compliance with employment laws is framed, as well as more targeted monitoring.
The most interesting discussion addresses the question of how workers can be encouraged to speak out against poor pay and conditions where labour unions are weak or non-existent, and where basic workplace rights are increasingly violated. Weil uses the analogy of broken windows to make a point about the escalating social problems associated with tolerating small crimes: if one window is left broken in a building, all will soon be broken, as this is a signal that “no one cares”. Similarly, if systematic violations of basic labour standards are tolerated, workers will be increasingly reluctant to speak out against such practices, or even to recognise them as abuses.
The message behind Weil’s metaphor is that safe, healthy and well-compensated jobs are a social good worth pursuing, just like clean, crime-free neighbourhoods. He sees hope for “fixing broken windows” in the efforts of labour unions as well as the workers’ centres, community organisations and immigrant rights groups that have stepped in to help coordinate monitoring and enforcement.
Even as he acknowledges the scale of the problems created by workplace fissuring, Weil remains optimistic about the possibilities for balancing returns from these models to firms and shareholders with a degree of redistribution of these returns to workers. This faith in the possibilities for mutual gains skirts, to some extent, the broader trends driving restructuring that Weil identifies in his opening chapters – including the seemingly insatiable appetite of financial markets for evidence of short-term cost savings and labour union decline.
Solving the fundamental problems associated with increasingly skewed power and resources is clearly beyond the scope of this book. However, it makes a convincing case that the better regulation of fissured workplaces is a first step towards reversing the erosion of pay and conditions at the bottom of the labour market.
“My grandmother always predicted I would end up being a professor, but I resisted that idea as a young man, swearing I would not end up in an ivory tower, detached from the real world,” says David Weil, Peter and Deborah Wexler professor of management at Boston University’s School of Management and co-director of the Transparency Policy Project at the John F. Kennedy School of Government, Harvard University.
“I was born in Denver, Colorado and grew up in a small town northeast of Denver named Greeley, where my parents still live. My father was a physician in the county hospital, but involved in community initiatives dealing with poverty and access to health care for farm workers in the 1960s and early 1970s. His involvement in that work, and nightly dinnertime discussions of politics and conditions of the day made me aware and interested in economic and social problems,” Weil recalls.
In The Fissured Workplace’s acknowledgements, Weil writes: “I have always been fond of the rabbinical admonition ‘Find yourself a teacher’.” Over the course of his education he found mentors who showed him that – contrary to his early fears – scholarship need not be divorced from the real world.
“I was very influenced by a number of professors in my undergraduate and graduate studies, who, in the course of their academic careers, combined rigorous scholarly work with the application of those ideas to real problems.
“One major influence, who I acknowledge in the book, was John T. Dunlop, a professor of economics at Harvard and former US Secretary of Labor, who worked for every US president from Franklin Roosevelt to Bill Clinton. John believed strongly in trying to bring to bear careful and creative analytic thinking to problem solving, particularly in regard to the labour market and workplace. While I draw on different tools and approaches, I try to emulate his effort to make sure that research is grounded in an understanding of institutions and the people who make decisions within them.”
Weil, who divides his time between two renowned institutions, says: “One of the great benefits of living and working as an academic in the Boston area is the abundance of universities and researchers in the area. While my home base is Boston University, I have been fortunate to participate in active research communities at Harvard, including co-directing the Transparency Policy Project at the Kennedy School and an ongoing affiliation with the Harvard Law School Labor and Worklife Program. The research and insights from my different institutional homes cross-pollinate one another and keep my intellectual life interesting.”
His intention for The Fissured Workplace, Weil observes, “is that it provides a complete analytic picture of the origins and underpinnings of the fissured workplace and a compelling discussion of its impacts on the workforce. At the same time, I wanted to suggest how public policies might better align the private and social benefits of new forms of business organisation. In this sense, the book’s message is optimistic: I argue that one can capture many of the benefits of more flexible forms of business organisation made possible by digital technologies and new forms of coordination that are enabled by them, while still meeting the responsibilities established by our workplace laws and treating workers fairly.”
As Weil was writing this book, his wife Miriam was writing her doctoral thesis. He recalls: “My wife has always been one of my best sounding boards for ideas as well as an editor, and I tried to return the favour as she was working on her dissertation. My writing tends to be long and complicated; hers is terse and succinct. So our tendencies help to balance one another out – although this can occasionally lead to tense moments. But we have learned to settle those amicably. ”
The Weils live in Belmont, Massachusetts, a Boston suburb. “We have lived in this area ever since I was a graduate student. Our daughters Rachel and Alanna were born and grew up in Boston. Suddenly, in the blink of an eye it sometimes seems, we have lived here for more than 30 years.”
Were a good fairy to decide to bestow on him the gift of any talent or skill, what would he choose? “I love music and play the cello and the banjo. Being able to play either of those instruments really well – or playing the saxophone like Sonny Rollins – would be my dream talent. And I would be happy with talent in just one instrument, although it would be beyond cool to perform Beethoven quartets in the morning, pick some bluegrass in the afternoon, and jam with a trio on Monk tunes late into the night!”
Back in the real world, Weil awaits a decision by the US Senate on his recent presidential nomination to a senior government post.
Weil says simply: “I am deeply honoured to be nominated by President Obama to serve as the Wage and Hour Administrator in the US Department of Labor. I am very excited by the opportunity to serve in that capacity and work with the talented men and women of the agency if I am confirmed by the US Senate.”
The Fissured Workplace: Why Work Became So Bad for So Many and What Can Be Done to Improve It
By David Weil
Harvard University Press, 424pp, £22.95
Published February 2014