Rethinking Workplace Regulation: Beyond the Standard Contract of Employment [Unabridged] 0871548593, 9780871548597

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Rethinking Workplace Regulation

Rethinking Workplace Regulation Beyond the Standard Contract of Employment

Katherine V.W. Stone and Harry Arthurs editors

Russell Sage Foundation  •  New York

The Russell Sage Foundation The Russell Sage Foundation, one of the oldest of America’s general purpose foundations, was established in 1907 by Mrs. Margaret Olivia Sage for “the improvement of social and living conditions in the United States.” The Foundation seeks to fulfill this mandate by fostering the development and dissemination of knowledge about the country’s political, social, and economic problems. While the Foundation endeavors to assure the accuracy and objectivity of each book it publishes, the conclusions and interpretations in Russell Sage Foundation publications are those of the authors and not of the Foundation, its Trustees, or its staff. Publication by Russell Sage, therefore, does not imply Foundation endorsement. BOARD OF TRUSTEES Robert E. Denham, Esq., Chair Kenneth D. Brody Karen S. Cook W. Bowman Cutter III John A. Ferejohn

Lawrence F. Katz Nicholas Lemann Sara S. McLanahan Nancy L. Rosenblum

Claude M. Steele Shelley E. Taylor Richard H. Thaler Eric Wanner

Library of Congress Cataloging-in-Publication Data Rethinking workplace regulation : beyond the standard contract of employment / Katherine V.W. Stone and Harry Arthurs, editors.   pages cm   Includes bibliographical references and index.   ISBN 978-0-87154-859-7 (paperback : alk. paper)—ISBN 978-1-61044-803-1 (ebook)   1.  Labor contract.  I.  Stone, Katherine Van Wezel, editor of compilation.  II.  Arthurs, H. W. (Harry William), 1935– editor of compilation.   K1765.R48 2013   344.01—dc23      2012046068 Copyright © 2013 by the Russell Sage Foundation. All rights reserved. Printed in the United States of America. No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without the prior written permission of the publisher. Reproduction by the United States Government in whole or in part is permitted for any purpose. The paper used in this publication meets the minimum requirements of American National Standard for Information Sciences-Permanence of Paper for Printed Library Materials. ANSI Z39.48-1992. Text design by Suzanne Nichols. RUSSELL SAGE FOUNDATION 112 East 64th Street, New York, New York 10065 10  9  8  7  6  5  4  3  2  1

Contents

List of Tables and Figures



Contributors



Acknowledgments

Chapter 1

The Transformation of Employment Regimes: A Worldwide Challenge Katherine V.W. Stone and Harry Arthurs

Part I The New Political Economy of Employment Chapter 2

Changes in the Labor Market and the Nature of Employment in Western Countries Morley Gunderson

Chapter 3

Labor Market Regulation and the Global Economic Crisis Robert Kuttner

Chapter 4

The Decline of the Standard Contract of Employment in the United States: A Socio-Regulatory Perspective Katherine V.W. Stone

Part II

Revising Legal Conceptions of Employment

Chapter 5

Burying Caesar: What Was the Standard Employment Contract? Mark Freedland

Chapter 6

“The Employment Contract Is Dead! Hurrah for the Work Contract!” A European Perspective Bruno Caruso

ix xiii xv 1

21

23

42

58

79 81

95

vi     Contents

Part III The Restructuring of Labor Market Institutions Chapter 7

Erosion, Exhaustion, or Renewal? New Forms of Collective Bargaining in Germany Thomas Haipeter

Chapter 8

Flexibility and Security in Post– Standard Employment Relations: The Netherlands Jelle Visser

113 115

135

Chapter 9

Regional and Local Experiments for Labor Market Policy in Europe Ida Regalia

155

Chapter 10

New Forms of Dispute Resolution: Japan’s Labor Tribunal System Takashi Araki

174

Chapter 11

Organizational Primacy: Employment Conflict in a Post–Standard Contract World Alexander J.S. Colvin

194

Part IV

Beyond the Employment Nexus

211

Chapter 12

Flexibility and Security in Employment Regulation: Learning from Denmark Thomas Bredgaard

213

Chapter 13

The Regulation of Supply Chains: An Australian Contribution to CrossNational Legal Learning Michael Rawling and John Howe

233

Chapter 14

Organizing Nonstandard Workers in Japan: Old Players and New Players Keisuke Nakamura and Michio Nitta

253

Part V

Social Policy in Changing Labor Markets

271

Chapter 15

Safety Nets and Transition Assistance: Continuity and Change in a Liberal Welfare State Anthony O’Donnell

Chapter 16

Flexible Work, Flexible Pensions: Labor Market Change and the Evolution of Retirement Savings Kendra Strauss

273

292

Contents     vii

Chapter 17

Chapter 18

Work-Family Balance and Gender Equality: Pension Reform and Antidiscrimination Law Julie C. Suk Social Rights in Changing Labor Markets: Caring for Caregivers in the European Union Julia López, Consuelo Chacartegui, and César G. Cantón

Part VI Learning Without Borders Chapter 19

APPENDIX



Cross-National Legal Learning: The Uses of Comparative Labor Knowledge, Law, and Policy Harry Arthurs The Decline in the Standard Employment Contract: A Review of the Evidence Katherine V.W. Stone Index

314

333

351

353

366 405

Tables and Figures

Table 4.1

Unionization Rates in the United States

64

Table 9.1

Patterns of Intervention

169

Table 10.1

Newly Filed Labor Cases

181

Table 12.1

Flexibility Versus Security Trade-Offs

216

Table 12.2

Labor Market Indicators in 2009

218

Table 14.1

Workforce Composition by Employment Type from 1982 to 2007 (in Thousands)

254

Table 14.2

Development of Labor Union Members

257

Table 14.3

Enterprise-Based Unions Dealing with Nonstandard Workers

258

Table 16.1

Comparing Multi-Tier Pension Systems Across Welfare Regimes

298

Table A.1

Percent U.S. Workforce in Contingent Employment

370

Table A.2

Percent Employed Workers Employed Part-Time, Men and Women

379

Table A.3

Percent Employed Workers Employed Part-Time, Men, All Ages

380

Table A.4

Percent Employed Workers Employed Part-Time, Women, All Ages

380

Table A.5

Workers at the Same Job Ten Years or More, Selected European Countries, Men

387

Table A.6

Workers at the Same Job Ten Years or More, Selected European Countries, Women

387

Table A.7

Workers at the Same Job Ten Years or More, Selected European Countries, Men and Women

387

Table A.8

Average Years on Job, Selected European Countries, Men and Women

388

x     Tables and Figures

Table A.9

Change in Job Tenure 1992 to 2009, Men

388

Figure 1.1

Union Membership Rate and Middle-Class Income Decline in the United States, 1967 to 2007

Figure 4.1

Union Density in the United States

72

Figure 5.1

The Two Axes of Regulation and Integration

85

Figure 6.1

Graduated Protections Model

106

Figure 7.1

Collective Bargaining Coverage

120

Figure 7.2

Trade Union Density in Germany

121

Figure 7.3

Derogations and Agreements

125

Figure 7.4

Counterconcessions in Derogation Agreements

126

Figure 8.1

Unemployment Rates

136

Figure 8.2

Male Employment Population Rates

140

Figure 8.3

Female Employment Population Rates

141

9

Figure 10.1 Overview of Labor Dispute Resolution Systems in Japan

176

Figure 10.2 Ratio of Standard to Nonstandard Employees in Japan

178

Figure 10.3 Newly Filed Labor Cases at First Instance in Japan

179

Figure 10.4 Consultations at Labor Offices

180

Figure 10.5 Consultation Cases on Civil Individual Disputes, FY 2007

180

Figure 12.1 Danish Flexicurity

220

Figure 12.2 Preconditions of Danish Flexicurity

223

Figure 14.1 Development of JTUC Community Unions

263

Figure 16.1 Temporary Workers as a Percentage of All U.K. Employees

303

Figure 16.2 Part-Time U.K. Workers

304

Figure 16.3 Temporary Employees Who Could Not Find a Permanent U.K. Job

305

Figure 16.4 Part-Time Workers Who Could Not Find a Full-Time U.K. Job

306

Figure 16.5 Active Members of Occupational U.K. Pension Schemes

307

Figure 18.1 Time Spent on Domestic Work

337

Tables and Figures     xi

Figure 18.2 Time Spent on Child Care

337

Figure A.1

Contingent U.S. Workforce Forty-Five and Older, 1995–2005

371

Figure A.2

Workforce in Temporary Employment, Selected European Countries

372

Figure A.3

Young Persons in Permanent Employment, Selected OECD Countries

373

Figure A.4

Indexed Employment Growth of Temporary Help Services and of All Industries in the United States, 1990–2008

376

Figure A.5

Trends in Number of Registered Dispatched Workers in Japan, 1994–2005

378

Figure A.6

Median Job Tenure in the U.S., Men

383

Figure A.7

 orkers with Ten or More Years Tenure with Current W Employer, U.S. Men 384

Figure A.8

Median Job Tenure, U.S. Women

Figure A.9

 orkers with Ten or More Years Tenure with Current W Employer, U.S. Women 386

Figure A.10 Employed by Job Tenure, Canadian Men Age 44–49

385

389

Figure A.11 Percent Employees Holding Current Job for Ten Years or More, Canadian Men 390 Figure A.12 W  orkers in Current Jobs Ten Years or More and Five Years or Less, Australia

390

Figure A.13 Change in Union Density

392

Figure A.14 Union Density and Collective Bargaining Coverage, Australia

393

Figure A.15 Union Density and Collective Bargaining Coverage, Canada

393

Figure A.16 Union Density and Collective Bargaining Coverage, Denmark

394

Figure A.17 Union Density and Collective Bargaining Coverage, France

394

Figure A.18 Union Density and Collective Bargaining Coverage, Germany

395

Figure A.19 Union Density and Collective Bargaining Coverage, Italy

395

xii     Tables and Figures

Figure A.20 Union Density and Collective Bargaining Coverage, Japan

396

Figure A.21 Union Density and Collective Bargaining Coverage, Netherlands

396

Figure A.22 Union Density and Collective Bargaining Coverage, Spain

397

Figure A.23 U  nion Density and Collective Bargaining Coverage, United Kingdom

397

Figure A.24 U  nion Density and Collective Bargaining Coverage, United States

398

Figure A.25 Change in Gini Coefficient Between Mid-1980s and Late 2000s for Working Age Population, Selected OECD Countries

399

Contributors

Katherine V.W. Stone is Arjay and Frances Miller Distinguished Professor of Law in the University of California at Los Angeles (UCLA) School of Law. Harry Arthurs is university professor emeritus, former dean of Osgoode Hall Law School, and former president of York University, Toronto, Canada.

Takashi Araki is professor of law in the Faculty of Law at the University of Tokyo, Japan. Thomas Bredgaard is associate professor in the Department of Political Science at the Centre for Labour Market Research, Aalborg University, Denmark. César G. Cantón is visiting professor of industrial relations at Pompeu Fabra University, Barcelona, Spain. Bruno Caruso is professor of law and director of the Massimo D’Antona Centre for the Study of the European Labour Law at the University of Catania, Italy. Consuelo Chacartegui is associate professor of labor law at Pompeu Fabra University, Barcelona, Spain. Alexander J.S. Colvin is professor of labor relations and conflict resolution at the ILR School at Cornell University. Mark Freedland is professor of employment law at St. John’s College, Oxford University, United Kingdom. Morley Gunderson is professor and CIBC chair of Youth Employment, a professor at the Centre for Industrial Relations and Human Resources,

xiv     Contributors

the Department of Economics, and the School of Public Policy and Governance at the University of Toronto, Canada. Thomas Haipeter is head of the Department of Working Time and Work Organisation at the Institute for Work, Skills, and Training (IAQ), University of Duisburg-Essen, Germany. John Howe is associate professor and director of the Centre for Employment and Labour Relations Law at Melbourne Law School, Australia. Robert Kuttner is coeditor of The American Prospect, senior fellow at Demos, and visiting professor at Brandeis University. Julia López is professor of labor law at Pompeu Fabra University, Barcelona, Spain. Keisuke Nakamura is professor at the Institute of Social Science, the University of Tokyo, Japan. Michio Nitta is professor at Kokushikan University in the Department of Management, Tokyo, Japan. Anthony O’Donnell is senior lecturer in the School of Law at La Trobe University, Melbourne, Australia. Michael Rawling is lecturer in the Faculty of Law at the University of Technology, Sydney, Australia. Ida Regalia is professor of comparative industrial relations in the Department of Social and Political Sciences at the University of Milan, Italy. Kendra Strauss is lecturer in the Department of Geography at Cambridge University, United Kingdom. Julie C. Suk is professor of law at the Benjamin N. Cardozo School of Law. Jelle Visser is professor of empirical sociology, chair of the Department of Sociology of Labour and Organization, and director of the Amsterdam Institute for Advanced Labour Studies at the University of Amsterdam, Netherlands.

Acknowledgments

T

his project was initially funded by a presidential grant from the Russell Sage Foundation. We thank Eric Wanner, president of the foundation, for the confidence he showed in the project by providing this grant, as well as for his intellectual engagement with, and sustained support for, our efforts. We also much appreciated the opportunity to work together at the foundation in July 2011 to edit the volume. Thanks to the generosity of the Rockefeller Foundation—herewith gratefully acknowledged—we were able to bring the contributors to the volume together at the Bellagio Center, in September 2010, for an invaluable exchange of information and ideas. Further financial support, and support in kind, for travel, logistics, and editorial assistance was kindly provided by Osgoode Hall Law School of York University, the UCLA School of Law, the UCLA Institute for Research on Labor and Employment, the UCLA Center for American Politics and Public Policy, and the University of California Labor and Employment Research Fund. A number of individuals assisted our work in various ways at different stages. At Osgoode Hall Law School, Lynne Fonseca ably took charge of logistics, and Tiffany Wong and Ryan Edmonds edited the first chapter drafts. At UCLA, Randi Kusumi prepared the charts and the final manuscript, Michael Smart helped compile the data for the appendix, and Lori Amadei provided excellent research assistance. Professor Matthew Drennan, of the UCLA Luskin School and the Cornell Department of City and Regional Planning, provided essential expertise and advice in analyzing and presenting the data that form the appendix. The Russell Sage Foundation Press editor, Suzanne Nichols, provided both initial editorial advice and detailed guidance on shaping the final, published volume. We learned much from the comments of two anonymous reviewers. And finally, of course, we salute our indefatigable contributors who have done so much to make this volume a genuine (and rare) example of successful transnational and interdisciplinary collaboration. Katherine Stone Harry Arthurs Los Angeles and Toronto May 2012

Chapter 1 The Transformation of Employment Regimes: A Worldwide Challenge katherine v.w. stone and harry arthurs

A

round the world, workers are embattled, labor markets are in disarray, and labor laws are in flux. The premise of this volume is that the decline of the standard employment contract is both a cause and an effect of these developments. Employment relationships, we argue, have become increasingly unstable in most industrialized countries and this instability is undermining the regulatory regimes that organized and governed labor markets and employment relationships for much of the twentieth century. As a result of the breakdown in regulation, we further contend, working people are increasingly experiencing the debilitating social, political, and psychological effects of growing economic insecurity and inequality. And, finally, we believe it unlikely that the standard employment contract can be revived or that the regulatory regimes once intertwined with it can be resuscitated. In the wake of the decline of the standard employment contract, new regulatory approaches are emerging in many places and in disparate forms. These approaches are sometimes local small-scale initiatives, sometimes national in scope. The focus of this volume is on innovations in labor market regulation that might conceivably improve the lot of workers involved in new, nonstandard types of employment relationships. After assessing the extent and significance of the decline of the standard employment contract, we and our coauthors explore changing legal conceptions of the employment contract, new forms of worker organization, experiments with decentralized regimes of regulation and dispute resolution, and linkages between labor market regulation and social policies. We also examine challenges and opportunities for trans1

2     Rethinking Workplace Regulation

national learning and borrowing that grow out of the current regulatory disarray. For four or five decades after 1945, in most industrialized countries, large numbers of workers enjoyed an array of job rights that included decent wages, protections against unfair treatment at work, social insurance provided by the state or the employer and, notably, some degree of job security. These rights comprised what many describe as the standard employment contract. Some elements were literally contractual—that is, part of a bargain between employers and employees, whether individually or collectively negotiated. Some were regulatory requirements layered on top of the individual contract of hire. For example, to reinforce the norm of job security, many industrialized countries gave workers effective protection against arbitrary dismissals, made redundancies prohibitively expensive, and placed strict limits on the ability of employers to use nonstandard workers, such as those hired on temporary or shortterm contracts and independent contractors. The standard employment contract, though not universal, nonetheless constituted a norm such that an employer’s failure to conform might well result in social, economic, or legal sanctions. Moreover, in most industrialized countries, the standard employment contract was the platform from which many other social rights—old age assistance, vacation entitlements, health insurance, and so on—were delivered. State-sponsored labor market policies—skills training, job creation, unemployment insurance—likewise assumed, promoted, and normalized the standard employment contract. The standard employment contract was thought to be foundational for other economic labor market policies as well. It provided the logic underpinning the growth of internal labor markets in which workers developed narrow job-specific skills and knowledge in exchange for advancement opportunities and seniority-related benefits within the firm. It provided workers with the confidence to assert their rights under labor standards and health and safety legislation. And, by giving workers the actual or potential experience of working together over extended periods, the standard employment contract taught them how to organize for industrial and political action. Finally, it is fair to say that the standard employment contract became one of the pillars of the postwar economic system. Decent wages gave workers the opportunity to consume, to acquire the accoutrements of middle-class life, and to better the prospects of their families. The availability of long-term employment gave them the confidence to save and invest either directly, in housing and other capital goods, or indirectly, through their pension and benefit funds. Moreover, the standard employment contract, by providing governments with a dependable revenue stream based on income and consumption taxes, made possible the postwar welfare state.

The Transformation of Employment Regimes     3

Of course it is easy to overstate the case. Job tenure—a key feature of the standard employment contract—was neither automatic nor universal. In most countries it emerged only gradually, as a by-product of the techno-social revolution associated with mass production or as an implied term of the postwar social contract. Depending on their historical circumstances or political configurations, some nations created the institutional framework and social environment necessary for the widespread adoption of the standard employment contract; others used legislation to provide specific elements directly or to mandate employers to do so; still others in principle allowed employers a margin of choice, but in practice forced them either to bargain with unions for job-related benefits or to risk alienating employees or losing recruits who could secure such benefits elsewhere. Even in the heyday of the standard employment contract, some workers enjoyed more job security than others, and some enjoyed it not at all. In general, it was more often found in large manufacturing enterprises and the public sector than in small enterprises or the service sector. It was more likely to cover men than women, more available to well-established populations than recent immigrants or racial and ethnic minorities. In few countries, if any, was tenure so sacrosanct that employers could never strip it away by legal means or otherwise. Nor, for that matter, was the standard employment contract necessarily standard or even contractual. In some legal systems, security of job tenure derived from the explicit terms of individual or collective bargains negotiated between, or adhered to by, the parties; in others, it was decreed by statute. In others, it was simply assumed as part of the psychological contract between worker and employer, read into contracts retroactively by judges as a reasonable inference of what the parties must have intended, or merely detected as a social fact through close observation of recurring patterns of labor market behavior. But acknowledging all these historical caveats and legal differences, the postwar political economy—the natural habitat of the standard employment contract—has eroded dramatically over the last two or three decades. The legal and regulatory structures that once facilitated, provided, and protected the standard employment contract have been dismantled. Furthermore, the emergence of new types of employment relationships has meant that fewer and fewer workers in the advanced economies are covered by standard employment contracts. The result is that more and more workers are experiencing greater job insecurity and its adverse consequences. Globalization, technology, and new management strategies have all contributed to these developments. As global trade rapidly accelerates, firms respond more quickly to a wider variety of market signals, replace human operatives with digitized machinery, and disperse operations

4     Rethinking Workplace Regulation

down a supply chain of local and off-shore feeder firms. Moreover, to benefit from economies of scale and to take advantage of global brand awareness, firms have sought out new markets, often operating through local subsidiaries, franchisees, or distributors. Their diminished reliance on home markets and their ability to operate through proxies has made firms less responsive to pressures from their domestic workforce, whether as producers or consumers. Given rapid and extensive changes in technology, markets, and management strategies, firms feel the need to continually renew their skills base, often to the prejudice of long-serving incumbent workers who are deemed to be too set in their ways, too highly paid to perform the tasks needed at an acceptable price, or both. One result has been a new and constantly evolving international division of labor in which firms initially relocate low-skill, low-wage functions to the developing world, and later relocate their more sophisticated operations as well, retaining only key jobs or those requiring proximity to head offices in the advanced economies. In such a scenario, long-term, locally based, semiskilled industrial workers—the primary beneficiaries of the standard employment contract—have come to be seen as a costly burden rather than an asset. Not surprisingly, then, firms have repudiated the implicit or explicit promise of long-term jobs associated with the standard employment contract and opted with increasing frequency for a variety of short-term, episodic employment relationships. In short, flexibility has replaced stability in the lexicon of corporate managers. In place of the standard employment contract, increasing numbers of workers in advanced economies experience flexible, nonstandard, contingent, or precarious employment relations. These arrangements are often explicitly limited in duration, sometimes implicitly so. They may offer part-time or project-specific rather than full-time, ongoing work. They sometimes position workers as autonomous, independent, or selfemployed, sometimes dispatch them from a temporary employment agency, and sometimes redeploy them from the core workforce of large dominant firms and companies to that of their smaller and less stable suppliers. Although the extent and nature of these alternative arrangements differ from sector to sector and from country to country, almost all offer less security than did the standard employment contract. Not only is job tenure foreshortened or stripped away altogether, so too are many of the benefits associated with job tenure. As a result, in many countries union density and collective bargaining coverage are in decline, workers’ real earnings are falling, and economic inequality is rising. Of course, these changes did not occur in a political or legal vacuum. They were systematized and legitimated by an ideology that espouses unconstrained markets as a natural and unqualified good and that characterizes restraints on markets, such as legal rules reinforcing and en-

The Transformation of Employment Regimes     5

forcing the standard employment contract, as artificial and illegitimate. This ideology, moreover, has been translated into legal structures—trade regimes, domestic legislation, contractual and corporate forms—that often undermine or foreclose effective regulation of labor markets. Additionally, many governments have adopted fiscal restraints and austerity measures that radically reduce their capacity to either subsidize good labor market practices or suppress bad ones. It is unlikely that these trends can be reversed any time soon or that we can reinstate the standard employment contract and the workerfriendly regulatory regimes that were built upon it. The new labor market arrangements are widely regarded as inevitable and desirable not just by influential business elites and business-friendly governments, but also by many academics, policy communities, and the media. Indeed, there seems to be little appetite for reviving the employment security regimes of the past—even amongst many whom such regimes were designed to benefit. Hence the challenge for progressive social policy thinkers in the twenty-first century is not simply to identify the risks and vulnerabilities created by the emerging forms of employment relations, but also to design new approaches to labor market regulation that will be regarded as plausible in the political and intellectual climate in which we find ourselves today.

Evidence of Changes in the Employment Relationship Our analysis is controversial. Some scholars question the extent to which the standard employment contract was actually predominant during the postwar period; some deny that changes in recent years have been extensive or consequential; some assert that such changes are limited to particular worker populations; and some contend that the end of the standard employment contract, with its associated benefits, is an essential precondition for enhanced productivity and prosperity. In response to these challenges we offer, in the appendix, empirical evidence that, in our view, confirms the decline of the standard employment contract over recent decades in a number of advanced economies having different systems of law, social protection, and industrial relations. Admittedly, statistical comparisons across time and space are notoriously difficult. Moreover, highly aggregated data are unlikely to reveal the differential impact of overall labor market trends on different worker cohorts. Nonetheless, we, along with our nineteen coauthors from ten countries and half a dozen disciplines, are confident that we are making broadly accurate claims concerning the changing nature of employment and the implications of these changes for regimes of labor market regulation.

6     Rethinking Workplace Regulation

Our conclusions about the changing nature of the employment relationship are hardly counterintuitive. As is well known, the new international division of labor has been characterized by the migration of a broad range of jobs from the advanced economies examined in this volume to newly industrializing countries. The employment prospects of those who held (or hoped to hold) the now-absent jobs in their former location are more likely to have worsened rather than improved, though the opposite is true for workers where the jobs are now located. Within the advanced economies, the decline of manufacturing and the rise of the service sector have notoriously been associated with a polarization of good jobs and bad jobs; those who now hold (or expect to hold) bad jobs are unlikely to enjoy the same benefits as those who now hold (or formerly held) good jobs. And secular trends toward the feminization of the workforce and persistent high levels of un- and underemployment among the young can hardly be expected to leave unchanged the protections and perquisites enjoyed by older male workers, the primary beneficiaries of the standard employment contract in its heyday. Moreover, our claims are not only supported by considerable data they are also reinforced by numerous sociological studies and journalistic accounts that highlight the rise of uncertainty and insecurity in working people’s lives (see Vosko 2010; Fudge and Owens 2006; Standing 2011; Thornley, Jefferys, and Appay 2010; Sennett 1998; Tilly 1995; Ross 2010; Uchitelle 2006; Ehrenreich 2005). These studies suggest that most workers can no longer expect to be employed by a single firm for their entire career. Many older workers are being forced either to change jobs mid-career or accept an early and often poorly pensioned retirement, despite their expectations of career stability. Most younger workers expect to—and do—change jobs more frequently than their forebears, and recognize that they will have to retrain, update their skills, or learn new skills periodically in order to remain employable (Kurz et al. 2008, 352– 53). Many workers, especially younger ones, have come to see themselves as free agents who sell their knowledge, skill, and talent in a volatile labor market (Hoffman and Casnocha 2012). Just as firms no longer demonstrate long-term attachment to their workers, many workers neither expect nor desire to spend their entire lives with one employer. While they may in fact remain employed by the same firm for a relatively long period, this will seldom be their expectation at the outset or during their tenure at the firm (Sennett 1998). The result of these changes in the labor market is that, for an increasing number of workers, employment is no longer the open-ended longterm relationship that was characteristic of the standard employment contract, but rather has become a series of episodic arrangements that may or may not be renewed from time to time. Workers today move from job to job, in and out of different nonstandard employment relationships,

The Transformation of Employment Regimes     7

in and out of training, in and out of self-employment and indeed, in and out of the labor market. Employers no longer hire for life with the expectation that their workers will gain experience and receive training during the course of a lengthy tenure within the firm’s internal labor market. Rather, in lieu of regular, long-term employees, employers hire individuals with specific skills on an as-needed basis from the external labor market, using a variety of arrangements including part-time, temporary, and short-term contracts, and contracts for the provision of services by independent contractors and temporary employment agencies. And, not surprisingly, the new labor market constituted by these changing patterns no longer reinforces—nor does it value—long-term, stable employment relationships. Instead, at its best, it rewards skill, flexibility, adaptability, and entrepreneurial self-marketing. At its worst, it creates enclaves of persons trapped in unpleasant and lowly paid work without a right to complain or an expectation of future improvement. It is, in other words, a highly polarized and unstable labor market, one very unlike the one that gave rise to, reinforced, assumed, and ultimately came to depend on the standard employment contract. This new labor market therefore requires a very different approach to regulation

The Decline of Postwar Regimes of Labor Market Regulation Labor laws and other regimes of labor market regulation are usually based on a paradigm of employment—a set of relationships believed to be sufficiently typical to serve as the model to which other relationships should be made to conform or from which they should require a license to deviate. In many industrialized countries during the decades following World War II, the standard employment contract was that paradigm. However, changes in firm-level employment practices and labor market dynamics have undermined the descriptive validity, statistical incidence, and normative power of the paradigm. Not surprisingly, then, regimes of labor market regulation based on it have become increasingly unstable. This instability has taken several forms. For example, many countries during the postwar period closely regulated the form and content of employment contracts, and greatly circumscribed the right of employers either to hire workers under nonstandard employment arrangements or to derogate from legislatively specified terms. A number of these countries have been modifying or abandoning these constraints in recent years. Japan, for example, had long prohibited temporary employment agencies and forbidden the use of fixed-term contracts for most work relationships. However, a series of legal reforms that began in the 1990s has gradually relaxed these prohibitions to the point where there is practically no limitation on fixed-term employment

8     Rethinking Workplace Regulation

or worker dispatching. As a result, the number of temporary agency workers in Japan doubled between 1998 and 2006 (Japanese Institute 2008). Many European countries that also had previously placed severe limits on the use of short-term and other atypical employment contracts have similarly relaxed their restrictions. As these restrictions have been lifted, the use of temporary agencies, short-term contract workers, oncall workers, and independent contractors has surged in those countries. For example, between 2004 and 2007, temporary agency work increased 53 percent in Germany, 48 percent in the Netherlands, 70 percent in Sweden, 27 percent in Belgium, 40 percent in Ireland, and 133 percent in Greece (Arrowsmith 2009). Outsourcing, in-sourcing, and subcontracting have all increased, thereby contributing to the rapidly diminishing empirical and normative significance of the standard employment contract. Where the standard employment contract prevailed, most states provided extensive social welfare benefits directly to workers or required employers to do so. However, changes in the global political economy and in local political cultures have led governments across the political spectrum to weaken programs designed to buffer workers from the consequences of unemployment and other job-related misfortunes. Sometimes the weakening of the social safety net has been undertaken in the name of austerity, sometimes with the aim of improving national competitiveness by reducing labor costs. Sometimes it has involved an overt reduction of benefits or the tightening of eligibility rules; sometimes it has been achieved by inaction rather than action, as governments fail to extend the reach of existing legislation to workers engaged in nonstandard employment relations. But in almost all advanced economies the trend has been to reduce the entitlements and protections that had come to be accepted as normal incidents of the standard employment contract. In countries with less generous safety nets, such as the United States and the U.K., the effect of changes in the standard employment contract has been even more extreme. To the extent that workers in these countries looked primarily to their employers for wages, benefits, and job security, the developments have hastened an erosion of the middle class. On the political side, the decline of firm-specific careers undermined working-class solidarity and culture, thereby weakening unions and labor-affiliated political parties. On the industrial side, some of the same developments have led to the weakening of labor laws whether through amendment, judicial interpretation, degraded enforcement, or willful neglect. The combined effect of all of these developments in the advanced economies over the past two decades is that workers have experienced flat or declining real wages, reduced social protection, diminished political influence, and a declining capacity to defend their own interests

The Transformation of Employment Regimes     9

30

54

25

52

20

50

15

48

10

46

5

Middle Class Share

Union Membership Rate

Figure 1.1  Union Membership Rate and Middle-Class Income Decline in the United States, 1967 to 2007

44

Union Membership Rate Middle Class Share of National Income

07 20

02 20

97 19

92 19

87 19

82 19

77 19

19

19

72

42

67

0

Year Source: Madland, Walter, and Bunker (2011, 2), reprinted with permission. This figure was created by the Center for American Progress (www.americanprogress .org).

through industrial action. In the United States, to take an extreme example, private sector union density declined from 24 percent in 1973 to under 7 percent in 2010 (Hirsch 2003), and the number of major strikes fell from more than 460 per year in the early 1970s to just five in 2010. Furthermore, as figure 1.1 illustrates, the decline of union membership and power has been closely paralleled by a decline in the incomes of the middle three quintiles of the income distribution—what Americans think of as the middle class. While extreme in its manifestations, the American experience is not unique. Union density, power, and influence have also declined and income inequality has risen in most other industrialized countries. According to the OECD, the wage share of national income in the OECD countries dropped from 67 percent to below 60 percent between 1975 and 2005 (Hijzen 2007). At the same time, union membership in the European OECD countries has declined and collective bargaining coverage has

10     Rethinking Workplace Regulation

shrunk, as shown in the appendix. The close parallels between the trajectory of unionization and the trajectory of economic inequality strongly suggests a causal relationship between the two. There seems little doubt that many workers in the advanced economies are experiencing less job security, flat or declining real wages, diminished social protections, and the loss of collective power and individual agency. If this is indeed the case, there is an urgent need for new policies, regulatory strategies, and institutional arrangements that will somehow—in a very different environment—produce the positive social and economic outcomes once associated with the era of standard employment contracts and regulated labor markets.

New and Plausible Approaches to Labor Market Regulation The challenge we have set ourselves and our coauthors is to identify new ways of regulating employment relations in an era when labor markets are increasingly characterized by polarization and instability. Of course, not everyone agrees that state intervention in labor markets and employment relationships is the best or only way to achieve positive outcomes. On the contrary, businesses, business-friendly governments, and market-minded scholars argue that workers would be best served by the further deregulation of labor markets and the further reduction of employee protections and entitlements. Deregulation would usher in a rising tide, they argue, that will lift all boats. Economic growth will generate more job opportunities and higher wages for workers, whose enhanced earning capacity will in turn enable them both to save more and to consume more—a virtuous circle that will operate to their ultimate benefit. Proponents of this approach insist that economic growth can only be achieved by enhancing the capacity of employers to respond flexibly to rapidly changing technologies and highly competitive markets. This will require states to allow employers to lower their direct labor costs, to reduce corporate taxes that presently support the social safety net, and to eliminate constraints on management’s initiative, whether they originate in collective bargaining or in state regulation. In one version of the rising-tide argument, employers will voluntarily adopt strategies to enhance the quality of work and the capacity of their workers because doing so will make those workers more productive and offset any advantage enjoyed by low-wage offshore competitors. In another, workers will come to realize that they benefit as consumers from the lower prices achieved by policies that suppress labor costs and enhance productivity. But alas, in no version of the rising-tide scenario do workers receive long-term benefits without first suffering short- to medium-term erosion of their prosperity and bargaining power.

The Transformation of Employment Regimes     11

The approach taken here is rather different. We believe that it is nec­ essary to seek and possible to find new ways to achieve the array of ­positive social and economic outcomes previously associated with the standard employment contract. This is not to say that we offer grand proposals to restore the postwar regime of labor market regulation, strong unions, generous welfare provision, and the standard employment contract. Too much has changed too profoundly and too rapidly to imagine that such proposals—however meritorious in principle—will elicit much support or, if they do, that they will prevail over the contrary tendencies that have dominated public policy, corporate practice, and academic discourse for a generation or more. Instead, we and our coauthors subscribe to the plausibility principle, which maintains that new approaches to labor market policy and employment relations ought to be plausible. To be plausible, they ought to take account of how things actually are, not the way they used to be or ought to be. That is why this volume focuses on current experiments in labor market policies and institutions. What do those experiments show? They show that at the local level, new strategies of collective representation are emerging in Germany and new forums for the adjudication of individual rights are emerging in Japan and the United States; that Denmark and the Netherlands have developed public policies that facilitate labor market flexibility while safeguarding workers’ economic security; that labor market stakeholders in France, Italy, and Canada are collaborating on new approaches to job training and worker deployment; that Australia and Japan are extending labor standards protection to some nonstandard workers; that the United Kingdom, Australia , Spain, France, and other EU countries are wrestling with issues of gender and generational equity in turbulent labor markets; and that common law and civil law scholars alike are groping toward new conceptual approaches to the contract of employment. Some of these experiments may succeed, others will almost certainly fail. However, our aim is not so much to identify specific regulatory formulas that particular countries can emulate or eschew. It is rather to expose scholars, policymakers, and advocacy groups to a series of real-life, real-time experiments whose success or failure will, we hope, provoke them to seek out constructive solutions to the challenges of labor market regulation in their own time, place, and circumstances. Even if readers share our commitment to the plausibility principle, they are likely to view the purposes, principles, and prospects of regulatory innovation through very different lenses. Some no doubt accept the fundamental virtues of neoliberal capitalism but pragmatically accept the need for limited regulation and a modest safety net so as to maintain workers’ cooperation or diminish their discontent. Others are committed to one of the more salutary motifs of contemporary capitalism—the im-

12     Rethinking Workplace Regulation

portance of human capital—and therefore welcome experiments in labor market policies and practices that enhance workers’ capacities to remain or to become productive members of society. And still others are doubtless keen to spot the emergence of “green shoots” amidst the withered remains of old institutions as evidence of their ability to renew themselves and to survive in a radically changed environment. This last narrative of regulatory renewal—the green-shoots narrative—receives special attention in this volume. Some countries, regions, and localities are attempting to devise new approaches that facilitate organizational and labor market flexibility and innovative economic performance without sacrificing worker security. These experiments are of several types: new forms of worker activism and representation that engage multiple employers across multiple sectors of the economy; supportive labor markets that facilitate people’s work-life transitions; new conceptions of the social safety net that provide assistance for transitions into, out of, and within the labor market; mechanisms to transnationalize the structures of labor market regulation; new types of worker training and unemployment programs; new types of dispute resolution that move the locus of labor protection outside the workplace to public tribunals; and other attempts to find more efficient and flexible regulatory strategies that nonetheless can plausibly claim to produce results for workers reminiscent of those they enjoyed under the old standard employment contract. Admittedly little in this volume will appeal to those who advocate stonewall resistance to the loss of workers’ rights, last ditch defense of the institutions and policies that embody those rights, or mass mobilization to reclaim and expand them at the ballot box, in the streets, in workplaces, and in the domain of culture and public consciousness. Speaking only for ourselves, as editors of the volume, this omission is meant to neither signal disrespect for this fourth approach nor to deny that, over the long term, it may prove efficacious, but only our belief that it is implausible in the present difficult circumstances.

The Organization of This Volume This volume includes nineteen chapters, most of them case studies of an innovative development in labor market regulation in a particular country. These chapters are arranged in six parts. Part I features a multidisciplinary examination of the new political economy of employment. In chapter 2, Morley Gunderson provides an economist’s account of the decline of the standard contract of employment and advocates “active assistance adjustment programs that reinforce or ‘grease the wheels’ of market mechanisms by promoting job creation.” He warns, however, that unintended negative consequences may

The Transformation of Employment Regimes     13

flow from ill-considered attempts to reverse that decline or rectify its effects by extending the reach of out-dated regulatory schemes. Acknowledging the risks identified by Gunderson, Robert Kuttner— also an economist—argues in chapter 3 that the deregulation of labor markets reflects shifts in relative political power. He disputes the proposition that “the current stage of capitalism requires a loosening of labor regulation.” Citing extensive evidence from Europe, Kuttner insists on the possibility of combining “socially guaranteed employment security with flexibility and continuing upgrading of workforce skills.” Chapter 4, by socio-legal scholar Katherine Stone, offers a legalinstitutional account of the rise of the standard employment contract in the United States, the industrialized country best known for the absence of job security. She demonstrates that the standard contract of employment in the United States developed “not as a set of legally imposed obligations, but as a widespread social practice.” She shows that assumptions about those social practices deeply permeated regulatory strategies so that “as employment arrangements changed, the regulatory regime became dysfunctional” with detrimental consequences for workers. This chapter is designed to clarify that the standard contract of employment is not merely or always a product of a particular labor law or a collective bargaining agreement, but can also be embodied in widespread workplace culture and practices. Stone ends with a description of some “green shoots” in which local groups are attempting to reconstruct both social practices and regulatory approaches to worker protection. Together, the chapters in part I provide an account of how we got where we are today, a critical analysis of current constraints and possibilities for the future, and a preliminary look at actual experiments in regulatory innovation. In part II, the focus shifts to efforts by legal theorists to reconceptualize the employment contract in the face of current developments. In chapter 5, in contrast to Stone’s account of the origins of the standard employment contract in social practice, Mark Freedland, an English common lawyer, emphasizes its legal rather than its factual dimensions. He argues that the standard contract of employment, as a legal concept, operated on two dimensions—a regulatory variable that reflected the extent to which its contents are subject to mandatory legal regulation—and an integration variable—“the extent to which such regulation also constitutes an integral element of the employment contract and is integrated into it.” Although he agrees that there is a decline in the standard employment contract throughout Europe, he contends that national legal systems display considerable divergence along these two dimensions of employment regulation, and cautions us to understand the decline in the standard employment contract in each country according to its own legal context.

14     Rethinking Workplace Regulation

In chapter 6, Bruno Caruso, an Italian civil lawyer, focuses on the crisis of the standard employment contract in Europe, with particular emphasis on Italy. He locates Freedland’s argument within broader and more highly politicized debates over the fate of the employment contract under European law, and describes the erosion of the standard employment contract and the rise of alternative employment contracts in Italy. In a concluding section, with potential application well beyond the EU, he advocates a reinvigoration of the employment contract and the creation of what he calls a “new employment contract,” one that does not depend on the bilateral vision of the parties to the employment relationship. Caruso also raises the question of why and whether employment contracts should be treated differently from other contracts. He reports on attempts in the EU to constitutionalize employment and other contracts—not only to preserve the protective principles traditionally associated with the contract of employment in many European countries but also to extend them “to all contracts in which economically strong parties could take advantage of economically weak and information-poor parties.” Constitutionalization in this sense used by Caruso refers not only to the existence of enforceable legal norms embedded in the supreme law of the European Union or its member states. It also serves as a metaphor to describe the DNA of the social and political value systems of many European countries—the embedded belief that respect and fair treatment for workers is a fundamental premise of the social contract. Caruso’s articulation of a constitutional-like norm that exists in many European countries helps to explain the experiments described in parts III and IV of the volume. It shows why, as national institutions and actors have found themselves increasingly unable to vindicate these constitutional or bedrock values, new, decentralized modes of governance of the employment relationship have emerged. Part III, “Restructuring Labor Market Institutions,” describes greenshoots developments in the institutions of labor relations—specifically the institutions of collective bargaining, employment contracting, and workplace dispute resolution—that have arisen in response to the erosion of the standard contract of employment. Chapter 7, by the sociologist Thomas Haipeter, describes the realignment of forces in the German industrial relations system. Rejecting the notion that decentralization represents either complete erosion or exhaustion of Germany’s highly centralized postwar corporatist system of collective bargaining, Haipeter presents a number of case studies to argue that the German industrial relations system, and the union movement itself, is in a phase of renewal. For example, he notes that bargaining is taking new forms and unions are undergoing revitalization. In chapter 8, the sociologist Jelle Visser describes flexicurity in the

The Transformation of Employment Regimes     15

Netherlands as a process of selective deregulation, whereby particular segments of the labor market—part-time, temporary, fixed-term, and agency workers—have been exempted from overarching prohibitions against nonstandard employment but have been extended specific protections appropriate to their situation. The overall result, Visser argues, is increased labor market flexibility with some compensatory moves in the direction of security. However, he notes, there is a risk “that employers may ‘lock in’ to substandard jobs and that unions may lack the power . . . to set the balance between flexibility and security . . . right.” In chapter 9, Ida Regalia—also a sociologist—provides an account of decentralization and destandardization of employment regulation operating simultaneously in experimental local and regional pacts in Italy and France—institutions whose objective is to bolster protection for workers hired on nonstandard terms not by introducing new legal protections but by developing new arrangements to provide workers “with the security of permanence in the labor market.” The pacts accomplish their goal by promoting employment growth, facilitating transitions from more to less precarious work, enlisting local associations of employers rather than individual firms as providers of work, and organizing nonstandard workers into unions based on their employment status rather than the sector in which they are employed. She also describes new types of employer arrangements by which several employers share a group of temporary workers, thereby providing the workers job security with the group rather than with any individual firm. Part III concludes with two chapters by legal scholars on new approaches to the resolution of employment disputes associated with changes in labor markets and employment relations. The first, chapter 10, by Takashi Araki, describes Japan’s new labor tribunal system for adjudicating labor disputes—a system that operates outside the workplace and outside the framework of traditional Japanese enterprise unions. Araki explains that the labor tribunals were created in response to the proliferation of individual employment disputes associated with the rise of nonstandard employment practices. The tribunals embody a series of institutional innovations including the appointment of lay judges, the introduction of tripartite tribunals, and the development of a new system of resolution-oriented, rather than precise, justice. No less important, Araki suggests, the rapid expansion of labor tribunals underlines the need to codify the substantive law of employment, much of which now consists of nonstatutory norms. Chapter 11, by Alex Colvin, an American industrial relations expert, shows a stark contrast between Japan and the United States with regard to trends in dispute resolution. As in Japan, the rise of nonstandard employment in the United States has coincided with the proliferation of in-

16     Rethinking Workplace Regulation

dividual employment disputes. However, as Colvin reports, the American response—unlike the Japanese—has been to emphasize not public, but rather private organization-centric dispute resolution processes. Employers have increasingly, and with the approval of the U.S. Supreme Court, diverted employment disputes from courts and other public tribunals to private forums which they establish or control, such as peer decision-makers, ombudspersons, and management-designated arbitrators. As a result, dispute resolution has become an integral element of strategic human resource management and serves the organization’s objectives rather than external values such as justice or fairness. From one perspective, these two accounts of dispute resolution mechanisms depict a reversal of national stereotypes: the Japanese system is becoming more litigious and rights-driven, while the American is placing greater emphasis on loyalty to the enterprise and nonadversarial ­dispute resolution. Seen from another perspective, both the Japanese experience and the American—like the German, French, and Italian experiences described—can be seen as attempts to reconstruct labor market institutions to take account of the growing importance of nonstandard employment relations. Such an understanding underlines the importance of a point made earlier in this chapter: regimes of labor market regulation are constructed on paradigms of employment relations. As those paradigms change, or as their true nature becomes better understood, regulatory regimes are destabilized. Part IV considers changing labor market institutions that attempt to address the new employment paradigm in ways that go beyond the immediate employment relationship. Thomas Bredgaard’s chapter 12 describes the regulatory practice known as flexicurity, which seeks to locate individual worker security not in a specific job or with a specific firm, but in the labor market as a whole. His description of the operation and effects of flexicurity in Denmark differs considerably from Jelle Visser’s account of flexicurity in the Netherlands in chapter 8. Bredgaard, a political scientist, begins with the suggestion that Denmark “seems to contradict the assumption that . . . atypical forms of employment . . . are becoming more common” because “Denmark may never have had a standard employment rela­tionship.” Or to place the Danish experiment in comparative context, it introduced the institutional apparatus of flexicurity avant le mot. The ingredients of Danish flexicurity are hefty public expenditures for vocational training and income security for the unemployed, active labor market policies designed to generate jobs and redeploy workers to fill them, and the absence of legal protection for workers facing dismissal or redundancy. The result has been high levels of labor force participation, high levels of worker mobility, and low levels of structural or cyclical unemployment. According to Bredgaard, Denmark’s labor market success depends on “a long and gradual institu-

The Transformation of Employment Regimes     17

tional history” and thus may be impossible to export. Indeed, he warns, the success of flexicurity may be difficult to sustain in Denmark itself if it is unable to maintain its strong tradition of social dialogue and mutual trust, if the vested interests of unions and employed workers engender resistance to new flexicurity initiatives, and if the financial costs of maintaining current policies cannot be sustained in the context of deteriorating worldwide economic conditions. Whereas Denmark has evolved a suite of labor market policies that do not depend on strengthening the employment nexus, Australia has acted deliberately to reinforce and extend the employment nexus by enacting laws to protect outworkers located far down the supply chain. In chapter 13, John Howe and Michael Rawling—both legal scholars—show how determined governments can use relatively simple legal technology to raise the labor standards of even the most precarious workers by imposing labor standards on the retailers who ultimately acquire their work product. Four of Australia’s six states have enacted legislation that deems outworkers to be entitled to the same terms and conditions as those conventionally employed elsewhere in the same industry, and makes retailers responsible for ensuring that their subcontractors’ employees have been treated in accordance with the law. In somewhat similar fashion, the Australian federal government uses its extensive procurement programs to ensure that workers employed in firms that supply goods and services to the public sector are treated in accordance with proper labor standards. Unlike the Danish experiment, this simple Australian innovation, Howe and Rawling contend, is easily exportable to countries that wish to escape labor law’s historic constraint, the employment nexus. The employment nexus haunts not just public laws and policies but organizations such as unions. In their study of unions in Japan, Keisuki Nakamura and Michio Nitta—both political scientists—show in chapter 14 how the emergence of multiple, growing, and overlapping categories of nonstandard employment have put pressure on Japanese unions to redefine their membership criteria, revise their approach to delivering services to their members, and ultimately abandon the employment nexus as the prime determinant of union affiliation. Of particular interest is the emergence of community-based unions to complement, and perhaps compete with, the long-established enterprise-based unions that have until recently exercised a virtual monopoly within Japan’s labor movement. Part V moves beyond both the workplace and the domain of labor policy to describe ways in which more general social policy is being renegotiated in light of the changing nature of work. Changing patterns of employment tenure, of workplace demography, and of family life require a new approach to the provision of social services—a new integra-

18     Rethinking Workplace Regulation

tion of policy approaches that have heretofore been consigned to discrete domains. In chapter 15, the first in this section, Anthony O’Donnell, a legal scholar, argues that Australia has done better than most countries in achieving such integration. Its system of social assistance, he maintains, is “flexible, adaptable to changes in both labor market conditions and gender roles, redistributive, and cheap.” The reason, he explains, is that it is tightly targeted to buffer the least well-off against risks associated with their normal life course. However, as the underlying paradigm of employment and of family life are both changing, increasing numbers of people are experiencing risk during their working lives rather than before or after. It is therefore necessary, O’Donnell claims, to “find a new welfare discourse” that no longer treats these individuals as fraudulent claimants or as individuals who are “poor through their own fault.” He notes that this concern has led to serious consideration in Australia of a system of “drawing rights”—savings schemes on which workers could draw not only to meet the cost of specified contingencies, such as further education or retirement, but also to engage in income smoothing as they encounter periods of labor market dislocation. These schemes, however, have not yet been realized. The concern for finding new approaches to social welfare systems is echoed in chapter 16, by Kendra Strauss, a geographer. Focusing on pensions, Strauss contends that “changes in the normative framing of labor relationships . . . and the institutions that structure and mediate those relationships are fundamentally related to, and co-construct, changes in the normative framing and institutions of social welfare.” Her wide-ranging comparative analysis of occupational pension systems leads her, like O’Donnell, to point out that “the male breadwinner model of labor and social reproduction” of the postwar era has changed along with the standard employment relationship that gave rise to and sustained an extensive system of workplace pensions. Applying these observations to the U.K. system of pension provision, she concludes that the challenge is to create flexible pensions for flexible workers—a project she specifically analogizes to the development of flexicurity in Denmark and the Netherlands. Finally, chapters 17 and 18, both written by legal scholars, explore attempts by the EU and its member states to protect social rights and implement social policies in the context of the changing gender demography and increasing volatility of the labor market. The first, by Julie Suk, begins by noting that “working mothers have always been on the margins of the standard employment contract,” one result of which is the gender pension gap, which in turn is associated with the predominance of women in part-time or intermittent employment. France, in particular, introduced a number of policies designed to close the gender pension gap only to have them challenged as discriminating against men under both French and European law. It is as yet unclear whether these chal-

The Transformation of Employment Regimes     19

lenges can be deflected by making identical advantages available to all caregivers regardless of gender, but Suk poignantly asks, “does antidiscrimination law facilitate work-family balance and gender equality?” Her conclusion is a tentative no. The right approach, she says, is to “adapt social security to the changing nature of work” and to abandon the standard employment contract as “the starting point and aspiration of pension policy.” In chapter 18, the legal scholar Julia López and her coauthors Consuela Chacartegui and César Cantón raise similar questions about the EU’s family-friendly policies on maternal and parental leave, the availability of child care, opportunities for part-time work, and care for dependent persons. They detect declining interest by EU member states in the promotion of work-life balance through the equal treatment of men and women but identify a different culprit: a shift in the emphasis of public policy toward “increasing overall economic growth and employment.” Acknowledging that some corporations have nonetheless adopted progressive and family-friendly policies, perhaps out of the conviction that such policies are good for business, the authors conclude by insisting that such policies must ultimately rest not on corporate advantage but on democratic principles. Part VI, the final section of the volume, asks what might be learned from these case studies of innovation in regulatory design. Is it possible to transplant good ideas across boundaries, from one political economy to another, from one legal system to another, and from one type of enterprise to another? How can we can learn from each other while maintaining a healthy awareness of the unique circumstances confronting each state and economy? Chapter 19, by Harry Arthurs, concludes this volume by asking whether the current crisis of global capitalism has perhaps opened up some policy space for experimentation at the national level, and whether countries forced to reconsider their long-standing regulatory frameworks may seek instruction and inspiration in the experience of others. We hope the essays in this volume illustrate both the innovation and the diversity with which countries are confronting the policy challenges created by the changing nature of work. We also hope that by presenting, comparing, and evaluating some of the most interesting policy experiments now under way, we can help create a discursive space in which new policies can be imagined and constructive transnational learning can become possible.

References Arrowsmith, James. 2009. “Temporary Agency Work and Collective Bargaining in the EU.” Dublin: European Foundation for the Improvement of Living and

20     Rethinking Workplace Regulation Working Conditions. Available at: http://www.eurofound.europa.eu/docs/ eiro/tn0807019s/tn0807019s.pdf. Accessed November 2012. Ehrenreich, Barbara. 2005. Bait and Switch: The (Futile) Pursuit of the American Dream. New York: Henry Holt. Fudge, Judy, and Rosemary Owens. 2006. Precarious Work, Women, and the New Economy, Oxford: Hart Publishing. Hijzen, Alexander. 2007. Workers in the Global Economy. Paris: Organisation for Economic Co-operation and Development. Hirsch, Barry T. 2003. “Union Membership and Coverage Database from the Current Population Survey.” Industrial and Labor Relations Review 56(2): 349– 54. Hoffman, Reid, and Ben Casnocha. 2012. The Start-Up of You. New York: Crown Publishing. Japan Institute for Labour Policy and Training (Japan Institute). 2008. “Japanese Working Life Profile, 2007/08.” Tokyo: Japan Institute for Labour Policy and Training. Kurz, Karin, Sandra Buchholz, Paul Schmelzer, and Hans-Peter Blossfeld. 2008. “Young People’s Employment Chances on Flexible Labor Markets.” In Young Workers, Globalization, and the Labor Market, edited by Hans-Peter Blossfeld, Sandra Buchholz, Erzsébet Bukodi, and Karin Kurz. Northampton, Mass.: Edward Elgar. Madland, David, Karla Walter, and Nick Bunker. 2011. “Unions Make the Middle Class, Center for American Progress Action Fund.” Washington, D.C.: Center for American Progress Action Fund. Available at: http://www.american progressaction.org/issues/2011/04/pdf/unionsmakethemiddleclass.pdf. Accessed October 2012. Ross, Andrew. 2010. Nice Work If You Can Get It: Life and Labor in Precarious Times. New York: New York University Press. Sennett, Richard. 1998. The Corrosion of Character. New York: W. W. Norton. Standing, Guy, 2011. The Precariat: The New Dangerous Class. London: Bloomsbury Press. Stone, Katherine V.W. 2004. From Widgets to Digits: Employment Regulation for the Changing Workplace. Cambridge: Cambridge University Press. Thornley, Carole, Steve Jeffreys, and Beatrice Appay. 2010. Globalization and Precarious Forms of Production and Employment. Cheltenham, UK: Edward Elgar. Tilly, Chris. 1995. Half a Job: Bad and Good Part-Time Jobs in Changing Labor Market Philadelphia, Pa.: Temple University Press. Uchitelle, Louis. 2006. The Disposable American. New York: Alfred A. Knopf. Vosko, Leah F. 2010. Managing the Margins. Oxford: Oxford University Press.

Part I The New Political Economy of Employment

Chapter 2 Changes in the Labor Market and the Nature of Employment in Western Countries morley gunderson

T

he labor policies of Western developed countries were generally established in an earlier era when the nature of work was quite different from what it is today. The old world of work was generally characterized as male-dominated involving blue-collar manufacturing jobs in a fixed worksite with lifetime jobs often protected by a tariff as well as a collective agreement or employment standards legislation established and monitored by governments that had the power and discretion to enforce regulatory initiatives. The new world of work is vastly different. In such circumstances, it would be surprising if the labor regulations previously established for the old world of work were appropriate and relevant to the new world of work (see also Supiot 1999; Gomez and Gunderson 2005b; Gunderson and Riddell 2000). This chapter outlines the nature of changes in the labor market and employment in Western developed countries that have important implications for labor regulation. Emphasis is placed on Canadian material. This may be of more general interest because Canada is often regarded as between the less intensively regulated regime of the United States and the more extensive regulatory regimes of Europe. This chapter also brings to bear on the issues a neoclassical economics market-oriented perspective.

Pressures Affecting the Standard Employment Contract Although they are interrelated, various pressures that are affecting the standard employment contract can be categorized as emanating from 23

24     Rethinking Workplace Regulation

the demand side of the labor market, from the supply side, and from its institutional and regulatory features. The impact on labor markets of many of these factors reflects regulatory choices, such as immigration policy, and the decision not to impose labor protections in the structure of global trading regimes.

Demand-Side Pressures Skill-biased technological change, such as the use of robotics in assembly-line work and computers in all aspects of the knowledge economy, has fostered a hollowing-out of the occupational structure with former well-paying, often unionized blue-collar jobs in manufacturing that are disappearing and being replaced by jobs at polar ends of the pay distribution: well-paying professional, managerial, and administrative jobs at the high-end, and poor-paying jobs in personal services at the low-end (Autor, Katz, and Kearney 2008). Workers displaced from the former middle jobs generally have industry-specific skills that do not enable them to obtain jobs at the high end so they are displaced to low-end jobs, where their supply influx further depresses wages. The hollowing out of the middle of the occupational distribution also means that the rungs in the middle of the career ladder have often disappeared, leaving groups such as youths and new immigrants trapped at the bottom with fewer chances for upward career progression. Skill shortages at the high-end have often placed a further premium on pay at that end. Globalization and trade liberalization, such as the North American Free Trade Agreement), have meant increasing imports from and outsourcing offshore to low-wage countries like China and India, further depleting the declining middle of what were once secure jobs protected by collective agreements or labor regulations (see, for example, Rodrik 1997; Wood 1996; Yan 2006). Deregulation of formerly regulated industries in sectors like transportation and utilities has generally led to more competitive pressures in those industries, and this has filtered down to more competitive pressures in their labor markets. The same applies to the privatization of services formerly provided in the public sector. In both cases, these pressures have generally led to reductions in wages, employment, and job security, often associated with reductions in collective bargaining protection after deregulation and privatization (Benjamin et al. 2012, 297). As indicated, these demand-side forces have had negative consequences on a number of labor market outcomes. Workers displaced from their jobs who are fortunate enough to find new jobs often take wage losses in the neighborhood of 10 to 30 percent. Wage polarization has also increased the risk of a society of haves versus have-nots. The associated stresses have broad negative social consequences in terms of health

Changes in the Labor Market     25

problems, child abuse, spouse abuse, accidents, and criminal activity (Gunderson and Riddell 2000).

Supply-Side Pressures Demand-side pressures emanate from employers, but pressures from the supply side of the labor market arise from the changing nature of the workforce. Prime among these pressures is the aging of workers, giving rise to increased costs to employers associated with such factors as senioritybased wage increases, disability and health-related benefits, and pension obligations. Obsolescence can also be a concern if older workers do not have the computer and other skills associated with the technological transformation to a knowledge economy. Retraining can be an issue because the evidence indicates that older workers often have problems in being retrained (Kubeck et al. 1996, based on a review of thirty-two studies), but those issues can generally be overcome if the training is geared to their specific needs (Dunn 2005; Simpson 2005). Large cohorts of retirees can also create skill shortages and a loss of mentoring capabilities and institutional knowledge. The continued increase in the labor force participation of women and the associated increase in multiple-earner families have increased pressures on the work-family balance (Duxbury and Higgins 2001; Gunderson 2002). On the regulatory front, it has increased the demand for initiatives in areas such as equal pay and equal employment opportunities, parental leaves, and rights to refuse overtime. Immigrants are increasingly finding it difficult to assimilate into the labor market in the sense of having their wages converge to those of otherwise comparable nonimmigrant workers (for more on assimilation issues, see Ferrer and Riddell 2008; Hawthorne 2008; Reitz 2006). In part, this may reflect outright discrimination, in part a refusal to recognize foreign credentials (for more on credential recognition issues, see Ferrer and Riddell 2008; Picot and Sweetman 2005). These difficulties are giving rise to human rights initiatives focusing on national origin and visible minority status, as well as to pressures in the occupational licensing area to recognize foreign credentials and experience. At the younger end of the age spectrum, challenges are associated with the school-to-work transition for youths, especially for those who drop out of school. Dropouts miss not only the high returns that continue to prevail for acquiring additional education but also the very high returns associated with the credential effect from completing key phases rather than dropping out (Gunderson and Oreopoulus 2010). They are often relegated to low-wage service jobs with little or no prospects for moving up the occupational ladder, given that the well-paid jobs in the

26     Rethinking Workplace Regulation

middle of the pay distribution have often disappeared, as discussed earlier. On the legislative front, concerns with dropping out have given rise to pressures to increase the compulsory school-leaving age in light of evidence that those who are compelled to stay in school longer generally earn very high returns from their additional education (Oreopoulus 2006).

Pressures on Institutions and Regulations These pressures are creating substantial adjustment problems for large portions of the workforce. This in turn is creating a demand for protection from the vicissitudes of market forces. Even as this demand is increasing, however, the normal institutional and other arrangements that have historically supplied that protection are less able to continue to provide it. For example, union protection has declined dramatically in most developed countries (Lipsig-Mummé 2009, 473). As well, governments are under considerable pressure to reduce their regulatory and legislative initiatives in order to compete for the more mobile investment and the jobs associated with that investment. In essence, the very forces that have fostered many of the negative adjustment consequences are restricting the ability of governments to provide the regulations and protections to deal with those consequences (Canadian evidence provided in Gomez and Gunderson 2005b).

Job Instability and Nonstandard Employment The pressures from the demand, supply, and institutional sides of the labor market have given rise to two phenomena of the utmost importance for the demise of the standard employment contract and the search for alternative regulatory regimes: an increase in job instability and in nonstandard employment.

Job Instability The picture of job stability is complicated by the fact that the workforce is increasingly made up of older workers who have long tenure and women who are remaining in the labor force for longer and more continuous periods of time. For young workers, however—and this is the group for whom future employment protection is most relevant—expectations of long-tenured jobs are increasingly remote (Cazes and Tonin 2009). As Farber concludes, “long-term employment relationships in the United States, while not a thing of the past, are not as dominant as they

Changes in the Labor Market     27

once were. . . . Young workers today should not look forward to the same type of career with one firm experienced by their parents” (2007, 27). In a more recent study, he emphasizes that “more recent cohorts of workers are less likely than their parents to have a career characterized by a ‘life-time’ job with a single employer” (2008, 1). And, finally, neither workers nor employers have the same expectations of long-term attachment that they had in the past: the “psychological contract” has changed so that even “regular” workers perceive that they have less job stability (Stone 2002).

Nonstandard Employment Part of the decline in job stability for youth has occurred because of the increase in non-standard employment that tends to be of shorter duration and less stable—hence, the descriptor contingent employment. Despite the various ways of defining nonstandard employment, the term generally includes permanent part-time work, seasonal work, casual and temporary work on limited-term contracts, self-employment, temporary-help agencies, on-call work, telecommuting, and home-working. Such nonstandard employment has increased substantially in Western developed economies (Gleason 2006; Houseman and Osawa 2003; OECD 2008; Vosko 2010). Nonstandard employment is generally characterized by low pay, modest fringe benefits, little or no job security, limited training, few opportunities for career development and advancement, and little if any protection through unions or labor laws and regulations. Even when laws and regulations exist, they are generally difficult to enforce in this context, not least because nonstandard jobs are also often occupied by vulnerable and disadvantaged persons on an involuntary basis: the recently unemployed, some women, minorities, and youths, especially school dropouts. The negative aspects of much nonstandard employment is highlighted by the phrases that are often used to describe it: contingent work, secondary work, just-in-time work, atypical employment, and stronger phrases like deviant employment and antisocial employment (Rubery 1998, 139, 151). Because nonstandard jobs are disproportionately occupied by women, they are often regarded as a women’s issue (Fudge and Owens 2006; Krahn and Lowe 2002; Vosko 2006, 2010; Vosko, MacDonald, and Campbell 2009; Zeytinoglu 1999; Zeytinoglu and Muteshi 2000), women occupying such jobs in part because of their restricted choices due to their disproportionate burden of household tasks. Nonstandard employment is often regarded as a form of risk-shifting from employers to employees—a just-in-time workforce to fit the just-in-time production

28     Rethinking Workplace Regulation

needs of employers—in spite of the fact that workers are often not in a position to absorb or diversify such risks especially if trapped at the bottom of the wage distribution. A concern has therefore developed that such workers may be permanently trapped at the bottom given that the middle rungs of the career ladder have often disappeared as a result of the polarization of the workforce into “good jobs” and “bad jobs” associated with the industrial restructuring described earlier. Although workers in nonstandard jobs are often the most in need of employment protection, they are also the least likely to receive it because of difficulties of implementing labor laws for such jobs (Banks 2001; Cazes and Tonin 2009; Chicha 1999; Houseman 1998; Kalleberg et al. 1997; Mangon 2000; Rubery 1998; Supiot 1999, 2001; Trudeau 1997; Zeytinoglu and Muteshi 2000). They are often not covered by labor laws, and when they are covered, monitoring compliance and enforcing regulations in this quadrant of the labor market is difficult. Their lack of effective statutory protection is enhanced by the fact that nonstandard jobs are less likely to be covered by a collective agreement (Banks 2001), that is, less likely to receive not only the wage gains and job security afforded by unions but also the assistance of unions in enforcing legislative standards. Unions traditionally do so in a number of ways: informing workers of their rights, representing them in disputes, providing protection from managerial reprisals in the case of complaints, and incorporating regulatory requirements into the collective agreement so that they are subject to grievance procedures and survive repeal of the original legislation. Nonstandard employment, however, is an extremely heterogeneous phenomenon in terms of its characteristics and populations (Gomez and Gunderson 2005a). Many nonstandard jobs are voluntary and fit the needs of persons seeking work-life balance or transitions into and out of retirement or from school to work; some are extremely well paid; others can accommodate the needs of persons with disabilities. Some are temporary stepping stones into more permanent jobs; others eschew fringe benefits in favor of cash wages because they already receive fringe benefits as the children or spouses of other workers. Some are conducive to a lifestyle of mutual noncommitment; others, even if they are bad jobs, are better than no job at all; some, like limited-term contracts, sometimes simply replace the probationary period of the old standard employment contract. In essence, some nonstandard employment can meet the needs of an increasingly heterogeneous workforce, just as it can meet the needs of employers for flexibility and adaptability. The following section argues that, in such circumstances, a one-size-fits-all legislative and regulatory policy response is unlikely to be appropriate and can be counterproductive.

Changes in the Labor Market     29

Implications for the Appropriate Regulatory Response The previous analysis suggested some implications for an appropriate regulatory response to the demise of the standard employment contract and to the challenges and cautionary notes to be addressed in the framing of new labor market policies.

Targeting as Opposed to One-Size-Fits-All Solution As discussed, nonstandard employment is an extremely heterogeneous phenomenon. In such circumstances, a one-size-fits-all solution of trying to regulate all nonstandard employment is unlikely to be appropriate. Given the pressures associated with costly forms of regulation, targeting initiatives toward the most vulnerable individuals, who are involuntarily and permanently in undesirable dead-end nonstandard jobs, seems most appropriate. Otherwise, resources are dissipated and benefits spill over to nontarget groups not in need of protection.

Focus on Individual and Not Jobs Similarly, the targeting approach suggests focusing on individuals and not jobs. This is particularly important given the growing job instability for many workers and that many youths are increasingly unlikely to expect or secure lifetime or long-term jobs. Additionally, vulnerability tends to be associated with individuals and not necessarily jobs. For example, if individuals are more mobile and less likely to have lifetime jobs with the same employer, and if employers find it less important to bind their employees to long-term service with schemes such as definedbenefit pension plans, then perhaps it makes sense to worry less about protecting the integrity of defined-benefit plans and to think more about pension accounts that are attached to individual workers. In fact, because income security is needed by all older persons, there is no need to tie it to work at all.

Regulatory Challenges Arising from Unintended Consequences Consistent with its image as the dismal science, economics emphasizes that well-intended initiatives can have unintended negative consequences, often for the very groups that the initiatives are designed to assist. This does not mean that these initiatives do not serve a broader

30     Rethinking Workplace Regulation

social purpose. Rather, they can have additional, unintended consequences that may give rise to difficult trade-offs and regulatory as well as policy challenges. For example, the legislative protection provided under the standard employment contract may have induced employers to shift to nonstandard employment and even the underground economy as a way to avoid costly regulations (see Addison and Teixeira 2003; Blanchard and Wolfers 2000; Nickell and Layard 1999; OECD 1999). The adverse impacts disproportionately fall on youths (outsiders) and least on prime-age males (insiders). Regulations to protect the integrity of defined-benefit pension plans (such as vesting rules, cost-sharing, and requirements to share fund ­surpluses with beneficiaries) have likely contributed to the demise of workplace pensions in general and the shift from the less risky defined benefit-plans toward the more risky but less well-regulated defined-contribution plans. The evidence, though mixed, generally suggests that these effects have occurred but that their effect is often quantitatively small (international evidence reviewed in Gunderson 2007). Minimum wage laws designed to alleviate poverty among the working poor can exacerbate poverty by reducing employment opportunities and hours of work because of the higher cost associated with the minimum wage increase. This reduction of employment opportunities may also inhibit the acquisition of informal on-the-job training that occurs as a by-product of working. Such training may also be inhibited by the fact that minimum wages make it difficult for young workers to accept lowwage jobs in return for training. Students also may leave school to queue for the now-higher minimum wage jobs, ensuring that they do not receive the high returns attributable to education and especially to completing key phases of education. The evidence, though contested, also indicates that minimum wages tend to have little or no effect on reducing poverty and that their positive effect of raising some wages among the working poor is offset by negative effects, including reductions in overall employment (see reviews in Burkhauser and Sabia 2007; Neumark and Wascher 2008). Economics also emphasizes that advantaged interest groups can often “capture” the regulatory process for their own ends and may support regulatory initiatives that protect them from competition from lowercost new entrants. For example, the protection extended to women and youths early in the industrial revolution were designed in part to protect male jobs from competition. The protection provided to consumers from occupational licensing may protect incumbent professionals from competition from newcomers, including immigrants, who could perform the services if their credentials were recognized. The protection extended to nonunion workers through wage extension by juridical decree may pro-

Changes in the Labor Market     31

tect unionized workers from lower-wage competition in that sector. For instance, Wal-Mart’s lobbying for higher minimum wages may protect them from competition from other low-wage retailers because Wal-Mart already pays above the minimum wage. Nor are academics without selfinterest: professors may try to “protect” students from the “pitfalls” of large classrooms and “teaching-stream” appointments because such arrangements threaten the job security of professors. In short, calls to protect the vulnerable can be thinly disguised ways to protect already advantaged interest groups.

Cost Shifting A related unintended consequence of legislative initiatives is that the costs are shifted from the parties against whom the initiatives are applied, often to the parties they are designed to assist. In a world of global competition and mobile capital, employers can avoid high labor costs by shifting their investment elsewhere, but they are less able to pass the cost forward to customers who can shop elsewhere. That is, the demand for their product is price elastic under global competition. In such circumstances of mobile capital and mobile consumers, the costs are increasingly shifted to the immobile factor of production—labor and especially low-wage labor that is immobile and cannot “escape” the tax. The empirical evidence, for example, indicates that most of the payroll tax (approximately 80 percent) for programs like workers’ compensation, unemployment insurance, and public pensions is shifted back to labor in the form of lower compensating wages in return for the benefits from the programs (Kesselman 2001). Evidence also exists that much of the cost initially imposed on employers for providing accommodation to injured and disabled workers in the workplace is shifted back to these workers in the form of lower wages (Gunderson and Hyatt 1996). Again, this does not imply that such programs are undesirable. Rather, it reminds us that most of the cost is generally borne by workers, even if it is initially imposed on employers. Seen in this light, concerns expressed by employers over the cost of such programs seems somewhat misguided.

Shifting Across Programs and Forum Shopping Just as employers can shift part of the cost of programs to workers, so can governments shift costs to other levels of governments and individuals can shift their claims to other programs if benefits are curtailed or expanded (forum shopping). Evidence of such substitution has been documented for unemployment insurance, disability compensation, workers’ compensation, and social assistance or welfare (see Fortin and

32     Rethinking Workplace Regulation

Lanoie 2000; for more recent Canadian evidence, see Campolieti and Krashinsky 2003). For the issue at hand, the prominence in the literature of substitution across programs suggests that the absence of protection for workers in nonstandard employment and unstable jobs means that they are more likely to try to access income support programs such as unemployment insurance, disability compensation, workers’ compensation or social assistance. If access to one is blocked, if, for example, they are ineligible for unemployment insurance, they will try to access others. Conversely, providing such protection can save on the cost of various income maintenance programs. Of course, if the legislative protection prices some jobs out of existence, the income support programs will be accessed more intensely.

Extending Coverage and Enforcement Issues As indicated previously, labor legislation often does not cover mobile nonstandard workers, and when it does it is extremely difficult to enforce compared with former large fixed worksites, where enforcement was also often aided by the presence of unions. A common response to such a situation is to extend the protection of labor laws to nonstandard workers when they are not covered and to enforce the legislation more effectively for those who are already covered (Supiot 1999, 2001). Basic principles of economics provide some insights into a more strategically optimal enforcement policy when enforcement is difficult and costly. The expected penalty for violations is the product of a number of components: the probability of being investigated times the probability of getting caught, times the probability of being found guilty, times the penalty if found guilty. If the first three factors are difficult to police for employers of nonstandard employees and workers with limited job stability, they can be offset by increasing the penalty for those found not to be in compliance. This could be done by increasing the monetary penalty, often so trivial as to be regarded simply as a normal cost of doing business, or by focusing on certain high-profile employers for whom the image costs of bad publicity are also high (Gomez and Gunderson 2005a). An alternative to extending and enforcing costly legislation is for the regulatory and enforcement agencies to shift from a policing mode to a more cooperative one that emphasizes providing assistance to employers to comply with the legislation. Such assistance can be especially important for the growing cadre of small employers that do not have sophisticated human resource or legal departments. It can be especially important in areas where the legislative requirements are complicated including: pay equity (generally termed comparable worth in the United

Changes in the Labor Market     33

States and equal pay for work of equal value in Europe), employment equity or affirmative action, health and safety, reasonable accommodation for injured or disabled workers, and pensions.

Other Mechanisms for Regulating the Employment Relationship In the search for innovations in regulatory design to deal with the demise of the standard employment contract, attention must also be paid to the fact that mechanisms other than laws and regulations can affect the employment relationship. Alternatives include the market or private ordering, and collective bargaining or other forms of employee representation. Some regulations can productively harness market mechanisms. Active adjustment assistance programs, which work in the direction of basic market forces, may help vulnerable workers move from declining sectors and regions and nonstandard jobs into expanding sectors and regions and standard jobs, for example. Principles of economics can also be used in the design of optimal enforcement mechanisms, as discussed. Compensating wage premiums exist for such negative features of the employment relationship as risk of injury, job instability, lack of fringe benefits such as pensions, and overtime, commute time, and shift work (see Benjamin et al. 2012, 236–38). Such wage premiums can compensate employees for negative job features and deter employers from providing “bad jobs” by making them more costly. A full-employment economy is the greatest contribution market mechanisms can make to ensuring that vulnerable workers are not forced into dead-end nonstandard jobs or subjected to high levels of job instability. This can foster job stability and facilitate movement from involuntary nonstandard work to voluntary standard work. Despite legitimate debate over the extent to which a rising tide raises all boats (perhaps not those anchored to the bottom), agreement is widespread that a full-employment economy is a boon to otherwise vulnerable workers. Conversely, any policy choice to curb inflation and the deficit rather than emphasize job creation within a full-employment economy will have major redistributive consequences. Market mechanisms and their outcomes are shaped not only by the basic forces of supply and demand but also by legal rules and regulations that determine the power balance among the various actors. This is the case for numerous laws and policies, from those that allow the use of replacement workers during strikes, to free trade agreements that do not require the mutual enforcement of labor protections, to immigration regulations that allow the importation of temporary workers or that tie a temporary worker to a particular employer, to employment-at-will doc-

34     Rethinking Workplace Regulation

trines that allow either party to terminate the employment contract for any reason. Consequently, reliance on market mechanisms must be considered in light of all of the rules and regulations that shape market outcomes and that contribute to leaving large portions of the workforce vulnerable and lacking bargaining power or even information. Conversely, the imperfections of regulatory solutions must be compared with the imperfections that arise from the market. These broader perspectives must be addressed in the framing of regulatory policy. The mechanism of collective bargaining and representation can also complement regulatory initiatives in various ways: informing workers of regulations and their rights, monitoring enforcement at the workplace, protecting workers who complain against management reprisals, incorporating legislative provisions into the terms of collective agreements, negotiating stronger contractual provisions and providing grievance procedures, and political lobbying by labor representatives for further reforms. However, as discussed, the ability of unions to perform these roles in the new world of work has been curbed, especially given the rise of nonstandard employment and job instability.

Attention to Design and Implementation Details In developing innovative regulatory designs to deal with the demise of the standard employment contract it is important that the implementation and design features of any new initiatives be considered. The devil is in the details. All too often, initiatives are announced in only general terms (that being all that is necessary to get political credit from the public) and promise details of the regulation and implementation to follow. When the details do follow, they are often complicated, with the result that either the legislation is not enforced or extensive resources have to be devoted to securing compliance (see, for example, Fudge 1991; Lewis 1991, 225; Donner 1987). By contrast, small design changes can be innovative in meeting the changing requirements of the new world of work. The unemployment insurance system in Canada, for example, changed its eligibility requirements from one requiring a minimum number of weeks worked, so that part-time workers were not eligible, to one based on hours worked that covered a growing number of part-time and seasonal workers.

Sector Councils: A Modest Canadian Experiment in Innovative Regulation Notwithstanding these cautionary observations about the hazards of regulation in the context of more volatile labor markets, described ear-

Changes in the Labor Market     35

lier in this chapter and elsewhere in this volume, some experiments in regulatory design do point to the possibility of positive results. One such experiment, now some three decades old, involves the establishment in Canada of some thirty sector councils covering almost half of the Canadian workforce (see Gunderson 2011; Gunderson and Sharpe 1998; HRSDC 2005; Watt and Gagnon 2005). Most councils represent a particular industry but some are based on other characteristics such as occupations or membership in a particular ethnic group. All are joint labor-management initiatives, under which employees are represented by unions, by employee and professional associations, or by designated individuals. And all are ongoing rather than ad hoc. Although initially supported by temporary seed money from the federal government, and intended ultimately to be self-sustaining, they have managed to secure government support on a more permanent basis, presumably reflecting their perceived success. The councils deal with issues of particular relevance to their sectors: recruiting and retention; labor adjustment; impending skill shortages; training, professional development, and lifelong learning; apprenticeship design and skills upgrading; industry standards in areas such as certification and the recognition of foreign credentials; essential skills and workplace literacy initiatives; labor market information on job opportunities and training; the harmonization of provincial standards and other mobility-related issues; career development and career ladders in the sector; immigration issues including those related to temporary workers; and liaisons with education and training institutions. Many of these issues are particularly relevant to vulnerable and disadvantaged workers and indeed many of the councils have been established in sectors where issues relating to nonstandard work and job instability are prominent, such as apparel, apprenticeships, auto repair, child care, construction, contact centers, fish harvesting, food processing, groceries, supply chains, textiles, tourism, and trucking. However, while sector councils clearly have the potential to address many issues relevant to vulnerable workers in sectors where nonstandard employment and job insecurity are widespread, they deal with such issues only indirectly as part of their larger mandate: to “increase industry investment in skills development to promote a quality workforce,” to develop “a learning system that is informed of, and more responsive to, the needs of industry,” to “reduce barriers to labor mobility,” and to enhance industry’s ability to “recruit and retain workers” (HRSDC 2005, 1). These themes are clearly relevant to improving labor market outcomes for some—but by no means all—nonstandard workers. However, a number of councils have emphasized the need to tap the talents within groups that have often been relegated to the margins of the labor market, including disabled and Aboriginal persons. It is notewor-

36     Rethinking Workplace Regulation

thy that both stakeholders and successive governments have supported the retention and expansion of the Sector Council system. It would be fair to say, then, that the sector councils represent an array of promising tripartite institutions that have the potential to generate more favorable conditions in Canada’s labor markets for many nonstandard workers and to address issues raised by the demise of the standard employment contract more generally. More research is needed, however, on the actual effectiveness of sector councils and on their potential to serve as a template for further labor-management initiatives.

Concluding Observations The previous analysis suggests a number of implications for innovations in regulatory design to deal with the demise of the standard employment contract. The ones outlined here emphasize basic principles of economics. The shift to nonstandard employment and the demise of the standard employment contract itself has likely been intensified somewhat by the weight of regulations that are especially costly and may lack strategic fit in the new world of work. In such situations, the search should be for strategic innovations in regulatory design, and not necessarily for more regulations or the extension and enforcement of existing regulations. The various pressures arising from the demand and the supply side of the labor market are creating substantial adjustment problems for much of the workforce. This in turn is creating a demand for protection from the vicissitudes of the market forces that play a prominent role in the adjustment pressures. At the same time that this demand is increasing, the familiar institutions and legal regimes that have historically supplied that protection are less and less able to continue to provide it. Union and government regulatory protection that is costly to employers has to confront the credible threat by businesses to relocate their investment and the associated jobs to other jurisdictions. Hence, again, there is a need for innovative regulatory design to deal with the demise of the standard employment contract. A one-size-fits-all solution is not likely to be appropriate to deal with the issues of nonstandard employment and job instability given that they are extremely heterogeneous phenomena in various dimensions: the vulnerability of employees, the extent to which nonstandard employment is voluntary or involuntary, the extent to which it is transitory or permanent, and the extent to which it involves bad jobs. Focusing on the protection of the most vulnerable workers is likely to be appropriate, especially because they are also the ones hardest hit by the changes associated with the new world of work.

Changes in the Labor Market     37

For similar reasons, the initiatives should likely focus on individuals and not necessarily jobs. This is the especially the case given the growing job instability for youths. Consistent with its image as the dismal science, economics warns that well-intended initiatives can have unintended negative consequences, often for the very groups that the initiatives are designed to assist. Economics also emphasizes that calls to protect the vulnerable can be thinly disguised ways for interest groups to protect their already advantaged position. These trade-offs pose challenges for the architects of regulatory policy. Economics further emphasizes that the cost of legislative initiatives is often shifted from the parties to whom they are initially applied, typically employers, to the parties they are designed to assist, typically vulnerable workers. Similarly, governments may shift costs to other levels of governments, and individuals may shift their demand for protection from one program to another. The natural response to declining legislative coverage and enforcement for standard workers is to expand coverage to and improve enforcement in new sectors for nonstandard workers. Such a response, however, has to confront the possibility that such costly initiatives are increasingly constrained and that one-size-fits-all solutions may not meet the heterogeneous needs of such workers. Economic principles suggest the potential desirability of increasing penalties for noncompliance to compensate for the difficulties in monitoring and enforcement, but also of providing assistance especially to small employers when the regulatory requirements are complicated. In the search for innovation in regulatory design to deal with the demise of the standard employment contract, attention must also be paid to the fact that other mechanisms exist for regulating the employment relationship, though they too have their problems. Alternative mechanisms include the market or private ordering, and collective bargaining or other forms of employee representation. Active adjustment assistance programs that reinforce or grease the wheels of market mechanisms may assist vulnerable workers to move from declining sectors and regions and nonstandard jobs to expanding sectors and regions and more standard jobs. Market mechanisms can best assist vulnerable workers by ensuring a full-employment economy and job creation. The mechanism of collective bargaining and representation can also complement regulatory initiatives in various ways: informing workers of the regulations and their rights, monitoring enforcement at the workplace, protecting workers who complain against reprisals by management, embedding legislative provisions in the collective agreement, ne-

38     Rethinking Workplace Regulation

gotiating stronger provisions, providing a grievance procedure, and lobbying for further legislative reforms. The ability of unions to perform these roles in the new world of work, however, has been curbed. A somewhat innovative form of labor-management cooperation is developing in Canada in the form of sector councils. They deal with a wide range of issues relevant to more vulnerable and disadvantaged workers and many of the councils are in sectors where nonstandard work and job instability are prominent. As emphasized, the points developed here reflect an economic perspective on the issue. They highlight the challenge in combining economic efficiency and social decency in regulatory reform.

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Changes in the Labor Market     39 ited by Paulette T. Beatty and Roemer M.S. Visser. Malabar, Fl.: Krieger Publishing. Duxbury, Linda, and Chris Higgins. 2001. Work-Life Balance in the New Millennium: Where Are We? Where Do We Need to Go? Ottawa: Canadian Policy Research Networks. Farber, Henry S. 2007. “Is the Company Man an Anachronism? Trends in LongTerm Employment in the U.S., 1973–2006.” IRS working paper 518. Princeton, N.J.: Princeton University Press. ———. 2008. “Employment Insecurity: The Decline in Worker-Firm Attachment in the United States.” IRS working paper 530. Princeton, N.J.: Princeton University Press. Ferrer, Ana, and W. Craig Riddell. 2008. “Education, Credentials, and Immigrant Earnings.” Canadian Journal of Economics 41(1): 186–216. Fortin, Bernard, and Paul Lanoie. 2000. “Effects of Workers’ Compensation: A Survey.” In Handbook of Insurance, edited by Georges Dionne. Norwell, Mass.: Kluwer Academic Publishers. Fudge, Judith. 1991. “Litigating Our Way to Gender Neutrality: Mission Impossible?” In Just Wages: A Feminist Assessment of Pay Equity, edited by Judith Fudge and Patricia McDermott. Toronto: University of Toronto Press. Fudge, Judith, and Rosemary Owens. 2006. “Precarious Work, Women, and the New Economy: The Challenge to Legal Norms.” In Precarious Work, Women, and the New Economy: The Challenge to Legal Norms, edited by Judith Fudge and Rosemary Owens. Oxford: Oxford University Press. Gleason, Sandra. 2006. The Shadow Workforce: Perspectives on Contingent Work in the United States, Japan, and Europe, edited by Sandra Gleason. Kalamazoo, Mich.: Upjohn Institute for Employment Research. Gomez, Rafael, and Morley Gunderson. 2005a. “Non-standard and Vulnerable Workers: A Case of Mistaken Identity?” Canadian Labour and Employment Law 12(2): 171–98. ———. 2005b. “Does Economic Integration Lead to Social Policy Convergence? An Analysis of North American Linkages and Social Policy.” In Social and Labour Market Aspects of North American Linkages, edited by Rick Harris and Thomas Lemieux. Calgary: University of Calgary Press. Gunderson, Morley. 2002. Rethinking Productivity from a Workplace Perspective. Ottawa: Canadian Policy Research Network. ———. 2007. Incentive Effects of Occupational Pension Plans. Toronto: Ontario Expert Commission on Pensions. ———. 2011. “Impact of Sector Councils: A Canadian Institution.” Journal of Labor Research. 32(4): 414–26. Gunderson, Morley, and Douglas Hyatt. 1996. “Do Injured Workers Pay for Reasonable Accommodation?” Industrial and Labor Relations Review 50(1): 92–104. Gunderson, Morley, and Phil Oreopoulos. 2010. “Returns to Education in Developed Countries.” In International Encyclopedia of Education, 3rd ed., edited by Penelope Peterson, Eva Barker, and Barry McGaw. Philadelphia, Pa: Elsevier. Gunderson, Morley, and W. Craig Riddell. 2000. “The Changing Nature of Work: Implications for Public Policy.” In Adapting Public Policy to a Labour Market in Transition, edited by W. Craig Riddell and France St. Hilaire. Montreal: Institute for Research on Public Policy.

40     Rethinking Workplace Regulation Gunderson, Morley, and Andrew Sharpe, eds. 1998. Forging Business-Labour Partnerships: The Emergence of Sector Councils in Canada. Toronto: University of Toronto Press, 1998. Hawthorne, Lesleyanne. 2008. “The Impact of Economic Selection Policy on Labour Market Outcomes for Degree Qualified Migrants in Canada and Australia.” Institute for Research on Public Policy (IRPP) Choices 14(1): 1–49. Houseman, Susan. 1998. “Labor Standards in Alternative Work Arrangements.” Labor Law Journal 49(7): 1135–42. Houseman, Susan, and Machiko Osawa, eds. 2003. Nonstandard Work in Developed Economies: Causes and Consequences. Kalamazoo, Mich.: Upjohn Institute for Employment Research. HRSDC. Sector Councils. 2005. Ottawa: Human Resources and Skills Development Canada. Available at: http://www.hrsdc.gc.ca/eng/workplaceskills/sec tor_councils/information.shtml. Kalleberg, Arne L., Edith Rasel, Ken Hudson, David Webster, Barbara F. Reskin, Naomi Cassirer, and Eileen Appelbaum. 1997. Nonstandard Work, Substandard Jobs. Washington, D.C.: Economic Policy Institute and Women’s Research Institute. Kesselman, Jonathan. 2001. “Payroll Taxes and the Financing of Social Security.” In Labour Market Policies in Canada and Latin America: Challenges of the New Millennium, edited by Albert Berry. Boston, Mass.: Kluwer Academic Publishers. Krahn, Harvey, and Graham Lowe. 2002. Work, Industry, and Canadian Society. Scarborough, Ont.: Thompson/Nelson. Kubeck, Jean, Norma Delp, Tammy Haslet, and Michael McDaniel. 1996. “Does Job-Related Training Performance Decline with Age?” Psychology and Aging 11(1): 92–107. Lewis, Debra. 1991. “Pay Equity and the State’s Agenda.” In Just Wages: A Feminist Assessment of Pay Equity, edited by Judy Fudge and Patricia McDermott. Toronto: University of Toronto Press. Lipsig-Mummé, Carla. 2009. “Trade Unions and Labour Relations Regimes: International Perspectives in a Globalizing World.” In Canadian Labour and Employment Relations, 6th ed., edited by Morley Gunderson and Daphne Taras. Toronto: Addison-Wesley. Mangan, John. 2000. Workers Without Traditional Employment: An International Study of Non-standard Work. Cheltenham, UK: Edward Elgar. Neumark, David, and William Wascher. 2008. Minimum Wages. Cambridge, Mass.: MIT Press. Nickell, Steve, and Richard, Layard. 1999. “Labor Market Institutions and Economic Performance.” In Handbook of Labor Economics, vol. 3C, edited by Orley Ashenfelter and David Card. Amsterdam: Elsevier Science. OECD. 1999. “Employment Protection and Labour Market Performance.” In OECD Economic Outlook No. 65 (June). Paris: Organisation for Economic Cooperation and Development. ———. 2008. Growing Unequal? Income Distribution and Poverty in OECD Countries. Paris: Organisation for Economic Co-operation and Development. Oreopoulos, Philip. 2006. “The Compelling Effects of Compulsory Schooling: Evidence from Canada.” Canadian Journal of Economics 39(1): 22–52. Picot, Garnet, and Arthur Sweetman. 2005. “The Deteriorating Economic Welfare of Immigrants and Possible Causes: Update 2005.” Analytical Studies Branch

Changes in the Labor Market     41 research paper series. Ottawa: Statistics Canada, Business and Labour Market Analysis Division. Reitz, Jeffrey. 2006. Recent Trends in the Integration of Immigrants in the Canadian Labour Market. Ottawa: Human Resources and Social Development Canada. Rodrik, Dani. 1997. Has Globalization Gone Too Far? Washington, D.C.: Institute for International Economics. Rubery, Jill. 1998. “Part-time Work: A Threat to Labour Standards?” In Part-time Prospects: An International Comparison of Part-time Work in Europe, North America, and the Pacific Rim, edited by Jacqueline O’Reilly and Colette Fagan. London: Routledge. Simpson, Patricia A. 2005. “Academic Perspectives on Training Older Workers.” In Thriving on an Aging Workforce: Strategies for Organizational and Systemic Change, edited by Paulette T. Beatty and Roemer M.S. Visser. Malabar, Fla.: Krieger Publishing. Stone, Katherine. 2002. “Knowledge at Work: Disputes over Ownership of Human Capital in the Changing Workplace.” Connecticut Law Review 34(3): 721–63. Supiot, Alain. 1999. Transformation of Labour and the Future of Labour Law in Europe. Luxembourg: European Commission. ———. 2001. Beyond Employment: Changes in Work and the Future of Labour Law in Europe. Oxford: Oxford University Press. Trudeau, Gilles. 1997. “Temporary Employees Hired Through a Personnel Agency: Who Is the Real Employer?” Canadian Labour and Employment Law Journal 5(1997): 359–75. Vosko, Leah, ed. 2006. Precarious Employment: Understanding Labour Market Insecurity in Canada. Montreal: McGill-Queen’s University Press. ———. 2010. Managing the Margins: Gender, Citizenship, and the International Regulation of Precarious Employment. New York: Oxford University Press. Vosko, Leah, Martha MacDonald, and Jain Campbell, eds. 2009. Gender and the Contours of Precarious Employment. New York: Routledge. Watt, Douglas, and Natalie Gagnon. 2005. The Skills Factor in Productivity and Competitiveness: How Canada’s Sector Councils Are Helping Address the Skills and Labour Needs of Employers. Ottawa: Conference Board of Canada. Wood, Adrian. 1996. “How Trade Hurt Unskilled Workers.” Journal of Economic Perspectives 9(1): 57–80. Yan, Beiling. 2006. “Demand for Skills in Canada: The Role of Foreign Outsourcing and Information-Communication Technology.” Canadian Journal of Economics 39(1): 53–67. Zeytinoglu, Isik. 1999. “Flexible Work Arrangements: An Overview of Developments in Canada.” In Changing Work Relationships in Industrialized Economies, edited by Isik Zeytinoglu. Amsterdam: John Benjamins. Zeytinoglu, Isik, and Jacinta Khasiala Muteshi. 2000. “Gender, Race, and Class Dimensions of Non-standard Work.” Relations Industrielles/Industrial Relations 55(1): 133–67.

Chapter 3 Labor Market Regulation and the Global Economic Crisis robert kuttner

T

he current economic crisis has increased rates of unemployment and exacerbated a long-term weakening of institutions such as employment security, labor regulation, and collective bargaining. This trend has different particulars for different nations, but has common general characteristics everywhere. High unemployment and protracted crisis tend to put downward pressure on wages and erode regulated labor markets. Protracted joblessness increases tensions between unions and their members by creating pressures for reductions in wages and other labor protections that union leaders have to broker with their membership. It creates defensive responses that often take the form of twoclass systems of labor relations that undermine labor solidarity, established workers retaining traditional benefits and younger workers or workers in new economic sectors getting fewer protections. It creates hardships that induce people to work in the gray economy. From the perspective of the state, the crisis puts pressure on public budgets, which in turn reduces benefits to workers and undermines systems of labor protection. From the view of industries facing reduced earnings and diminished demand for workers, the crisis accelerates both the desire and capacity of businesses to find ways to cut costs at the expense of labor. Industry is more likely to outsource work and to convert permanent payroll jobs to temporary jobs or short-term contract workers. All of this erodes tacit, as well as explicit, social compacts, and increasingly treats the labor market as just another spot market in which workers are added or discarded, and wages and benefits are increased or decreased, based on short-term economic fluctuations. All of this tends to destabilize and undermine the systems of labor regulation that have been part of Western democracies since the postwar era. At the same time, however, the pressure for more flexible labor markets creates opportunities. In principle, it is possible to combine greater 42

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job flexibility with greater employment security as nations such as Denmark, Sweden, and the Netherlands have shown. Yet so-called flexicurity takes many forms, some genuinely conducive to employment security, and others simply new strategies for reducing it. Moreover, forms of flexicurity that replace older, more rigid forms of job security with newer, more adaptive ones require three things that are in short supply in current economic circumstances: ample government budgets, politically influential trade unions, and relatively full employment. This set of pressures on labor markets did not begin with the financial collapse of 2007 to 2009. Indeed, the current crisis only accelerated a trend in place for at least three decades, weakening the postwar model of labor relations. Although particulars differed widely among countries, the older postwar social settlement assumed stable and negotiated labor relations and the regularization of work. Casual labor gave way to a new set of standards, partly anchored in laws and partly the fruits of collective bargaining. The aspiration was to gradually expand these conditions of normalized work arrangements from core jobs to peripheral ones (socalled primary and secondary), so that the entire labor market would be regulated. Scholars have identified three broad traditions and significant variations among Western nations: a liberal and relatively more marketoriented Anglo Saxon system with islands of strong unionism and partial social insurance protections, a corporatist continental European tradition based heavily on state regulation, and a Nordic or social-market model that relied less on state standards and more on direct bargaining, wage-setting, and shared responsibility for keeping wage growth in line with productivity growth for purposes of maintaining international competitiveness. These diverse institutional settings suggest that comparable macroeconomic outcomes can have very different institutional and political ingredients and distributive consequences. Consider the issue of productivity and wages. In the United States, the extreme case of unregulated labor markets, wage restraint has been the result of weak unions, casualization of work, widening income inequality, and increased political power of industry. In the Nordic countries, wage restraint has been a deliberate policy goal of labor as well as industry. But until very recently, it has been coupled with a deliberate narrowing of income inequality (solidaristic wage policy), suggesting that there is more than one path to keeping wages in line with productivity growth, resulting in very different social outcomes. However, these models have lately come under both political and economic assault. And undermining the broad social model of which flexicurity is a part can make it more difficult to maintain comprehensive labor-market policies that are part of systemic incomes policies and that

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require substantial social outlay. For example, in Sweden, which pioneered the macroeconomic strategy of active labor market policy combined with solidaristic wage policy, the model is deteriorating. Investment in workers during downturns is far less than it was between the 1960s and the 1990s, as is coordinated wage bargaining. As a consequence, despite relatively high unemployment (7 to 8 percent in early 2011), certain highly skilled workers are in short supply, leading both to greater wage dispersion and to central bank concerns about inflationarywage pressures. So Sweden is denied its earlier virtuous policy circle, in which public investment in workers during downturns lowered the unemployment rate and increased skills, and centralized wage bargaining during boom periods led to wage restraint and allowed fuller employment without inducing inflation.

Labor Markets, Flexibility, and the Trade-Off Debate The discussion of appropriate labor market institutions and their impact on economic performance is part of a long-standing debate in the economics and political science literature about the supposed trade-off between social equality and economic efficiency (Okun 1975). The starting point is the efficient market hypothesis. If markets naturally deliver efficient prices, efficient allocations of capital investment, and appropriate payments to factors of production, it logically follows that efforts to increase equality must tamper with market pricing and therefore come at the expense of economic performance. My own contribution to this discussion, “The Economic Illusion: False Choices Between Prosperity and Social Justice” (Kuttner 1987), reviewed the theoretical debate and the actual economic performance of major nations. The available evidence indicated that the range of possible and actual relationships between equality and efficiency is broad. Some state interventions that overcame market failures also produced a more productive economy. These included public investments (in education, training, public health, science, and technology), antipollution regulations that induced technical innovation, and labor market institutions that increased trust and collaboration. All of these overcame externalities and increased both equality and economic performance. Likewise, state interventions to counteract macroeconomic failures, prevent recessions, and preserve full employment improved both economic performance and earnings equality. Other well-intentioned interventions, such as social welfare programs that rewarded idleness, labor contracts that delinked wage increases from productivity, and overly generous unemployment compensation, all increased equality in the overall income distribution by raising worker

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incomes, but at a cost to economic efficiency. Still others, such as tax preferences that induced unproductive investment in tax shelters, or regulatory failures that enriched speculators but invited economic collapse, produced a trade-off opposite to the one usually advertised; they increased both inequality and inefficiency. I concluded that, contrary to the standard trade-off story, the relationship of equality to efficiency was at best indeterminate, that theory did not settle the question, that institutions and politics mattered, and that one had to get down to cases. More recent works, such as Jonas Pontusson’s “Inequality and Prosperity: Social Europe vs. Liberal America,” updates the story and delves deeper into the data (2005). He finds that nations that have more redistributive policies generally do not necessarily suffer poorer economic performance. The weak social and economic regulation in Anglo Saxon countries, most notably the United States, has some benefits for flexibility and entrepreneurship, but also serious costs in the form of inadequate social investment and precarious employment. Much of the ostensibly superior U.S. economic performance reflects increased hours worked, not higher rates of productivity growth. With respect to coordinated wage bargaining and regulated labor markets, Pontusson finds that institutional differences matter immensely, but that “the macro-economic benefits of coordinated wage bargaining do not appear to have diminished over time” (2005, 113). Other scholars of comparative economic and social systems, such as Lane Kenworthy in “Egalitarian Capitalism,” have reported similar findings (2007). This intellectual debate notwithstanding, on a practical political level, the shifting balance between industry and labor, between states and markets, and between globalization and national regulation has intensified the trend toward greater liberalization of all kinds of markets quite apart from whether this course is economically justified, necessary, or salutary. Politically, greater market liberalization tends to feed on itself because it weakens the political power of countervailing institutions such as trade unions, which defend a more managed form of capitalism; it undercuts state-based economic regulation without substituting effective global regulation, weakens nation-based workers and worker institutions in a globalized labor market, and undermines the credibility of center-left parties that are sponsors of regulated labor markets, but can no longer deliver economic security based on models that have been overtaken by events. As part of this circular reinforcement and with the old social compact no longer reliable, citizens’ preferences have also tended to shift in a free-market direction, younger people in many countries internalizing their precarious economic situation, and becoming less committed to an ethic of solidarity or redistribution, and more attracted to an individualist ethic. As public services are reduced under budgetary pressures, the wealthier, more successful, and more influen-

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tial citizens who had been political supporters of the welfare state are more likely to defect. The pressure for deregulated labor markets can be understood as a part of these intellectual, economic, and political trends. Free-market economists and their neoliberal allies in government, who have been ascendant since the late 1970s, contend that labor protections create rigidities in labor markets, cause a divergence between wage payments and marginal contributions to output (which misprices a key factor of production), and deter employers from creating permanent jobs; all of these reduce economic output and either increase unemployment or drive employment offshore. Defenders of a social-contract model of labor relations respond both in Keynesian terms and in terms of the ingredients of labor productivity. A well-paid and secure workforce contributes to stable aggregate demand more reliably than a precarious one. Workers in a reciprocal relationship with employers are more likely to share what Michael Polanyi called “tacit knowledge” (1951) about potential productivity gains without fearing for their jobs. A stable industrial relations context makes it more rational for employers to invest in the skills of their workers, either at the firm level or socially. Different models of European labor regulation have shown that a more productive and collaborative workforce can more than compensate for increased costs. German workers are among the world’s most expensive, yet highly productive; Germany has relatively low unit labor costs. Danish workers enjoy some of the most comprehensive social protections in the world, yet voluntarily change jobs at the highest rate in Europe because they have confidence that they can find or be retrained for better jobs. Regulated labor markets can produce great economic efficiencies, but defensive forms of regulation can also induce the rigidities the critics allege. Like the larger debate about equality and efficiency, at the level of broad generalization this debate about labor-market regulation is inconclusive. An institutional analysis suggests that a variety of labor market institutions can produce good (or bad) macroeconomic outcomes. At the level of aggregate economic performance, protagonists to these debates can selectively use data to make their respective cases. During the postwar boom, western Europe was able to combine high growth, full employment, and significant job protections. The economies of continental Europe grew more rapidly than those of Anglo Saxon countries with their laissez-faire, less regulated labor markets. Conversely, the slowgrowth era of the “Euro-sclerosis” of the 1980s was used as the definitive proof that labor markets had become too rigid, and the neoliberal recipes of the United States under Ronald Reagan and of the United Kingdom under Margaret Thatcher produced resurgent growth rates. Defenders of

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a social-compact approach to labor relations countered that the sources of slow growth in Europe were mainly macroeconomic, and that Europe surprised its critics by rebounding in the 1990s. Nonetheless, nations that used labor-market policies and other strategies to produce egalitarian outcomes have found that despite their best efforts, their societies are becoming more unequal. A 2005 to 2008 series of monographs by multinational teams of scholars sponsored by the Russell Sage Foundation found that low-wage work, defined as work paying less than two-thirds of median wage, ranged from a low of 8 percent of all jobs in Denmark to 25 percent in the United States (Bosch and Weinkopf 2008). However, despite institutional differences, wage inequality is increasing in nearly all of the Organisation for Economic Cooperation and Development (OECD) countries as European labor market institutions become more Americanized (Pontusson 2005; OECD 2008). Both the primary income distribution and the post-tax-and-transfer distribution have been growing more unequal as state redistributionist measures are called on to work harder to overcome primary market-driven inequalities as a time of stresses on public budgets (OECD 2008).

Models of Labor Regulation In recent years, the United States has continued to epitomize weak labor regulation. Basic laws regulating wages, hours, working conditions, and the right to form unions remain on the books, but are poorly enforced. Wage theft is endemic. Misclassification is widespread, meaning the categorization of permanent workers as temps who report to the same employer and perform the same job day after day. Temps are not able to organize unions and do not qualify for social benefits. This strategy is not limited to small marginal employers, but is also used by large corporations such as FedEx in its ground delivery operations and Wal-Mart for its warehouse workers. Misclassification is illegal, but crackdowns are rare. Though the 1935 National Labor Relations Act is nominally in force, employers with impunity fire workers who seek to form unions. With a handful of signal exceptions, the labor movement has not had much success in extending unionization to the new service economy, even for low-wage jobs that cannot easily be relocated offshore such as hospital, janitorial, security, and restaurant workers. In the banking, retail, and computer sectors in the United States, which are almost entirely nonunion, outsourcing is rampant. The United States also spends far less than Europe on unemployment compensation; it has shorter durations of coverage and lower wage replacement ratios. It lacks anything that might be considered an active labor market policy, spending less than 0.3 percent of gross domestic prod-

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uct (GDP) on labor market subsidies, and the vast majority in the form of passive subsidies such as unemployment insurance. Despite this extreme degree of labor-market flexibility, which is presumably conducive to economic performance, the United States is recovering from the current economic crisis more slowly than much of Western Europe, and new job creation is extremely sluggish. This would suggest that ultraliberal labor markets have costs as well as benefits and that other macro-economic and regulatory factors matter at least as much as labor market institutions. The continued downward drag of an impaired banking system and a vicious circle of devalued assets, diminished wages, high debts, and business hesitancy to invest keeps the United States in a prolonged economic slump. Labor market institutions that contribute to depressed wages may well exacerbate rather than ameliorate this dynamic. At the other end of the continuum are the Nordic systems. For example, the Danish system goes a long way toward satisfying the economy’s need for a flexible and adaptive labor force, but does so in an institutional context that increases rather than reduces worker security and, for the most part, rejects the idea that the flexibility in the system comes via contingent workers. The system also relies heavily on consensual tripartite bargaining. Danish workers who lose jobs involuntarily are required to cooperate with a labor market system that pays them as much as 90 percent of their former wage for as long as four years. However, there is an emphasis on activation: they must take advantage of training and education opportunities that usually lead to equal or better employment. There are also no prohibitions on employers discharging workers. This system gives employers the confidence to create jobs knowing that redundant workers can be laid off, gives workers the confidence to change jobs, avoids the pitfalls of a two-class labor market, and creates a Danish labor force that becomes more highly skilled over time. The Danish system is under stress from several sources, however. It requires near-full employment to work well and is also expensive, costing about 3 percent of the Danish GDP. The system is also predicated on the assumption that every Dane can be trained for a decent job, but the increasing presence of immigrants and their children, some of whom are reluctant to learn the Danish language, puts both economic and political stresses on the system. The current center-right government is also considering reducing the system’s generous benefits, which are the key both to the active collaboration of unions and the widespread confidence that the system adequately tides workers over bouts of unemployment and moves them into better jobs. Despite the effort to have a one-class system, the combination of immigrants, rising unemployment, and the efforts of some employers to avoid the system’s high labor costs is creating a slowly increasing class of workers who lack decent wages or social pro-

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tections. If the trend continues, the system could reach a tipping point where its highly regulated, but highly flexible, labor markets lose the confidence of taxpayers and workers. Denmark, however, has come through other more serious crises such as the period of very high unemployment in the 1980s and has nevertheless managed to refine its institutions. In the middle of this spectrum are the state-regulated labor markets of nations such as France, Italy, and Germany. Although these countries have significant differences, in general, labor protections have been tied to the job rather than being largely absent, as in the United States, of a larger and more flexible system of employment security, as in Denmark and other Nordic nations. As a consequence, France, Germany, and other continental nations (though with different particulars beyond the scope of this chapter) are at risk of moving further into a two-class system in which a dwindling percentage of workers enjoy traditional long-term contracts and forms of social insurance attached to good jobs, and flexibility in the national labor market is provided by increasing numbers of contingent workers who are disproportionately young, female, and immigrant. This is a way of adding flexibility and lowering some labor costs, but at a risk of destroying the legitimacy of the system. This trend is economically and politically unsustainable. It defeats the entire purpose of labor market regulation and the solidarity that goes with it by creating what the French political scientist Bruno Palier terms a “society of insiders and outsiders” (2010, 97). Over time, the relative percentage of insiders with good jobs and social protections is dwindling to a core of industrial workers and civil servants. This working-class elite is resented by other workers, thus undermining the political coalition that supports the welfare state. Industry responds by making it ever harder for new workers to get permanent contracts. Précarité has become a major political issue in France. The particulars have been somewhat different in Germany where the Hartz reforms, named for a 2002 commission chaired by the labor director of Volkswagen, reduced the amount and duration of unemployment and other welfare benefits, and made it more difficult for unemployed people to turn down jobs and still collect benefits (Streeck 2009). These policy shifts had their intended effect of reducing both job security and wages. Although rising unemployment actually increased total costs to the state, the reduction in protections increased the relative number of mini-jobs that do not enjoy traditional wages, benefits, or job security. This will also reduce the value of pensions received by these lower-paid workers when they retire. At the same time, Germany has also used a variety of creative strategies such as state subsidy of workers in industries that suffer a temporary drop in demand for their products, including partial subsidy of

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shortened working time (Kurzarbeit), so that workers who work halftime receive between 60 and 80 percent of their net full-time pay, and more when the value of other social supports is included. In the current crisis, Germany’s strong position as an exporter, coupled with these measures, has allowed unemployment in Germany to drop more quickly than in the United States . However, the drift to a two-class labor system where mini-jobs are prevalent in a variety of sectors, from call-centers to hotels to food processing to health and hospitals, is continuing and even accelerating. Scholars debate why the income distribution has been growing more unequal, and why a postindustrial, post-Fordist economy with relatively more service sector jobs would logically require a reduction in labor market protections. If anything, an economy with fewer large corporations and less lifetime employment should require more social interventions on both efficiency and equity grounds for a number of reasons, namely, to protect workers from unstable employer environments entirely beyond their control, to facilitate transitions, and to retrain workers for newly demanded skills. The failure of some nations to expand these policies is more a reflection of political choices than of adaptive economics.

Inequality and the Skills Debate In economics literature, a familiar explanation for widening wage inequality is skill-biased technology shifts. Supposedly, in the new highly computerized economy, industry now demands higher skills of its workers at an accelerating rate of change and pays for it accordingly. Not surprisingly, those with routine skills command reduced wages, and the highly skilled and those comfortable with a continuous learning culture command a wage premium. The Princeton economist Alan Blinder has written that “the labor market has turned ferociously against the low skilled and the uneducated” (2006, 12). However, other scholars have persuasively challenged this argument. There is little empirical evidence that the demand for more advanced worker skills has increased at a rate above its historic trend. The Northwestern University economists Ian Dew-Becker and Robert Gordon observe that the rate of increases in wage inequality has diverged sharply among different advanced industrial countries, despite the free flow of technology across borders. They further state that “in the 1989–97 period [for compensation increases in poorly tracked occupations with demands for increased skills reflecting a computerized economy], total real compensation to [American] CEOs increased by 100 percent, while those in occupations related to math and computer science increased only 4.8 percent, and engineers decreased 1.4 percent” (2006, 103). The huge shift in profits and earnings to executives in the financial sector cannot be the

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result of their increased skills in any sense that is meaningful for the productivity of the larger economy. The skills of financial engineers increased their own incomes, shifted risks to the rest of the economy, widened inequality, and ultimately cost the world GDP tens of trillions of dollars. A much more plausible story is that widening income equality reflected a shift in political power that in turn weakened a range of what Richard Freeman calls equalizing institutions, such as strong trade unions, economic regulation, and an effective social wage (1999). Most of the labor force of the postwar boom had only a high school diploma, if that, and the educational gap between ordinary production workers and scientists and engineers was far wider. Yet overall income distribution was far more egalitarian. The countries that have had the least erosion of income equality—notably in northern Europe—have been those with stronger equalizing institutions, and those that have connected distributive policy directly to skill enhancement programs.

Globalization and Political Power To explain increasing income inequality and the intensifying deregulation of the standard labor contract, something is at work besides an increasing rate of change in the demand for skills. One key factor is the globalization of labor markets. Globalization erodes decent standards of work in multiple and reinforcing ways, both economically and politically. Economically, workers in countries with comparable skill levels but far lower prevailing wages are able to perform similar jobs at less cost. New transportation, production, computer, and inventory-control technologies have lowered the cost and risk of outsourcing. Liberalization of the global trade regime has facilitated a bargain between multinational corporations and state-led enterprises in emerging economies in a way that leaves out labor both in the advanced North and much of the developing South. Many of the developing-world competitors to European and North American workers also have relatively unregulated labor markets and lack basic labor rights that might otherwise serve to increase wages as productivity increased. A combination of neomercantilist development and suppressed wages is core to the economic model of the biggest emerging nation, China. This brand of globalization has also tended to increase the power of transnational business and business, generally, at the expense of states and labor. That shift, in turn, weakens the political constituency for domestic labor regulation, which is both out of fashion and out of power in most of the West. One mark of this shift is the fact that the economic crisis has not brought center-left governments to power in most nations, be-

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cause they are seen as largely impotent in the face of larger economic trends. In Europe, the particular form taken by the emergent European Union (EU) has weakened states without substituting comparable state authority at a continental level. This has resulted in weakened national regulation in Europe. Before the emergence of the single market, relatively strong nation states in Europe were in a position to enforce national social contracts and tripartite arrangements between business, labor, and government that balanced market and extra-market measures. The original European Community began as a pro-market initiative, but has undergone an ideological odyssey that has come nearly full circle. The predecessor institutions of the EU, such as the European Coal and Steel Community and the 1957 Common Market of the Treaty of Rome, were very much in the spirit of increased market liberalization within a larger economic union. The EU of the Delors era, conversely, was an effort to balance economic liberalization with social rights and regulation on a continental scale. Yet basic EU law gives constitutional priority to free movement of capital, goods, services, and people; social rights do not have equal standing and the former trumps the latter. Moreover, the expansion of the EU, most of whose new members associate social democracy with their former experience with communism, has given its centerright majority something close to a lock on political power. The European Court of Justice, in several recent cases, has translated this basic discrepancy in the EU’s fundamental law into a practical weakening of national labor regulation and collective bargaining. One decision allowed a company based in Estonia to reflag a Baltic ferry line that employed Finns, thereby reducing wages to Estonian levels. A second permitted a Latvian construction company to bring Latvian workers into Sweden under rules that undermined Swedish trade unions. The company was required to meet statutory wage minimums, but the court held that it could lawfully reject collective-bargaining demands of Swedish unions. A third case, originating in Germany, denied state (Länder) governments the right to set wage standards in government contracting, and permitted a Polish subcontractor to a German contractor to pay wages below the specified standard (Bucker and Warneck 2010). This provision of the EU’s basic law has created a series of time bombs that, unless altered, will continue to threaten both state-led labor regulation and standards that emerge from collective bargaining. The EU, as an agent of neoliberal norms and practices, achieves at a continental scale what instruments such as the World Trade Organization, International Monetary Fund (IMF), OECD, World Bank, and “Washington Consensus” seek to achieve worldwide. It is fair to conclude, therefore, that the single most potent source of the weakening of national regulated labor markets is globalization. This

Labor Market Regulation and the Global Economic Crisis     53

trend, and only secondarily changes in modes of production, explains why trends are cutting in the same direction throughout the OECD area. Note, however, that the culprit is not globalization per se, but the particular brand of globalization that has developed since the 1970s. As a number of scholars have observed, there is more than one form of globalization. After the experience of the Great Depression and World War II, which together reduced world trade and world financial flows to a trickle, leaders of that era were determined to rebuild international commerce along lines consistent with domestic full-employment, Keynesian demand-management, and the protections of a welfare state. To the statesmen of that era, the lessons of the Great Depression had both a domestic and a global dimension. Domestically, laissez-faire had plainly failed. It left societies vulnerable to bouts of financial panic and mass unemployment, which were in turn breeding grounds for totalitarianism. States needed to be able to sponsor and administer managed forms of capitalism for reasons of efficiency, equity, and stability. However, the interwar experience also showed that global laissez-faire impaired the capacity of states to pursue necessary domestic policies. The gold standard, the constraints of balance of payment crises, and the need to reassure private global money markets, all these operated perversely by commanding austerity when growth and stimulus were indicated. Therefore, at Bretton Woods, the architects of the postwar global economic and financial order opted for a compromise that John Gerard Ruggie famously termed “embedded liberalism” (1982). The classical liberalism of free trade and free capital movements would be constrained out of recognition that, to be socially acceptable, the economy had to be embedded in society. Nations would be freed from the shackles of the gold standard. Pressure would be put on surplus nations to expand their economies rather than on deficit nations to contract. Capital controls would be permitted. Tariffs would be reduced only very gradually. State enterprises and industrial planning would be tolerated, even encouraged. In practice, the guarantor of this system was less the intended Bretton Woods institutions of the IMF, World Bank, and General Agreement on Tariffs and Trade than it was the ad hoc institutions of enlightened selfinterest created by the hegemonic postwar United States, such as the Marshall Plan and the use of the dollar as a global reserve currency. Nonetheless, that system, which survived into the early 1970s, created what the economist Dani Rodrik, crediting his colleague Robert Lawrence’s concept of shallow global integration, has usefully termed “shallow globalization” (2011). Although the specifics were rather different from what was ventured at Bretton Woods, the salutary consequence was roughly the same: domestic governments were able to combine increasing global trade with the domestic policy space to pursue high growth, full employment, welfare states, and social compacts.

54     Rethinking Workplace Regulation

The Bretton Woods era collapsed due to a series of pressures, including the Triffin Dilemma (that the dollar could not serve as global reserve currency without triggering unacceptable inflation at home), other currency crises, inflationary pressures that were supercharged by oil price shocks, and the resulting failure of demand management as a prime policy tool. In the wake of these serial failures, the economics profession reverted to a more radically classical mode, business regained political influence, regulation went out of fashion, and conservative governments took power in the United Kingdom and the United States. As a result, center-left governments in France and elsewhere found their room to maneuver newly constrained by an unleashed global capital market. As part of this resurgence of laissez faire, deep globalization replaced shallow globalization as the policy ideal. Beginning with the Uruguay Round launched in 1986, the United States placed “nontraditional” objectives on the agenda for GATT negotiations that went far beyond tariff reductions. Trade commitments were now used to undermine domestic systems of managed capitalism. Bilateral trade agreements went even further than the General Agreement on Tariffs and Trade (GATT) and later World Trade Organization (WTO) commitments by defining many instruments of managed capitalism as violations of free trade. As Rodrik observes in his important and recent book, The Globalization Paradox, deep globalization, national self-determination, and political democracy are not compatible (2011). If all the instruments of national economic management are sacrificed on the altar of laissez-faire, nationstates lose the ability to manage their economies and elites force unpopular policies on skeptical electorates. As he writes, “we can have at most two out of three. If we want hyperglobalization and democracy, we must give up on the nation state. If we must keep the nation state and want hyperglobalization too, then we must forget about democracy. And if we want to combine democracy with the nation state, then it is bye-bye deep globalization” (2011, 200). After considering the practicalities, Rodrik dismisses as naïve and impractical the course of either complete or partial global governance: “We have no choice [he says] but to settle for a ‘thin’ version of globalization—to reinvent the Bretton Woods compromise for a different era” (2011, 205). Rodrik is surely right about the big picture, but this still leaves open the question of how advanced nations defend regulated labor markets and high wages in the face of developing countries that use a brand of neomercantilism that combines state-led growth with very low wages. Presumably under “thin” globalization, advanced countries would have the right to impose tariffs against imported products that did not follow basic norms of decent worker treatment, such as the right of collective action and the norm that wage growth broadly should in-

Labor Market Regulation and the Global Economic Crisis     55

crease with productivity growth. This course, however, would strike many as unacceptably protectionist. It would be a hard sell in nations like Germany that rely heavily on export-led barriers, and consequently would be hesitant to ratchet up trade conflict. It would also require the West as a whole to take a much harder line with China. A key question is whether even the most nimble of European labor market systems that value high skills and high flexibility can withstand the increased competitive pressure from nations such as China, which combine strategies of state-led, export-oriented development with extremely low domestic wages. In the recent past, Western business and political leaders could confidently assure themselves that as routine production shifted to Asia, the West would continue to compete based on technological leadership. But lately, Asian mercantilism has shown itself as able to innovate along the entire range of technology and production. U.S.- and European-based corporations have been partners in some of these ventures, so that a percentage of the profits would go to Western companies and their investors, but at the expense of a dwindling share of good jobs. This, in turn, puts more pressure on the model of regulated labor markets. In Germany, which until lately could feel confident that its prowess in engineering and advanced manufacturing would protect its export industry, doubts have set in. Business, labor, and political leaders now question the impact of China’s economic assault. A Financial Times article quotes Jurgen Heraeus, chairman of Germany’s Precious Metals Trading Group: “German companies are in danger of being pushed ever higher onto the technological ladder until one day the market niche will be too small to survive” (Daniel Schafer, “Reflected Glory,” January 19, 2011, p. 9). At the same time, a recent study on the bargain that Apple struck with China on design in the United States and offshore production points out that though more than 90 percent of iPod and the iPhone production occurs outside the United States, more than 50 percent of the ultimate value added is captured by U.S. retailers, distributors, and the parent company. Of course, the elite earnings of designers and engineers at Apple and similar technology companies account for only a tiny fraction of the good jobs needed by advanced diversified economies. However, if union penetration and wage regulation were stronger in retailing and distribution, workers could capture more of the fruits of Apple’s innovation, even if routine production stays in China. Even so, it remains to be seen whether a nation can support a broad range of middle-class jobs on an economic model that combines nicheinnovation at the top with even well-regulated service-sector jobs that are relatively low productivity, compared with manufacturing. A rebalancing of national economic models as well as a greater claim by thirdparty workers on the fruits of their labor, so that they can consume and

56     Rethinking Workplace Regulation

import more are both necessary. Ultimately, democratic nation states need to reclaim their capacity to regulate both labor markets and terms of trade if workers and citizens alike are not going to lose out to the global economic elites that profit from a particular version of globalization—a version that is not the only possible brand.

Conclusion A review of these labor market trends suggests that the shift away from more regulated labor markets is not the necessary consequence of changes in the structure or content of the economy, but rather reflects shifts in relative political power. The state has lost regulatory capacity, trade unions have lost influence, and private market actors have gained leverage over workers and the rules of the system. There is no inherent reason why the current stage of capitalism requires a loosening of labor regulation, and the several ingenious variations on flexicurity demonstrate that it is possible to combine socially guaranteed employment security with flexibility and continuous upgrading of workforce skills. Conversely, during a period of increased globalization and high unemployment, more orthodox systems of wage regulation do run the risks of contributing to both labor-market rigidities and political fragmentation as well as increasing inequality. In these circumstances, labor-market protections that promote both equality and efficiency remain possible, but have become more difficult to achieve politically.

References Blinder, Alan. 2006. “Preparing America’s Workforce: Are We Looking in the Rear-View Mirror?” Princeton, N.J.: Center for Economic Policy Studies. Bosch, Gerhardt, and Claudia Weinkopf. 2008. Low-Wage Work in Germany. New York: Russell Sage Foundation. Bucker, Andreas, and Wiebke Warneck. 2010. Viking – Laval – Ruffert: Consequences and Policy Perspectives. Brussels: European Trade Union Institute. Dew-Becker, Ian, and Robert J. Gordon. 2006. “Where Did the Productivity Growth Go? Inflation Dynamics and the Distribution of Income.” In Brookings Papers on Economic Activity 2: 2005, edited by George L. Perry and William C. Brainard. Washington, D.C.: Brookings Institution. Freeman, B. Richard. 1999. The New Inequality: Creating Solutions for Poor America. Boston, Mass.: Beacon Press. Kenworthy, Lane. 2007. Egalitarian Capitalism: Jobs, Incomes, and Growth in Affluent Countries. New York: Russell Sage Foundation. Kuttner, Robert. 1987. The Economic Illusion: False Choices Between Prosperity and Social Justice. Philadelphia, Pa.: University of Pennsylvania Press. OECD. 2008. Growing Unequal? Income Distribution and Poverty in OECD Countries. Paris: Organisation for Economic Co-operation and Development.

Labor Market Regulation and the Global Economic Crisis     57 Okun, M. Arthur. 1975. Equality and Efficiency: The Big Tradeoff. Washington, D.C.: Brookings Institution. Palier, Bruno. 2010. A Long Goodbye to Bismarck: The Politics of Welfare Reform in Continental Europe. Amsterdam, The Netherlands: University of Amsterdam Press. Polanyi, Michael. 1951. The Logic of Liberty. Chicago: University of Chicago Press. Pontusson, Jonas. 2005. Inequality and Prosperity: Social Europe Vs. Liberal America. Ithaca, N.Y.: Cornell University Press. Rodrik, Dani. 2011. The Globalization Paradox: Democracy and the Future of the World Economy. New York: W.W. Norton. Ruggie, John Gerald. 1982. “International Regimes, Transactions, and Change: Embedded Liberalism in the Postwar Economic Order.” International Organization 36(2): 379–415. Streeck, Wolfgang. 2009. Re-forming Capitalism: Institutional Change in the German Political Economy. New York: Oxford University Press.

Chapter 4 The Decline of the Standard Contract of Employment in the United States: A Socio-Regulatory Perspective katherine v.w. stone

A

potent mix of globalization, technological change, and neoliberal public policies is undermining established employment practices as well as employment regulatory regimes around the world. The employment relationship is being transformed from a longterm stable relationship between an employee and a firm to one in which the employee is a free agent operating in a boundaryless workplace. Along with the transformation in the individual employment relationship, there has been a deterioration of the labor market institutions in which the individual contract of employment is embedded. Earlier in this volume, Robert Kuttner described the demise of established labor market institutions from a political economy perspective. Morley Gunderson also discussed the same phenomenon from a macroeconomic perspective. In this chapter, I describe the decline of standard contract of employment from a regulatory perspective, using the United States experience as a case study. At first glance, one might find the United States an odd choice because it is practically unique among industrialized countries for having no statutory or constitutional protection for job security. In the United States, the overwhelming majority of employment relationships take the form of at-will contracts. In an at-will contract, either side may terminate the relationship at any time for any reason (for a detailed exposition of the nature of the at-will employment contract under U.S law, see Stone 2007b). Because most U.S. employees have no claim to ongoing employment, they do not seem to fit the template of the standard contract of employment. Nonetheless, my thesis is that the United States developed 58

Decline of the Standard Contract of Employment in the United States     59

a standard employment contract, not as a set of legally imposed obligations, but as a widespread social practice. Moreover, the U.S. story illustrates how deeply current regulatory regimes are based on a particular understanding of the nature of work, and how changes in the nature of work have therefore made these regulatory regimes dysfunctional.

Pre-history of the Standard Employment Contract In the United States, the standard contract of employment is not a legal construct but a social practice, one that grew out of early twentieth-century approaches to human resource management. It first developed in response to changes in the technology of production in the late nineteenth century, and later matured with the advent of industrial unionism in the mid-twentieth century. The essential features of the standard contract of employment in the United States are an implicit promise of job security and employer-provided health and pension benefits. It often includes other benefits such as paid vacations, sick days, or a grievance procedure for resolving disputes arising in the workplace. The standard employment contract in the United States developed in tandem with shifts in the location of worker knowledge. In the nineteenth century, craft workers were the exclusive repositories of production knowledge. Although there were many distinct crafts, workers in each craft collectively possessed all of the knowledge necessary to produce the various items they manufactured, such as steel, barrels, glass, paper, and shoes. Craft workers created institutions to protect their human capital and control its dissemination, including apprenticeship systems, craft unions, and inside-contracting. They used their monopoly of knowledge to obtain fair compensation, insulate themselves from product market fluctuation risks, control the pace of production, veto the introduction of labor-saving technologies, and control the hiring and training of new employees. With these institutions, craft workers guarded what they termed the “mysteries of the craft” in order to protect their jobs, status, and way of life (Stone 1974; 2004, 13–26). In the late nineteenth and early twentieth century, technological change and the opening of new markets destabilized the artisanal system of production (Stone 1974). Employers came to see skilled workers as an impediment in their quest to exploit new profitable opportunities. Thus manufacturers teamed up with industrial engineers to remove production bottlenecks, devise new methods of work organization, and maximize the advantages of the technological breakthroughs of the era. The most important figure in the movement to rationalize work was an industrial engineer named Frederick Winslow Taylor. Working in the steel industry in the late nineteenth and early twentieth century, Taylor

60     Rethinking Workplace Regulation

devised what he termed a “scientific” method for organizing work. Like other industrial engineers of the era, Taylor saw the manifestations of skilled workers’ control as antithetical to efficiency. But, unlike his peers, Taylor gave employers a method to break the skilled workers’ exclusive access to production knowledge. Break their hold on knowledge, he proclaimed, and their power would vanish (Stone 2004, 27–48). Taylor’s central message was that it was necessary to separate thinking from doing in the production process and put production knowledge exclusively in control of management. In Taylor’s system, known as scientific management, knowledge was removed from the shop floor and placed in a newly created planning department, to be doled out on an asneeded basis throughout the production process. Taylor believed that there was one best way to perform each task, so he told employers to break down each job into its component tasks, determine the best way, and then instruct each worker to perform each task in that way. Under his system, jobs were redefined into minute, rote tasks that could be easily learned (Kanigel 1997). Under the influence of scientific management, many large firms redefined jobs to eliminate the need for highly skilled workers. They turned to a new type of worker, termed semi-skilled, to perform the tedious and repetitive tasks Taylor’s system generated. But despite Taylor’s call for “deskilling” jobs, he did not advocate a spot market for labor. Rather, he counseled firms to develop long-term relationships with their employees to build loyalty, encourage the development of firm-specific skills, and discourage turnover (Taylor 1911, 31–32). Another industrial relations movement emerged in the early twentieth century. The stated goal of the personnel management movement was to reduce turnover and enhance employee loyalty. Like scientific management, it aimed to increase productivity and solve labor problems by reorganizing work, but it grew out of the field of psychology rather than engineering (Stone 2004, 38–44). Personnel management advised firms to establish social insurance and welfare programs. It showcased several prominent firms that established elaborate welfare programs in the early twentieth century. For example, U.S. Steel established a stock subscription plan for workers and a profit-sharing plan for executives in 1903. The programs were designed to encourage attachment between the workers and the firm. Under the stock subscription plan, employees were required to stay with the corporation for at least five years and to show “a proper interest” in the company’s welfare. Similarly, the U.S. Steel pension plan, established in 1911, offered its workers retirement benefits after age sixty barring any “misconduct on the part of the beneficiaries” (Stone 1975). U.S. Steel’s welfare programs also included a safety and sanitation

Decline of the Standard Contract of Employment in the United States     61

campaign and educational and recreational facilities. Because it believed that home ownership would encourage permanency in employment, U.S. Steel offered low-interest loans to enable workers to buy houses. It also built tens of thousands of rental houses, hospitals, libraries, and public schools. Every plant had its own glee club, band, or orchestra. By 1924, U.S. Steel had built 175 playgrounds, 125 athletic fields, 112 tennis courts, nineteen swimming pools, and twenty-one bandstands (Stone 1975). National Cash Register, International Harvester, General Electric, and Westinghouse soon established similar programs (Ozanne 1967; ­Jacoby 2004). Corporate welfare work was advocated by those in the personnel management movement as a way to restore a personal relationship to the workplace that was lacking in the impersonal massproduction factory. In part, these corporate welfare programs were animated by a genuine concern for the well-being of employees. At times, they were heavy-handed methods of social control.1 But at their core, corporate welfare policies, and particularly social insurance programs, were part of personnel management’s goal of encouraging long-term ties between the employee and the firm (Stone 1974, 51–54; Ozanne 1967, 77–78). In addition to creating elaborate welfare regimes, scientific management and personnel management experts advised employers to reengineer jobs to fortify worker-firm attachment. Jobs were arranged into sequences, called job ladders, in which each job provided the training necessary for the job one rung up. Employers adopted the practice of hiring only at the bottom of the ladder—the “port of entry”—and using internal promotions to fill all vacancies higher up. Well-defined promotion pathways encouraged attachment and instilled loyalty among incumbent workers who could reasonably foresee a progression if they stayed with their firm. The policies of promotion from within had the additional advantage of encouraging incumbent workers to share their knowledge with those hired after them because they knew that they would not be displaced by a newcomer (Stone 1974). Employers also established wage systems and benefit plans that rewarded long service. Predictable promotions, wage increases, and long vesting periods for pensions encouraged workers to stay on their jobs. These practices form what labor economists today call “internal labor markets” (Doeringer and Piore 1971; Stone 1975; Osterman 1984; Stone 2004). With these measures, the early twentieth-century efforts to restructure jobs created a culture in which workers acquired an implicit promise of job security in exchange for relinquishing their craft autonomy and becoming dependent on their specific employer for their livelihoods (Stone 2004; Jacoby 2004; Waring 1991, 13–14).

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Emergence of the At-Will Employment Doctrine In the late nineteenth century, when Taylor was first developing his theories, the at-will doctrine emerged in the state courts. In contrast with the previous legal regime, the at-will doctrine was an advance for at least some groups of workers (Orren 1991). Previously, workers in the United States were subject to an employment law default rule known as the entire contract doctrine, which required workers to perform an entire job before they were entitled to payment. Pursuant to the entire contract doctrine, workers who quit or were fired before the end of the term of their employment contract were denied any wages for work they had performed up to that point. For example, if a worker was hired for a year but left after ten months, he would often find himself with no pay for the ten months he worked. For unskilled workers, who lacked unions or market power, the entire contract doctrine led to harsh results. The at-will rule mitigated the harshness of the entire contract regime by providing that workers hired on an indefinite contract had the right to be paid for the time worked, up to the moment they quit or were fired. Because the new rule made it easier for unskilled workers to quit, it gave them a degree of mobility and autonomy they had not previously possessed. It meant they could change jobs without forfeiting payment for time already worked on their old jobs. It also gave them income security, at least for the time they worked. The rule did not provide employment security, but this was something unskilled workers never had anyway. The impact of the at-will doctrine on skilled workers was not as propitious. Skilled workers needed neither income security nor employment security from the law. For them, job security existed by virtue of their knowledge of the craft and membership in the powerful craft unions, not from attachment to a particular employer. However, the new mobility the at-will doctrine conferred on unskilled workers ultimately threatened the power of craft workers and their unions because it made it easier for employers to obtain unskilled workers to perform the newly deskilled jobs that Taylorized companies were creating. Thus the at-will rule contributed to the undermining of the craft union monopoly over the production process. At first blush, the personnel and scientific management theorists’ message to employers to develop long-term employment relationships seemed to be in tension with the emergent at-will rule. However, the atwill rule actually facilitated the development of the U.S. standard contract of employment. In the at-will world, employees had no guarantee of job security, so that employers’ implicit promises of job security were an effective way to elicit loyalty and cooperation (Stone 2004, 48–50). If there had been no at-will rule and employees instead had a legal right to

Decline of the Standard Contract of Employment in the United States     63

job security, employers would not have been able to use the promise of job security as an inducement for loyalty.

Development of the U.S. Standard Contract of Employment Despite the pervasiveness of the at-will rule, employers in the early twentieth century began to institute practices to encourage worker-firm attachment. Out of these trends, a standard employment relationship developed in U.S. large industrial establishments by the middle of the twentieth century. The standard contract of employment first and foremost promised job security, predictable promotions, and wage growth opportunities. In addition, it often included health insurance, pensions, vacation entitlements, and other employer-based benefits. This industrial practice was reinforced by the surge of industrial unionism in the 1930s, when mass organizing drives, aided by new labor laws, swept through the giant firms in the auto, steel, rubber, meat-packing, metalworking, and other mass production industries. Industrial unionism accepted the long-term attachment model of employment and aimed to protect and improve workers’ positions within the internal labor markets of mass production firms. Unlike craft unions, industrial unions made job security a priority in their bargaining practices. Their bargaining strategies emphasized seniority arrangements and just-cause dismissal protections, two institutional features that reinforced the developing practice of encouraging long-term attachment between workers and their firms. Some labor economists contend that seniority was a union-created institution, not the creation of management (see, for example, Osterman 1997; for detail, see also Stone 2004, 60–61). However, several labor historians have shown that some large firms instituted seniority systems unilaterally in the 1910s and 1920s, although they did not always adhere to them in practice. For example, the labor historian Ronald Schatz shows that between 1920 to 1935, General Electric and Westinghouse began to use seniority as well as offering its workers other rewards for long service in order to limit turnover. Yet employers sometimes departed from seniority when making layoffs. In the mid-1930s, when the electrical workers unions succeeded in organizing the companies, the unions bargained for strict application of the seniority principle to protect job security (Schatz 1983, 107–11). More broadly, the industrial unions that came into power in the 1930s codified, extended, and enforced the existing seniority rules. That is, the use of seniority often began as a managementinitiated human resource policy, but then was regularized, institutionalized, and enforced by industrial unions (Lichtenstein 2002).

64     Rethinking Workplace Regulation Table 4.1  Unionization Rates in the United States Industry

1880

1910

1930

1953

1974

1983

2000

Agriculture, forestry, fishing Mining Construction Manufacturing Transportation, communication,   utilities Private services Public employment All private All

 0 11.2   2.8   3.4

  0.1 37.7 25.2 10.3

  0.4 19.8 29.8   7.3

  0.6 64.7 83.8 42.4

 4 34.7 38 37.2

  4.8 21.1 28 27.9

  2.1 10.9 18.3 14.8

  3.7   0.1   0.3   1.7   1.7

20   3.3  4   8.7   8.5

18.3   1.8   9.6  7   7.1

82.5   9.5 11.3 31.9 29.6

49.8   8.6 38 22.4 24.8

46.4   8.7 31.1 18.4 20.4

24   4.8 37.5 10.9 14.1

Author’s compilation of data from Friedman (2008).

The standard employment contract in the United States thus originated in management practice but was reinforced by industrial unions, who bargained for seniority and other practices that fostered job security. Many nonunion firms deliberately duplicated the labor practices of unionized firms to gain the advantages of internal labor markets without encountering the rigidities unions imposed. Nonunion firms such as Dupont Chemical, Delta Airlines, and Exxon modeled their human resource policies on those of its unionized competitors for decades. They paid similar wages, offered similar health and pension benefits, utilized seniority when considering layoffs and promotions, and even established nonunion grievance procedures for handling complaints. Thus, even without the compulsion of a statute or a contract, many firms instituted the type of job structures that evolved into the standard contract of employment. The standard contract of employment in the United States was never universal in practice. The distinguishing characteristic of workplaces that offered such an employment relationship was not the presence of a union, but the size of the employer. Large employers and medium-sized employers were more likely than small ones to offer job security, pensions, health insurance, grievance systems, and other aspects of the standard contract of employment. There were other exceptions as well. One was found in the craft unions. Although industrial unionism was the most visible and dynamic social movement of the 1930s, craft unionism also thrived in that decade. For example, the Teamsters called a successful secondary boycott on the West Coast in 1937 that resulted in a collective agreement for all truck drivers in Los Angeles (Milkman 2006, 27). Union growth in the construction and transportation industries—organized on a craft basis—was dramatic in the 1930s. Table 4.1 shows the share of workers belonging to

Decline of the Standard Contract of Employment in the United States     65

unions in the United States by industry from 1880 to 2000, and demonstrates substantial increases between 1930 and 1953 in construction and transportation—sectors dominated by craft unions—as well as mining and manufacturing sectors that consisted primarily of industrial unions. Craft unions tend not to advocate job security with a specific employer. Their members often work on short-term assignments rather than having long-term relationships with a particular employer. Thus, instead of establishing seniority systems, unions in the building trades established closed shops and hiring halls to ensure that their members enjoyed high labor standards and ample work opportunities. Of course, not all craft unions eschewed job security. The railroad brotherhoods, though craft unions, insisted on complex seniority arranagements to provide its senior (and white) members with job security. Apart from crafts such as the construction trades, the standard contract of employment that originated in large firms’ human resource practices and was later reinforced by industrial unions gradually spread to other sectors, including the public sector and white-collar service industries. Public-sector unions negotiate seniority and job security provisions similar to those achieved by private-sector unions (Slater 2004). They are today the largest and most dynamic feature of the labor movement.

Role of Law in the Standard Employment Relationship The labor laws that emerged in the United States were based on and reinforced the employment practices of their day. The basic labor and employment laws were enacted in the 1930s, the New Deal period, and they established a two-tiered labor law regime: legal support for collective bargaining and mandated minimum terms of employment for everyone else.2 When the labor laws were enacted, the dominant sectors in the U.S. economy were steel, auto, rubber, and other heavy manufacturing industries. Firms in those industries were early adopters of internal labor markets (Stone 1975). The New Deal labor laws were responsive to the problems in those industries and used their labor practices as the template on which regulatory policy was modeled. Hence the labor laws assumed the existence of strong firm-worker attachment, long-term jobs, and promotion ladders for advancement. Some of the respects in which the labor laws were tailored to the industrial era workplace are discussed in the following section.

The Collective Bargaining Law Unlike most other advanced economies, the United States locates collective bargaining at the workplace or subworkplace level rather than at the enterprise, sectorial, or national level.

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Bargaining Unit  Under the National Labor Relations Act (NLRA), if a union wins an election, it is certified to represent workers in a “bargaining unit.” The employer and the union have a duty to bargain for a collective agreement that will govern the terms and conditions of employment for the entire bargaining unit. Any contract concluded between the union and the employer applies to all employees in the unit, whether union members or not. The National Labor Relations Board (NLRB) sets the “appropriate unit” by determining which workers share a “community of interest.” It does so by looking at similarity in wages, working conditions, types of task performed, skill requirements, and supervision. The NLRB favors single facility units, so bargaining units are usually a single workplace or a department within a workplace; rarely are they defined as an entire company, industry, or local labor market (except in the building trades). Within a single plant, separate bargaining units usually exist for white collar and blue collar workers; skilled and unskilled workers; and professional and nonprofessional workers. Bargaining units are also divided functionally. Indeed, the community of interest test assumes a functionally delineated workplace in which work tasks are well-defined and job definitions are static. This assumption is problematic today when employers institute measures such as broad-banding, which blurs job definitions, and departmental boundaries to achieve functional flexibility. Secondary Boycott Prohibitions  Another feature of the NLRA that assumes the existence of internal labor markets and a well-bounded workplace is the prohibition of secondary boycotts. For a hundred years, U.S. courts have been hostile to actions by unions that exert economic pressure on entities other than primary participants in an immediate labor dispute (Frankfurter and Greene 1931). Congress visited the issue of secondary boycotts on several occasions, the last of which was in 1947, when it enacted an amendment to the NLRA, making made secondary boycotts illegal. Labor law’s ban on secondary activity assumes that union economic pressure and collective bargaining should take place within a discrete economic unit—the bargaining unit—and should be confined to the immediate parties in a bounded arena of conflict. Yet the effort to limit economic warfare to primary participants assumes that the unionized workplace has static and well-defined borders and that disputes between the firm and its workers affect only those immediate and identifiable parties. This assumption is becoming less plausible as unions are finding that, to be effective, they must exercise economic pressure beyond traditional bargaining unit and corporate boundaries. Unions today seek to apply pressure on suppliers, joint venturers, co-employers, network partners, and subsidiaries—thereby colliding with the statutory ban on secondary boycotts.

Decline of the Standard Contract of Employment in the United States     67

Definition of Employee and Employer  The NLRA provides protections only for individuals who fall within the statute’s definition of an employee. Those who work for multiple employers or the wrong kind of employer fall outside the protection of the statute. Agricultural laborers, domestic workers, government employees, and independent contractors are explicitly denied coverage. Additional exclusions apply for confidential employees and those who exercise supervisory authority over others or wield managerial power. The law was written at a time when the distinction between an employee and a supervisor was clearly delineated by distinct titles, tasks, and symbols of hierarchy. In today’s workplace, in which hierarchies have been flattened and decision-making authority is frequently delegated downward, the supervisory and managerial exclusions deprive many mid- and low-level employees of the protections of the act.

Union Practices Just as the labor law embodies the assumption of long-term employment, so too do many established union practices. For example, unions routinely negotiate wage structures, benefits, and work rules that reward long-term employment. Wages, vacations, and sick-leave policies are also often based on length of service. Long vesting periods for pensions also assume and reinforce the norm of long-term employment. Unions protect employees against employer breaches of the implicit promises of long-term employment by means of their negotiated seniority and grievance and arbitration systems. Through the conjunction of the labor laws and relatively powerful unions, the dominant U.S. employment system in the middle third of the twentieth century was characterized by job security, longevity-based wages, employer-based health insurance, and employment-linked retirement security. For many unionized American workers, this employment system was the epitome of a good life. In the United States in the 1950s, 1960s, and 1970s, it created the largest middle-class society in history.

Decline of the Standard Employment Contract In the late 1970s and 1980s, internal labor markets began to break down and large corporations stopped making implicit promises of long-term employment to their employees. Since then, the use of temporary, short-term, and casual employees has risen, and the attachment between regular employees and the firm has weakened. In 1989, the former CEO of General Electric Company, Jack Welch, told the Harvard Business Review:

68     Rethinking Workplace Regulation Like many other large companies in the United States, Europe, and Japan, GE has had an implicit psychological contract [with its employees] based on perceived lifetime employment. People were rarely dismissed except for cause or severe business downturns. . . . This produced a paternal, feudal, fuzzy kind of loyalty. You put in your time, worked hard, and the company took care of you for life. . . . That kind of loyalty tends to focus people inward. But given today’s environment, people’s emotional energy must be focused outward on a competitive world where no business is a safe haven for employment unless it is winning in the marketplace. The psychological contract has to change. (Tichy and Charon, 1989, 120)

And change it did. As shown in the appendix, between 1983 and 2008, job tenure for men over the age of twenty declined dramatically, most significantly among those over age forty-five. These were the workers who had been the beneficiaries of the implicit promises of long-term employment during the heyday of the standard contract of employment. The decline for women was not so marked because women were not generally part of the long-term employment system (Stone 2004). The job tenure data is consistent with accounts by industrial sociologists and industrial relations practitioners. For example, the sociologist of work, Richard Sennett, interviewed a number of younger employees about their experiences in the labor market, and reported that the most tangible sign of that change might be the motto “No long term.” In work, the traditional career progressing step by step through the corridors of one or two institutions is withering . . . . Today, a young American with at least two years of college can expect to change jobs at least eleven times in the course of working, and change his or her skill base at least three times during those forty years of labor. (1998, 24)

U.S. employers are changing the employment relationship in order to adjust to the imperatives of globalized production and exploit the possibilities of new technologies. As in the late nineteenth century, firms are encountering a more competitive environment and are responding by paying more attention to short-term cost reduction. They have thus turned to just-in-time production, just-in-time product design, and justin-time workers. As employers dismantled their internal labor market job structures, they created new types of employment relationships designed to give them greater flexibility. In an explicit rejection of scientific management, employers no longer establish narrow, static job definitions nor seek workers who expect long-term career jobs. They want to be able to decrease or redeploy their workforce quickly as market opportunities shift or as skill requirements change. They also want to harness the cognitive

Decline of the Standard Contract of Employment in the United States     69

knowledge of employees on the firm’s behalf. Today’s industrial relations specialists advocate a “new deal at work” in which the previous assumption of long-term attachment between an employee and a single firm is not present. They characterize employees as free agents operating in a market for talent (Stone 2004). Organizational theorists have devised new organizational structures to provide management flexibility and promote employee skill development. Two prominent exemplars of programs to restructure work without promising long-term security are competency-based organizations and total quality management (TQM). Advocates of the competencybased organization insist that employees be paid for the skills they have rather than according to lock-step job evaluation formulas. Skill-based pay, they claim, will give employees an incentive to acquire new skills and also make it incumbent on employers to provide training and career development opportunities (Lawler 1992, 144–56; Stone 2001, 560–65). Advocates of TQM counsel firms to involve every employee, at every level, in continuous product and service improvement. Some of the specific TQM recommendations are to provide continuous training and opportunities for individual improvement, and to give workers direct contact with customers, external suppliers, and others who do business with the firm (Rosett and Rosett 1999; Anschutz 1995). A new employment relationship is emerging through these and similar programs of organizational theorists and management practitioners. Despite differences in emphasis, the approaches share several features. One is that employers no longer explicitly or implicitly promise to give employees job security. Instead, they offer employability—the opportunity to develop their human capital and form professional networks that will enable them to find employment elsewhere. The new employment relationship also involves compensation systems that peg salaries and wages to market rates and performance factors rather than internal institutional factors. Other aspects of the new employment relationship are flattened hierarchies, the elimination of status-linked perks, and microdiscretion devolved to lower-level employees in order to elicit their ideas and cooperation (Stone 2004).

Is There a New Standard Employment Contract? Some scholars claim that we are not witnessing the decline of the standard contract of employment, but the rise of an alternative regulatory system that extends protection to new groups of employees who were previously left out (Piore and Stafford 2006; Edwards 1993). For example, the MIT economist Michael Piore argues that to the antidiscrimination laws and the growth of individual employment rights in the 1970s

70     Rethinking Workplace Regulation

and 1980s are the harbinger of a new system of employment regulation, one that offers benefits to a wider group of employees and is no longer confined to unionized workplaces. Although acknowledging that internal labor markets have declined and enterprises no longer offer job security or career mobility, Piore claims that a new system of regulation has emerged that, together with new labor market intermediaries, has created a more inclusive and equitable employment relationship, one that replicates the security and career development functions of the standard contract of employment (Piore 2003). Piore is right that individual employment rights have expanded. Since the 1930s, laws have set minimal employment standards for all employees, particularly those not covered by collective bargaining. Initially, these laws provided social security for old-age assistance and disability insurance, unemployment compensation for workers who lost their jobs through no fault of their own, and a federal minimum wage and maximum hours law. Over the past forty years, employment laws have expanded in number and scope as the extent of the collective bargaining system has contracted. In the 1970s and 1980s, Congress enacted occupational safety and health protection, pension insurance, protection against discrimination for pregnant women and disabled workers, and protection for whistleblowers. In 1988, the federal government enacted the Worker Adjustment and Retraining Notification Act (WARN) requiring employers to give their employees advance notice of plant closings and mass layoffs, and the Employee Polygraph Act to protect worker privacy interests. Also in the 1980s, numerous states enacted legislation to protect the job security, privacy, dignity, and other concerns of employees. Thus, as union density has declined in the private sector, statutory protections have become the main source of worker rights (Stone 1992). In addition to these legislative developments, in the 1980s some state courts began to create exceptions to the at-will employment doctrine, thereby giving workers in those states judicial protection against unfair dismissal. The exceptions were not uniform; some states recognized a tort of unjust dismissal, some imposed implied terms of good faith and fair dealing in employment contracts, and some expanded the situations in which they would enforce implied contracts for job security. Some courts also became more receptive to the application of conventional torts to workplace harms. These legislative and judicial developments signal an important change in employment relationships in the United States. Over the past several decades, antidiscrimination laws have enabled women and minorities to enter previously all-male workplaces, thereby making large firm employment available to previously excluded groups. To the extent that large firms provided the advantages of the standard contract of employment—health insurance, pensions, grievance procedures, and job

Decline of the Standard Contract of Employment in the United States     71

security—the new laws have arguably democratized and extended the standard contract of employment, not eliminated it. However, the expansion of statutory and judge-made rights for individual workers is neither a simple expansion of, nor a substitute for, the previous standard contract of employment. This is because employment practices inside large and medium-sized firms have changed profoundly over the past two decades. These firms no longer offer the same employment security or the same package of employment benefits that they did in the past. Moreover, the new employment relationship that has emerged is a major alteration in the allocation of risk between the employee and the firm. One example involves social insurance. In the early twentieth century, employers deliberately structured health insurance and pension plans to tie the worker to the firm. Because employers today no longer seek or offer long-term employment to their employees, they no longer use those benefits to induce workers to stay with their firms. Instead, many employers have eliminated or cut back on pension and health benefits. In the past, most large employers offered private pensions that took the form of defined benefit plans. In such a plan, employers contribute to a fund on behalf of employees who are guaranteed a specified pension benefit at the time of retirement, based on their length of service and outgoing salary. Since the 1980s, most employers have shifted from defined benefit plans to defined contribution plans, under which the employer contributes a fixed amount into a worker’s account for each hour worked. In some cases, the worker makes a contribution as well and is given some control over how the funds will be invested. The amount of pension individuals receive is determined by the value of their account on retirement. Unlike the secure retirement income of the past, today’s retirement benefits are unpredictable, at risk of both market conditions and bad investment decisions (Stone 2007a). A similar development has occurred in health insurance. Although the overwhelming majority of employees in the United States obtain their health insurance from their employer, most employers have reduced the insurance they provide or increased the amount employees have to pay. According to the Bureau of Labor Statistics (BLS), between 1983 and 1997, the number of workers in medium and large privatesector establishments who had medical benefits from their employer decreased from 97 percent to 76 percent. In addition, the plans offered by employers have also become less comprehensive, imposing more exclusions and coverage limitations. Moreover, employers have responded to escalating health-care costs by shifting some of the expense to employees. A recent Kaiser Foundation study found that many workers decline coverage because it has become too expensive (Commission on Medicaid

72     Rethinking Workplace Regulation Figure 4.1  Union Density in the United States 45 40 35

1973 2010

30 25 20 15 10 5 0

Overall union density

Private sector

Manufacturing

Public sector

Source: Author’s calculations based on Hirsch and MacPherson (2012).

and the Uninsured 2002). According to the health economist William ­Wiatrowski, “Medical care covered 63 percent of workers in 1992–93, compared with 45 percent in 2003” (2004, 29). Probably the respect in which employment in large and mediumsized firms today differs most dramatically from the past involves the implicit promise of job security. As noted, firms have moved from fostering a culture of permanency to fostering one of of free agency. One mantra frequently repeated today is that employees must manage their own careers. Employers today continually churn their workforces, changing personnel as their markets shift and as skill requirements change (Osterman 1999). As a result, employees face a constant threat of job loss. In addition, employees now have wage uncertainty because wages are increasingly pegged to individualized factors and to the external labor market. Gone are the days of reliable and steadily progressing pay levels along an established salary grid. Another important change is the decline in unions. Since the 1970s, union density has dropped sharply. As shown in figure 4.1, between 1973 and 2010, overall union density fell from 24 percent to less than 12 percent and private-sector union density fell from 24 percent to less than 7 percent. Union density in the manufacturing sector—the traditional core of U.S. unionism—has shrunk from almost 39 percent to under 11 percent in the same period. One of the factors causing union decline is undoubtly the expansion

Decline of the Standard Contract of Employment in the United States     73

of global markets. Heightened global competition forces firms to cut production costs and lower wages, thereby inducing employers to resist unions fiercely. At the same time, the decline of unions has facilitated the spread of new work practices because in nonunion environments, firms are free to restructure their labor relations practices along more flexible lines (Stone 2006b). The decline in unions sets in motion a spiral that affects not only union firms but nonunion ones as well. As discussed, in the past, nonunion firms often provided wages and working conditions that mimicked those in union firms in order to undercut any appeal that unions might otherwise have. Today, with union density at low levels, this unionavoidance strategy is no longer necessary. As a result, many nonunion firms have abandoned the union-level wages and conditions they previously maintained.

Should Labor Law Be Reformed? A new employment relationship is emerging that is based on new assumptions about the best way to organize work for today’s competitive environment. On the positive side, the new relationship offers new opportunities for creativity and autonomy, and is potentially more inclusive than the old one. The post-1970 employment laws offer employment opportunity and the prospect of wage equity to groups previously excluded from the old standard contract of employment. Nonetheless, the demise of the standard contract shifts risks and creates new vulnerabilities that are not adequately addressed by the new employment laws. Neither the employment laws nor the labor laws facilitate unionism or other institutions for worker empowerment. The statutory employment protections are too partial in their subject matter and too problematic in their enforcement to provide security or protection to most workers (Colvin 2012). Furthermore, given the decline of internal labor markets, the logic of unionism based on bargaining units is no longer tenable. Much of today’s work involves networks that extend across multiple establishments, joint ventures, or multiemployer production chains, defying traditional bargaining unit definitions. Thus the NLRB’s approach to bargaining unit determination is in tension with the flexible job definitions and porous workplace boundaries typical of work practices today (Colvin 1998, 430–31). Moreover, the whole notion of a community of interest has little salience when community members frequently come and go. Because terms and conditions negotiated by unions and management apply to the jobs rather than to the individuals who hold the jobs, contractual entitlements such as wages, vacation benefits, social insurance, and job security do not follow workers as they move between de-

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partments or leave the firm altogether. As a result, in today’s world of mobile workers, union gains are increasingly ephemeral from the individual’s point of view. Workers therefore have less incentive than their predecessors to join a union. Additionally, neither the labor laws not employment laws give much protection to one of the fastest-growing categories of employees—independent contractors. The test for independent contractor status is broad, so many who depend on a particular employer for their livelihood are classified as independent contractors and deprived of all employment law protections. Some low-paid employees such as janitors, truck loaders, typists, and building cleaners have been redefined as independent contractors even though they work for large companies on a regular basis (Stone 2006a). It has been argued that new legal protections may not be necessary because labor market intermediaries, such as temp agencies, Web-based bulletin boards, professional or identity networks, and executive search firms, provide the job security and training that employees previously obtained from their firms (Piore 2003). However, the best data available suggest that, at least for low-skilled workers, temporary agency work does not aid in skill acquisition, long-term jobs, or earnings growth (Autor and Houseman 2005). For them, intermediaries rarely offer training, and when they do it is expensive for individuals. The results may be different for more highly skilled workers, and this is a matter that deserves further research. Moreover, labor market intermediaries do not foster worker empowerment. For example, even when temps and regular employees perform identical tasks under identical conditions, the NLRB has made it difficult for temporary workers to be included in existing unions.3 If all workers are to function and flourish in the new workplace, it is necessary to rethink labor and employment law quite broadly. For example, given the decline in the standard employment contract, labor law will have to be reformed to make it possible for workers to organize and assert economic pressure across establishments. In addition, it is important that health and pensions no longer be linked to specific employers, but rather that they be universal and portable. Finally, in a labor market in which individuals frequently change jobs and skill requirements constantly shift, individuals need lifetime training opportunities and wage replacement and other assistance for periods of transition. However, more than changes in the law are required for the new workplace to provide justice and fairness to transitory workers. To address the problems of worker vulnerability in both regular and informal employment relationships, labor organizations will have to operate across industries and across firms. As workers move frequently within and between firms throughout their working lives, a mechanism is

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needed through which workers can deploy their collective power to negotiate conditions across employers. Some new types of organizations are forming that attempt to fill this vacuum. For example, in many cities, unions have worked with community groups to enact living wage ordinances that require local governments to pay a wage to their workers, and those of their contractors, higher than the legislated minimum wage. Presently there are citywide living wage ordinances in effect in Baltimore, Los Angeles, San Francisco, and 140 other cities. Some mandate not only living wages but also paid family leave, vacations, sick leave, employer-provided health insurance, and job security. Although such ordinances are limited to public sector employees, they suggest a new form of mobilization of workers across industries on a locality-wide basis (Stone and Cummings 2011). In a similar vein, in Los Angeles, San Antonio, and more than thirty other cities, unions, and community groups have worked together to negotiate community-benefit agreements with city authorities and private investors. In these new agreements, developers promise to provide community benefits such as living-wage jobs, job training, affordable housing, social services, public parks, and other community improvements and, in exchange, the community groups commit themselves to publicly support the development project (Stone and Cummings 2011). There have also been multiple-employer organizing efforts of immigrant workers within particular sectors. In many cities, worker centers have developed to inform low-wage workers, often immigrants, of their legal rights (Fine 2006; Milkman 2006). Another instance of successful local union-community pressure occurred in San Francisco, where local groups pressured the city to enact the Health Care Security Ordinance in 2006, requiring employers to provide health insurance coverage to all uninsured residents, including undocumented immigrants (Stone and Cummings 2011).

Conclusion In the United States, the development and decline of the standard contract of employment parallels the development and decline of labor law. Since the late 1970s, employment arrangements have changed and the labor law and the institutional mechanisms for worker protection have lost much of their effectiveness. The demise of the standard employment contract underlies the tremendous rise in insecurity and disruption now prevalent in the working population. Progressive thinkers and policymakers need to devise new institutional and regulatory arrangements that can address the vulnerabilities workers face in the twenty-first century.

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Notes 1. The most notorious of these efforts was the Ford Motor Company’s Sociology Department, which conducted intrusive investigations of its workers’ home lives, checking their financial stability, monitoring for signs of drinking, smoking, or other immoral conduct, and checking for any union-related proclivities (see Jacoby 2004, 50, 118). 2. The three New Deal Labor statutes were the Norris-LaGuardia Act, 29 U.S.C. 101–115 (1932) (prohibiting federal courts from issuing injunctions in labor disputes); the National Labor Relations Act, 29 U.S.C. 151–68 (1935) (creating a system for unions to be certified as a majority representative and imposing a duty on employers to bargain with certified majority unions); and the Fair Labor Standards Act, 29 U.S.C. 201–19 (1937) (establishing a minimum wage and maximum hours of employment). 3. See Oakwood Care Center and N & W Agency, 343 NLRB 659 (2004).

References Anschutz, Eric E. 1995. TQM America. Bradenton, Fla.: McGuinn and McGuire. Autor, David, and Susan, Houseman. 2005. Temporary Agency Employment as a Way Out of Poverty? NBER working paper 11742. Cambridge, Mass.: National Bureau of Economic Research. Colvin, Alexander. 1998. “Rethinking Bargaining Unit Determination.” Hofstra Labor and Employment Law Journal 15(2): 419–90. ———. 2012. “American Workplace Dispute Resolution in the Individual Rights Era.” International Journal of Human Resource Management 23(3): 459–75. Commission on Medicaid and the Uninsured. 2002. “Under-insured in America: Is Health Coverage Adequate?” Washington, D.C.: Kaiser Family Foundation. Doeringer, Peter B., and Michael J. Piore. 1971. Internal Labor Markets and Manpower Analysis. Lexington, Mass.: D.C. Heath. Edwards, Richard. 1993. Rights at Work: Employment Relations in the Post-union Era. Washington, D.C.: Brookings Institution Press. Fine, Janice. 2006. Worker Centers. Ithaca, N.Y.: Cornell University Press. Frankfurter, Felix, and Nathan Greene. 1931. The Labor Injunction. New York: MacMillan. Friedman, Gerald. 2008. “Unions and Collective Action.” Available at: http:// eh.net/encyclopedia/article/friedman.unions.us. Accessed September 11, 2012. Hirsch, Barry T., and David A. MacPherson. 2012. Unionstats.com. “Union Membership and Coverage Database from the CPS.” Available at: http://www. unionstats.com. Accessed September 11, 2012. Jacoby, Sanford M. 2004. Employing Bureaucracy: Managers, Unions, and the Transformation of Work in the 20th Century. London: Lawrence Erlbaum. Kanigel, Robert, 1997. One Best Way: Frederick Winslow Taylor and the Enigma of Efficiency. New York: Viking Penguin. Lawler, Edward E., III. 1992. The Ultimate Advantage. San Francisco: Jossey-Bass Publishers.

Decline of the Standard Contract of Employment in the United States     77 Lichtenstein, Nelson, 2002. State of the Union: A Century of American Labor. Prince­ ton, N.J.: Princeton University Press. Milkman, Ruth. 2006. LA Story. New York: Russell Sage Foundation. Orren, Karen. 1991. Belated Feudalism. Cambridge: Cambridge University Press. Osterman, Paul. 1984. Internal Labor Markets. Cambridge, Mass.: MIT Press. ———. 1997. “Introduction: The Nature and Importance of Internal Labor Markets.” In Internal Labor Markets, edited by Paul Osterman. Cambridge, Mass.: MIT Press. ———. 1999. Securing Prosperity: How the American Labor Market Has Changed and What to Do About It. Princeton, N.J.: Princeton University Press. Ozanne, Robert. 1967. A Century of Labor-Management Relations at McCormick and International Harvester. Madison: University of Wisconsin Press. Piore, Michael J. 2003. “The Reconfiguration of Work and Employment Relations in the United States at the Turn of the Century.” In Changing Patterns in Western Industrial Societies, edited by Janet Zollinger Giele and Elke Holst. Kidlington, Oxford: Elsevier. Piore, Michael J., and Sean Stafford. 2006. “Changing Regimes of Workplace Governance, Shifting Axes of Social Mobilization, and the Challenge to Industrial Relations Theory.” Industrial Relations 45(3): 299–325. Rosett, Joshua G., and Richard N. Rosett. 1999. “Characteristics of TQM.” NBER working paper 7241. Cambridge, Mass.: National Bureau of Economic Research. Schatz, Ronald W. 1983. The Electrical Workers: A History of Labor at General Electric and Westinghouse 1923–60. Urbana: University of Chicago Press. Sennett, Richard. 1998. The Corrosion of Character. New York: W.W. Norton. Slater, Joseph E. 2004. Public Workers: Government Employee Unions, the Law, and the State, 1900–1962. Ithaca, N.Y.: Cornell University Press. Stone, Katherine V.W. 1974. “The Origins of Job Structures in the Steel Industry.” Review of Radical Political Economics 6(2): 113–73. ———. 1992. “The Legacy of Industrial Pluralism.” University of Chicago Law Review 59(2): 575–644. ———. 2001. “The New Psychological Contract.” UCLA Law Review 48(February): 519–69. ———. 2004. From Widgets to Digits: Employment Regulation for the Changing Workplace. Cambridge, Mass.: Cambridge University Press. ———. 2006a. “Legal Protections for Atypical Employees.” Berkeley Journal of Employment and Labor Law 27(2): 251–56. ———. 2006b. “Flexibilization, Globalization, and Privatization: Three Challenges to Labor Rights in Our Time.” Osgoode Hall Law Journal 44(Fall): 77–104. ———. 2007a. “A Fatal Mis-match: Employer-Centric Benefits in a Boundaryless Workplace.” Lewis and Clark Law Review 11(2): 451–80. ———. 2007b. “Revisiting the At-Will Employment Doctrine: Imposed Terms, Implied Terms, and the Normative World of the Workplace.” Industrial Law Journal 36(1): 84–101. Stone, Katherine V.W., and Scott Cummings. 2011. “Labor Activism in Local Politics: From CBAs to ‘CBAs.’” In The Idea of Labour Law, edited by Guy Davidov and Brian Langille. Oxford: Oxford University Press.

78     Rethinking Workplace Regulation Taylor, Frederick Winslow. 1911. Principles of Scientific Management. New York: Harper and Brothers. Tichy, Noel, and Ram Charan. 1989. “Speed, Simplicity, Self-Confidence.” Harvard Business Review September–October (5): 112–20. Waring, Stephen P. 1991. Taylorism Transformed: Scientific Management Theory Since 1945. Chapel Hill: University of North Carolina Press. Wiatrowski, William J. 2004. “Medical and Retirement Plan Coverage: Exploring the Decline in Recent Years.” Monthly Labor Review 127(8): 29–36.

Part II Revising Legal Conceptions of Employment

Chapter 5 Burying Caesar: What Was the Standard Employment Contract? mark freedland

“I come to bury Caesar, not to praise him; The evil that men do lives after them, The good is oft interred with their bones, So let it be with Caesar . . . You all did love him once, not without cause: What cause withholds you then to mourn for him?” Julius Caesar, Act III, Scene ii

M

ark Antony’s famous funeral oration to his Roman friends and countrymen is so heavily charged with irony and manipulation of the crowd that it is difficult to extract a straightforward sentence from it. His underlying purpose is clear enough: he is seeking to vindicate an institution that he reveres against detractors and assassins. A somewhat similar impulse animates this chapter. The theme that animates this entire volume is the demise of the standard employment contract, either as a fait accompli or as an imminent and inevitable event. Those who identified that theme probably had no special animus against the standard employment contract, but many do have that animus, regarding it as the sclerotic emblem of labor law systems in urgent need of de-rigidification. Like Mark Antony, I do not challenge them head on. Rather, I reflect on new and emerging contracts of employment and models of flexicurity, both of which notions are implicitly contrasted with the standard employment contract. I approach those topics 81

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obliquely by asking what the standard contract of employment was during its lifetime or in its heyday. My answer—derived from some comparative reflections primarily on European labor law systems—will be to suggest that this question is more complicated than it is normally taken to be. I argue that it is complicated by the fact that the standard contract of employment means, or has meant, different things in different labor law systems not just at a superficial practical level, but at a profound conceptual level. To construct that argument, I identify two key variables that between them give rise to very different approaches to the law of employment contracts, and very different understandings of the standard employment contract as a legal concept. Underlying the arguments is a general reflection. In Europe, a standard form of employment relationship—a long-term attachment to a single employer and accompanying wage and benefit expectations—developed that takes different forms in its details and has different legal components in different countries. In this chapter, I advance an analysis that explores, at an essentially doctrinal level, a way of understanding the variations between national labor law systems as to the manner in which they construct their legal notion of the standard employment contract and indeed to the contract of employment more generally. When conducting that discussion, we should always be mindful that its true importance depends on an assessment of how changes in social practice have been reflected in, facilitated by, or constrained by these nationally variable conceptions of the legal SEC.

Approaches to the Standard Employment Contract: A Theoretical Spectrum In this first section, I investigate the question of what we mean by the demise of the standard employment contract. I suggest that it could mean a number of different things and that two key variables can be identified that enable us to differentiate among the approaches of various national labor law systems to the standard employment contract. I begin by clearing some fairly open ground through a process of identification and differentiation, which allows us to penetrate into more densely wooded areas of discussion where the argument becomes more difficult. Those who speak of the diminution or demise of the standard employment contract often turn out to be making a factual observation rather than offering an analysis of a legal evolution. They refer to the fact that whereas workers in the past were normally to be employed on a full-time and permanent basis and directly by the user of their services, they are now very often employed on a part-time or temporary basis and employed through an intermediary agency or subcontractor. In that

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usage or parlance, the standard contract of employment has a largely factual rather than legal meaning. It characterizes a factual set of arrangements for a particular kind of personal work relation, rather than offering a legal taxonomy or analysis of that set of arrangements. However, the standard contract of employment has a rather different and more specific legal-conceptual meaning. The legal standard contract of employment, I suggest, can be understood as the set of contractual arrangements that a particular legal system requires or supports as typical for the formation and conduct of employment relations. If, as I suspect, our real concern is to consider the legal consequences of the demise, actual or imminent, of the standard contract of employment, then it becomes rather important to analyze some of its key legal features and, in particular, to consider how its nature varies across legal systems. This specifically legal analysis involves close scrutiny of two key variables that go far in identifying the way in which each national labor or employment law system has (or had) defined its contract of employment. The first variable is well recognized. It measures the extent to which labor standards are made mandatory for the standard employment relationship, and is often expressed as the distinction between jus cogens (status) and jus dispositivum (contract) in employment law (Freedland 2002). The second and less familiar variable addresses the degree to which labor standards are integrated into and enforced as part of the legal standard employment contract. These two variables and the way in which they relate to each other will be examined next. The first variable—the regulation variable—reminds us that national labor or employment law systems vary considerably in the extent to which the standard employment contract is subject to mandatory legal regulation, either by direct legislative standard-setting or by legal enforcement of standards derived from collective bargaining. I earlier drew attention to the fact that the standard employment contract may exist in a factual sense without being the subject of a high level of mandatory legal regulation. It is now important to recall that in its heyday, the legal standard employment contract became the template for employment relations, not solely or even primarily because mandatory legal regulation imposed it on employers, but because strong and powerful conventions supported it. Thus, the standard employment contract might have existed at some times and in some legal systems as jus dispositivum, that is, as a largely optional set of contractual arrangements, but one that had nonetheless become standardized by the strength of conventional practice. On the other hand, it is equally true that in other systems, the standard employment contract has been and to some extent is still subject to a high level of mandatory legal regulation that displays a tendency toward the character of jus cogens. Indeed, so much was this the case in the heyday of the standard employment contract that it became common-

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place, at least among those less well disposed to high levels of legal regulation, to assert that the relationship was no longer truly contractual, but rather a status which the contract was no more than the formal point of entry. However, before concluding and turning our attention to the second and less familiar integration variable, we should note that the first variable does not take the form of a simple contrast between jus cogens and jus dispositivum or, more specifically, between genuine contract and status pretending to be contract. Those represent polar positions on a theoretical spectrum not in practice populated at its extreme ends but instead at various points on a continuum between those extremes. Many legal rules and doctrines operate to create not only extreme positions but also such intermediate positions, which can be conceptualized as cogency rules. A statutory labor standard mandating a maximum forty-eight hour work week, for example, might be embodied in the standard employment contract. But in one legal system it might be imposed as an absolutely mandatory component, in another as tightly limited derogation rules, and in a third as much less tightly limited derogation arrangements. These would represent different cogency rules locating the standard employment contract at different points on the mandatory regu­la­ tion spectrum. In other words, the regulation variable has a cogency variable built into it. Now to address the integration variable, the second and more subtle variable that must be understood to fully comprehend the legal standard employment contract. A careful explanation of this second variable, and how it interacts with the regulation variable, together with comparative examples of its operation in different systems of labor law, gives rise to the central argument of this chapter. That argument is as follows: we have observed that labor law systems may vary, both as to the extent to which they impose mandatory regulation on standard contractual employment relations, and as to the degrees of cogency or rigor with which such regulation is imposed. I now suggest that they may also vary according to the extent to which such regulation also constitutes an integral element of the employment contract and is integrated into it. These two variables are very different in nature. The regulation variable refers to differences, as between legal systems, in the substantive content of legal and other institutional norms (even if customary rather than juridified) and the strictness with which they are applied or upheld. The integration variable has more to do with the differing legal-cultural understandings of the employment contract and the employment relationship between legal systems. In some labor law systems, mandatory regulation affecting the standard employment contract has tended to be viewed as being embedded in the legal vision or conception of the standard employment contract itself. As such, mandatory regulation comes

What Was the Standard Employment Contract?      85 Figure 5.1  The Two Axes of Regulation and Integration High Regulation Zone 2 HR/LI

Zone 1 HR/HI High Integration

Low Integration

Zone 3 LR/HI

Zone 4 LR/LI Low Regulation

Source: Author’s figure based on a diagram in Freedland and Kountouris (2011).

to define the contract and becomes inseparable from it. This might be regarded as the integrated paradigm of the standard employment contract. In other labor law systems, however, the same kind and degree of mandatory regulation affecting the standard employment contract might nevertheless be regarded as separate from the contract itself. Such systems might therefore be regarded as based on the nonintegrated paradigm of the standard employment contract. In the next section, I map the location of several legal systems in relation to these two variables. More important, I indicate how these variables interact with each other in a manner that may determine the meaning and understanding of the standard employment contract within those systems, and may affect the way in which they evolve around or away from that contract.

Approaches to the Standard Employment Contract: Comparative Observations I argue that we can draw some significant comparative contrasts among labor law systems by deploying our two notions of a regulation variable and an integration variable. I suggest that variations in respect of the integration variable are especially important in determining what the standard employment contract means in any given legal system and how deeply it is embedded. To aid in our comparison between various legal systems, it is useful to regard the regulation variable and the integration variable as two axes whose intersection produces four quadrants or zones (see figure 5.1).

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Particular labor law systems can be situated within each zone. For example, we can locate many continental European labor law systems within Zone 1 as being of the High Regulation–High Integration type (HR/HI); U.S. labor and employment law can be situated within Zone 4, given its characteristic Low Regulation and Low Integration type (LR/ LI); and British labor law, which is significantly high on the regulation axis but low on the integration axis (HR/LI), provides an especially interesting intermediate case, justifying its assignment to Zone 2. To understand both how particular labor law systems became located in their respective zones and how that location has determined the meaning that they attached to the standard employment contract, it will be helpful (at the risk of overgeneralization and oversimplification) to identify both common historical starting points and divergent patterns of evolution away from those starting points. If we take as our historical starting point the very beginning of the twentieth century, we can safely generalize that virtually all legal systems fell within Zone 4: regulation of employment relations, at least in the sense of regulation protecting workers, was low, and such regulation that did exist, relating for example to health and safety at work, was clearly not integrated into anything that recognizably resembled a standard employment contract in the modern sense of that term. This does not mean, however, that the conceptual space, which was in the course of the twentieth century gradually occupied by the standard employment contract, was at the outset an empty one, a kind of legal carte blanche on which a new contract of employment was notionally written each time a worker was engaged for employment. Far from it, for each legal system had its default models for contractual employment relations, in which the exercise of the notional freedom of contract of employers and employees was quite firmly channeled into conventionally established and legally supported patterns of master and servant relations. These default models were generally characterized by the large or maximal disciplinary power and managerial prerogative accorded to the employer, and the small or minimal job security accorded to the employee. If this was, broadly speaking, a common starting point at the beginning of the twentieth century for legal systems in the United States, the United Kingdom, and Europe, it was overlaid in the course of the century, to a greater or lesser extent among legal systems, by worker-protective legal regulation consisting either of directly enacted legislation or collectively bargained labor standards. It was from and by this workerprotective overlay on an earlier employer-protective foundation that the legal conception and practice of the standard employment contract was essentially formed. This analysis explains divergences among legal systems concerning

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the meaning and content they accord to the standard employment contract. Both the precise starting point and the subsequent regulatory overlay vary from one legal system to another within those broad parameters. These starting points represent the positions we assign to national conceptions of the standard employment contract on the vertical regulation axis in figure 5.1. These conceptions, moreover, are affected by the second variable—the integration variable—that operates along the horizontal axis of our diagram. To recapitulate, as different legal systems built up the workerprotective overlay to greater or lesser degrees, they also varied in the extent to which their regulatory superstructures were integrated into the existing legal infrastructure. Moreover, there may be a correlation between the two variables. Many legal systems tend to be either high or low on both axes and therefore fall either into zone 1 or zone 4. Thus, most continental legal systems fall into zone 1 in the sense that their worker-protective regulation seems to be deeply integrated into their conception of the standard employment contract. Provisions of the French Code du Travail, the German Betriebsverfassungsgestez, and the Italian Statuto dei Lavoratori all seem to have formed an integral part of the respective national conceptions of the standard employment contract. On the other hand, the labor and employment law of the United States and its individual states stand as examples of the opposite paradigm of low regulation combined with low integration. The notably elaborate regulatory apparatus of the National Labor Relations Board system has always been confined to the unionized sector, leaving a very different, less-regulated regime in place for the nonunion sector, where the development of unfair discharge legislation and doctrine has remained incomplete and its coverage partial. And neither aspect of American labor law has been fully integrated into the core conception of the contract of employment to displace the notoriously non-worker-protective default model or underlying paradigm of the at-will employment contract. Even in its heyday, the standard employment contract represented a factual model, a conventional practice, rather than a truly integrated legal paradigm in within the American system. British labor law is an especially interesting case in which the two variables do not closely correlate, an instance of a high level of workerprotective regulation not integrated in the core conception of the contract of employment. For example, there is a real disjunction between the common law of contractually wrongful dismissal and the legislative regulation of unfair dismissal. It appears that even at a time when it might be said that there was a British labor law conception of a standard employment contract, much of the panoply of worker-protective legislation that supported that conception was nevertheless not fully integrated into it. At this point, it is appropriate to take stock of the state of the argument

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of this chapter and its possible contribution to the study and understanding of labor protection and regulation in the world of post–standard employment contracts that has emerged following the asserted demise of the standard employment contract . The argument thus far has sought to deconstruct the notion of a standard employment contract and to dispel nostalgia for a rather false retrospective vision of its supposed heyday. That false vision identifies the standard employment contract as a more or less uniform pattern in developed countries of contracting that is regulated by combinations of collective bargaining and workerprotective legislation and that, supposedly, ensured workers opportunities to secure full-time, long-term employment. This chapter argues, to the contrary, that no matter how much or how little one might regard that as an ideal pattern, we should not suppose that at any stage a uniform historical reality of this kind existed. Rather, diversity was always wide among national economies and labor law systems. This diversity existed, I have suggested, in two dimensions—not only, as is well known and understood, in the level or intensity of regulation of employment contracting but also, as is much less well known and understood, in the degree to which such regulation was integrated into the contract of employment as variously conceived in different national legal systems. By identifying these two variables in national legal-regulatory systems, I have tried to demonstrate that the standard employment contract was a congeries of conceptions and practices defined by two vectors, regulation and integration. This means that the variety of patterns, which have been conceptually unified under the banner of the standard employment contract, was and is more elaborate than previously supposed. If I have convincingly deconstructed the simple stereotype of a standard employment contract, I must next meet the challenge of identifying the causes and consequences of this newly identified heterogeneity of the standard employment contract. This important challenge can, I think, best be met by revisiting some of Otto Kahn-Freund’s core arguments about the social and economic significance of the law of the contract of employment, and indeed of labor law as a whole. I turn to KahnFreund—the generally acknowledged grand master of such foundational assessments—despite, or perhaps because of, the fact that his later works in the field of labor law were written during what appears in hindsight to have been the heyday of the standard employment contract. Some of Kahn-Freund’s core arguments seem rather to discourage any refined analysis of the importance of the heterogeneity of the standard employment contract among national labor law systems. He advanced a famously general argument about the ultimate marginality of labor law itself by claiming that “I regard law as a secondary force in human affairs, and especially in labor relations” (1972, 10). This was, in a real sense, the underlying basis for his articulation and advocacy of the idea of collec-

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tive laissez-faire. More particularly, he tended to regard the whole concept of the individual contract of employment as little more than a hypocritical masking by lawyers of the reality of managerial power over workers, referring to it as “that indispensable figment of the legal mind known as the ‘contract of employment’” (6). Those perceptions, both the general one and the particular, do not seem encouraging for developing an argument about the significance of finely textured nuances of variation in national legal systems. However, his conceptualization of the standard employment contract is important, especially when considered retrospectively. Despite his generally dismissive view, in certain respects KahnFreund was very interested in the variables discussed in this chapter and accorded them considerable practical significance. Although his arguments are couched in somewhat different terms from those I have introduced, Kahn-Freund’s essential preoccupation in the field of labor law was to achieve an appropriate balance between the sources of regulation of the employment relationship. Most conspicuously, he sought to ensure that a proper role and priority were assigned to collective bargaining; but he also had a real concern about securing the place of workerprotective legislation in that regulatory firmament. I argue that both of those concerns bear on the standard employment contract in general, and more specifically on what I have identified as the integration variable in the way that the standard employment contract is or was constructed in national labor law systems. In fact, I suggest that we could regard Kahn-Freund as having a central interest in the integration both of collective bargaining and of worker-protective legislation into the standard employment contract. Indeed, this formed what was in many ways his main point of engagement with English law in the labor law field. The first of those two concerns Kahn-Freund elucidated was that the role of collective bargaining is much more obvious and readily comprehensible than his concern with the role of worker-protective legislation. Collective bargaining does not, in its nature or in practice, have a guaranteed place in the legal regulation or the legal construction of the employment relationship. Kahn-Freund regarded it as the very task and duty of a labor law system to ensure that essential linkage. When he came upon the British labor law system in the 1930s after immigrating to England from Germany, he was confronted, in both a personal and an intellectual sense, by what was to him a paradox: Britain had what seemed to be the best-developed system of voluntary collective bargaining to be found anywhere, but that system seemed to be the least integrated into any kind of holistic conception of the legal regulation of employment relations. In subsequent years, he devised a famous set of responses to that paradox. Veering away from an initial strategy of promoting the idea of

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collective agreements as having legally enforceable normative effect (Kahn-Freund 1943, 112), his preferred solution was to maintain that at the strategic level, the primary commitment of the labor law system should be to facilitate and support collective bargaining. At the tactical or technical level, the results of collective bargaining should be seen as incorporated into individual contracts of employment as the “crystallized custom of the workplace” (Kahn-Freund 1954). In other words, his recipe for the integration of collective bargaining into British labor law generally depended on its integration into British labor law’s vision of the standard contract of employment. There was no obvious obstacle to Kahn-Freund establishing the integration of worker-protective legislation within the British labor law system. Indeed, one might feel surprised at the suggestion that there was or is any such problem: surely worker-protective legislation has an automatically assured and integrated role in any labor law system? However, I am convinced that Kahn-Freund did see integration as a real and significant issue and that he was right to do so. He was particularly concerned about the sharp conceptual and practical distinction that English law made and makes between common law and statute law. In particular, he worried about the consequential lack of integration of worker-protective legislation into English law’s conceptual and practical construction of the contract of employment as a creature of the common law, in the sense that it is the common law, the essentially judge-made doctrinal foundations of contract law, that English lawyers see as translating the social and economic practice of normative arrangements for employment into the legal contract of employment. This is not the appropriate place to locate Kahn-Freund’s concern about integration within his larger intellectual biography. I will, however, relate the issue of integration to the larger one of whether and in what sense Kahn-Freund was interested in the constitutionalization of the employment relationship, a question most fruitfully pursued in the writings of Ruth Dukes (2008). It is enough to say that though the tide of this concern ebbs and flows in the course of Kahn-Freund’s writings, it was especially prominent in one of his late writings, “Blackstone’s Neglected Child: the Contract of Employment” (Kahn-Freund 1977). In that article, he speaks of Blackstone’s “failure to treat the contract of employment as the general foundation of the service relation” (527) and argues that “like other expounders of the common law, [Blackstone] was intellectually helpless in the face of legislation, unable to see statute law and common law as a whole” (527). I think this stricture was directed as much at English common lawyers of KahnFreund’s day as at Blackstone. I suggest that my concern in this chapter with the regulation variable, and especially with the integration variable, has significant antecedents in the writings and thinking of Kahn-Freund. That reflection helps me

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say why I regard this discussion as having real practical relevance to the story of the demise of the standard employment contract and to the way in which that story continues to play itself out in the evolution of labor law. Although Kahn-Freund could point to some precise technical problems brought about by the divorce of the statute law of worker protection from the common law of the contract of employment, I think his real concerns were with the more general fragility of this essentially fragmented legal conception of the employment relationship. If this was English law’s vision of the standard employment contract, it was one into which the advances in legislative worker protection had not managed fully to penetrate. The real consequences of this lack of integration were less apparent thirty years ago than they are today; even now, they remain a matter of speculation rather than fact. But might we not have predicted that the political impulses of recent years toward deregulating the employment relationship and dismantling the standard employment contract would assert themselves more quickly and more strongly in labor law systems under which there had been a less integrated vision of the standard employment contract in the first place? It is important to remind ourselves that the standard employment contract never consisted of a universal formulaic contractual document, a sort of boilerplate standard form contract for the employment relationship. Rather to speak of a standard employment contract is a way of conceptualizing a body of practice and regulation that at a certain period and in a certain set of locations produced a strong convergence on rather stable or secure worker-protective patterns of employment. Those patterns were always vulnerable to dissolution under economic pressures, and it is the general succumbing to those pressures that many have identified as the demise of the standard form contract. Yet it would still seem to be a reasonable hypothesis that these developments might be a nationally path-dependent phenomenon in which the degree of integration of the regulatory norms into the legal vision of the contract of employment is an important variable. An anecdotal contrast illustrates the point. Around 2005, the French government was engaged in legislative initiatives designed to introduce regimes whereby workers in small enterprises or young workers entering the labor market for the first time would be hired on a probationary basis, without protection against dismissal, for the initial two years of their employment. The latter attempt, relating to young workers, provoked such political resistance, reinforced by judicial condemnation, that it was swiftly abandoned (Pélissier, Supiot, and Jeammaud 2008). At the time of writing, the British government is canvassing a set of proposals that would have a similar, indeed more widespread, deregulatory effect (UK Department for Business, Innovation, and Skills 2011), but those proposals have not attracted much opposition and may well be imple-

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mented without any effective protest. This is a highly path-dependent pair of stories in which many contingent factors were at work. It may nevertheless be significant that whereas the French proposals involved the highly symbolical imposition of new types of employment contract (the contrat nouvelles embauche and, more particularly, the contrat premières embauche) that were perceived to encroach on and undermine the classical standard employment contract type (the contrat à durée indéterminée) into which regulatory legislation is highly integrated, the British proposals carry no such symbolism, taking the form of amendments to a body of unfair dismissal legislation that is not at all integrated into the law of the contract of employment. I am conscious that the arguments advanced in this chapter are rather experimental, and that the anecdotal examples I have cited may confirm suspicions in some quarters that the whole line of argument depends too much on rather impressionistic notions of deep implicit contrasts among national legal cultures in the field of labor law. I admit to an increasing adherence to that school of thought about the methodologies of comparative law (Cotterell 2006) and, more important, I think that Kahn-Freund in this context was a more than an occasional exponent of this particular methodology. These questions require, but also merit, further reflection and discussion. Perhaps even in its present, tentative mode, this chapter tells us something about the standard employment contract whose demise—past, present, or future—this book considers. If the arguments advanced in this chapter are convincing, we know from them that there has been no singular Caesar, no one standard employment contract, that there have instead been many. Each labor law system has buried, is burying, or may one day bury its own unique Caesar in its own time and its own way. All that said, I feel it incumbent on me briefly to reflect on what the SEC might look like, following its burial in an era characterized by insecurity and contingency, or for that matter what is likely to emerge if and when it is resurrected. This is a speculation to which other chapters in this volume offer very valuable insights; this is, for example, the task Bruno Caruso sets himself in chapter 6, in which he identifies the two diverse yet convergent patterns of change affecting the standard employment contract: on the one hand, an endogenous movement toward greater flexibility in the internal regulation of the terms of the employment relationship, and, on the other hand, an exogenous set of transformations in the organizational structure of employing enterprises and in social organization of an increasingly service-based economy. I endorse and echo that line of analysis and add this concluding suggestion to it. It seems to me clear, from any kind of assessment of the directions in which employment contracts and employment arrangements are being pushed by a continuing international economic crisis, that the drive is over-

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whelmingly toward what Nicola Kountouris and I have sought to characterize as the demutualization of personal work relations—a process of transforming the individual worker into the sole bearer of risks formerly mutualized as between workers and employing enterprises and, in a different sense, between workers themselves (Freedland and Kountouris 2011). It seems to me increasingly clear that this will give rise to, indeed is already giving rise to, not only demutualized nonstandard employment relations but also considerably demutualized counterparts of standard employment contracts. This is evident in the shape, for example, of much reduced provision for income security in retirement under such contracts, as Kendra Strauss so ably demonstrates in chapter 16 of this volume. Such processes of demutualization seem to be somewhat more accelerated under labor law systems such as those of the United Kingdom and the United States, which display the features both of low regulation and of low integration in their legal standard employment contracts. This suggests some prospect that the two vectors of change singled out in this chapter may not only assist us more accurately to perceive the past and present but also predict or shape the future as well.

This paper draws on arguments that have been developed in discussion with Dr. Nicola Kountouris and are embodied in our work on The Legal Construction of Personal Work Relations. Although I am solely responsible for the errors and omissions in the arguments of this chapter, I gratefully acknowledge his invaluable contribution to the evolution of those arguments. I would also like to acknowledge the exceptionally perceptive and helpful comments made on the preliminary draft of this chapter by the editors of the Bellagio symposium and by the other participants in the colloquium at which the drafts were discussed.

References Cotterell, Roger. 2006. “Comparative Law and Legal Culture.” In The Oxford Handbook of Comparative Law, edited by Mathias Reimann and Reinhard Zimmermann. Oxford: Oxford University Press. Dukes, Ruth. 2008. “Constitutionalizing Employment Relations: Sinzheimer, Kahn-Freund, and the Role of Labour Law.” Journal of Law and Society 35(3): 341–63. Freedland, Mark R. 2002. “Jus Cogens, Jus Dispositivum, and the Law of Personal Work Contracts.” In Themes in Comparative Law in Honour of Bernard Rudden, edited by Peter Birks and Arianna Pretto. Oxford: Oxford University Press. Freedland, Mark, and Nicola Kountouris. 2011. “Conclusion.” In The Legal Construction of Personal Work Relations. Oxford: Oxford University Press.

94     Rethinking Workplace Regulation Kahn-Freund, Otto. 1943. “Collective Agreements Under War Legislation.” Modern Law Review 6(1): 112–43. ———. 1954. “Legal Framework.” In The System of Industrial Relations in Great Britain, edited by Allan Flanders and H.A. Clegg. Oxford: Blackwell. ———. 1972. Labour and the Law, 2nd ed. London: Stevens. ———. 1977. “Blackstone’s Neglected Child: The Contract of Employment.” Law Quarterly Review 93(October): 508–28. Pélissier, Jean, Alain Supiot, and Antoine Jeammaud. 2008. Droit du travail (Employment Law), 24th ed. Paris: Dalloz. UK Department for Business, Innovation, and Skills. 2011. Resolving Workplace Disputes: A Consultation. Impact Assessment no. BIS 0202. London: Department for Business Innovation and Skills.

Chapter 6 “The Employment Contract Is Dead! Hurrah for the Work Contract!” A European Perspective bruno caruso

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his chapter presents the recent history of the individual employment contract in a civil law system (that of Italy), describes its current functions, and considers its potential transformation in the European context. As often the case when applying the comparative method, we come to perceive that, even within the same trends and functions in different national systems, legal institutions, particularly in the employment law field, carry strong traits of the juridical and constitutional systems of the nation states in which they originated. Nonetheless, globalization and the building of a European system have made the trend toward unity in difference increasingly evident. The history of the individual employment contract in the Italian system has thus come to resemble that of the ugly duckling in the fairy tale— unappreciated and despised at first, even feared (to mix a metaphor) for being the Trojan horse of liberal deregulation. However, as we come to see, like the ugly duckling, the individual employment contract is ultimately transformed into a beautiful swan—a tool for evaluating individual capacitas in a renewed and integrated regulatory institution: the personal work contract. This transformation is accomplished by the adoption of a protective infrastructure established by law, by its elaboration through the process of collective bargaining, and ultimately by its entrenchment in the new European structures of fundamental rights.

Two Diverse Yet Convergent Trends Two analytical trends emerge in any discussion of the standard employment contract (SEC) in Italy and Europe, but both converge on the same result: the crisis of the SEC as an institution. 95

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On the one hand, the SEC is changing in response to demands for greater flexibility in its internal regulation of the terms of the employment relationship. Throughout Europe, in varying degrees, the desire for numeric, wage, functional, or temporal flexibility has led to the SEC’s reregulation (not deregulation) either by formal legal means or through collective bargaining. Many of the terms and conditions governed by the SEC—dismissals, working time, occupational and professional status, fixed-term contracts—in both the private and public sectors (OECD 2005, 2008) have been reregulated to lessen their rigidity and, in some cases, to reduce the protection they once afforded. These changes have been directly influenced by the transformation of internal labor markets within enterprises due to the organizational changes associated with the postFordist era. We may term this the endogenous aspect of the SEC crisis. On the other hand, the crisis of the standard employment contract has an exogenous as well as an endogenous dimension. This dimension is linked not to changes in the technical organization of work but rather to the transformation of the organizational structure of corporations as they seek to adapt to the globalization of markets (the network structure of the company), and to the deeper transformations of social organization (the service economy). These phenomena generate profound changes in the composition and functioning of labor markets, the regulatory response to which involves not only the transformation of the traditional SEC into an institution with greater flexibility of content but also its declining role in organizing the labor force. Numerous alternative contractual models are used now for mobilizing the work of others: the SEC has ceased to be the sun in the galaxy and has become a mere planet, a contract like any other (Caruso 2004, 22). These new contractual models or templates mirror real changes in the employment market and in the organization of work relations, giving rise to an unprecedented differentiation of workers and of the arrangements under which they work. Given the number of workers and types of work contracts available, legal discourse can summarize this development as a progressive enlargement of the grey area between dependent and autonomous work. These two trends are separable only for analytical and conceptual purposes because they are intertwined in the economic and social realities of the labor market. However, they give rise not only to different theoretical questions but also to different regulatory solutions. The effect on the SEC of flexibly organizing work, especially in continental Europe, puts in question the legal sources and consequences of external regulation, not least with respect to the binding effect of statute law and collective agreements on individual contracts—in continental legal terms, the issue of inderogability. By contrast, the transformation of company structures and labor markets confronts the SEC with competing contractual

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models, thus creating a threat to its very survival. But both crises pose the problem of whether it is possible to go beyond the SEC without, metaphorically, leaving it by the wayside. Finally, the two crises raise the question of how such a change in the importance of the SEC might affect its structure and function.

Traditional Regulatory Techniques: The Italian Case Historical and comparative research immediately alerts us to the fact that it is difficult, if not impossible, to talk about the traditional SEC as a homogenous and unitary institution (Freedland and Kountouris 2008; Veneziani 2009; Kountouris 2011). Within the institution of the employment contract, we find specific historical, economic, social, institutional, constitutional, and anthropological references to different capitalist models and employment law systems. In terms of regulation, the differences are structural but also functional. It is impossible to retrace the history of the SEC—above all in Italy but also in Spain, France, and Germany—without considering its original and tight connection to a system of external sources that regulate labor relations. These sources, which are substantially related, assert their influence through the civil law concept of inderogability, or mandatory effects (jus cogens). Inderogability is at the same time a value and a technical instrument, which ensures that legal and collective contractual norms will shape the contents of the employment contract regardless of the voluntas (will) of the contracting parties. Although not directly derived from the constitution, the concept of inderogability is a way of thinking, a legislative presumption. Through this presumption, the principles of the welfare state and social justice, themselves enshrined in constitutional norms, are introduced into the context of both individual and collective employment relations. The traditional employment contract and mandatory legal and collective contractual norms in continental European systems have historically been considered coterminous. They are integrated at every level, from technical legal effects to the cultural and social sphere and to the conceptual. This explains why, for a long time after the fall of fascism and the adoption of its postwar constitution, Italy abandoned the traditional employment contract both as the primary source of regulation and as the privileged subject of research. In place of the SEC, Italy has come to rely on two institutions that incorporate the SEC but differ from it: mandatory legal regulation and collective private autonomy as manifest in the collective agreement. As for legal regulation, Italy has gone back to the roots of the Civil Code it adopted in 1942 on the eve of the collapse of the fascist regime.

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Oddly, however, the code does not directly regulate employment contracts; rather it provides a wide-ranging definition of employee (art. 2094), constructed in reality and in detail by theoretical and practical jurisprudence that has generated an array of social typicalities. Thus the benefits of legal protection and collective bargaining are automatically and mandatorily applied to everyone who falls within the extended category of employee rather than only to the parties to an employment contract, as strictly defined. Because the legal status of the employee, rather than the contract itself, is the subject of regulation, the legally specified incidents of the employment relationship must prevail over the agreed terms of an employment contract. This is accomplished through a process that Italian labor law scholars call, in almost untranslatable terms, il meccanismo di imputazione automatica degli effetti giuridici (the mechanism of automatically imputing juridical effects). Moreover, as the Constitutional Court has declared, even legislators may not alter the legal rules applicable to any relationship deemed by its nature to be one of subordinate employment. This postwar tendency in Italian law, and in other systems where the standard contract typology prevails, may explain the apprehension felt in some circles when contractualism was rediscovered at the end of the twentieth century, and in particular when the employment contract began to be perceived once more as an autonomous institution, whose terms were quite distinct from those derived from statute law and collective bargaining. Moreover, the rediscovery of the individual employment contract has been obscured in current debates by the use of a metaconcept that is ­epistemologically ambiguous and semiotically indeterminate: flexibility. Concepts such as flexibility, and more so flexicurity, are useful cultural suggestions because they are summary representations of the direction of policy. However, they are less useful when we seek to identify the sources and techniques of regulation; indeed, they often mask what is really at stake. This ambiguity and indeterminacy help explain why widespread renewed interest in individual contractual autonomy has not in fact led to the reinvigoration of the SEC as a source of consensual and autonomous regulation of the employment relationship, particularly in systems like Italy’s, where strong constitutional and jurisprudential constraints remain entrenched. The Biagi reforms in Italy in 2003 (Legislative decree 276/03) constitute a laboratory experiment in not detaching the SEC from its system of sources, which remain central to the employment contract. The reforms seek to create a new space for the autonomy of the contracting parties by giving those who offer to work and those who use workers the option to bypass the SEC, in its fundamentally unchanged regulatory framework, and to choose instead from a myriad of alternative contractual models

“The Employment Contract Is Dead! Hurrah for the Work Contract!”     99

and templates. Of the two trends mentioned earlier—the internal reform of the SEC and its decreased relative importance through the proliferation of contractual alternatives—Italian lawmakers have decisively supported the second. Thus, by providing the contracting parties with access to alternative contractual forms not previously available, they have accorded them greater autonomy in determining their preferred contractual arrangements without weakening the SEC, which remains fundamentally unchanged. Under the Biagi reforms, the initial stage of contract formation, the recruitment stage, has been identified as the moment when the parties to an employment relationship are able to assert their autonomy. However, this autonomy is not unlimited. They must still choose from an array of work contract models and templates, preregulated by law, albeit different from the full-time, permanent employment relationship that is the defining characteristic of the SEC. Today, in principle, those who meet in Italy’s labor market may choose from some forty-eight contractual models when deciding how, when, and according to which rules to work, all of which are legally regulated by the various articles of the Biagi law.1 In practice, however, the choice is of course imposed on those looking for work by those offering work. In practice, too, only a few of these templates are actually used by employers. The most popular is the fixed-term contract, a typical variant of the SEC because of its limited duration.2 The second is the project contract (Biagi law art. 61), a type of semi-independent work contract, which in Italian juridical taxonomy falls into the category of parasubordinate work. Finally, and less frequently, work relationships are established through labor market intermediaries under which a triangular relationship is established among an employment agency, the company using the worker’s labor, and the worker, all in accordance with Italian regulatory templates. Here, the commercial contract between the agency and the company prevails, and the relationship between the worker and the agency is governed by a normal subordinate employment contract that may be either for a fixed term or permanent. The legislative regulation of this voluntary system of derogabilità assistita (assisted derogation) is subject to constraints deriving from the constitution, from ordinary law, and from practical jurisprudence. Certif­ ication commissions may be established by local labor inspectorates, universities, or joint labor-management bodies to evaluate alternative contractual models proposed by the parties to govern their employment relationship (Biagi law art. 75). However, approval of a proposed contract model by these administrative bodies is binding only for the purposes of fixing liability for taxes and social security contributions. It does not prevent a labor court from subsequently requiring that the work contract be modified. Nor are labor courts prevented from intervening in re-

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lationships that in reality do not conform to the formal legal terms to which the parties have contractually agreed. In such cases, the reality of the working relationship will prevail, notwithstanding the prior administrative approval of a certification commission. Quite recent legislation has extended the role of certification commissions by empowering them to intervene not only to provide an element of certainty concerning the contractual model or template chosen by the parties but also to interpret dubious clauses of the SEC itself (Legislative decree n. 183/2010 art. 30). For example, it may be unclear whether provisions of an SEC that deviate from the statutory formulation or from the provisions of a collective agreement are more favorable to the employee or less. The distinction is crucial because the principle of inderogability is normally understood to be unidirectional: parties to an employment contract may derogate in melius but not in peius: they may enhance but not reduce the employee’s rights under the law or a collective agreement. Only judicial practice will determine whether this new legislation will lead to more frequent recourse to these commissions by employers than at present.

Is the Comeback of Individual Autonomy Necessarily the Trojan Horse of Deregulation? Capacitas in the SEC The SEC sits at the epicenter of an epistemological contradiction. On the one hand, that the SEC continues to remain fundamentally regulated ab externo by legislation and collective agreements highlights its ineffectiveness as an autonomous regulatory source. On the other hand, the SEC continues to be a central feature of employment regulation, the unavoidable medium through which the multifaceted regulatory apparatus is applied. It is therefore indispensable in the realization of individual and collective rights. The SEC has thus been doubly marginalized, initially by the historical colonization of its legislative and collective-contractual sources and more recently by competition from new contractual models used in establishing and regulating nonstandard work relationships. Is it possible to extract the SEC from this epistemological contradiction? To put the question differently, is it theoretically possible to revitalize the idea of the subordinate employment contract as an independent source of regulation that neither draws sustenance from nor is integrated with other legal-regulatory sources, as a contract that operates autonomously and freely, although situated within a network of guarantees and protections established by law and collective agreements? Or, in a more practical version of the same question, having due regard for the interests of all parties, is it possible to conceive of an employee who is genu-

“The Employment Contract Is Dead! Hurrah for the Work Contract!”     101

inely freer, more independent and mature, and whose working life is less colonized by the lawmaker and the collective organization of interests? Is it possible, in short, to think of the contract of employment as promoting the integral capacitas of the subject (a socially active citizenship) rather than focusing solely on its functional role in the employment relationship? Can the individual employment contract constitute one of the important nodes of an integrated social protection network, while complying fundamentally with the law and the norms of collective bargaining? From this new perspective, the individual contract would, in fact, perform two fundamental functions. The first, which is traditionally negative, is to protect personal employee interests, including emotional and psychological integrity and professional interests, from what is in the modern work organization an omnipresent, microphysical company power. We might call this “freedom from.” The second function is more innovative and certainly more difficult to imagine in the context of Fordist work organizations. The employment contract would become personalized and individualized, the person being situated and contextualized. It would constitute a positive statement of freedoms and rights, such as that to continual and differentiated training (Caruso 2007; Deakin 2009), to a better work-life balance, to the security of an employment relationship based on one’s abilities, to a work schedule chosen through the use of bankable hours and personalized time entitlements built up during the employment relationship. If this second version of the employment contract were possible, it would become a statement of “freedom to” and thus of emancipation (Cherednychenko 2006; Collins 2007a). If it were possible to move beyond the skeletal vision of traditionally diminished employment contracts (mere work performance, pay, and benefits) by broadening the reductive bilateral vision of the employment contract that is common in civil law systems (Carabelli 2004), by widening the scope of the object of the contract to include new goods, services, and reciprocal obligations (such as to provide training), the result might be to endow employees with countervailing power. Thus, reinvigoration of the employment contract could have a constructive rather than a deregulatory effect. The central theoretical challenge is to prevent company power from overflowing beyond the domain of what is strictly defined as work performance, the only domain in which the employer’s interests are arguably paramount. Acceptance of what I call the new employment contract (NEC) would provide a platform for recovery not only of the legal structure but also of the unitary function, of employment contracts. In this new vision, the NEC would become a relational contract par excellence. It would counteract the tendency toward increasing internal fragmentation and de­ standardization of employment relations, thus reducing the effects of the balkanization of internal and external labor markets.

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The theoretical, but also regulative, challenge is to define that single labor contract much discussed in France and in Italy, but whose regulatory outcomes are still limited, incidental, and provisional, in relation to the legal systems of those countries (Boeri and Garibaldi 2008; Freedland and Kountouris 2008). Various regulatory approaches have been proposed. However, before favoring one over the other, we must first untie a fundamental theoretical and socioeconomic knot. We must decide whether or to what extent the primary function of the NEC is optimal allocation of resources for the stability of the market, protection and guarantees for the weaker party (in economic terms and ability to negotiate), or enhancement of individual skills in the context of both employment and social life (in a broad sense of personal capacitas). This additional challenge of building a theory and regulating the traditional employment contract at a European level also means that we have to identify the actors who will be the promoters and protagonists of such a project. Everyone has a part to play. First, the academic community, if it can and as it did in Europe in medieval times, should produce a Juristenrecht so authoritative that it will be imposed on lawmakers as the basis of a new supranational legal order (Grossi 2006). Second, national and European courts must communicate with each other.3 Third, social partners must coordinate on a national and European level. Fourth, national lawmakers should be coordinated and directed by European legal institutions. And finally, the activities of all actors must be considered not only as coordinated but also as reciprocally provocative.

Employment or Personal Work Contract? Field-Based Solutions The opportunity for reregulating the labor contract in a wide and unitary sense also includes the possibility of addressing the independent or autonomous work contract (IWC), the ever-present and sometimes antagonistic neighbor that lives across the road from the SEC in all European systems and was, until a decade ago, considered its alternative. Because of changes resulting from the end of Fordism, the distinctions between these two types of contracts, as well as their social referents, have become clouded. Indeed, the grey area between dependent and independent work has grown larger and now encompasses many new and different work arrangements that are hardly traceable to their origins in a comprehensive classification. These novel and diverse arrangements are the result of vertical fragmentation and the externalization of production and distribution, phenomena widely studied by economic and social scientists as well as by legislators and jurists. They are consequently associated both with the

“The Employment Contract Is Dead! Hurrah for the Work Contract!”     103

flexible firm and with the service economy in which such firms increasingly operate (Collins 1990). With regard to employment law, the consequences are evident. The need to reflect on the implications of a new category of dependent, selfemployed workers—in Italian terminology, parasubordinate or quasi­ dependent workers—is clear. These no longer constitute a category clearly distinguishable from dependent workers, but instead represent one segment of a unified continuum of legal discourse on the work contract and the protection it affords. Acknowledgment of the new background against which we engage in broadened reflection on the labor contract also requires us to focus on a few abstract theoretical macro alternatives (metaregulatory alternatives): First, fragmentation of production and the advent of the service economy have in turn fragmented and destandardized the traditional contract of employment (SEC), not only internally but also externally. This is attributable to the proliferation in the market of balkanized work and, consequently, of types of work contracts created directly by the contracting parties—contractual models rooted in practice that only subsequently (if ever) become legally recognized by theoretical and practical jurisprudence. This might be regarded as a triumph of the lex mercatoria, its emergence in both trade and labor relations. Such an outcome, however, is unimaginable in legal systems such as the Italian one, where, under the Civil Code and according to constitutional principles, individuals are not allowed the freedom to create contractual models for personal work, but can only choose from the various models permitted and regulated by statute law. Second, on the contrary, confirming the prevalence of the employment contract over other contractual models requires, in effect, the extension of the SEC’s strongly integrated mandatory and standardized pro­tec­tions beyond the boundaries of its traditional beneficiary, the employee. It is a matter of re-proposing the colonizing function of employment law. However, given the flight from employment law (Simitis 1986, 1990) and the enhanced risk of its ineffectiveness (Teubner 1986, 311), this option is likely no longer viable. Third, fragmentation of production inside and outside the firm is an economic and social fact that can no longer be reversed by law. Deploying the resources of legal rationality to correct those outcomes most obviously at odds with the common principles of social justice (the proliferation of nonstandard contracts that offer workers no protection whatsoever) would require an approach to legal reregulation neither confined to correcting information asymmetries, nor constrained by social and typological differentiation.

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These metaregulative hypotheses form the background of a number of pragmatic regulatory proposals that are found to some degree all over Europe. An echo of these hypotheses, particularly the third, can also be detected in the European Commission’s recent Green Paper (European Commission 2006; Massimiani 2006).4 Analysis of that document points to a plausible regulatory proposal by EU institutions, which could be accepted by the social partners, in the sense of a broad, common definition of an economically dependent worker and the provision of minimum guarantees.5 A provision setting out the general principles governing this approach could also enable the various member states to adapt them to the special features of their labor markets and of semi-independent work as it has developed in the national context. However, as many commentators have observed, it will be difficult for the legal systems of member states to agree on a common legal definition of an economically dependent worker. Without considering the national nuances and juridical variables, three related strategies have emerged in discussions over the pragmatic reregulation of work contracts. Some systems—Germany, Great Britain, and to some extent Italy—have given regulatory answers partly aligned with and partly straddling these three hypotheses. These strategies, however, point to solutions that are still fragmented and unsystematic (Perulli 2002, 2011). The first strategy is to broaden the notion of dependency to the point of including all its instances in economic relationships. The identification of economic dependency may vary on the basis of qualitative and quantitative indices, so, too, may the regulatory outcomes of attempts to transform the subordination that derives from economic dependency. According to a pro-labor vision, the outcome of such a strategy should extend the traditional protection enjoyed by genuine employees (insiders) to all economically dependent workers (outsiders) and to raise such workers to the same high level of protection as is enjoyed by regular employees. By contrast, according to a pro-market vision, the outcome should be a lowering of the protection afforded to all workers, regardless of category, particularly with regard to dismissal.6 The difficulty with this strategy lies in finding an appropriately selective and fair definition of economic dependency. What must be considered, under this strategy, is that diluting the notion of dependency—and its contractual expression, the SEC—down to a more general notion, the personal work contract, does appear in line with some tendencies among jurists. This, for example, is both the direction taken by the European Court of Justice and the accentuated teleological and functional role of the notion of the worker and the employment contract in the EU system (Giubboni 2009). However, attempts—in Italy, for example—to combine traditional notions of subordination founded on power, control, manage-

“The Employment Contract Is Dead! Hurrah for the Work Contract!”     105

ment, and discipline of the employee (a technical functional strategy), with a more comprehensive socioeconomic notion such as economic dependency, collide with the neo-Marxist concept of subordination. According to this notion, regardless of the mode of the exercise of power on behalf of the employer, employees are individuals who find themselves doubly alienated, both from the organization of work, the means, and from the outcome of work, the value (Roccella 2008). A second, more pragmatic strategy to regulation starts from the proposal to create a tertium genus halfway between the IWC and SEC, a parasubordinate and semi-independent work relationship of a coordinated and continuing nature. Compared with the first hypothesis, the problems relating to legal classification have worsened. It becomes even more difficult to identify appropriately selective criteria regarding the semiindependent worker and the relevant contract of employment. Such criteria could include the nature of the work, the lack of direct contact with the market, the exclusivity of the market relationship, functional integration into the company’s structure, the strength of the employer’s power of coordination, the length of the relationship, and so on. What remains unresolved is the question of what level of protection, minimum or maximum, should be extended from the employee to a similar tertium genus. The third strategy, favored by the majority of academics, was adopted by the United Kingdom in the period straddling the end of the last century and the start of the present one (Davidov 2005). Rather than proposing the regulation of different contractual models, it proceeds on the assumption that all contracts in which a person is in some sense employed require protection adequate to the circumstances of the situation. The idea that protection should be modified and graduated, starting from a universal floor of rights, is gaining increasing support among European scholars. It contemplates replacement of the rigid juxtaposition between employment and economically dependent self-employment with a continuum of activities to which a series of modulated, variable guarantees are attributed, starting from a shared minimum of rights and gradually progressing toward stronger forms of protection. A methodological perspective of this kind is also to be found in the report drawn up for the European Commission by a group of scholars coordinated by Alain Supiot (2009), in which the protection envisaged is depicted in the form of concentric circles. The most concrete version of this strategy is depicted in figure 6.1. The extent to which some or all of these three hypothetical strategies for regulating work will be accepted by various European states is not yet clear. Nonetheless, the intensification of transborder mobility of workers among European states suggests a need for convergence among them. Convergence would not only ensure the freedom of movement of workers but also the protection of the fundamental rights of European

106     Rethinking Workplace Regulation Figure 6.1  Graduated Protections Model

Independent entrepreneurs Health and safety Independent workers Discrimination legislation

Workers Pay and time legislation

Employment contract (SEC)

Source: Reprinted with permission from Perulli (2003, 246).

citizens working in the European domain. After all, Europe is now endowed with a hard, as well as a soft, program of fundamental rights following the incorporation of the Charter of Nice into the Treaty of Lisbon, whereby social rights are placed on the same level as civil and political rights.

The Personal Work Contract and the Constitutionalization of Private and Contract Law in Europe All of these hypotheses—one that contemplates the endogenous transformation of the SEC, and one that extends the SEC to include contractual models until now considered external—lead us to consider the future of the work contract. This consideration must take place in a supranational rather than a purely national context. The supranational European perspective, much like Russian matryoshka dolls, includes multiple layers. For example, much—arguably excessive—abstract discussion in Italy centers on whether labor law scholars should be involved in the construction of a European Civil Code inspired by principles of social justice and enshrined in the EU’s com-

“The Employment Contract Is Dead! Hurrah for the Work Contract!”     107

mon constitutional traditions (Study Group 2004). Such an initiative is essential not only to avoid the “civilianization of labor contracts” but also to facilitate the extension of SEC-type protective principles to all contracts in which economically strong parties could take advantage of economically weak and information-poor parties, including both employment and consumer contracts (Nogler 2008). Likewise, there is support for the contrary view—that it is inappropriate for labor law academics to be involved in constructing a European Civil Code because its formulation is in the hands of experts who indubitably have business efficiency rather than principles of social justice at heart (Lo Faro 2008). However, the principles of social justice enshrined in most European employment law systems could—it is said—evolve from the special contractual principles governing employment to emerge as general principles that mold contract law from the outside (Vettori 2008; Castronovo 2006; Mengoni 1990). Examples might include the protection of the weaker party through the application of the principle of favor (whereby in the event of conflict, the employee benefits from the most favorable among divergent legal sources) and the principle of imperative integration (whereby the contract of employment is integrated with external normative sources such as principles of good faith and the constitution). It is exactly this impasse on protection beyond the traditional domain of the employment contract that makes the research perspective of the constitutionalization of private law so methodologically, intellectually, and politically intriguing. This is a perspective that goes well beyond European codification of the principles of civil law. It forces us to consider, above all, how limited the European Union’s possibilities for regulatory intervention are, how frequently its efforts are slowed down, and how rarely they are effective. The controversy over approval of the European directive on agency work and the impasse that confronts the EU Green Paper proposals on the reform of employment law systems remind us of this fact. That said, the analytical position can be proposed as follows. Whether it be the German solution of directly applying fundamental constitutional rights to private contracts (meaning that public law prevails hierarchically over private law), or the methodologically more sophisticated version of integration and hybridization of public and private law through discursive strategies of intertextuality or interlegality (Collins 2007b), the constitutionalization of private law has acquired new plausibility and urgency given the legal effect ascribed to the Charter of Nice by Article 6 of the Treaty of Lisbon. These newly recognized fundamental social rights are meant to have direct horizontal effect, insofar as primary European law provisions not only bind the member states to apply EU law but also indirectly govern relationships among private actors. This goes well beyond the formal delimitations of jurisdiction, which all

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universal provisions regarding fundamental rights ultimately produce (Pernice 2009; Caruso 2010). Similar far-reaching results flow from Article 6, subsection 2 of the European Convention on Human Rights. Beyond these formal juridical developments, it is also possible that the Charter of Nice has opened strong new legal arguments in favor of constitutionalizing private law and contract law (Cherednychenko 2004; Kumm 2006; Columbi Ciacchi 2006; Ferrajoli 2004). One approach that may have both an immediate result, in enhancing judicial activism on a European and national level, and a medio tempore result, in shaping European and national regulation of personal work contracts, is the development and deployment of arguments favoring equitable interpretations of work contracts to secure the selective and adaptive extension of typical protections of dependent work to economically dependent workers. In this regard, why not think, for example, of the enhancement of the principle of “potentially fair reasons for dismissal” and the employer’s duty to state reasons for termination, both of which derive from Article 30 of the Charter of Nice? These requirements should be deemed to be implied in all contractual relationships that have, as their object, the work-product of others (personal work contracts). They could also be implied terms of open-ended relational contacts other than work contracts (Cohen 2009). Similar reasoning could be applied to initiatives aimed at guaranteeing fair standards of remuneration, under Article 31 of the Nice Charter, Fair and Just Working Conditions (Perulli 2003). The constitutionalization of contract law, in the perspective opened by the new legal status of the Nice Charter, from “the viewpoint of legal practice . . . provides the judiciary with a powerful tool to adapt traditional contract law instruments to contemporary democratic and social values. In other words, horizontal effect is an important vehicle for social justice policies” (Columbi Ciacchi 2006, 180).

Notes 1. For instance: art. 20ff agency work contract; art. 34ff, job on-call contract; art. 41ff, job sharing contract; art. 47ff, apprenticeship contract (three different templates); art. 54ff insertion contract (with at least other two subspecies); art. 61ff project contract, occasional contract, accessory occasional contract, and so on. 2. Trade union sources report that in Italy, in the annus horribilis of 2009–2010, of 14.3 million new work relationships, 11 million are fixed-term contracts, approximately 76 percent of total recruitment (UIL 2011). A more flexible regulation of the fixed-term contract has also been introduced (Legislative decree 368/2001) and several times amended to modify the effect of strict and rigid interpretations by labor courts. 3. See the important common document recently published by European Court of Human Rights (ECHR) and the Court of Justice of the European Union

“The Employment Contract Is Dead! Hurrah for the Work Contract!”     109 (CJEU) on the application of the Charter of Fundamental Rights of the European Union. “Joint communication from Presidents Costa and Skouris.” 4. Such a rediscovery of personal work contracts at a European institutional level is treated under the very broad umbrella of the flexicurity debate, which will probably be fuelled again after the recent epochal reform of the stability pact by the European Council in March 2011 (Mario Monti, Il patto per l’Euro, Corriere della sera 28 March 2011. Available at: http://eur-lex.europa.eu/ smartapi/cgi/sga_doc?smartapi!celexplus!prod!DocNumber&lg=en&type_ doc=COMfinal&an_doc=2006&nu_doc=708). Accessed March 29, 2011. 5. Positive appreciation of this part of the Green Paper proposal in the document “The labour lawyers and the Green Paper on ‘Modernising labour law to meet the challenges of the 21st century: A critical and constructive evaluation.’” Available at: http://www.lex.unict.it/eurolabor/news/en/doc_libro verde.pdf. Accessed October 1, 2011. 6. Pietro Ichino, “Portale della semplificazione e della flexsecurity (Web Portal on Simplification and Flexicurity),” Pietroichino, November 11, 2009, http:// www.pietroichino.it/?p=1079.

References Boeri, Tito, and Pietro Garibaldi. 2008. Un nuovo contratto per tutti (A New Contract for All). Milano: Chiarelettere. Carabelli, Umberto. 2004. “Organizzazione del lavoro e professionalità: una riflessione su contratto di lavoro e post-taylorismo” (Organization of Work and Skill: A Reflection on the Contract of Employment and Post-Taylorism). Giornale di diritto del lavoro e delle relazioni industriali 101(26): 1–99. Caruso, Bruno. 2004. “Flexibility in Labour Law: The Italian Case.” In Labour Law and Flexibility in Europe: The Cases of Germany and Italy, edited by Bruno Caruso and Maximilian Fuchs. Baden Baden: Nomos. ———. 2007. “Occupabilità, formazione e ‘capability’ nei modelli giuridici di regolazione del mercato del lavoro” (Employability, Training, and “Capability” in the Models of Legal Regulation of the Labor Market). Giornale di diritto del lavoro e delle relazioni industriali 113(29): 1–134. ———. 2010. “I diritti sociali fondamentali dopo il Trattato di Lisbona (tanto tuonò che piovve)” [The Fundamental Social Rights after the Treaty of Lisbon (Thundered So Much That It Rained)]. C.S.D.L.E. “Massimo D’Antona” working paper INT 81/2010. Catania: Università degli Studi di Catania. Available at: http://www.lex.unict.it/eurolabor/en/research/wp/wp_int_en.htm. Accessed January 20, 2011. Castronovo, Carlo. 2006. “Diritto privato generale e diritti secondi. La ripresa di un tema” (General Private Law and Derived Law). Europa e diritto private 2(2006): 397–423. Cherednychenko, Olha. 2004. “The Constitutionalization of Contract Law: Something New Under the Sun?” Electronic Journal of Comparative Law 8:1 (March). Available at: http://www.ejcl.org/ ———. 2006. “Fundamental Rights and Contract Law.” European Review of Private Law 4(2): 489–565. Cohen, Tamara. 2009. “Implying Fairness into the Employment Contract.” Industrial Law Journal 30(10): 2271–95.

110     Rethinking Workplace Regulation Collins, Hugh. 1990. “Independent Contractors and the Challenge of Vertical Disintegration to Employment Protection Laws.” Oxford Journal of Legal Studies 10(3): 353–80. ———. 2007a. “European Social Policy and Contract law.” European Review of Private Law 3(1): 78–87. ———. 2007b. “Utility and Rights in Common Law Reasoning: Rebalancing Private Law Through Constitutionalization.” Law Society Economy working paper 6. London: LSE Legal Studies. Columbi Ciacchi, Aurelia. 2006. “The Constitutionalization of European Contract Law: Judicial Convergence and Social Justice.” European Review of Contract Law 2(2): 167–80. Davidov, Guy. 2005. “Who Is a Worker?” Industrial Law Journal 34(1): 57–61. Deakin, Simon. 2009. “Capacitas: Contract Law, Capabilities and the Legal Foundations of the Market.” In Capacitas: Contract Law and the Institutional Preconditions of a Market Economy, edited by Simon Deakin and Alain Supiot. Oxford: Hart Publishing. European Commission. 2006. “Modernising Labour Law to Meet the Challenges of the 21st Century.” Green paper COM(2006)708 final. Brussels: Commission of the European Communities. Ferrajoli, Luigi. 2004. “Per un costituzionalismo di diritto privato” (For a Constitutionalism “Private Law”). Rivista critica di diritto privato 22(1): 11–24. Freedland, Mark, and Nicola Kountouris. 2008. “Towards a Comparative Theory of the Contractual Construction of Personal Work Relations in Europe.” Industrial Law Journal 37(1): 49–74. Giubboni, Stefano. 2009. “La nozione comunitaria di lavoratore subordinato” (The European Notion of Employee). In Trattato di di ritto privato dell’Unione europea, Il lavoro subordinato (European Union Private Law Treaty, the Employment Relationship), edited by Silvana Sciarra and Bruno Caruso. Torino: Giappichelli. Grossi, Paolo. 2006. L’ordine giuridico medievale (Medieval Legal Order). Bari: Laterza. Kountouris, Nicola. 2011. “The Employment Relationship: A Comparative Analysis of National Judicial Approach.” In The Employment Relationship: A Comparative Overview, edited by Giuseppe Casale. Geneva: International Labour Organization. Kumm, Mattias. 2006. “Who Is Afraid of the Total Constitution? Constitutional Rights as Principles and the Constitutionalization of Private Law.” German Law Journal 7(4): 341–70. Lo Faro, Antonio. 2008. “Perché i giuslavoristi trascurano il dibattito sul diritto contrattuale euroepo? Cinque risposte a Luca Nogler” (Why Do Labor Law Scholars Neglect the Debate on European Contractual Law? Five Answers to Luca Nogler). Giornale di diritto del lavoro e delle relazioni industriali 118(30): 225–36. Massimiani, Clemente, ed. 2006. “Modernizzare il diritto del lavoro per rispondere alle sfide del XXI secolo” (Dossier on the European Green Paper “Modernising Labor Law to Meet the Challenges of the Twenty-First Century”). Brussels: Commission of the Community of Europe. Available at: http://eur-lex .europa.eu/LexUriServ/site/it/com/2006/com2006_0708it01.pdf. Accessed January 20, 2011.

“The Employment Contract Is Dead! Hurrah for the Work Contract!”     111 Mengoni, Luigi. 1990. “L’influenza del diritto del lavoro sul diritto civile” (The Influence of Employment Law on Civil Law). Giornale di diritto del lavoro e delle relazioni industriali 45(12): 5–23. Nogler, Luca. 2008. “Why Do Labour Lawyers Ignore the Question of Social Justice in European Contract Law?” European Law Journal 14(4): 483–99. OECD. 2005. Public Sector Modernisation: The Way Forward. Paris: Organisation for Economic Co-operation and Development. ———. 2008. The State of the Public Service. Paris: Organisation for Economic Cooperation and Development. Pernice, Ingolf. 2009. “The Treaty of Lisbon: Multilevel Constitutionalism in Action.” Columbia Journal of European Law 15(3): 349–408. Perulli, Adalberto. 2002. “Economically Dependent/Quasi-Subordinate (parasubordinate) Employment: Legal, Social, and Economic Aspects.” Brussels: European Commission. ———. 2003. “Lavoro autonomo e dipendenza economica, oggi” (Self-Employment and Economic Dependence). Rivista giuridica del lavoro I: 221–70. ———. 2011. “Subordinate, Autonomous, and Economically Dependent Work: A Comparative Analysis of Selected European Countries.” In The Employment Relationship, A Comparative Overview, edited by Giuseppe Casale. Geneva: International Labour Organization. Roccella, Massimo. 2008. “Lavoro subordinato e lavoro autonomo, oggi” (Employment and Self-Employment). Quaderni di Sociologia 52(46): 71–112. Simitis, Spiro. 1986. “La giuridificazione dei rapport di lavoro” (The Legalization of Employment Relationships). Giornale di diritto del lavoro e delle relazioni industriali 30(8): 215–76. ———. 1990. “Il diritto del lavoro e la riscoperta dell’individuo” (Employment Law and the Rediscovery of the Individual). Giornale di diritto del lavoro e delle relazioni industriali 47(12): 87–113. Study Group on Social Justice in European Private Law. 2004. “Social Justice in European Contract Law: A Manifesto.” European Law Journal 10(6): 653–74. Supiot, Alain. 2009. “En guise de conclusion: la capacitè, une notion à haut potential.” In Capacitas, edited by Simon Deakin and Alain Supiot. Oxford: Hart. Teubner, Gunther. 1986. “After Legal Instrumentalism? Strategic Models of PostRegulatory Law.” In Dilemmas of Law in the Welfare State, edited by Gunther Teubner. Berlin: Walter de Gruyter. Unione Italiana del Lavoro (UIL). 2011. “Dove, come e quanto si muove il lavoro in Italia: assunzioni, cessazioni, flessibilità, giovani, donne e stranieri” (Where, How, and How Much Work Moves in Italy: Recruitment, Terminations, Flexibility, Young People, Women, and Foreigners). 2° Rapporto UIL sulle comunicazioni obbligatorie (2nd Report UIL on Compulsory Communications), Gennaio 2008–30 giugno 2010. Marzo 2011. Rome: Italian Labor Union. Available at: http://www.uil.it/rapporto-uil-co32011.pdf. Accessed March 29, 2011. Veneziani, Bruno. 2009. “The Employment Relationship.” In The Transformation of Labour Law in Europe, edited by Bob Hepple and Bruno Veneziani. Oxford: Hart Publishing. Vettori, Giuseppe. 2008. “Diritto contrattuale europeo, rimedi di ‘terza generazione’ e diritto del lavoro” (European Contract Law, Third-Generation Remedies and Employment). Giornale di diritto del lavoro e delle relazioni industriali 118(30): 207–23.

Part III The Restructuring of Labor Market Institutions

Chapter 7 Erosion, Exhaustion, or Renewal? New Forms of Collective Bargaining in Germany thomas haipeter

I

ndustrial relations and collective bargaining in Germany are experiencing an upheaval. Traditionally, collective bargaining actors and collective bargaining itself have been driving forces in the development and definition of standard employment relationships characterized by well-paid, permanent, and full-time labor contracts. For more than a decade, a process of erosion of collective bargaining and the standard employment relationship has been observed (see, for example, Hassel 1998). Indeed, the signs of erosion or exhaustion are manifold—from the decline of collective bargaining coverage, the membership losses of employers’ associations and unions, and the decentralization of collective bargaining—to other developments such as the growth of a lowwage sector (Bosch and Kalina 2008), the weakening of labor standards in the course of privatization (Brandt and Schulten 2008), the rise of a nonunion sector (Artus 2008), and the increase in precarious labor contracts such as temporary work (Holst, Nachtwey, and Dörre 2010). The central question concerning the development of German industrial relations is not whether this diagnosis is correct. It is certainly correct. Rather, it is what the consequences are for the actors in collective bargaining and whether there are any opportunities for ameliorative action. The erosion hypothesis leaves little room for such action. From this perspective, a process of erosion is destroying old institutions without any possibility for the creation of new nonmarket institutions. In this scenario, a liberal or Anglo-Saxon model of weak unions, powerless employers’ associations, dispersed collective bargaining on the plant level, 115

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and a growing nonunion sector is regarded as the most probable scenario for the future of German industrial relations. Wolfgang Streeck’s hypothesis of exhaustion (2010) points in a similar direction. In this view, institutional exhaustion of industrial relations is fueled by a process of liberalization that weakens the sanctioning power of nonprivate and nonmarket institutions on employers. This process does not necessarily lead to a deinstitutionalization of collective bargaining as suggested in the erosion scenario, but to a reinstitutionalization characterized by the replacement of compulsory institutions by institutions and forms of cooperation formed voluntarily by market actors. The most prominent example Streeck gives us is the development of local alliances for work between management and works councils. These alliances, on the one hand, can go along with deviations from the norms of collective bargaining, fostering internal erosion of collective bargaining norms. On the other hand, they also form a new mode of coordination between capital and labor at the plant level, building on the exchange of job protection for concessions. However, the exhaustion argument, like the erosion one, takes for granted a prolongation of the weakening of collective bargaining and the collective bargaining actors. The relationship between collective bargaining and collective bargaining actors is described as mutual destabilization. Exhausted actors have neither the power to reverse these trends nor the conceptual means to invent alternatives. Regarded this way, the new central actors of industrial relations will be corporations, because liberalization, brought about by the internationalization of production, the financialization of corporate governance, and the privatization of former public services, provide them with more leeway for action and reduce the maneuvering room for workers and their collective bargaining agents. In this chapter, I argue that both explanatory approaches—erosion and exhaustion—have prematurely sent unions, and possibly employers’ associations, into early retirement. The future of collective bargaining in Germany, I contend, cannot be adequately described as one stemming from exhaustion. Although this is an interesting heuristic device to describe institutional developments, it ignores the capabilities of actors to recognize problems and to react to them when they are still powerful enough to make significant contributions to the development of institutions. From my point of view, this is precisely what is observable in the German system or, more specifically, in some sectors of the current German system of industrial relations. Erosion and exhaustion still continue, but there are also signs of new developments. Collective bargaining is characterized not, as Streeck argues, by several independent yet unidirectional processes of liberalization, but instead by several processes that are tightly connected and nevertheless go into different, even opposite, directions. These new developments do not turn back time. In this re-

Erosion, Exhaustion, or Renewal?     117

spect, the argument of the resiliency of the German system of industrial relations, made occasionally in the 1990s, no longer holds (see, for example, Thelen 2000; Turner 1998). Rather, the developments are signs of what can be called a renewal that, if successful either in some sectors or in the economy as a whole, would change the institutional pillars of the system in a way that differs from both resiliency and liberalization.

Contours of the Former System of Collective Bargaining in Germany The German system of collective bargaining, shaped in the 1950s and 1960s and more or less stable until the 1990s is well known and widely analyzed in English-language literature (see Thelen 1991; Turner 1991; Wever 1995). Scholars point to two institutional features that have given the German system a special flavor. The first is a rather stable system of industry-level collective bargaining by trade unions and employers’ associations. This stability has two aspects. On the one hand, unions and employers’ associations have been encompassing in the sense that most employees (80 percent or more) were covered by collective bargaining agreements. Collective bargaining coverage was and still is dependent on the membership of companies in employers’ associations, membership in which made the application of collective agreements compulsory. Unions always had a lower density that even, at its best times in the late 1970s, never exceeded 36 percent, although in core industries of the system it has been much higher. Competition between unions was low because of the dominance of industry unions organized in the German Trade Union Federation (Deutscher Gewerkschaftsbund, or DGB). Therefore, unions were able to make centralized agreements with employers’ associations despite low membership rates. Material labor standards, however, experienced paralleled development between the core manufacturing industries, particularly the metalworking industry, and the private-service sector industries. As a result of pattern bargaining, wage dispersion among sectors has been rather stable. Within the industries, unions tried to compress wages at the high and low ends of the wage spectrum. The second institutional feature of the German system of industrial relations is codetermination by works councils. Works councils are workers’ representative bodies that have legally defined rights of codetermination (and of consultation and information) and are also formally independent of unions. Although the codetermination law was designed as a device to keep unions out of the plants and therefore was initially criticized by unions, in the course of its development, unions made their peace with works councils by capturing them. In the 1980s, about four of five works council representatives were union members. Works councils

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performed important functions for unions, such as recruiting union members and controlling the implementation of collective bargaining agreements at the plant level. In return, the unions supported the works councils by providing them with consulting and educational services. The German system was dual (Müller-Jentsch 1997) in the sense that two levels coexisted, but with respect to actors or agreements did not compete. The priority of collective bargaining agreements over plant level agreements was defined by law. Therefore, at the plant level, agreements could be negotiated that dealt only with topics not covered in collective bargaining agreements (such as the occupational health and safety or equal treatment of women), that improved working standards above the levels of collective bargaining agreements (such as positive wage drift), or that were allowed or demanded explicitly by collective bargaining agreements (such as organizing working time flexibility). A final note on the system points to the fact that both unions and works councils have democratic legitimacy because they are representative organizations, in the case of the unions being mediated by several levels of elections from the bottom to the top of the organizations. They are also intermediate organizations in the sense that they have tried to mediate the material interests of their members (unions) or voters (works councils) on the one hand, and the system interests of individual plants, industries, or the whole economy on the other. However, they defined the collective interests of their members and negotiated collective agreements with little or no direct participation of their members or voters. In other words, the legal foundation and the encompassing structure of the dual system of representation allowed unions, works councils, and employers’ associations to become corporatist actors. What made the German system of industrial relations so attractive to foreign analysts in the 1980s was the fact that it was, to some degree, able to adapt to new developments yet retain traditional forms. Institutional stability in Germany contrasted significantly with the experiences of exhaustion of collective bargaining in the United States and the United Kingdom. One explanation is that the conservative-liberal German government was representing a moderate conservatism and was neither able nor willing to put much pressure on unions and collective bargaining at the time. Another explanation is that conflicts did not become as dominant as in liberal countries because new demands by employers, especially regarding working time flexibility, could be handled within the system by shifting responsibilities from the industry level to the plant level. Unions acceded to decentralization in working time regulation by agreeing to so-called opening clauses in collective bargaining agreements that permitted plant-level actors to organize a flexible distribution of working time. Although some scholars stressed the potential dangers of such plant-orientation (Verbetrieblichung) (Schmidt and Trinczek 1999),

Erosion, Exhaustion, or Renewal?     119

this development showed that although unions had diminished influence over plant-level working time policy, works councils could often be remarkably successful in introducing flextime (Haipeter and Lehndorff 2007). Thus, driven by the economic success of the 1980s, the German industrial relations system seemed an example of an industrial relations system that reconciled the collective regulation of labor standards with the efficiency of companies.

Indicators of Erosion and Exhaustion Although stable and adaptive during the 1980s, the institutional features of the German model underwent rapid changes after the deep crises of the early- to mid-1990s and onward. The main impetus for this development was a growing critique within the employers’ camp about high wages and the rigidities of collective bargaining. This critique was driven by new market-sensitive business models that stressed decentralization and outsourcing, and by a push for the internationalization of production, especially in Eastern Europe and later China. Exit options, both internationally and within Germany (from highly regulated to lessregulated sectors), made it relatively easy for employers to put pressure on both works councils and unions. At the same time, in many companies, management pressed ahead with the financialization of corporate governance that proved to be financially attractive for top management and, at the same time, legitimized ambitious rates of return. Altogether, employers were eager to increase competitiveness by cutting costs, were less willing to accept collective bargaining agreements, and began to reject the former logic of wage increases based on advances in productivity. Unions became aware of these developments for the first time when employers’ associations in the metalworking sector cancelled the collective bargaining agreement for East Germany in 1992 before its expiry date—an entirely unusual initiative at this time. The employers’ associations no longer wanted to accept lockstep adaptation of West Germany’s wage level to the East. Rather, they sought to negotiate a new agreement that prolonged the steps of wage level adaptation and introduced a hardship clause that allowed firms in crisis to deviate from collective bargaining norms (Schroeder 2000). Here, for the first time, unions had to deal with deteriorations in collective bargaining agreements, and from this time forward, they have been on the defensive in a way not previously known. On the one hand, protection of labor standards and jobs became increasingly important even as, on the other, improvements of labor standards became increasingly difficult. As a consequence, Germany was the only country in the European Union in which real wages decreased rather than increased from 1995 onward. Decreasing real wages were a result of lower wage increases in collective bargaining agree-

120     Rethinking Workplace Regulation Figure 7.1  Collective Bargaining Coverage 80

76

70

63

Percentage

60

73 57

70 55

71 56

70 55

70 54

68

67

65

63

63

65

53

53

54

54

52

51

50 40 30 20 10 0

Western Germany Eastern Germany 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 Year

Source: Author’s calculations based on Ellguth and Kohaut (2010).

ments, the decline of wage drift within enterprises, and the growing deviation from collective bargaining norms, both by an enlarged nonunion sector and by company failure to comply with collective bargaining norms despite being members of employers’ associations (Bispinck 2009). However, low wage increases did not stem from a concerted offensive by employers’ associations. In fact, these associations had to deal with growing conflicts among their members, a growing critique of collective bargaining agreements, and a growing incidence of companies resigning from membership in them. These problems affected the coverage of collective bargaining and resulted in a decline from about 80 percent in the mid-1980s in West Germany to 65 percent in 2009 (see figure 7.1) and a parallel and even more severe decline in East Germany. Employers’ associations reacted in two ways. First, many of them created new forms of associations, so-called OT-associations, whose members were not bound by collective bargaining agreements. Membership in most of these associations has continued to grow to the present, but it remains unclear whether they have recruited defectors from the old employers’ associations, thereby weakening them, or new members whose presence will increase the overall membership of employers’ associations (Haipeter 2010a). Second, employers’ associations have opted for further decentralization of the collective bargaining system, giving more leeway to individual firms. This explains why they demanded clauses in

Erosion, Exhaustion, or Renewal?     121

40 35 30 25 20 15 10 5 0

Trade Union Density

19 8 19 5 8 19 6 8 19 7 8 19 8 8 19 9 9 19 0 9 19 1 9 19 2 9 19 3 9 19 4 9 19 5 9 19 6 9 19 7 9 19 8 9 20 9 0 20 0 0 20 1 0 20 2 0 20 3 0 20 4 0 20 5 0 20 6 0 20 7 08

Percentage

Figure 7.2  Trade Union Density in Germany

Year Source: Author’s calculations based on OECD (2012).

industry agreements that would permit deviations from collective bargaining norms at the firm level in the sense that local norms of wages or working times undercut the industry norms. In many industries, these demands for derogation clauses have been rather successful, though derogation clauses have been implemented earlier in some industries than in others. They have also been relatively consensual in some places, such as the chemical industry, but the result of conflictual negotiations in others, such as in the metalworking industry. That unions agreed to the decentralization of collective bargaining in the form of derogation clauses can be explained by the weakness they were experiencing. One important indicator of union weakness is the long-term decline in trade union density that had already started in the mid-1980s and was interrupted only temporarily by German unification. Since 2007, union density has even fallen below 20 percent (see figure 7.2). Today it is only slightly higher than the average of the OECD countries, and below the average figures for the EU fifteen (OECD 2012). The decline of union density does not reflect directly on collective bargaining coverage, which, as noted, depends on a company’s membership in an employers’ association. However, what has happened since the 1990s, and what remains important to understanding Germany’s decentralization of collective bargaining, is that unions have not been able to defeat increasing numbers of employers’ defections from collective norms either by mobilization or by strike. One reason for the increasing importance of informal deviations from collective norms in the course of the 1990s has been the appearance of “local alliances” between management and works councils, the term for

122     Rethinking Workplace Regulation

new types of local understandings that developed during the crisis of the early 1990s to increase labor flexibility and lower labor costs for employers and to safeguard jobs for workers, however temporarily. Some local alliances (but not all, or even the majority) have fallen short of collective bargaining norms, and were therefore, strictly speaking, illegal. This was one of the main reasons that unions agreed to derogation clauses in collective bargaining agreements. Despite criticism within the unions by those who opposed derogation clauses, a positive sentiment prevailed that claimed these clauses could control the process of deviation that was already happening informally. In the first decade of the twenty-first century, things became even worse for unions for two reasons. The first was that new regulations allowed temporary employment agencies to agree on labor standards in collective bargaining that fell far short of those prevailing in the industries where the employees were ultimately deployed. The second was the implementation of “mini-jobs,” those up to a wage level of €400 per month with reduced fringe benefits, and the introduction of wage supplements for low-wage work (temporary agency work, mini-jobs, or just low-paid work) using public funds. Both developments fuelled the growth of a low-wage sector that expanded from 15 percent in 1994 to nearly 21.5 percent in 2007 (Bosch and Kalina 2008). And both developments have contributed decisively to the upsurge of nonstandard employment relationships in Germany. Moreover, the low-wage sector has also had repercussions for core workers in standard employment relationships, because wage competition increased between core and temporary workers, and between industrial and service workers in areas of overlap.

Signs of Renewal in Collective Bargaining At first glance, these developments seem to constitute strong evidence of the erosion and exhaustion of the German system of industrial relations. Formerly encompassing institutions, such as collective bargaining agreements, are in retreat; the actors of collective bargaining are weakened; and nonstandard employment relationships are spreading quickly. Although these are important parts of the story, they are not the whole story. First, it is important to keep in mind that erosion or exhaustion is not a fixed condition, but rather a process. If there were complete erosion or exhaustion, then industry collective bargaining, unions, and employers’ associations would have virtually disappeared. But this is not the case. Compared with unions in liberal market economies, German unions still retain more financial or personnel resources with which to build their

Erosion, Exhaustion, or Renewal?     123

strategies (Turner 2008). However, simply having resources at one’s command is meaningless if these resources are not used for new strategies. German unions have indeed tried to develop strategies to revitalize collective bargaining. These strategies can be found only in some industries and not in the economy as a whole. However, selectivity can also be regarded in a positive way, as a first step in a process of learning that may be followed by other steps based on positive experiences. The first important development is that recently, collective bargaining agreements have been implemented in several industries that deal with new issues, such as qualification (which gives workers the right to engage in a continuous dialogue about further training with their superiors), or demography (which gives firms and works councils instruments to cope with demographic change), or operate within new frameworks (which are modernizing wage groups by integrating blue- and whitecollar work or adopt new criteria for wage classification including social competencies, and new responsibilities emanating from teamwork) (Bahnmüller 2010). Collective bargaining agreements of this kind can be regarded as a sign of vitality because they demonstrate that the collective bargaining actors are able to modernize collective agreements and adapt to new conditions. The second important development is the emergence of new forms of collective bargaining associated with the decentralization of collective bargaining in the form of derogations from industry agreements. Derogations are, above all, an expression of union defensiveness and of the internal perforation of industry collective bargaining agreements. In the face of threats from employers to relocate, close, or outsource production or services, unions in many cases have had to agree to concessions that undercut wage levels or working-time norms as defined in the collective bargaining agreements on industry level. Decentralized collective bargaining thus marks a power shift in favor of employers and against works councils and unions. Moreover, in this way, a second local level of collective bargaining has been constructed that competes with industrylevel collective bargaining and has the potential to hollow out industrylevel norms. This part of the story is often told (see Streeck 2010). However, the other part of the story is that unions have been able to improve both their control over the process of decentralization and to develop new forms of collective bargaining at the plant level that are gradually increasing their organizational power. I analyze these developments more in-depth based on my research on derogation clauses in twelve firms in the metalworking and chemical industries. The two industries constitute the core of the German export sector and have been in the forefront of the development of derogations. In each industry, the first collective bargaining agreements on derogations were concluded as early as the early 1990s. The hardship clause for East

124     Rethinking Workplace Regulation

German regions in the metalworking industry, allowing derogations from collective bargaining norms in case of economic hardship of companies, was concluded in 1993 and the “corridor” for working times, allowing extensions or reductions of weekly working times up to 2.5 hours, was introduced in the chemical industry in 1994. In the subsequent years, the chemical industry introduced derogations that created the possibility of lower wages, up to minus 10 percent. In the metalworking industries, some agreements concluded in the 1990s opened possibilities for derogations in West Germany. In 2004, the Pforzheim Agreement introduced a general opening clause for all regions by allowing derogations under two conditions: that they help to safeguard or create jobs, and that they improve a firm’s competitiveness, investment conditions, and capacities to innovate.

Improvement of Control Differences in the form and practice of local derogations of collective bargaining norms as between these two industries could not be greater. In the chemical industry, collective agreement derogations were regarded by the collective bargaining actors as a social partnership project. The purpose of derogations was to make collective bargaining agreements more attractive and, hence, to strengthen collective bargaining coverage. Derogations were negotiated at the plant level in the form of agreements by plant-level management and work councils that were subsequently accepted by the union. By contrast, in the metalworking industry, negotiations for so-called opening or derogation clauses gave rise to considerable conflict. This situation was further complicated for unions by the fact that in 2004, the federal government announced that it would introduce legislation on derogations if collective bargaining actors were not able to reach an agreement. The Pforzheim Agreement of 2004 was to a certain extent a reaction to the government’s threat. In contrast to the chemical industry, the Pforzheim Agreement stipulated that derogations in the metalworking industry must be negotiated as local collective bargaining agreements “additional” to industry-level collective agreements. In contrast to the chemical industry, they are to be negotiated by the union from the start. The union, not the works councils, is the main actor on the labor side of negotiations. Despite these differences, the use of derogations developed along similar lines in both industries. The graph in figure 7.3 compares the number of local derogative agreements negotiated in the metalworking industry from 2004 to 2006 with the number of topics dealt with in derogative plant-level agreements, and within the corridors defined in the collective bargaining agreements, in the chemical industry from 1994 to 2007.1 The number of agreements and the number of topics are difficult

Erosion, Exhaustion, or Renewal?     125 Figure 7.3   Derogations and Agreements 450

Number of Agreements

400 350 300 250 200 150 100 50

07

06

20

05

20

04

20

03

20

02

20

01

20

20

00

20

99

98

19

19

97

19

96

19

95

19

19

94

0

Year Working times chemical industry Wages chemical industry

Single payments chemical industry Metalworking industry

Source: Author’s calculations from unions’ data.

to compare, because in one agreement several topics can be combined, such as working-time extensions and pay cuts. However, the comparison of the respective figures shows a common trend in time. As can be observed, in both industries, the number of derogations or topics increased considerably from 2004 to 2005. These increases were closely linked to widespread demands from employers and their associations for increases in working time without increases in compensation. In the eyes of both unions, the growth of derogations was a serious threat to collective bargaining agreements. Both unions reacted in a similar way—by trying to regain, or more precisely to gain, actual control over the number and contents of local agreements on derogations. Both the chemical workers’ union (IG BCE) and the metalworkers’ union (IG Metall) developed and implemented rules of coordination that were intended to standardize processes of derogations and improve the control exerted by union headquarters. They included detailed investigations of the economic situation of the firms demanding derogations and of the

126     Rethinking Workplace Regulation Figure 7.4  Counterconcessions in Derogation Agreements

Percentage of Share of Topics in Derogations

90 80

2004 2005 2006

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0

Topics of Agreements Source: Author’s calculations based on Haipeter (2009).

effects of derogations on other firms or locations within one company, the duty to inform union headquarters about demands for derogations, and the right of headquarters to make the final decision about whether to accept derogation. Both unions also wanted their local members in the plants to participate in decision-making. In IG BCE, such participation was to be based on meetings of members. In IG Metall, members were to participate in decision-making through ballots about whether to initiate negotiations or to accept any agreement that might be reached. Coordination rules have been a rather successful organizational innovation. There has also been a decrease in the number of derogations and topics since 2006, companies with derogations reaching a stable level of about 10 percent. Another indicator of improved control is the rising quality of derogations, especially those concerning employment protection to encourage investments and extended rights of codetermination (figure 7.4). Furthermore, counterconcessions by companies were more than just cosmetic. Between 2004 and 2006, investment promises of more than €3 billion were made in the derogation agreements of the metalworking industry—nearly 4 percent of all investments made in the metalworking sector during this period (Haipeter 2009). These agreements

Erosion, Exhaustion, or Renewal?     127

involve innovation—joint efforts by management and works councils to increase productivity levels in order to be able to pay wages according to the collective bargaining norms in the future, provision for apprenticeship and further training and increased codetermination rights for unions and works councils, including, in some cases, the right of works councils to codetermine plant reorganization. Overall, unions were able to improve their control over both local ­processes of negotiation and material outputs, at least with respect to ­winning counterconcessions from management. But compromise also introduces ambiguity. Derogations offer some temporary security for employment protection and investment, but they often also involve some reduction in the employment security that, until the 1990s, was a salient characteristic of the German production model. And compromise is also ambiguous for firms. Derogations help cut costs, yet they also weaken the pressures for management to be innovative and produce better products. This is the reason that unions have demanded investment and innovation as counterconcessions.

New Forms of Collective Bargaining Negotiations for derogations pose a serious problem of legitimacy for unions and works councils. In all of the cases I analyzed, the workforce was generally critical of derogations and negotiations. Employees were not asking for derogations to safeguard their jobs; on the contrary, they were hostile to them because they viewed them as unfair and as violations of the norms of distributive justice. This interpretation was fed by experiences of wage restraint employees have experienced since the 1990s, which had inflamed strong sentiments of injustice. In this context, works councils and unions have had to mobilize support during the negotiations with management. Labor representatives developed two strategies to deal with this problem. One was the integration strategy, which stressed the need to accept derogations as an act of solidarity with those employees who would otherwise lose their jobs. The integration strategy appealed to common interests in a situation when employees, works councils, and management were all under threat. Derogations were characterized as a cooperative strategy for safeguarding jobs and were therefore advocated jointly by works councils and management, mainly at employee meetings. In contrast, some works councils pursued a conflict strategy that emphasized the conflict of material interests between the workforce and management and tried to unite employees against a common adversary. In this strategy, works councils presented themselves as representatives of the material interests of the employees who tried to reach the best results possible for the employees in a defensive situation.

128     Rethinking Workplace Regulation

These two strategies were implemented in various ways, but in all cases were based on efforts to integrate the employees by involvement. The main instrument used in this respect was information and communication. The most important forum of communication was workforce meetings. But also other means of communication, such as flyers, notice boards, emails, or face-to-face interchanges, were widely used by works councils. This intensified communication was widespread and was successful in bringing the employees in line with the works councils and unions. By doing so, interest representatives disseminated not only information but also their interpretations of the situation to the workforce. In some cases, the works councils did more than that. In five of the twelve cases analyzed, the chemical and metalworking industries mobilized employees for short-term strikes. This mobilization was closely linked to conflict strategies the works councils had pursued in negotiations. Works councils were able to build on a fighting spirit among employees that in most cases exceeded short-term actions planned by the works councils, because employees would have preferred to intensify the strikes. Mobilization proved to be rather effective in transforming a critical attitude toward derogations into broad support for the works councils in their negotiations with management. Criticisms of the employees against derogations were attributed to management, not to the works councils (on the role of attributions for integration, see Kelly 1998). Rank-and-file participation, the third form of employee involvement, was practiced in five of the twelve cases studied. Participation is different from communication and mobilization in that it systematically involves employees in the decision-making process. This is done by or­ ganizing ballots to decide whether to start negotiations and accept agreements. It is no accident that all five cases of rank-and-file participation were located in the metalworking industry. There are two reasons. First, derogations have the status of collective bargaining agreements in the metalworking industry, and hence negotiations in collective bargaining agreements are organized by unions and not by works councils. This gives the metalworkers’ union, in contrast to those in the chemical industry, an opportunity to define participatory processes. Second, in the metalworking industry, rank-and-file participation was promoted by the union, not by works councils. Works councils see themselves as elected representatives of the workforce, and, in being elected, they claim a legitimacy that makes employee participation unnecessary. The only thing some of them did was try to identify the mood of the workforce at large meetings. Only the metalworkers’ union, IG Metall, adopted a strategy of plant-related collective bargaining. This strategy was intended to increase the union’s organizational power through the negotiation of local collective bargaining agreements and to strengthen the relevance of the union in enforcing and guaranteeing labor standards in local disputes.

Erosion, Exhaustion, or Renewal?     129

Finally, enhanced participation was also intended to make the union more attractive to existing and potential members. Before the era of derogations, plant-related collective bargaining was favored only by a minority within the higher levels of the union. In the course of negotiating derogations, however, it came increasingly to be regarded as a strategy for regaining the initiative in local disputes. It even became part of the union’s coordination rules implemented in 2005. Rank-and-file participation had important ramifications for the organizational power of the union. Derogations based on rank-and-file participation set the recruitment issue in motion. The union was able to improve its legitimacy and boost union density in the plants. In all five cases when rank-and-file participation was common practice, it proved possible to compensate for membership losses and to increase union density. In three of the five cases, membership density increased significantly despite the union’s being on the defensive in the negotiations about concessions. In one case, it even doubled from about 20 percent to more than 40 percent, and shop stewards were added where they had not previously been. In the other two cases, when density was high at the outset, it increased by 5 to 10 percent. In the two residual of the five cases, membership losses that had taken place during former derogations were stemmed. One local union official said, “It is crazy, but somehow, whenever we organized negotiations on derogations using rank-and-file participation, we were successful in committing our members to the union and attracting new members” (Haipeter 2010b, 221). Perhaps the most important factor in this success story is that the metalworkers’ union developed a strategy of involving union members— and union members only—in negotiations. By privileging its members, existing members strengthened their loyalty, and the union became more attractive to nonmembers. This finding is reinforced by the fact that in the chemical industry, where no participation of this kind took place, no improvements in union density occurred.

Summary An analysis of the recent history of derogation clauses reveals a somewhat paradoxical result. Rather than reflecting erosion and exhaustion, negotiation of these clauses appears to have given rise to new forms of collective bargaining, to the strengthening of the unions’ role in collective bargaining, and to union revitalization. That is, erosion, exhaustion, and renewal are co-developing. In an environment of contraction, unions have found new strategic answers that have enabled them to successfully cope with at least some of their problems. The precondition for these successes is that unions are still powerful enough to make significant contributions to the way collective bargaining develops. Erosion

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has not yet reached a tipping point that would leave unions utterly disempowered. In some cases, unions have proven their ability to coor­ dinate processes of derogation within their organizations and to work effectively with works councils. They were able to put pressure on employers to make counterconcessions and have developed new forms of decision-making based on rank-and-file participation, thereby increasing their organizational power and strengthening their positions in the plants. Thus we found that unions are still capable of shaping the development of the collective bargaining system. One of the main questions for the future of renewal is whether German unions will learn from the positive experiences of controlling derogations, and in particular whether they will strengthen their organizational power by fostering rank-and-file participation in local collective bargaining. Positive examples of rank-and-file participation in derogations can be found only so far in the metalworking industry where mobilization of union members is widespread. Other unions can learn from this example. Furthermore, one of the challenges in the metalworking industry is that, until now, local collective bargaining and rank-and-file participation has been restricted to derogations and hence to defensive action in the plants. It can be expected that the revitalization of unions can gain momentum if rank-and-file participation and local collective bargaining are developed for more proactive approaches. The learning aspect also has an international dimension. German unions have learned from the organizing strategies developed by unions in liberal market economies (Turner 2008). In the German context, however, unions have to coexist with works councils and they have more ­resources than their counterparts in Anglo-Saxon countries. Social movement unionism has played a much smaller role in Germany than elsewhere because German unions do not need coalitions with other actors except in sectors, such as the retail trade, where they have become weak actors (Turner 2008). This is why German unions, at least in the manufacturing sector, can develop strategies within an existing system of collective bargaining and build on existing organizational power in the plants. In this system, rank-and-file participation seems to be the most promising organizational strategy. For Anglo-Saxon unions, the German experience has a lesson to offer: that it is important to centrally coordinate local activities, especially if they pertain to derogations and concessions. Only then can decentralization become an opportunity to strengthen a centralized union rather than to undermine it, as occurred in Britain in the 1960s (see Flanders 1970). Regarding prospects of revitalization and renewal, two qualifications must be kept in mind. The first is that renewal in German industrial relations is not a return to the old system of industry-level corporatism.

Erosion, Exhaustion, or Renewal?     131

Rather, renewal means that something new is emerging, something that did not exist before. Collective bargaining is increasingly developing into a two-level system on an industry and plant level. Although there is a danger that plant-level agreements could undermine industry-level ones, unions have shown a surprising capacity to control interference between levels and to launch an offensive on the plant level through mobilization and rank-and-file participation. As a consequence, union organization is likely to become more participatory and industrial relations are likely to become more conflictual at the plant level. Both developments show that it would be misleading to speak only of a new plant-level micro-corporatism; union success on the plant level depends to a certain degree on whether they become less corporatist in style and more willing to actively engage their members. At the same time, being less corporatist does not mean that employers can freely choose whether to adopt the institutions of industrial relations to obtain the advantages of coordination. However, as we have seen, employers are capable of enforcing derogations but are not able to determine the outcomes of negotiations or to prevent unions from coordinating the process. The second qualification is that renewal does not mean the end of erosion or exhaustion. Erosion in the sense of the dissolution of old institutions is still evident in the decline of collective bargaining coverage and union membership. In some new industries such as the IT or the solar energy industry, no industry-wide collective bargaining agreements have been negotiated so far, and in others, such as the butcher and bakery trade, old collective bargaining agreements have not been renewed for years because the unions have been too weak. What makes the German situation particularly complex is that the co-development of erosion, exhaustion, and renewal can be observed both within single industries and between industries. In the private-services sector in particular, erosion and exhaustion dominate and signs of renewal are quite difficult to locate. In these industries, it makes much more sense to speak of liberalization. Not by accident, it is here that union efforts for renewal are more closely related to the American experience of social movement unionism and organizing campaigns. Our findings are not skewed by the current financial crisis. During the crisis, unions and employers have been able to avoid dismissals by reducing working time collectively through using public cofinanced shorttime work, working-time reductions negotiated through local workplace arrangements, reduced overtime work, and clearing cumulated working time on working-time accounts (Zapf and Brehmer 2010). With these instruments, Germany—in contrast to other advanced economies—has prevented a collapse of the labor market. However, there is little evidence that this “revival of corporatism,” as it was called by Walther Müller-Jentsch (2010), is indeed anything more than voluntary corporatism

132     Rethinking Workplace Regulation

by employers who wish to retain their core workforce in order to preserve their ability to respond quickly to increases in international demand and to maintain order in the plants. All of the structural problems of collective bargaining and union organization discussed earlier are still on the agenda. In summary, industrial relations developments in Germany at best can be described as fragmented because vast differences exist between industries in terms of union power. Renewal, erosion, and exhaustion go hand-in-hand in varying degrees within and between industries. The standard employment relationship is slowly melting away, faster in some private services industries than others, and it is changing its character by becoming more unstable and disputed. Derogations are the most prominent indicators of this development. The decisive point, however, is that the development is far from being unidirectional in the sense of a broad liberalization trend. There is liberalization, but there are also counter developments attributable to unions adopting new strategies and retaining enough organizational power to influence the developmental trend. Future prospects will depend to a large extent on the strategy building capabilities of unions and how much they will learn from each other’s successful experiences.

Note 1. These numbers are difficult to compare directly. The reason is the number of agreements in the chemical industry, which is lower than the number of derogations for the three corridor topics, because usually these agreements contain more than one topic. In many cases, they combine working-time extensions and wage reductions. However, what is comparable are the trends of the respective figures in both industries, and they point in the same direction.

References Artus, Ingrid. 2008. Interessenhandeln jenseits der Norm. Mittelständische Betriebe und prekäre Dienstleistungsarbeit in Deutschland und Frankreich (Collective action beyond norms: Small firms and precarious service work in Germany and France). Frankfurt-am-Main: Campus. Bahnmüller, Reinhard. 2010. “Dezentralisierung der Tarifpolitik—Re-Stabilisierung des Tarifsystems?” (Decentralization of Collective Bargaining—Re-Stabilization of the Collective Bargaining System? In Zukunft der Tarifautonomie: 60 Jahre Tarifvertragsgesetz: Bilanz und Ausblick (The Future of Collective Bargaining: 60 Years of Collective Bargaining Law: Evidence and Perspectives), edited by Reinhard Bispinck and Thorsten Schulten. Hamburg: VSA Verlag. Bispinck, Reinhard. 2009. “Tarifpolitischer Jahresbericht 2009” (Annual Report of Collective Bargaining Policy 2009). Düsseldorf: Wirtschafts- und Sozialwissen schaftliches Institut. Available at: http://www.boeckler.de/pdf/p_ta_jb_2009 .pdf. Accessed December 12, 2012.

Erosion, Exhaustion, or Renewal?     133 Bosch, Gerhard, and Thorsten Kalina. 2008. “Low-Wage Work in Germany: An Overview.” In Low-Wage Work in Germany, edited by Gerhard Bosch and Claudia Weinkopf. New York: Russell Sage Foundation. Brandt, Thorsten, and Thorsten Schulten. 2008. “Liberalisierung und Privatisierung öffentlicher Dienstleistungen und die Erosion des Flächentarifvertrags” (Liberalization and Privatization of Public Services and the Erosion of Collective Bargaining). WSI-Mitteilungen 61 (10): 570–76. Ellguth, Peter and Susanne Kohaut. 2010. “Tarifbindung und betriebliche Interessenvertretung: Aktuelle Ergebnisse aus dem IAB-Betriebspanel 2009” (Collective Bargaining Coverage and Works Councils: Current Findings from the IAB Panel). WSI-Mitteilungen 63(4): 204–209. Flanders, Alan. 1970. Management and Unions: The Theory and Reform of Industrial Relations. London: Faber. Haipeter, Thomas. 2009. Tarifabweichungen und Flächentarifverträge: Eine Analyse der Regulierungspraxis in der Metall- und Elektroindustrie (Derogations from Collective Bargaining and Collective Bargaining Agreements: An Analysis of Forms and Modes of Regulation in the Metalworking Industry). Wiesbaden: VS-Verlag. ———. 2010a. “OT-Mitgliedschaften und OT-Verbände” (Unbound Employers’ Associations and their Members). In Handbuch Arbeitgeber- und Wirtschaftsverbände in Deutschland (Handbook of Employers’ and Business Associations in Germany), edited by Wolfgang Schroeder and Bernhard Wessels. Wiesbaden: VS-Verlag. ———. 2010b. Betriebsräte als neue Tarifakteure. Zum Wandel der Mitbestimmung bei Tarifabweichungen (Works Councils as New Actors of Collective Bargaining: Changes in Codetermination in the Course of Derogations from Collective Bargaining Agreements). Berlin: Edition Sigma. Haipeter, Thomas, and Steffen Lehndorff. 2007. “Gewerkschaften und andere Akteure der Arbeitszeitpolitik—Wer bestimmt über die Zeit?” (Unions and Other Actors of Working Time Policy—Who Decides About Time?) WSI-Mitteilungen 60(4): 181–87. Hassel, Anke. 1998. “The Erosion of the German System of Industrial Relations.” British Journal of Industrial Relations 37(3): 483–505. Holst, Hajo, Oliver Nachtwey, and Klaus Dörre. 2010. “The Strategic Use of Temporary Agency Work: Functional Change of a Non-standard Form of Employment.” International Journal of Action Research 6(1): 108–38. Kelly, John. 1998. Rethinking Industrial Relations: Mobilization, Collectivism and Long Waves. London: Routledge. Müller-Jentsch, Walther. 1997. Soziologie der industriellen Beziehungen: Eine Einführung (Sociology of Industrial Relations: An Introduction). Frankfurt: Campus. ———. 2010. “Vom Klassenkampf zum Korporatismus. Gewerkschaften im rheinischen Kapitalismus a.D.” (From Class Conflict to Corporatism: Unions in the Rhenish Capitalism). Blätter für deutsche und internationale Politik (7): 61–70. OECD 2012. Available at: http://stats.oecd.org/Index.aspx?QueryId=20167. Accessed December 12, 2012. Schmidt, Rudi, and Rainer Trinczek. 1999. “Der Betriebsrat als Akteur der industriellen Beziehungen” (Works Councils as Actors in Industrial Relations). In Konfliktpartnerschaft. Akteure und Institutionen der industriellen Beziehungen

134     Rethinking Workplace Regulation (Conflict Partnership: Actors and Institutions of Industrial Relations), edited by Walther Müller-Jentsch. Munich: Hampp. Schroeder, Wolfgang. 2000. Das Modell Deutschland auf dem Prüfstand. Zur Entwicklung der industriellen Beziehungen in Ostdeutschland (The German Model Put to Test: The Development of Industrial Relations in Eastern Germany). Wiesbaden: VS-Verlag. Streeck, Wolfgang. 2010. Re-Forming Capitalism: Institutional Change in the German Political Economy. Oxford: University Press. Thelen, Kathleen A. 1991. Union of Parts: Labor Politics in Postwar Germany. Ithaca, N.Y.: Cornell University Press. ———. 2000. “Why German Employers Cannot Bring Themselves to Dismantle the German Model.” In Unions, Employers, and Central Banks, edited by Torben Iversen, Jonas Pontusen, and David W. Soskice. Cambridge: Cambridge University Press. Turner, Lowell. 1991. Democracy at Work: Changing World Markets and the Future of Labor Unions. Ithaca, N.Y.: Cornell University Press. ———. 1998. Fighting for Partnership: Labor and Politics in Unified Germany. Ithaca, N.Y.: Cornell University Press. ———. 2008. “Institutions and Activism: Crisis and Opportunity for a German Labor Movement in Decline.” Industrial and Labor Relations Review 62(3): 294–312. Wever, Kirsten S. 1995. Negotiating Competitiveness: Employment Relations and Organizational Innovation in Germany and the United States. Boston, Mass.: Harvard Business School Press. Wiedemuth, Jörg. 2007. “Erhalt des Flächentarifvertrages oder Verbetrieblichung der Tarifpolitik?” (Resiliency or Decentralization of Collective Bargaining). In Wohin treibt das Tarifsystem? (Where Does the Collective Bargaining System Go To?), edited by Reinhard Bispinck. Hamburg: VSA Verlag. Zapf, Ines, and Wolfgang Brehmer. 2010. “Flexibilität in der Krise: Arbeitszeitkonten habensich bewährt” (Flexibility in Crisis: Working Time Accounts Have Proven Their Worth). IAB-Kurzbericht 22. Available at: http://doku.iab .de/kurzber/2010/kb2210.pdf. Accessed December 12, 2012.

Chapter 8 Flexibility and Security in Post–Standard Employment Relations: The Netherlands jelle visser

I

n recent times, the Netherlands has been one of the most successful advanced economies in terms of raising employment levels and keeping unemployment down. Since 1993, it has maintained an unemployment rate consistently lower than the EU average, and employment rates for both men and women rising considerably faster than the EU average (see figure 8.1).1 The “Dutch miracle” has been the result of two factors: the decentralization and devolution of collective bargaining from national and sectoral to the company and local level, thereby enabling parties to tailor flexible solutions to market pressures, and the enactment of regulatory policies encourage and support part-time and other nonstandard forms of work. In 2009, almost half of all employed people and three-quarters of all women in employment had a part-time job of fewer than thirty-five hours per week, making the Netherlands “the first part-time economy in the world” (Freeman 1995; Visser 2002). The incidence of fixed-term employment has also risen, and by 2009 made up 18 percent of the workforce (European Commission 2010). In addition, between 1996 and 2009 the ranks of self-employed have swelled from 661,000 to 954,000, an increase of 44.3 percent and more than double the 17.8 percent increase of employee jobs in the same period. About one-third of the self-employed are in fact employee but in name. They are independent contractors who perform the same job as employees, are often tied to one or few employers, but are paid for their services on the basis of a work rather than an employment contract. In this chapter, I review the policies and regulatory framework behind 135

136     Rethinking Workplace Regulation Figure 8.1  Unemployment Rates

Percentage of Civilian Labor Force

12.0

10.0

8.0

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93

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Netherlands EU15 average

Year Source: Author’s calculations based on European Commission (2010).

the extraordinary diffusion of part-time, flexible, and independent employment in the Netherlands, as well as policies that have enabled unions and companies to negotiate flexibility for standard employees. Certain regulatory innovations in the areas of part-time work and semimandatory employment laws have made possible these efforts to facilitate flexibility while protecting worker security. I evaluate the success of these innovations and discuss lessons that other countries might learn. It is crucial for my argument to distinguish between nonstandard employment and nonstandard employment relationships. The rise of nonstandard employment does not necessarily entail the decline of the standard employment relationship, as shown in this Dutch story. Associated with the rise of nonstandard employment is, however, a change in employment contracting, a development toward what I call poststandard employment relations. Nonstandard employment has been defined as work that is not full

Post–Standard Employment Relations: The Netherlands     137

time, continuous in time, or supervised by the legal employer (Kalleberg 2009). A critical feature of standard employment relationships is that workers are entitled, by law or collective agreement, to receive pay for unworked hours due to illness, disability, unemployment, parental leave, or vocational training. Applying these definitions, nonstandard employment relationships in the Netherlands are not very widespread. In fact, a strategy of normalization—offering an almost similar coverage of labor and social security law and collective bargaining agreements to workers in nonstandard employment—has been a crucial factor in the diffusion of non-standard work in the Netherlands (Visser 2002). Compared with full-time workers with open-ended contracts, people with part-time and fixed-term employment have similar (pro rata) rights to paid holidays, parental leave, or continued wage payments in case of sickness, access to unemployment and disability and old age pensions, and even some rights to training. The major difference between workers on open-ended and fixed-term contracts is the former’s much higher degree of employment protection. This is related to differences in pay, career chances, and unemployment risks. Some scholars have offered a more restrictive definition of the standard employment relationship, at least in its traditional understanding. Gerhard Bosch defines the traditional standard employment relationship as one based on full-time jobs guaranteed by secure, open-ended employment contracts, because “only full-time employment guarantees a family wage and an adequate level of social protection, while a stable job places the relationship between employer and employee on a long-term footing” (2004, 619). Based on his definition, the days of the traditional standard employment relationship are gone, at least in the Netherlands. Until about the 1980s, most workers were remunerated on the basis of a family wage of two adults and two children, a principle that was applied to the mandatory minimum wage and all social insurance and assistance benefits. The mirror image of such breadwinner principles was that married women were discouraged from and grossly disadvantaged when participating in the labor market. Today, many full-time jobs no longer guarantee a family wage and married women have joined the labor force both by choice and out of necessity. This development has been encouraged by decades of low wage growth, individualization of taxes, social benefits and pensions, and the phasing out of allowances for nonworking partners and older children. I argue that the standard employment relationship has changed in another, perhaps even more fundamental sense, however. To accommodate diversity and assign risks more individually, employment contracts offer more variation and choice than twenty years ago or so, and the law offers many more possibilities to derogate by collective bargaining. What the standard is has become much harder to say, because it hides much varia-

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tion. In the Netherlands over recent decades, this development is shaped not only by legal reform but also by collective bargaining, which itself has become decentralized. I call this a tendency toward poststandard employment relations. Accommodating and encouraging diversity across contract types, flexibility and variation in time use, and a more contingent attachment to the employer, poststandard employment relations tend to offer not only more choice to firms and individual employees but also burdens both firms and employees with increased risks and responsibilities. I begin with a brief overview of the extent and development of standard and nonstandard employment.

Extent and Development of Nonstandard Employment There is little dispute that nonstandard work in the Netherlands has increased in the past fifteen years. The trend in part-time work began earlier, when the percentage of such jobs increased from 14 percent in the late 1970s, to 20 percent in the mid-1980s, to 33 percent in the early 1990s, and to 48.3 percent in 2009.2 The use of fixed-term employment contracts in the Netherlands has, according to Eurostat data, risen from less than 11 percent in 1993 to 18 percent in 2009. This number includes agency workers, on-call contracts, and fixed-term contracts with the (nonbinding) promise of an open-ended contract after a prolonged period of probation. Work for temporary work agencies has been common at least since the 1970s, though it has become more pervasive in the 1990s. According to data from the industry, the market share of temporary work agencies has decreased from 4.5 percent in the late 1990s to 2.8 percent in 2010, but this includes a cyclical effect. With the exception of the United Kingdom, temporary work agencies have a higher market share in the Netherlands than elsewhere in Europe (Rasmussen et al. 2004). The expansion of contract work based on self-employment is a recent trend. The Dutch statistical office estimates that currently 2 million people, roughly one-fourth of the employed, are on a flexible contract that can be ended on very short notice (NRC 2011). There is an overlap with parttime employment, in particular the short part-time jobs of fewer than twelve hours per week, of which there are about 1 million—a quarter of the total number of part-time jobs. Most longer part-time jobs are based on open-ended contracts and most temporary jobs, with fixed duration contracts, are full time. Part-time work is predominantly women’s work, with 75 percent of all employed women having a part-time job compared with 25 percent of all employed men. Part-time jobs can be found in all sectors and companies, with the highest incidence in hotels and restaurants, retail, health,

Post–Standard Employment Relations: The Netherlands     139

education, and business services. People with lower levels of education and incomplete education (students) tend to have small part-time jobs. Temporary work is concentrated in retail, manufacturing, hotels and restaurants, health care and business services, and characterized by an overrepresentation of people at the lowest levels of education and skills. Temporary jobs are the domain of young people. In the fifteen to twentyfive age group, 30 percent of all employed persons have a fixed-term or agency contract, in the fifty-five to sixty-five age group only five percent (Cörvers et al. 2011). The profile of the new self-employed is almost the opposite: only 5 percent of the employed between fifteen and twentyfive are self-employed, compared with 20 percent in the fifty-five to sixty-five age group. Many self-employed contractors change from an open-ended contract late in their careers, sometimes after a company restructuring or as part of a layoff package. This group is predominantly male (Cörvers et al. 2011). It is useful to distinguish between long and short part-time work, drawing the line at twelve or twenty hours per week (see Blossfeld and Hakim 1997; O’Reilly and Fagan 1998). The risk of a lapse back into inactivity or unemployment is much higher for employees in small rather than in large part-time jobs (Visser and Yerkes 2008). The same is true for the risk of remaining in a low-paid job (Salverda 2011) or the probability of temporary employment (Cörvers et al. 2011). Half of all part-time jobs in the Netherlands are based on contracts of fewer than twenty hours per week and a quarter are fewer than twelve hours; the average is 6.5 hours. Many small part-time jobs are temporary and although they provide valuable extra income to students, families, pensioners, or recipients of (part-time) benefits, they do not provide independence, let alone stability. It would be desirable to create some further distinctions in the categories of temporary work (such as between those with and without the implicit promise of advancing to permanent work with the same employer) if they perform well and the business continues, but current statistics do not allow comparisons over time or across countries with such refinement. Hence, I make do with a coarser summary statistic by defining nonstandard employment as all temporary jobs plus the (positive) sum of all part-time jobs of fewer than twenty hours per week minus temporary jobs. This is probably the lower boundary of nonstandard employment held by employees because it excludes those self-employed who are attached to one or few employers through a work contract. This definition can be rigorously applied across time (since 1983) and countries.3 Based on this definition, it appears that the incidence of nonstandard employment, calculated over all those with (dependent) employment contracts, has doubled from 4.1 to almost 8.5 percent between 1983 and 1993 and again doubled to 17.3 percent in 2010 among dependently employed men age fifteen to sixty-four and has risen from 25 percent to 33

140     Rethinking Workplace Regulation Figure 8.2   Male Employment Population Rates 0.80 0.60 0.40 0.20 0.00

1991

1993 1995

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2003

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2009

Year Standard employment males NL Nonstandard employment males NL

Standard employment males EU Nonstandard employment males EU

Source: Author’s calculations based on European Commission (2010).

percent during the same period among women in the same age span. Since 1990, the rate of nonstandard employment, calculated over the entire working age population, has during this period risen from 5 to 8 percent among men and from 13 to 20 percent among women. In the same period, the rate of standard employment slightly decreased from 60 to 58 percent among men and increased from 28 to 44 percent among women. Figures 8.2 and 8.3 compare this development with the (nonweighted) average for fourteen (western) EU countries, showing that among men the standard employment rate and among women the nonstandard employment is much higher in the Netherlands, resulting in a much higher overall employment level. Developments point in the same direction, however. Before examining how that may be related to regulation, I introduce the legal setting and collective bargaining regime in the Netherlands.

Bargaining in the Shadow of the Law In the Netherlands, collective agreements negotiated between one or more unions and one or more employers or employers’ associations apply to 82 percent of all employees. This percentage has hardly changed since the 1980s, in contrast with the declining unionization rate, from 35 percent in the early 1980s to just over 20 percent in 2009. The coverage rate varies by industry (highest in the manufacturing sector and the

Post–Standard Employment Relations: The Netherlands     141 Figure 8.3   Female Employment Population Rates 0.80 0.60 0.40 0.20 0.00

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Year Standard employment females NL Nonstandard employment females NL

Standard employment females EU Nonstandard employment females EU

Source: Author’s calculations based on European Commission (2010).

public sector, lowest in business services and retail) and firm size (lower in the small firm sector). Many collective agreements exclude students, people with training contracts, on lease or short-duration contracts, on the one hand, and directors and executives, on the other. Temporary work agencies negotiate their own collective agreements with temporary workers. Collective bargaining is regulated by the act of 1927 to standardize employment conditions and protection of workers. Trade unions and employers’ associations are free to negotiate, or refuse negotiations, and can decide how much standardization and protection above the minimum levels defined in the law (on working time, pay, employment protection, or social security) they want, and whether to allow deviations from legally mandated or collectively negotiated standards. If they reach agreement, Article 14 of the act makes it obligatory for employers to apply the terms of the agreement to all their employees, regardless of whether they are members of a contracting union. Employers can choose between single (company) and multipleemployer (sector) bargaining, in the latter case delegating negotiations to an employers’ association. Company bargaining currently applies to about 700,000 employees (in 678 companies) and sector bargaining to 4.6 million employees (in 214 multiemployer agreements). These propor-

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tions have hardly changed in the past quarter century. The minister can extend the sector agreement to all employers in the sector if there is a request from one or both the contracting parties, on condition that one of them (usually the employers) represents at least 60 percent of the sector’s combined workforce. Through this technique, an additional 850,000 employees are covered, bringing the total to 6.1 million, or 82 percent of the total of 7.4 million employees in 2009. Since the 1980s, collectively bargaining has changed from a mechanism to ensure uniform terms of employment to one that permits considerable diversity. Today there are three types of collective agreements: standard agreements with no deviations, minimum agreements allowing only deviations favorable for employees, and framework agreements allowing deviations in both directions, subject to subsequent negotiations under rules defined in the agreement. Based on a sample of seventythree large sector and forty large company agreements, together covering 4.7 million employees, employer data show that currently between 27 and 47 percent of the agreements have a standard character, 46 percent are minimum agreements, 4 percent are framework agreements, and 3 percent combine these features (Zielschot 2009). For instance, the sector agreement for the metal-engineering industry is a minimum agreement on holidays and holiday payments, but allows derogation in both directions, and further negotiations, on wages. About 38 percent of all agreements are layered, meaning that they require follow-up negotiations at lower levels on some issues. This is now usually the case in large sector and large (conglomerate) firm agreements, such as in the metal-engineering, printing, and media industries. In addition, clauses on variable pay are found in about 80 percent of all agreements—half of them tie a small percentage of the total pay package to individual performance. Fifty-five percent of all agreements have an à la carte provision, offering employees individual choice to exchange money for working time or paid leave. After initial hesitations, the unions favor à la carte agreements over layered negotiations on the grounds that two-step negotiations impose high transaction costs. With an aggregate union density rate of 22 percent, unions neither have the resources to negotiate an additional round of local agreements, nor can rely on the works councils to do this job for them (Schilstra and Smit 2005). Furthermore, from the unions’ point of view, à la carte agreements have the advantage of giving more choice to individual employees, far beyond their limited membership base, and thus providing more legitimacy to union-negotiated agreements in times of decreasing membership (Schilstra and Jongbloed 2003). The use of minimum agreements and framework agreements makes collective bargaining in the Netherlands flexible and adaptable to changing and more varying conditions. This has not always been the case. Un-

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like unions in Denmark, Sweden, or even Germany, Dutch unions were never strong in the workplace. Historically, their focus has been on national policymaking. Works councils are mandatory in firms with fifty or more staff, and the representatives are usually elected through union lists. Works councils have comparatively strong consultation rights, forcing companies to seek advice on mergers, divestment or restructuring, and on social issues and pay evaluation systems, but they tend to stay away from wage bargaining, which has remained the prerogative of the unions (Visser 1995). Until the early 1980s, Dutch labor relations were centralized, the government and peak associations of employers and unions playing the dominant role. Institutional integration between collective bargaining, labor, and social security law was high, as was uniformity, manifested in standard agreements, the commonality of breadwinner principles in defining (minimum) wages and social protection entitlement, and the widespread presence of (automatic) indexation clauses (Nagelkerke and Wilthagen 2002). This was the cumulative result of recurrent and increased state intervention in collective bargaining in the 1970s and a growing body of labor and social security law. At the time, the Netherlands was firmly placed in the upper-left corner of Mark Freedland’s scheme (figure 5.1, this volume), having a highly institutionalized and cogent set of laws duly observed and replicated in collective agreements on issues such as working hours and social protection. The Wassenaar Agreement of 1982 was a turning point (Visser and Hemerijck 1997). In that agreement, made to avert a threat of government intervention, unions and employers reclaimed responsibility for wage setting and opened the door to decentralization. A decade passed before the central union and employers’ federations dared take a further step and allow more variation across sectors and firms. The New Course Agreement of 1993, negotiated between the peak associations of unions and employers, and supported by the government, marked the shift to a looser form of coordination, with more freedom for local negotiators, and a widening of the bargaining agenda to nonwage issues (Visser 1998). In the decade that followed, the central organizations issued recommendations to negotiators in firms and sectors on issues such as parttime employment, continuous vocational training, integration of ethnic minorities, promotion of à la carte agreements, employability, and the creation of personal budgets for career development. On the issue of temporary and agency work, the central organizations reached an agreement, the Flexibility and Security Agreement of 1996, which became the basis for legal changes later in the decade. Decentralization has been assisted by changes in law. The government has tried to deregulate and reregulate with a view to creating more scope for “bargaining in the shadow of the law” by setting minimum or default

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rules from which it is possible to deviate by collective agreement. To accomplish this, Dutch labor law uses the technique of semi-mandatory law (driekwart bindend Recht), allowing for various degrees of selfregulation and requiring less adherence to statutory norms. Examples can be found in the new law on working time (1996), flexibility and security (1999), and the right to work part-time (2000). In these cases, the law defines the default position that applies if no collective agreement is in place or procedural and substantive minimum conditions for agreements have been met. Thus, the working time act sets a maximum working week in line with European legislation but a wider maximum if it has been agreed between the union (works council) and the employer. Agreements do need negotiations by bona fide unions or elected works councils; only in the case of extended agreements (to nonorganized employers) is a super majority of 60 percent required. The 1996 Working Hours Act, which replaced the 1919 Labor Act, is a fine example of a semi-mandatory law. The main thrust was to reduce the burden of regulation, increase the flexibility for firms, accommodate employees’ care responsibilities and religious holidays, and stimulate self-regulation through decentralized negotiations. Another objective was to respond to the EU directive on working time of 1993, which had set the maximum working week at forty-eight hours with the possibility of derogation. The new law breaks with the idea of standard hours and sets much wider margins for normal and maximum working hours, up to sixty hours per week, thus allowing deviation from statutory norms on condition that a formal agreement with the union or works council is in place, and that minimum standards on holidays and rest periods are guaranteed (Meer, Visser, and Wilthagen 2005). The unions are willing to negotiate working-time flexibility because they see it as a form of internal flexibility, making it possible to adjust the volume of work to changing business conditions without discontinuing the employment relationship, and hence as an alternative to external flexibility. Another area where the law has promoted decentralization of collective bargaining involves social security. In the face of the austerity measures in the domains of unemployment, sickness, and disability benefits dating back to the 1980s, unions have added top-up benefits and a host of social protection issues to the agenda of collective bargaining. These issues are taken up in surprising uniformity across bargaining jurisdictions in an attempt by the unions to restore levels of protection through occupational benefits that compensate for the lowering of social benefits (Trampusch 2006). In various steps, starting with legislation in 1994 and finished in 2007, employers have been assigned a gatekeeper role with regard to the inflow in sickness and disability schemes, making them responsible for continued wage payments, up to two years, in case of sickness and for reintegrating disabled employees into the workplace (Ger-

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ven 2008). The lowering of mandatory wage payments to employees on sickness leave and of benefits to partially disabled employees was compensated, in part, by collective agreements that set benefit levels higher than those set in the law (Yerkes and Tijdens 2011). The effect of legal reform and collective bargaining on the regulation of standard and nonstandard employment are discussed in the following section.

Changes in the Regulation of Standard and Nonstandard Employment The general tendency in employment and social security law, and in taxation, in recent decades has been to increase the costs to individuals of nonemployment. This was accomplished by tightening the criteria that allowed entry in unemployment, sickness, disability, and early retirement schemes, and by encouraging paid employment of young people, women and, in a later stage, older workers. Lower student loans, phasing out breadwinner wages and social transfers, individualizing taxes and work-in benefits, creating more opportunities to work part-time, and improving the legal status for part-time workers, making social assistance schemes conditional on the acceptance of (part-time) employment, allowing more fixed-duration contracts, and making early retirement costlier, all changed the relative price of nonemployment. This has translated into a sharp rise in the employment rate in all age groups, a sharp rise in female employment, and a decline in the average number of working hours, mostly due to the high incidence of part-time employment. With the rise in the employment rate, unemployment has decreased and even today, more than two years into the Great Recession, the unemployment rate is just over 4 percent, one of the lowest in the OECD. With respect to standard employment, the most relevant legal changes are those made in the sickness, disability, and unemployment laws, working-hours regulation, and the right to work part time. However, as explained in the following section, dismissal protection for standard workers has hardly changed. For nonstandard employment, on the other hand, it is necessary to look at the employment conditions of part-time and full-time workers, the regime for fixed-term employment and temporary work agencies, and self-employment.

Part-Time Employment Despite the pervasiveness of part-time employment in the Netherlands, it is notable that only a very small percentage—some 5 to 10 percent—of persons working part time say that their choice is involuntary or moti-

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vated by the lack of a full-time job (Portegies et al. 2008).4 The voluntary nature of part-time employment is largely a result of collectively negotiated and statutory measures designed to make part-time work attractive and secure. Work-sharing policies developed in the 1980s, when the country was faced with an unemployment crisis. The Wassenaar Agreement of 1982 encouraged part-time work, especially among employers who saw it as an alternative to the reduction in working hours promoted by the unions. For employers, part-time jobs tend to increase internal flexibility and enable them to adjust working hours to variable business conditions. Around 1990, women union members in the public sector began to campaign for more equality between part-time and full-time workers. The Labor Foundation—a joint platform for meetings and negotiations of the central union and employers’ federations—recommended in 1993 the adoption of a so-called part-time clause in collective agreements, giving full-time workers a “conditional right” to choose fewer hours. In 1995 and 1996, about 40 percent of all collective agreements contained a part-time clause, rising to 60 percent in 2001 (Yerkes and Tijdens 2011). The main public policy response was the Prohibition of Discrimination by Working Hours Act 1996, which added Article 7:648 to the Dutch Civil Code, forbidding employers to discriminate between employees on the basis of differences in working hours in the conditions under which they enter, extend, or terminate a contract of employment, unless there is objective justification for such discrimination. The statute provided that employees who do the same kind of work should receive the same (gross) hourly wage regardless of working time. The same principle applies to holiday and leave entitlements. Legal rules on dismissal, probation, unemployment benefits, continuous wage payment during sickness, disability benefits, and health and safety in the workplace can make no distinction between full-time and part-time workers. Under the General Old Age Pensions Act, every person with a minimum number of years of residence is entitled to a pension, regardless of employment status, years, or hours of work. Nearly all employees build up an additional occupational earnings-related pension. In 1997, the central union and employers’ organizations signed a pension covenant with the government to increase pension coverage on a voluntary basis for seasonal workers, young people, and women working flexible or few hours in low-pay occupations. In the same covenant, they agreed to move from final to average earnings as the benchmark for calculating defined benefit pensions (Van Riel, Hemerijck, and Visser 2003). Part-time work has also been made more attractive by measures giving employees the ability to move in and out of part-time work without incurring a career penalty. In 2000, Parliament adopted the Working Hours Adjustment Act, which states that firms must grant the employ-

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ee’s request for modification of working hours, unless conflicting business interests apply. To assure the reversibility of the part-time decision, employees can seek both a reduction and extension of working hours. By conferring on employees the conditional right to unilaterally alter the terms of an existing employment contract, the Working Hours Adjustment Act is unique in Dutch labor law. It inserts a new kind of right in labor law; an individual right to economic independence, thus going well beyond the traditional concerns of labor law to compensate the weaker party and offer social protection. One may wonder why a unilateral right to adjust working hours was established in a country that already had the highest part-time employment rate in the world. Part of the explanation is that unions were not satisfied with the implementation of the part-time clause in collective agreements and believed that there should be an obligation on employers to honor employee requests. In addition, they wanted to make the choice reversible and encourage workers in small part-time jobs to demand more hours, thereby lowering the risk that people become trapped in small part-time jobs. The government wanted to promote more parttime employment among men as a step toward a better balance in the gender division between work and care. It was believed that a part-time right would especially help male full-time workers with young children to demand fewer hours from their employers. Court rulings have ensured that employee choice is enforced and that employee demands for fewer or longer hours are in fact honored (Visser et al. 2005). Also, since 2000, more Dutch men have chosen to work part time, although it is unclear how much of the recent trend can be attributed to this particular law. However, the gender division of work and care has changed only very little and in this aspect the law of 2000 has disappointed. To facilitate part-time work, collective bargainers also negotiated parttime clauses with more frequency so that the number of agreements with such clauses increased from about 60 in 2001 to 88 percent in 2009 (Yerkes and Tijdens 2011, 377). These clauses are mostly procedural, but many restrict the right to demand more hours. The Adjustment Act does not allow derogation from the right to ask fewer working hours.

Temporary Employment Both fixed-term employment contracts and temporary agency work contracts underwent a major reform with the Flexibility and Security Act of 1999. This legislation was prefigured by the 1996 Flexicurity Agreement between unions and employers, a compromise in which the unions gave employers greater freedom to use temporary contracts, and in return preserved the system of protection against dismissals for open-ended

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contracts and obtained some protection for workers in temporary contracts. In particular, the compromise permitted temporary agency workers to acquire more rights with their length of service (see Avdagic, Rhodes, and Visser 2011). The essential features of the agreement were later incorporated into the 1999 Act, although many clauses in the act have a semi-mandatory character and allow negotiators to redefine the balance between security and flexibility in collective agreements.

Job Security in Fixed-Term Employment Contracts Although the 1999 act gave some temporary workers more security, it also gave employers more latitude to employ workers on fixed-term contracts. Previously, a second consecutive fixed-term contract was treated as an open-ended employment contract that could not be terminated without permission from the public employment service or a court. Employers had two ways around this rule. If thirty days had lapsed between two contracts, they were not considered consecutive. Meanwhile, the employee could continue to perform the same job, usually on dispatch by a temporary work agency. From the early 1990s, the courts began to restrict this revolving door construction. The second escape route required derogation by collective agreement. The Flexibility and Security Act increased the possibilities for employers to use fixed duration contracts by allowing up to three consecutive fixed-term contracts. This new chain provision is based on the 3x3x3 rule, allowing a maximum of three consecutive temporary contracts, to be renewed within three months for a maximum duration of three years. Any contract violating these rules is deemed open ended. Under the law, collective agreements can deviate from all three elements of the 3x3x3 rule. Studies of the ministry and sector studies show that with the passing of time, deviations tend to go in the direction of conceding more flexibility (Houwing 2010). Initially, most agreements limited the maximum number of contracts to less than three, but in 2006, an almost equal number of agreements increased the maximum. The same tendency is visible with regard to the three-year maximum of consecutive fixed-term contracts. In all agreements with deviations, the interval between two fixed-term contracts has been shortened. Overall, the semi-mandatory character of the 1999 act permitted employers to obtain increased rights to use fixed-term contracts. On the other hand, the new law also gave some temporary employees increased protection. It regulated on-call and standby employment contracts with a view to discouraging the spread of precarious jobs. First, based on a presumption of law, workers with such contracts can claim an employment contract for the hours they actually work. Second, on-call workers have become entitled to a minimal payment of three hours ev-

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ery time they are called to work, even if they have worked less. Third, trial periods, which had been two months or more, are now limited to one month. Instead, fixed-term contracts are used as a prolonged trial period.

Temporary Agency Workers The 1999 law also gave some protection to workers on agency work contracts. Previously, the relationship between an agency worker and the agency was considered a commercial contract. The 1999 law defines the relation between temporary work agency and the agency worker as an employment relation covered by labor law (Article 7:690 of the Civil Code). In a parallel act on labor intermediaries the license system for temporary work agencies was abolished. Under Article 8 of the new law on labor intermediaries, agency workers are entitled to the same wages as comparable workers in the user firm, unless the agency worker is covered by a collective agreement that states otherwise. When the agency that lends out a worker who is not covered by a collective agreement and the collective agreement covering the user firm contains provisions on agency workers, the collective agreement of the user firm applies. The 1999 act also provides that agencies cannot charge workers a fee, cannot dispatch agency workers to replace striking workers, and must contribute to social security insurance and the relevant sectoral pension fund.

Employment Protection in Open-Ended Employment Contracts So far, employment protection for employees on open-ended contracts has not changed. The OECD ranks the Netherlands as having rather strict employment protection legislation that includes numerous procedural requirements for employers who want to dismiss workers. Employers can choose between two tracks when they want to terminate an employment contract. They can ask permission from the regional public employment office or they can file a request at the lower district court on grounds of serious cause (Article 7:685 Civil Code). During the past decade, both tracks have been used in roughly equal proportions. The public agency track is plagued by delay, administrative inconvenience, and the risk that permits will not be granted. In 2009, 76 percent of the termination requests were granted and the average delay was a month and a half, during which wages had to be paid. The judicial track is faster and less uncertain, but also imposes higher severance payments on employers. Some collective agreements specify which track is to be followed, but generally workers have no say in the track even if it affects

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their treatment significantly. Many economists, lawyers, and employers have argued that there is no need for two tracks for dismissal and that the public track is an unnecessary complication. Unions, on the other hand, want to retain it as a preventive check on dismissals of regular workers, their main constituency. Various attempts at reform have been made, but none have succeeded. Labor lawyers have proposed to vary employment protection by the amount of employability or post–job training offered by employers in the current job and by taking into account the training effort of the employee. Under their proposal, if the employer fails to provide training, the culpability of the dismissal is larger, which circumstance should be reflected in more protection or larger severance payments. If the employee fails to participate in training, the opposite holds (Heijden and Noordam 2001; Baris and Verhulp 2007). The unions have thus far opposed the idea to vary employment protection and severance payments by the amount of job and post–job training. They remain unconvinced that employers will offer better training and employment offers to older workers.

Assessing Post-Standard Employment Relations in the Netherlands The Dutch labor market shows signs of being both flexible and inflexible. Forty-two percent of all male workers have been in the same job during ten or more years. In the forty-five to fifty-four age group, this percentage rises to 63 percent, in the fifty-five to sixty-four age group to 75 percent. These proportions are very similar in Germany and France, but much higher than in the United Kingdom (Cörvers et al. 2011). Wage returns to tenure are rather high and employees may be discouraged from changing jobs for fear of losing tenure rights in collective dismissals. The problem of a perceived or real lack of flexibility is concentrated among older workers; as their chances to get a new job once they become unemployed are very low, these workers have every reason to defend existing employment protection rules. They are the main constituency of the unions. The Dutch case seems to offer an example of partial deregulation. The essence of the strategy is to keep the full set of protections in place for skilled workers and allow flexibilization of product and labor markets in the domestic service sector, and to compensate workers in nonstandard employment with a somewhat improved social protection, for instance, by indexing the minimum wage to general wage and price developments, and strengthening rights of access to sickness insurance, pensions, and training. For workers in standard jobs, the principal concern is that insurance against loss of skills remains high and that employment protection and unemployment insurance are not undermined. This requires that existing standard jobs not be replaced by temporary con-

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tracts, and that workers who lose their jobs are not forced to accept lower-graded jobs. With such guarantees, full-time workers can benefit from more flexible markets in services, including longer opening hours, a more diversified choice of services, and possibly lower prices of services. The regulatory changes discussed in this chapter show a mixed balance of creating more flexibility and offering some increased security. In evaluating the success of the Dutch flexicurity innovations, three concerns must be kept in mind. First, the alternative of nonemployment has been made less attractive for all workers, but the risks fall much heavier on people with fewer skills and those with temporary jobs. The expectation that workers with temporary jobs engage more and earlier in job search, and thus have a lower risk of unemployment, is not borne out by the facts (Dekker and Mooi-Reci 2011). Transition rates from fixed-duration into open-ended employment contracts appear to have decreased since 2000, from 35 percent to 18 percent in 2009 (Dekker and Mooi-Reci 2011). This may hide a cyclical effect, due to the recession, but also suggests that the expansion of temporary employment and easing of regulation have locked in employers who in some sectors have now restructured the work organization in such ways that they demand only flexible labor or small part-time jobs. This suggests that the union strategy of offering more internal flexibility (in working hours, but also functionally, through enhanced training) has not worked, at least not in all sectors. Second, in the areas of part-time work, fixed-term, and temporary work, the use of semi-mandatory laws has led to negotiated deviations from legally set standards that go more in the direction of flexibility rather than security. This could be a result of union weakness. Alternatively, it might be explained by the hypothesis that, in decentralized negotiations, unions use their declining bargaining power first and foremost for the defense of insiders—their ageing membership with standard employment contracts. This possibility has inspired the minister of social affairs and employment in 2007 to see the problem as unions insisting on too much protection for insiders and calling for another reform of employment protection for open-ended employment contracts, without any result. The conclusion is for fair application of semi-mandatory law, there must be not only union power to balance employer strength but also representation of outsiders. In the case of part-time work, these outsiders had a voice, within and outside the unions, through strong women’s lobby groups, also in political parties. In the case of temporary workers and migrants, the outsider voice is weak. Third, the EU Fixed-Term Directive (99/70/EC) states that there should be equality between workers with fixed-term contracts and those with open-ended contracts. However, controlled for sector and firm size, temporary workers with the same education and experience appear to

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pay a wage penalty of about 5 percent with respect to workers in openended contracts. For agency workers, the disadvantage may be as high as 15 percent. Clearly, wages do not compensate for lower security. Temporary workers, like part-time workers in small jobs, are much less unionized and tend to be located in sectors such as hotels and catering, or retail and personal services where union density and bargaining power are already low.

Conclusion In terms of institutionalization and cogency of labor and social security law, the Netherlands has in recent years moved out of the upper-right quadrant of figure 5.1 (this volume). The use of semi-mandatory law on issues of working time, part-time employment and, above all, fixedduration and agency employment have created variable regulation regimes for different sets of employment relations. The legislator has assigned gatekeeper responsibilities to employers in the area of sickness and disability, but not in the case of training, employability, or unemployment. In poststandard employment relations, employers and employees have more choice of employment contracting and working hours. The other side of the coin is that postcontractual risks (risk of unemployment, inactivity or poverty, and chances of reemployment) must somehow be translated into contractual obligations on both employer and employee. The Dutch case shows some steps in that direction, but also offers a warning that employers may lock in to highly flexible, substandard jobs and that unions may lack the power or representation to set the balance between flexibility and security, and between choice and responsibility right. Whether lawmakers can or will move back to a more cogent or forbidding legal framework that would provide a better outcome—more job growth, less dualism, and inequality—is not at all certain.

Notes 1. Although employment rates were stagnant at 71 percent in the EU-15, in the Netherlands the male employment rate, calculated over the fifteen to sixtyfour population, increased from 74.6 in 1993 to 82.4 percent in 2009. During the same period, the rise in the female employment rate in the Netherlands, from 52.2 to 71.2 percent, was twice as strong as in the EU-15, from 49.2 to 59.9 percent (European Commission 2010). 2. Based on a stricter definition, using thirty hours per week instead of thirtyfive hours as the cut-off point, the OECD estimates the incidence of part-time work at 36.1 percent, which is still much higher than in any other developed economy. 3. See http://www.oecd.org/statsportal/. 4. Although the choice of working mothers may be conditioned by the lack of good quality child-care arrangements, the rapid increase of these facilities

Post–Standard Employment Relations: The Netherlands     153 after 2006, combined with a rather tight labor market, did not propel more women to seek more hours or full-time jobs. In fact, frequently women without children tend to choose part-time jobs and women with older children do not shift back to full-time jobs.

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154     Rethinking Workplace Regulation vided: Why Women Work Part-Time). The Hague: SCP Social and Cultural Planning Bureau. Rasmussen, Erling, Jelle Visser, and Jens Lind. 2004. “Divergence in Part-Time Work in New Zealand, the Netherlands and Denmark.” British Journal of Industrial Relations 42(4): 637–58. Salverda, Wiemer. 2011. “Laagbetaald werk, deeltijdwerk, en loonmobiliteit” (Low-Paid Employment, Part-Time Employment, and Wage Mobility). In Dyna-miek op de Nederlandse arbeidsmarkt (Dynamics in the Dutch Labor Market), edited by Ruben van Gaalen, Jos Sanders, Wendy Smits, and Jan Fekke Ybema. The Hague: CBS-TNO Publication. Schilstra, Keimpe, and Anja Jongbloed. 2003. “Geslaagde decentralisatie” (Successful Decentralization). In Sturen in het laagland, over continuiteit en vernadering vande Nederlandse arbeidsverhoudingen (Steering in the Low Countries, on Continuity and Change in Dutch Labor Relations), edited by Ad Nagelkerke and Willem de Nijs. Delft: Elburon. Schilstra, Keimpe, and Evert Smit. 2005. Voeten op de vloer (Feet on the Floor). Amsterdam: Aksant. Trampusch, Christine. 2006. “Industrial Relations and Welfare States: The Different Dynamics of Retrenchment in Germany and the Netherlands.” Journal for European Social Policy 16(2): 121–33. Van Riel, Bart, Anton Hemerijck, and Jelle Visser. 2003. “A Dutch Way to Pension Reform?” In Pension Reform and Pension Markets, edited by Gordon Clark and Noel Whiteside. Oxford: Oxford University Press. Visser, Jelle. 1995. “The Netherlands: From Paternalism to Representation.” In Works Councils: Consultation, Representation, and Cooperation in Industrial Relations, edited by Joel Rogers and Wolfgang Streeck. Chicago: University of Chicago Press. ———. 1998. “Two Cheers for Corporatism. One for the Market.” British Journal of Industrial Relations 36(2): 269–92. ———. 2002. “The First Part-time Economy of the World: A Model to Be Followed?” Journal of European Social Policy 12(1): 23–41. Visser, Jelle, and Anton Hemerijck. 1997. ‘A Dutch Miracle’: Job Growth, Welfare Reform, and Corporatism in the Netherlands. Amsterdam: Amsterdam University Press. Visser, Jelle, and Mara Yerkes. 2008. “Part-Time Work and the Legacy of Breadwinner Welfare States: A Panel Study of Women’s Employment Patterns in Germany, the United Kingdom, and the Netherlands.” In Method and Substance in Macrocomparative Analysis, edited by Lane Kenworthy and Alexander Hicks. New York: Palgrave-Macmillan. Visser, Jelle, Ton Wilthagen, Ronald Beltzer, and Esther van der Putte. (2005). “Part-Time Employment in the Netherlands: From Atypicaly to a Typicality.” In New Discourses in Labour Law: Employment Policy and Labour Law in the EU, edited by Silvana Sciarra and Mark Friedland. Cambridge: Cambridge University Press. Yerkes, Mara, and Kea Tijdens. 2011. “Social Risk Protection in Collective Agreements: Evidence from the Netherlands.” European Journal of Industrial Relations 16(4): 369–83. Zielschot, Evelien. 2009. “Decentralisatie (Decentralization).” Unpublished manuscript, General Employers’ Federation (AWVN), Haarlem.

Chapter 9 Regional and Local Experiments for Labor Market Policy in Europe ida regalia

I

n assessing the potential for regional and local-level interventions in labor-market policy intended to bolster job security for workers hired on flexible contracts in Europe, this chapter does not take a normative approach. Its aim is not to propose changes or reforms through legislation or collective agreements among social partners, nor to discuss those that already exist. It is also not descriptive: it does not seek to furnish a complete and up-to-date description of how matters stand. The intention—more modest—is to use results of empirical research from European countries conducted in the past fifteen years on programs intended to give greater security to flexible forms of employment, thereby identifying and discussing the different logics available to address the topic. These programs are essentially experimental and, also for this reason, are developed at the subnational level where conditions may be favorable to fostering innovative practices. Finally, that this argument is developed in Europe (indeed, in “old Europe”) is not a mere geographic detail; it identifies a context in which, for both political and economic reasons, political and economic actors have been increasingly concerned about averting the disruptive consequences of substantially market-based regulation.

A First Premise: Nonstandard Forms of Employment and the Need for New Standards For some time, especially in periods of sustained employment crisis such as the present, there has been an erosion of the standard contract of employment (understood as open-ended and dependent full-time work) 155

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and the development of nonstandard forms of employment, albeit to differing extents among various countries. In a recent study, one of the leading scholars of European labor markets, Günther Schmid, has summarized the trends observed over the last ten years in Europe (2010): Although differently distributed, open-ended part-time contracts are everywhere on the increase except in the new EU-accession countries. Among women and low-wage jobs, they generate numerous risks in terms of social security on conclusion of the work career—all the more so because transitions to full-time contracts are generally infrequent. Trends in the use of fixed-term and temporary contracts are diversified, but in many instances they are rising. The high concentration of these contracts among young adults raises serious concerns as to how they will be able to plan their lives. Also, the diffusion of the self-employed, understood here as ownaccount workers without additional employees, exhibits diversified trends. Many of these workers must cope with fluctuating incomes and a lack of health care or pension. By combining the different forms of nonstandard employment, and controlling for overlaps, one can calculate an aggregate nonstandard employment rate that ranges from the modest levels of the accession countries to the 43 percent of the Netherlands. On using this aggregate indicator, one finds that in the past decade nonstandard employment has grown in almost all the EU member states, and especially in the Netherlands, Germany, and Italy, but has sometimes decreased in the new accession countries. Disaggregating by gender, both levels and dynamics show that the phenomenon mainly concerns female employment. But it is perhaps surprising that the aggregate indicator of nonstandard employment for women records the highest values both in the so-called social democratic systems (Sweden, Denmark, Holland) and the liberal ones (United Kingdom and Ireland), but average values in both the continental conservative systems (Austria, Belgium, France, Germany) and the Mediterranean ones (Italy, Spain), and low ones in the new member-states. That nonstandard employment registers high values in both the social democratic and liberal systems indicates that it is associated with different models of labor-market regulation, to which correspond different employment and income security arrangements. And although nonstandard forms of employment are not necessarily all precarious, even in countries with high-security standards, they entail higher risks of exclusion that standard jobs do.

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In terms of socioeconomic performance, nonstandard employment is positively correlated with both labor-market participation and percapita gross domestic product—and hence, in aggregate terms, with both employment growth and economic well-being. On the other hand, it is strongly concentrated among the most vulnerable segments of the labor market: women, young people, and low-skilled workers. Finally, the data seem to indicate that the increase in nonstandard employment does not lead to an increase in productivity. Rather, the relation appears to be weak and negative, though no clear evidence indicates that nonstandard employment hampers productivity growth. Whatever the case, in no EU member state has there been simultaneous high growth in both employment and productivity. This means that the possibility to redistribute, and thus compensate the losers in a highly dynamic economy, is weakened rather than strengthened. Overall, Schmid concludes that the standard employment contract is being eroded but it is not disappearing (see also Regalia 2006). On the other hand, the insecurities associated with new forms of employment are considerable, and the risk of a dual labor market has not yet been satisfactorily dispelled. It is for these reasons that new solutions need to be devised. But what are these insecurities and risks? Or better, what are the risks that are possible or expedient to tackle, and how can this be done? For a long time, the principal risk envisaged in academic and policy discourse was the consequences of unemployment, particularly of male breadwinners. In European countries, protecting against this fundamental risk had traditionally been a task of the welfare state and collective bargaining, in both cases according to a logic structured on the standard model of employment (Supiot 1999). For a large part of the 1990s, the concerns and policies of the European Commission and the EU member states centered on the quantitative reduction of unemployment (Reyneri 2011, ch. 3). At the policymaking level, this mainly gave rise to programs that favored entry and permanence in the labor market, including through flexible forms of employment. At the administrative and policyimplementation level, it favored the expansion and, when necessary, reform of employment services. More recently, with the development of nonstandard forms of employment, the classic risk of unemployment has been outflanked by other difficulties: insecurity about regularity of an income sufficient to produce predictable earnings; the lack of adequate protection in the event of sickness, accident, maternity, invalidity, or old age; the risk of being unable to acquire or update skills, or have them recognized in different work contexts; the lack of clear career prospects, or easy access to the know-how and technological resources necessary to improve them; the risk of discrimination or of being unable to compete on equal terms and conditions with workers on other types of contracts; and the risk of

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not having one’s interests properly represented. These risks can be grouped into three categories: risks of future unemployment and earnings insecurity, risks of limitations on human capital development, and risks of reduced rights and entitlements. Overall, the use of nonstandard forms of employment correspond to the disappearance of some of the positive consequences that had accompanied the development of the standard form of employment in the past, such as security and predictability for workers, the possibility for cooperative labor relations for employers, and opportunities to develop solidaristic policies for governments. In dealing with these unintentional outcomes and new problems, new standard forms of employment should be devised that are not unrealistic simple resumption of the old ones.

Second Premise: Devolution of Labor-Market Intervention Measures In parallel with the development and consolidation of nonstandard employment, the past twenty years have seen tendencies across Europe to shift labor-market initiatives and programs from the center to subnational levels of governance. Despite numerous differences among countries, this trend toward decentralization stems from various processes, not necessarily connected with one other, but rather with production and the economy, the policies of national governments, and those of European Union. In the economic-productive domain, as the consolidated and relatively linear model of occupational structure, substantial stability, and uniformity of the employment relationship, which characterized the labor market during the long Fordist period, were being dismantled, pressures increased for the local-level management of a more diversified, specific, and complex labor supply. In the domain of government policies, a tendency emerged to devolve a wide range of powers to subnational levels of governance, in a period when centralized regulation appeared to be less suited to meeting the diversified needs of the economy and of society, the state could count on fewer resources and had to contend with the greater mobility of production factors and the proliferation of transnational authorities that weakened its boundaries and functions. At the European level, finally, an increasing intervention in social affairs, especially in the field of labor policies after the 1997 Treaty of Amsterdam, opened new spaces for regional and local institutions, both through policies to foster and support development (structural funds), and through the definition of guidelines for action based on local-level social partnerships. The devolution of labor market measures entails differences not only in how policies are implemented but also in the objectives pursued and

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the methods of doing so. Decentralization is functional for active labor policies based more on the supply of specialized services for employment than on the disbursement of incentives. It is even more functional for designing tailor-made solutions to specific and difficult problems when they arise, which would not be possible from the center. All this also has implications for which style of action to adopt. In fact, because of their intrinsic characteristics, tailor-made active policies that target specific problems do not lend themselves to uniform bureaucratic-administrative management; rather, they require the mobilization of, and support for, relevant actors and consensus-based coordination of initiatives. Thus, it is not by chance that one observes that the development of new kinds of local or territorial concertation is typically manifested in some form of pact. As recently shown in cases where decentralization does not happen (Altavilla and Caroleo 2009) and where one-size-fits-all centralized active labor-market policies prevail, it is likely that unintended distorting effects will ensue in light of differences that accompany policy implementation. In contrast, decentralization of labor policy decision-making may increase the efficiency of the measures taken in response to greater local-level knowledge of problems and the increased motivation to take initiatives that local actors may feel. However, decentralization may hinder achievement of general policy objectives decided at the national level (Lundin and Skedinger 2000). The issue is therefore anything but straightforward and uncontroversial. With respect to the design of strategies, it is evidently not possible to simply oppose local or regional ones to central ones. Instead, it is necessary to try to realign relations, prerogatives, and responsibilities between levels. What matters for my purposes here, however, is that particularly at the local or regional level, conditions may emerge in which it becomes possible to experiment with new solutions to problems that cannot be solved with the usual instruments. From this point of view, the tendency for solutions not to conform to existing standards and the absence of clear guidelines—often cited as limitations on local-level action—are, on the contrary, its strengths and represent windows of opportunity.

Examples of Experiments Various research projects conducted in the past ten to fifteen years have shown that at the local-regional level of European countries, experimental schemes have been undertaken with numerous local actors to regulate aspects of new forms of employment. (Regalia 1998, 2006, 2007) In terms of the forms that these initiatives may assume, the following have been distinguished: regional and territorial pacts, and in general con-

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certed, tri- or multilateral initiatives; bilateral agreements or contracts between local institutions and agencies furnishing services (temporary work, job placement, training, services to businesses); bilateral agreements between public institutions and firms; accords among firms or entrepreneurs; collective agreements at the territorial or local level; forms of self-organization by workers; collective agreements with organizations representing nonstandard workers; and other agreements struck formally or informally at the company level (Regalia 2006, 19). Despite these differences in form, all the initiatives share one feature: the joint search for solutions to employment security problems undertaken by relevant actors at the local level. In no case, however, have the solutions identified been entirely satisfactory. Nonetheless, examining them will enable us to conceive of new directions for a socially fairer and economically more efficient regulation of the employment relationship.

Territorial Pacts Territorial pacts are, in fact, not in themselves instruments with which to resolve job security problems, but rather are modes of governance based on negotiated or deliberative methods within large, inclusive partnerships, open to the participation of all relevant public and private actors. Their objective is to promote local development starting with addressing some of the most critical problems. Very common in many European countries during the 1990s, they have not disappeared thereafter. The pact formula has covered different experiences. For example, pacts were created in the late 1980s and early 1990s in some European countries, including Italy, Spain, and Germany, as forms of concertation on the joint and consensual planning of initiatives for economic development and local-level employment, with the more or less formalized support of central governments. In addition, territorial pacts for employment, experimentally promoted by the European Commission in the second half of the 1990s in all member countries, aim to coordinate local initiatives for employment growth and create conditions for the more appropriate use of structural funds. Finally, other types of pacts have more specifically contingent and local origins. Note that, especially in the first two cases, special national or European funding is available to facilitate the formation and operation of pacts (Regalia 2007). In spite of their numerous differences, some features are shared by these schemes. First, they involve a search for stable partnerships between public and private actors at the local level. Second, participation is highly inclusive, involving all significant local actors. Third, the objectives are the interwoven goals of local development and employment growth. And, fourth, the pacts are structured so that they include numerous projects with numerous purposes.

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This last aspect is of particular interest. Aside from the often highly critical evaluations of these initiatives (see Regalia 2007), it must be emphasized that a pact defines a structured space for possible broad and open interactions. In other words, a pact marks out a sort of “equipped area” within which numerous local actors—public institutions, social partners, firms, NGOs—can agree on creating voluntary and experimental economic initiatives for increasing and protecting employment. Of course, that a pact has been reached does not guarantee that it will subsequently bring innovations. In all cases, what matters and what should be analyzed is less the pact as a whole and more the degree of success achieved by the specific programs it envisages. We now consider three pertinent examples. The first is one of the eighteen initiatives launched by the BirminghamSolihull-Black Country Territorial Employment Pact (of European ­origin) with the participation of numerous partners: local authorities, ­Training and Enterprise Councils and other public agencies, including education and training institutions, employers’ organizations, trade unions, and voluntary and community organizations. The declared aim was to “maximize sustainable employment opportunities and their take-up by those people in the area currently unemployed and discriminated against within the local economy” (McIlroy and Marginson 2006, 219). Operationally, this specific initiative created a not-for-profit agency to facilitate the most advantageous match between supply and demand for labor in two specific local settings. On the one hand is the demand for temporary work, adequately trained and easy to integrate into the work cycle, by two organizations that by their nature have constant need of temporary work—Birmingham’s international airport and the neighboring National Exhibition Centre (NEC). On the other hand is the supply of labor by a population with high rates of unemployment and low education levels in a depressed local area with poor transport services. The task of the agency was to remove obstacles to work entry, starting with the social security system, which penalized acceptance of temporary jobs. The program provided participants with short-term contracts of six or twelve months’ duration, so as to overcome the obstacles raised by the social security system, with an hourly wage standardized on an annual basis, so as to guarantee a monthly income even in case of irregular placements. It also envisaged the involvement of training bodies and local authorities in the design of suitable training programs and the provision of transport services. The advantage expected for workers was that they would enter or reenter employment with a minimum basis of protection, guarantees, and improved human capital. The advantage for employers was that they could draw on an easily accessible pool of trained human capital, at a cost lower than that charged by commercial agencies, to deal with fluctuations in demand. Overall, the intention was to raise commu-

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nity well-being by responding to the needs of firms and allocating dedicated resources to people economically and socially excluded. However, despite involving various local actors, the agency at the core of the program failed to take off. Understaffing and a severe lack of funds, but also insufficient demand by the NEC, have been cited as the main reasons for this failure. In contrast, a similar project subsequently undertaken in a very similar context—that of Stansted Airport near London—proved successful and provides evidence that the formula can work (McIlroy and Marginson 2006, 220–22). The second example, which belongs to the category of initiatives supported by national programs, is the territorial pact of eastern Veneto, an economically weak enclave in Italy’s affluent northeast (Bortolotti and Giaccone 2006, 163–65). In this case, construction of the pact, on the initiative of the Eastern Veneto Conference of Mayors, created by a regional law in 1993, with the participation of all relevant local actors, was envisaged as an opportunity to promote development from below (Trigilia 2005). The agreement, signed in 1997, laid down guidelines for infrastructural interventions and employment targets, and opened the way for a series of further agreements on specific goals: a pact for social solidarity, a pact for employment, and later pacts for training, safety, and agriculture. In particular, the aim of the pact for social solidarity was to support change (with the cooperation of social partners) within a network of institutions and services (housing, child care, assistance for the elderly, and similar services) intended to promote social cohesion and stimulate labor-market participation by women as well as migrant workers. The aim of the pact for employment was to encourage—by agreement with trade unions—the use of specific forms of temporal flexibility and fixed-term contracts with a view to increasing production and therefore employment. Operationally, every project was subjected at the start to joint scrutiny by management, employers’ association, and unions, the last of which agreed to exercise wage restraint to create conditions for improvements in economic performance. Regarding the use of labor, the pact envisaged forms of bargained vertical part-time work—that is, a contract by which a worker is hired to work only in specific periods of a year such as during weekends, the Christmas season, summer holidays, and so on—in order to stabilize the use of seasonal labor at least to some extent. It also envisaged experiments with the possibility of coordinating alternation between several employers, for example, manufacturing jobs during the winter and jobs in tourism during the summer. This last aim has been largely unsuccessful, mainly because of resistance from employers. However, the search for more efficient and socially sustainable ways to manage seasonal temporary work has been quite successful, and has subsequently received normative recognition in a national law revising the rules governing part-time employment.

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Overall, the eastern Veneto pact has been characterized, at least until the mid-2000s, by the notable ability of parties to grasp opportunities and propose solutions to local problems. Its main shortcomings, however, have been the lack of monitoring action, especially for development policies, and a breakdown in cooperation, especially by employers’ associations and local administrations governed by center-right coalitions. The experience with the Veneto pact confirms that the most critical aspects of schemes based on free and voluntary agreement among participants with differing interests relate to the implementation phases of agreements, the importance of which is often underestimated by the protagonists (Pichierri 2002). A third case is that of Vallès Occidental in Catalonia (Lope and Gibert 2006). Once again, the anticipated actions are numerous and varied, and many actors are involved. Most notable for present purposes is a program, promoted by trade unions and local authorities with participation from employers’ organizations, that oversees experimental action by a Task Force on Employment Policy within Firms to promote in-company agreements on creating or maintaining employment and improving its quality. These agreements are intended to foster employment and competitiveness while reducing unemployment and precarious employment. In this framework of cooperation between trade unions and ­employers’ associations, the best results have been achieved by company-level pacts that seek to combine the needs of employers and workers through the negotiated transition of temporary workers to permanent status, and the acceptance of greater working time flexibility by permanent employees. Overall, the cases described illustrate the potential of pacts, but also show their intrinsic fragility.

Employment Pools A second category of solutions or experiments for devising new employment standards involves the organization of “employment pools” from which employers can draw flexibly as required (Weinkopf 1999, 329). Perhaps the most interesting example is that of groupements d’employeurs (employers’ groupings, or GdE) in France. These are nonprofit associations formed by entrepreneurs to collectively hire employees. The workers are hired on open-ended contracts and are made available to members on a time-sharing basis (Mériaux and Duclos 2006, 62–63). These arrangements combine employment stability for workers with the flexible use of labor for the firm. In fact, by linking temporary work for different employers with an open-ended employment contract, the GdE provides an alternative to internalizing workers in the firm while guaranteeing their security.

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This particular solution to the inherent tension between employment security and labor flexibility originated among small businesses in the agricultural sector and was subsequently extended to all sectors, especially those that have seasonal variations in labor demand. Since 2000, the possibility of joining a GdE has been legally extended to medium and large size firms, conditional on agreement by their union representatives. In practice, however, a GdE is not practical in numerous situations for two primary reasons. On the one hand, it is most appropriate for firms that require workers with particular skills such that it is more convenient to ensure their constant availability than to resort to the market for them, but whose skills are not so necessary that firms need to hire them permanently. On the other hand, it is an arrangement that requires the creation of a coalition among employers for the shared use of labor—something that does not come about spontaneously. As illustrated by a number of case studies (Mériaux and Duclos 2006), even when a GdE has been created, its success is by no means guaranteed because of numerous structural difficulties connected with the collective action of the employers. To succeed, two preconditions must be in place. First, a set of local enterprises willing to make joint use of specific human resources must be in place. This entails recognition of a shared interest among the participants and either a considerable endowment of social capital or substantial investments to construct it. Second, enterprises must be able to forecast their shared labor demand. A GdE differs from a temporary work agency in that it can respond well to recurrent or cyclical requests for additional labor, though it is less able to respond to unforeseen peaks in demand. This means that labor requirements must be known in advance. On the other hand, in exchange for their anticipatory commitment to future hiring, firms will be ensured access to workers who are committed to the firm and whose investments in training can be amortized over a long period. Under certain conditions, a functional alternative to the GdEs is the option of temporary work agencies (TWAs). In recent years in some European countries (Holland and Italy), interest in temporary agency work (TAW) has increased as a possible solution to the tension between employment security and labor flexibility. On the firms’ side, recourse to TWAs for appropriately selected and trained workers makes it possible to address multiple flexibility needs without subjecting them to the coordination, forecasting, and planning costs of the GdE. Work for a TWA may be equally advantageous for workers, provided that they are offered pay and working conditions equal to those of analogous permanent employees, guarantees of employment continuity, protection against the risks of human capital deterioration, and guarantees concerning social security and welfare, as well as union rights. The case in which, at least on paper, these conditions are met is Italy. An Italian sectoral col-

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lective agreement, signed in 2008 by the trade unions for nonstandard workers (to which we shall return) and the association of TWAs, foresees the stabilization (that is, hiring on open-ended contracts) of temporary agency workers by TWAs after a series of fixed-term contracts.1 In conclusion, both GdEs and TAW are efforts to pool labor supply and demand in a local context. However, although the GdE arrangement is certainly advantageous for workers, who are offered open-ended contracts, it requires constructing an entrepreneurs’ association whose affiliates receive “club goods” (Buchanan 1965)—that is, collective goods available only to members of that specific collectivity—and whose human resource needs correspond to the aforementioned preconditions— that is, a recurrent need to draw on specific human resources and the ability to forecast that need. The TWA arrangement, which is instead based on more costly commercial contracts, is advantageous for firms to the extent that it does not entail coalition costs, anticipated commitments, or the ability to make forecasts; however, it can be advantageous for workers only in the presence of rarely available conditions.

Regulation by Contract and Framework Agreements A third approach to problems in the use and regulation of nonstandard employment involves agreements reached on specific issues by a wide variety of local actors outside the large-scale frameworks constituted by territorial pacts. In various ways, these agreements have sought to improve the protection of nonstandard employment by acting on both the demand and the supply side. On the demand side, this means using contracts that are more stable but also more flexible from a temporal or functional point of view, redistribution of job vacancies, increased training opportunities, and introducing specific social security programs. On the supply side, it entails fostering willingness to accept more varied work schedules or forms, participating in training programs, and agreeing to innovative work methods. However, the studies show that the degree of success is uncertain and depends significantly on whether participants in the scheme can gain short-term advantages amid the constraints of national industrial relations systems. Among the many examples, specific mention must be made of initiatives intended to furnish protection and security to self-employed freelancers (or own-account workers without employees). This is terrain on which, in the past decade, the labor unions in several European countries, among them Germany, Spain, the United Kingdom, and Italy, have made various attempts to intervene. Of notable interest is the Italian case, which has seen a particularly ample diffusion in forms of economically dependent self-employment (Ballarino 2006, 131–33). In Italy, new

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unions affiliated with large central federations have emerged that specialize in representing workers on nonstandard contracts, particularly freelancers and those employed through TWAs.2 They have fostered the development of individual information and consultancy services (on tax, social security, and contracts) priced lower than the consultancy market, and of collective training services (for example, courses on labor law, the job interview, or accountancy for self-employed workers). These unions have also negotiated agreements intended not as much to stabilize the workers indefinitely with open-ended contracts as to increase their rights and protection. For example, agreements have been reached with private and public organizations that make recurrent use of freelancers or project workers on matters such as minimum pay levels, easier access to continuing training, norms on career development and performance assessment, guarantees in the case of absence, sickness, or maternity, tradeunion rights, and the introduction of forms of mutual aid and collective social security. In the case of professional interviewers in the market research sector, local-level negotiations have given rise to a national framework agreement for the entire sector. Furthermore, a national agreement was reached in 2004 that regulates freelance contracts in outsourced call centers that cover some 110,000 workers (Coletto 2004). It has been observed (Ballarino 2006, 133) that interventions of this kind indicate the possibility of a “third way” between dependent work and selfemployment that reconciles flexibility for the firm and security for the worker, a third way that enables the union to go beyond its traditional representation of insiders. However, the examples are still rather few, though they are increasing. Above all, little is known about the implementation of these agreements.

Toward a More General Interpretation As noted, the previous examples are not exhaustive, nor are their results entirely satisfactory. They should instead be considered among a repertoire of possible actions based on local-level experimentation intended to ensure security for workers in ways different from standard measures. But they prompt several general considerations. One concerns the type of security that can be envisaged. It has been observed that the term security can denote different things: it can mean employment security in a particular firm, or the security of being employed in a particular job and developing one’s skills, or the security of permanence in the labor market (Reyneri 1996). Although standard employment contracts ensure the first and therefore the third meaning of the term, they do not necessarily guarantee the second. The aim of new, sustainable forms of employment is to guarantee the third type of security, combined as far as possible with the second, but not necessarily the first.

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In regard to the worker security objectives pursued by the experimental programs just described, four main categories of intervention can be identified (Regalia 2006, 243–45). The first comprises programs whose main purpose is to promote employment growth and to reduce unemployment. The type of security such programs intend to promote is the basic one of securing and continuing in employment. Offered for this purpose are nonstandard, mostly temporary jobs accompanied by incentives and specific forms of services and protections. This is typical of the majority of concertation initiatives undertaken by local institutions, both in connection with external incentives, from either European programs or national legislation, and autonomously, where they involve social partners pursuing targets for development and employment. Examples include the territorial pacts for employment and other types of concerted multilateral initiatives. The resources available, mainly furnished by the institutions and generally by the European Social Funds, are usually invested in training programs to increase the employability of labor, and in improved information systems on trends in labor demand and supply, to which access is either free or available at very low cost. When interest is in the use of workers on the demand side, as in the Stansted and Veneto Orientale pacts, specific actions are undertaken to support programs, such as vocational training courses modeled on firms’ needs, transport services, housing, social services to support the female labor supply, migrant workers, and so on. Moreover, specific job protection mechanisms are sometimes envisaged, such as fixed-term contracts of relatively long duration, or guarantees of reemployment in the local catchment area. A second category of programs seeks to reduce the insecurity of nonstandard forms of employment through initiatives intended to facilitate transition from the most precarious kinds of work to less precarious work, with the prospect of eventual hiring on an open-ended contract. This progression moves from irregular work to temporary agency work, from temporary agency work to a fixed-term contract, and from fixedterm contracts to hiring for vertical part-time work. The security sought through such programs is that of finally getting a stable job with a firm. The majority of in-company and territorial collective agreements, for example, within the framework of the Veneto Orientale or Vallès Occidental pacts, pursue objectives of this kind through negotiations that also affect permanent workers, whose employment conditions are made more flexible. In these cases, trade unions mainly take the initiative. Programs of this kind assume that the various forms of nonstandard employment can be arranged along a continuum from a maximum to a minimum distance from the standard model of employment. This path can be seen as a sort of internal atypical labor market on local bases in which the important threshold is the change from temporary to permanent part-time

168     Rethinking Workplace Regulation

work. It is notable that adopting a strategy of this kind requires trade unions not only to reach agreement with management or employers’ associations but also to gain the solidarity of the permanent workers whose employment conditions may be damaged. A third category concerns initiatives intended to internalize forms of nonstandard employment within an organized space broader than that of the individual firm, but which has a circumscribed, locally defined perimeter. Also in this case, the security sought is that of more stable employment with an organization. That is not a particular firm, but rather an association of firms, an agency, or a set of firms connected by locally negotiated agreements with labor unions (as documented in Germany, see Scherer 2006). In this case, the security of being stably reinternalized within an organized perimeter tends to be the security of being able to keep one’s job and develop one’s skills. The clearest example is provided by the French groupements d’employeurs. Other examples are schemes for coordinated alternation among periods of seasonal work, as in the Veneto Orientale pact, or for the shared use of generally rare human resources to be found in industrial districts, or certain protected forms of temporary agency work, as discussed. The overall aim is to create employment security for workers whose exclusive employment cannot be afforded by an individual firm, but whose availability is guaranteed by cooperatively redefining the boundaries within which workers are entitled to stability and protection. The fourth and final category includes initiatives that seek to define measures to support nonstandard work that shifts frequently among firms, or remains external to them, without seeking to internalize it—not even in the new sense given to the term by the third type of initiative. In this case, the security to be furnished is that of labor market permanence, combined as far as possible with skills maintenance and development. The clearest examples are those that redefined the contractual conditions of employer-coordinated freelance workers in Italy, as represented by recently created labor unions for atypical workers and bargaining on the employment conditions of temporary workers. Another example is the project to organize a computerized network for management of multiactivity that is an alternation among several jobs envisaged by the territorial pact of Albertville in France (Mériaux and Duclos 2006). In table 9.1, the various types of initiative considered are reclassified according to whether they seek to promote security founded on affiliation with organized settings or permanence in the labor market, and to whether they also seek to promote skills maintenance and development. The first quadrant includes programs intended to establish formalized procedures for the gradual hiring of workers into firms on standard contracts after more or less long periods on nonstandard contracts. It is obvious that this already normally happens for many workers not on

Regional and Local Experiments for Labor Market Policy     169 Table 9.1  Patterns of Intervention Security Through Membership Within Organized Settings

Security Through Permanence on the Labor Market

Low

I Promotion of paths leading to a standard contract in a firm

II Compensated promotion of opportunities for atypical work

High

III Programs for the shared use of human resources by several firms

IV Invention of protections and rights independent from stable memberships

Job security and skills development

Source: Author’s compilation.

specific programs, but does not always do so (see also Schmid 2010). It is for this reason that, for some time, discussion has centered on the extent to which the new forms of contract should be regarded as what Alison Booth, Marco Francesconi, and Jeff Frank (2000) have called either “stepping stones or dead ends.” This is the approach often taken by labor unions through firm-level or territorial bargaining. The objective of programs in the third quadrant is to encourage hiring on stable employment contracts, but within organizational settings broader than those of an individual firm. Common to the various modes in which this takes place (GdEs, labor pools, hiring by work agencies) is the intent to favor the shared use by several firms of human resources of which those firms have occasional need because they possess specific skills or experience. The aim of the schemes in the other two quadrants is to support workers entering and remaining in the labor market by active employment policies structured according to the needs of the local economy. The second quadrant includes programs intended to stimulate the labor-market entry or reentry of inactive or unemployed workers by providing nonstandard employment opportunities, accompanied by incentives or services that increase their attractiveness according to the characteristics of the local labor market. Implicit in these programs is that the desirable outcome is ultimately access, in the future, to stable forms of employment. The fourth quadrant includes the various initiatives—often still embryonic—intended to identify appropriate forms of protection for workers who, because of their qualifications and skills, and because of the characteristics of the local economy, can accept and may prefer high labor-market mobility. It is evident that in this case, unlike the previous one, focus is on the availability of support in the enhancement, development, and recognition of workers’ skills and qualifications.

170     Rethinking Workplace Regulation

The foregoing analysis shows that the initiatives discussed respond to different logics: the more traditional logic by which promotion of the use of nonstandard forms of employment within the framework of programs intended to increase employment is combined with incentives and benefits for workers (quadrant II), the one based on progress along a continuum that gradually leads to standard employment (quadrant I), that of the internalization and stabilization of nonstandard work within an organized perimeter broader than that of the individual firm (quadrant III), and that of the invention of protections and rights for workers independent of stable affiliations (quadrant IV). The first two logics implicitly confirm the substantial centrality of the standard model, which is to be approached as closely as possible, or in regard to which compensatory measures are to be offered. The last two instead distance themselves from the standard model and implicitly dispute it: either by extending the boundaries of entitlement to stability and protection rights beyond the firm, or by releasing workers from the obligation of establishing enduring bonds with a firm in order to enjoy rights and protections. It is in light of this diversity of goals underlying the specific forms assumed by various programs that, more or less explicitly, have attempted to give greater security to workers on flexible contracts that we may finally go beyond simply acknowledging historical experiences to investigate the desirability and possibility of pursuing similar aims in different contexts.

A Provisional Conclusion This analysis prompts a number of concluding remarks at different levels. However, only two are outlined because they are both not so much points of arrival as points of departure for further investigation. Referring to the discussion in the previous section, the first point concerns the directions in which it is possible to move—in other words, policy prospects. It seems evident that the identification of new standard forms of employment can come about mainly through an endeavor to make the last two discussed logics practicable and socially acceptable. In other words, it should be recognized that being hired on an open-ended or long-term contract within a firm is not necessarily the best possible or even preferable solution. It should also be admitted, however, that the current situation characterized by dualistic labor markets is unfair and at least partly dysfunctional to the efficient operation of the economy. In more practical terms, the question is how to ensure that all workers enjoy protections, rights, and security also without necessarily joining a firm on a long-term basis? How can suitable programs and institutions be constructed to facilitate the different types of labor-market transitions undertaken by individuals during their life courses (Schmid 2006)? The

Regional and Local Experiments for Labor Market Policy     171

examples here signal the direction that might be taken in reconfiguring labor-market policies so that they are more fair, more efficient, and generally better suited to the economic and societal changes ongoing in more advanced European countries. Such a reconfiguration does not coincide simply with implementation of flexicurity programs, at least in the form with which they tend to be described (Schmid 2006). The second issue that requires further examination is the effect, to date, of the various experiments and initiatives described. The evaluation of these programs is problematic not only because evaluating policies is generally quite difficult but also because, in this case, we have a large number of rather different initiatives that have arisen on a more or less voluntary basis, sometimes at random, but inevitably embedded in a wide variety of local circumstances. The foregoing survey has given some idea of the potential for such initiatives which, notwithstanding their differences, have an overall purpose in common—furnishing greater work opportunities and security— as well as a shared method with which to achieve that purpose—acting through multi-actor cooperation at local level. We can refer to this as “decentralized collaborative governance” (Culpepper 2005). The potential of such an approach lies in the possibility to devise and experiment with at least partly unexpected solutions to problems arising from the failure or inadequacy of general norms (Regalia 1998). But we have also seen that these are fragile initiatives prone to risk. The studies outlined have mainly considered the risks connected with the start-up phases of initiatives. Much remains to be done in framing the problem of the relationship between decentralized, and somewhat erratic, initiatives and their more general impacts in a manner appropriate to the current features of socioeconomic systems. However, despite their limitations, what our case studies already suggest is that although positive innovations may originate in particular circumstances from bottom-up processes of cooperation, their consolidation and the possibility of preventing conflicts and negative externalities require some kind of intervention that operates more from above or outside the given situation and that can beneficially constrain the behaviors of the parties (Streeck 1997). As pointed out by even those who most firmly believe in the importance of decentralized initiatives (such as Trigilia 2005), this reintroduces the need for intervention by states or by supranational levels of governance.

Notes 1. Following the severe recession that affected this sector immediately following signature of the new collective agreement, it has not yet been possible to apply the new rules.

172     Rethinking Workplace Regulation 2. This is a new kind of labor representation. It is neither trade (occupational) unionism, nor industrial unionism and, even less, company unionism. Rather, it is a unionism where workers are organized on the basis of their employment contracts.

References Altavilla, Carlo, and Floro E. Caroleo. 2009. “Unintended Effects on NationalBased Active Labour Market Policies.” IZA discussion paper 4045. Bonn, Germany: Institute for the Study of Labor. Ballarino, Gabriele. 2006. “Between Institutionalized Concertation and Experimentation: The Regulation of New Forms of Employment in Lombardy.” In Regulating New Forms of Employment: Local Experiments and Social Innovation in Europe, edited by Ida Regalia. London: Routledge. Booth, Alison L., Marco Francesconi, and Jeff Frank. 2000. “Temporary Jobs: Stepping Stones or Dead Ends?” IZA discussion paper 205. Bonn: Institute for the Study of Labor. Bortolotti, Franco, and Mario Giaccone. 2006. “Inclusions Strategies: Regulating Non-Standard Employment in the ‘Third Italy.’ ” In Regulating New Forms of Employment: Local Experiments and Social Innovation in Europe, edited by Ida Regalia. New York: Routledge. Buchanan, James M. 1965. “An Economic Theory of Clubs.” Economica 32(1): 1–14. Coletto, Diego. 2004. “First National Agreement Signed for Freelance Coordinated Workers in Outsourced Call Centres.” Eironline, IT0403203F. Available at: http://www.eiro.eurofound.eu. Accessed December 10, 2012. Culpepper, Pepper D. 2005. “Re-embedding Public Policy: Decentralised Collaborative Governance in France and Italy.” In The Economy as a Polity: The Political Constitution of Contemporary Capitalism, edited by Christian Joerges, Bo Stråth, Peter Wagner. London: UCL Press. Lope, Andreu, and Francesco Gibert. 2006. “Catalonia: The Difficulty of Transferring Locally Concerted Solutions into Firms.” In Regulating New Forms of Employment: Local Experiments and Social Innovation in Europe, edited by Ida Regalia. London: Routledge. Lundin, Martin, and Per Skedinger. 2000. “Decentralisation of Active Labour Market Policy: The Case of Swedish Local Employment Service Committees.” IFAU working paper 6. Uppsala, Sweden: Office of Labour Market Policy Evaluation. McIlroy, Rachael, and Paul Marginson. 2006. “The West Midlands: A Mixture of Promising and Faltering Steps.” In Regulating New Forms of Employment: Local Experiments and Social Innovation in Europe, edited by Ida Regalia. London: Routledge. Mériaux, Olivier, and Laurent Duclos. 2006. “Building Local Institutional Arrangements for Flexicurity in France.” In Regulating New Forms of Employment: Local Experiments and Social Innovation in Europe, edited by Ida Regalia. London: Routledge. Pichierri, Angelo. 2002. La regolazione dei sistemi locali (The Regulation of Local Systems). Bologna: Il Mulino.

Regional and Local Experiments for Labor Market Policy     173 Regalia, Ida. 1998. “Industrial Relations at Regional Level in Europe: Strengths and Weaknesses of an Intermediate Level of Social Regulation.” European Journal of Industrial Relations 4(2): 157–76. ———, ed. 2006. Regulating New Forms of Employment: Local Experiments and Social Innovation in Europe. London: Routledge. ———. 2007. “Territorial Pacts and Local Level Concertation in Europe: A Multilevel Governance Perspective.” New Modes of Governance Report (NEWGOV) 18b/D05b. Florence: European University Institute. Reyneri, Emilio. 1996. Sociologia del mercato del lavoro (Sociology of the Labor Market). Bologna: Il Mulino. ———. 2011. Sociologia del mercato del lavoro. Vol. I, Il mercato del lavoro tra famiglia e welfare (Sociology of the Labor Market. Vol. I, Labor Market Between Family and Welfare), new and updated edition. Bologna: Il Mulino. Scherer, Stefani. 2006. “Non-Standard Employment: Experiments in Regulation at the Local Level in Germany.” In Regulating New Forms of Employment: Local Experiments and Social Innovation in Europe, edited by Ida Regalia. London: Routledge. Schmid, Günther. 2006. “Social Risk Management Through Transitional Labour Markets.” Socio-Economic Review 4(1): 1–33. ———. 2010. “Non-Standard Employment and the New Standard EmploymentContract: Reflections from a Transitional Labour Market Point of View.” Paper presented to the IIRA European Congress. Copenhagen (June 28–30, 2010). Streeck, Wolfgang. 1997. “Beneficial Constraints: On the Economic Limits of Rational Voluntarism.” In Contemporary Capitalism: The Embeddedness of Institutions, edited by J. Rogers Hollingsworth, and Robert Boyer. Cambridge: Cambridge University Press. Supiot, Alain. 1999. Au-delà de l’emploi (Beyond Employment). Paris: Flammarion. Trigilia, Carlo. 2005. Sviluppo locale. Un progetto per l’Italia (Local Development: A Project for Italy). Bari: Laterza. Weinkopf, Claudia. 1999. “Labour Pools: Innovative Approach on the Labour Market.” In Working Europe. Reshaping European Employment Systems, edited by Jens Christiansen, Pertti Koistinen, and Anne Kovalainen. Aldershot: Ashgate.

Chapter 10 New Forms of Dispute Resolution: Japan’s Labor Tribunal System takashi araki

W

hen labor contracts become unstable, atypical, nonstandard employment becomes prevalent, and employment mobility increases, labor disputes tend to come to the surface. Under the long-term and stable employment relationship, employees are hesitant to file claims with courts and other external dispute resolution organs, fearing that such actions might damage their relationship with their employer and not pay off in the long run. Therefore, complaints, if any, tend to be dealt with by in-house dispute resolution procedures. Once employment relations are terminated, by contrast, employees are free to make claims against former employers in courts or other external forums without fearing future disadvantage. Diversification of the workforce and individualization of human resource management, such as performance-based remuneration systems, have further accelerated an increase in individual labor disputes. The decline in union representation in most industrialized countries has also led to employees having to defend themselves by filing individual complaints. In fact, industrialized countries have experienced a surge in labor litigation, and some have introduced countermeasures to deal with overloaded labor tribunals. For instance, in the United Kingdom, the Employment Act 2002 requires parties to a labor dispute to attempt to resolve it through in-house procedures before filing the case with the Employment Tribunal.1 In Germany, revision in 2003 to the Dismissal Protection Act (Art. 1a, Dismissal Protection Act) was also intended to promote monetary solutions to dismissal disputes without needing to file the case in labor courts.2 Other countries, such as the United States, where parties to labor disputes want to avoid litigation costs, loss of time and privacy, and so on, have developed methods of private alternative dispute resolution (ADR). 174

New Forms of Dispute Resolution     175

Similarly, Japan, which has long been believed to be a less litigious country, has experienced a rapid increase in individual labor disputes over the last two decades. To cope with these changes, Japan introduced a new labor dispute resolution system in 2006 called the labor tribunal system (Roudou Shinpan). The labor tribunal, consisting of one professional judge and two lay judges recommended by labor and management, is not an independent court, but rather a forum established in each district court. Although many countries encourage private settlements and ADR to minimize the number of complaints filed with courts, Japan has established a new dispute resolution mechanism in the court system that encourages parties to individual labor disputes to bring their cases to courts. This chapter examines why Japan has taken a different approach toward the increase in individual labor disputes, why a tripartite bench that includes lay judges was adopted, how the lay judge participation has been regarded in Japan, and how the introduction of the labor tribunal system has altered the notion of justice in labor relations. The main focus of this chapter is on the individual dispute resolution system of rights disputes in contrast to the collective dispute resolution system of interest disputes (see also Gladstone 2007). A review of the limitation of the traditional workplace-centered institutions, such as in-house dispute resolution systems and enterprise-based unions, confirms the need for new dispute resolution mechanisms for nonstandard employees and terminated employees expelled from the traditional long-term employment relationship. At the same time, this chapter examines whether the new system—one that prioritizes speedy, flexible, and resolutionoriented justice and uses labor experts rather than time-consuming precise justice provided by professional judges—changes the nature of employee protection or workplace justice. By so doing, it reconsiders how employee protection and dispute resolution can respond to the real needs of the diversified workforce.

Overview of Labor Dispute Resolution Systems in Japan One of the features of Japan’s labor dispute resolution system is that Japan did not have a separate court for resolving individual labor disputes, such as those found in European countries (see figure 10.1). In many European systems, labor disputes are heard by lay judges representing the interests of labor and management. For instance, both labor courts in Germany (Arbeitsgerichte) and employment tribunals in the United Kingdom are tripartite organs, whereas French labor courts (conseil de prud’hommes) have bipartite membership. But though Japan has had a system of tripartite labor relations commissions since 1945, these are administrative and deal only with collective labor disputes.3

176     Rethinking Workplace Regulation Figure 10.1  Overview of Labor Dispute Resolution Systems in Japan In-house dispute resolution Private ADR

Labor disputes

Administration

Labor administration (individual disputes)

Judiciary Courts (individual and collective disputes)

Labor relations commissions (collective disputes)

General Adjustment Adjudication labor of collective of unfair consultation labor labor corner disputes practices

Labor tribunal procedures (individual disputes)

Guidance Labor inspection and advice by labor (violation of bureau laws) Dispute Adjustment Committee

Provisional disposition procedures

Regular civil procedures Adjudication Adjustment (mediation, conciliation)

Source: Author’s figure. Note: Dark gray boxes indicate adjudication procedures and light gray boxes indicate adjustment procedures. The dark line around the box for labor tribunal procedures indicates this chapter’s focus on the whole dispute resolution system in Japan.

Previously, all individual labor-related disputes in Japan had to be filed with the ordinary courts, and were heard by judges who were professional jurists but not necessarily specialists in adjudicating labor matters. Nor were there special civil procedures governing labor litigation. However, as noted, Japan’s labor tribunal system, which went into force on April 1, 2006, has provided a new and specialized forum for the adjudication of individual labor disputes (see figure 10.1). This system was created for several reasons, the most fundamental of which was the rapid increase in individual labor disputes since the 1990s.

New Forms of Dispute Resolution     177

Increase in Individual Disputes Although collective labor disputes in Japan have decreased significantly since the mid-1970s, individual labor disputes filed in the civil courts have increased following the burst of the economic bubble in the early 1990s (see figure 10.2). The main reason for this increase is the subsequent economic slump and corporate restructurings that followed, which include personnel downsizing and tightened working conditions. In the past, when the lifetime employment prevailed in Japan’s corporate culture, workers’ grievances were normally resolved within the firm and through informal procedures; workers feared that bringing lawsuits would likely damage their future relationship within the firm. However, once layoffs began, terminated workers did not hesitate to file complaints in the courts, labor inspection offices, or other dispute resolution agencies. Another reason for the growth in individual disputes is the diversification of the workforce. In Japan, nonstandard employment has increased from 20 percent in 1990 to 34 percent in 2008 (see figure 10.2). Because women, the elderly, and foreigners are often employed on fixedterm or part-time contracts and are more likely than regular or standard employees to be dissatisfied with their unstable and inferior working conditions, they are less likely to adhere to the “community firm” norms that are invoked to resolve regular employees’ grievances and more likely to air their complaints in public. Moreover, union density in Japan declined from 34.4 percent in 1975 to 25.2 in 1990 and further to 18.5 percent in 2010. Therefore, four of every five Japanese employees must defend themselves by bringing cases to courts or other disputes resolution organs. This has also contributed to the dramatic increase in cases involving individual labor disputes. In 1991, labor-related civil cases filed in the district courts, such as claims for unpaid wages and those contesting termination of employment, including provisional disposition cases, numbered only about 1,000. This number had tripled by 2002 (see figure 10.3). The number of consultations and complaints received by labor administration offices of each prefecture has also increased. For instance, the number of complaints received by the labor administration offices of Tokyo Metropolitan government was 31,712 in 1991, but 52,445 in 2001.

A New Mechanism This increase in individual labor cases and grievances arising from individual labor relations put Japan on notice that it needed a new mechanism to efficiently resolve individual labor disputes.

178     Rethinking Workplace Regulation Figure 10.2   Ratio of Standard to Nonstandard Employees in Japan 100

Percentage

80

60

40

20

0

1990

1993

1996

1999

2002

2005

2008

Year Nonstandard employees

Standard employees

Source: Author’s compilation based on Labor Force Survey 1990–2008 (Ministry of Internal Affairs and Communications, various years).

Legislation to Promote Individual Labor Dispute Resolution In 2001, the government enacted the Act to Promote Resolution of Individual Labor Relations Disputes, which newly authorized the prefectural labor offices—that is, local offices of the Ministry of Health, Labour, and Welfare—to provide counseling and mediation services to workers and employers. Under the act, the head of the local labor office has the power to transfer grievances to the mediation procedures of the Dispute Adjustment Committee (Funso Chosei Iinkai). This body can provide a mediation proposal, but it is up to the parties whether to accept it, and the committee performs no adjudicatory function. Despite the 2001 act, the number of complaints received by the labor offices has increased annually (see figure 10.4), which indicates that there are more underlying individual labor disputes in Japanese workplaces than previously assumed (see figure 10.5).

91

662 392

19

92

892 485

19

93

19

95 19

96 19

804

1,507

94

696 1,552

19

686 1,525

Number of Cases

97

19

98

19

99

19

Year

00 20

01 20

Source: Author’s compilation based on Supreme Court Secretariat (1991–2009).

0

1,000

2,000

792 1,793

3,000 815 1,802

4,000

682 2,063

5,000

708 2,119

6,000

768

20

02

2,309

Labor tribunal cases Provisional disposition cases Regular civil cases

20

03

20

04

726 2,433

7,000

649 2,519

8,000

598

20

05

2,446

Figure 10.3  Newly Filed Labor Cases at First Instance in Japan

642

1,307

705 1,656

470 877

20

06

2,035

1494 417

20

07

2,246

2052 440

20

08

2,441

3468 655

20

09

3,218

180     Rethinking Workplace Regulation

40,000

FY 2002

FY 2003

FY 2004

176,429

80,000

160,166

120,000

625,572

140,822

734,257

1,000,000 900,000 800,000 700,000 600,000 500,000

FY 2005

Number of individual civil labor dispute consultations

FY 2006

400,000

FY 2007

Overall Number of Labor-Related Consultations

823,864

160,000

907,869

187,387

200,000

997,237 946,012

(Cases) 1,100,000

197,904

(Cases) 240,000

103,194

Number of Individual Civil Labor Dispute Consultations

Figure 10.4  Consultations at Labor Offices

Overall number of laborrelated consultations

Source: Reprinted with permission from Japan Institute for Labour Policy and Training (2009). Figure 10.5  Consultation Cases on Civil Individual Disputes, FY 2007

Others 15.5%

Bullying or harassment 12.5% Employment management 1.7% Recruitment/ hiring 1.4%

Other working conditions 21.5%

Child and family care 0.8%

Dismissal 22.9%

Lowering of working conditions 12.5%

Inducement toward retirement 7.7% Transfer or job location 3.6%

Source: Reprinted with permission from Japan Institute for Labour Policy and Training (2009).

New Forms of Dispute Resolution     181 Table 10.1  Newly Filed Labor Cases Japan

Germany

United Kingdom

France

3,168 (2004)

590,442 (2004)

115,042 (2003–2004)

156,442 (2004)

Source: Author’s compilation based on Bundesministerium für Wirtschaft und Arbeit (2004), Employment Tribunals Service (2006), and Ministère de la Justice (2006).

A Limited Number of Labor Cases Although the 2001 legislation did not stop the growth of individual labor disputes, the absolute number of labor cases in Japan has remained extremely small compared with other countries. The number of newly filed labor-related cases in Japanese district courts (first instance) in 2004 was only about 3,000, versus 156,000 in France, 115,000 in the United Kingdom, and 590,000 in Germany at about the same time (table 10.1). On the other hand, the limited number of litigated labor cases does not necessarily mean that there are correspondingly few complaints or disputes in Japanese employment relations. On the contrary, there is a distinct possibility that many complaints or grievances have simply remained invisible for various reasons. Two have already been mentioned. First, it was thought impractical or unwise to bring disputes to the courts or other external dispute resolution forums under the long-term employment system. And, second, Japan had neither special labor courts nor special procedures for labor litigation; thus workers were likely to be discouraged from filing claims because of the unsuitability of judicial procedures, the high cost and time-consuming nature of litigation, and lack of access to legal representation. The content of substantive labor laws may also explain the relative absence of labor litigation. In Japan, many important legal rules governing employment relations—such as restrictions on unjust dismissals,4 termination of repeatedly renewed fixed-term employment contracts,5 abusive disciplinary actions,6 and unilateral alteration of terms and conditions of employment7—were not legislated but remained simply as unwritten case law until recently. Given the difficulty encountered by ordinary employees in ascertaining the content of the law, it seems likely that many complaints were not filed because the aggrieved employees simply do not know their rights. This problem was partly solved by the enactment of the Labor Contract Act of 2007, which codifies some of the established case law rules and makes them more accessible to the workers they were meant to benefit (see Yamakawa 2009).

182     Rethinking Workplace Regulation

In any event, it was thought necessary to make the labor dispute resolution system more accessible to employees with complaints, and to resolve individual disputes by applying labor law to ensure that the rule of law permeates workplaces. In Japan, the increase of individual labor disputes was deemed less problematic than allowing the victims of unjust employer behavior to go without recourse. In this crucial sense, attitudes toward labor litigation in Japan were very different from those prevailing in other industrialized countries that suffered from an overload of labor cases.

Judicial Reform and Proposal Struggling with an unprecedented sluggish economy and facing intensified global competition in the 1990s, Japan adopted a policy of deregulation and embarked on a large-scale legislative reform project. It was thought necessary to relax and repeal ex ante regulation by the government and strengthen ex post regulation by the judiciary. A more effective judiciary and a larger number of jurists would be required. There were also calls for new courts or forums to be established within the judiciary dealing with individual labor disputes. In 1999, Japan embarked on a large-scale judicial reform initiative (see Sugeno 2006). The reform began with the formation of the Judicial Reform Council (Shihou Seido Kaikaku Shingikai) of the cabinet. Among other questions, the council debated whether to introduce special procedures or special adjudicators such as labor experts for labor litigation. The Supreme Court and the Ministry of Justice were initially skeptical about the special nature of labor litigation, claiming that labor cases do not require special expertise comparable to the scientific and medical knowledge required in patent and medical malpractice proceedings. However, a consensus gradually emerged that labor cases in which employees’ lives and dignity are at stake required special and swift treatment reflecting the common sense of the workplace. After two years of deliberation, the council’s final report proposed to introduce a labor conciliation system with expert involvement and to deliberate further on whether to introduce a court system with similarly expert involvement, or alternatively to introduce special procedures for labor litigation. This question was referred to one of ten study groups formed to give shape to the plans for judicial reform, the Labor Study Group chaired by Kazuo Sugeno of the University of Tokyo. The group endured heated discussion and deadlock among its labor and management representatives, but finally agreed to recommend the introduction of a new labor tribunal system, described earlier, to deal with individual labor disputes (Sugeno 2005).

New Forms of Dispute Resolution     183

Features of the Labor Tribunal System The goals of the labor tribunal system can be characterized as the three Es: expeditiousness, expertise, and elasticity (Sugeno, Tokuzumi et al. 2007).

Expeditiousness In the past, labor litigation in Japan was notorious for delays. In the 1990s, courts endeavored to expedite procedures to decrease the backlog. As a result, the average period for labor litigation at the first instance became shorter than previously, but still remained at 13.5 months as of 2001 (Shihou-seido Kaikaku Suishin Honbu, Roudou Kentou-kai 2003). Because the new tribunal is in principle aimed at overcoming delays in labor litigation, the Labor Tribunal Committee (LTC), which hears the dispute, must decide the case within three sessions (Labor Tribunal Act [LTA] Art. 15, para. 2). This means that a filed complaint will be disposed of within three or four months. Hearings are informal and not open to the public, although the LTC may allow observers when appropriate. To dispose of the case within these time constraints, the LTC clarifies the issues of the case and examines evidence in the first session. In the second and third session, it seeks a solution through mediation (chotei) while continuing to investigate the facts by interviewing witnesses and examining documents. If the parties to the case accept the mediation proposal by the LTC, the agreement is written into the court record, which has the same effect as a court settlement, namely, a finalized court decision. If not, the case is adjudicated.

Expertise The second important feature of the procedures is the participation of lay judges with specialized expertise, experience, or knowledge of labor relations provided by its two lay members, both of whom are expected to be experts in labor relations. Although the Japanese Trade Union Confederation (Rengo) and the Japan Business Federation (Nippon Keidanren) recommend the two lay judges, they are expected to be fair and impartial in their handling of cases, and participate in each stage of decision-making on equal footing with the professional judge member.

Elasticity The third characteristic of the labor tribunal procedures is the elasticity and wide discretion given to the LTC to make such orders as it deems appropriate to resolve the dispute. If one of the parties rejects the media-

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tion proposal, the LTC will hand down a decision (roudou shinpan)8 in which it may confirm the rights of the parties, order payment or delivery of property, or specify measures that would be “appropriate to resolve the dispute taking the judgment of the rights of the parties as well as the situations found in the labor tribunal procedures into account” (LTA, Art. 20). It is notable that the LTC is not limited to determining the legal merits of a complaint, but may also consider the broader circumstances of the case, such as the parties’ desires, with a view to resolving the dispute (Supreme Court Secretariat 2006; Sugeno, Yamakawa et al. 2007; Yamakawa 2007). For instance, it is possible for the LTC to order an employer who unjustly dismissed a worker to pay a certain amount of money rather than to nullify the dismissal. Such a monetary remedy in lieu of confirming continued employment is not available in the ordinary courts because, under current Japanese law, remedies for unjust dismissals are limited to nullifying dismissals, confirming continued employment relationships, and ordering payment for wages lost during the period pending disposition of the case.

Relationship with Regular Civil Procedure The labor tribunal’s procedures resemble those in force in ordinary civil proceedings. If either party fails to notify the court in writing within two weeks of its rejection of the labor tribunal decision, the decision becomes binding on both parties and is enforceable under the Civil Execution Act. If either party rejects the decision, it has no effect, but the case is automatically transferred to the regular civil section of the same district court where it is deemed to have been filed as of the date when it was originally filed with the labor tribunal. Subsequently, the case will proceed to adjudication in the normal manner. Given the time delays and costs associated with regular civil proceedings, this prospect gives both parties an incentive to settle the case in the labor tribunal.

Use and Reputation of the Labor Tribunal System The labor tribunal system came into operation in April 2006. As expected, many cases were filed with it, as seen in figure 10.2. From 2006 to 2010, 10,629 cases were filed and finalized. Among them, 48.3 percent relate to dismissal and termination, and 29.8 percent deal with unpaid wages. The labor tribunal has two stages: mediation proposal and labor tribunal decision. Of the 10,629 cases finalized in labor tribunals from 2006 to 2010, 7,384 cases (69.5 percent) resulted in the acceptance of the mediation proposal, and 1,974 cases (18.6 percent) reached the stage of a formal labor tribunal adjudication. Among the cases resulting in adjudi-

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cation, 1,230 cases (11.5 percent of the finalized 10,629 cases) were subject to an objection by one or both of the parties and were transferred to the regular civil procedures, but the other 744 adjudicated cases (7 percent) concluded with the tribunal decisions because no objection was raised. Other cases were settled as well, including those withdrawn before or during the hearing (846 cases, or 8 percent of 10,629). By adding all of these percentages together, 84.5 percent of the finalized 10,629 cases were resolved through the labor tribunal procedures (Haruna 2011, 14). The average period for labor tribunal procedures was less than two and a half months, specifically, 73.7 days (15). Therefore, the tribunal achieved its aim of expediting justice. Labor, management, and their lawyers, not to mention the courts, welcome expedited procedures. The labor tribunal’s speedy procedures have also improved accessibility by reducing both the time-consuming procedures and the financial burdens normally associated with prolonged civil procedures. However, unemployed and nonstandard employees lacking financial resources still need more direct financial support to take full advantage of the labor tribunal system. Some legal aid is available through the Japanese Legal Support Center (Houterasu), a public entity established by the government that provides people in need of financial support for litigation with free legal counseling and loans to cover the expenses of trials and lawyers’ fees. Local governments also grant loans to individuals involved in labor litigation. Finally, labor unions such as the Japanese Trade Union Confederation (Rengo) and community unions also provide financial support to nonstandard employees for litigation, as described in chapter 14 of this volume. Among the labor side litigants in the labor tribunal procedures, these legal supports are actively utilized. All in all, the labor tribunal system has had a highly successful debut and enjoys a strong reputation for service among litigants, lawyers, and members of labor tribunal committees.

Significance of Lay Judge Participation Apart from court-administered mediation services in family and civil cases, lay judges did not play a role in the Japanese justice system. Professional judges were initially skeptical about the deployment of lay judges in the labor tribunal system, especially in the field of labor relations where ideological conflicts are—they thought—both ubiquitous and irreconcilable.

Reputation of Lay Judges One judge, the head of the Tokyo District Court, Labor Division, candidly stated, “Professional judges could not imagine the kind of people the labor tribunal lay members would be before the implementation of

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the Labor Tribunal System. However, we have come to recognize that they are long on common sense and very industrious” (quoted in Sugeno, Tokuzumi et al. 2007, 30). Because the labor tribunal’s lay members are recommended by the Japanese Trade Union Confederation and the Japan Business Federation (Nippon Keidanren), they are usually current or former officials of enterprise-based labor unions (on the labor side) and directors or officials in charge of labor relations or human resource management (on the management side). However, despite their prior affiliations, concerns over whether they would be capable of serving as impartial and fair adjudicators proved unfounded. Practicing lawyers have stated that, in the labor tribunal proceedings, they often cannot recognize which member represented labor and which represented management, because the seat arrangements were not fixed and the lay judges maintained their neutrality and impartiality when questioning the parties (Sugeno, Tokuzumi et al. 2007, 8, 27). Professional judges who worked with these lay members have also highly evaluated their ability to identify the facts and issues in each case, and to find an appropriate resolution to disputes (Ohtake 2007; Sugeno, Yamakawa et al. 2007).

Performance in Resolving Disputes As mentioned, about 80 percent of the complaints filed are resolved within the labor tribunal system. Such a high rate of resolution has largely been accomplished due to the effective use of lay members’ expertise, which in turn has been made possible because of the elasticity or flexibility of the tribunal’s procedures. Effectiveness of Expertise  Because the LTC must dispose of each filed case within three sessions, identification of the key points at issue in the dispute is vital. The lay members use their expertise in finding the critical facts and issues that might otherwise escape the notice of the professional judge or even the lawyers representing the parties. In one case, for instance, the employer contended that the firm had a briefing session for employees to explain that the introduction of the annual salary system would entail the change of open-ended labor contracts into fixed-term contracts. The lay member requested the submission of the handouts used at that briefing because it was unthinkable that such a meeting would be conducted without any handouts. Such practical common sense has functioned very effectively in uncovering critical facts (Sugeno, Tokuzumi et al. 2007, 27). Persuasiveness of the Mediation Proposals  An important factor that explains the high rate of resolution for labor tribunal cases is the persua-

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siveness of the mediation proposals developed by the labor tribunals. Almost all mediation proposals are unanimously agreed on by the three tribunal members; endorsement of proposals by both labor and management sides is usually highly persuasive to the parties. Moreover, terms of such mediation proposals can be more flexible than those imposed by an ordinary court following adjudication, and are more likely to respond to the actual circumstances of the dispute. In shaping such contextual proposals, lay members’ knowledge and experiences are both helpful and useful. Finally, lay members are adroit at persuading the parties to accept the mediation proposals.

Reconsideration of Justice in Employment The wide discretion given to the LTC in rendering a decision, the active use of the lay members’ expertise and experience, and the tribunal’s expeditious procedures enable both the parties and LTC to concentrate on the resolution of disputes (resolution-oriented justice) rather than on the production of elaborate legal decisions through technical, strictly formalized procedures (precise justice). Indeed, the nature of the proceedings induces the parties to express their real intention to resolve the dispute (hon-ne) rather than encouraging them to persist in strict legal positions (tatemae).

From Precise to Resolution-Oriented Justice This is especially true in dismissal cases. In ordinary civil procedures, dismissed workers must assert the invalidity of their dismissal and justify reinstatement even if they do not want to be rehired by the company. The respondent or the employer, in the same manner, must contend that the dismissal was valid, even if they fully intend to pay compensation for the dissolution of the employment contract. In the labor tribunal, the LTC has a power to order a monetary settlement when both parties want to resolve the dispute in this way. Another example of the labor tribunal’s resolution-oriented justice is the calculation of unpaid overtime premiums. Under ordinary civil procedures, precise calculation of unpaid wages is indispensable and requires time-consuming procedures for fact-finding. By contrast, in the labor tribunal, if the committee finds a certain amount of unpaid overtime premium to be owing in one month, it can exercise its discretion by applying a similar calculation to another period (Yamakawa 2009, 10 fn. 21; Sugeno, Tokuzumi et al. 2007, 11). The object, then, is not to precisely clarify the rights and obligations of each party, but rather to seek an appropriate resolution to the dispute by taking each party’s rights and obligations into consideration. Such resolution-oriented justice introduced by the labor tribunal sys-

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tem combined with the workplace-based common sense provided by the lay members seems to enable the effective functioning of the new dispute resolution system.

Is Half a Loaf Better Than No Bread? Given the tendency of the labor tribunals to produce resolution-oriented justice, it may be appropriate to ask whether the parties are receiving reduced or inferior justice in exchange for an expeditious remedy? And if so, is this a situation where half a loaf is better than no bread? Of course, this question presupposes that an employee is compelled to choose between two inadequate outcomes—half a loaf or no bread. But a labor tribunal decision does not compel such a choice because the decision is not binding and can be rejected by a dissatisfied party, the only consequence being the transfer of the case to regular civil procedures in which the parties can, in effect, opt to pursue a whole loaf of bread, that is, precise justice. In fact, as noted, only 20 percent of labor tribunal litigants make such a choice. By contrast, the relatively small number of labor cases in Japan before the labor tribunal suggests that ordinary employees were being forced to choose the no bread side of the equation. Second, it should be considered whether resolution-oriented justice indeed provides only half a loaf. In other words, does a whole loaf of precise justice necessarily respond to the needs of employees? In dismissal cases, the full remedy under the current law is reinstatement. In larger firms, it would not be very difficult for dismissed employees to resume normal employment relations after reinstatement. However, in small and medium-sized enterprises where interpersonal relations between an employee and an employer are important, it would be impractical to expect both a reinstated employee and an employer to restore a normal employment relationship because the dismissal dispute involves questioning the employee’s ability, performance as well as personality or accusing the employer of arbitrariness, unfaithfulness, and inhumanity. Thus it is common to settle dismissal disputes by paying money in lieu of reestablishing the employment relationship. According to the statistics over the last ten years, from 2000 through 2009, on dismissal cases settled in the labor relations commissions, 73.1 percent (239 cases of 326) were settled without reinstatement. In 86.5 percent of such settled cases (206 of 239), the employers withdrew the dismissals and the dismissed employees agreed to voluntary retirement usually with monetary compensations (Central Labor Relations Commission 2000–2009). In civil lawsuits of dismissal cases, however, Japanese courts cannot order such monetary solutions because the employment contract is no longer in force. Outcomes of civil dismissal lawsuit must be either invalidating dismissals entailing reinstatement or validating dismissals without any remedies.

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In such a context, for those employees who no longer wish to work for their former employer and instead desire monetary compensation for their unjust dismissals, the monetary solution in the labor tribunal might not be just a half of a loaf but precisely the different type of whole loaf desired by the dismissed employee. Under Japanese labor law, many abstract norms require interpretation, such as whether an employer’s exercise of a right should be deemed abusive, or whether modification of working conditions should be regarded as reasonable. Fact-finding by professional judges will not necessarily produce better interpretation of such norms. Instead, these abstract norms should be interpreted and applied in the light of workplace common sense. It is in this context that the expertise of lay judges is both much needed and effectively used. Therefore, a labor tribunal decision, which is usually made unanimously by the tripartite panel, is not be regarded as mere reduced or diluted justice, but rather as realistic, pragmatic, and persuasive justice meeting both parties’ needs to resolve the dispute. These arguments demonstrate that the resolution-oriented justice adopted by the labor tribunal can be deemed preferable to the previous precise justice, which discourages ordinary employees from litigation. However, this conclusion does not imply that the current situation leaves no room for improvement. For instance, to settle cases within three sessions, parties are forced de facto to hire lawyers, which in fact they do in more than 80 percent of labor tribunal cases (Haruna 2011, 16). Whether the current legal aid system enables poor employees and the unemployed to initiate and persevere with litigation should be examined. Given the rapid increases in labor tribunal cases, there is also a concern that the current number of professional judges and lay members may be inadequate to permit the tribunal to speedily dispose of its caseload. And if the labor tribunal employs more lay judges, it remains to be seen whether the currently high reputation of lay judges can be maintained, because the number of labor experts who are suitable to be lay judges is not unlimited.

Conclusion The answers to the four questions posed at the outset of this chapter can now be summarized as follows. First, unlike some industrialized countries that encourage private settlement and ADR to divert cases from overloaded labor tribunals, by providing a new dispute resolution mechanism with expedited and simplified procedures Japan has encouraged disputing parties to go to court. Because the volume of labor litigation in Japan was exceptionally small compared with other industrialized countries, it was feasible for Japan to

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choose this approach, while ensuring that the new system would apply distinctive rules and procedures that would enable the rule of law to reach workplaces. Second, in the course of establishing a new dispute resolution system, Japan introduced the participation of lay judges in adjudicative procedures. This initiative was based on a developing consensus that the participation of lay experts was appropriate because of the effect of labor litigation on workers’ lives and dignity, and because of the need for speedy outcomes that respond to workplace common sense. Third, the skepticism toward lay judges initially shared among professional judges dissipated when the system was put into effect and judges knew the lay judges’ neutrality and capability to lead the parties to settlement. The performances of lay members are also highly evaluated by the parties to disputes and lawyers for both sides. Fourth, the labor tribunal system has triggered a reconsideration of the nature of justice in employment relations. The labor tribunal system was needed to resolve an increase in individual disputes swiftly and appropriately. Speed is vital because justice delayed is justice denied, especially in employment disputes. After five years’ experience, the labor tribunal has confirmed that speediness minimizes losses for both labor and management and greatly facilitates dispute resolution. Therefore, the three-session limit on proceedings of the labor tribunal has been welcomed by all parties. Such expedited resolution has been made possible by tapping lay members’ expertise and workplace common sense, and also by giving the tribunal wide discretion in framing decisions ap­ propriate to the dispute rather than according to a strict assessment of the rights and obligations of each party. This implies a change to the notion of justice by these courts, a significant shift from precise justice to resolution-oriented justice.

New Developments and the Labor Tribunal System The labor tribunal system has also had an impact on the broader developments in Japanese labor law. First, a new approach to the enforcement of labor laws has been recognized. Traditional labor law envisaged two guardians for workers: labor inspectors and labor unions. The state establishes minimum labor standards and relies on inspections by the labor inspectors to detect violations. Conditions more favorable than minimum labor standards are, of course, expected and can be established through collective bargaining between employers and labor unions. However, the governmental inspection system is inefficient and union density continues to decrease. Thus the traditional labor law model has become dysfunctional. Individ-

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ual workers need a mechanism to enforce their rights other than by relying on labor inspectors or labor unions. In this sense, the labor tribunal system and other individual labor dispute resolution systems have become the new guardians of working conditions and workers’ rights. In response to the diversification of the workforce and the growth in workers whose working conditions are not directly regulated by the statutory minimums but by employment contracts, effective labor dispute resolution systems have become particularly important. Second, the establishment of the labor tribunal system has underscored the need to enact substantive law regulating individual labor relations. Many legal norms applied in the labor tribunal procedures have not been legislated but are derived from case law rules. Reliance on nonstatutory legal norms poses many problems: it is inconvenient for workers to understand, for lay members to apply, and for the Labor Tribunal Committee to use to persuade the parties to accept mediation proposals. In response to these concerns, the substantive rules governing employment relations and those applied in dispute resolution procedures were consolidated into the Labor Contract Act of 2007. This act is a new type of labor legislation in that it consists solely of civil norms, not enforced by criminal penalties or by administrative measures, but rather applied by ordinary courts, including labor tribunals. In this sense, the establishment of the labor tribunal system has had a significant impact on the development of substantive labor laws in Japan.

Notes 1. The act was amended in 2009 and the failure to follow in-house procedures does not bar the claims but give the tribunals the authority to increase or decrease award amounts. 2.  BT-Drucks. 15/1204, S. 8ff. 3. The Labor Relations Commissions have two major functions: collective dispute resolution through mediation, conciliation, and arbitration and quasijudicial determination of cases involving allegations of unfair labor practices. The former function is not limited to norm enforcement or dispute over rights; it also includes resolution of disputes over interests such as collective bargaining culminating in strikes or lockouts. The latter function is directed at enforcing norms in the Trade Union Acts, namely, the proscription of unfair labor practices by employers such as the disadvantageous treatment of union members, the unreasonable refusal to submit to collective bargaining, and attempts to control or interfere in the unions’ formation and administration. 4. The Japanese Supreme Court has established that a dismissal without just cause shall be regarded as an abusive exercise of an employers’ right to dismiss, and such dismissals are null and void. The Nihon Shokuen Case, Supreme Court, April 25, 1975, 29 Minshu 456. 5. The Toshiba Yanagicho Case, Supreme Court, July 22, 1974, 28 Minshu 927.

192     Rethinking Workplace Regulation 6. The Daihatsu Kogyo Case, Supreme Court, September 16, 1983, 415 Rodo Hanrei 16. 7. The Japanese Court held that unilaterally modified work rules have binding effect on all workers in the establishment as long as such modification can be regarded as reasonable. The Shuhoku Bus case, Supreme Court, December 25, 1968, 22 Minshu 3459. 8. The LTC is to render its decision in writing but, if it deems it appropriate, it may give the decision orally without making any written decision. The content of the oral decision must be written in the record of the court (LTA, Art. 20, para. 3, 6, 7).

References Bundesministerium für Wirtschaft und Arbeit (Federal Ministry of Labour and Social Affairs). 2004. “Tätigkeit der Arbeitsgerichte” (Activities of the Labor Courts). Available at: http://www.bmas.de/SharedDocs/Downloads/DE/ PDF-Statistiken/Ergebnisse-Statistik--Arbeitsgerichtsbarkeit-2004.pdf?__ blob=publicationFile. Accessed October 12, 2012. Central Labor Relations Commission. 2000–2009. “Rodo Iinkai Nenpo” (Labor Relations Commission Annual Report). Tokyo: Chuo Rodo Iinkai. Employment Tribunals Service. 2006. “Annual Report 2005–06.” London: Stationery Office. Available at: http://www.official-documents.gov.uk/document/ hc0506/hc13/1303/1303.pdf. Accessed October 12, 2012. Gladstone, A. 2007. “Settlement of Disputes over Rights.” In Comparative Labour Law and Industrial Relations in Industrialized Market Economies, edited by Roger Blanpain. The Netherlands: Kluwer Law International. Haruna, Shigeru. 2011. “Zenkoku-no Roudou Shinpan Jiken no Doko to Kadai” (Trends in Labor Tribunal Cases in Japan and Future Tasks). Houritsu no Hiroba 64(June): 11. Japan Institute for Labour Policy and Training. 2009. Labor Situation in Japan and Analysis: General Overview 2009/2010: 106. Ministère de la Justice. 2006. “Annuaire statistique de le Justice Edition 2006” (Annual Statistics of the Judiciary, 2006 Edition). Documentation française. Paris: Ministère de la Justice. Available at: http://www.justice.gouv.fr/budget-et-statistiques-10054/annuaires-statistiques-de-la-justice-10304/annuairestatistique-de-la-justice-2006-11862.html. Accessed October 12, 2012. Ministry of Internal Affairs and Communications. Various years. “Rodoryokuchosa” (Labor Force Survey). Tokyo: Ministry of Internal Affairs and Communications. Ohtake, Akihiko. 2007. “Kaishi-go 1 nen wo heta Rodo Shinpan Seido no Genjo to Kadai” (The Current Situation and Future Issues After One Year Operation of the Labor Tribunal System). Kikan Rodo-Ho 217:46–59. Saiko Saibansho Jimusokyoku (Supreme Court Secretariat). 2006. Roudou Shinpan Tetsudsuki ni Kansuru Shitsumu Shiryo (Manuals for Labor Tribunal Procedures). 138. Tokyo. Shihou-seido Kaikaku Suishin Honbu, Roudou Kentou-kai (Judicial Reform Promotion Headquarters). 2003. Distributed material no. 121, p. 3. Available at:

New Forms of Dispute Resolution     193 http://www.kantei.go.jp/jp/singi/sihou/kentoukai/roudou/dai20/20sir you121.pdf. Accessed October 12, 2012. Sugeno, Kazuo. 2005. “The Birth of Labor Tribunal System in Japan: A Synthesis of Labor Law Reform and Judicial Reform.” In Liber Amicorum Reinhold Fahlbeck, edited by Birgitta Nystrom, Annamaria Westregard, Hans-Heinrich Vogel. Lund, Sweden: Juristförlaget I Lund. ———. 2006. “Judicial Reform and the Reform of the Labor Dispute Resolution System.” Japan Labor Review 3(1): 4–12. Sugeno, Kazuo, Kenji Tokuzumi, Makoto Nakamachi, and Koichi Nanba. 2007. “Roudou Shinpan Seido 1 nen—Jisseki to Kongo no Kadai” (One Year of the Labor Tribunal System—Its Performance and Future Challenges). Jurisuto 1331: 6–31. Sugeno, Kazuo, Ryichi Yamakawa, Tomoyoshi Saito, Makoto Jozuka, Satoko Otokozawa. Roudou Shinpan Seido (Labor Tribunal System), 2nd ed. Tokyo: Kobundo. Supreme Court Secretariat. 1992–2009. “Rodo-Kankei Minji-Gyosei Jiken no Gaiyo” (Overview of Civil Labor Cases and Administrative Cases) Hoso-Jiho No. 9. Tokyo: Supreme Court. Yamakawa, Ryuichi. 2007. “Roudou Shinpan Seido no Rironteki Kadai” (Theoretical Issues in Labor Tribunal System). Kikan Rodoho 217: 4–15. ———. 2009. “The Enactment of the Labor Contract Act: Its Significance and Future Issues.” Japan Labor Review 6(2): 4–21.

Chapter 11 Organizational Primacy: Employment Conflict in a Post–Standard Contract World alexander j.s. colvin

I

n the era of the standard employment contract, conflicts between employees and employers often centered on the question of whether the employer was abiding by the terms of the standard contract or the employee was being unfairly denied the normal benefits derived from working under such a contract. With the decline of the standard contract, the nature of conflict in the workplace has changed with new disputes arising in the course of new, nonstandard careers. Now we see coming to the fore issues such as entry and exit to organizations in multi-organizational careers, determination of who is an employee or an independent contractor, and who owns trade secrets or intellectual property developed by an individual during employment or work with an organization. These newly prominent types of disputes reflect the challenges of trying to organize work relationships and careers in an era where the relationship between the individual and the organization is often episodic, fluid, and ill-defined. How will these new work and employment relationships be defined and how will the conflicts that arise from them be resolved? I argue that rather than weaken the influence of organizations relative to market forces (Cappelli 1999), the demise of the standard employment contract built around long-term employment relationships has actually strengthened the hand of employers in determining the terms on which work and employment is conducted. In the area of dispute resolution, this is reflected in the growth of organization-centric dispute resolution procedures that are unilaterally designed, adopted, and often operated by the employer. Yet these organization-centric procedures are being used to resolve disputes that involve individuals whose relationship with the organization is itself contested. My argument is that the changing nature of 194

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employment contracts makes the organizationally focused dispute resolution procedure deeply problematic for resolving new types of employment disputes, and that new procedures for resolving conflicts are needed that are not tied to the organization, but instead reflect the changed nature of employment contracts and relationships.

Decentralization and the Primacy of the Organization One of the striking features of contemporary employment relations is that as the individual’s attachment to the organization in the form of standard long-term employment contracts and career progression through internal labor market structures has weakened, organizations have assumed greater primacy in the determination of terms and conditions of employment. The first of these trends has been well documented by many researchers. Manifestations include the increasing mobility of employees between employers over the course of careers, greater willingness of employers to hire for all positions from the external labor market, and decreasing willingness of employers to offer long-term employment guarantees, including attendant retirement and other benefits (see, for example, Cappelli 1999). Many scholars have argued that these changes have weakened the attachment between the employee and the firm (Farber 1995; Stone 2004). Notably, even in a debate over whether career jobs are dead, Sanford Jacoby, taking the contra position, argued that rather than being unchanged, the employment relationship had been transformed within a context of continued relatively long job tenure for many employees (1999). The second trend is the growing primacy of the organization and its human resource strategies in employment relations. The theoretical groundwork for this development can be found in the field of strategic human resource management (SHRM). The core idea of SHRM researchers is that organizations can gain competitive advantages through the adoption of employment strategies that maximize the effectiveness of the organization’s human resources. A common SHRM argument is that employers should adopt human resource strategies that are best matched to the business strategy of the organization. So, for example, an organization that competes as a low-cost producer should adopt a human resource strategy focusing on the control of labor costs. Meanwhile, an organization that competes based on quality and customization might be more effective if it adopted a human resource strategy focused on investing in a highly skilled workforce that could achieve greater flexibility and quality in production (Arthur 1992, 1994). Research suggests that the emphasis in SHRM theory on organizations developing distinctive human resource strategies has been paral-

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leled by a growing variation in patterns of practices and strategies in ­organizations. In his surveys of a representative sample of U.S. establishments, Paul Osterman (1994, 2000) found widespread and continuing variation in the adoption of some of the key workplace practices associated with high involvement strategies. Similarly, the periodic Workplace Employment Relations Surveys (WERS) of British workplaces have found substantial innovation and variation in methods of managing employees (Brown et al. 2009). The argument for growing divergence in employment practices at the organizational level in many countries is most strongly advanced by Harry Katz and Owen Darbishire (2000) in their Converging Divergences analysis. In a study of work and employment practices in the United States, the United Kingdom, Australia, Germany, Japan, Sweden, and Italy, they find a common phenomenon of growing divergence at the organizational level in practices, which they argue fall into four common patterns: low-wage, HRM, Japanese-oriented, and joint team-based. Organizations following each of these different patterns adopt distinct sets of practices that provide alternative paths to competitive advantage. The important feature for employment relations is that it is the organization’s strategic choices that decide which of the patterns is followed, and hence it is the organization that has become the central actor in determining the nature of the employment relationship. In the next section, I examine how this primacy of the organization in determining terms and conditions of employment is being reflected in employment dispute resolution procedures.

Organizational Primacy in Dispute Resolution Procedures Two major recent trends in employment dispute resolution are the growth of individual disputes, with a corresponding decline in collective conflicts, and the expansion of alternative dispute resolution (ADR) procedures for resolving these disputes. The growth of individual employment disputes is manifest both in the expansion of individual ­employment rights in many countries and in the growing numbers of employment disputes involving claims brought by individual employees against their employers. For example, employment discrimination lawsuits filed in federal courts in the United States increased by 270 percent in the 1990s (Clermont and Schwab 2004). Although the United States is the most prominent example, research has also found significant growth in employment litigation claims filed in the United Kingdom, which shows a 150 percent growth in the 1990s, as well as in Germany (Schneider 2001). At the same time, the number of collective conflicts has declined, evident in phenomena such as the widespread decrease in strike rates (for example, Akkerman 2008; Rosenfeld 2006).

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In part, this is a result of the decline in union membership and collective bargaining coverage across many developed countries. The decline has a particularly strong impact on dispute resolution systems in which the mechanisms for resolving employment conflict are tied to collective representation. For example, in the United States, workplace conflict resolution and industrial justice is traditionally provided through the system of independent labor arbitration jointly negotiated and administered by unions and management. This system of labor arbitration derives its legal authority from the collective agreement and as the extent of union representation has declined to only 13.0 percent of the American workforce (Bureau of Labor Statistics 2012), so also has the coverage of labor arbitration declined. What these trends indicate is a growing individualization of workplace conflict and a focus on disputes around individual employee rights and contracts. The rising numbers of individual employment disputes is straining standard public dispute resolution systems—courts, public tribunal systems, and governmental agencies. One response is the promotion of alternative dispute resolution procedures, which operate in the private domain and are believed to provide a more efficient and effective mechanism for resolving employment disputes. ADR procedures, generally involving some form of arbitration or mediation, hold out the promise of simplifying the process of resolving disputes and transferring greater control to the parties with the attendant potential to achieve more integrative solutions to conflicts. Yet when we turn to examine the specific types of ADR mechanisms increasingly being used to resolve employment disputes, it becomes clear that they also embody particular choices about the desired locus and outcomes of dispute resolution. This is illustrated by three increasingly prevalent types of employment ADR: peer review panels, ombudspersons, and integrated conflict management systems. These types are designed to enhance organization-centric approaches to workplace dispute resolution. Peer review panels are one of the most interesting innovations to arise in ADR in the United States. Under a peer review procedure, a panel that includes fellow employees who are peers of the complainant decides the outcome of workplace grievances. The critical feature of peer review panels is that though they may include managerial members, a majority of the panel members are peers of the employee bringing the grievance (Colvin 2004). These procedures were first developed in the nonunion sector in the United States, where they are often used as union substitution devices to provide workers with an alternative to the grievancearbitration procedures common to American unionized workplaces (Colvin 2003a). Peer review panels establish something akin to an arbitration procedure within the organization, the key difference being that the decision-maker is not an outside third-party neutral, but a group of fellow

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employees. The system purports to be fair not because of the presence of a neutral outside decision-maker but because coworkers are putatively more likely to identify with the complainant’s perspective than that of management. Research on the usage of peer review procedures suggests that they do enhance the likelihood of employees successfully challenging managerial decisions compared with more typical nonunion grievance procedures, which only involve appeals to higher management. In a study comparing grievance procedures across organizations, I found an average 9.9 percent probability of having the discipline decision overturned under grievance procedures that used peer review panels, versus only a 2.7 percent probability under grievance procedures with only managerial decision-makers (Colvin 2003b). At the same time that peer review was associated with higher employee success rates than other nonunion procedures, it was less employee-favorable than grievance procedures in unionized workplaces, where there was a 17.3 percent probability of having a disciplinary decision overturned (Colvin 2003b). Despite the advantages of peer review over purely managerial grievance procedures, it is important to understand that the nature of the peer employee role is strictly circumscribed by the organization. In particular, a common approach to designing the rules of peer review procedures is to specify that the panel’s decision-making criteria should be based on whether the organization’s rules and procedures have been fairly applied, and to exclude challenges to these rules (Colvin 2004). Therefore, the function of the peer review panel becomes to ensure that the organization lives up to the rules and norms it has enunciated for governing itself, rather than to question these organizational rules and norms by applying external standards of fairness and justice. In this way, peer review procedures provide an enhancement to organizational justice while reinforcing the primacy of the organization over external agents in determining the terms and conditions of employment. Ombudspersons had their origin in Sweden as a mechanism for dealing with complaints by individual citizens against the government. Although governmental ombudsperson offices continue to perform this function in many countries, recent decades have also seen the expansion of corporate or organizational ombudspersons. Organizational ombuds­ persons serve as an in-house neutral employees can go to for a variety of problems in the workplace, from personal issues to more traditional disputes with management (Fernie and Metcalf 2004). These ombudspersons use various dispute resolution and problem-solving techniques, from serving a mediator type role to helping the employee navigate complex organizational structures and procedures. A hallmark of the ombuds’s role is that the ombudsperson is a neutral within the organization and explicitly operates outside the standard hierarchical management structure. Practices that reinforce this idea in-

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clude placing the ombudsperson outside the organizational chain of command and physically locating the ombudsperson’s office in a place that facilitates confidential access. Organizational ombudspersons generally emphasize the confidentiality of any complaints brought to their offices. However, it is important to recognize that their confidentiality extends to the rest of the organization, particularly to the company’s managers and supervisors, but not to the outside world. In an important analysis of the legal status of the organizational ombudsperson, the 8th Circuit Court of Appeals noted in Carman v. McDonnell Douglas (114 F.3d 790, 8th Cir. 1997) that the purpose of this confidentiality was to protect the employee against retaliation within the organization, unlike the confidentiality offered by third-party mediators, which is designed to encourage settlement discussions in legal cases. Given this critical difference in roles and in the reality that the ombudsperson, unlike the thirdparty mediator, remains an employee of the organization, the court held that the privilege granted to mediators against testifying in subsequent litigation should not be extended to an ombudsperson. As with peer review panels, ombudspersons represent a significant ADR innovation that helps not only resolve workplace disputes but also ensures that employees receive fairness within the context of the operation of the organization, rather than by recourse to external norms or entities. The move toward organizationally focused ADR mechanisms receives more general expression in the trend toward the development of integrated conflict management systems (ICMS). The idea of ICMS is that organizations should develop an integrated approach to identifying, managing, resolving, and preventing workplace conflict, drawing on a range of different procedures and mechanisms that operate in an integrated fashion (Lipsky, Seeber, and Fincher 2003). As described in guidelines developed by the Association for Conflict Resolution, an ICMS should have the following five characteristics: broad scope to include all people in the workplace and all types of problems, a culture that welcomes dissent and encourages resolution of conflict through negotiation at the lowest possible level, multiple access points for individuals seeking to resolve conflicts, multiple options for resolving conflicts including rights-based and interest-based options, and support structures for conflict management. A growing number of organizations, particularly in the United States, are adopting an ICMS approach as a strategy for managing workplace conflict (Lipsky, Seeber, and Fincher 2003). The advent of ICMS represents a greater willingness of organizations to accept the inevitability and legitimacy of workplace conflict, as well as the need to resolve rather than simply attempt to suppress employment disputes. However, the ICMS approach also reinforces the idea that employment disputes are something internal to the organization and that the organization has primary control over the process of managing conflict and

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procedures for dispute resolution. Notably, the ICMS emphasizes organizational culture as a key determinant of dispute resolution and the idea that conflicts can and should be handled informally at lower levels in organizations without reference to external actors or rules. In their leading description of the ICMS approach, David Lipsky and his coauthors analyze the adoption of ICMS as an organizational strategy, which they dub the “Prevent” strategy for dealing with conflict, driven by key organizational leaders who serve as ADR champions. In this vision, ICMS emerges as the embodiment of a successful organization-centric approach to conflict resolution, in which employees receive workplace justice through their membership in an organizational community based on the precepts of progressive human resource management policies. The rise of organizationally focused ADR mechanisms is clearly driven by the interests and strategies of the organizations, whether these involve human resource, union avoidance, or litigation avoidance strategies. However, the growth of organizational primacy in employment dispute resolution is also being reinforced by the legal system. This tendency is most strongly evident in the United States, but is also emerging in other countries as well. In the United States, two key Supreme Court judgments—Gilmer v. Interstate/Johnson Lane in 1991 and Circuit City v. Adams in 2000—held that courts must enforce agreements that require employees to arbitrate all legal claims, even those based on statutes, such as claims of employment discrimination. When an arbitration clause is included in an employment contract, the Court held, employees were precluded from pursuing remedies through the courts, even though they had been required to accept arbitration as a condition of obtaining employment. Furthermore, employment arbitration awards are subject to review only on very narrow grounds and tend to feature fewer wins and much lower damages for employees than litigation in the courts (Colvin 2011). In my own research examining a sample of 1,213 arbitration cases from 2003 to 2007, I found the median damages that employees received in mandatory arbitration were only 10 to 20 percent of those received in litigation through the state or federal court systems (Colvin 2011, 7). Over the past two decades, mandatory employment arbitration in the United States has grown to the point where it covers approximately onequarter to one-third of the nonunion workforce. Deferral by the courts to mandatory arbitration for employment disputes radically reinforces the primacy of the organization in determining how disputes are resolved. Mandatory arbitration agreements are routinely presented to employees as take-it-or-leave-it contracts of adhesion. It is the employer who designs and drafts the arbitration agreement and arranges for the administration of the procedure. The employer designates which, if any, organization will provide arbitration administration services and where the

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arbitrators will come from. The leading providers of employment arbitration services in the United States, such as the American Arbitration Association (AAA) and JAMS (originally Judicial Arbitration and Mediation Services), are private organizations in an industry with little government regulation. Although some organizations, such as the AAA, have signed onto the voluntary Due Process Protocol committing to basic procedural fairness standards, such as the right to representation, there is wide variation in this industry. For example, in 2009, the National Arbitration Forum (NAF), a major arbitration service provider, was required to cease its consumer arbitration program under a settlement with the Minnesota Attorney General’s Office, which had been investigating conflicts of interest arising from hidden financial connections between the NAF and debt collection companies (Folberg et al. 2010). The structural advantage employers have in these systems is further supported by my research finding that in mandatory arbitration cases when the employer and arbitrator have been involved in multiple cases together, the employee has significantly lower probability of winning the case and on average receives significantly less damages (Colvin 2011). This situation of a repeat employer-arbitrator pairing suggests that the employer can obtain an advantage from repeated involvement in an employer-centric forum, such as the ability to select more employerfavorable arbitrators or a tendency of the arbitrators to rule in favor of the employer in hopes of selection in future cases. For an employee covered by mandatory arbitration who has a potential legal claim against the employer, the place to turn to determine how that claim will be resolved is no longer the public legal system, but rather an arbitration procedure designated by the organization’s management and administered by an agency of its choosing, which may or may not have chosen to abide by generally accepted standards of due process. The U.S. Supreme Court has reaffirmed the primacy of organizations in employment disputes in two decisions on sexual harassment. In the 1998 cases of Farrager v. City of Boca Raton and Burlington Industries v. Ellerth, the Court established a new affirmative defense in cases in which supervisors or managers engage in unauthorized harassing behavior toward employees. Under this affirmative defense, the employer can avoid liability if it can show that the organization took reasonable steps to prevent harassment and the employee unreasonably failed to take advantage of procedures to prevent and complain about the harassment. This new defense has the salutary effect of creating an incentive for organizations to adopt effective policies and procedures against sexual harassment in the workplace. However, it also makes the organization and its internal policies the locus for dealing with such disputes. Under the affirmative defense, the key issue is not whether the employee suffered from conduct that would violate general public standards against sexual

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harassment, but rather whether the organization was reasonable in the preventative steps it took, and whether the employee was unreasonable in not using the employer’s internal system. Reasonableness continues to be defined as cases arise in this area, but as a standard it suggests that steps that would be reasonable for one organization to take might not be reasonable for another, given differences in size, organizational structure, or other factors. Similarly, under the second prong of the defense, the inquiry about the employee plaintiff’s conduct focuses on the reasonableness of his or her behavior in using or failing to use internal organizational procedures. This presupposes that employees suffering a violation of their rights should be attempting to resolve disputes internally within the organization. The presumption is that the organization has primacy as the initial locus of dispute resolution, and that public systems serve only a secondary role. The United States represents the most extreme case of legal deferral to organizational primacy in employment dispute resolution, but examples exist in other countries as well. In the United Kingdom, employees have been able to bring unfair dismissal actions through a system of public employment tribunals since the Industrial Relations Act of 1971. More recently, this public system for resolving unfair dismissal disputes was supplemented by a “statutory grievance procedure” established in the Employment Act of 2002. This legislation set out a standard to be followed when an employee wishes to bring a grievance at work, including a claim of unfair dismissal. Under the statutory grievance procedure, the employee must file a grievance in writing. A meeting to discuss the grievance must follow, at which the employee has the right to be accompanied by a representative, such as a union official or a legal representative. The employee then has the right to appeal the decision, which leads to a further meeting at which the employee again has the right to representation and after which the employer must issue a final decision. Under the initial legislation, an employment tribunal would not hear an ­unfair dismissal case unless the employee initially went through the statutory grievance procedure, and the employer would be presumed to have engaged in an unfair dismissal if it did not follow the statutory procedures. However, in response to complaints that this structure was overly rigid for handling disputes, the legislation was amended in 2009 so that the mandatory standard procedure became an advisory code of practice. Instead of barring claims, employment tribunals were given the authority to increase or decrease award amounts by up to 25 percent if the parties unreasonably fail to follow the procedures recommended in the code. The U.K. disciplinary and grievance procedures set up a system similar to that in the United States in that the establishment of internal procedures gives the organization a degree of protection against legal liability in the public realm. The 2009 amendments soften the extent of

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protection against liability and make the required procedures both less rigid and subject to a standard of reasonableness, which has echoes of the affirmative defense standard in U.S. sexual harassment cases. These developments, both in law and practice, in the area of employment dispute resolution resonate strongly with the self-regulatory theories that have gained currency in recent scholarship. Self-regulatory approaches seek to channel the internal structures and impulses of the targets of regulation to achieve desirable public objectives. As its name suggests, this approach emphasizes strategies that encourage selfregulatory behavior by private organizations, rather than direct regulatory oversight by governmental agencies. Advocates suggest that these self-regulatory approaches can be both more efficient and effective than traditional regulation in the modern world. For example, Cynthia Estlund in Regoverning the Workplace argues, “a forward-looking agenda for labor should embrace and try to steer the movement toward selfregulation—toward relying on, encouraging, and channeling the impulses and resources that lie within and among private firms toward public-regarding ends” (2010, 29). The positive side of the self-regulatory vision can be seen in aspects of the development of organization-centric systems in employment dispute resolution. In previous empirical research, I found evidence that the new American nonunion ADR procedures provide significantly greater workplace protections for employees against unfair discipline and dismissals than traditional nonunion grievance procedures that only have managerial decision-makers (Colvin 2003b). Similarly, it can be argued that the new grievance procedures encouraged by the U.K. legislation are a step forward from no encouragement for internal workplace procedures, yet preserve access to the public employment tribunals. By contrast, there is a cost to privileging self-regulation under U.S. nonunion ADR procedures that involve a trade-off in which employees are granted greater rights within the firm as organizational citizens, but the organization is shielded from oversight by outside actors, such as the public court system or independent unions. I describe the trend of using ADR to promote organizational self-regulation as strengthening the organizational citadel (Colvin 2003a). Going beyond the question of whether the trade-off of greater organizational citizenship for less external oversight is worthwhile, additional questions need to be posed about the self-regulatory approach after the decline or demise of the standard employment contract. A key assumption of self-regulatory theory is that an organization that should be engaging in self-regulation can be identified, and that its reach includes the desired targets of the regulatory initiatives. This may make sense in many employment situations involving conflict arising within wellestablished and ongoing employment relationships. But what if mem-

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bership within the self-regulatory organization is itself the question in dispute? Should we then be encouraging self-regulatory dispute resolution procedures that give primacy to this organization? In the following section, I discuss three prevalent types of employment disputes that implicate the question of the boundaries of membership in an organizational community.

Conflicts over Entry and Exit from the Self-Regulating Community Three of the most frequently arising types of disputes in the modern workplace challenge the self-regulatory approach to dispute resolution. These are disputes over membership in the community, disputes over ownership of intellectual property that arise on exit from the community, and disputes about the use of mandatory arbitration. As will be seen, such disputes cannot usefully or fairly be decided by favoring an organization-centric view of the firm.

Disputes over Membership A common dispute in the contemporary workplace concerns the question of who has status as an employee. Complementing the SHRM ­theory that the firm’s human resources strategy should be the key determinant of employment relations, the idea has developed that the organization itself should determine to what degree it owes obligations to those who perform work for it. In SHRM theory, a distinction must be drawn between the core workforce that provides the organization with the valuable human resources that give it competitive advantage and the noncore workforce in whom the organization should neither make significant investments nor assume significant obligations (Barney 1991). This conceptual distinction underlies strategies such as outsourcing parts of the firm’s workforce and using independent contractors rather than employees wherever possible. Initial versions of this trend focused on noncore functions such as custodial, cafeteria, maintenance, or payroll. The growing use of the core-noncore human resource strategy was explored in the widely publicized U.S. case of Vizcaino v. Microsoft Corp (102 F.3d 1006, 9th Cir. 1997), which dealt with Microsoft’s practice of using large numbers of temporary workers. Unlike the traditional image of temps as short-term workers filling relatively low-skilled positions, the Microsoft temps were performing high-skill jobs and had often worked for the organization for many years. Indeed, testimony in the case indicate that these workers, sometimes referred to as perma-temps, would often be working alongside regular employees and were indistinguish-

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able from them, apart from the different color of their employee badges and that a different organization (the temp firm “employer”) sent them their paycheck each month. The perma-temps in Vizcaino sued Microsoft, arguing that they were being misclassified as independent contractors and unfairly denied benefits, including particularly valuable company stock options, which they should have been entitled to as employees. They were ultimately successful in obtaining a $97 million settlement from Microsoft (Van Jaarsveld 2004). However, the broader impact of this case has been to encourage firms to take greater care in the design of their independent contractor arrangements to avoid subsequent finding of employment status. The new ADR procedures such as peer review, ombudspersons, and ICMS are deeply embedded in the organization and focus on ensuring procedural fairness in the application of its rules, policies, and norms, as opposed to a new public standard of substantive justice. Because of their organization-centric focus, they are not suited to resolving disputes about who is a true member of the community and who is an outsider. Deferring to the organization’s definition of a worker’s status would enable the organization to exclude anyone from membership in order to evade its labor law obligations and effectively to nullify all labor protective legislation (Stone 2006). Furthermore, it is unreasonable to expect a worker to be satisfied with dispute resolution procedures that emerge from the same organization that denies him or her status as a full member of that workplace community. Hence organization-centric mechanisms are not adequate for resolving disputes about who is an insider and who is an outsider to an organization.

Disputes About Intellectual Property A second category of employment-related disputes that has been growing in recent years concerns issues of intellectual property, trade secrets, and covenants not to compete. Unlike traditional employment disputes in which the employee is alleging some type of unfair treatment by the employer, in these cases, it is the employing organization that initiates a claim against the employee. Often the cases involve an allegation that the employee is appropriating some type of intellectual property or trade secret that by virtue of the employment relationship belongs to the employer. A notable feature of these types of claims is that they commonly arise in situations where the employee has left the organization and is now attempting to use the contested ideas or information for career advancement. Similar disputes arise concerning the enforcement of covenants not to compete. By definition, these disputes involve employer attempts to restrict the behavior of individuals who have severed their relationship with the organization. They often turn on interpreta-

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tion of covenants not to compete and agreements regarding ownership of intellectual property developed during the course of the relationship, both of which are both commonly included in initial hire contracts. Thus, the key events in this type of dispute—the circumstances of entry into the contract and the conduct after exit from employment—occur during time periods when the putative employee is not actually employed within the organization. This makes it problematic to assign resolution of such disputes to an organization-centric dispute resolution procedure that emphasizes fair enforcement of the norms and rules as among its members.

Disputes About Dispute Resolution Conflicts concerning mandatory arbitration comprise a third category of disputes in which an organization-centric approach to dispute resolution is problematic. As described earlier, mandatory arbitration is a key feature of the growing tendency to organization-centric dispute resolution in the United States. A major advantage of mandatory arbitration for employers is that they can unilaterally design and implement these procedures. When an individual is employed by the organization, he or she is obliged as a mandatory term and condition of employment to agree to submit all disputes to arbitration. However, when a dispute arises, employees often wish to challenge the applicability of mandatory arbitration procedures and to revive their right to access a judicial forum. In such cases, employees often claim that they did not give the requisite consent at the time the agreement was entered into, or that the terms of the agreement proffered by the employer were unconscionable. Both of these claims relate to events that have occurred before the individual actually entered the employment relationship. For example, one set of challenges focused on whether the entry into the arbitration agreement by the employee was knowing and voluntary. It is therefore necessary to determine what information was communicated to the employee before he or she entered into the agreement, at the time of initial hiring or at the employee’s initial orientation by management. Moreover, because disputes that reach arbitration usually involve dismissals, by definition the individual is no longer an employee of the organization. As noted, despite considerable controversy, the U.S. Supreme Court has expanded the reach of mandatory arbitration in employment disputes. In 2010, the Court was confronted with the question of who should decide whether a particular mandatory arbitration agreement was unconscionable. In Rent-a-Center West v. Jackson (130 S.Ct. 2772), the majority of the court held that such challenges should be decided by the arbitrator designated under the procedure, not by a court. The effective

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result of this case is that arbitrators selected under a procedure designated by an employer will, in most cases, determine their own jurisdiction, even in cases where an individual is no longer an employee and may be arguing that he or she never properly entered into an agreement to have the arbitrator decide the dispute in the first place.

Alternative Approaches for a Post–Standard Contract World In resolving employment disputes in a post–standard contract world, dispute resolution systems not tied to any individual employing organization offer an advantage. Systems that use specialized public employment tribunals, such as continental European labor courts or the British employment tribunal system, may have an advantage in this regard over systems like the U.S. procedures tied to a specific workplace. The French system of conseils de prud’homme is an interesting variant on the public employment tribunal approach in that it is composed of representatives of employers and employees who are elected on a regional geographical basis rather than for any specific organization. Although the origins of this system are quite old, the idea of regional- or industry-focused dispute resolution panels might be a useful approach for employees pursuing careers that involve moving between various firms within a regional industry cluster. For example, in the American setting, one might envision something like a Silicon Valley employment dispute tribunal that had employer and employee representatives who would be well versed in the nature of careers in that region and able to resolve conflicts that emerge in the context of its environment of high employee mobility and frequent organizational turnover. Another interesting innovation is the Australian Fair Work Ombudsman, which was established as part of the recent Australian labor and employment reforms introduced in 2009 by the Labour government. The Fair Work Ombudsman is a public agency that provides advice to both employees and employers on workplace rights and responsibilities. It has the power to investigate and enforce workplace laws, but also operates through education and the establishment of codes of best practice for employment. The mixed set of tools for promoting workplace rights available to the Fair Work Ombudsman echoes the diverse approaches used by private organizational ombudsman offices to promote fairness within organizations. However, as a public office, the Fair Work Ombudsman has a mandate to ensure that public policies—not merely organizational norms—are enforced. It also has the potential to address concerns and conflicts of individuals transitioning between organizations in post–standard contract careers.

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Conclusion In conclusion, I raise three problems that need to be addressed in thinking about how to resolve conflicts in a post–standard contract employment world. First, how will employees obtain representation? In the old standard contract world, labor organizations built their representational strength by organizing workers in individual workplaces. Even when unions were organized at the national or industry level, they were commonly built on membership centers in individual workplaces. In an employment system in which workers have diminished attachment to an individual workplace, union membership will suffer, as will representational structures to address individual employee grievances and complaints. Absent the connection to the shop steward, staff representative, or works councilor of the old standard contract representation systems, who will the employee in the post–standard employment contract world turn to for assistance in resolving an employment conflict? Second, in the new employment world, entitlements that accrue to long-term employees are lost. In particular, entitlements tied to seniority, such as greater protections against arbitrary dismissal or longer notice periods for terminations, lose their value in post–standard contract careers that lack long-term attachment to any one organization. Under the old standard contract system, an idea held sway that over time an employee developed something akin to a property interest in the job. For post–standard contract careers, we need to imagine the possibility of individuals accruing a transferrable bundle of employment rights over their careers. That is, perhaps a mechanism is needed by which an employee who has had a long career working for a number of different organizations in an industry can have that history of service taken into ­account in the resolution of an employment conflict. In this way, the post–standard contract version of seniority rights might accord a degree of respect for contributions made over a career to an industry, profession, or community. Third, where will employees find sources of power in a post–standard contract world? In the old standard contract model, employees derived bargaining power in part from their ability to withhold their labor from the employing organization through strikes and other work action. Even the white-collar nonunion employee in a classic internal labor market derived bargaining power from the accumulation of firm-specific human capital the organization would be loathe to lose. Such sources of bargaining power, deriving from the strong attachment of employees to the organization, provided the underpinning for negotiation of favorable contracts and inhibited the employer from taking excessive reprisals toward employees in the event of a dispute. However, in the post–standard con-

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tract world, the weakening of the attachment of the employee to the organization reduces bargaining power and limits the employee to the strength of his or her position in the external labor market. The issue of power becomes acute in the context of an organizational-centered structuring of the employment relationship. Absent an employee power in relation to the organization, why should an employer listen to an employee when determining its internal rules, practices, and norms? How then do employees engage and participate in the process of ordering this organization-centric world when their careers are increasingly disconnected from any individual organization?

References Akkerman, Agnes. 2008. “Union Competition and Strikes: The Need for Analysis at the Sector Level.” Industrial & Labor Relations Review 61(4): 445–59. Arthur, Jeffrey B. 1992. “The Link Between Business Strategy and Industrial Relations System in American Steel Minimills.” Industrial & Labor Relations Review 45(4): 488–506. ———. 1994. “Effects of Human Resource Systems on Manufacturing Performance and Turnover.” Academy of Management Journal 37(3): 670–87. Barney, Jay. 1991. “Firm Resources and Sustained Competitive Advantage.” Journal of Management 17(1): 99–120. Brown, William, Alex Bryson, John Forth, and Keith Whitfield. 2009. The Evolution of the Modern Workplace. Cambridge: Cambridge University Press. Bureau of Labor Statistics. 2012. Union Members, 2011. Washington, D.C.: U.S. Department of Labor. Cappelli, Peter. 1999. The New Deal at Work. Boston, Mass.: Harvard Business School. Clermont, Kevin M., and Stewart J. Schwab. 2004. “How Employment Discrimination Plaintiffs Fare in Federal Court.” Journal of Empirical Legal Studies 1(2): 429–58. Colvin, Alexander J.S. 2003a. “Institutional Pressures, Human Resource Strategies, and the Rise of Nonunion Dispute Resolution Procedures.” Industrial and Labor Relations Review 56(3): 375–92. ———. 2003b. “The Dual Transformation of Workplace Dispute Resolution.” Industrial Relations 42(4): 712–35. ———. 2004. “Adoption and Use of Dispute Resolution Procedures in the Nonunion Workplace.” Advances in Industrial & Labor Relations 13(1): 71–97. ———. 2011. “An Empirical Study of Employment Arbitration: Case Outcomes and Processes.” Journal of Empirical Legal Studies 8(1): 1–23. Estlund, Cynthia. 2010. Regoverning the Workplace: From Self-Regulation to Co-Regulation. New Haven, Conn.: Yale University Press. Farber, Henry S. 1995. “Are Lifetime Jobs Disappearing? Job Duration in the United States: 1973–93.” NBER working paper no. 5014. Cambridge, Mass.: National Bureau of Economic Research. Fernie, Sue, and David Metcalf. 2004. “The Organizational Ombuds: Implica-

210     Rethinking Workplace Regulation tions for Voice, Conflict Resolution, and Fairness at Work.” Advances in Industrial and Labor Relations 13(1): 97–135. Folberg, Jay, Dwight Golann, Thomas J. Stipanowich, and Lisa A. Kloppenberg. 2010. Resolving Disputes: Theory, Practice, and Law, 2nd ed. New York: Aspen Publishers. Jacoby, Sanford M. 1999. “Are Career Jobs Headed for Extinction?” California Management Review 42(1): 123–45. Katz, Harry C., and Owen R. Darbishire. 2000. Converging Divergences: Worldwide Change in Employment Relations. Ithaca, N.Y.: ILR Press. Lipsky, David B., Ronald L. Seeber, and Richard D. Fincher. 2003. Emerging Systems for Managing Workplace Conflict. San Francisco, Calif.: Jossey-Bass. Osterman, Paul. 1994. “How Common Is Workplace Transformation and Who Adopts It?” Industrial Labor Relations Review 47(1): 173–88. ———. 2000. “Work Reorganization in an Era of Restructuring: Trends in Diffusion and Effects on Employee Welfare.” Industrial Labor Relations Review 53(1): 179–96. Rosenfeld, Jake. 2006. “Desperate Measures: Strikes and Wages in Post-Accord America.” Social Forces 85(1): 235–65. Schneider, Martin. 2001. “Employment Litigation on the Rise? Comparing British Employment Tribunals and German Labor Courts.” Comparative Labor Law & Policy Journal 22(2): 261–80. Stone, Katherine V.W. 2004. From Widgets to Digits: Employment Regulation for the Changing Workplace. Cambridge: Cambridge University Press. ———. 2006. “Legal Protections for Workers in Atypical Employment Relationships.” Berkeley Journal of Employment and Labor Law 27(2): 251–86. Van Jaarsveld, Danielle. 2004. “Collective Representation Among High-Tech Workers at Microsoft and Beyond: Lessons from WashTech/CWA.” Industrial Relations 43(2): 364–85.

Part IV Beyond the Employment Nexus

Chapter 12 Flexibility and Security in Employment Regulation: Learning from Denmark thomas bredgaard

I

n a remarkably short time, flexicurity, a portmanteau of flexibility and security, has emerged on the international political scene as a new and popular concept for reforms of labor markets, labor laws, and employment policies. An innovative policy experiment, it promises to reconcile the contradictory demands of employers wanting more flexibility in employment relations with the demands of workers wanting more job security and social security. The Danish experience is particularly interesting because it seems to contradict the assumption that open-ended, full-time contracts are a thing of the past. In the Danish case, there is not much evidence to support the assumption that atypical forms of employment such as fixedterm contracts, temp agency work, self-employment, or part-time employment are becoming more common. I argue that the resilience of regular full-time employment relationships is related to the specific configuration of external flexibility and external security of the Danish labor market. Standard employment contracts are usually defined as a combination of long-term commitment with the same employer and job security in internal labor markets (see chapter 4, this volume). In this case, Denmark may never have had a standard employment relationship. Before discussing the peculiarities of the Danish employment system, I describe and define the concept of flexicurity.

Flexicurity: The Concept The concept of flexicurity is relatively new in academic and policy discourse. It was first coined in the Netherlands in 1995 in a memorandum 213

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by the minister of social affairs and employment. Flexicurity was defined as a policy strategy to modify job protection for workers on standard contracts and improve job and income security for flexible workers on temporary contracts. In 1999 this strategy materialized into new legislation, the Act on Flexible Work (Flexwet Act) in which dismissal protection for workers on standard contracts was modified, the permit system for operating temp agencies was abolished, and job and employment security for atypical workers was improved (Wilthagen and Tros 2004). The academic roots of flexicurity can also be traced to the Netherlands and the research group around Professor Ton Wilthagen (Wilthagen 1998). The second empirical reference source for the concept of flexicurity comes from Denmark. In the early 2000s, the concept came to the attention of Danish policymakers and academics (Madsen 2002, 2003, 2004; Bredgaard, Larsen, and Madsen 2005). It was realized that, as a concept, flexicurity encapsulated specific characteristics of the Danish labor market model, specifically liberal dismissal protection, a relatively generous unemployment benefit system, and active labor market policies. These three elements were labeled the “golden triangle” (Danish Ministry of Labour 1999; Madsen 1999). At the same time, international organizations such as the International Labour Organization (ILO) and the Organisation for Economic Co-operation and Development (OECD) touted the Danish model of flexicurity as a “best practice” (Auer 2000; Auer and Cazes 2003; OECD 2004, 97). The flexicurity discourse soon spread to the European Union. The concept was not entirely new to decision-makers in Brussels, because various EU bodies had been referring to the need to balance between ­employment flexibility with security since the mid-1990s (compare Wilthagen and Tros 2004). But from the mid-2000s, flexicurity suddenly became a “political celebrity” in the European discourse on social and economic policies (Jørgensen and Madsen 2007). For the EU Commission, flexicurity became an overarching vision to balance the expectations of economic competitiveness, full employment, and social cohesion. In 2007, the European Council decided on a set of common principles on flexicurity and decided to apply the open method of coordination for reporting and monitoring progress in its member states. The EU Commission acknowledged that there were different “pathways” to flexicurity and that “one size would not fit all.” Flexicurity was defined by four dimensions: flexible and reliable contractual arrangements, comprehensive lifelong learning strategies, effective active labor market policies, and modern social security systems (Council of the European Union 2007). Although these components were broad and open to interpretations, it is striking how similar the four dimensions were to the main elements of the Danish version of flexicurity (Bredgaard, Larsen, and Madsen 2008).

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The upsurge in European popularity can be explained by flexicurity’s promise to reach win-win solutions by bridging the interests of business and employers, on the one hand, and trade unions and workers on the other. As a result, the concept was easy to adapt to the role of the EU Commission as a policy-broker (Keune and Jepsen 2007). Moreover, the concept is ambiguous and difficult to define, making it easy for different actors and organizations to adapt to their own interpretations and interests. This vagueness of the concept probably explains why flexicurity succeeded in turning into a politically attractive semantic magnet (Barbier 2007). The European economic crisis since 2008 seems, nonetheless, to have dampened the interest of European decision makers on the integrated and abstract reform ambitions of the flexicurity agenda, and have turned their attention toward more immediate concerns of financial recovery and crisis management. Nonetheless, the aspiration of flexicurity remains an important European policy goal (European Commission 2010a, 2010b, 2011).

Defining Flexicurity How can we define this catchy, but elusive concept? At least three definitions of flexicurity can be identified in the literature: a policy strategy, a certain state of affairs on the labor market, and an analytical concept (Wilthagen and Tros 2004; Bredgaard, Larsen, and Madsen 2005). The most precise and most widely used definition of flexicurity comes from Wilthagen and his colleagues. Wilthagen, more specifically, defines the concept as a policy strategy: “A strategy that attempts, synchronically and in a deliberate way, to enhance the flexibility of labor markets, work organization and labor relations on the one hand, and to enhance security—employment security and social security—notably for weaker groups in and outside the labor market, on the other hand” (Wilthagen and Tros 2004, 169). To qualify as flexicurity, the policy strategy must be synchronic (include elements of flexibility and security at the same time), deliberate (the actors must be conscious of this mutuality), and targeted at weaker groups (persons on the margins of or outside the labor market). This definition is appropriate to describe the policy strategy underpinning policy developments in the Netherlands from the mid-1990s when policymakers and social partners aimed at normalizing atypical employment relationships. However, Wilthagen argues that the definition is relevant ­beyond the original Dutch context. In that case, flexicurity should be understood as a political attempt to normalize atypical forms of employment (temp-agency work, fixed-term contracts, part-time work, dispatched workers, and so on). This can be done by offering more security

216     Rethinking Workplace Regulation Table 12.1   Flexibility Versus Security Trade-Offs Flexibility-Security

Job Security

Employment Security

Income Security

Combination Security

External-numerical Internal-numerical Functional Variable pay Source: Author’s compilation based on Wilthagen and Tros (2004).

in such “insecure” employment relationships (for instance, more job protection, rights to an indefinite contract after a specified number of renewals of fixed-term contracts, income transfers when unemployed, sick, or injured, pension entitlements, rights to education and training and leave entitlements). It remains unclear, however, how such policy strategies will at the same time increase the flexibility of either atypical or standard workers. Second, to include situations where flexicurity describes a certain state or condition of the labor market, as in the Danish case, Wilthagen and Tros add another definition: Firstly a high degree of job, employment, income and combination security that facilitates the labor market careers and biographies of workers with a relatively weak position and allows enduring and high-quality labor market participation and social inclusion, while at the same time providing a degree of numerical (both external and internal) and functional and wage flexibility that allows for labor markets’ (and individual companies’) timely and adequate adjustment to changing conditions in order to maintain and enhance competitiveness and productivity. (compare Wilthagen and Tros 2004, 170)

This definition better captures the Danish version of flexicurity, even if the normative addition about facilitating the labor market careers and biographies of workers in a relatively weak position is not particularly relevant. The Danish case is a stylized description of the ordinarynormal labor market and not particularly addressed at weaker groups. The third definition of flexicurity conceives of it as an analytical approach to empirical analyses that combine security and flexibility in various national labor market systems or in specific programs or policies. It is important that both flexibility and security are multidimensional concepts. The innovation of flexicurity as an analytical concept is to combine the dimensions of flexibility with various dimensions of security. There are many ways to combine flexibility and security, as shown in table 12.1. The matrix in table 12.1 offers a heuristic tool that can be applied to

Flexibility and Security in Employment Regulation     217

identify flexicurity policies empirically as specific trade-offs, or at least as interconnections between flexibility and security. It can also be used as an analytical framework to identify stylized trade-offs between flexibility and security in different national labor-market regimes. In the following section, I apply the flexicurity framework to describe the relationship between specific dimensions of flexibility and security on the Danish labor market. I focus on the combination between external-numerical flexibility, income security, and employment security. These relationships are mainly regulated by law and collective agreements. I also address the most important preconditions (socioeconomic, political and cultural) of Danish flexicurity by describing how the combination between flexibility and security emerged and developed.

Flexicurity: The Danish Case When Danish decision-makers and experts in the beginning of the 2000s discovered flexicurity, it quickly became shorthand for the Danish labor market or the Danish model. However, there is much more to flexicurity than Denmark and there is more to the Danish labor market than flexicurity, but the concept remains helpful in delineating some specific institutional characteristics of the Danish labor market and its interrelationships. These interrelationships make the Danish labor market different from most other labor markets in the world. At a more general level, Danish flexicurity demonstrates, to some observers, that it is possible in the global economy to combine economic competitiveness and prosperity with generous and expensive welfare state policies (Daemrich and Kramarz 2009). One distinguishing feature of Danish labor law is that it includes practically no statutory or contractual protection for job security. Rather, in Denmark, the share of employed persons who change jobs from one year to the next is among the highest in the EU.1 In this and other respects, the Danish welfare and employment system displays a hybrid character between liberal welfare states characterized by high numerical flexibility and generous Nordic welfare regimes characterized by high social security. Some observers have suggested that this hybrid is unstable and bound eventually to head off in either the direction of liberal or coordinated market economies (Hall and Soskice 2001). But, as will be shown, Danish flexicurity is the result of a long evolutionary development, supported by relatively stable institutions and class compromises. Crucial in this institutional configuration is the legitimacy of strong and organized social partners capable of striking negotiated and flexible agreements on flexibility and security. Although there is not, however, a direct chain of causality from flexicurity to labor market performance, the Danish labor market has been

218     Rethinking Workplace Regulation Table 12.2  Labor Market Indicators in 2009 United Denmark Sweden Netherlands Kingdom Germany EU-27 Labor force participation rate (percentage of population age fifteen to sixty-four) Employment rate (percentage of population age fifteen to sixty-four) Unemployment rate (percentage of labor force fifteen and older) Long-term unemployment rate (percentage of labor force) Youth unemployment rate (percentage of labor force fifteen through twenty-four)

80.7

78.9

79.7

75.7

76.9

71.1

75.7

72.2

77.0

69.9

70.9

64.6

  6.0

  8.3

  3.4

  7.6

  7.5

  8.9

  0.5

  1.1

  0.8

  1.9

  3.4

  3.0

11.2

25.0

  6.6

19.1

10.4

19.6

Source: Author’s compilation based on European Commission (2010c).

among the top performers in Europe both before and also during the current global economic crisis. As seen in table 12.2, Danish participation and employment rates remain among the highest in the European Union. Unemployment rates are among the lowest, despite a rapid increase in unemployment due to the crisis. Furthermore, the structure of unemployment shows that Denmark’s share of long-term unemployment and youth unemployment is among the lowest in the European Union (see table 12.2). The causality between flexicurity and labor market performance is not simple and, so far, not well documented empirically. The relationship between employment protection and the standard employment relationship seems more straightforward. We may assume that countries with stringent Employment Protection Legislation (EPL) for regular workers must resort to other types of flexibility to achieve productivity and com-

Flexibility and Security in Employment Regulation     219

petitive advantages. This can be internal flexibility (like functional, working time or wage flexibility) or external flexibility (performed by nonregular workers). There seems to be some empirical support for this assumption. For instance, the European Commission suggests that stringent rules on regular contracts tend to increase the incidence of temporary work, although the statistical relationship appears rather weak (compare European Commission 2006, 89). In the Danish case, the outcome of its particular combination of flexibility and security means that a relatively constant share of the working age population is in open-ended, regular, at-will employment relationships. In contrast to most other developed nations, Denmark’s share of nonstandard work has remained relatively constant. Further, the share of persons with fixed-term contracts as a percentage of total employees has fallen slightly, from 11.6 percent in 1995 to 8.9 percent in 2009. In the same period, the share of self-employed has also fallen slightly, from 7.6 percent of total employment in 1995 to 6.2 percent in 2009. Both of these figures are well below the European average. In contrast, Denmark’s share of part-time employment remains high and has increased from 21.8 percent of total employment in 1995 to 26.0 percent in 2009 (compare European Commission 2010c, various years). But part-time workers are in permanent, that is, at-will contracts and are in general covered by the same collective agreements and legislation as full-time workers. These figures on the persistence of regular, as opposed to atypical, employment may mean that at-will employment contracts provide sufficient levels of job mobility and managerial freedom for employers, and externalize social costs to the government budget. The liberal rules and procedures for dismissal that have characterized Danish labor relations for more than a century, as well as other pillars of the employment system (income security and employment security), also have a firm institutional foundation. The Danish combination of a flexible labor market with a relatively generous social security system and active labor market policies are often depicted as a so-called golden triangle. This illustration tends to neglect the important and independent role played by adult continuing vocational training. I prefer to depict the Danish employment system as a parallelogram (see figure 12.1). The arrows between the corners illustrate the flow of people. The flexibility of the labor market is indicated by rates of job turnover and average tenure that is comparable to the liberal Anglo-Saxon countries. High job-to-job mobility is generally found in countries with liberal employment protection. Since the early 1990s, the OECD has published measures on the strictness of employment protection as a composite index of protection for permanent workers against (individual) dismissal, specific requirements for collective dismissal and regulation of temporary forms of employment. From 1995, the Danish summary indicator has re-

Flexible labor market

Source: Author’s compilation.

• Two years eligibility for unemployment insurance benefits • Up to 90 percent of former income • Indefinite means-tested social assistance

Generous income security

• High job mobility • Low tenure • Low strictness of employment protection

Figure 12.1   Danish Flexicurity

• • • •

Strict criteria for showing availability High spending on ALMP Low incidence of long-term unemployment Motivation and qualification effects

Active labor market

Continuing vocational training

• Expenditures and participants among the highest in the world

Flexibility and Security in Employment Regulation     221

mained unchanged (1.5) and consistently ranks among the lowest in the OECD area (Venn 2009). Recent research on the impact of employment protection has found that strict regulations can reduce job flows, have a negative impact on some groups of workers (notably youth), encourage labor market duality and hinder productivity and economic growth (compare Venn 2009, 5). Therefore, the Danish labor market, like that of Anglo-Saxon countries, is characterized by high external-numerical flexibility and low levels of job security. But, like other Nordic countries, Denmark is also characterized by a generous and expensive welfare state. For the labor market, this welfare state takes the form of relatively generous income security, especially unemployment benefits and social assistance for the unemployed. High job-to-job mobility increases individuals’ risk of unemployment. Each year, about 20 percent of employed persons experience unemployment, and a shorter or longer period on either unemployment benefits or social assistance. One of the main assumptions of flexicurity is that the availability of generous income replacements increases the risk-taking propensities of the labor force, thereby facilitating job mobility. Compared with other OECD countries, Denmark has one of the longest entitlements periods for unemployment insurance (now two years)2 and highest replacement rates for low-wage earners (up to 90 percent of former income). If unemployment benefits are exhausted or the unemployed individual has not paid contributions into the unemployment insurance funds, then means-tested social assistance is available as a last resort, at approximately 80 percent or 60 percent of the unemployment insurance benefit (UIB) level, depending on caring responsibilities. Unemployed individuals have to demonstrate labor market availability by searching for jobs, taking job offers at local job centers, and participating in activation programs. In international comparisons, the Danish rules for showing labor market availability are relatively strict (Velfærdskommissionen 2005, 96) and have been tightened repeatedly in the last decade. Therefore, I contend that there is an intimate link between job and income security: workers and trade unions accept low job security because they are compensated by relatively generous income security. Alternatively, companies and their employers’ associations accept the relatively generous welfare services and unemployment benefits because they are compensated with a flexible labor force. The potential disincentives deriving from generous income replacement rates are not only addressed by strict availability criteria but also by active labor market policies; the third corner in the parallelogram. Among OECD countries, Denmark has one of the highest total expenditures on labor-market policies, 2.56 percent of gross domestic product (GDP) in 2008, as well as the highest expenditure on active labor market

222     Rethinking Workplace Regulation

policies, 1.35 percent of GDP in 2008 (OECD 2010). Furthermore, the OECD has demonstrated that higher expenditure on active labor-market policies tends to increase workers’ perceptions of employment security (OECD 2004, 95–98). As an indicator of how effective active labor market policies are in integrating unemployed persons into the labor market, the incidence of long-term unemployment as a percentage of total unemployment has remained among the lowest in the EU area. Those who do become unemployed long-term end up a target group for active labor market policies, which ideally assist them in finding employment again. Active labor market policies have two important and somewhat contradictory functions: to motivate the unemployed to find work without assistance (motivation effect), and to qualify those who cannot find employment on their own (qualification effect). Finally, continuing vocational training (CVT) or lifelong learning plays an important role in the Danish version of flexicurity. By international comparison, Denmark’s expenditures and share of training participants is among the highest in the world (Trepartsudvalget 2006, chapter 11). For instance, the Eurostat Labour force Survey in 2009 found that Denmark had the highest rate of participation in adult vocational training in Europe. More than 30 percent of people between twenty-five and sixty-four had participated in adult vocational training within the previous four weeks compared to an EU-27 average of 9 percent. Participation in CVT underpins a flexible labor market by increasing the employability of its labor force—that is, improving their numerical and functional flexibility (Bredgaard et al. 2009, 7011).

Preconditions and Challenges The interrelationship between flexibility and security of Denmark’s labor market is a product not of any deliberate policy strategy, but rather of specific institutional, political, and cultural preconditions, which I describe in figure 12.2. I also summarize the most important current challenges to the balance between flexibility and security. The liberal employment protection that underpins the flexible labor market has characterized the Danish labor market for more than a century, since the so-called September Compromise between capital and labor in 1899. In this compromise, trade unions accepted employers’ right to manage and their right to hire the number and types of workers they deemed necessary. In return, employers accepted the right of workers to join unions and their right to go on strike. With few modifications, the employment protection instituted by the September Compromise has remained in effect until now. The regulation and implementation of employment protection is done through collective agreements negotiated by the social partners for each occupational group. This makes the sys-

Generous income security

Flexible labor market

September Compromise between capital and labor (1899) Regulation by collective agreements Law on Salaried Workers (1938) Many SMEs

Active labor market

Continuing vocational training

Source: Author’s compilation.

• Unemployment insurance administered by unemployment insurance funds (1907) • Public employment service responsible for reintegration and unemployment insurance funds responsible for benefit administration (1969) • Municipalities responsible for social assistance (1976)

• • • •

Figure 12.2  Preconditions of Danish Flexicurity

• Activation policies from early 1990s • Learn-fare rather than work-fare • Administrative corporatism

• Financed by the public budget for employed and unemployed • Transferable, general skills • Administrative corporatism • Rights to training in collective agreements • Indirect subsidy to the competitiveness of Danish firms

224     Rethinking Workplace Regulation

tem flexible and adaptable to the various diversities of each occupational and sectoral group. Conflict resolution takes place in a specialized arbitration system administered by the social partners in consultation. An important exception to this corporatist implementation is the 1938 law on salaried workers (Funktionærloven). The law defines a salaried worker as a person who conducts office work, clinical work, or similar functions, or supervises the work of others. The majority of public employees and about half of the employees in the private sector are, by implication, covered by the law. The law stipulates, among other things, a set of dismissal rules, especially notice periods depending on the duration of employment. By international comparison, this law seems rather flexible, in that public employees enjoy no special protection and the notice periods and severance pay are comparatively low. Low job protection is functional in the Danish industrial structure, which is dominated by small and medium-sized enterprises (small internal labor markets). It is, furthermore, in line with the long liberal tradition of the Danish welfare state, which, among other things, is attributable to a tradition whereby social partners have been left to regulate most of the terms and conditions important to the labor market themselves, in contrast to state regulation found in other countries (Jørgensen 2002). Despite low levels of formal job protection, the sense of job security among all subgroups of Danish workers is high (Auer 2007). During the current financial crisis, this feeling has declined somewhat with the rapid climb of unemployment. When the social partners began collective bargaining in the private industry sector in the spring of 2009, trade unions succeeded in responding to their members’ feeling of insecurity by creating a new right to severance pay.3 In general, the flexibility of the labor market will likely decrease if the dismissal costs of employers increase, but the extent to which this new severance pay will affect the hiring and dismissal practices of Danish employers is still unclear. The backbone of Danish flexicurity is the combination of a flexible labor market with generous income security. The unemployment benefit system dates back to the unemployment laws of 1907, which were administered by union-sponsored, but state-licensed, unemployment insurance funds. In 1969, the public employment service took over responsibility for reintegrating the unemployed in the labor market, but the unemployment insurance funds remained responsible for benefit administration and, from 1979, administration of the early retirement scheme as well. At the same time, net compensation rates of unemployment benefits were increased and the government took over responsibility for financing increases to unemployment benefit rates. A historical compromise was thus struck between employers’ demands for job-to-job mobility to avoid wage drift, and trade union demands for better income security during unemployment and financial compensation for unem-

Flexibility and Security in Employment Regulation     225

ployment fluctuations. Later, in 1976, the social assistance system was reformed as a safety net of last resort. The responsibility for administration of social assistance and other welfare benefits was also decentralized to local governments. As a result, a two-track income security system was institutionalized. The public employment service and the unemployment insurance funds administered the unemployment insurance system in consultation with social partners. The municipalities administered social assistance and other related welfare benefits. These two types of benefits were also constructed on different principles. Eligibility for ­unemployment insurance depended on voluntary membership contributions, in contrast to the social assistance system, which became meanstested. In international comparison, however, both unemployment ­insurance and social assistance provide relatively generous income replacement rates. In recent years, the generosity of the income security system has declined. First, again compared internationally, the net compensation rate is high for low-wage earners and for those unemployed long-term, but for high-wage earners with short durations of unemployment is surpassed by other countries. Second, all types of welfare benefits, including unemployment benefits and social assistance, are regulated each year on the basis of developing average wages, but with a 0.3 percent deduction and excluding pension contributions. Since the mid-1980s, the deductions and exclusions has led to a rather substantial decline in net compensation rates. Finally, the unemployment benefit period has recently been reduced to two years. The net compensation rates for specific groups on social assistance have also been reduced to “make work pay” (for example, refugees, immigrants, and married couples on social assistance). This is not to say that income security has suddenly become ungenerous, but that the relative decline in generosity has affected the propensity to join unemployment insurance funds, thereby affecting the labor force’s level of risk-aversion. As membership in unemployment insurance funds and trade unions declines, the legitimacy of the Danish model of voluntarist and flexible labor market regulation declines too, increasing pressure for state legislation.4 Declining income security has already led to demands by trade unions for greater job security. The third leg of Danish flexicurity, active labor market policies, is relatively new, and in its present form dates from the labor market reforms of 1994. This reform marked a significant shift from a passive to a more active labor market policy. The trade unions in particular made concessions by accepting shorter eligibility periods for unemployment benefits (initially seven plus two years) and by accepting that the former right to regain eligibility by participating in activation measures was abolished. In return, the trade unions got a more active labor market plan with intensified and individually tailored activation policies. The government

226     Rethinking Workplace Regulation

and social partners thus compromised: less income security for more employment security. Organizationally, implementation was decentralized to regional labor market councils in which the social partners had strong influence over the administration of the public employment service. This reform was combined with an expansive fiscal policy that kick-started private consumption. Unemployment responded quickly and began declining from its peak of 12 percent of the labor force in 1993 to 5 percent in 2001. In 2001, a liberal-conservative government took office. Its main objective in labor market policy, at least until the financial crisis in 2008, was increasing effective labor supply. The activation strategy was extended to include new target groups like people on sickness insurance benefits, and income benefits were reduced for specific groups to “make work pay.” Organizationally, the responsibility for policy implementation was transferred to local governments (municipal job centers) and social partners became sidelined with a more reactive role. Therefore, in the last decade there has been a stronger focus on the “motivation effect” of employment policies, rather than their “qualification effect” and a shift toward “work first” policies (Larsen 2009). Again, this transformation of the substance and organization of labor market policies does not imply that employment security is disappearing or that the new employment policies are not capable of reintegrating the unemployed on the open labor market. But the probability of revolving door and carousel effects has increased at the expense of longer-term sustainable job matching. Finally, continuing vocational training plays an important role in the effect of Danish flexicurity. Normally, when job-to-job mobility is high, the incentive for employers to invest in the human capital of their workers is low due to fear of poaching. This is especially so for investments in general and transferable skills. In the Danish case, the government and social partners stepped in to avoid underinvestment in lifelong learning. The CVT system is predominantly financed by the public budget. Therefore, CVT activities are more likely to provide general rather than firmspecific skills. Social partners are institutionally committed to planning and implementing CVT policies. A specific institutional characteristic of the Danish system is that CVT is provided for both the employed and the unemployed, and that collective agreements grant individual rights to participation in lifelong learning. Social partners plan and administer the CVT system, even if the state government is its main financier. Therefore, the financing system externalizes the costs of training and education from the company level, and indirectly serves as a government subsidy to bolster the competitiveness of Danish companies. Partly as a result of this and the extensive inducements for participation in CVT, Denmark has for a number of years ranked among the top performers in Europe in relation to CVT participation.

Flexibility and Security in Employment Regulation     227

Nonetheless, this system faces some important challenges. First, the unskilled are less likely to participate in CVT than other occupational groups. This is problematic in light of the skills bias for technological developments and globalization. Second, the global financial crisis and the economic recovery plan of the government, among other things, challenge the foundation of the CVT system by imposing reductions in spending and in entitlements to CVT-courses. Third, the government has recently reduced spending on other labor market programs. For example, in January 2011, the government proposed to gradually phase out early retirement benefits.5 Some of these institutions and compromises have been shaken by the current financial crisis and the economic recovery policies of the Danish government. The government has recently demonstrated that reducing the public deficit is more important than the sustainability of Danish flexicurity. The reduction to the unemployment benefit period is likely to result in strong demands by trade unions for more job security during the next round of collective bargaining.

Transfer of Policy Lessons from Danish Flexicurity? The current balance between flexibility and security in Danish employment regulation is the result of a long and gradual institutional history, and not the result of any deliberate or recent policy strategy. This history makes Danish flexicurity impossible to export wholesale to other contexts where different institutional preconditions prevail. Of course, countries with their own unique historical and institutional backgrounds may be inspired by the European policy discourse in general, or by Danish flexicurity experiment specifically. There are, however, at least three important impediments to implementing flexicurity-oriented policy reforms. One is lack of social dialogue and mutual trust. The two foremost examples of flexicurity, the Netherlands and Denmark, both emerged from a particular set of favorable historical circumstances, namely corporatist systems of collective bargaining with a long tradition of cooperation, coordination, and mutual trust between social partners and the government. Mutual trust between the government and social partners is an important precondition for the balance between external flexibility and security. The government must trust that social partners are capable of regulating the labor market by collective agreements and trust in their ability to compromise and implement policies that cover the entire labor market. In return, social partners are granted an institutionalized voice in the formulation and implementation of policy decisions on labor market issues. Similarly, the level of trust between trade unions and employ-

228     Rethinking Workplace Regulation

ers’ associations and the climate of collaboration on workplace issues are both vital for reaching balanced compromises and negotiated solutions (Bredgaard, Larsen, and Madsen 2006). These preconditions are not easily replicated in other countries. Yann Algan and Pierre Cahuc (2006) have argued that some continental and Mediterranean countries cannot implement Danish flexicurity because they lack the public spiritedness necessary for it to work. For example, they claim that generous unemployment insurance raises moral hazard issues that are much more difficult to overcome in countries where individuals are more prone to cheating to secure government benefits. Another challenge in implementing flexicurity is making a transition from internal to external combinations of flexibility and security. This will typically involve core workers and their trade unions accepting increased numerical flexibility (loosening EPL), and therefore uncertainty in their working life, in order to receive compensation in the form of improved security provided by employers or the government, especially employment security and income security. For regular employees, this imposes a risk of being hijacked by accepting more external flexibility without gaining a reward in the form of increased employment and income security. Similarly, trade unions in European countries where job protection is high for core workers (like in Spain, Portugal, Italy, France) have been skeptical of policy proposals in the European discourse that suggest a transformation from job security to employment security. Their resistance relates, among other things, to the vested interests of “insiders” (employed workers and trade unions) who want to avoid reforms that harm their interests, such as loosening EPL for regular workers and easing access to permanent jobs for the unemployed or the nonstandard employed. Thus policymakers often introduce reforms at the margins, like reforms of temporary contracts, which may eventually lead to greater duality in labor markets (European Commission 2006, 110). A possible way out of this impasse is to try to buy out resistance to reforms by implementing compensatory schemes for “losers.” In the Danish case, the reduction in the length of the unemployment benefit period was compensated by investments in active labor market policies. The third impediment is that reforms to labor markets that are inspired by the principles of flexicurity are likely to have budgetary and financial implications for governments, social security funds, enterprises, and possibly workers’ incomes as well. The European Expert Group on Flexicurity, in their report to the European Commission, notes that the financial and budgetary costs should be assessed against the direct budgetary benefits of enhanced labor market dynamism enjoyed by en­ terprises, as well as the more general societal benefits of enhanced competitiveness, employment, and productivity (2007, 35). Nonetheless, the problem is that though costs are short term and tangible, the benefits are

Flexibility and Security in Employment Regulation     229

long term and uncertain. A policy option is, therefore, to introduce phased reforms and transitional arrangements. Transferring policy from the Danish flexicurity model would certainly mean higher public spending on income security, active labor market policies, and lifelong learning systems in most countries. This would, in the short term, be hampered by fear of increasing public budget deficits. Instead of increasing expenditures, it may be possible, in some countries, to increase the effectiveness of active labor market policies and lifelong learning systems without additional costs. The composition of labor market expenditures could also be shifted away from providing subsidies for job maintenance toward active labor market policies aimed at reintegrating the unemployed. There is no simple causality between flexicurity and macroeconomic performance. The upsurge in interest in learning from Danish flexicurity coincided with a period in which the Danish labor market performed well in light of international comparisons. In the Danish case, the main axis between liberal job protection and relatively generous income security also existed in the 1970s and 1980s, when macroeconomic performance was relatively poor and unemployment was high and persistent. The main difference in the institutional set-up of the 1990s, when labor market performance improved considerably, was the shift from passive to active labor market policies. This shift in orientation cannot alone explain the positive performance of the Danish labor market (Andersen and Svarer 2007). A number of other factors need to be added to the equation, many of them unrelated to Danish flexicurity. Despite this, Danish flexicurity illustrates that the institutional facilitation of “protected mobility” is an important ingredient in the current age of international competition, rapid technological change, and the transformation of the economy. A generous and expensive welfare state is not incompatible with a flexible and competitive labor market.

Notes 1. In 2005, the share of workers who changed jobs was 11.5 percent in Denmark versus an EU average of 8.8 percent. Average job tenure is also comparatively low, fewer than eight years in Denmark, the United Kingdom, and the Baltic states compared with the EU average of more than ten years. Average job duration (the length of the labor market career divided by the number of jobs the individual has held) was in 2005 the lowest in the EU, fewer than five years in Denmark and more than eight in the EU-25) (DTU 2008; Eriksson and Westergaard-Nielsen 2007). 2. From July 2010, the unemployment benefit period has been reduced from four to two years and the criteria for regaining access to unemployment benefits increased from twenty-six weeks of full-time employment to fifty-two weeks. This measure was an element in the economic recovery package of the liberal-conservative government.

230     Rethinking Workplace Regulation 3. This new right means that a dismissed person is entitled to special severance pay if the person has three, six, or eight years seniority. Then the employer must pay one, two, or three times a special severance pay. This lump sum is calculated as the difference between the monthly unemployment benefit payment and the monthly wage deducted by 15 percent. 4. Since 1995, the share of the labor force that has a membership in unemployment insurance funds has declined from 80 percent to 70 percent in 2008. Traditionally, the unemployment insurance funds have been a recruitment channel for trade union membership. This is therefore also one of the reasons why trade union membership is declining, from 73 percent in 1995 to 67 percent in 2010 (Due and Madsen 2009, 2010). 5. In January 2011, the government proposed to gradually phase out early retirement benefits. Currently, members of unemployment insurance funds who have paid in contributions for up to thirty years have the right to go on early retirement at the age of sixty and until old age pension at sixty-five. Early retirement was intended as a fair intergenerational distribution of work—that is, a way to reduce both labor supply of older workers and youth unemployment. In recent years, however, the problem’s definition has shifted toward increasing effective labor supply and reducing large public deficits (Bredgaard and Tros 2008).

References Algan, Yann, and Pierre Cahuc. 2006. “Civic Attitudes and the Design of Labor Market Institutions: Which Countries Can Implement the Danish Flexicurity Model?” CEPR discussion paper no. 5489. London: Centre for Economic Policy Research. Andersen, Torben M., and Michael Svarer. 2007. “Flexicurity—Labour Market Performance in Denmark.” CESifo Economic Studies 53(3): 389–429. Auer, Peter. 2000. Employment Revival in Europe: Labour Market Success in Austria, Denmark, Ireland, and the Netherlands. Geneva: International Labour Office. ———. 2007. “In Search of Optimal Labour Market Institutions.” In Flexicurity and Beyond: Finding a New Agenda for the European Social Model, edited by Henning Jørgensen and Per Kongshøj Madsen. Copenhagen: DJØF Publishing. Auer, Peter, and Sandrine Cazes. 2003. Employment Stability in an Age of Flexibility: Evidence from Industrialized Countries. Geneva: International Labour Organization. Barbier, Jean-Claude. 2007. “From Political Strategy to Analytical Research and Back to Politics: A Sociological Approach to ‘Flexicurity.’” In Flexicurity and Beyond: Finding a New Agenda for the European Social Model, edited by Henning Jørgensen and Per Kongshøj Madsen. Copenhagen: DJØF Publishing. Bredgaard, Thomas, Flemming Larsen, and Per Kongshøj Madsen. 2005. “The Flexible Danish Labour Market—A Review.” CARMA research paper 2005: 01. Aalborg: Centre for Labour Market Research. ———. 2006. “Opportunities and Challenges for Flexicurity—The Danish Example.” TRANSFER—European Review of Labour and Research 12(1): 61–83. ———. 2008. “Flexicurity: In Pursuit of a Moving Target.” European Journal of Social Security 10(4): 305–25.

Flexibility and Security in Employment Regulation     231 Bredgaard, Thomas, Flemming Larsen, Per Kongshøj Madsen, and Stine Rasmussen. 2009. “Flexicurity på Dansk.” CARMA research paper 2009: 2. Aalborg: Centre for Labour Market Research. Bredgaard, Thomas, and Frank Tros. 2008. “Flexicurity and Human Resources Management for Older Workers in the Netherlands, Denmark, Germany and Belgium.” In Bulletin of Comparative Labour Relations, vol. 67, edited by Roger Blanpain and Linda Dickens. Alpen aan den Rijn: Kluwer Law International. Council of the European Union. 2007. “Towards Common Principles of Flexicurity—Council Conclusions.” SOC 523, ECOFIN 503. Brussels: Council of the European Union. Daemrich, Arthur A., and Benjamin Kramarz. 2009. “Denmark: Globalization and the Welfare State.” HBS case no. 709–015. Cambridge, Mass.: Harvard University Press. Danish Ministry of Labour. 1999. Arbejdsmarkedsreformerne—en status (Labour Market Reforms—A Status). Copenhagen: Arbejdsministeriet. DTU. 2008. Job Mobility in the European Union: Optimising Its Social and Economic Benefits. Taastrup: Danish Technological Institute. Due, Jesper, and Jørgen Steen Madsen. 2009. “Medlemmerne fosser ud af akasserne” (Members Are Pouring Out of the Unemployment Insurance Funds). Politiken, January 17, 2009. ———. 2010. “Fortsat vigende organisationsgrad.” Analyse FAOS, August 18. Copenhagen: Forskningscenter for Argejdsmarkeds-og Organisationsstudier (Union Density is Still Declining). Available at: http://faos.ku.dk/pdf/artikler/ ovrige_artikler/2010/Fortsat_vigende_organisationsgrad_180810.pdf. Accessed September 20, 2010. Eriksson, Tor, and Niels Westergaard-Nielsen. 2007. “Wage and Labor Mobility in Denmark.” NBER working paper 13064. Cambridge, Mass.: National Bureau of Economic Research. European Commission. 2006. Employment in Europe 2006. European Commission: Directorate-General for Employment, Social Affairs, and Equal Opportunities. ———. 2010a. “Europe 2020—Integrated Guidelines for the Economic and Employment Policies of the Member States.” Brussels, 27.4.2010, SEC(2010) 488 final. Brussels: European Commission. ———. 2010b. “Europe 2020—A Strategy for Smart, Sustainable, and Inclusive Growth.” Brussels, 3.3.2010, COM(2010) 2020 final. Brussels: European Commission. ———. 2010c. Employment in Europe 2010. Brussels: Directorate-General for Employment, Social Affairs, and Equal Opportunities. ———. 2011. “Annual Growth Survey Annex 3. Draft Joint Employment Report.” Brussels, 12.1.2011, COM(2011) 11 final. Brussels: European Commission. European Expert Group on Flexicurity. 2007. “Flexicurity Pathways: Turning Hurdles into Stepping Stones.” Brussels: European Expert Group on Flexicurity. Hall, Peter A., and David Soskice. 2001. Varieties of Capitalism: The Institutional Foundations of Comparative Advantage. Oxford: Oxford University Press. Jørgensen, Henning. 2002. Consensus, Cooperation and Conflict: The Policy-Making Process in Denmark. Cheltenham: Edward Elgar. Jørgensen, Henning, and Per Kongshøj Madsen. 2007. Flexicurity and Beyond:

232     Rethinking Workplace Regulation Finding a New Agenda for the European Social Model. Copenhagen: DJØF Publishing. Keune, Maaten, and Maria Jepsen. 2007. “Not Balanced and Hardly New: The European Commission’s Quest for Flexicurity.” In Flexicurity and Beyond: Finding a New Agenda for the European Social Model, edited by Henning Jørgensen and Per Kongshøj Madsen. Copenhagen: DJØF Publishing. Larsen, Flemming. 2009. Kommunal beskæftigelsespolitik: Kommunale jobcenter mellem statslig styring og communal autonomi (Municipal Employment Policy: Jobcenters Between State and Local Government). Frederiksberg: Frydenlund Academic. Madsen, Per Kongshøj. 1999. “Denmark: Flexibility, Security, and Labor Market Success.” ILO employment and training paper 53. Geneva: International Labour Office. ———. 2002. “The Danish Model of Flexicurity: A Paradise with Some Snakes.” In Labour Market and Social Protections Reforms in International Perspective: Parallel or Converging Tracks? edited by Hedva Sarfati and Giuliano Bonoli. Aldershot, Surrey: Ashgate. ———. 2003. “‘Flexicurity’ Through Labor Market Policies and Institutions in Denmark.” In Employment Stability in an Age of Flexibility: Evidence from Industrialized Countries, edited by Peter Auer and Sandrine Cazes. Geneva: International Labour Office. ———. 2004. “The Danish Model of ‘Flexicurity:’ Experiences and Lessons.” Transfer—European Review of Labour and Research 10(2): 187–207. Organisation for Economic Co-operation and Development (OECD). 2004. Employment Outlook 2004. Paris: Organisation for Economic Co-operation and Development. ———. 2010. Employment Outlook 2010. Paris: Organisation for Economic Cooperation and Development. Trepartsudvalget. 2006. Livslang opkvalificering og uddannelse for alle på arbejdsmarkedet—rapport fra Trepartsudvalget (Lifelong Learning and Education for All—Report from the Tripartite Committee). Bind 2 Kortlægning og analyser. Copenhagen: Ministry of Finance, Center for Employment Relations, Distribution, and Transfer Payments. Available at: http://www.fm.dk/db/filarkiv/ 14295/sammenfatning.pdf. Accessed September 20, 2010. Velfærdskommissionen. 2005. “Fremtidens velfærd—sådan gør andre lande” (Welfare of the Future: The Way It’s Done in Other Countries). Copenhagen: Velfærdskommissionen. Available at: http://www.fm.dk/db/filarkiv/18671/ Rapport_andre_lande.pdf. Accessed September 20, 2010. Venn, Danielle. 2009. “Legislation, Collective Bargaining, and Enforcement: Updating the OECD Employment Protection Indicators.” OECD Social, Employment, and Migration working paper no. 89. Paris: Organisation for Economic Co-operation and Development. Wilthagen, Ton. 1998. “Flexicurity—A New Paradigm for Labor Market Policy Reform?” WZB discussion paper FS I 98–202. Berlin: Social Science Research Center. Wilthagen, Ton, and Frank Tros. 2004. “The Concept of ‘Flexicurity:’ A New Approach to Regulating Employment and Labour Markets.” TRANSFER—European Review of Labour and Research 10(2): 166–87.

Chapter 13 The Regulation of Supply Chains: An Australian Contribution to Cross-National Legal Learning michael rawling and john howe

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ne of the key features of the standard employment contract is a direct relationship between an employer and an employee. Labor law scholars have for some time highlighted the artificiality of this restriction on the regulatory scope of labor law, in that it excludes workers deserving of social protection but engaged under nonstandard work arrangements (for Australia, see Stewart 2002). Moreover, in the last three decades, business and government have become increasingly decentralized as a result of contracting out or outsourcing the provision of goods and services. This vertical disintegration or fragmentation of large organizations has meant that many workers are no longer directly employed by core businesses or government. The security and welfare of these workers has become the responsibility of less visible contractors, subcontractors, and franchisees down often extensive supply chains (Marshall 2006; Fudge 2006; Nossar 2007, 5–12). Literature indicates that the issues of fragmentation of the standard employment contract (see Stone 2010; Freedland 2006; Fudge 2006; Rubery, Earnshaw, and Marchington 2005) and the resulting exploitation of precarious workers (Benach, Muntaner, and Santana 2007; Quinlan, Mayhew, and Bohle 2001) transcend jurisdictional boundaries. Moreover, the literature is voluminous on the global expansion of supply chains and outsourcing, which documents the effects of these forms of business organization on vulnerable workers (British TUC Commission 2008, 147; De Luca-Tamajo and Perulli 2006; Johnstone 1999). These developments suggest that national 233

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governments in the developed world, as well as international bodies, should develop a more comprehensive set of protections for workers laboring at the base of supply chains across the globe. However, some existing regulatory schemes graphically illustrate the extent to which a focus on direct employment relationships within a unitary idea of the firm has been transcended. This chapter examines two such schemes. First, it describes an innovative legislative model of supply chain regulation that has been adopted by a number of Australian states principally, but not exclusively, in relation to the textile, clothing, and footwear (TCF) industries. Second, it examines a recent initiative in the regulation of supply chains effectively controlled by government agencies in Australia through governmental procurement policy. We suggest that the regulation of private- and public-sector supply chains in Australia has some innovative features, a study of which may make a useful contribution to debates about improving protections for vulnerable workers around the globe.

Breakdown of the Standard Employment Contract and Supply Chains The decline of the standard employment contract is partly due to the fracturing of the direct employment relationship between the employee and the unitary employer. This fracturing has involved both the demise of the unifying category of “employee” (Howe and Mitchell 1999) and the fracturing of the unitary employer. The marked growth in various forms of contingent or precarious work in industrialized countries has ended the unifying class of employee. Australia has been no exception to this trend, with steep and widespread growth in casual employment, (in)dependent contracting, labor-hire work, outwork and other less secure arrangements such as fixed-term contract work. Despite the reemergence of the widespread exploitation of vulnerable workers, the Australian labor law framework has left employers with a largely unchecked power to impose precarious work arrangements. Of equal importance has been the breakdown of the unitary employer (see Davies and Freedland 2006; Fudge 2006). In the twentieth century, business was characterized by large integrated firms that employed large numbers of employees to perform work in-house (see Stone 2004, 27–50). However, widespread outsourcing has resulted in more complex business structures. Many firms that were once large integrated organizations now coordinate a network of suppliers, distributors, and other companies that indirectly and cost-effectively provide labor to those large firms. A key type of business network is the supply chain, and part

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of the transition to the business network has been capital reintegration into supply chains (Rawling 2010, 280). Lead client firms now wield power over entire national and transnational supply chains consisting of multiple-level vertical, contractual relationships that are used to provide a good or service to consumers at a profit. The power of key economic players to exert control over entire business networks is now increasingly being realized—not least by the lead client firms themselves—as a key form of commercial power. In a typical supply chain, which usually involves more than three levels, the lead client firm at the apex of the supply chain can wield power over contractors and subcontractors, and ultimately over the way in which work is performed by workers at the base of supply chains. Similarly, over the same period that the business firm has fragmented, the structure and functions of government have transformed significantly. This has been characterized as a shift from government to governance (Rhodes 1997), whereby governments have retreated from ownership of key resources and utilities through privatization, and delegated provision of public services to the private sector by contracting out. As noted, this has an obvious impact on the number of people involved in public service delivery to be employed directly by government. However, in what has been described as the era of the regulatory state, there has been a parallel increase in state regulation and oversight of privatized service delivery as governments seek to ensure that business is held accountable to public and social concerns. For this chapter, we suggest that the potential influence of government as purchaser of goods and services in this era is similar to that of the private firm at the apex of the supply chain. One result of these developments in private- and public-sector organization, is that a considerable literature now argues for new labor law measures to address contemporary configurations of work and capital by extending the reach of regulation beyond the direct employment relationship (see, for example, Supiot 2001, 219; Freedland 2006; Quinlan 2006, 37, 39; Klare 2002, 7; Mitchell and Arup 2006, 16). To an extent, the developments described in this chapter exemplify the new kind of governance strategies required to deal with the fragmentation of the employment relationship and the emergence of supply chains. This need arises from their obvious potential to regulate complex contractual chains beyond the direct employment relationship (Nossar, Johnstone, and Quinlan 2004; Nossar 2006; Rawling 2006). Although these Australian initiatives do not have economy-wide application, within their more limited scope of application they do provide extensive protections for vulnerable workers and deploy some innovative methods of regulating supply chains for those protective purposes.

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Australian Scheme of Supply Chain Regulation Here we outline two separate but interrelated types of supply chain regulation within the Australian federation: first, the legislative scheme under state laws regulating supply chains in the apparel sector; second, the federal government’s new procurement policy regulating labor standards in public-sector supply chains, the Fair Work Principles (FWP).

Legislative Scheme Regulating the Apparel Sector Four of Australia’s six states have adopted legislative schemes regulating supply chains to protect outworkers (for a full analysis of the Australian legislative model of supply chain regulation, see Nossar, Johnstone, and Quinlan 2004; Rawling 2006).1 Outwork is a form of precarious, informal work undertaken at residential or other premises not usually considered business premises. The legislation—enacted first in New South Wales (NSW) and then largely copied in Victoria, South Australia, and Queensland—imposes responsibilities for the working conditions of outworkers on all major players in the relevant industry, including principal manufacturers and retailers. The statutory model consists of “deeming provisions” designed to clarify the employment status of outworkers, statutory rights of recovery allowing outworkers to make a claim for their lawful entitlements against parties throughout the contracting chain other than retailers, and statutory authority for the adoption of mandatory codes applicable to retailers. To date, mandatory retailer codes have in fact been promulgated in three of the four states: NSW, South Australia, and Queensland.2 The political impetus for the improved regulation of supply chains to protect outworkers originally arose from the activities of a coalition of civil society organizations including the Textile Clothing and Footwear Union of Australia (TCFUA), FairWear, and Asian Women at Work. These organizations had become increasingly concerned about the growth of an informal-sector workforce in the TCF industry following the massive reduction of government measures, including tariffs, which had previously protected the Australian clothing manufacturing industry from overseas competition. A coordinated industrial and community campaign against the exploitation of outworkers in Australia was organized and sustained over a long period. A number of government inquiries found widespread evidence of outworker exploitation and were used to press the case for improved public regulation (see Australian Senate Economics Reference Committee 1996; Industrial Relations Commission 1998). The campaign eventually coalesced around a set of integrated proposals for legislative reform put forward by the TCFUA. How-

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ever, because this campaign came at a time when the ultra-conservative Howard coalition government was in power in Australia’s federal parliament, the push for legislative reform was strategically—and in the end successfully—directed at a constellation of Labor governments that held power at the state level (see, in particular, Nossar 1999). Australia is not unique in seeking to find an effective mechanism to regulate labor standards down supply chains. In particular, the “hot goods” provisions in section 15(a) of the U.S. Fair Labor Standards Act has been used very effectively by the U.S. Department of Labor in recent times (see Weil and Mallo 2007, 795; James et al. 2007, 176); Article 42 of the Spanish Code of Law imposes some very significant supply chain obligations on businesses at or near the top of the supply chain; and other schemes exist or have been proposed in Canada (Doorey 2005, 393– 95), the United Kingdom (James et al. 2007), and elsewhere. However, we argue that the legislative model that resulted from the Australian campaign is a particularly innovative solution to the challenges facing labor identified earlier, and one that might be extended to other industries and sectors in other jurisdictions. As noted earlier, the limited scope of the standard employment contract is a major challenge for labor regulation. The Australian apparel sector legislative model seeks to address this challenge through four mechanisms. First, New South Wales and South Australia have secured jurisdiction to regulate supply chain contracts as well as employment contracts by amending their statutory definitions of industrial matter—a matter to which the industrial statute applies and therefore a potential subject of state legislative regulation. For example, under South Australia’s industrial statute, industrial matter is taken to include any matter involving any person who gives out work, or the process of giving out work, where the work might possibly be performed by an outworker.3 Second, deeming provisions clarify the employment status of outworkers so that outworkers are entitled to the same terms and conditions as employees, who may be directly employed by an employer to work in a factory, in the same industry. For example, the South Australian provision deems an outworker to be an employee even though a contract for the undertaking of outwork “would not be recognized at common law as a contract of employment.”4 Usually the person deemed to be the employer of the outworker is the person either who engages the outworker or for whom the outworker performs work.5 Technically, therefore, not all entrepreneurs and businesses in the supply chain become co-employers. By contrast, in New South Wales, a factory occupier or trader who sells clothes by wholesale or retail and for whom an outworker performs work, whether directly or indirectly, is taken to be the employer.6 The third mechanism by which the supply chain regulation legislation

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circumvents the limited scope of the contract of employment is the statutory right of outworkers to recover from principal contractors both remuneration and, in some instances, other legislated employee entitlements. These statutory rights are available to outworkers even in the absence of any direct employment relationship, or common law contract of employment between the principal contractor and an outworker (see Nossar, Johnstone, and Quinlan 2004, 156). Accordingly, these rights extend liability for outworker remuneration—traditionally associated with the employer—to any party up the supply chain except the retailer and consumer. Thus the liability for outworker remuneration is not confined to those parties deemed to be employers of outworkers. For example, under the South Australian legislation an outworker may make a claim against a person the outworker reasonably believes is a responsible contractor.7 Therefore, an outworker, even if ostensibly an independent contractor, can claim all of the legal minimum industrial entitlements owed to employees working in the same industry. The responsible contractor, who does not need to be a direct employer, is liable for the claim unless it can be referred to someone who actually pays,8 or deducts, or sets off the amount of the claim from moneys owed to a person who has a closer contractual relationship with the outworker.9 Fourthly, the legislative scheme seeks to leverage firms at the apex of the apparel supply chain—TCF retailers. In New South Wales, South Australia, and Queensland the codes that regulate these firms are mandatory, not voluntary, and are enforceable under industrial legislation. These mandatory codes operate by default and apply to all apparel retailers in the State except those who are signatories to, and operating in compliance with, the voluntary Homeworkers Code of Practice agreed between retailers and the relevant trade union.10 This voluntary code includes a number of obligations similar to, although not identical with, the obligations that bind retailers under mandatory codes. Therefore, for apparel retailers in these three states there is no escape from an interlocking system of improved public regulation of apparel supply chains. Although there is currently no Victorian mandatory retailer code of practice, retailers operating exclusively in that state can be signatories to the voluntary code. The retailer codes import compulsory, standardized, enforceable provisions into contracts between retailers and suppliers for the supply of domestically produced Australian apparel. Where outworkers are to be engaged, retailers must obtain, and suppliers must provide, an undertaking that the supplier and its contractors will engage outworkers under conditions no less favorable than those provided under the relevant industrial award.11 To ensure compliance with these undertakings, novel commercial sanctions apply. A retailer must inform the supplier that a breach of an undertaking by the supplier or one of its contractors will allow the retailer to terminate its agreement to purchase the goods.12 Fur-

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thermore, in New South Wales and South Australia, a retailer must not enter into an agreement with a supplier who does not provide one of the undertakings described.13 Although the retailer is not legally required to terminate a supply contract, it is nonetheless obliged to proactively report substandard working conditions to the relevant governmental agency and trade union.14 Additionally, an apparel retailer must obtain information and keep records concerning all manufacturing work locations. A retailer covered by one of the mandatory codes must also obtain and retain information about other parties in the supply chain, including all suppliers and all contractors engaged by suppliers, as well as precise information about the apparel products supplied including the quantity and price of goods. Retailers must report this information at least every six months to the relevant trade union and state agency, or provide it on request.15 Although, under the retailer codes, retailers are not responsible for the liabilities of manufacturers and suppliers, retailers are effectively turned into commercial enforcers with a vested interest in ensuring compliance with the codes, and risk prosecution for failing to discharge their responsibilities.16 This prospect—and the reputational damage associated with any such prosecution—raises the stakes considerably for retailers, especially those who are indifferent to the conditions under which the goods they sell are produced. Moreover, the proactive and reactive disclosure obligations under the codes assist with the enforcement of industrial obligations by empowering the relevant trade union to identify all sites of clothing production in Australia and empowering the union to “exercise effective regulatory oversight over the entire clothing supply chain in relation to compliance with labor law minimum standards” (Nossar 2006, 218). However, more research is needed in order to evaluate the actual effectiveness and impact of this legislative scheme in attaining improved working conditions for outworkers. During the writing of this chapter, the Fair Work Amendment (Textile Clothing and Footwear Industry Act 2012), was passed by the the federal parliament and came into force. The legislation establishes a parallel federal scheme of supply chain regulation to protect TCF outworkers without excluding or limiting the operation of state outworker legislation. Like the state schemes, the federal act deals with the deeming of outworkers as employees, the rights of outworkers to recover unpaid amounts from almost any party in the chain of contracts up to, but not including, the ultimate retailers and the government’s capacity to adopt a mandatory code, which can bind all parties in the relevant supply chain including the ultimate retailer. Legislative Regulation Beyond Jurisdictional Borders  Notably, because they require retailers to provide information about apparel products that are

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manufactured anywhere in Australia, the existing mandatory codes have consequences beyond the borders of the three states—NSW, Queensland, and South Australia—that have adopted them.17 This has led in turn to proposals to extend the new system of regulation to transnational supply chains as well as those operating only within Australia. Because commercial contracts for the supply of clothing products routinely span national borders, such an initiative would effectively require local retailers to take steps that would ultimately benefit workers abroad (see Nossar 2007). Thus, the Australian experience demonstrates that the statutory entrenchment of public obligations within the terms of commercial contracts may enable states to overcome the constraints that geographical jurisdiction places on their regulatory reach (Nossar 2006, 219; Rawling 2010, 323). There has also been a proposal to extend extraterritorial laws to address egregious labor abuses which occur at the base of the transnational supply chains of Australian firms (Cooney 2004, 329). However, despite the plausibility of such proposals, a lack of political will has prevented Australian supply chain regulation from having a broader transnational application. Legislative Regulation Beyond the Apparel Sector  Although supply chain regulation has its origins in the TCF sector, there is no obvious reason why it should be confined to that sector. Indeed, there is considerable scope to expand the most advanced right of recovery, in South Australia, to protect outworkers in a range of industries by activating simple inbuilt mechanisms (see Rawling 2006). In particular, the right of recovery applies to outworkers where “a provision of an award or enterprise agreement relates to outworkers.”18 Therefore, it appears that the right of recovery could be extended by making or varying an award that includes a provision that relates to outworkers or by inserting a provision that relates to outworkers in an enterprise agreement (Rawling 2006, 536). The right of recovery can also be extended by regulation to any person who falls within the statutory definition of outworker (536). In NSW the model has already been adapted to protect the occupational health and safety of long haul truck drivers.19 The impetus behind this NSW legislation was the frequency of road fatalities involving trucks and a successful campaign by the Transport Workers Union linking truck driver working conditions and the safety of all road users. The NSW legislation imposes explicit obligations both on consignors and consignees, such as the large retail supermarkets, that require receipt and delivery of road freight and effectively control transport supply chains and head transport carriers that employ drivers or engage the self-employed owneroperators of trucks. It also requires the preparation of fatigue management plans by fleet operators and prohibits contracts with operators who have not assessed, controlled, or eliminated the risk of fatigue of long-

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haul drivers (see James et al. 2007; Kaine and Rawling 2010). Moreover, late in the course of writing this chapter, the federal parliament passed the Road Safety Renumeration Act 2012, which established a new national workplace tribunal empowered to implement mandatory regulation of entire road transport supply chains in order to provide a safe rate of pay for road transport workers throughout Australia. Commentators have mused about which type of supply chain might be the best or only candidates for improved public regulation, for example, buyer-driven supply chains supplying retail products to Western consumers. They have also speculated about whether supply chain regulation can only be effective where retailers at the apex of supply chains enjoy enough market share to enable them to wield disciplinary power over suppliers further down the chain (see Marshall 2006, 544, 555; Business and Industry Advisory Committee to the OECD 2002, 4). And they have asked whether the presence of a powerful ethical consumer movement, capable of pressuring these retailers, is another necessary condition of successful public supply chain regulation. Both practical experience and academic research appear to justify an optimistic view of the Australian experiment in supply chain regulation. For example, the extension of supply chain regulation to the transport industry—a service industry removed from the production of consumer products—militates against the notion that supply chain regulation might be applicable only to industries such as garment manufacturing, which produces goods for Western consumers. The notion that supply chain regulation must rely on consumer sentiment is also undermined by recent research finding that the extent to which consumers are willing to alter their behavior on the basis of ethical considerations has been significantly overestimated (Devinney, Auger, and Eckhardt 2010). The suggestion that supply chain regulation should be confined to particular product markets is also called into question by the fact that supply chain arrangements vary considerably from firm to firm rather than, or as well as, among different industries. As to whether a party at the apex of supply chain must possess significant market share to wield power over suppliers, clearly other commercial methods of influencing supply chains may be effective. For example, astute business controllers may be able to use their firms’ strategic position at the apex of a supply chain by refusing to deal with noncompliant suppliers, or by actually doing so, thus establishing themselves as gatekeepers of the supply chain and providing them with the power and authority to influence who participates in a particular supply chain and on what terms (see, for example, James et al. 2007; Rawling 2010, 288). In short, less emphasis should be placed on buyer-driven supply chains and retail market share. The literature suggests that a far broader range of supply chains might be appropriate for the application of this

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new regulatory strategy: those operating in private industry sectors other than TCF; those in sectors where suppliers deliver not only goods but services; and those in domains where government agencies are dominant rather than private firms. In connection with this last point, it will be useful to briefly consider the steps that the Australian federal government has taken to regulate labor standards in its own supply chains through its adoption and enforcement of Fair Work Principles.

Regulation of Public Sector Supply Chains Governments have long used their market power as substantial purchasers of goods and services from the private sector to pursue social policy objectives secondary to the immediate goal of cost-effective government procurement (McCrudden 2007). By attaching social conditions to purchasing contracts, governments provide businesses with an economic incentive to comply with desirable practices (Howse 1993).20 Over the last twenty years in particular, Australian governments at both the federal and state levels have actively used public purchasing power to promote local employment creation, achieve affirmative action targets, and secure compliance with their labor and employment laws (see Howe 2006; Creighton and Stewart 2005, 30). Paradoxically, while procurement policies have often embodied the notion of progressive government as a model employer and required private-sector adherence to collectivist labor relations practices as practiced in the public sector, conservative governments have also used procurement to promote individualized and managerially administered workplaces, in particular in the building and construction industry (Howe 2006; Australian Procurement and Construction Council 1999). Public-sector procurement has therefore tended to be somewhat ad hoc and patchy, varying among jurisdictions and industries and in the content and extent of the labor standards it incorporates. Moreover, with some exceptions, governments have been reluctant to extend procurement conditions beyond direct contractors to more remote suppliers further down the supply chain.21 Fair Work Principles  In 2009, the federal Labor government took the incorporation of labor conditions in procurement processes to a new level with the introduction of the Fair Work Principles (DEEWR 2009, 2010). The FWP represent the most substantial attempt by the Commonwealth Government in Australian history to incorporate employment and labor relations criteria into public procurement policies. The principles were adopted after extensive lobbying by the trade union movement, which sought to build on successes achieved in the incorporation of labor standards in procurement by some states over the previous four years. They apply to all purchases of property, goods, or

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services above AU$80,000 by all federal government departments and many government agencies, excluding construction services, and require that both contractors and their subcontractors agree to comply with FWP as a condition of successfully bidding on a government contract. Overseas-based suppliers must be contractually required to comply with labor and employment laws in their home jurisdiction. The principles therefore apply to a significant proportion of the federal government’s purchasing budget, extend beyond previous industry-specific schemes, and make fair labor practices a key criterion in procurement. The principles are monitored by a new office, the procurement coordinator, with powers of oversight over all commonwealth procurement practices and policies. Although certain aspects of the principles do not represent best practice—some of these are canvassed in the next section—the mere fact that the federal government has been willing to implement a procurement policy with labor standards conditions across such a significant part of the public sector, and to extend it to subcontractors and overseas suppliers, renders FWP worthy of discussion as an example of innovative labor market regulation. Implementation of the Fair Work Principles  The government can impose FWP requirements at three stages in the procurement process: when establishing qualification or eligibility to tender for a government contract, during tender assessment, and by way of contractual conditions that must be agreed by the successful bidder. To varying degrees, the principles operate at all three stages. To be eligible for federal government contracts, suppliers must demonstrate compliance with relevant labor and employment laws over the previous two years. The FWP require commonwealth entities and agencies to include in tender documents for procurement a requirement that contractors and their subcontractors will comply with “materially relevant laws,” including industrial laws, occupational health and safety laws, and workers’ compensation laws. If bidders disclose breaches within the previous two years, they must demonstrate compliance with any court orders made against them or be excluded from eligibility for tender. On securing government contracts, successful bidders will be subject to contractual requirements concerning ongoing compliance with relevant laws, and “as far as practicable” must ensure that their subcontractors comply as well (DEEWR 2010, cl. 6.2). The FWP not only require minimal legal compliance; they also seek to promote positive relations between employers and workers. For example, they anticipate that suppliers of goods and services to the government will promote “fair, cooperative and productive workplace relations including, where appropriate, a commitment to supporting apprenticeships and education and training in the workplace” (DEEWR 2010, cl.

244     Rethinking Workplace Regulation

5.3). This more ambitious goal reflects one of the stated objectives of the new federal labor relations legislation, the Fair Work Act 2009 (Commonwealth): to establish “a balanced framework for cooperative and productive workplace relations that promotes national economic prosperity and social inclusion for all Australians” (s. 3). Another example is that bidders for Commonwealth contracts must disclose whether they have “consultation arrangements which encourage cooperation and engagement of employees and management” (DEEWR 2010, cl. 5.3.2), arrangements not otherwise mandatory in Australia. And a third example: ­although the principles do not require suppliers to demonstrate participation in collective workplace relations, such as collective bargaining, the principles do require tendering contractors to provide confirmation that they “understand and respect their employees” rights in relation to freedom of association and the right to representation at work” (DEEWR 2010, cl. 5.3.2). Unfortunately, the latter two requirements—fair, cooperative workplace relations and respect for freedom of association—need not be incorporated as contractual conditions. This means that successful bidders are not required to demonstrate their continuing commitment to these ideals over the life of the contract. Another innovation designed to advance the objective of promoting cooperative and productive workplace relations is a requirement that bidders with collective enterprise agreements registered under the 2009 act must confirm that the agreement has a “genuine dispute resolution” procedure. The definition of such a procedure includes a requirement that there be provision for binding arbitration by an independent third party, a requirement that has been criticized by employers as going beyond what is required by the act (Workplace Express 2010). Special criteria apply to two areas of government purchasing long associated with vulnerable workers and avoidance of minimum employment standards: cleaning services and textile, clothing, and footwear manufacturing. As to the former, the government has announced that contractors will have to comply with best practice standards in addition to the Fair Work Principles. These standards are presently being developed by a tripartite consultative group. As to the latter, the principles build on the TCF supply chain regulation model discussed above, by requiring contractors to be accredited under the Home Workers Code of Practice, or to seek accreditation prior to signing the contract. Not surprisingly, the main sanction available under a regulatory initiative based on public procurement is ineligibility to bid on government contracts or cancellation of existing contracts in the event of breach. However, the FWP also provide for naming and shaming—that is, publication of the names of procurement contractors that breach compliance requirements (DEEWR 2010, cl. 6.2). It is still early days in the life of the Fair Work Principles. It remains to

Regulating Supply Chains     245

be seen whether government departments and agencies will observe the spirit of the principles and place enough emphasis on labor standards, given the many other factors that must be taken into account in government procurement—value for money being the most obvious. It is also unclear whether enough resources will be devoted to monitoring and enforcing the principles, whether with regard to the assessment and award of tenders and or to the ongoing observance of relevant contractual conditions. Bidders are expected to volunteer information as part of the tender process, verifying the information they have provided by signing a statutory declaration. It is unclear whether they will also have to provide evidence of compliance with relevant laws, codes, and best practices and to demonstrate that they conduct cooperative and productive workplace relations and respect freedom of association and the right to representation. These are important issues. Nevertheless, now that the principles are in place there is time to assess their potential flaws and for improvements to be made, assuming the political will to do so. Neither the state outworker schemes, nor the commonwealth procurement strategy are unique in using purchasing power to regulate labor standards. However, the International Labour Organization has found that many countries that are signatories to its conventions have inadequate procurement systems (ILO 2008). The Fair Work Principles are therefore of particular interest in a comparative sense because, although some areas of purchasing are excluded, they are very broad in their reach and detailed in their requirements. The FWP are not limited to particular goods or services like many procurement programs, and they purport to extend to offshore subcontractors. The linkage created between the principles and the state outworkers’ legislation is also significant given the lack of synergy between public and private supply chain regulation in the past.

Supply Chain Regulation and Cross-National Legal Learning The innovative Australian schemes of top-down supply chain regulation have notable protective features. However, the question of whether such schemes can contribute to improvements in labor law regimes in other jurisdictions is a vexed one. It is true that “borrowings,” with appropriate adaptation, are common in practice. For example, Ron McCallum (2006) has written about the considerable extent to which Australian labor law has borrowed from overseas labor laws. Of course, all of these borrowings were adapted to local conditions; they are cases of “crossborder inspiration” rather than “pure imitation” (De Roo in Forsyth 2006, 335). Although it has been argued that there are many examples of successful legal transfers between Western societies (see Forsyth 2006,

246     Rethinking Workplace Regulation

328),“at least as frequently” legal transplants have failed (Arthurs 2010, 4). In particular, when the likelihood of opposition to the legal transplant of labor laws from business or unions is considered, it is prudent to initially have more modest ambitions than legal transplantation (see Forsyth 2006, 333). Nonetheless, “comparative law has much to offer as a window into alternative solutions for pressing policy issues. It can be quite useful to look outside our borders to see if other perspectives can usefully shed light on core policy questions” (Eberle 2009, 485). On this point, Otto Kahn-Freund (1974, 9) noted that in developed countries the issues addressed by labor law had become similar. More recently, Harry Arthurs has made a similar point, arguing that globalization has “reduced or eliminated some of the unique features of national labor law systems” (2010, 6). Moreover, as noted at the beginning of this chapter, the supply chain regulation model is particularly well suited to address labor problems that transcend jurisdictional boundaries altogether. Of course, we are not advocating legal transplantation to or holusbolus adoption (Arthurs 2010, 4) of the Australian model of supply chain regulation. The limits of the scope of any future schemes of supply chain laws would have to be carefully considered. And of course, as initially in Australia, public and private supply chain regulation would have to be applied on a case-by-case basis to particular industries after research reports on their amenability to such regulation. However, even the legal transplant skeptic Kahn-Freund favored a “far reaching free trade in legal ideas” (1974, 10). The Australian model of supply chain regulation, as well as the other schemes of top-down supply chain regulation referred to in this chapter, may constitute an important addition to that trade, and in particular may contribute to cross-national legal learning about the regulation of supply chains. Australia’s willingness to establish a broadly applicable public procurement model extending to overseas contractors may serve as inspiration to other jurisdictions that have, so far, been unwilling to take this step. Moreover, cross-national learning may involve a two-way movement of ideas and concepts with mutual benefits to the jurisdictions in question. For example, it may be that the Fair Work Principles would be improved by borrowing the sophisticated monitoring arrangements the City of Los Angeles’ Sweat Free Procurement Ordinance in the United States, which requires factory list disclosure by head contractors to assist with monitoring, and verification of compliance by independent monitors (see Howe 2010). We also think that it is useful to examine both public and private supply chain regulation, rather than seeing each as separate regulatory domains as has tended to be the case in the existing literature.

Regulating Supply Chains     247

Nevertheless, it is important to recall Kahn-Freund’s warning that the use of “comparative law for practical purposes” risks becoming an abuse especially if it “ignores the context of law” (1974, 27). Indeed, law both drives and is influenced by contextual factors, such as the power relationships within which law is embedded, as well as the politics, culture, economics, geography, morals, religion, technology, and history of the home country (Eberle 2009, 452). In short, when considering the contribution of a particular set of domestic laws to cross-national legal learning, one has to understand the broader context of that law in the home country as well as the context of law overseas (see Forsyth 2006, 339). This can be quite complex, but is not impossible (see Eberle 2009, 471), although the task may be further complicated by the inclusion of gov­ ernment procurement power within the scope of potential crossjurisdictional fertilization of ideas. Arguably, too, cross-national comparisons are facilitated when one Western democratic culture is compared with another, but the literature on comparative institutional advantage (see for, example, Marshall, Mitchell, and Ramsay 2008), legal origins and in particular legal systems (see Milhaupt and Pistor 2008) reminds us that significant differences among them must still be taken into account. For example, drawing on the legal systems literature, it must be acknowledged that the Australian model of public and private supply chain regulation in this chapter assumes a relatively centralized lawmaking and enforcement process, suggesting it may be more difficult to transplant in decentralized systems. Nevertheless, enforcement of the private-sector legislation by trade unions through the court system is important to its success, and is a feature of more decentralized legal systems (Milhaupt and Pistor 2008, 6–7). Moreover, pressure by trade unions and nongovernmental organizations (NGOs) was crucial to the introduction of both public- and private-sector supply chain regulation, suggesting that a political economy allowing contestation of law may be a necessary precondition to the transferability of these models. In comparative labor law, the question of how the operation of industrial relations systems varies from jurisdiction to jurisdiction has to be understood, including features such as level of union organization, collective bargaining coverage, and more generally the distribution of power between organized interests—especially business and trade unions (Kahn-Freund 1974, 12). On this point, it is notable that the Australian scheme of supply chain regulation was achieved within Australia’s liberal market economy and its now largely adversarial system of industrial relations. Although the obstacles may appear insurmountable, it is still valuable to highlight the innovative features of existing schemes of regulation in order to promote progressive legal reform. After all, perhaps the main factor in achieving progressive reform is generating the political will to improve worker protections.

248     Rethinking Workplace Regulation We thank Harry Arthurs, Katherine Stone, and participants at the workshop “New Approaches to Employment Regulation,” held at the Rockefeller Centre in Bellagio, Italy, on September 20–23, 2010, for their helpful feedback.

Notes   1. See, in particular, Industrial Relations Act of 1996, s.5, ss.129A-129J, Schedule 1.1(f); Outworker (Improved Protection) Act of 2003 (Victoria), and Outworker (Improved Protection) Amendment Act of 2005 (Victoria); Industrial Relations Act of 1999, s.5, s.8C, ss.400A-400I, and Schedule 5; and Fair Work (Clothing Outworker Code of Practice) Regulations 2007 (South Australia) s.4, s.5, ss.99A-99J. See also Industrial Relations Act 1984 (Tasmania) , s.3(1).   2. See Ethical Clothing Extended Responsibility Scheme (New South Wales), which is made under Part 3 of the Industrial Relations (Ethical Clothing Trades) Act of 2001 (New South Wales); South Australian Clothing Outworker Code of Practice, which is set out in the Fair Work (Clothing Outworker Code of Practice) Regulations of 2007 (South Australia); and the Mandatory Code of Practice for Outworkers in the Clothing Industry (Queensland) which is made under section 400I of the Industrial Relations Act of 1999 (Queensland).   3. Fair Work Act of 1994 (South Australia), s.4(1).   4. Fair Work Act of 1994, definition of contract of employment.   5. See Outworkers (Improved Protection) Act of 2005 (Victoria), Fair Work Act of 1994, s.4; s.5(1)(b); Industrial Relations Act of 1999, s.6(2)(f).   6.  Industrial Relations Act of 1996, Schedule 1, cl. 1(f).   7.  Fair Work Act of 1994, s.99D(1).   8.  Fair Work Act of 1994, ss. 99E and 99F.   9.  Fair Work Act of 1994, s.99H. 10. See Ethical Clothing Extended Responsibility Scheme, cl. 8; Fair Work Act of 1994, cl. 8; Mandatory Code of Practice for Outworkers in the Clothing Industry, cl. 8. 11. Ethical Clothing Extended Responsibility Scheme, cl. 10(2)(a); Fair Work Act of 1994, cl. 10(2)(a); Mandatory Code of Practice for Outworkers in the Clothing Industry, cl. 10(1)(b), form 3A. An Australian industrial award is a binding industrial instrument created by a state or federal industrial tribunal providing for minimum standards that may, for example, apply to a class of employers in a particular industry. 12. Ethical Clothing Extended Responsibility Scheme, cl. 10(2)(b); Fair Work Act of 1994, cl. 10(2)(b); Mandatory Code of Practice for Outworkers in the Clothing Industry, cl. 10(1)(b)(c). 13. Ethical Clothing Extended Responsibility Scheme, cl. 10(3); Fair Work Act of 1994, cl. 10(3). 14. Ethical Clothing Extended Responsibility Scheme, cl. 11; Fair Work Act of 1994, cl. 11; Mandatory Code of Practice for Outworkers in the Clothing Industry, cl. 13.

Regulating Supply Chains     249 15. See Ethical Clothing Extended Responsibility Scheme, cl. 5, 12, 17, 20; Fair Work Act of 1994, cls. 5, 12, 17, 20; Mandatory Code of Practice for Outworkers in the Clothing Industry, cls. 6, 14, 22, 23, Forms 2, 3, 4, 8. 16. See Ethical Clothing Extended Responsibility Scheme, cl. 7(2); Industrial Relations (Ethical Clothing Trades) Act of 2001, s.13; Fair Work Act of 1994, cl. 7(2); Industrial Relations Act of 1999, s.400I(6). 17. See definition of clothing products in Ethical Clothing Extended Responsibility Scheme, cl. 5; in Fair Work Act of 1994, cl. 5; in Mandatory Code of Practice for Outworkers in the Clothing Industry, cl. 6. 18. Fair Work Act of 1994, s.5(4)(a). 19. OHS Amendment (Long Haul Truck Driver Fatigue) Regulation 2005 (NSW). 20. Robert Howse (1993) describes public procurement as a form of economic incentive-based regulation. 21. In the Australian context, two exceptions were the special procurement arrangements for the 2000 Sydney Olympic Games and the 2006 Commonwealth Games in Melbourne (Howe 2010).

References Arthurs, Harry. 2010. “Cross-National Legal Learning: The Uses of Comparative Labour Knowledge, Law, and Policy.” Paper presented to Employment Regulation After the Standard Employment Contract: Innovations in Regulatory Design conference. Bellagio, Italy (September 20–24, 2010). Australian Procurement and Construction Council. 1999. National Code of Practice for the Construction Industry: Towards Best Practice Guidelines. Deakin West, ACT: Australian Procurement and Construction Council. Available at: http://www .apcc.gov.au/LinkClick.aspx?fileticket=mtJjVTW8uPw%3D&tabid=139& mid=484. Accessed November 28, 2012. Australian Senate Economics References Committee. 1996. Outworking in the ­Garment Industry, Official Hansard Reports. Canberra: Commonwealth of Australia. Benach, Joan, Carles Muntaner, and Vilma Santana. 2007. Employment Conditions and Health Inequalities. Final Report to the WHO Commission on Social Determinants of Health. Barcelona, Toronto, and Salvador: Employment Conditions Knowledge Network. Available at: http://www.who.int/social_determinants/ resources/articles/emconet_who_report.pdf. Accessed November 28, 2012. British Trade Union Congress Commission on Vulnerable Employment (British TUC Commission). 2008. Hard Work Hidden Lives. London: Commission on Vulnerable Employment. Available at: http://www.vulnerableworkers.org .uk/files/CoVE_full_report.pdf. Accessed November 28, 2012. Business and Industry Advisory Committee to the OECD. 2002. “Supply Chains and the OECD Guidelines for Multinational Enterprises.” Paper presented to the OECD Roundtable on Corporate Responsibility: Supply Chains and the OECD Guidelines for Multinational Enterprises. Paris (June 19, 2002). Cooney, Sean. 2004 “A Broader Role for the Commonwealth in Eradicating Foreign Sweatshops?” Melbourne University Law Review 28(2): 290–342.

250     Rethinking Workplace Regulation Creighton, Breen, and Andrew Stewart. 2005. Labour Law. Sydney: Federation Press. Davies, Paul, and Mark Freedland. 2006. “The Complexities of the Employing Enterprise” In Boundaries and Frontiers of Labour Law: Goals and Means in the Regulation of Work, edited by Guy Davidov and Brian Langille. Oxford: Hart Publishing. Department of Education, Employment, and Workplace Relations (DEEWR). 2009. Fair Work Principles (July). Canberra: Australian Government. ———. 2010. Fair Work Principles User Guide (January). Canberra: Australian Government. De Luca-Tamajo, Rafaele, and Adalberto Perulli. 2006. “General Report.” Paper presented to the World Congress of Labor and Social Security Law. Paris (September 5–8, 2006). Devinney, Timothy, Pat Auger, and Giana Eckhardt. 2010. The Myth of the Ethical Consumer. Cambridge: Cambridge University Press. Doorey, David. 2005. “Who Made That?: Influencing Foreign Labour Practices Through Reflexive Domestic Disclosure Regulation.” Osgoode Hall Law Journal 43(4): 353–405. Eberle, Edward. 2009. “The Method and Role of Comparative Law.” Washington University Global Studies Law Review 8(3): 451–86. Forsyth, Anthony. 2006. “The ‘Transplantability’ Debate Revisited: Can European Social Partnership Be Exported to Australia?” Comparative Labor Law and Policy Journal 27(3): 305–56. Freedland, Mark. 2006. “From the Contract of Employment to the Personal Work Nexus.” Industrial Law Journal 35(1):1–29. Fudge, Judy. 2006. “Fragmenting Work and Fragmenting Organizations: The Contract of Employment and the Scope of Labour Regulation.” Osgoode Hall Law Journal 44(4): 609–48. Howe, John. 2006. “Money and Favours: Government Deployment of Wealth as an Instrument of Labour Regulation.” In Labour Law and Labour Market Regulation, edited by Christopher Arup, Peter Gahan, John Howe, Richard Johnstone, Richard Mitchell, and Anthony O’Donnell. Sydney: Federation Press. ———. 2010. “The Regulatory Impact of Using Public Procurement to Promote Better Labour Standards in Corporate Supply Chains.” In Fair Trade, Corporate Accountability and Beyond, edited by Kate Macdonald and Shelley Marshall. Aldershot, Surrey: Ashgate Publishing. Howe, John, and Richard Mitchell. 1999. “The Evolution of the Contract of Employment in Australia: A Discussion.” Australian Journal of Labour Law 12(2): 113–30. Howse, Robert. 1993. “Retrenchment, Reform or Revolution? The Shift to Incentives and the Future of the Regulatory State.” Alberta Law Review 31(3): 455–492. Industrial Relations Commission. 1998. Pay Equity Inquiry: Report to the Minister. Matter no. IRC6320 of 1997, conducted by Justice Glynn. Sydney: Industrial Relations Commission of New South Wales. Available at: http://www.law link.nsw.gov.au/lawlink/irc/ll_irc.nsf/pages/IRC_research_information_ publications_pay_equity_inq. Accessed November 28, 2012.

Regulating Supply Chains     251 International Labour Organization (ILO). 2008. “Labour Clauses in Public Contracts: Integrating the Social Dimension into Procurement Policies and Practices.” Report of the Committee of Experts on the Application of Conventions or Recommendations, Report III (Part 1B) for the International Labour Conference, 97th Session. Geneva: ILO. James, Phil, Richard Johnstone, Michael Quinlan, and David Walters. 2007. “Regulating Supply Chains to Improve Health and Safety.” Industrial Law Journal 36(2): 163–87. Johnstone, Richard. 1999. “Paradigm Crossed? The Statutory Occupational Health and Safety Obligations of the Business Undertaking.” Australian Journal of Labour Law 12(2): 73–113. Kahn-Freund, Otto. 1974. “On the Use and Misuses of Comparative Law.” Modern Law Review 37(1): 1–27. Kaine, Sarah, and Michael Rawling. 2010. “Comprehensive Campaigning in the NSW Transport Industry: Bridging the Divide Between Regulation and Union Organizing.” Journal of Industrial Relations 52(2): 183–200. Klare, Karl. 2002. “The Horizons of Transformative Labour and Employment Law” In Labour Law in an Era of Globalization: Transformative Practices and Possibilities, edited by Joanne Conaghan, Richard Fischl, and Karl Klare. Oxford: Oxford University Press. Marshall, Shelley. 2006. “An Exploration of Control in the Context of Vertigal Disintegration.” In Labour Law and Labour Market Regulation, edited by Christopher Arup, Peter Gahan, John Howe, Richard Johnstone, Richard Mitchell, and Anthony O’Donnell. Sydney: Federation Press. Marshall, Shelley, Richard Mitchell, and Ian Ramsay. 2008. Varieties of Capitalism Corporate Governance and Employees. Melbourne: Melbourne University Press. McCallum, Ron. 2006. “The New Work Choices Laws: Once Again Australia Borrows Foreign Labour Law Concepts.” Australian Journal of Labour Law 19(2): 98–104. McCrudden, Chris. 2007. Buying Social Justice: Equality, Government Procurement and Legal Change. Oxford: Oxford University Press. Milhaupt, Curtis J., and Katharina Pistor. 2008. Law and Capitalism: What Corporate Crises Reveal About Legal Systems and Economic Development Around the World. Chicago: University of Chicago Press. Mitchell, Richard, and Christopher Arup. 2006. “Labour Law and Labour Market Regulation: Beyond the Employment Relationship.” In Labour Law and Labour Market Regulation, edited by Christopher Arup, Peter Gahan, John Howe, Richard Johnstone, Richard Mitchell, and Anthony O’Donnell. Sydney: Federation Press. Nossar, Igor. 1999. Proposals for the Protection of Outworkers from Exploitation. Sydney: Textile Clothing and Footwear Union of Australia. ———. 2006. “Cross-Jurisdictional Regulation of Commercial Contracts for Work Beyond the Traditional Relationship.” In Labour Law and Labour Market Regulation, edited by Christopher Arup, Peter Gahan, John Howe, Richard Johnstone, Richard Mitchell, and Anthony O’Donnell. Sydney: Federation Press. ———. 2007. “The Scope for Appropriate Cross-Jurisdictional Regulation of In-

252     Rethinking Workplace Regulation ternational Contract Networks (Such as Supply Chains): Recent Developments in Australia and their Supra-National Implications.” BORRRN working paper no.1. Sydney: The Business Outsourcing and Restructuring Regulatory Research Network. Nossar, Igor, Richard Johnstone, and Michael Quinlan. 2004. “Regulating Supply-Chains to Address the Occupational Health and Safety Problems Associated with Precarious Employment: The Case of Home-Based Clothing Workers in Australia.” Australian Journal of Labour Law 17(2): 137–60. Quinlan, Michael. 2006. “Contextual Factors Shaping the Purpose of Labour Law: A Comparative Historical Perspective.” In Labour Law and Labour Market Regulation, edited by Christopher Arup, Peter Gahan, John Howe, Richard Johnstone, Richard Mitchell, and Anthony O’Donnell. Sydney: Federation Press. Quinlan, Michael, Claire Mayhew, and Philip Bohle. 2001. “The Global Expansion of Precarious Employment, Work Disorganisation, and Occupational Health: A Review of Recent Research.” International Journal of Health Services 31(2): 335–414. Rawling, Michael. 2006. “A Generic Model of Regulating Supply Chain Outsourcing.” In Labour Law and Labour Market Regulation, edited by Christopher Arup, Peter Gahan, John Howe, Richard Johnstone, Richard Mitchell, and Anthony O’Donnell. Sydney: Federation Press. ———. 2010. “Supply Chain Regulation: Work and Regulation beyond the Employment Relationship.” Ph.D. diss., University of Sydney. Rhodes, R.A.W. 1997. Understanding Governance. Philadelphia, Pa.: Open University Press. Rubery, Jill, Jill Earnshaw, and Mick Marchington. 2005. “Blurring the Boundaries to the Employment Relationship: From Single to Multi-Employer Relationships” In Fragmenting Work: Blurring Organizational Boundaries and Disordering Hierarchies, edited by Damian Grimshaw, Damian Grimshaw, Jill Rubery, and Hugh Wilmott. Oxford: Oxford University Press. Stewart, Andrew. 2002. “Redefining Employment? Meeting the Challenge of Contract and Agency Labour.” Australian Journal of Labour Law 15(3): 235–77. Stone, Katherine. 2004. From Widgets to Digits: Employment Regulation for the Changing Workplace. Cambridge: Cambridge University Press. ———. 2010. “The Instability of Labor Contracts: The Impact of Globalization and Flexibilization on Employment Regulation.” Paper presented to Employment Regulation After the Standard Employment Contract: Innovations in Regulatory Design conference. Bellagio, Italy (September 20–24, 2010). Supiot, Alain. 2001. Beyond Employment: Change in Work and the Future of Labour Law in Europe. Oxford: Oxford University Press. Weil, David, and Carlos Mallo. 2007. “Regulating Labour Standards via Supply Chains: Combining Public/Private Interventions to Improve Workplace Compliance.” British Journal of Industrial Relations 45(4): 791–814. Workplace Express. 2010. “Fair Work Principles Users’ Guide Released.” January 15, 2010.

Chapter 14 Organizing Nonstandard Workers in Japan: Old Players and New Players keisuke nakamura and michio nitta

J

apanese union membership reached its highest level in history, 12.7 million, in 1994; by 2006 it had declined to 10.04 million. This lengthy negative trend was arrested in 2007 by two developments. First, tra   ditional enterprise-based unions abandoned their previous practice and began to organize nonstandard workers. Second, a new type of union emerged that organizes workers in multiple small companies employing nonstandard workers. Unlike traditional Japanese unions, these new community unions recruit members on a regional rather than an enterprise basis. This chapter examines how the old players, enterprisebased unions, and new players, community unions, have come to organize nonstandard workers and to address their problems.

Destandardization of the Japanese Labor Market The decline in standard workers and an increase in nonstandard workers in Japan over the past three decades has been significant. From 1982 to 2007, the percentage of regular workers has declined from 57 percent to 52 percent of the workforce, and the number of part-time and other nonstandard workers has increased from 11.4 percent to 28.5 percent.1 The Japanese Employment Status Survey has collected data on nonstandard workers by subcategory every five years between 1982 and 2007. The results are shown in table 14.1. The assumption behind the results of the Employment Status Survey is that worker categories matter. If a worker is labeled under a particular category, the job requirements or terms of employment are different from those in other categories, despite any similar personal attributes. 253

254     Rethinking Workplace Regulation Table 14.1  Workforce Composition by Employment Type from 1982 to 2007 (in Thousands) Category Total   Percentage Self-employed   Percentage Family workers   Percentage Private-sector executive   Percentage Regular employee or staff   Percentage Total part-timer or arbeiter   Percentage Part-timer   Percentage Arbeiter   Percentage Contract worker   Percentage Agency workers   Percentage Others   Percentage

1982

1987

1992

1997

2002

2007

57,888 60,502 65,756 67,003 65,009 65,978 100 100 100 100 100 100 9,536 9,071 8,442 7,931 7,041 6,675 16.5 15 12.8 11.8 10.8 10.1 5,869 5,255 4,712 4,052 3,114 1,876 10.1 8.7 7.2 6 4.8 2.8 2,751 3,089 3,970 3,850 3,895 4,012 4.8 5.1 0.6 5.7 6 6.1 33,009 34,565 38,062 38,542 34,557 34,324 57 57.1 57.9 57.5 53.2 52 4,675 6,563 8,481 10,342 12,061 12,935 8.1 10.8 12.9 15.4 18.6 19.6 4,677 5,967 6,998 7,824 8,855 7.7 9.1 10.4 12 13.4 — 1,886 2,514 3,344 4,237 4,080 3.1 3.8 5 6.5 6.2 695 730 880 966 2,477 3,313 1.2 1.2 1.3 1.4 3.8 5 — 87 163 257 721 1,608 0.1 0.2 0.4 1.1 2.4 1,325 1,118 1,008 1,025 946 965 2.3 1.8 1.5 1.5 1.5 1.5

Source: Authors’ calculations based on Statistics Bureau (1983, 1988, 1993, 1998, 2003, 2008).

Despite these aggregate numbers, the issue of nonstandard workers requires additional clarification. For instance, many part-timers work long hours. According to one statistic, more than 40 percent of those deemed to be part-time workers regularly work more than thirty-five hours per week (Nitta 2001, 84). Another statistic shows that just 33 percent of part-time workers say that they are on a limited-term contract of less than one year (Statistics Bureau 2008).These statistics suggest that the two main criteria for defining a nonstandard worker—working hours and type of contract—do not provide enough of a basis to clarify the status of nonstandard workers in Japan. Another example of the difficulties of defining nonstandard workers in Japan concerns the term arbeiter. Originally the term was the German word for worker. Japanese students began using it, however, to describe part-time student jobs, the implication being that such jobs are side jobs. Today, arbeiter generally refers to young nonregular workers who are either male or female. The distinction between part-timer

Organizing Nonstandard Workers in Japan     255

and arbeiter is not clearly defined because many arbeiters work parttime. As mentioned, many part-timers in Japan work long hours, frequently on limited-term contracts. Conversely, certain groups of workers are referred to as limited-term contract workers or contract workers. They are different from contract labor, a term that generally refers to workers with individual subcontracts. According to Japanese statistics, a contract worker generally works full time—that is, the same working time as a regular worker—but is hired on a limited-term contract basis. From the point of view of working hours and type of employment contract, extended working hour part-timers are quite similar to contract workers in this sense, but, generally speaking, their terms of employment are quite different. Contract workers are typically paid significantly more than extended working hour part-timers. Judging from their levels of pay and academic backgrounds, contract workers perform jobs that require more skill than extended working hour part-timers. In effect, the categories of workers shown in table 14.1 are institutions that evolved in the Japanese labor market without concrete state regulations. These categories have their own history and are not confined to legal definitions. In all likelihood, the only status clearly defined by law in table 14.1 is agency temporary workers. Therefore, the rather unorthodox method of gathering employment statistics actually produces a fairly good overview of the labor market landscape in Japan. The results in table 14.1 indicate that Japan is experiencing destandardization of its labor market. Various types of nonstandard workers apparently increased as a proportion of the total working population from 11.4 percent in 1982 to 28.5 percent in 2007. It is notable that while the proportion of nonstandard workers increased by 17.1 percent in 25 years, the proportion of regular workers declined by only 5 percent. This apparent discrepancy reflects the large decline in self-employment during this period: the number of selfemployed and family workers dropped by 13.7 percent in response to changing economic structures and government policies designed to rationalize inefficient sectors. For instance, large-scale chain stores increasingly displaced small stores operated by self-employed workers. As a result, self-employed workers were replaced with nonstandard workers rather than with regularly employed workers. One of the prominent features in the period is the increase of two types of nonstandard workers: limited-term contract workers (or contract workers, as noted) and agency workers. Generally speaking, these workers are employed full-time and earn more than ¥1,300,000 per year. In contrast, part-timers and arbeiters typically earn less than ¥1,300,000 to avoid losing dependent worker status in health care and public pension systems. As such, contract workers and agency workers appear

256     Rethinking Workplace Regulation

more like regular workers than part-timers or arbeiters. In other words, they pose more of a threat to regular workers, whom they most nearly resemble in terms of earnings and hours worked. The increased use of nonstandard workers in the past ten to fifteen years was prefigured by the Employment Portfolio Strategy proposed by the former Japan Federation of Employers’ Association (Nikkeiren) in 1995. In the aftermath of the bubble economy’s collapse in the early 1990s, business leaders needed to demonstrate their determination to cope with an increasingly globalized business world. Some reformist executives wanted to pursue a significant departure from past employment and labor relations practices. Inspired by the ideas of market fundamentalism, they pushed an agenda that included revisions to dismissal regulations. Mainstream business leaders, however, opposed the fundamental revision of dismissal law proposed by the reformists in 2002 under the Koizumi government. They believed that entirely scrapping the Japanese social contract of lifetime employment with the core workforce would create chaos. Instead they proposed a more effective Employment Portfolio Strategy, which envisioned that companies in the future would have three distinct groups of workers: core workers (long-term competence accumulation), peripheral workers (flexible employment), and inbetween workers (professional-specialist). Over the past fifteen years, employers have attempted to implement this strategy. Mainstream business leaders hoped that such a strategy would make it possible to maintain the commitment of the core workforce while increasing operational versatility by introducing various types of adjunct flexible workforces. This proposal can be defined as a dualist approach different from the boundary-less workplace approach of large corporations in the United States (Stone 2004). The implementation of the Employment Portfolio Strategy, however, brought about serious challenges for Japanese society that may be causing deep and permanent divisions in the labor market. There is a danger that large numbers of young workers who have experienced only flexible employment may end up as second-class citizens with no prospects of moving up in Japanese society. This has been one of the most debated policy issues in Japan for the past four to five years. This growing concern over a divided society has in turn provided fuel for opposition political parties and has contributed to the loss of power of the LDP, Japan’s long-dominant conservative party.

Old Players with New Ideas How have Japanese labor unions tried to address these serious challenges? Table 14.2 shows recent trends in Japanese union membership among regular and part-time workers.

Organizing Nonstandard Workers in Japan     257 Table 14.2   Development of Labor Union Members Year

Total Number

Regular Workers

Part-Time Workers

1990 1994 2000 2006 2007 2008 2009 2010

12,265 12,699 11,539 10,040 10,080 10,065 10,078 10,054

12,167 12,531 11,279   9,525   9,492   9,449   9,377   9,328

  97 168 260 515 588 616 700 726

Source: Authors’ calculations based on Ministry of Health, Labour, and Welfare (1990, 1994, 2000, 2006, 2007, 2008a, 2009, 2010). Note: Numbers in thousands. Part-time workers here refer to those who work fewer hours than regular workers in establishments, or those who are called part-time workers in establishments. The number of unionized regular workers is calculated by subtracting the part-time worker union membership from total union membership. The regular workers here, therefore, include some nonstandard workers such as temporary workers, contract workers, agency workers, and so forth.

As these numbers confirm, overall union membership hit its highest point in Japanese history in 1994, decreased each subsequent year until 2006, and then became relatively stable after 2007. They also show that unionization of regular workers peaked in 1994 and has continued to decrease ever since as existing enterprise-based unions have lost members due to massive employer layoffs. However, the ranks of unionized parttime workers have been increasing steadily over the past two decades. The data thus support the claim made at the beginning of this chapter that the long-term declining trend of union membership in Japan was halted by the active organization of part-time workers aided by enterprise-based unions.

Efforts to Organize Part-Time and Nonstandard Workers The Japanese labor movement is built around enterprise-based unions that—though affiliated with industry-wide federations and national labor centers—generally remain independent in terms of finance and administration. Typically, these unions represent standard or regular employees working in a particular enterprise and protect neither workers employed in other enterprises nor nonstandard workers in the same enterprise. They have long been criticized for limiting their responsibilities in this way and have been described as a labor aristocracy that takes

258     Rethinking Workplace Regulation Table 14.3  Enterprise-Based Unions Dealing with Nonstandard Workers Category Temporary workers Part-time workers Contract workers

Approach

1993

1998

2003

2008

  3.3

  3.3

  6.1

11.2

11.1

  8.8

  7.8

  5.5

  8.9

  4.9

16.6

23.0

11.7

14.7

11.0

10.6

15.0

23.3

  9.8

  7.3

Organize Other organizational initiative Organize Other organizational initiative Organize Other organizational initiative

Source: Authors’ calculations based on Ministry of Health, Labour, and Welfare (1993, 1998, 2003, 2008b). Note: Numbers in percentages.

advantage of low-paid nonstandard workers. In response, enterprise unions have sometimes claimed that nonstandard workers themselves are unwilling to become members—because of union fees, union duties, and so forth—but their exclusionary policies have remained in place. In a significant shift, traditional enterprise-based unions and industrywide federations have begun to organize part-time workers employed in already unionized enterprises, as well as in enterprises that were previously unorganized. These initiatives have yielded annual average increases in their membership of about 65,000 workers (Nakamura 2011). The federation most prominent in this new organizing strategy is the Japanese Federation of Textile, Chemical, Food, Service and General Workers’ Unions (UI Zensen) (see Nakamura, Sato, and Kamiya 1988, chapter 8). Table 14.3 shows the ways in which enterprise-based unions have, since 1993, organized or made other efforts to reach out to develop institutional ties with various types of nonstandard workers by giving them quasi-membership, cooperating with their existing organizations or, at minimum, attempting to organize them. The proportion of unions that organized temporary workers increased from 3.3 percent in 1993 to 11.2 percent in 2008. In the same period, the proportion of unions that organized part-time workers and contract workers increased, from 8.9 percent to 23.0 percent, and 15.0 percent to 23.3 percent, respectively. Despite these increases, 70 to 80 percent of enterprise unions still do not represent nonstandard workers within their enterprise.

Organizing Nonstandard Workers in Japan     259

Responding to Two Kinds of Crises What has brought about this shift in attitude on the part of some “old player” unions and how well have they succeeded in organizing nonstandard workers? Interesting findings were obtained in our study of ten enterprise-based unions that have succeeded in organizing nonstandard workers, such as part-time workers, contract workers, temporary workers, and agency workers (Nakamura 2009). Three of the ten unions are in the manufacturing sector and four are in the tertiary sector. One is in transportation, and the remaining two are in the public sector. Eight of the ten are large unions, and two are small unions in the manufacturing sector and in the tertiary sector. Those unions that decided to organize nonstandard workers did so out of a realization that they faced two kinds of crises: the malfunctioning of the collective voice mechanism, and the underrepresentation of workers. The collective voice mechanism is the mechanism through which a labor union conveys union members’ complaints and preferences to management. Effective use of the voice mechanism often results in a decrease in separation rates and an increase in productivity (Freeman and Medoff 1984). Most Japanese enterprise-based unions are cooperative with management, and hence through this mechanism, they can propose suggestions and ideas that both improve efficiency and enhance the security of employment for their members. The increasing presence of nonstandard nonunion workers, however, poses a threat to the continued functioning of the collective voice mechanism. As outsiders, such workers are more likely to choose to exit the enterprise than to voice their concerns when problems arise. They are also reluctant to convey their complaints, preferences, and suggestions to management even if they remain inside the enterprise. The rela­ tionship between nonstandard workers and regular workers becomes strained as well. This can bring confusion or stagnation to the workplace, leading to a decrease in productivity, which in turn may have a negative effect on the survival and growth of the enterprise, and ultimately the employment security of regular employees. This is one crisis felt by union leaders. The other crisis that led unions to begin to organize nonstandard workers is related to the requirements for majority representation of workers. The Labor Standards Law requires that whenever an employer initiates or modifies work rules, the employer should seek the opinion of the representatives of a majority of the workers in the establishment (Article 90, paragraph 1) even though the law does not require their consent. This law also prescribes that an employer should conclude a labormanagement agreement regarding overtime work with a majority repre-

260     Rethinking Workplace Regulation

sentative of the workers present at the establishment as a condition of requiring the employees to work overtime (Article 36, paragraph 1). Many other provisions in this law also require an employer to conclude labor-management agreements with a majority representative of the workers (see Araki 2002, chapter 4). When a union enjoys majority support, the union leader will almost certainly be the majority representative. By contrast, when it does not, a majority representative must be selected by voting or a show of hands or other appropriate procedures. Here, the union leader will not necessarily be the natural choice as a majority representative, and the union may find its ability to speak on behalf of its members impaired, and its ability to protect their interests undermined. Moreover, two conditions should be kept in mind. One is that labormanagement agreements are concluded at the establishment level, not in an enterprise as a whole. In a large enterprise with more than one establishment, a majority representative must be selected at each location. Note, however, that a majority union in an enterprise is not always a majority union at an establishment. When a majority union does not organize a majority of workers at a given location, the union leader will not automatically become the majority representative there. The other condition is that workers who choose a majority representative at an establishment include not only regular workers but all workers employed there as well, including nonstandard workers, but not agency workers. Thus, if nonstandard workers are in the majority at an establishment, they might choose their own leader as majority representative, seek a wage increase for themselves, and sign a labor-management agreement on overtime work or other matters that take account of their preferences rather than those of regular workers. In sum, the increased presence of nonstandard workers undermines the union’s position as a majority representative. Our study revealed that the union leaders who confronted or anticipated one or both of these crises were motivated to organize nonstandard workers in order to protect themselves and their members. Nonetheless, in many of the ten cases we examined, the decision by union leaders to act in this way was not immediately accepted by the members. In one case, the majority of the union’s executive committee was initially against the proposal. In another, the lay union officers did not actively play their expected role of organizing nonstandard workers. In yet another case, when a union leader requested the enterprise to employ agency workers as regular workers, a heated argument unfolded about the proposal at a special general meeting. In these types of cases, after a long discussion, the union leaders finally persuaded executive committees and rank and file members to agree. Not all nonstandard workers were initially willing to accept union ap-

Organizing Nonstandard Workers in Japan     261

proaches. Some part-time workers made many complaints against union organizers by expressing the sentiment: “You have not taken care of us for a long time. Why now? Do you need our money?” One of the most frequently asked questions was what the union would give them in return for union fees. Young contract workers simply voiced to union organizers such sentiments as, “annual union fees amount to about ¥40,000 that we can use to buy brand name handbags. What are the merits of joining the union instead of buying such handbags?” Union organizers were not deterred by such complaints and continued their organizing activities. Concerning the complaints about union fees, they frankly answered that the unions needed their own funds for union activities. Because the Trade Union Law prohibits an employer from giving financial support to a union (Article 7), the union is forced to collect relatively high fees. Regarding the union’s merits, the organizers insisted that the unions would not treat nonstandard workers as customers, and the unions required them to act together to improve working and employment conditions. Using these arguments, union organizers succeeded in obtaining the consent of most or all of the nonstandard workers. One of the reasons for their success is that when the unions, to save themselves, initially began to organize nonstandard workers, they did not simply lower existing barriers to membership, but instead appealed to nonstandard workers to join in their interests. Moreover, in all cases, nonstandard workers actually saw improvements in their working and employment conditions. In many of the cases studied, they received an increase in their bonuses or wage rates (or both); in others, they were provided with new or additional fringe benefits comparable to those enjoyed by regular workers; and in one case, nonstandard workers serving for one year or more were given family and child-care leave, even though the governing statute does not require an employer to grant such leave to workers employed on a daily basis or a fixed-term contract.

The Emergence of New Types of Unions Not all Japanese labor unions are enterprise based. Regional general unions, known as community unions, open their doors to every worker in certain regions of Japan. Overall, community unions have organized about 40,000 workers in total. Although this figure is not particularly impressive, what is noteworthy is that a new type of inclusive labor union has emerged that organizes various kinds of workers regardless of industry, trade, enterprise, employment status, and so on. These are the new players in organizing nonstandard workers. Although formal statistics do not yet exist, there appear to be at least three groups of community unions. The first and oldest is the Commu-

262     Rethinking Workplace Regulation

nity Union National Network (CUNN). Formed in 1990, CUNN is a network organization consisting of seventy-two community unions in thirty prefectures, some of which were formed as early as the 1980s. As of 2010, CUNN had a total of about 15,000 individual members. Thirteen community unions from CUNN and one non-CUNN community union form the Japan Community Union Federation (JCUF),which is affiliated with the Japanese Trade Union Confederation (JTUC). As of 2009, JCUF had 6,390 members, about 40 percent of CUNN’s total membership. The second group of community unions belongs to the National Confederation of Trade Unions (NCTU). Oh (2010) describes ­NCTU’s community unions as local unions directly affiliated with NCTU’s prefecture-level local centers. There are thirty-four prefecture-wide NCTU community unions and 101 NCTU community unions covering one or more cities, yielding a total membership of 10,355 as of June 2009. The third group of community unions are direct affiliates of JTUC, where they are referred to as regional unions. JTUC community unions are organized mainly at a prefecture-wide level and are directly affiliated with prefecture-level local centers of JTUC. As of 2009, forty-five prefecture-level local centers have community unions with a total of 15,500 members. The remaining part of this section focuses on the JTUC’s role in fostering community unions in order to illustrate its regional organization reform and the development of community unions (Nakamura 2010).

The JTUC’s Regional Organization Reform Community unions were formally approved as organizing actors by the JTUC in 1996. Before then, it was assumed that only industry-wide federations took responsibility for organizing workers, and that local centers and the regional branches were supposed to merely assist these higher level bodies. Two factors seem to have prompted the JTUC’s change in policy. The first was the stagnation of JTUC union membership at about 7.7 million during the first half of 1990s, far below its target of 10 million. The second was that more and more unorganized workers had come to local union centers—prefecture-level local centers of the JTUC—to ask for assistance with work-related issues, even though industry-wide federations were not always able to provide such assistance. In 2003, the JTUC decided to adopt a policy of radically strengthening community unions—not only at the prefectural level but also at the regional level—with a view to establishing unions as a positive presence in communities across the country. The policy also established organizing principles for community unions. Individual workers and enterprisebased unions with fewer than 100 members were deemed qualified to

Organizing Nonstandard Workers in Japan     263 Figure 14.1   Development of JTUC Community Unions 18,000

Number of Members

16,000 14,000 12,000 10,000 8,000 6,000 4,000 2,000 0

1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 Year

Source: Authors’ calculations based on Japanese Trade Union Confederation (1999, 2001, 2003, 2005, 2007, 2009).

join community unions; enterprise-based unions with 100 or more members were supposed to join industry-wide federations, even if they were organized with the assistance of regional branches and community unions. Finally, union fees were set at 1.5 percent of monthly wages, about the same level as that adopted by industry-wide union federations. In general, before this policy was adopted, community unions had been viewed as interim structures that would ultimately evolve into formally constituted enterprise-based unions affiliated with industry-wide federations as soon as conditions permitted. By contrast, the new policy aimed to give community unions a well-defined mandate and a permanent local presence. Community unions organized on average about 2,300 workers annually from 1999 to 2009. As of September 2009, JTUC community union membership was 15,500. Not all organized workers retained their membership in community unions for lengthy periods; some left once their individual problems were resolved; and some small enterprise-based unions grew in size and graduated from community union status to affiliation with industry-wide federations. Figure 14.1 shows the growth in membership of JTUC community unions between 1999 to 2009. In 2005, the JTUC decided to reorganize its 471 regional branches covering cities and towns into 300 regional branches, each of which would

264     Rethinking Workplace Regulation

have a full-time officer and clerk. To support the new arrangements, it decided to transfer funds from JTUC headquarters and its prefecturelevel local centers to the regional branches. As of April 2010, there were 163 reformed regional branches. This reform is revolutionary for Japan’s labor union movement because the national centers of Japan’s labor unions have never placed full-time officers and clerks at all their regional branches.2 The main purpose of the JTUC reform was to revitalize the labor union movement by showing the union’s face to those living and working in the regions. New branches covering cities and towns are expected to play a role in five areas: promoting labor-friendly policies to local governments; organizing workers; providing a meeting place for retired exunion members; participating in running life-support centers (LSCs), which provide advice to citizens on various problems; and cooperating with other nonprofit organizations (NPOs). Under the JTUC’s structure, enterprise-level unions are affiliated with industry-wide federations, which in turn are affiliated with the JTUC at the national and local levels; they also have a direct relationship with the JTUC’s regional branches.

Activities of Regional Branch We investigated ten life support centers and ten reformed regional branches to clarify the extent to which branches played the expected role in the five areas. Three of the ten branches had full-time union officers and clerks before 2005. The remaining seven branches appointed these individuals after 2006. The present state of activities varies widely among the branches and also among the five areas of activity mentioned above. Most branches seemed to perform relatively well in two areas: organizing workers and running LSCs. A few branches also seemed to perform relatively well in promoting labor-friendly policies at the local level, providing a meeting place for retired ex-union members, and cooperating with NPOs. JTUC’s headquarters requires new branches to promote policyrelated issues to local governments because one of the main aims of JTUC is to involve itself in crafting government policies. JTUC performs as expected at the national level (Ohmi 1994; Nakamura and Miura 2001), and its local centers promote policy-related issues to prefecture governments (Nakamura and Miura 2004). Two of the three branches that had historically had full-time officers periodically submitted their policy-related demands to city governments, which then provided them with written responses. For example, they advocated employment promotion policy for handicapped and elderly workers, improvements in the local school lunch program, and a policy of promoting gender eq-

Organizing Nonstandard Workers in Japan     265

uity. Among the seven branches that did not use full-time officers, one had a practice of having its lay officer issue policy-related demands to city governments. This practice was inherited by the new branch after reorganization, which now submits demands to all nine local governments within its jurisdiction. The other seven branches have not yet begun policy work. By providing a meeting place for retired union members, the branches are able to enlist their help with union activities, including election campaigns. One of the ten branches examined assists with running an NPO serving elderly citizens. Another, which runs its own NPO, involves union retirees in the NPO’s activities. The remaining branches do not cater specifically to retired workers. Finally, new branches are expected to build networks with NPOs in order to work cooperatively with grassroots movements. One of the three branches examined, which runs its own NPO, has close relations with other NPOs. Of the remaining nine branches, some have relations with a few NPOs; others do not. Among the branches studied, eight are involved in running LSCs or subcenters of LSCs. In 2005, an agreement was reached among four national labor organizations on the necessity of providing a support service for citizens in every aspect of life. The parties to this agreement are the JTUC, the National Council of Worker’s Welfare,3 the National Federation of Workers and Consumers Insurance Cooperatives, and the National Association of Labour Banks. According to this agreement, LSCs must be established at the prefecture level. There were forty LSCs as of May 2009. Those studied are financially supported by the prefecturelevel regional councils of workers’ welfare. There are three types of LSCs. The first is run by a prefecture-level regional council of workers’ welfare and exists at only one of the ten JTUC local centers. It has five subcenters, located in the same offices as the JTUC regional branches. When a citizen calls a counselor at the LSC for advice, the counselor provides advice or refers the citizen to one of more than 100 organizations—including both NPOs and public institutions— with which it has close connections. A second type of LSC is an organization run cooperatively by four regional labor organizations and has three subcenters located at the same offices as the JTUC’s regional branches. The remaining six LSCs are run by JTUC regional branches with some part-time counselors. Finally, all of the ten regional branches studied are affiliated with community unions or branches of prefecture-wide community unions and actively assist in organizing workers who live or work in their region. The full-time union officers of these branches also hold the post of union officer of their community unions. The following section addresses the development of JTUC community unions and their activities.

266     Rethinking Workplace Regulation

Community Union Activities Community unions are legally entitled to bargain collectively just like enterprise-based unions. The Japanese Trade Union Law—unlike its U.S. counterpart—does not adopt an exclusive representation system. Each union that meets statutory requirements enjoys full-fledged rights to bargain collectively and go on strike. Even a union that organizes a few workers in a single company shares the same bargaining rights as a union that organizes the majority of workers in the company” (Araki 2002, 172). Moreover, the Trade Union Law (Article 6) states that “a representative of a labor union” or “a person who is mandated by a union” has bargaining authority.” A union officer of an industry-wide federation and a community union, or a lawyer, can become the latter, because the article specifies no conditions of “a person who is entrusted by a union” (see Araki 2009, 501). Community unions thus can and often do perform the same functions as enterprise-based unions—advocating for the rights and interests of their members in the workplace, bargaining with enterprises in which their members work, representing individual members or their affiliated enterprise-based unions, helping enterprise-based unions bargain with employers, and supporting enterprise-based unions that strike when an agreement cannot be reached through collective bargaining. Occasionally union members cannot solve problems through collective action. In such cases, community unions advise them to bring their disputes to labor relations committees, labor tribunals, or courts. If necessary, community unions, the regional branches, and also the local centers support them financially. The ten community unions that we studied organize workers several ways. First, individual workers who have been dismissed or failed to collect pay for work they have done may go to regional JTUC branches or community unions to consult union officers about their difficulties. If a union officer judges that their complaint is well founded, and the worker decides to take action against the employer, the union officer will ask the individual whether he or she is willing to join the community union by paying union fees. In cases of dismissal, most workers who have taken out membership in these circumstances leave the union after obtaining the customary monetary settlement in exchange for a letter of resignation. Second, a number of workers employed by the same enterprise may approach a JTUC regional branch or a community union because they are dissatisfied with their working conditions, employment security, or specific management actions. The union officers may encourage them to organize a union. If the effort to do so succeeds, their organization may join a community union.

Organizing Nonstandard Workers in Japan     267

Third, a small, unaffiliated enterprise-based union may approach a regional branch or community union for assistance in dealing with an employer. The community union’s officers will listen to their story and ask whether the union wants to join the community union to get its support. What is common in all three situations is that the community unions wait for workers to come to them. They do not seek out workers to persuade them to become union members. As a result, a given community union may organize only dozens of workers, or fewer, each year. Considering the limited resources available to them, there are few things that community unions can do. Nonetheless, community unions provide a safety net for workers suffering from poor working conditions and unstable employment security that includes nonstandard workers. Community unions, despite their small total membership of some 40,000, are a new player with the potential to organize nonstandard workers. They are particularly suited to this task because they have fulltime union officers and clerks, and have a demonstrated record of successfully organizing unions, advising workers and advocating their rights, both alone and in collaboration with JTUC regional branches. These attributes give them a special capacity to address workplace issues involving the small-sized enterprises that employ significant numbers of nonstandard workers.

Conclusion In Japan, labor unions themselves are tackling the problem of declining union membership in the face of changes in the structure of the economy and in the nature of employment relationship. Although some argue that structural change in the economy has caused stagnation in union membership, this argument fails to trace any clear causal relationship between the two developments. Moreover, it does not instruct unions on any strategies for reversing their declining fortunes. As the experience of both new and old union players in Japan demonstrates, improved attention to regional organization and new approaches to organizing nonstandard workers may hold the key to long-term improvement. In a larger sense, the lesson from Japan is that existing organizations and institutions often possess an unexpected capacity for adaptation, and that new circumstances can give them reason to change as well as the opportunity to do so.

Notes 1. This number reflects the number of total part-time workers, contract workers, and agency workers. See table 14.1. 2. The General Council of Trade Unions of Japan (Sohyo) had 1,222 regional

268     Rethinking Workplace Regulation branches, only 277 of which had full-time officers. The Japan Confederation of Labor (Domei) had 530 regional branches many of which were run by lay union officers. 3. The National Council of Worker’s Welfare is composed of various labor organizations, such as national centers of labor unions, industry-wide federations, worker’s independent welfare businesses, and regional councils of worker’s welfare. It aims to comprehensively promote the worker’s welfare movement.

References Araki, Takashi. 2002. Labor and Employment Law in Japan. Tokyo: The Japan Institute of Labour. ———. 2009. Rodo Ho (Labor and Employment Law). Tokyo: Yuhikaku. Freeman, Richard B., and James Medoff. 1984. What Do Unions Do? New York: Basic Books. Japan Federation of Employers’ Association. 1995. Shinjidai no Nihonteki Keiei (Japanese-style Management in the New Era). Tokyo: Japan Federation of Employers’ Association. Japanese Trade Union Confederation. 1999. Dai 6 kai Teiki Taikai Ippan Katsudo Hokoku Bessatu (The Separate Report on General Activities at the Sixth Regular General Meeting). Tokyo: Japanese Trade Union Confederation. ———. 2001. Dai 7 kai Teiki Taikai Ippan Katsudo Hokoku Bessatu (The Separate Report on General Activities at the Seventh Regular General Meeting). Tokyo: Japanese Trade Union Confederation. ———. 2003. Dai 8 kai Teiki Taikai Ippan Katsudo Hokoku Bessatu (The Separate Report on General Activities at the Eighth Regular General Meeting). Tokyo: Japanese Trade Union Confederation. ———. 2005. Dai 9 kai Teiki Taikai Ippan Katsudo Hokoku Bessatu (The Separate Report on General Activities at the Ninth Regular General Meeting).Tokyo: Japanese Trade Union Confederation. ———. 2007. Dai 10 kai Teiki Taikai Ippan Katsudo Hokoku Bessatu (The Separate Report on General Activities at the Tenth Regular General Meeting).Tokyo: Japanese Trade Union Confederation. ———. 2009. Dai 11 kai Teiki Taikai Ippan Katsudo Hokoku Bessatu (The Separate Report on General Activities at the Eleventh Regular General Meeting).Tokyo: Japanese Trade Union Confederation. Ministry of Health, Labor, and Welfare. 1990. Rodo Kumiai Kiso Chosa 1990 (General Survey on Labor Unions 1990). Tokyo: Ministry of Health, Labor, and Welfare. ———. 1993. Rodo Kumiai Jittai Chosa 1993 (Survey on Status of Labor Unions 1993). Tokyo: Ministry of Health, Labor, and Welfare. ———. 1994. Rodo Kumiai Kiso Chosa 1994 (General Survey on Labor Unions 1994). Tokyo: Ministry of Health, Labor, and Welfare. ———. 1998. Rodo Kumiai Jittai Chosa 1998 (Survey on Status of Labor Unions 1998). Tokyo: Ministry of Health, Labor, and Welfare. ———. 2000. Rodo Kumiai Kiso Chosa 2000 (General Survey on Labor Unions 2000). Tokyo: Ministry of Health, Labor, and Welfare.

Organizing Nonstandard Workers in Japan     269 ———. 2003. Rodo Kumiai Jittai Chosa 2003 (Survey on Status of Labor Unions 2003). Tokyo: Ministry of Health, Labor, and Welfare. ———. 2006. Rodo Kumiai Kiso Chosa 2006 (General Survey on Labor Unions 2006). Tokyo: Ministry of Health, Labor, and Welfare. ———. 2007. Rodo Kumiai Kiso Chosa 2007 (General Survey on Labor Unions 2007). Tokyo: Ministry of Health, Labor, and Welfare. ———. 2008a. Rodo Kumiai Kiso Chosa 2008 (General Survey on Labor Unions 2008). Tokyo: Ministry of Health, Labor, and Welfare. ———. 2008b. Rodo Kumiai Jittai Chosa 2008 (Survey on Status of Labor Unions 2008). Tokyo: Ministry of Health, Labor, and Welfare. ———. 2009. Rodo Kumiai Kiso Chosa 2009 (General Survey on Labor Unions 2009). Tokyo: Ministry of Health, Labor, and Welfare. ———. 2010. Rodo Kumiai Kiso Chosa 2010 (General Survey on Labor Unions 2010). Tokyo: Ministry of Health, Labor, and Welfare. Nakamura, Keisuke. 2009. Kabe wo Kowasu (Breaking the Walls). Tokyo: Institute of Labor Education and Culture. ———. 2010. Chiiki wo Tsunagu (Connecting Regions). Tokyo: Institute of Labor Education and Culture. ———. 2011. Hiseiki to Chiiki: Saisei heno Futatsu no Chansu (Non-standard Workers and Region: Two Chances of Revitalizing Japanese Labor Unions). The Journal of Social Science 62(3–4): 57–75. Nakamura, Keisuke, and Mari Miura. 2001. “Rengo no Seisaku Sanka: Rokiho to Hakenho wo Chuushin ni” (JTUC’s Policy Involvement Focusing on the Revision of the Labor Standard Law and the Worker Dispatching Law). In Rodo Kumiai no Mirai wo Saguru: Henkaku to Teitai no 90 nendai wo Koete (Searching the Future of Labor Unions Beyond the 1990s of Changes and Stagnation). Tokyo: Research Institute for Advancement of Living Standards. ———. 2004. “Chiho Rengo no Chosen” (Local center’s challenge). In Suitai ka Saisei ka: Rodo Kumiai Kasseika heno Michi (Decline or Rebirth?: A Path Toward Revitalization of Labor Unions), edited by Keisuke Nakamura and Research Institute for Advancement of Living Standards. Tokyo: Keiso Shobo. Nakamura, Keisuke, Hiroki Sato, and Takuhei Kamiya. 1988. Rodo Kumai ha Honto ni Yaku ni Tatte irunoka? (Are Unions Really Useful?). Tokyo: Sogo Rodo Kenkyusho. Nitta, Michio. 2001. “Modes of Employment in Japan.” In Can Japan Globalize? edited by Arne Holzhausen. Heidelberg: Physica-Verlag. Oh, Haksoo. 2010. “Godo Roso no Genjo to Kadai: Kobetu Rodo Funso Kaiketsu ni kannren shite” (Organization, Activities, and Significance of Regional General Unions in Japan: In Terms of the Resolution of Individual Labor Disputes). The Japanese Journal of Labour Studies 52(11): 47–65. Ohmi, Naoto. 1994. “Gendai Nihon niokeru Makuro Coporathizumu: Chingin Kettei to Seisaku Sanka” (Macro-Corporatism in Contemporary Japan: Wage Determination and Policy Involvement). In Neo Coporathizumu no Kokusai Hikaku (International Comparison of Neo-Corporatism), edited by Takeshi Inagami, Hugh D. Wittarker, Naoto Ohmi, Tooru Shinoda, Yoshihiro Simodaira, and Tsujinaka Yutaka. Tokyo: Japan Institute of Labour. Statistics Bureau. 1983. Shuugyo Kozo Kihon Chosa 1982 (Employment Status Survey 1982). Tokyo: Statistics Bureau.

270     Rethinking Workplace Regulation ———. 1988. Shuugyo Kozo Kihon Chosa 1987 (Employment Status Survey 1987). Tokyo: Statistics Bureau. ———. 1993. Shuugyo Kozo Kihon Chosa 1992 (Employment Status Survey 1992). Tokyo: Statistics Bureau. ———. 1998. Shuugyo Kozo Kihon Chosa 1997 (Employment Status Survey 1997). Tokyo: Statistics Bureau. ———. 2003. Shuugyo Kozo Kihon Chosa 2002 (Employment Status Survey 2002). Tokyo: Statistics Bureau. ———. 2008. Shuugyo Kozo Kihon Chosa 2007 (Employment Status Survey 2007). Tokyo: Statistics Bureau. Stone, Katherine. 2004. From Widgets to Digits. Cambridge: Cambridge University Press.

Part V Social Policy in Changing Labor Markets

Chapter 15 Safety Nets and Transition Assistance: Continuity and Change in a Liberal Welfare State anthony o’donnell

T

o a large extent, the standard employment contract and the welfare state grew up together, emerging hand-in-hand across the middle years of the twentieth century. Some of the earliest welfare policy measures in Europe and Australia were precisely about constructing the type of life course that characterized industrialized, wage-based economies. That is, the prohibition of child labor complemented by the introduction of compulsory education, and the system of old age pensions in effect created both childhood and old age as social phases in life (Leisering and Leibfried 1999). Later these policies were supplemented by a range of income support measures the purpose of which was to safeguard individuals and households against the risks—of unemployment, sickness, or loss of a breadwinner, for example—that arose from dependence on wages as the main source of income. Leisering and Leibfried refer to these later policies as social risk management policies. These differed from the earlier policy interventions. Whereas those earlier policies actively attempted to construct a normal life course, the later agencies were seen as coming into play when “the idealised assumptions of the model fail to materialise in individual cases.” They are safety nets for “deviant” life courses. Education and retirement define lengthy standardised periods of life and represent continuity. By contrast, the agencies of risk management react mainly to short-term circumstances and episodes which may affect individual lives at various points in the lifetime; they represent discontinuity . . . [T]he point of expo273

274     Rethinking Workplace Regulation sure to risk is not predetermined . . . Services for education and old age provide for the normal flow of life, while the risk-management systems deal with damage to it. (Leisering and Leibfried 1999, 20)

It is these safety net policies I am concerned with here. The connection between such welfare programs and the standard employment contract was articulated in different ways in different countries. The connection was seen most explicitly where a social insurance model of welfare provision linked benefit payments to employment status and a sustained and regular record of employee contribution, these serving as qualifying thresholds and, in some instances, providing for payments calibrated to previous earnings. But even where welfare payments were financed through general tax revenue rather than the contributory principle, taxes based on the employment relationship were pivotal in ensuring adequate resources for welfare state programs. Systems of labor market regulation, by way of either legislation or self-regulation by labor market actors, can also “substantially increase the level of economic security experienced by wage earners” (Bonoli 2007, 27). It is the relative emphasis given to each of three redistributive mechanisms—protective labor legislation, collective bargaining, and government transfer programs—that differentiate families of nations or welfare state regime-types. For example, according to Gøsta EspingAndersen (1990), the continental corporatist regime features a fair degree of legislative labor market regulation and strong collective bargaining, but weak redistributive transfer programs. In contrast, Nordic countries have low levels of legislative employment regulation, but strong col­ lective bargaining and strongly redistributive tax-transfer programs. English-speaking welfare states are characterized by an emphasis on redistributive income transfer programs, but in the context of overall low levels of social expenditure, fairly weak employment protection and collective bargaining. Yet all represent “different means to contain the socially disruptive character of free markets under industrial capitalism” (Bonoli 2007, 33). Leisering and Leibfried’s observation makes it clear that most welfare transfers were designed primarily to help people cope with crises in their lives, rather than with the normal flow of life. By the time the full array of welfare payments was in place in the middle of the twentieth century, it was presumed that for people of working age, such crises would be few and far between as everyone would have either a full-time employer or be married to a breadwinner. It was a model that presumed fairly standardized life courses, especially the dominance of uninterrupted fulltime paid employment across men’s adulthood and married women’s full-time unpaid work in the home. Such life courses were characterized by a series of linear, age-related transitions between education and paid

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work, marriage, home purchase, family formation, and so on, with few sanctioned reversals such as divorce, career switching, prolonged involuntary unemployment, or returning to education (Block 1987, 109). The common starting point for contributors to this volume is that such presumptions have ceased to hold over the past few decades. Whereas the postwar social settlement sustained an increasing homogenization of working life, we are now witnessing an increasing diversification of both working time and employment relationships. There has been a major growth in nonstandard employment arrangements. Australia, in particular, has seen a growth in casual employment, fixed-term, and contractorbased employment (O’Donnell 2004; Productivity Commission 2006). This represents a recommodification of the employment relationship as market logic penetrates organizations and the financial risks of shortterm fluctuations in labor demand, redundancy, sickness, and so on, are transferred to the worker, rather than being borne, at least in part, by the firm (Breen 1997). Yet we must also factor in the fundamental shift in gender relations that has occurred. The shift is clearly seen in the increasing labor force participation of women, especially middle-class married women. A host of quite new behavioral norms is being set by women’s increasing participation in both education and paid work: the delay in marriage and births, the management of complex and individualized combinations of paid work, unpaid work, and education, and the creation of new household models (dual income, lone parent, single person). Many households now include multiple earners with increasingly significant contributions to household income being made by women and, less so, by young people. Also, because of the dissolution and reformation of households, many earners now have responsibility for multiple households as parents support children from previous relationships while reestablishing new households. Whereas women with children are concentrated in forms of nonstandard work, the extent of full-time paid work over the life course has also shrunk for men, with full-time work—and hence high incomes—now concentrated in a relatively short period between the ages of thirty-five to fifty-five (Gregory 1998). In this context, several scholars have pointed out that social welfare systems need to adapt to the new social risks or life-course risks that call for policy responses that go beyond the traditional one of protecting the income of the male breadwinner (Bonoli 2005; Gautié and Gazier 2003). Increasing income inequality and nonstandard work result in the possibility of working poverty, and while the emergence of dual-earner couples reduces dependency on the male wage, it results in a new need to balance the requirements of domestic care work and labor force participation. Furthermore, if appropriate combinations of earnings and forms of work pooling within households are the key to getting ahead in the

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new labor market, then the break-up or dissolution of households and families is a sure way to fall behind, given that family relations, like work relations, are becoming increasingly contingent and serial (Froud et al. 1997). The demise in the standard employment contract, along with the emergence of these new social risks, presents challenges both to liberal welfare systems such as Australia’s, based on social assistance, and to European social insurance systems—although arguably the stresses and challenges are experienced differently by different systems (Iverson and Wren 1998). On a general level, though, whereas in many countries welfare transfers were once seen as supplements to the protections inherent in the standard employment contract and in established modes of labor market regulation, they are now being asked increasingly to act as substitutes for such protections. Australia offers an interesting case study as to how welfare systems can adapt to accommodate the changes in working and family life outlined above. In the following sections, I explore three themes in the Australian response to these challenges: the extent to which Australia has adhered to a social assistance, rather than a social insurance model; the extent to which in-work benefits have transformed the liberal model of welfare provision; and how systems of private savings and contributory benefits have emerged as a new element in the Australian system.

Social Assistance Versus Social Insurance The Australian system of social welfare stands out from the overwhelming majority of Organisation for Economic Co-operation and Development (OECD) countries that rely predominantly on work-related welfare provisions, that is, transfers financed by contributions and benefits related to past earnings, or that have universal systems. Instead, Australia sits with a handful of predominantly AngloSaxon countries in relying largely on means-tested, flat-rate benefits financed from general taxation. These types of social assistance or minimum income benefits are, in fact, fairly widespread through OECD countries—and expanding in the proportion of beneficiaries they support (Gough et al. 1997). What is noteworthy about the Australian system, however, is that these benefits are generally not supplemented by more generous earnings-related or contributory social insurance benefits, or by universalist payments. That is, rather than representing a payment of last resort, these flat-rate means-tested payments constitute the core of the Australian system of social protection (Immervoll 2009). Australia’s provision of social welfare benefits was inaugurated in 1908 at the federal level with the introduction of pensions for old age and invalidity. The payment in each instance was flat rate, subsistence level,

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and paid out of consolidated revenue. Entitlement depended on meeting a means test, rather than any history of contributions. This model became the norm for subsequent benefits, including widows’ pension introduced in 1942 and unemployment benefits and sickness benefits ­introduced in 1944. Reliance on means-tested social assistance-type payments is shared with several other Anglophone countries such as New Zealand, the United Kingdom, Canada, and Ireland (Gough et al. 1997, 20; Whiteford 2010, 4). In the past few decades, real increases have been made to benefit rates, most payments subsequently indexed to inflation or average weekly earnings; rent assistance has been increased; and payments to meet the costs of children have been substantially increased. However, Australia has always linked unemployment support to a more or less rigorous work testing. This linkage has been intensified in the past two decades, and unemployment benefits are now directed toward not only ensuring that the unemployed make themselves available for employment but also strategies and interventions meant to improve the employability of the unemployed, often underpinned by the rhetoric of contract and obligation. An emphasis on employability has also been extended to other categories of working-age recipients and, since 2006, single parents with school-age children have been subject to a work-test similar to the unemployed. Of course, by widening the behaviors and activities required for compliance, activation contracts have increased the opportunities to add new areas of sanctionable conduct. In Australia, this takes the form of breaching, that is, imposing penalties in the form of a deductions from income support payments on those claimants who fail to meet their activation requirements. Again, this form of hard activation appears consistent with developments in other liberal welfare states (Barbier and LudwigMayerhofer 2004). Australian payments are generous by OECD social assistance standards. Unrelated to contributions or entitlement thresholds and unlimited in duration, such payments are also capable of much greater coverage than social insurance schemes under which significant sections of the population may not have built up entitlement due to a lack of appropriate labor market activity, or may have exhausted such entitlement. Further, Australia—along with New Zealand—has relatively high means tests and a tapered benefit withdrawal rate, which allows benefit recipients to earn some income without losing entitlement to their benefit, and benefits are then phased out as earned income increases. This allows social assistance benefits to be used as a supplement for low earnings (Gough et al. 1997). This is especially the case with family assistance payments, a point I return to, but it also suggests that means testing is not synonymous with residualism if it works primarily to exclude the welloff rather than to restrict benefits to the poorest.

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Benefits in the Australian system are also more redistributive than social insurance schemes as they are financed through a progressive tax system and targeted at lower-income households both through meanstesting and through very low levels of direct taxation on poor households, such that very little of the assistance is clawed back by the government (Whiteford 2010, 6). Nordic countries tend to transfer large amounts of gross benefits to low-income households, but also levy significant taxes on them. Overall, Peter Whiteford (2010) estimates that the combined effect of Australia’s taxes and transfers in reducing inequality is similar to that in Sweden and Norway, and that the United Kingdom and New Zealand perform similarly to Germany and the Netherlands. That Anglophone countries record higher levels of disposable income inequality therefore reflects not less effective welfare states, but rather higher market inequality.1 In contrast, contributory and career-based entitlement systems of social insurance dispense benefits on the basis of sustained labor market attachment and at a level determined by previous earnings, not need. The major danger of such schemes is that those citizens with regular and high-wage working patterns build up a higher level of entitlement than those with more marginal labor market attachment. In particular, such systems are now confounded by the new diversity in work patterns, wages, and family structures that can work to effectively exclude the long-term unemployed, youth unemployed, lone parents, long-term sick and disabled, part-time and seasonal workers, self-employed and divorcees from insurance-based benefits (Alcock 1996, 40). As a dual system develops between those with entitlement and those forced to rely solely on basic social assistance payments by virtue of their more marginal labor market position,2 welfare schemes begin to facilitate new forms of exclusion, rather than ameliorate them. Overall, the Australian tax-transfer system as a redistributive tool is capable of alleviating poverty through what is, in essence, a Robin Hood strategy of taking money from well-off households and giving it to poor households, taking money from households with no children and giving it to households with children, and taking money from working-age households and giving it to retirement-aged households. This broad characterization overlooks the fact that many people will move from being net contributors to the tax-transfer system to net beneficiaries depending on life course circumstance. Approximately 40 percent of the redistribution effected by the Australian system is in fact redistribution of income across individuals’ lifetimes (Falkingham and Harding 1996). This is perhaps unsurprising as many of the risks that the system compensates for are fairly strongly associated with particular life course events, such as aging, and the costs associated with child-rearing. Many OECD countries’ social insurance schemes similarly place some

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importance on the alleviation of poverty in addition to income smoothing over the life course. That is, although classic insurance models favor lifetime redistribution over interpersonal redistribution—that is, they follow a piggy bank rather than a Robin Hood strategy (Barr 2001)—they by no means eliminate interpersonal redistribution (Falkingham and Harding 1996). Seen in such a light, it is perhaps easy to overstate the differences between social insurance models of welfare and Australia’s social assistance model.3 How easy, then, is it for a welfare system based on social assistance to adopt elements of a social insurance approach, or vice versa? Some data suggest that the diversity that can be identified within many national systems relates precisely to the type of risk covered (Salais 2003). The heterogeneity of the Australian system tends to support this proposition. However, this does not mean that nations do not to some degree become locked in to a particular model of welfare provision. The case of paid parental leave in Australia offers a useful illustration. Australia did not legislate a national paid parental leave scheme until 2010. Such a scheme could have been predicated on existing paid leave schemes: that is, employers would meet the cost of parental leave as an employment on cost in the same way they currently pay for sick leave, annual leave, and long service leave. Alternatively, such a scheme could take as its model the existing scheme of workers’ compensation—a social insurance-type mechanism whereby employers make mandatory contributions on a payroll and experience-rating basis to fund no-fault income maintenance for people injured at work. In the context of parental leave, the idea would be to leverage co-contributions from employers who are currently enjoying many of the benefits of an increasingly flexible and feminized labor market. In short, parental leave schemes might have been financed, at least in part, by a levy on business defined by reference to either cash flow or declared profits. This would also ensure that the cost of employing women who become pregnant is shared across employers, reducing the costs to individual employers. Such an arrangement would ensure that all women benefit, not just those in permanent, long-term employment. Such a social insurance-type entitlement would also provide an individual entitlement regardless of a partner’s income, unlike social assistance parenting payments (Buchanan and Thornthwaite 2001). Yet despite the presence of workers’ compensation as an existing model of a social insurance scheme, in 2010 the legislature adopted a fully government-funded parental leave scheme replacing earnings up to the level of the minimum wage. At first glance this seems to confirm the common characterization of the Australian model of welfare: a flatrate payment, financed out of consolidated revenue. What sets it apart is the level of payment: at a rate equal to the minimum wage, it is consider-

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ably more generous than that offered for disability or sole parents pension. The reluctance to fully embrace a social insurance model for parental leave means that the payment sits oddly within the panoply of welfare arrangements currently in place. As Julia Perry (2006) has pointed out, if we are indeed insisting that social assistance payments be based on need, the introduction of such a higher social assistance payment for new parents compared with other claimants appears unjustifiably in­ equit­able.

In-Work Benefits Changes to social assistance in Australia over the past couple of decades have led to an increasing proportion of claimants receiving both social assistance and income from work at the same time. As noted, means tests have been tapered so as to allow phased withdrawal of benefits as earned income increases. In short, governments have tried to devise a system that facilitates the transition from income support to part-time or casual employment by focusing on a range of financial incentives—such as the capacity to retain part of a benefit payment—that make labor force participation more attractive than inactivity. The role of financial incentives is not a wholly new concern for the social assistance system. It was always implicit that employment would provide an escape from poverty for prime-age males and their dependents, an escape made possible in Australia by the prevalence of full-time employment at arbitrated wages that far exceeded benefit levels. In part, this strategy has been challenged by the noted increase in benefit levels over the past thirty years or so. However, the major challenge to the postwar structure of incentives has been the quite profound changes in the world of paid work—in particular, the growth of part-time and intermittent employment, and the fall in real wages at the lower level of the male income distribution. Therefore, now the choice for many welfare recipients is not between welfare and full-time employment, but between welfare and part-time, intermittent, or low-wage employment or, over time, some combination of these. The recognition that certain forms of labor market participation might not lift recipients out of poverty has shifted the focus to how people in work may combine elements of income support with market earnings. This packaging of income support and earnings is most apparent in Australia’s system of family assistance. When first instituted in 1941, child endowment was Australia’s sole instance of a universal benefit. However, from the early 1980s a new and enhanced family income supplement was paid to low-income households with children, and in 1987 access to child endowment, now rebranded as family assistance, was made subject to a parental income test, which denied benefits to high-

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income families. Then, in the mid-1990s, the supplement and basic benefit were integrated, resulting in a general family benefit paid to the primary child-carer in all but relatively high-income households with the most generous benefits paid to low-income households, whether in or out of work. In 2000, the welfare and tax systems were further integrated with family assistance relabeled as family tax benefits. To some extent, the imposition of a means test on family assistance seems the high-point of liberal residualism, but in other ways the reconfigured scheme of family payments represents a fundamentally new form of relief in the Australian context, which had hitherto carefully separated those out of work from those working. Because the new meanstested payment was available to working persons, this made it to some extent a low-wage subsidy. The original child endowment was always a wage subsidy in the sense that it made up for the perceived inadequacy of wages for families with children. However, being neither means tested nor more generously targeted toward low-income households, the original child endowment was not a low-wage subsidy; its emphasis had been on horizontal, not vertical, equity (Cass and Brennan 2003). A means-tested family assistance scheme means the growth of a large portion of Australia’s welfare expenditure has become directly linked to the prevalence of low wages (Gregory, Klug, and Martin 1999). Moreover, given that this benefit also reaches relatively far up the income scale, John Myles and Paul Pierson observe that “conventional accounts of the politics of ‘poor relief’ in ‘liberal’ welfare states . . . provide a poor guide to the political dynamics and distributional consequences of this new form of welfare provision” (1997, 444). In-work benefits designed to make work pay now feature in a number of liberal welfare states, such as Canada, the United Kingdom, and the United States. However, a number of continental welfare states—France, Belgium, and the Netherlands—also have schemes that subsidize lowpaid workers’ wages, suggesting policy convergence across regime types. What is notable about several of the liberal examples is that benefits take the form of employment-conditional payments that operate as a refundable tax credit, calculated according to earned income with a marginal supplement paid for every dollar of income earned up to a certain plateau, and then gradually withdrawn. The U.K. and U.S. systems are tightly targeted according to family income and thus have a fairly strong redistributive or antipoverty effect (Immervoll and Pearson 2009). However, a danger inherent in all such schemes is that recipients may be reluctant to increase their hours of work because of the rate at which means-tested top-ups are withdrawn over a certain range.4 Why, then, has Australia not yet adopted the full-blown liberal model of an employment-conditional in-work benefit? The strengthening and targeting of the Australian family payment system in the 1980s arose out of a concern

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with child poverty, and mirrors the strong poverty-alleviation focus of the social assistance regime. That around half of in-work benefits schemes in the OECD are limited to families with children also reflects a particular concern with child poverty (Immervoll and Pearson 2009). The Australian family assistance scheme already attempts to meet the costs of children for low-income families, regardless of the labor force status of the parents. If our concern is addressing child poverty, this seems a sensible approach, rather than making in-work benefits employment conditional. The problem of household means testing and subsequent work disincentives remains as it does under other liberal in-work benefit schemes.

Savings, Investment, and Income Smoothing Whereas social insurance involves both lifetime redistribution and also a pooling of risk, a piggy bank scheme in its purest form entails individual saving accounts to facilitate income smoothing across the life course. Indeed, some have proposed schemes for the wholesale replacement of the tax-transfer system with mandatory contributions to individual savings accounts, from which individuals can draw for welfare contingencies (see, for example, Fölster, Orszag, and Snower in European Commission 1998). However, most recent discussion of savings or assets-based policies focus not on substitutes for established income support programs and service provision, but on offering an additional pillar of welfare ­policy. Evidence suggests that people use various strategies to smooth income to meet unexpected costs, or to cover transition periods where costs outstrip lowered income. For many, this means drawing down savings, but it can also mean drawing on rights accrued through the employment relationship, such as sick leave, annual leave, parental leave, or longservice leave, as well as redundancy and severance payouts, and wages received in lieu of notice. However, many workers today, particularly low-income workers, do not have the attachment to standard employment relationships that allows them to accrue such rights to paid leave. Income savings that yield a pool of financial assets can therefore offer several benefits: lump sums that can be accessed to make ends meet or for rainy days (paying off a consumer debt, replacing a consumer durable without going into debt, covering for a temporary period of unemployment); longer-term investments that might deliver some form of ­social mobility and increased opportunity (education and training, moving house or home purchase, starting up a business); provision for retirement. In Australia, both superannuation, the compulsory contributory aged pension scheme, and the Higher Education Contribution Scheme (HECS) follow a compulsory savings model, the first prospective, the second retrospective.

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Australia’s retirement income framework comprises three pillars: the age pension that provides a publicly funded minimum level of income in retirement, based not on past contributions or previous earnings but on current level of financial need; the superannuation guarantee, in operation since 1992, comprising compulsory employer superannuation contributions of 9 percent of employee earnings to investment accounts; and voluntary superannuation savings and other forms of personal savings and investment. HECS operates as an income-contingent loan, whereby the loan is repayable only when a person’s income reaches a certain level. The justification is that as university degrees are likely to lead to higher income, students should contribute to the cost of the degree when and if that advantage is realized (Perry 2006, 289). The loan is available regardless of family income and is underwritten by a government guarantee against default. New Zealand, the United Kingdom, and Thailand have introduced similar schemes. The architect of HECS, the academic economist Bruce Chapman, has advocated similar models to fund parental leave and drought relief, but as Perry points out, this may be asking too much of compulsory saving accounts: The income smoothing rationale works equitably for people whose lifetime earnings are average or above average, for a universal contingency such as retirement or when it provides future financial advantages, as in the case of higher education. It is inequitable when individual redistribution over the life course replaces social redistribution from rich to poor. Individualization of funding exacerbates lifetime inequality. (2006, 288)

Because people’s work lives are no longer securely continuous, but rather broken by spells of unemployment or other absences from work, one useful innovation would be to allow people to use a certain proportion of their superannuation savings, capped on an annual and lifetime basis, for purposes other than retirement. For example, some have proposed a lifelong savings system (ACOSS 2002), whereby compulsory savings at about 10 to 12 percent of earnings would be held in lifetime savings accounts in which two-thirds would be quarantined until age sixty-five for retirement and the remaining third would be available for any purpose after five years of contributions. Some other countries have adopted similar income-smoothing mechanisms that attempt to redistribute time over the life course. The Dutch life-course saving scheme and the Belgian time credit system offer employees the opportunity to save funds to finance periods of unpaid leave (Delsen 2007; Devisscher and Sanders 2007). A government-mandated account system has the potential to generalize coverage, especially for

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workers who do not maintain long-term work relationships with a single employer. Any such savings schemes involve a danger that excessive emphasis on incomes derived from investment funds enhances the risk of capital market failure. Workers, in the case of insolvent companies, are already being asked to bear the risk not just of labor market failure, but also of capital market failure. The proliferation of individualized savings accounts could mean that as people seek to enhance their individual security through clamoring for optimum returns on their investment incomes, they spread collective uncertainty through the labor market as shareholder value demands corporate restructuring and downsizing.5 An alternative is to ensure portability of employment-based entitlements between employers. Australia already has a long service leave entitlement, which is an employer-funded extended leave scheme that accrues after seven to ten years of continuous service. Some employers have reciprocal arrangements that allow accrued entitlements to be carried from one employer to another either within an industry sector, for example, higher education, or even between sectors, for example, higher education and government employment. All states have introduced portable schemes for the construction industry given that the short-term nature of work projects means that a person is unlikely to accrue sufficient time with any one employer to gain an entitlement to long service leave. Similar schemes are found in the stevedoring and coal mining industries. Peter Gahan and Peter Stricker (2005) have suggested that this long-established Australian entitlement has the potential to be transformed into a more generalized time-bank akin to continental European schemes.

Australian Liberalism in Comparative Perspective In my introductory comments, I referred in passing to Australia as a liberal welfare regime and contrasted it with corporatist regimes and Nordic (or social democratic) welfare regimes. The characterization of Australia as a liberal welfare state is not uncontested, however (see, for example, Castles and Mitchell 1993). Moreover, we should be alert to the problems that arise from the notion of welfare regimes itself, or indeed from most theories that attempt to cluster families of nations or varieties of capitalism.6 The literature on comparative capitalism tends “to imply a theory of institutional path dependence” (Jackson and Deeg 2006, emphasis in original). In other words, that there are “institutional linkages and complementarities” within national systems makes it difficult to introduce changes that can have the effect of transforming “the overall institutional configuration from one type of capitalism to another” (Jackson and Deeg

Safety Nets and Transition Assistance     285

2006, 35–36). Peter Hall and David Soskice (2001) identify two distinct sets of institutional arrangements, complemented by legal systems and styles of regulation that are identified either as liberal market economies or coordinated market economies. Other comparative studies identify more than two groupings, or families, of nations (see, for example, Boyer 2005; Amable 2003; Whitley 1999). Less considered in the literature, but potentially important for our inquiry, is the possibility of varieties of liberal market economies, or at least significant differences among liberal regimes (Mahon 2008). Importantly for this volume, the idea implicit in regime theory that countries will develop path-dependent responses to new challenges would seem to limit the possibilities for transnational learning. For example, although Castles has contested Australia’s placement in the liberal camp, or at least has pointed to Australia as representing a particularly distinct variety of liberalism, he does seem to espouse a certain path-dependency to explain the Australian system. His thesis describes working-class strategy in Australia as wage security for the worker rather than social security for the citizen. In the early decades of the twentieth century, trade unions were successful at securing things like fair and reasonable family wages and sick leave in arbitrated awards that governed the bulk of employees’ working conditions. Furthermore, Castles argues that the early success in establishing such centralized wage fixing determined the future strategy of working-class politics. There was little political pressure for subsequent expansion of the level and generosity of income transfer benefits. The protection of the take-home wage meant that labor was loath to support either contributory insurance schemes or an increase in the capacity of the tax base to finance increased transfers (Castles 1985). Yet, from today’s perspective, Castles’ characterization of the Australian welfare system seems unnecessarily limiting. Although payments to people of workforce age most closely follow the pattern that has arguably dominated the Australian social security model—flat rate payments, means-tested, and paid out of consolidated revenue—it is worth remembering that the full panoply of income maintenance and welfare schemes in Australia exhibits a greater diversity than this model suggests. State-based systems of workers’ compensation, which were among Australia’s earliest income maintenance schemes, follow a social insurance model based on contributory financing and offer earnings replacement rather than flat-rate benefits. Medicare follows an insurance model based on a hypothecated tax. Both superannuation, that is, compulsory contributory pensions, and the Higher Education Contribution Scheme (HECS) follow a compulsory savings model. This hybridity within the Australian system raises important questions as to whether it has the capacity to adapt to the changes outlined

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earlier. Regime analysis suggests that the feasible responses available to nations depend on national institutional capabilities (Zeitlin 2003, 10). That is, liberal welfare states can learn from other liberal welfare states, but there is little scope for learning and policy transfer across welfare regimes (11). In contrast, if we recognize that national cases tend not to fully correspond to a pure type of welfare regime but “comprise instead an idiosyncratic and historically contingent mix of institutions and programs,” then the capacity for cross-national learning is enhanced and, ­indeed, “mongrel” systems rather than “pedigree” systems may prove “more robust and adaptable” (13–14; see also Thelen 2010).

Conclusion What are the comparative advantages of the Australian system of social assistance? It is flexible, adaptable to changes in both labor market conditions and gender roles, redistributive, and cheap. In 2005, Australia was the sixth lowest spender on cash transfers among OECD countries (Whiteford 2010, 2). Although spending only marginally more overall on cash transfers than its liberal counterpart the United States, Australia spends five times more on income-tested benefits. (Whiteford 2010). By being tightly targeted toward the least well-off, the Australian system has proven highly effective at alleviating poverty at a lower cost than many international models. Reforms to the welfare system during the 1980s—greater targeting, a greater focus on the adequacy of benefits, and the extension of benefits to working people—built on an existing liberal legacy but moved away from a strict residualism often associated with social assistance, and represented initial attempts to come to terms with changed labor market and social conditions. The aim was to use limited resources to hold the line against market-generated poverty and vulnerability. To a large degree, the targeted, social assistance principle was successful: the disposable income of the poorest 20 percent or so of households has remained more or less constant over the past three decades despite joblessness, the disappearance of full-time jobs, an ageing population, and increases in sole parenthood (Harding and Szukalska 2000; ABS 2009). The relative stability of the poverty rate in Australia sets it apart from many OECD countries that saw poverty rates rise across this period (Caminada, Goudswaard, and Koster 2010, 18–19). Other aspects of the Australian welfare system adhered more closely to the residualist liberal path. The treatment of unemployed beneficiaries is a case in point: work testing of the unemployed has evolved into a harsher system of administrative surveillance and coercion. Compared with other welfare beneficiaries, the unemployed are given a far more limited opportunity to combine benefit receipt with part-time or lowwage work (O’Donnell 2006). Similarly, a seeming distrust of social in-

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surance saw Australia stick with a flat-rate, government-funded model when it introduced a paid parental leave scheme, although the potentially negative features of the model were offset by the relatively generous level of the benefit. Some other reforms of the past three decades have introduced fundamentally new elements into the Australian system of social protection: universal health insurance funded by a hypothecated tax or levy is one; compulsory superannuation is another. Ideally, social policy is about more than servicing a small potential clientele of the poor, unemployed, or aged. Partly these limited understandings come from snapshot views rather than looking at life-course dynamics. The postwar welfare state bundled its provisions at the passive ends of the life course, assuming most working-age citizens would have welfare needs met from a combination of market and household sources. Although social policy must remain primarily attentive to the worst-off, intensified or new uncertainties associated with working-age mean poverty becomes a greater risk even in normal life courses: this might be termed the democratization of risk (Leisering and Leibfried 1999). As Julia Perry (2006) notes, the reasons for less-than-full participation in the labor market fall into four broad categories: normal, predictable, and universal, such as childhood and old age; sanctioned and valued nonmarket activities, such as child-rearing and other forms of caring; those associated with improving employability and productivity, such as frictional unemployment, education, and training; and undesirable misfortunes, such as unemployment, sickness, and disability. It may be that direct transfers through a generous social assistance scheme, social insurance, and individual savings accounts or income smoothing each represents a different strategy that is more or less appropriate for any given set of risks. Overall, governments must maintain a role in managing risk not only because the demise of the standard employment contract creates more victims of risk who need protection but also because many people desire and pursue flexible, fluid, and nonstandard life courses: whether leaving a relationship, returning to education to upgrade skills, devoting increased time to caring obligations, seeking the right job, or some other reason. People recognize that transitions entail taking risks, and want a reasonable relation between the risk and the reward. To think of people as active risk-takers will mean, ultimately, finding a new welfare dis-

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course. Individuals taking such risks cannot be thought of as fraudulent claimants, nor is their poverty their fault. Rather, it is a matter of people planning their lives in a way that is meaningful for the individual and legitimate for society (Leisering and Leibfried 1999, 241).

Notes 1. Similarly, despite the generosity and effectiveness of redistribution, Australia still records a child poverty rate approximately twice as high as the OECD average, reflecting a very high level of joblessness among families with children (Cass and Whiteford 2009). 2. Of course, even in the absence of a social insurance system, the relatively well-off strata of Australian households already have de facto contributory, income-smoothing devices, whether through voluntary savings or accrued rights through the employment relationship, that play an important part in managing life course transitions. 3. Some 40 percent of redistribution under the Australian social assistance scheme is lifetime distribution and the other 60 percent is interpersonal distribution. In the United Kingdom, the proportions are more or less reversed (Falkingham and Harding 1996). Compare this with Sweden, where Stahlberg estimates that 80 percent of the transfers received by the average individual over the life course have been financed by the individual (Stahlberg 2007). 4. More particularly, because couples’ incomes are assessed jointly, the use of means-tested wage top-ups can make it less worthwhile for the second income earner, usually a woman, to enter the labor market or increase his or her hours of work. 5. As Robert Solow observed with regard to the potential transformation of U.S. Social Security (that is, retirement incomes) into privatized individual investment accounts: “When the Bush-Cheney administration proposed to replace Social Security with a system of individually accumulated, individually owned, and individually invested accounts, my first thought was that its goal was to take the Social out of Social Security. It took a few minutes longer to realize that it also intended to take the Security out” (Solow 2008). 6. The varieties of capitalism schema is based on national contexts of corporate governance, finance, and labor management systems. These derive from mechanisms by which employers coordinate their activities: either through market mechanisms or through more cooperative means.

References Alcock, Pete. 1996. “The Advantages and Disadvantages of the Contribution Base in Targeting Benefits: A Social Analysis of the Insurance Scheme in the United Kingdom.” International Social Security Review 49(1): 31–49. Amable, Bruno. 2003. The Diversity of Modern Capitalism. Oxford: Oxford University Press. Australian Bureau of Statistics (ABS). 2009. Household Income and Income Distri­

Safety Nets and Transition Assistance     289 bution, Australia, 2007–08 (Cat no. 6523.0). Sydney: Australian Bureau of Statistics. Australian Council of Social Service (ACOSS). 2002. “Fairness and Flexibility: Making Superannuation Work for Low and Middle Income Earners.” Working paper no. 123. Sydney: ACOSS. Barbier, Jean-Claude, and Wolfgang Ludwig-Mayerhofer. 2004. “Introduction: The Many Worlds of Activation.” European Societies 6(4): 423–36. Barr, Nicholas. 2001. The Welfare State as Piggy Bank: Information, Risk, Uncertainty, and the Role of the State. Oxford: Oxford University Press. Block, Fred. 1987. Revising State Theory: Essays in Politics and Postindustrialism. Philadelphia, Pa.: Temple University Press. Bonoli, Giulani. 2005. “The Politics of the New Social Policies: Providing Coverage Against New Social Risks in Mature Welfare States.” Policy and Politics 33(3): 431–49. ———. 2007. “Too Narrow and Too Wide at Once: The ‘Welfare State’ as Dependent Variable in Policy Analysis.” In Investigating Welfare State Change, edited by Jochen Clasen and Nico A. Siegel. London: Edward Elgar. Boyer, Robert. 2005. “How and Why Capitalisms Differ.” Economy and Society 34(4): 509–57. Breen, Richard. 1997. “Risk, Recommodification, and Stratification.” Sociology 31(3): 473–89. Buchanan, John, and Louisa Thornthwaite. 2001. Paid Work and Parenting: Charting a New Course for Australian Families. Report prepared for the Chifley Research Foundation. Sydney: ACIRRT, University of Sydney. Caminada, Koen, Kees Goudswaard, and Ferry Koster. 2010. “Social Income Transfers and Poverty Alleviation in OECD Countries.” MPRA working paper no. 20733. Munich: University Library of Munich. Cass, Bettina, and Deborah Brennan. 2003. “Taxing Women: The Politics of Gender in the Tax/Transfer System.” eJournal of Tax Research 1(1): 37–63. Cass, Bettina, and Peter Whiteford. 2009. “Social Inclusion and the Struggle against Child Poverty: Lessons from the Australian Experience.” Paper for Expert Group Meeting on Policies to Advance Social Integration, United Nations Department of Economics and Social Affairs. New York (November 2–4, 2009). Castles, Francis. 1985. The Working Class and Welfare. Sydney: Allen and Unwin. Castles, Francis, and Deborah Mitchell. 1993. “Three Worlds of Welfare Capitalism or Four?” Discussion paper no. 21. Canberra: Australian National University. Delsen, Lei. 2007. “Ins and Outs of the Dutch Life-Course Savings Scheme.” In Modernising Social Policy for the New Life Course. Paris: Organisation for Economic Co-operation and Development. Devisschers, Stephanie, and Debbie Sanders. 2007. “Ageing and Life-Course Issues: The Case of the Career Break Scheme (Belgium) and the Life-Course Regulation (Netherlands).” In Modernising Social Policy for the New Life Course. Paris: Organisation for Economic Co-operation and Development. Esping-Andersen, Gøsta. 1990. The Three Worlds of Welfare Capitalism. Cambridge: Polity Press. European Commission, Directorate General for Employment and Social Affairs. 1998. The Welfare State in Europe: Challenges and Reforms. Luxembourg: Office for Official Publications of the European Communities.

290     Rethinking Workplace Regulation Falkingham, Jane, and Ann Harding. 1996. “Poverty Alleviation versus Social Insurance Systems: A Comparison of Lifetime Redistribution.” Discussion paper 12. Canberra: University of Canberra. Froud, Julie, Colin Haslam, Sukdev Johal, John Williams, and Karel Williams. 1997. “From Social Settlement to Household Lottery.” Economy and Society 26(3): 340–72. Gahan, Peter, and Peter Stricker. 2005. “The Challenge of Reconciling Working Time Demands and Life Transitions: A Policy Proposal.” In Transitions & Risk: New Directions in Social Policy Refereed Conference Papers, edited by Lauren Rosewarne. Melbourne: University of Melbourne. Gautié, Jerome, and Bernard Gazier. 2003. “Equipping Markets for People: Transitional Labor Markets as the Central Part of a New Social Model.” Paper prepared for SASE Conference. Aix-en-Provence (June 28–30, 2003). Gough, Ian, Jonathan Bradshaw, John Ditch, Tony Eardley, and Peter Whiteford. 1997. “Social Assistance in OECD Countries.” Journal of European Social Policy 7(1): 17–43. Gregory, Robert. 1998. “Competing with Dad: Changes in the Intergenerational Distribution of Male Labor Market Income.” Unpublished paper prepared for Income Support, Labour Markets, and Behaviour: A Research Agenda Conference. Canberra (November 24–25, 1998). Gregory, Robert, Eva Klug, and Yew May Martin. 1999. “Labour Market Deregulation, Relative Wages, and the Social Security System.” In Reshaping the Labour Market: Regulation, Efficiency and Equality in Australia, edited by Sue Richardson. Melbourne: Cambridge University Press. Hall, Peter A., and David Soskice. 2001. Varieties of Capitalism: The Institutional Foundations of Comparative Advantage. Oxford: Oxford University Press. Harding, Ann, and Aggie Szukalska. 2000. “Social Policy Matters: The Changing Face of Child Poverty in Australia, 1982 to 1997/98.” Paper presented at the 7th Australian Institute of Family Studies Conference. Sydney (July 26, 2000). Immervoll, Herwig. 2009. Minimum Income Benefits in OECD Countries: Policy ­Design, Effectiveness, and Challenges. Paris: Organisation for Economic Cooperation and Development. Immervoll, Herwig, and Mark Pearson. 2009. A Good Time for Making Work Pay? Taking Stock of In-Work Benefits and Related Measures Across the OECD. Paris: Organisation for Economic Co-operation and Development. Iversen, Torben, and Anne Wren. 1998. “Equality, Employment, and Budgetary Restraint: The Trilemma of the Service Economy.” World Politics 50(4): 507–46. Jackson, Gregory, and Richard Deeg. 2006. “How Many Varieties of Capitalism? Comparing the Comparative Institutional Analyses of Capitalist Diversity.” Discussion paper no. 06/2. Köln: Max Planck Institute for the Study of Societies. Leisering, Lutz, and Stephan Leibfried. 1999. Time and Poverty in Western Welfare States. Cambridge: Cambridge University Press. Mahon, Rianne. 2008. “Varieties of Liberalism: Canadian Social Policy from the ‘Golden Age’ to the Present.” Social Policy and Administration 42(4): 342–61. Myles, John, and Paul Pierson. 1997. “Friedman’s Revenge: The Reform of ‘Liberal’ Welfare States in Canada and the United States.” Politics and Society 25(4): 443–72.

Safety Nets and Transition Assistance     291 O’Donnell, Anthony. 2004. “Non-Standard Workers in Australia: Counts and Controversies.” Australian Journal of Labor Law 17(1): 89–116. ———. 2006. “Reinventing Unemployment: Welfare Reform as Labor Market Regulation.” In Labor Law and Labor Market Regulation, edited by Christopher Arup, Peter Gahan, John Howe, Richard Johnstone, Richard Mitchell, and Anthony O’Donnell. Sydney: Federation Press. Perry, Julia. 2006. “Alternative Sources of Welfare.” Australian Bulletin of Labor 32(3): 280–94. Productivity Commission. 2006. The Role of Non-Traditional Work in the Australian Labor Market. Melbourne: Commission Research Paper. Salais, Robert. 2003. “Work and Welfare: Toward a Capability Approach.” In Governing Work and Welfare in a New Economy: European and American Experiments, edited by Jonathan Zeitlin and David M. Trubek. New York: Oxford University Press. Solow, Robert 2008. “Trapped in the New ‘You’re on Your Own’ World.” New York Review of Books, November 20. Available at: http://www.nybooks.com/arti cles/archives/2008/nov/20/trapped-in-the-new-youre-on-your-own-world. Accessed December 10, 2012. Stahlberg, Ann-Charlotte. 2007. “Redistribution Across the Life Course in Social Protection Systems: An Overview.” In Modernising Social Policy for the New Life Course, edited by Organisation for Economic Co-operation and Development. Paris: OECD. Thelen, Kathleen. 2010. “Beyond Comparative Statistics: Historical Institutional Approaches to Stability and Change in the Political Economy of Labor.” In The Oxford Handbook of Comparative Institutional Analysis, edited by Glenn Morgan, John Campbell, Colin Crouch, Ove Kai Pedersen, and Richard Whitley. Oxford: Oxford University Press. Whiteford, Peter. 2010. “The Australian Tax-Transfer System: Architecture and Outcomes.” Economic Record 86(275): 524–44. Whitley, Richard. 1999. Divergent Capitalisms: The Social Structuring and Change of Business Systems. Oxford: Oxford University Press. Zeitlin, Jonathan. 2003. “Introduction.” In Governing Work and Welfare in a New Economy: European and American Experiments, edited by Jonathan Zeitlin and David M. Trubek. New York: Oxford University Press.

Chapter 16 Flexible Work, Flexible Pensions: Labor Market Change and the Evolution of Retirement Savings kendra strauss

I

f a new paradigm of employment has emerged, albeit unevenly, in many developed economies, fundamentally related to the increasing instability of the standard contract of employment (see chapter 4, this volume), it should come as no surprise that a new paradigm in occupational (employment-related) pensions has also gained traction to the detriment of established postwar models. Changes in the normative framing of labor relationships, actual conditions of work, and the legal, regulatory, political, and economic institutions that mediate and structure those relationships are fundamentally related to, and co-construct, changes in the normative framing and institutions of social welfare. The corollary of the standard contract of employment, where pensions are concerned, is the defined benefit (DB, or final salary) model that coevolved with the standard employment relationship as part of the range of occupational welfare benefits that made up the social wage. Since the late 1970s, however, labor markets and pension systems in advanced capitalist economies have been affected, again unevenly, by the interaction of multiple processes including labor market deregulation, the erosion of union power, deindustrialization, the rise of service sector employment, and a generalized trend toward welfare state retrenchment. These processes are often considered under the rubric of neoliberalism, which broadly refers, inter alia, to the resurgence of liberal economic orthodoxy, de- and reregulation, policy transfer and new forms of governance, welfare state retrenchment, and individualization of risk (Brenner et al. 2010; Harvey 2006; compare Larner 2003; on neoliberalization, see also Peck and Tickell 2002). They are related to the globalization of labor 292

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markets and new financialized regimes of accumulation which, it is claimed, make traditional pension commitments untenable (World Bank 1994; compare Blackburn 2002). This orthodoxy has strong parallels with discourses of flexibility and political exhortations to dismantle labor market rigidities including the legal proscription of temporary, contract and agency work. With the normative and numerical, albeit uneven, decline of standard jobs in the Global North came the normative and numerical decline, albeit uneven, of occupational welfare benefits including pensions. The transition from traditional defined benefit (usually final salary) employer-sponsored schemes to defined contribution (DC, or money purchase) schemes in the United States (Zelinsky 2004) is one example that illustrates how changes in the terms, conditions, and perceptions of employment relate to changes in pension provision, not only the greater prevalence of contingent work but the perception that choice and flexibility, rather than security, are key for both workers and firms.1 Yet the shift to more flexible but risky, and less generous, defined contribution schemes has been neither universal nor the straightforward outcome of new patterns of work. The continued diversity in national pension systems and their different trajectories of reform likewise suggest several possible paths rather than a single teleological outcome, though there are some similarities in the direction of travel. This diversity belies the purported inevitability of a wholesale adoption of either the individualized, financialized Anglo American model or the normative multipillar system advocated by the World Bank. In this sense, it is logical to analyze the coevolution of changes in employment and pensions; in fact, however, they are often examined separately. This chapter looks at trends in the evolution of occupational pensions and labor markets among a subset of Organisation for Economic Co-operation and Development (OECD) countries. I argue that the new employment paradigm is not only objectively important in terms of dictating the viability of existing pension institutions but it is also ideologically and discursively important in delimiting what is “thinkable” in pension policy. Although traditional collective DB occupational plans face challenges in most jurisdictions, and nonstandard work, especially parttime work, is increasing, the range of approaches to both flexible work and flexible pensions suggests that differences in welfare-state models remain important and offer opportunities for cross-national learning.

Understanding the Links Between Old-Age Security and Employment The provision of old-age security (World Bank 1994) is one of the most significant dimensions of modern welfare states, all of which provide

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some form of protection against poverty in old age. Typically this protection takes the form of a pension, and pension systems generally are made up of different layers, tiers, or pillars. Although tiers and pillars are sometimes used interchangeably in the pension literature, their provenance differs—the former originates in OECD literature, the latter in the World Bank literature—as to some extent does the analytical framework they are meant to invoke. Internationally, there is huge complexity and diversity in the composition of these layers, tiers, or pillars, the balance between them, as well as in how and by whom they are managed and regulated. An additional challenge is to disentangle pensions, especially where they are either public or state mandated, from other tax and transfer programs that provide income smoothing and social welfare benefits over the life course. In this sense, a sole focus on traditionally defined pension systems or regimes can only ever provide a partial picture of how welfare states address issues of income security and poverty alleviation in older age. Nevertheless, because the architecture of key components of most pension systems is grounded in the labor market, changes in norms, institutions, and regulatory structures of one will inevitably have an impact on the norms, institutions, and regulatory structures of the other. This makes pensions an important lens for studying labor market change. Most pension systems link income in retirement to labor market attachment, but the nature of this link varies. Some states use pensions to facilitate decommodification, the degree to which an individual or household can uphold a socially acceptable standard of living independent from participation in the market (Esping-Andersen 1990); others use them to ensure that income and labor market participation are tightly coupled. In practice, all OECD countries have state-sponsored redistributive pension schemes to prevent poverty in old age, which are further subdivided into resource-tested (or targeted) plans, basic plans, and minimum plans (OECD 2011).2 All OECD countries with the exception of Ireland and New Zealand also have some form of mandatory pension coverage that provides income replacement for workers. The first tier, to use OECD terminology, comprises redistributive programs designed to guarantee a basic minimum standard of living for all, the second a savings component designed to achieve a level of income replacement relative to income while working (OECD 2009, 2011). The first and second tiers may be provided by either the public (state) or private sectors, but are both mandatory. The third tier represents voluntary, private schemes. An influential World Bank publication proposed a slightly different model that both identified and assigned prominence to different pillars within individual pension systems (1994). The first pillar referred to a means-tested minimum or flat pension guarantee, the second to a mandatory earnings-related scheme, and the third to a volun-

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tary (and unregulated) layer of personal pensions. In this model, only the first pillar is publicly managed and tax-financed; the second and third are both funded and managed privately. At the time of the World Bank report few countries had well-developed multipillar systems: “Most countries—including almost all developing countries and some industrial countries—combine all three functions [redistribution, saving, and insurance] in a dominant public pillar, a publicly managed scheme that pays an earnings-related defined benefit and is financed out of payroll taxes on a pay-as-you-go basis” (1994, 12). The three-pillar approach was thus a normative model for pension reform advocating the promotion of privately managed personal savings accounts. It was also related to a vision of labor markets that emphasized flexibility, light-touch regulation, and low payroll taxes—in other words, a neoliberal vision “proselytizing the virtues of free trade, flexible labor and active individualism” (Peck and Tickell 2002, 381).

Comparing Occupational Pension Regimes and Employment Regimes Even using the OECD’s analytical framework, the difficulty of comparing pension arrangements is exacerbated by variations between and complexity within national systems. The problem becomes even more complicated, however, if one seeks to relate pension developments to labor market developments. For example, one basis for broadly distinguishing among welfare systems was whether they adhered to a dominant social insurance or multipillar (three-tier) model (Bonoli and Shinkawa 2005)—a typology or taxonomy that within the social science literature was also widely applied to pensions, but not to labor markets. Alternative typologies have therefore gained traction, one of the most widely used of which is Gøsta Esping-Andersen’s “three worlds of welfare capitalism” (1990). Although it is subject to extensive critique for, among other things, its western European and Anglo American focus, its failure to adequately analyze gender and unpaid work, its lack of explanatory power, and the difficulty of classifying mixed regimes (for an overview, see Arts and Gelissen 2002), it remains useful for our purposes because of its focus on both labor markets and pension regimes as axes of decommodification. In this chapter, therefore, I use a modified set of categories based on a synthesis of Esping-Andersen’s original typology and that of the OECD. This allows us to examine differences between occupational pension arrangements across a diverse range of regime types and countries while recognizing commonalities in models, institutions, and policy approaches. In the OECD framework, pensions that aim to replace employment

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income in retirement, and that are therefore linked to labor market ­attachment (occupational pensions), are in the second and third tiers. Second-tier pensions may be public or private, but are mandatory for employees. The third tier comprises voluntary private pension schemes whether they be employer-sponsored or initiated by individuals. Table 16.1 maps this diversity of arrangements between and within regime types. It illustrates the types of schemes in the first and second tiers and the percentage of the working age population covered by mandatory private earnings-related (second-tier) and voluntary occupational (thirdtier) schemes. This gives a sense of the balance between state and private provision, as well as the prevalence across the tiers of DB versus DC plans, and their variations, including points-based and notional defined contribution plans.3 Because we are primarily concerned with earningsrelated pensions, third-tier personal savings schemes are not included in the table. The examples used are as follows: liberal regimes: Australia, Canada, the United Kingdom, the United States conservative corporatist regimes: France, Germany, Italy, Japan social democratic regimes: Denmark, Netherlands, Sweden post-socialist regimes: Czech Republic, Poland, Slovak Republic Liberal regimes, with the exception of Australia, have no mandatory private earnings-related pension coverage but instead a mix of secondtier public mandatory and third-tier voluntary schemes. In the social democratic states, where private occupational membership is mandatory, coverage is almost universal for workers. Conservative and postsocialist regimes are more mixed. Although it is notable that three countries in the conservative category have second-tier mandatory public schemes and voluntary occupational schemes like liberal regimes (the OECD does not provide data for Japan), two of the three post-socialist regimes have mandatory private DC schemes with quite high rates of coverage. Moreover—a point not revealed by table 16.1—the Slovak Republic and Czech Republic have no significant voluntary occupational schemes but do enjoy high rates of voluntary personal pension coverage, 21.9 percent and 60.2 percent respectively, suggesting a well-developed third pillar (OECD 2011). The structure of pension systems is one issue; what they deliver in terms of benefits is another. There are significant differences between national pension systems in the context of whether they are redistributive or serve to reinforce occupational and class hierarchies, how effective

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they are at preventing poverty, and how much states invest in retirement income security relative to gross domestic product (GDP). If we look at poverty rates for older people, age sixty-five and over, for example, in 2009 the average for our sample of liberal countries was 17 percent, for the conservative countries 13 percent, for social democratic countries 6 percent, and for the post-socialist regimes 4 percent (OECD 2009, 72). It is also important to note the variation within regime types. The conservative regimes—Germany, France, and Italy—all have rates of 13 percent or less but Japan has an old age poverty rate of 22 percent. In other words, some pension systems redistribute income away from high earners to increase the incomes of poorer pensioners (progressivity), and some disproportionately reward high earnings and long contribution histories (continuous labor market attachment). If we compare an example from each regime, we again observe a mixed picture. Canada combines high progressivity in the public first-tier system with negative redistribution in voluntary DC private schemes (see OECD 2011, 127); in 2008 it had an income poverty rate for over sixty-fives of 5.9 percent, compared with 12.0 percent for the whole population (149). Denmark is similar, but with an income poverty rate for those over sixty-five of 10.0 percent compared with 5.3 percent for the whole population. Italy and the Slovak Republic both have low progressivity in their public systems, in that replacement rates are not significantly higher for those on lowincomes, but Italy has an average replacement rate in the region of 71 percent and the Slovak Republic of 33 percent. The income poverty rates in 2008 were 12.8 percent, compared with 11.4 percent for the whole population, and 5.9 percent, compared with 8.1 percent. One of the criticisms of regime taxonomies is that they emphasize path-dependence rather than change. Thus, although table 16.1 provides a fairly accurate snapshot of contemporary pension systems, it does not reveal that pension reform has been an important political issue and site of social struggle over the last two decades, and that many countries have embarked on programs of reform. Two World Bank economists optimistically characterized the period after 1994 as one of “blossoming innovation in reform of mandatory pension provision, with an upsurge of ideas for creating financially sustainable mandatory public systems. Within pillar 1, the trend is towards tightening the links between contributions and benefits. . . . Within pillar 2, innovation has addressed the high costs of running individual financial account systems” (Fox and Palmer 2001, 94). Although the decade since 2000 has seen fewer large-scale changes, in the sense of creating new schemes or pillars, in many countries the pace of incremental reform has in fact increased. Analyses of pension trends since 1990s have thus highlighted several key themes. An examination of the distributional principles of pension

298     Rethinking Workplace Regulation Table 16.1  Comparing Multi-Tier Pension Systems Across Welfare Regimes Mandatory First Tier (Public): Type Liberal   Australia 1,2,3   Canada 2   United Kingdom 4

Second Tier (Earnings-Related): Public or Private private, DC public, DB public, DB

  United States 3,5 Conservative   France 6   Germany 7   Japan   Italy Social Democratic   Denmark

resource-tested resource-tested, basic resource-tested, basic, minimum resource-tested minimum resource-tested basic resource-tested

public, DB* public, points public, DB public, NDC

resource-tested, basic

private, DC

  Netherlands   Sweden 3

basic minimum

private, DB public, NDC and private, DC

Post-socialist   Czech Republic   Poland   Slovak Republic

basic, minimum minimum minimum

public, DB public, NDC and private, DC public, points and private, DC

public, DB

Source: Author’s compilation based on OECD (2011, 106, 173). Notes: Percentage figures in columns 4 and 5 relate to coverage of private schemes by type of plan, 2009, as a percentage of working age population (sixteen to sixty-four years). DB = defined benefit, DC = defined contribution, NDC = notional defined contribution. ATP, QMO, and PPM are names of specific private second-tier schemes in Sweden and Denmark. n.a. = not applicable. 1 Data refer to the total mandatory and voluntary. 2 Data refer to 2008. 3 OECD estimate based on data provided by national authorities as a percentage of total employment. See OECD (2011, 173). 4 Data may include multiple counting between active and deferred members of occupational schemes, and occupational and personal pensions. The percentages are based on a working life of sixteen to sixty-four for men and sixteen to fifty-nine for women. 5 Data refer to 2006. 6 OECD does not include the American first-tier resource-tested scheme in its table. 7 Coverage of occupational pensions refers to 2007 and includes all second-pillar pensions.

Flexible Work, Flexible Pensions     299

Voluntary Second Tier: Percentage of Private Coverage

Third Tier: Percentage of Coverage by Occupational Schemes

68.5 n.a. n.a.

data not available 33.9 49.1

n.a.

32.8

n.a. n.a. n.a. n.a.

3.5 32.2 data not available 7.5

ATP: ~70.0 QMO: ~59.0 69.3 PPM: ~76.0 QMO: ~78.0

n.a.

n.a. 53.0 36.5

n.a. 1.2 n.a.

n.a. n.a.

300     Rethinking Workplace Regulation

policy in Europe shows that reforms have generally modified the stratification effects of existing systems (Arza 2008). Typically, Bismarckian ­systems of social insurance, second-tier mandatory earnings-related schemes, that allocated benefits according to workers’ occupations and served to preserve status differentials—such as between public- and ­private-sector workers—have been targets of reform. In Italy, for example, the major reforms of the 1990s transformed the existing public ­earnings-related DB scheme into a notional defined contribution (NDC) model. In Poland, too, during the initial period of reactive post-socialist transformation between 1989 and 1992, most of the privileges entrenched in the previous pension system were abolished. But though measures to decrease stratification effects have reduced inequalities resulting from special pension regimes and privileges, they have also tended to result in greater individualization, privatization, and separation of poverty prevention and income replacement strategies, the state retaining responsibility only for the former. Giuliano Bonoli (2000) comes to a similar conclusion regarding other Bismarckian schemes, noting that cuts in generosity have been accompanied by the assumption of responsibility by governments for noncontributory elements. Finally, trends that are common to, but not uncontested within, all regimes focus on lengthening years of contribution (usually through raising the retirement age or, in the case of Germany, though the introduction of life expectancy coefficients), increasing funding, and reinforcing contributory elements—all with an eye to cost containment. For as the social policy specialist Camila Arza points out, Three types of adjustment are common . . . a graduate shift to the private sector . . . fostered by public incentives (such as tax exemptions) for personal savings . . . income testing and means-testing . . . as the side-effect of tightening eligibility conditions in the contributory system, a practice that has taken place almost everywhere in Europe . . . as the future value of public pension benefits falls, greater incentives are introduced to direct voluntary pension saving into the private sector. (Arza 2008, 124)

In the American context, as the legal scholar Edward Zelinsky has pointed out, that one of the most important trends has been the adoption of the model of individual DC accounts across the social welfare system. He states that “Americans today primarily conceive of and implement retirement savings in the form of individual accounts. Such accounts have become primary instruments of public policy . . . for health care and education as well” (2004, 453). This is undoubtedly true, and his argument about the ideological and discursive, as well as material, importance of the model is an important one. Nevertheless, it somewhat downplays the importance of the U.S.

Flexible Work, Flexible Pensions     301

Social Security system. Proposals to convert Social Security into a system of individual accounts, last mooted by President George W. Bush, stalled when fund losses associated with the collapse of Enron, WorldCom, and other firms shifted attention to the regulation of private occupational pension schemes. Nevertheless, declining unionization, fiscal retrenchment (especially at the state level), high unemployment following the 2008 financial crisis, and the virtual disappearance of DB plans in much of the private sector has opened a new pensions battleground: publicsector DB plans. There is little doubt that many in the public sector will soon see their pensions eroded as private-sector employees did from the 1980s onward. Many of the political and economic arguments for the reform of earnings-related pensions have been linked, implicitly or explicitly, to arguments about changing labor markets. These arguments range from those that highlight the perverse incentives and distortions wrought by special privileges such as early retirement and accelerated accrual, to problems of portability for workers who no longer expect to spend their entire career with a single employer. Thus, although the standard legal contract of employment (Freedland, this volume) was never universal, it nevertheless exerted enormous normative power. Likewise its demise, although also less than universal, and the rise of precarious (Vosko 2000) and contingent work (Freedman 1985, 35, quoted in Barker and Christensen 1998, 1), have exerted enormous power. Gone is the expectation that defined the male breadwinner model of labor and social reproduction in advanced capitalist economies in the postwar era. Now, although the security of permanent employment remains an aspiration for many— in the European Union in 2009, for example, 37 percent of fifteen- to twenty-four-year-old temporary workers and 65 percent of twenty-five to twenty-nine-year-old temporary workers were on fixed-term contracts because they could not secure a permanent job—few employees expect to remain with a single employer for the duration of their working lives (Beck and Beck-Gernsheim 2001; Eurostat 2010). This has entailed a shift away from the model of the employer as the guarantor of industrial citizenship and occupational stability and the beneficiary of employee loyalty. Instead, as Katherine Stone (this volume) describes, companies came to be understood as beholden to their shareholders rather than to their employees or to the societies in which they were embedded. Buffeted by forces of intense competition, their sole aim—it is now thought—should be to maximize shareholder value and cut costs. Employees should be seen as managers of their own careers, in which mobility, constant skills upgrading, and networking are tools for competitiveness and in which differences in attainment justify huge disparities in pay and benefits. This change in the perceived centrality of the standard contract of employment—and how its increasing

302     Rethinking Workplace Regulation

instability affects the perceived centrality of a collectivized model of oldage security and associated occupational pension arrangements—can be explored in greater depth through a case study of the interrelation of labor markets and pensions in the United Kingdom. The U.K. case also illustrates how the geo-historical specificity of different national regimes shapes, rather than binds, conditions of possibility for change, and reminds us that path dependence suggests, rather than dictates, the direction of travel.

The U.K. Pension System in Context The British pension system is a multipillar system, characterized by considerable degree of complexity. The first pillar includes the State Pension, a targeted (resource-tested) contributory pension with basic and minimum components. The first pillar also encompasses a second-tier, state-funded scheme, the State Earnings-Related Pension Scheme (SERPS), established in 1978 as an unfunded DB plan to provide an ­earnings-related top-up to supplement the basic state pension. The U.K. pension system has always featured private voluntary employersponsored pension plans, but their coverage has never been close to universal: SERPS was intended to address inequalities in occupational pension coverage. The Conservative Thatcher government was an early adopter of a model premised on individualization, privatization, and a reduced role for the state in occupational pension provision. It encouraged employers to contract out of SERPS, initially by permitting those who provided a guaranteed minimum pension to their employees to pay reduced National Insurance rates, and then in 1988 by qualifying money purchase (DC) schemes for this reduction. In a further development, the guaranteed value of SERPS was reduced to 20 percent of earnings and ultimately, in 2002, SERPS was converted into a residual scheme aimed at low-income workers with no occupational coverage. The 1980s also saw, in the wake of the industrial unrest of the 1970s, the forcible creation of flexible labor markets. This heralded long-term structural changes in the relations of employment. Changes in employment norms, institutions, and modes of regulation have often been analyzed under the rubric of the rise of nonstandard employment relations (for an overview, see Kalleberg 2000). What was considered nonstandard in the context of the Fordist model of industrial citizenship is becoming the new normal in some sectors and regions in the United Kingdom, where industries such as hospitality, health, and care services have come to rely increasingly on part-time and contract staff (see, for example, TUC 2005).4 Unfortunately good data are hard to come by, particularly longitudinal data that illustrate longer-term trends in the postwar period.5 We do know that part-time employment grew by around 5 per-

Flexible Work, Flexible Pensions     303 Figure 16.1  Temporary Workers as a Percentage of All U.K. Employees 10 9 8

Percentage

7 6 5 4 3

All Male Female

2 1

08

07

20

06

20

05

20

04

20

03

20

02

20

01

20

00

20

99

20

98

19

97

19

96

19

95

19

94

19

19

19

93

0

Year Source: Author’s compilation based on ONS (2010). Note: Numbers in thousands and seasonally adjusted.

cent—from 18 to 23 percent of the workforce—between 1983 and 1998, and that the proportion of women in part-time work fell from 89 percent of all part-time workers to 80 percent during the same period. Figures 16.1 and 16.2 illustrate that temporary work expanded in the United Kingdom during the recession of the 1990s, that is, between 1992 and 1996, before falling back and then declining in the decade from 1997 forward. It appears to be rising again since the economic crisis of 2007, especially for men; part-time work has increased steadily since 1993 (figure 16.2). As figures 16.3 and 16.4 show, many of these are workers who would prefer full-time jobs. It is difficult to correlate data on employment and occupational pensions over the longer postwar period. However, it appears that as nonstandard forms of employment have become more widespread, occupational pension coverage has declined in the United Kingdom in the private sector. Figure 16.5 shows that from the early 1960s to 2009 overall

304     Rethinking Workplace Regulation Figure 16.2  Part-Time U.K. Workers 8,000 7,000

Number of Workers

6,000 5,000 All Male Female

4,000 3,000 2,000 1,000

09

08

20

07

20

06

20

05

20

04

20

03

20

02

20

01

20

00

20

99

20

98

19

97

19

96

19

95

19

94

19

19

19

93

0

Year Source: Author’s compilation based on ONS (2010). Note: Seasonally adjusted.

rates of coverage, as defined by the number of active members of occupational pension schemes, have declined. Bearing in mind that the total number of people in the labor market increased during the same period, the decline in the percentage of the working population covered by pension schemes was even greater. In 1995, there were approximately 5 million members of private-sector DB schemes and 1 million in DC schemes. By 2009, these numbers had fallen to 1 million and 0.9 million respectively (ONS 2009, 10). Moreover, the character of contracted-out privatesector schemes changed: in 2004, 72 percent of active members were enrolled in DB schemes; by 2009 this proportion had declined to 63 percent (12). If we compare public and private sectors, we see that men’s membership rates in the public sector were over 80 percent (of employees) between 1997 and 2009, whereas in the private sector they fell from 52 to 40 percent (ONS 2009, 5–7). Women’s membership rates increased from 75 percent to 82 percent in the public sector, but in the private sector rose

Flexible Work, Flexible Pensions     305 Figure 16.3  Temporary Employees Who Could Not Find a Permanent U.K. Job 60

50

Percentage

40

30

20 All Male Female

10

09

08

20

07

20

06

20

05

20

04

20

03

20

02

20

01

20

00

20

99

20

98

19

97

19

96

19

95

19

94

19

19

19

93

0

Year Source: Author’s compilation based on ONS (2010). Note: Numbers in thousands and seasonally adjusted.

from 37 to 41 percent between 1997 and 2003 before falling back to 29 percent in 2009—an even larger reduction than for men. It was against this background of declining occupational pension coverage that the British government established the Pensions Commission early in the millennium. The commission produced three reports that recommended a range of measures to increase the sustainability, fairness, and affordability of all three pillars of the U.K. pensions system. As for occupational pensions, a key recommendation was the establishment of a National Pensions Savings Scheme (NPSS) to cover low- and middle-income earners without access to a workplace scheme (Pensions Commission 2004). Proposed as a funded DC scheme based on individual accounts, the scheme represented the government’s tacit admission that private occupational coverage, and the DB model in the private sector, were in serious decline.

306     Rethinking Workplace Regulation Figure 16.4  Part-Time Workers Who Could Not Find a Full-Time U.K. Job 35

All Male Female

30

Percentage

25 20 15 10 5

09

08

20

07

20

06

20

05

20

04

20

03

20

02

20

01

20

00

20

99

20

98

19

97

19

96

19

95

19

94

19

19

19

93

0

Year Source: Author’s compilation based on ONS (2010). Note: Numbers in thousands and seasonally adjusted.

The establishment of what is now called the National Employment Savings Trust (NEST) ushered in one of the biggest pension reforms in recent decades. NEST is an entirely new second-tier public scheme and therefore an implicit heir to SERPS. Between October 2012 and 2017, depending on the size of firm, all U.K. employers will be required to begin contributing a minimum of 3 percent of each employee’s eligible earnings into a pension fund unless the employee decides to opt out. Employees will also be required to pay a personal contribution of 4 percent with a further 1 percent tax relief being added to make the minimum contribution 8 percent. This compares with average contribution rates of 5.4 percent for employees and 14.9 percent for employers in open DB schemes in 2009, and 3 percent for employees and 6.4 percent for employers in open DC schemes (ONS 2010). Moreover, if many autoenrolled employees choose not to contribute the maximum £3,600 per annum, the amounts accrued for low-paid workers will be minimal.

Year

53 55 57 59 61 63 65 67 69 71 73 75 77 79 81 83 85 87 89 91 93 95 97 99 01 03 05 07 09 19 19 19 19 19 19 19 19 19 19 19 19 19 19 19 19 19 19 19 19 19 19 19 19 20 20 20 20 20

Private Public

Source: Reprinted from ONS (2010). Notes: The 2005 survey did not cover the public sector. Due to changes in the definition of the private and public sectors, estimates for 2000 and onward differ from earlier years. From 2000, organizations such as the Post Office and the BBC were reclassified from the public to the private sector. Changes to methodology for 2006 onward mean that comparisons with 2005 and earlier should be treated with caution.

9.0 8.0 7.0 6.0 5.0 4.0 3.0 2.0 1.0 0.0

Figure 16.5  Active Members of Occupational U.K. Pension Schemes

Number of Active Members (in millions)

308     Rethinking Workplace Regulation

Those earning £12,000 will see only £960 go into their pension fund, before charges, and many may well not achieve the 25 percent replacement rate originally guaranteed by SERPS. NEST represents a uniquely British compromise that reflects the tensions between path dependence, political bargaining, the emergence of policy windows and macro political-economic processes. Autoenrolment—compulsory membership for workers whose employer does not have an existing qualifying pension scheme with the option to opt out—reflects the British government’s current enthusiasm for libertarian paternalism (Pykett et al., 2011). It attempts to nudge individuals into making choices that will enhance collective welfare without promoting truly collective solutions. In this case, membership is mandatory for those without occupational pension coverage, so individual choice is confined to a menu of options that determine how individual contributions are invested. The structure of the scheme and the central role assigned to private providers and managers of investment funds reflect the same shift of risk from the plan sponsor to the plan member that is present in company-sponsored DC schemes. NEST is portable, but membership is still employer dependent, meaning that workers may well end up with patchwork membership of different schemes over the course of their working lives. Is it not clear how NEST will contribute to a more integrated, or at least better coordinated, pan-European pension system.

Conclusion: Flexible Pensions for Flexible Workers? Flexibility can be a double-edged sword. For skilled, mobile, well-paid workers, the prospect of the demise of the job-for-life represents greater personal freedom. Indeed, a strand of the literature on individualization and choice sees the satisfaction of preferences and the breaking-down of traditional social norms as generally positive (see, for example, Beck and Beck-Gernsheim 2001; Hakim 2000). These processes have, for example, challenged the male breadwinner model in pensions and occupational welfare and facilitated the entry of a significant proportion of women into the labor market in many countries. Moreover, flexibility in the terms of conditions of employment, related to hours of work, length of contract, and mobility, need not decouple workers from social protections or forms of occupational welfare. The Nordic experiments with flexicurity (see chapter 12, this volume) have attempted to combine high levels of labor market flexibility with generous social protections, including occupational pensions. It is undoubtedly true that the deregulation of labor markets and the rise of flexible and nonstandard forms of work have opened a range of new opportunities for some, but they have also enhanced precariousness

Flexible Work, Flexible Pensions     309

in the spheres of production and social reproduction. For many in the labor market—especially women, young workers, and racialized groups— the promise of a stable permanent job with full entitlement to paid holidays and sick leave is ephemeral. The same is true in the sphere of occupational pensions in some countries. Increasing numbers of workers in the United Kingdom are without occupational pension coverage, and many of those in DC schemes in the United States and United Kingdom are at risk of receiving inadequate income in retirement. Although issues of coverage are not as acute in many western European countries, there are nevertheless common trends toward cost-reduction, individualization, privatization, and financialization of earnings-related pensions. Polarization is thus occurring across the spectrum of advanced welfare states between workers with permanent full-time jobs and those without. Widening inequality is also occurring in the context of income and asset accumulation, including pension entitlements. It was the introduction of 401(k) plans in the United States that arguably provided a model for shifting the bulk of financial and administrative costs of occupational pensions onto both private and public sector employees (Clark 2000). This new DC model of occupational pension provision shifts risk to the individual. A discourse of individual choice and responsibility, underpinned by a process of the financialization of savings and welfare (Harmes 2001; Langley 2006, 2007), has sought to frame the shift as a libratory one. As I have argued elsewhere (Strauss 2008), this discourse is premised on a model of strong economic rationality that assumes that individuals will seek to maximize their individual utility if released from the constraints of collective welfare institutions. But, despite ample evidence from behavioral economics and economic geography that neither plan participants nor, in certain cases, plan trustees make “rational” economic decisions, the economic rationality model has continued to influence both pension discourse and the design of pension plans (Choi, Laibson, and Madrian 2004; Clark, Caerlewy-Smith, and Marshall 2006; Peggs 2000). Of course, plan sponsors and pension providers seek to mitigate risks through improved plan design, including the provision of better default options for DC plan members. Nonetheless, a significant danger persists that many DC pensioners will receive inadequate levels of income in retirement (Clark and Urwin 2010). In the United Kingdom, it is striking that even as pension plans are being closed to existing members by some of the nation’s biggest corporations, many of those same companies retain gold-plated DB pensions for top executives already in receipt of generous pay, bonus, and share packages.6 The extent and impacts of these trends, however, are mediated by context-specific political-economic and social norms and institutions. The introduction of a system of funded individual accounts in Sweden in the 1990s, for example, served to individualize earnings-related entitle-

310     Rethinking Workplace Regulation

ments and to introduce both private-sector involvement and an element of choice; the overall income replacement rate (for all mandatory schemes) averages 71 percent of individual earnings in Sweden compared with 34 percent in the United Kingdom (OECD 2009, 119). Yet Sweden also saw an increase in the relative risk of poverty for individuals over sixty-five between the mid-1990s and mid-2000s, the period during which the universal, flat-rate, and employer-financed folkpension was replaced by a noncontributory, transfer-tested garantipension (GP), suggesting that even generous individualized systems are often less redistributive than collective alternatives (OECD 2009; Arza 2008). Where does that leave us in terms of cross-national learning and an agenda for progressive pension reform? I argue that several conceptual and empirical issues need to be tackled. The first speaks to a point made by Camila Arza and Martin Kohli: it is important to deconstruct the rhetoric of reform. The “translation of fiscal pressures into specific institutional changes owes much to the mainstream of economic thinking and lobbying about the need for welfare state retrenchment and the merits of privatization” (2008, 4). This is as true for labor market reform in general as it is for pension reform in particular. Nonstandard work need not be precarious, as the case of the Netherlands shows, and flexible labor markets need not lead to insecurity, as the case of Denmark shows. If the ­social as well as economic dimensions of adequacy, sustainability, and safety—concepts that discursively underpin the European Commission’s 2010 Green Paper on European pensions and EU policy—are given equal weight, the resulting system could be one that enhances both flexibility and security in both employment and retirement savings. The second point to make, as the regime approach shows, is that no existing orientation or trajectory of reform is set in stone. The postwar systems of occupational pension provision provided enormous benefits to many workers after retirement. These included not only a reduced risk of poverty and increased opportunities for leisure but also the time and resources to contribute socially, culturally, and economically in myriad ways. Although models of employment and pensions may have shifted in recent decades, the concept of retirement is proving remarkably durable, as illustrated in France by protests over pensions in 2010. Accounts of the economic costs associated with pensions seldom account for the contribution to society that they enable older people to make. Moreover, over sixty-fives are increasing in number and in voice. Examining successful instances of cooperative policymaking in different contexts, where socially progressive measures have been part of the implicit bargain between the state and social partners, offers a starting point. In the United Kingdom, for example, unions, civil society groups, and politicians were involved in successfully lobbying for a system of credits for

Flexible Work, Flexible Pensions     311

parents and carers to ensure access to a basic and additional state pension for those engaged in unpaid work. By understanding the importance of the values that underpin decent work and decent retirement income, we can strive to influence the debate over pension reform in ways that highlight the importance of flexibility and security, adequacy and progressivity, and the importance of risk-sharing to cohesive societies.

Notes 1. Defined benefit pensions are defined by a specified output for participants, usually an annual income paid incrementally, in a wage-like manner determined by a formula based on salary and number of years of employment with the sponsoring firm. The income is for life, often attaching survivor benefits. Defined contribution (DC) plans, on the other hand, can take the form of both pensions and profit-sharing plans, and specify the level or type of contribution required by the employer and employee. It does not, however, guarantee a specified level of income upon retirement. The income generated by a DC plan will depend on a range of factors, including returns on the invested contributions, pension plan fees, and how the “pension pot” is paid on retirement. For example, plan members may be required to purchase an annuity as in the United Kingdom, or have the possibility of accepting a lump sum like plans in the United Kingdom and Australia. 2. The OECD, in 2011, had thirty-four members drawn from high- and middleincome countries and emerging economies (for a full list, see http://www. oecd.org/general/listofoecdmembercountries-ratificationoftheconvention ontheoecd.htm. Accessed October 17, 2012). 3. Notional defined contribution (NDC) plans, which exist in the public sector in Italy, Poland, and Sweden among others, mimic features of DC plans, in particular the use of personal accounts, but are unfunded. The pension will depend on the accumulation of contributions, but current contributions go to pay the current benefits of pensioners: thus individual accounts are notional. The capitalization rate is determined by managers of the plan, rather than by market mechanisms. In points-based pension schemes, such as in Germany, the final pension is determined by the number of points accrued (one year’s contribution at the average earnings of contributors earns one pension point—contributions based on lower or higher income earn proportionately fewer or more pension points). 4. Although nonstandard work is never not normal for some groups, such as lower socio-economic status women in paid work and certain racialized groups in the United Kingdom. 5. There is also an issue with data on employment classifications from the Labor Force Survey (LFS) that are based on the self-identified status of employees. 6. Paul Inman, “Executive Pensions: How Sir Fred Goodwin’s Gold-Plated Package Fits In,” The Guardian (online edition), February 27, 2009; “Survey finds huge deficit in funding pensions of Britain’s top bosses,” The Guardian (online edition), September 20, 2009.

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References Arts, Wil, and John Gelissen. 2002. “Three Worlds of Welfare Capitalism or More? A State-of-the-Art Report.” Journal of European Social Policy 12(2): 137. Arza, Camila. 2008. “Changing European Welfare: The New Distributional Principles of Pension Policy.” In Pension Reform in Europe, edited by Camila Azra and Martin Kohli. London and New York: Routledge. Arza, Camila, and Martin Kohli. 2008. “Introduction: The Political Economy of Pension Reform.” In Pension Reform in Europe: Politics, Policies and Outcomes, edited by Camila Arza and Martin Kohli. London: Routledge. Barker, Kathleen, and Kathleen Christensen, eds. 1998. American Employment Relations in Transition. Ithaca, N.Y.: Cornell University Press. Beck, Ulrich, and Elizabeth Beck-Gernsheim. 2001. Individualization. London: Sage Publications. Blackburn, Robin. 2002. Banking on Death. London: Verso. Bonoli, Giuliano. 2000. The Politics of Pension Reform: Institutions and Policy Change in Western Europe. Cambridge: Cambridge University Press. Bonoli, Giuliano, and Toshimitsu Shinkawa, eds. 2005. Ageing and Pension Reform Around the World: Evidence from Eleven Countries. Cheltenham, UK: Edward Elgar. Brenner, Neil, Jamie Peck, and Nik Theodore. 2010. “Variegated Neoliberalization: Geographies, Modalities, Pathways.” Global Networks: A Journal of Transnational Affairs 10(2): 182–222. Choi, James J., David Laibson, and Brigitte C. Madrian. 2004. “Plan Design and 401(k) Savings Outcomes.” National Tax Journal 57(June): 275–98. Clark, Gordon L. 2000. Pension Fund Capitalism. Oxford: Oxford University Press. Clark, Gordon L., Emiko Caerlewy-Smith, and John C. Marshall. 2006. “Pension Fund Trustee Competence: Decision-Making in Problems Relevant to Investment Practice.” Journal of Pension Economics and Finance 5(1): 91–110. Clark, Gordon L., and Roger Urwin. 2010. “DC Pension Fund Best-Practice Design and Governance.” Working Papers in Work, Employment, and Finance WPG 10–12. Oxford: Centre for Work, Employment, and Finance. Esping-Andersen, Gøsta. 1990. The Three Worlds of Welfare Capitalism. Cambridge: Polity. Eurostat. 2010. “Youth in Europe.” European Commission. Available at: http:// epp.eurostat.ec.europa.eu/statistics_explained/index.php/Youth_in_Europe #Labor_market. Accessed January 12, 2011. Fox, Louise, and Edward Palmer. 2001. “New Approaches to Multi-pillar Pension Systems: What in the World Is Going On?” In New Ideas About Old Age Security, edited by Robertz Holzman and Joseph Stiglitz. Washington, D.C.: The World Bank. Freedman, Audrey. 1985. “Speech to the American Productivity Center.” Daily Labor Report: A4-A6. Arlington, Va.: Bureau of National Affairs. Hakim, Catherine. 2000. Work-Lifestyle Choices in the 21st Century: Preference Theory. Oxford: Oxford University Press. Harmes, Adam. 2001. “Mass Investment Culture.” New Left Review (9): 103–24. Harvey, David. 2006. A Brief History of Neoliberalism. Oxford: Oxford University Press.

Flexible Work, Flexible Pensions     313 Kalleberg, Arne L. 2000. “Non-Standard Employment Relations: Part-time, Temporary, and Contract Work.” Annual Review of Sociology 26(2000): 341–65. Langley, Paul. 2006. “The Making of Investor Subjects in Anglo-American Pensions.” Environment and Planning D-Society & Space 24(6): 919–34. ———. 2007. “Uncertain Subjects of Anglo-American Financialization.” Cultural Critique 65(1): 67–91. Larner, Wendy. 2003. “Neoliberalism?” Environment and Planning D-Society & Space 21(5): 509–12. OECD. 2009. Pensions and a Glance 2009: Retirement-Incomes Systems in OECD Countries. Paris: Organisation for Economic Co-operation and Development. ———. 2011. Pensions at a Glance 2011: Retirement-Income Systems in OECD and G20 Countries. Paris: Organisation for Economic Co-operation and Development. ONS. 2009. “Chapter 7: Pension Scheme Membership.” In Pension Trends. Newport, South Wales: Office for National Statistics. ———. 2010. Occupational Pension Schemes Annual Report 2009. Newport, South Wales: Office for National Statistics. Peck, Jamie, and Adam Tickell. 2002. “Neoliberalizing Space.” Antipode 34(3): 380–404. Peggs, Kay. 2000. “Which Pension? Women, Risk, and Pension Choice.” The Sociological Review 48(3): 349–64. Pensions Commission. 2004. Pensions: Challenges and Choices. The First Report of the Pensions Commission. London: The Stationery Office. Pykett, J., R. Jones, M. Whitehead, M. Huxley, K. Strauss, N. Gill, K. Thompson, and J. Newman. 2011. “Interventions in the Political Geography of Libertarian Paternalism.” Political Geography 30(6): 301–10. Strauss, Kendra. 2008. “Re-Engaging with Rationality in Economic Geography: Behavioural Approaches and the Importance of Context in Decision-Making.” Journal of Economic Geography 8(2): 137–56. ———. Forthcoming. “Risk and Choice in Pension Policy.” Political Geography (Special Issue: Interventions in Paternalism and Political Geography). Street, Deborah, and Janet Wilmoth. 2001. “Social Insecurity? Women and Pensions in the U.S.” In Women, Work, and Pensions, edited by Jay Ginn, Deborah Street, and Sarah Arber. Philadelphia, Pa.: Open University Press. TUC. 2005. The EU Temp Trade: Temporary Agency Work Across the European Union. London: Trades Union Congress. Vosko, Leah. 2000. Temporary Work: The Gendered Rise of a Precarious Employment Relationship. Toronto: University of Toronto Press. World Bank. 1994. Averting the Old Age Crisis. Oxford: Oxford University Press. Zelinsky, Edward A. 2004. “The Defined Contribution Paradigm.” The Yale Law Journal 114(3): 451–534.

Chapter 17 Work-Family Balance and Gender Equality: Pension Reform and Antidiscrimination Law julie c. suk

H

ow might the decline of the standard employment contract affect the future of gender equality? The standard employment contract assumes the long-term, continuous attachment of the full-time worker to the employer (Stone 2004, 3). It was designed with a male breadwinner in mind, a worker with a female partner tending to home and family caregiving (Williams 2000, 64–86). Working mothers have always been on the margins of the standard employment contract because they are more likely to interrupt their careers and work parttime to achieve work-family balance. This is why temporary work, fixedterm work, and part-time work have long been associated with women. Now that the standard employment contract is on the decline for all workers, might the gap between men and women begin to disappear? One consequence of women’s disproportionate share of nonstandard work is the gender pension gap. Women’s disadvantage in retirement security provides an opportunity to reflect on public policy responses to nonstandard work. The new pension reforms sweeping across Europe continue to reward standard employment and penalize nonstandard work. It is often assumed that antidiscrimination law can offer a solution to all forms of gender inequality, including women’s disadvantage in employment and social security (ILO 2009, 32). However, when it comes to the retirement insecurity that results from women’s tendency to engage in nonstandard work, the story is far more complicated. In some European countries, such as France, pension policy traditionally recognized the pension disadvantages resulting from women’s disproportionate share of nonstandard work by awarding caregiving credits in pen314

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sion accrual to working mothers. A caregiving credit is one way the state can provide security to workers whose family responsibilities impede standard employment. In light of the overall decline of the standard employment contract, more such mechanisms are needed to provide retirement security for workers who do not have long-term full-time careers. However, the traditional caregiving pension credits for working mothers are being dismantled in the face of challenges from European antidiscrimination laws. This chapter charts and critiques this development.

Retirement Security and the Gendered Norm of Standard Employment The standard employment contract is in decline, but women continue to be overrepresented in the growing body of nonstandard workers (ILO 2009, 30–32). Women’s disproportionate share of nonstandard work has significant consequences for their retirement security. In many advanced societies, inequality between men and women in retirement security is significant. A 2007 report by the U.S. Government Accountability Office found that in the United States, women’s median social security income is 70 percent of the male equivalent. Women are also less likely than men to have private pension incomes, and even for those who do have pensions, the median value is about half that of men. Because social security benefits and pension income are directly tied to labor force participation, the gender gap for pensions is attributable to women’s weaker labor force attachment and lower lifetime earnings. The gender gap in retirement security is not unique to the United States. In France, as of 2004, retired women over the age of sixty receive average pension payments of €1,020 per month compared to retired men’s €1,636 per month. Women’s pensions are therefore 62 percent of those received by men. This inequality can be attributed to the higher incidence of career interruptions and part-time work among women. On average, upon retirement women will have worked twenty quarters (five years) less than men. Having accrued an average of 137 quarters, women fall short of the 160 quarters that current social security law regards as a “full career” worthy of full pension benefits with no reduction penalties. Men, by contrast, average 157 quarters, and 86 percent of men will have accrued 160 or more by retirement to establish a full career, whereas only 44 percent of women meet this requirement. The average salaries used to determine pension benefits also tend to be lower for women than men. For example, the average reference salary for women is 27 percent lower than men’s. The salary differentials are largely explained by women’s disproportionate participation in part-time work. Eighty-three percent of all part-time workers in France are women, and 31 percent of all women, versus 6 percent of men, are on part-time or reduced schedules. In addi-

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tion, women without children tend to have monthly pension benefits 25 percent higher than their counterparts with children (Grésy 2009, 4–24). Gender inequality in retirement security is the direct result of the disadvantaging effects of work-family conflict on women (U.S. Government Accountability Office [GAO] 2007). The weaker labor force attachment of women is directly correlated with their higher participation in family caregiving. The standard employment contract is a poor fit for workers who need to take breaks for childbirth and child care. Thus, the general decline of the standard employment contract provides an opportunity to rethink the male breadwinner model on which it is based. If nonstandard work becomes the norm around which opportunities for security and career advancement are structured, women who wish to combine working and caregiving will fare better. However, recent developments in pension reform suggest that social policies continue to reward standard employment and penalize nonstandard employment. Under such circumstances, the gender pension gap remains, and may be exacerbated in the absence of mechanisms for mitigating the disadvantaging effects of women’s disproportionate share of nonstandard work.

Pension Credits for Working Mothers In the past, European law and public policy have acknowledged and mitigated the effects of work-family conflict on women’s retirement security. Most pension regimes in Europe treat maternity leaves, which are generally fully paid, as time worked (Monticone, Ruzik, and Skiba 2008, 6). Unlike U.S. law, European gender discrimination law views discrimination against part-time workers as indirect sex discrimination,1 because women are more likely to work part-time due to family caregiving responsibilities. France, Germany, and Austria have also given women additional pension credits for having raised children (Frericks and Maier 2008, 253, 261). In France, since 1924, female civil servants have received extra pension credits for child-rearing. Similar credits have been offered to all working mothers under the general social security retirement scheme since 1971. Until recently, mothers automatically received credits, time treated as time worked, known as majorations de durée d’assurance (MDA) in calculating their pension benefits. Under the French public pension scheme, a worker must work a certain number of years, divided into and counted by three-month quarters referred to as trimestres, to qualify for a full pension without penalties (Bonnet, Buffeteau, and Godefroy 2006, 41, 47–51). Initially the 1971 law awarded women who had at least two children, biological or adoptive, with the credit of one year per child.2 This credit was awarded to mothers whether they stopped working to raise their children or did not. Until reforms that took effect recently,

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women automatically received one quarter of credit for every year during which they raised their children, with a limit of eight quarters per child.3 Ninety percent of French retired women benefit from the MDA. On average, the MDA adds eighteen quarters to the quarters they have accrued from working. It is estimated that women’s pensions would be 20 percent lower without the MDA. The total cost of the MDA to France’s social security regime in 2006 was €4.9 billion (Cour des comptes 2009, 335–37).

Pension Reforms In the last few years, European pension systems have been undergoing various reforms in an effort to retain their sustainability in light of changing demographics. Life expectancy has been rising and fertility rates have been declining. The proportion of the retirement-aged population is growing, and the proportion of the working-age population is shrinking. The economic crisis has exacerbated the deficits in pension systems, increasing the pressure for reform. The standard employment contract has been in decline since the 1980s, but pension policy has evolved during the same period to reward employees with standard employment contracts and to penalize nonstandard workers. Various features of these reforms disadvantage women’s access to retirement security because women are less likely to benefit from the dwindling number of standard employment contracts. Retirement Age  Many European countries have attempted to make their pension systems more sustainable by increasing participants’ working life (European Commission 2010a, 5). These reforms have raised both the pensionable age, the age at which one is permitted to receive a pension, and the retirement age, the age at which one becomes entitled to a full pension regardless of quarters worked. In addition, a recent Green Paper by the European Commission has recommended further increases (2010b, 9–10). In France, a new law has raised the pensionable age from sixty to sixty-two4 despite months of strikes and protests, and raised the retirement age from sixty-five to sixty-seven.5 Working Life  The French reform of 2010 follows the trajectory of earlier pension reforms, passed in 1993 and 2003, which lengthened the working life of persons qualifying for a full pension. Before 1993, 150 quarters of work was considered a full career, but the 1993 reform raised it to 160 quarters, or forty years. The 2003 reform provided that the contribution period be raised to forty-one years by 2012 and to 41.75 years by 2020. Those who work fewer years before reaching pensionable age, now sixty-

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two, face reductions of 1.25 percent for each missing quarter, which reduces the pension amount pro rata. To avoid these penalties, those who have not worked enough quarters to attain a full pension must work until the full pension age, which the new law has raised from sixty-five to sixty-seven. Contributory Principles  In determining pension entitlement, European countries have traditionally used the best earning years from a limited part of a person’s working life. In the 1980s, this ranged from five to twenty years, but recent reforms have extended the period (European Commission 2010a, 16). In France, the 1993 law provided for a gradual shift from counting the ten best wage-earning years to counting the twenty-five best years by 2008.6 This formula remains intact after the 2010 reform. All these reforms disadvantage workers who have sought to combine work with family responsibilities. Extending the working life required for a full pension penalizes those who have stopped working for a few years to raise their children. In France, recent studies indicate that 49 percent of the workforce has experienced some period of unemployment since beginning to work. On average, those who interrupt their careers to raise children take four years and three months off work. Forty percent of working women have interrupted their employment to care for their children (DARES 2010, 2–3). Finally, higher retirement ages penalize those who retire early to care for children, grandchildren, or aging parents.7 In addition, extending the period of earnings history used to determine pension entitlement disadvantages both those who have taken career breaks and thus have higher numbers of zero-earnings years, and those who have worked part-time. In France, a recent study shows that, among women who worked after the birth of their first child, 21 percent were in part-time jobs. Among working women with two or three children, with at least one child under the age of three, 47 percent worked part-time between 2005 and 2008 (DREES 2010, 4). As for working women living with a partner without children under the age of three, which includes married women with children over the age of three, 30 percent work part-time. Even when part-time workers are protected by being paid the same hourly rate as a full-time worker performing the same job, part-time workers’ total annual earnings tend to be lower due to less time worked. Therefore, the tendency to average more years of earnings to determine pension benefits has the effect of disadvantaging those who worked part-time for several years to raise children.

Antidiscrimination Law Meanwhile, over the past decade, European antidiscrimination law has been a catalyst for significant changes to pension systems, particularly in

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France. State pensions, both for civil servants and for all workers covered by social security, used to award credits for the time women spent raising their children. However, these credits have been found to violate various provisions of European law, both by the European Court of Justice (ECJ) as well as by French courts.

European Union Gender Discrimination Law Article 141, formerly Article 119, of the Treaty Establishing the European Community (EC Treaty) requires equal pay for men and women for equal work or work of equal value.8 In a 1990 case, the ECJ determined that occupational pensions, that is, private employer-provided pensions, are considered pay under Article 141.9 This invalidated the maintenance of different pensionable ages for men and women within private pension schemes. At the same time, different pensionable ages were maintained in state pension schemes, such as social security or civil service pensions. Pursuant to the 1979 directive on equal treatment of men and women in statutory schemes of social security, the determination of different pensionable ages for men and women in old-age pensions and retirement pensions is explicitly allowed, and thereby excluded from the prohibition of discrimination.10 In addition to explicitly permitting different pensionable ages, the 1979 directive also permits member states to exclude from the scope of the nondiscrimination requirement “advantages in respect of old-age pension schemes granted to persons who have brought up children; the acquisition of benefit entitlements following periods of interruption of employment due to the bringing up of children.”11 The rationale for treating men and women differently in the statutory scheme is that a statutory social security scheme, unlike an occupational pension scheme, may seek to do more than simply compensate employees for work performed. A state social security scheme also seeks to redistribute social welfare and protect vulnerable citizens. Indeed, in some European countries, including France and Italy, the constitution imposes a duty on the state to protect mothers. Although the 1979 directive excludes statutory social security schemes from the EC Treaty’s equal pay provision, the European Commission has successfully challenged Greece’s and Italy’s lower pensionable age for female civil servants by arguing that the civil service pensions are occupational rather than statutory. This litigation has catalyzed additional reforms in many European countries. To bring national laws in line with the ECJ’s equality jurisprudence, many member states have equalized or are in the process of gradually equalizing the retirement ages of men and women in all pension schemes, whether they are occupational, civil service, or social security schemes.12 In short, many legislatures and courts are going further in

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mandating gender neutrality in pension schemes than is legally required by the various applicable equal treatment directives. Others are maintaining some differences in how men and women are treated by their social security schemes,13 which are now being challenged both in domestic courts as well as in pension reform legislation. The past decade of reform concerning French child-care credits in the civil service and social security schemes is illustrative.

Griesmar’s Challenge to Child-Care Credits In France, the civil service pension scheme awards pension credits to women for having raised a child, much like the MDA in the social security scheme. Under Section 12(b) of the French Civil and Military Pensions Code, female civil servants received a service credit of one year for every child she raised, regardless of whether she interrupted her career to care for the child. Credits were awarded automatically for the female civil servant’s birth and adopted children. The female civil servant could also obtain a credit of one year each for her husband’s children from a former marriage, any other child over whom she or her husband exercised parental authority, or any children of whom she or her husband was guardian, including foster children, as long as she “raised” those children for at least nine years before they obtained the age of twentyone. Joseph Griesmar, a French judge and father of three children, brought a proceeding challenging the code’s child-care service credit provision.14 When he retired, only his actual years of service had been taken into account to calculate his pension entitlement. He argued that he was entitled to service credits for each of his children, and that the code’s provision restricting the credit only to women violated Article 119 of the EC Treaty. Griesmar pointed out that the child-care credits in the French Civil Service and Military Pensions Code were automatically awarded to mothers without any requirement to show their individual career detriment resulting from child care, such as a service break for maternity leave or other leave.15 Because the pension credit, available to adoptive mothers, was not premised on the biological fact that women rather than men experience pregnancy or childbirth, nor was it linked to the taking of child-care leaves, Griesmar argued that these maternity credits constituted unequal treatment on grounds of sex. The French government defended the policy by invoking Article 6(3) of the Agreement on Social Policy, which amended the equal pay requirement of the EC Treaty to provide that it “shall not prevent any Member State from maintaining or adopting measures providing for specific advantages in order to make it easier for women to pursue a vocational activity or to prevent or compensate for disadvantages in their professional careers.”16

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The French government argued that the mothers’ pension credit was designed to address the social reality that female civil servants are disadvantaged in their careers because of the role that mothers play in raising children. Women with children tend to be regarded as less available for work, which limits their employment opportunities. The disadvantage identified by the French government in these proceedings is social and complex, rather than individualized: women’s overrepresentation in nonstandard work is not simply the result of each woman’s choice to work fewer hours in order to provide more child care at home. Women tend to work less in part due to choice, but they also do so because of employers’ perceptions about women’s proper role in the labor market. The fact that some women choose to work less in order to care for children leads to discrimination against women generally, even against women who would choose the standard employment contract. Therefore, the government maintained that working mothers experience disadvantage regardless of whether they stop work to raise ­children, citing empirical studies and statistics showing the under­ representation of women in the higher echelons of the civil service. Furthermore, many women do continue to work while raising children and therefore would not be able to show that they interrupted their careers to do so. However, many women accommodate their caregiving duties by working part-time or in temporary fixed-term contracts. Thus, women’s underrepresentation in the standard employment contract is due to a complex dynamic between the actual disadvantage stemming from the individual’s juggling of work and family and discrimination based on stereotypes of working mothers as less than ideal workers.17 The ECJ rejected the French government’s position. It held that the maternity credit provision of the French Civil and Military Retirement Pensions Code “infringes the principle of equal pay inasmuch as it excludes male civil servants who are able to prove that they assumed the task of bringing up their children from entitlement to the credit which it introduces for the calculation of retirement pensions.”18 In applying the ECJ’s interpretation of Article 141 to French law, the Conseil d’Etat determined that the maternity credit provision was invalid insofar as it denied the credit to fathers who had raised their children.19 There was nothing in the decision that required a father to prove that he had raised his children, or taken time off from work to do so. The legal meaning of raising one’s children simply meant exercising parental authority as exercised by a child’s mother and father concurrently under Article 371–1 of the Civil Code. Therefore, it appeared that applying the civil service scheme equally to men and women would require all parents who exercised parental authority be entitled to the pension credits, regardless of whether parenting interfered with work.

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The French Constitutional Challenge In 2003, France enacted a pension reform that sought to make the pension system more sustainable in light of the Griesmar decisions. The 2003 law left intact the MDA provision in the Social Security Code awarding up to two years of credit to women who have raised children regardless of whether they had career interruptions. It was assumed, based on the Griesmar decisions and ECJ case law, that Article 141 did not apply to pensions in statutory social security regimes and that the 1979 directive explicitly permitted social security schemes to award child-rearing credits without running afoul of the antidiscrimination requirement. As for civil service pensions, the 2003 reform did not extend maternity credit to all mothers and fathers raising children. Instead, it created a gender-neutral child-rearing credit that was limited to those civil servants who had interrupted their careers to raise children. Specifically, the law provided one year of credit for each child born after January 1, 2004, only to those civil servants, male or female, who had raised the child for at least nine years before the child’s twenty-first birthday, and who had interrupted their careers under conditions to be determined by the Conseil d’Etat.20 The new law also provided female civil servants with a twoquarter credit for giving birth to a child, not for adopted children, after January 1, 2004. French legislators brought a constitutional challenge to the 2003 law before the Conseil constitutionnel, arguing that reserving the MDA only to women under the Social Security Code constituted a violation of the constitutional principle of equality between men and women. The Conseil constitutionnel rejected this argument, holding that the principle of equality between men and women permitted different treatment of different situations.21 It held that it was the proper role of the legislator to take into account the inequalities that have in fact affected women, specifically their tendency to interrupt their careers more significantly than men in order to raise children. It also cited the related statistical fact that, since 2001, women’s average number of years counted in pension calculations was eleven years less than that of men. Average pensions for these women were 30 percent lower than those of men. The Conseil constitutionnel deferred to the legislature’s discretion to adopt the MDA provision in response to these facts (Calvès 2006, 110–11).

The Impact of Recent Cour de Cassation Decisions on Social Security This provision of the Social Security Code has been subject to judicial review, not only by the Conseil constitutionnel, but also by the Cour

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de cassation, the highest court of general jurisdiction. In 2006 and 2009, the Cour de cassation held that the Social Security Code’s MDA provision in excluding men raising their children violated Article 14 of the European Convention on Human Rights (ECHR). Article 14 simply provides that “the enjoyment of the rights and freedoms set forth in this Convention shall be secured without discrimination on any ground such as sex, race, colour, language, religion, political or other opinion, national or social origin, association with a national minority, property, birth or other status.”22 In the 2006 case, a single father claimed that, by denying him the social security pension credit available to women who had raised their children, the regional social security office had violated the European Convention on Human Rights. This argument was advanced in various cases and reports by the Haute autorité de lutte contre les discriminations et pour l’égalité (HALDE), the former French antidiscrimination agency that became part of the new rights protection body, the Défenseur des droits, in 2011.23 In 2006, HALDE urged the Ministry of Labor to initiate a legislative reform to eradicate gender distinctions in the MDA. The 2006 Cour de cassation decision affirmed the holding of the lower court, which had invalidated the decision of local social security office to deny the MDA’s pension credits to the single father. The Cour de cassation noted that “there exists no justification for discriminating between a woman who has not interrupted her career to raise her children and a man who can prove that he raised his child alone.”24 This decision seemed to suggest that the MDA had to be extended to men insofar as they could show that they had raised their children without help from the children’s mother. In February 2009, the Cour de cassation broadened its earlier holding by extending the MDA’s pension credits to a father of six children who had presented no evidence that he had raised his children alone. Relying again on Article 14 of the European Convention of Human Rights, the Cour de cassation reasoned that under this provision, “a difference in treatment between men and women who had raised their children under the same circumstances cannot be sustained except in the presence of an objective and reasonable justification.”25 Finding no such justification, the Cour de cassation held that Article 351–4 of the Social Security Code, reserving the MDA to women for having raised their children solely on the basis of parenthood rather than biological circumstances of maternity constituted a violation of Article 14. Therefore, to remain consistent with the convention, it appeared that the MDA’s pension credits had to be extended to all women and men who were parents, regardless of whether parenthood interfered with their likelihood of remaining in the standard employment contract of continuous, long-term, full-time work.

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Gender-Neutral Caregiving Credits? The recent jurisprudence of the Cour de cassation led to immediate legislative reform of the MDA. The estimated cost of extending the MDA to all fathers, as well as mothers, is an additional €9 billion per year (Cour des comptes 2009). As of 2006, the annual cost of the MDA in the social security regime was €4.9 billion (Cour des comptes 2009, 339). In the context of pension reforms designed to make the system more sustainable, extending the existing MDA to all men is simply not feasible. Therefore, including men in the MDA framework requires a corresponding diminution of the credits now available to women (Panis 2009, 7). Accordingly, a new law in 2009 reformed the MDA to make it consistent with the recent sex discrimination jurisprudence.26 Echoing the civil service pension scheme, the social security scheme now awards four quarters of pension credit to women who have had a child to compensate for career setbacks resulting from pregnancy and childbirth. The link to pregnancy and childbirth is expected to meet the objective-and-reasonable justification for the different treatment of men and women. For children born before the reform, the additional four quarters are awarded to the mother unless the father can prove that he raised the child alone. For children born after the reform, the four quarters are awarded to the couple. If the couple remains silent, the credits automatically go to the mother. However, the couple is free to change the allocation of the credits by mutual agreement. Yet this solution is not without problems. First, it is not clear that the new French law would be consistent with the Cour de cassation’s interpretation of Article 14 of the ECHR. The recent decisions tend to find any disparate treatment of men and women to be problematic. Therefore, the default rule of awarding the credit to the mother unless the father can prove he raised the child alone continues to treat men and women differently, as does the default rule of awarding all the credits to the mother unless the couple notifies the authorities otherwise. Second, to the extent that its understanding of Article 119 has any influence on the way the principle of equal treatment is generally understood, the European Commission’s recent reproach of the French civil service scheme on gender discrimination grounds cannot be ignored. Even if the new MDA provisions survive scrutiny under EU law or the convention, disadvantaged women may be worse off under the new regime than they were under the old regime. The couple must decide together (“in common”) who gets the pension credits, presumably based on their collective assessment of how child-care duties were allocated between them. The decision must be made four years after the child’s birth or adoption. If the parents cannot agree, the credits are to be awarded to

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the parent who can prove that he or she was the primary caregiver for a longer amount of time, or if neither parent can prove this, each parent receives half, that is, two of the four credits per child. The local social security pensions office is to adjudicate these disputes, and each of the parents has the right to challenge the decision before specialized social security courts, and eventually to the courts of appeals of general jurisdiction and the Cour de cassation (Panis 2009, 32). It is reasonable to assume that disputes leading to the equal splitting of the parenthood credit will occur in the context of marital discord and divorce, leaving divorced mothers more vulnerable. Although no data will be available on how couples are allocating the MDA credits until 2014, one can reasonably predict that women will end up having fewer credits than they did in a system that automatically awarded eight credits per child to mothers, and men will end up having more credits than they did in a system that automatically awarded them none. This will widen the gender gap in pensions. In 2005, nine of every ten retired women benefited from child-care pension credits, and on average, these credits increased women’s pensions by 30 percent. Nonetheless, women-only MDA credits were not enough to equalize pensions between men and women. This is explained by the social reality of women’s disproportionate participation in nonstandard work.

Does Antidiscrimination Law Facilitate Work-Family Balance and Gender Equality? In France, judicial decisions about pension policy based on antidiscrimination litigation are generating a new approach to work-family balance and gender equality. Both the ECJ’s Griesmar decisions and the Cour de cassation’s decision of February 2009 extended mothers’ pension benefits to fathers. In light of such decisions, it is tempting to view antidiscrimination law as a leveling-up mechanism. The norm of equal treatment requires existing benefits to be offered to more people, because, as the saying goes, “a rising tide lifts all boats.” Nevertheless, this solution poses two problems. First, universalizing the child-rearing credit to all persons who exercise parental authority may raise the pension level for all workers who also happen to be parents, but this will not lessen the gendered pension inequality between mothers and fathers in the workforce. Nor will it offset the disadvantages faced by nonstandard workers, male or female. If equal treatment means that all mothers and fathers automatically receive eight additional quarters of pension credit, the gap between mothers and fathers remains constant as everyone’s level of pension benefits increases. This outcome is at odds with one of the purposes of the MDA, which, since its inception, was to reduce gender inequality in pension benefits and retirement

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security by compensating for disadvantages associated with women’s role in child-rearing. Furthermore, as the French experience demonstrates, it is highly unlikely for fiscal reasons that antidiscrimination law will simply lead to more generous pensions for all men and women alike. The reality is that the French legislative responses to the Griesmar decisions and to the Cour de cassation decision have achieved equality by leveling down, rather than leveling up. Legislatures simply cannot and do not ignore the costs of universalizing the child-rearing pension credit, particularly in times of economic contraction. The 2003 reform created a gender-neutral parenthood benefit limited to those parents who had interrupted their careers to raise children. This excludes many working women eligible under the previous regime. More women had benefited from these credits than men. Nonetheless, the reform ended the long-standing policy of awarding the credit to women who continued to work while raising their children. The new policy rewards those who abandon work for family, ignoring the fact that many women end up in nonstandard work for a variety of complex reasons related to work-family conflict, real and supposed. The new approach compensates individuals for only one type of career detriment—interruption of work—without addressing the full range of ways in which nonstandard work, especially part-time and temporary work, hurts women’s pensions in the long term. The 2009 law redistributes credits to men, including those who enjoy the benefits of the standard employment contract, which previously had gone to women, who were less likely to be standard workers. Although the child-rearing credits under the social security scheme are automatically awarded to mothers, the law provides that couples can decide on an alternative allocation. If there is a dispute within the family, the default rule is equal sharing of these credits. The default rule of equal sharing assumes that men and women are equally responsible for childrearing. Although this assumption embodies the normative aspirations of antidiscrimination law, it is unlikely to bring about the redistribution of caregiving roles within the family that produce the dynamics that have feminized nonstandard work.

Alternative Approaches How can social security schemes address the inadequacy of women’s pensions resulting from overrepresentation of women in nonstandard work arrangements without running afoul of antidiscrimination principles? The recent jurisprudence of the ECJ and the French courts has constrained policy experimentation that treats working mothers differently from working fathers based on statistical generalizations about working mothers’ disproportionate participation in nonstandard work. Indeed, a

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March 2011 ECJ ruling on gender-differentiated insurance premiums reaffirmed the incompatibility of statistical generalizations about women with the Charter of Fundamental Rights of the European Union.27 At the same time, the alternative of tying family credits to identifiable career interruptions is also inadequate to offset the gendered disadvantages of work-family conflict. Women’s disadvantages are manifested not only in career interruptions, but also in the part-time work and lower wages resulting from the aggregate effects of career interruptions and discrimination, which flow from women’s traditional caregiving roles. Furthermore, in light of the general decline of the standard employment contract, the new pension reform will undermine the retirement security of a growing number of workers, especially women, because they reward longer full-time careers and penalize careers involving temporary and part-time work. Instead of assuming that retirement policy can function as an incentive and thereby bring back the standard contract of employment, pension reforms should be seeking new ways of offering security to nonstandard workers. For example, HALDE, the French equality agency, proposed that social security retirement benefits be calculated based on the worker’s average salary in his or her 100 best quarters, rather than twenty-five best years.28 This formula would still use the same amount of time to determine the average benefit, but would mitigate disadvantages experienced by those who have frequent career interruptions, often due to the complex interplay of work-family conflict and gender discrimination. Another way of compensating the aggregate disadvantage imposed by maternity and caregiving is to institute a lower full retirement age for those who have taken maternity or caregiving leaves. The current law in France awards pension credits to those who have interrupted their careers for these purposes. However, these credits no longer remedy the aggregate disadvantaging effects of these interruptions, which can be greater than the mere loss of work during the interruption itself. The current law allows workers to qualify for a full pension at the age of sixtyfive rather than sixty-seven if they are disabled or a caregiver to a disabled family member. But perhaps the law should also include among this group those who have taken maternity or child-care leaves within their career. Finally, a gender-neutral way of offsetting the pension reforms’ privileging of standard workers might be to award the per-child caregiving credit to the parent who retires with the least quarters worked. Furthermore, as Katherine Stone has argued, employment discrimination law itself needs to be rethought in light of the changing nature of the employment relationship (2004, 157–95). As demonstrated by the Griesmar decisions and the French cases that followed it, employment discrimination laws have encouraged a formal conception of sex equality that emphasizes gender-neutral rules for the accommodation of work-

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family conflict. This has created a legal impediment for policies that recognize women’s caregiving role and the full and complex range of disadvantages it causes. At the same time, it appears that this formal conception of sex equality has eclipsed the idea of indirect discrimination. In France, opponents of the 2010 pension reform brought a constitutional challenge to the provision that raised the retirement age for a full pension from sixty-five to sixty-seven based on the principle of equality between men and women. They argued that since women tend to have more frequent career interruptions and are more likely to be in part-time work, this provision would disadvantage women, making them more likely to be penalized for failing to work until the age of sixty-seven. This was essentially an indirect discrimination theory, yet the Conseil constitutionnel rejected the claim.29 Neither the legislators nor the Conseil constitutionnel analyzed the issue through the legal framework of indirect discrimination, which would then require an objective justification that showed the provision was necessary and appropriate to achieve a legitimate purpose.30 In the past, European courts applied this framework to invalidate some policies that are adverse to part-time workers. In light of the feminization of nonstandard work, indirect sex discrimination is an appropriate legal theory to challenge policies that tend to assume a standard employment contract and provide incentives and advantages to such workers. Yet, employment discrimination law on both the European and the national level seems to have forgotten this concept in favor of formal gender equality. This tendency toward formal equality has created a dynamic by which gender-specific protections to offset women’s disadvantage are withering away.

Conclusion Taken together, the new pension reforms and the evolution of European antidiscrimination law toward formal equality are likely to exacerbate women’s insecurity in retirement. The new pension reforms in Europe attempt to maintain the sustainability of pension systems by rewarding the longer-term full-time careers associated with the standard contract of employment. However, it is doubtful whether these reforms will be enough to reverse the decline of the standard employment contract. Furthermore, the standard contract of employment has always been more difficult for women to obtain and sustain, due to the reality of women’s disproportionate share of family caregiving, as well as stereotypes about it. Although some of the older social security schemes compensated for both by providing caregiving credits to mothers, the application of antidiscrimination law is creating a dynamic by which courts are awarding the same credits to fathers and legislatures are reacting by scaling back

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the resulting overall benefit levels. Antidiscrimination law is thus leveling down retirement benefits for caregivers, rather than fostering policies that provide security for the growing number of workers outside the standard employment contract. Instead of hoping that penalizing nonstandard work will resuscitate the longer full-time careers associated with the standard contract of employment, policymakers need to adapt social security to the changing nature of work. Traditional caregiving credits that recognize the gender disparities in access to long-term full-time work are one way of decoupling retirement security from the standard employment contract. As long as the standard employment contract remains the starting point and aspiration of pension policy, antidiscrimination law may undermine, rather than promote, the interests of working mothers and gender equality.

The author is grateful to Katherine Stone, Harry Arthurs, and the participants in the Bellagio workshop on the Demise of the Standard Employment Contract and a faculty workshop at the University of Connecticut School of Law. Adam Panopoulos, Sabrina Gillespie, Drew Capurro, and Tessa Hayes provided excellent research assistance.

Notes   1. See Case 170/84, Bilka-Kaufhaus GmBH v. Weber von Hartz, 1986 E.C.R. 1607.   2. Loi 71–1132 du 31 décembre 1971 portant amélioration des pensions de vieillesse du régime géneral de sécurité sociale et du régime des travailleurs salariés agricoles (Law 71–1132 of December 31, 1971 improving old-age pensions in the general social security scheme and in the salaried agricultural workers’ scheme), art. 9, Journal Officiel de la République Française [J.O.] (Official Gazette of France), Jan. 5, 1972, p. 140.   3. Code de la sécurité sociale (Social Security Code) art. L. 351–54.   4. Loi 2010–1330 du 9 novembre 2010 portant réforme des retraites (Law 2010– 1330 of November 9, 2010 on pension reform), arts. 18 and 20, J.O., Nov. 10, 2010, p. 20034.   5.  Ibid., art. 20.   6. Loi 93–936 du 22 juillet 1993 relative aux pensions de retraite et à la sauvegarde de la protection sociale (1) (Law 93–936 of July 22, 1993 on retirement pensions and safeguarding social protection), J.O., July 23, 1993, p. 10374.   7. Indeed, some European countries allow younger pensionable ages for women than men to enable women to retire early to care for children, grandchildren, or aging parents. Despite the European Commission’s position that such differences in occupational pension schemes (including civil

330     Rethinking Workplace Regulation service pensions) constitute illegal sex discrimination, Italy and Greece have persisted in maintaining younger pensionable ages for women than for men in their civil service regimes.   8. Consolidated Version of the Treaty on the European Union and the Treaty Establishing the European Community, 2006 O.J. (L C321/E1) 141.   9. Case C-262/88, Barber v. Guardian Royal Exch. Assurance Grp., 1990 E.C.R. I-1889. 10. Council Directive 79/7/EEC of 19 December 1978 on the progressive implementation of the principle of equal treatment for men and women in matters of social security, 1979 O.J. (L 006), 24. 11.  Ibid., art. 7. 12. These countries include Austria, Belgium, Germany, the Netherlands, and the U.K. 13. Greece and Italy have maintained different pensionable ages for men and women in their civil service schemes. These policies have been challenged by the European Commission. Both of these countries maintain different pensionable ages for men and women in their social security schemes along with many former socialist countries that have recently joined the EU: Bulgaria, Czech Republic, Lithuania, Poland, Romania, and Slovenia (Prechal and Burri 2009, 19). 14. Case C-366/09, Griesmar v. Ministre de l’Economie, des Finances et de l’Industrie et Ministre de la Fonction publique, de la Réforme de l’Etat et de la Décentralisation, 2001 ECR I-09383 (Griesmar ECJ Decision). Griesmar challenged his pension decree before the Conseil d’Etat, which then referred to the ECJ the question of whether the equal pay provision of Article 119 was violated. 15. Case C-366/99, Griesmar v. Ministre de l’Economie, des Finances et de l’Industrie et Ministre de la Fonction publique, de la Réforme de l’Etat et de la Décentralisation, Opinion of Advocate General Alber (Griesmar Advocate General Opinion), 19–20. 16. Ibid., 21–22. 17. Griesmar ECJ Decision, 31–33. 18. Ibid., 67. 19. Griesmar, Conseil d’Etat [CE] (Highest administrative court), July 29, 2002, Rec. Lebon 284. 20. Loi 2003-775 du 21 août portant réforme des retraites (Law 2003–775 of August 21, 2003 on pension reform), J.O., Aug. 22, 2003, p. 14310. 21. Conseil constitutionnel [CC] (Constitutional Court) decision No. 2003– 483DC, Aug. 14, 2003, J.O., Aug. 22, 2003, p. 14343. (Fr.) 22. European Convention on Human Rights art. 14, Nov. 4, 1950, 213 U.N.T.S. 221. 23. Haute autorité de lutte contre les discriminations et pour l’égalité [HALDE] (The French Equal Opportunities and Anti-Discrimination Commission) decision No. 2008–237, Oct. 27, 2008, J.O. Dec. 9, 2008, 94. 24. Cour de cassation [Cass.] (Supreme court for judicial matters) 2e civ., 21, Dec. 21, 2006, Bull. civ. II, No. 04–30586 (Fr.). 25. Cass. 2e civ., Feb. 19, 2009, Bull. civ. II, No. 07–20668 (Fr.). 26. Loi 2009–1646 du 24 décembre 2009 de financement de la sécurité sociale pour 2010 (Law 2009–1646 of December 24, 2009 on the 2010 social security budget), art. 65, J.O., Dec. 27, 2009.

Work-Family Balance and Gender Equality     331 27. Case C-236/09, Association Belge des Consommateurs Test-Achats ASBL and Others. Available at: http://curia.europa.eu. Accessed March 1, 2011. 28. HALDE decision No. 2010-202. Available at: http://halde.defenseurdes droits.fr/Deliberation-relative-a-la%2c13819.html. Accessed Sept. 13, 2010. 29. CC decision No. 2010–617DC, Nov. 9, 2010, J.O., Nov. 10, 2010, p. 20056 (Fr.). 30. HALDE decision no. 2010-202, supra note 28.

References Bonnet, Carole, Sophie Buffeteau, and Pascal Godefroy. 2006. “Effects of Pension Reforms on Gender Inequality in France.” Population 61(1): 41–70. Calvès, Gwénaële. 2006. “Le conseil constitutionnel français et la réforme des retraites: une occasion manquée pour le développement du contentieux de l’égalité entre les sexes (A propos de la décision 2003–483 DC du 15 août 2003)” [The French Constitutional Council and Pension Reform: A Missed Opportunity for the Development of Sex Equality Litigation (after Decision 2003-489DC of August 15, 2003)]. In Egalité des sexes: la discrimination positive en question, edited by Miyoko Tsujimura and Danièle Lochak. Paris: Société de législation comparée. Cour des comptes. 2009. Rapport sur l’application des lois de financement de la sécurité sociale 2009 (Report on the Application of the Social Security Finance Laws 2009). September. Paris: Cour des comptes. Dares analyses-Dares indicateurs DARES. 2010. Premières Informations et Premières Synthèses, Interruptions de carrière professionnelle et salaire des hommes et des femmes en 2006 (First Information and First Syntheses: Professional Career Interruptions and the Salaries of Men and Women in 2006). February. Paris: DARES. Direction de la recherche, des études, de l’évaluation et des statistiques (DREES). 2010. L’activité des mères de jeunes enfants depuis la mise en place du complément du libre choix d’activité (Work of Mothers of Young Children Since the Adoption of the Free Choice of Work Supplement). May. Paris: DREES. European Commission. 2010a. “Interim EPC-SPC Joint Report on Pensions.” Brussels: EPC Secretariat. ———. 2010b. “Green Paper Towards Adequate, Sustainable, and Safe European Pension Systems.” Brussels: European Commission. Frericks, Patricia, and Robert M. Maier. 2008. “Pension Norms and Pension Reforms in Europe: The Effects on Gender Pension Gaps.” Community, Work, and Family 11(3): 253–71. Grésy, Brigitte. 2009. Rapport préparatoire à la concertation avec les partenaires sociaux sur l’égalité professionnelle entre les femmes et les hommes (Preparatory Report on the Dialogue of Social Partners on the Professional Equality Between Women and Men). Paris: French Ministry of Labor, Social Relations, Family, Solidarity, and the City. International Labour Organization (ILO). 2009. Global Employment Trends for Women. Geneva: International Labour Organization. Panis, Jacqueline. 2009. Rapport d’information fait au nom de la délégation aux droits des femmes et à l’égalité des chances entre les hommes et les femmes sur les dispositions du projet de loi, adopté par l’Assemblée nationale, de financement de la sécurité sociale

332     Rethinking Workplace Regulation pour 2010 relatives à la retraite des mères de famille (Information Report on Behalf of the Delegation for Women’s Rights and for Equal Opportunity Between Men and Women on the Provisions of the Proposed Law, Adopted by the National Assembly, on Social Security Finance for 2010 Concerning Mothers’ Pensions). Documents enregistrés à la présidence du Sénat no. 83, 3 novembre 2009. Paris: La Documentation Française. Prechal, Sacha, and Susanne Burri. 2009. “EU Rules on Gender Equality: How Are They Transposed into National Law?” Report prepared for the European Commission Directorate-General for Employment, Social Affairs, and Equal Opportunities. August. Luxembourg: Publications Office of the European Union. Stone, Katherine V.W. 2004. From Widgets to Digits: Employment Regulation for the Changing Workplace. Cambridge: Cambridge University Press. U.S. Government Accountability Office (GAO). 2007. Retirement Security: Women Face Challenges in Ensuring Financial Security in Retirement. GAO-08-105. Washington, D.C.: Government Printing Office. Williams, Joan. 2000. Unbending Gender: Why Family and Work Conflict and What to Do About It. Oxford: Oxford University Press.

Chapter 18 Social Rights in Changing Labor Markets: Caring for Caregivers in the European Union julia lópez, consuelo chacartegui, and césar g. cantón

L

abor markets have been transformed not only by the advent of new and more insecure forms of employment relations but also by the arrival of new populations of workers, among whom women feature most prominently. And the regulation of labor markets has been challenged not only by globalization, technology, and a declining appetite for state intervention but also by the need to harmonize traditional workplace policy concerns with broad social policies, especially those relating to the family. In both contexts, the capabilities approach of Amartya Sen (1999) and Martha Nussbaum (1992) has become highly influential (Alkire 2010). The basic tenet of the capabilities approach is that expanding individual freedom yields empowerment. It proposes that market dynamics and labor laws should not only facilitate a fair allocation of goods but also promote the development of the capabilities people need to do the things they have reason to value. In particular, Sen and Nussbaum’s scholarship helps us appreciate that the pursuit of gender equality in the context of a growing tendency toward nonstandard employment relations cannot be limited to providing legislative support for flexible work training programs and unemployment benefits; it must also include a broad array of arrangements that facilitate the empowerment of women. The new forms of employment analyzed in this volume are, of necessity, related to ongoing changes in gender relations and family dynamics—as some scholars and public policymakers have recognized. Emergent nontraditional forms of employment are in part driven by the evolution of gender and family roles and in other ways likely to influ333

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ence those relations. But even more important, as the scholarship of Gøsta Esping-Andersen (1999) has established, a high employment equilibrium in postindustrial societies requires positive synergies between labor market and family-care arrangements, making it possible for women to participate in large numbers in the workforce thus externalizing to the economy much work once handled within the family on a noncash basis. Indeed, most prominently in the Lisbon Strategy, the European Union has recognized the connection between gender and family matters on the one hand and employment goals on the other. From our perspective, if new employment arrangements are to foster genuinely positive trends in employment, they must do so in ways that operate, in complementary fashion, alongside gender and family policies related to caregiving. In this chapter, we examine policy approaches on the issue of caregiving from a gendered perspective not only out of an intrinsic concern for this theme but also because of its clear relevance for the ability of complex sets of new policies to successfully handle the interface of labor market and family care challenges. We will explore the relevance of the capabilities approach in three contexts—the development of antidiscrimination and family policies in the European Union (EU), the adoption and implementation of these policies by the EU’s member states, and the evolution of corporate policies and practices that help normalize familyfriendly work arrangements.

New Challenges for EU Family-Friendly Policies The European Union has long identified gender discrimination as a serious problem but has tended to treat it, as it has other social rights, in the context of market principles, thereby commodifying rights and creating a danger of both rightlessness and social exclusion (Somers 2008, 68). Indeed, while EU directives on various subjects can best be understood through the perspective of neovoluntarism with its emphasis on the weak juridical character of rights (Streeck 1995; Leibfried 1994; Leibfried and Pierson 1995), one area that has suffered in particular from the tendency to under-enforce social rights is the implementation of familyfriendly policy. However, the EU’s new Charter of Fundamental Rights (European Union 2009) has given binding legal effect to social rights, including those relating to gender and family policies, a development of considerable significance given that the employment nexus on which so many social rights have been built has become increasingly fragile. In its Charter of Women (European Commission 2010) and in Europe 2020 (European Commission 2011), the EU addresses the goal of equal economic independence for women and affirms that the life choices and economic independence of many women is affected by policies designed

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to prevent discrimination, avoid labor market segregation, reduce precarious employment conditions, limit involuntary part-time work, and promote shared care responsibilities between parents. Moreover, as part of its labor market strategy, the EU has implemented policies to further equality and nondiscrimination between men and women in salaries, working conditions, employment, and social security benefits. In other words, a dynamic and evolving policy on equality has been developing recently in the EU, the core of which is a combination of hard and soft law. However, despite the achievements made, deficits remain. We focus, by way of example, on recent attempts to integrate maternity and parental leave policies within a comprehensive nondiscrimination strategy. The EU has long used directives as the main instrument to build its family-friendly policy. For example, a 1985 council directive entitled women to maternity leave of fourteen weeks. However, implementation of this directive was devolved to member states. The EU itself ­retained responsibility only for the enforcement of its own nondiscrimination policies, which included a prohibition against dismissals attributable to maternity. Moreover, the directive as worded reinforced the norm that women have primary responsibility for child care. Thus, the EU’s regulation of maternity leave had not only become obsolete in its social assumptions but also disconnected from effective implementation of its equality policies and its prohibitions against discrimination. Maternity was protected at the EU level only from the point of view of women workers’ connection to labor markets, and not as a component of their citizenship rights as inscribed in the Charter on Fundamental Rights (European Union 2000). In 2010, however, the EU adopted a new parental leave directive (European Union 2010), bringing into effect a framework agreement negotiated by the European social partners. The new directive is intended to promote nondiscrimination and establish minimum requirements for the “reconciliation of parental and professional responsibilities” for working parents “taking into account the growing diversity of the labor force and . . . the increasing diversity in family structures while respecting national law, collective agreements and/or practice” with a view to encouraging “a more equal sharing of family responsibilities between men and women” (1, recitals 9–12). Of particular relevance in the context of this volume, the new directive provides that member states and social partners cannot exclude contracts of employment or employment relations from its scope and application solely because they relate to parttime workers, fixed-term workers, or persons working under the aegis of a temporary employment agency. Indeed, the directive requires member states and social partners to ensure that workers with fixed-term contracts make use of this provision, and that the sum of their fixed-term contracts is used to calculate the qualifying period for applicable em-

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ployment benefits (clause 1.3). This point is crucial because disproportionate numbers of women are engaged in precarious employment. The 2010 directive entitles men and women workers to an individual right to parental leave, on the birth or adoption of a child, allowing them to take care of children under the age of eight years. Such leaves are to be granted for a period of at least four months, at least one of which is to be nontransferable (European Union 2010, clause 2.2). By granting men as well as women parental leave entitlements, the directive opens a window to role-shift in caregiving activities. Women are presented with the option of reducing their caregiving involvement to focus on other pursuits, and men who are willing to assume a greater share of household responsibilities will see their capabilities enlarged under the directive. Workers who take parental leave are guaranteed the right to return to their former jobs (clause 5.1) and to seek an adjustment of their working time arrangements (clause 6.2). Finally, member states and social partners are required to take measures to protect workers against unfavorable treatment or dismissal for exercising their rights under the directive (clause 5.4). In short, there is much to commend in this initiative to promote a better work-life balance for workers. In the language of Sen and Nussbaum, it will help restructure the labor market so that both women and men are enabled to “do the things they value.” However, member states are given considerable latitude to determine the “modalities of application” of virtually all provisions of the directive (European Union 2010, clause 3). This is perhaps inevitable in the European context, where the principles of social dialogue and subsidiarity continue to shape labor market and social policy initiatives such as the new Parental Leave Directive. It is also the reason that we must examine developments in the member states to assess the actual outcome of efforts to make Europe more family friendly.

Family-Friendly Policies: Best Practices in EU Member States Translating EU level policies into national law and practice is always a complex challenge. We will explore that complexity by showing how member states have dealt with the challenge of implementing the EU’s capacity-building family-friendly norms in an era when contingent work and unemployment are becoming more common. According to a recent survey (Anderson et al. 2007), European household arrangements display great variation in both the early and later stages of family development. As the following data suggest, women between age twenty and seventy-four spend significantly more time than men on domestic work and care work by men—albeit with much ­variation by national case (see figures 18.1 and 18.2). According to Esping-Andersen, this pattern shows the “intensifying tensions” in most

Social Rights in Changing Labor Markets     337 Figure 18.1  Time Spent on Domestic Work 350

Men Women

Minutes per Day

300 250 200 150 100 50 0

Sweden

Germany

Spain

Source: Author’s compilation based on Eurostat (2006). Note: Ages twenty to seventy-four. Figure 18.2  Time Spent on Child Care

Percentage of Total Domestic Time

35

Men Women

30 25 20 15 10 5 0

Sweden

Germany

Spain

Source: Author’s compilation based on Eurostat (2006). Note: Ages twenty to seventy-four.

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advanced societies because the female revolution has not been complemented by a reformed family policy (2009, 80)—an obvious failure, we might say, to rethink social policy in line with the Sen-Nussbaum capabilities approach. Given these differences, it is not surprising that a broad spectrum of family-related policies has been implemented among the member states. In most countries, family benefits play an important role in those policies, including income support during maternity leave, birth-adoption grants, parental leave benefits, family or child allowances, and other cash benefits for families with specific needs. However, although these policies and the benefits provided pursuant to them are intended to harmonize the family and work dimensions of parents’ lives, they are not always well integrated into an overarching policy on equality and nondiscrimination. Thus, though maternity leaves are being extended in many countries,1 their entitled beneficiaries are women. Such policies are problematic to the extent that they are neither integrated into holistic family-friendly policies designed from a gender mainstreaming perspective nor capable of dealing with the existing panorama of standard and nonstandard contracts. In Spain, for example, maternity leave extends up to sixteen weeks and is covered by social protection benefits as long as the mothers have paid into the Social Security system for at least 180 days in the last five years before their child’s birth. The Spanish Equality Law of 2007 also provides for relatively short paternity leave—a maximum of fifteen days—but enables fathers to use ten of the mother’s sixteen weeks; only an insignificant number of fathers exercise this right (INSS Institute of Spanish Social Security, data referring to the first trimester of 2010). Either fathers or mothers may also take lactation leaves, which entail a shortened working day during the baby’s first nine months; again, very few fathers exercise this right. Overall, although the current Spanish social protection system shows some positive tendencies and does not explicitly discourage women’s participation in the labor force, it still assumes that women will perform their traditional role as caregivers and that men will function as the traditional breadwinner and head of the household. However, some national policies on maternal and parental leave are more imaginative and encouraging. Finland, for example, has successfully integrated nondiscrimination and leave policies, and has undertaken a major campaign to promote the use of parental leave by fathers— a reaction to the fact that, despite legislative changes opening possibilities for caregiving paternal leave, only a relatively small proportion of fathers were taking advantage of these possibilities. Denmark has taken steps to the same end. Danish mothers are entitled to four weeks of preg-

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nancy leave before birth and fourteen weeks afterward. Fathers are entitled to two weeks of paternal leave immediately after the birth. After the fourteenth week, both parents share thirty-two weeks of leave that can be divided or postponed according to their needs, but must be taken before the child reaches nine years old. However, because remuneration for child-care leave is relatively low—60 percent of the highest unemployment benefit rate—mothers rather than fathers tend to take up the major part of this leave, even though parents have the right to a combined total of fifty-two weeks (Rolandsen and García 2009, 33). This tendency might be overcome if nontransferable periods of parental leave were made available to fathers as provided in the 2010 directive. Child care is yet another case in point. The EU Guidelines of the Open Method of Coordination’s Lisbon strategy (European Parliament 2000) required that by 2010, the number of child-care facilities in each member state should be increased to cover at least 33 percent of children three years old and younger, and at least 90 percent of children between age three and mandatory school age. The purpose of this commitment, and of a parallel commitment to improve care services for dependent persons, was to promote equity by ensuring that women and men have equal opportunities to access the labor market. But, how were these objectives implemented? The answer diverges significantly from one country to another, as an account of best practices will illustrate. One approach to enabling women to participate in the labor market while providing child care is to expand opportunities for part-time work. In the Netherlands, the expansion of opportunities for part-time work was identified early on as a strategy to promote not only job creation but also equal employment opportunities for women and men (Jacobs and Schmidt 2001). Initiated in a 1982 agreement between the employers’ federation and the unions (Nickell and Ours 2000), the strategy of enhancing part-time employment opportunities ultimately received legislative approval with the passage of the Adjustment of Hours Act of July 2000. Part-time and other flexible working arrangements such as telecommuting, compressed work weeks, and time banks became significantly more common during this period (Berg et al. 2004). These arrangements have facilitated reductions in weekly working time, especially for new workers in large government-controlled sectors of the economy, and part-time work has become much more popular, widespread, and persistent in the Netherlands than in any other European country. As anticipated, this has encouraged the entry of more women into the labor market in the Netherlands, which—according to Eurostat (2010)—has the highest proportion of part-time workers among EU members, 47.7  percent in 2009, and the highest rate of employed women working part time, 75.7 percent in 2009. Many young men have also accepted part-time jobs (Neubourg 1985), and for 62 percent of

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young workers, mostly students, part-time work is a common pattern. Moreover, one of the most positive aspects of the Dutch model of parttime work is its voluntariness. In the Netherlands, the act of nondiscrimination on the grounds of working time (1996) states that part-time workers are entitled to social security benefits for the same period and on the same conditions as full-time workers, with 70 percent of their last gross wages used as the reference point for the calculation of benefits. As Vim Van Oorschot (2006) convincingly argues, the inclusion of social security protection is crucial for the popularity of part-time work. In this sense, it important to note that Dutch regulations have reinforced the communitarian elements of the EU’s directive on part-time work, especially its emphasis on social protection and voluntariness (European Community 1997). However, the picture may not be quite as positive as it initially appears. The Dutch part-time work initiative may be explained in part by three facts: that Dutch parents tend to mistrust the quality of child care (Wattis et al. 2006), that a majority of Dutch women apparently feel it best for children to be looked after exclusively by their parents, and that there is a lack of full-day child-care facilities and those that are available tend to be much more expensive and of lower quality than, for example, those found in Scandinavian countries (European Parliament 2007). Moreover, although a comparative analysis reveals that the Dutch regulations have strengthened the position of part-time female workers, it is also true that income inequalities have increased over the last twenty years, and that the proportion of poor households has risen, as well as the proportion of the working poor (Oorschot 2006). As the Dutch case indicates, it is not enough to ensure that jobs are reengineered to enable women to “do the things they value” in the workplace; it is also essential that other “things they value” in the family context are done to their satisfaction by their partners or other caregivers. This policy has not taken hold in southern Europe, where day care is available to fewer than 10 percent of children under three years old (Esping-Andersen 2009, 93). And it has received only modest acceptance in a second group of countries (Belgium, Netherlands, and the United Kingdom), where formal day-care coverage extends to around 30 percent of young children. However, Scandinavia presents a very different picture: Day-care coverage for children younger than three years old has now become basically universal in the Nordic countries. One of the best practices is found in Denmark, which has adopted a policy of locating child-care services close to those workers who require them. The proximity factor enhances the effectiveness of social services in addressing work-life balance. In Denmark, a subsidized public daycare benefit serves infants from the age of six months, guarantees all oneyear-olds a place, and provides a variety of child-care options for chil-

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dren up to age of six. Child care is delivered by, or under the regulatory authority of, municipalities, often with the cooperation of parents’ committees, usually in civic institutions but sometimes in subsidized private facilities. The provision of care for dependent persons also varies substantially. In Denmark, one of the main aims of social services for elderly and disabled people is to ensure they can manage in their own homes, so that they do not have to be institutionalized in a nursing home. The elderly and disabled are provided help with home cleaning and personal hygiene. A consequence of this approach is that immigrant women, who often perform care work, are provided an opportunity to participate in the economy. Dependent care in Spain—also designed to promote personal autonomy and to cater for the needs of people who require assistance—differs somewhat from the Danish approach. Care benefits in Spain are provided through the state Social  Services Network by duly accredited public or subsidized private agencies. However, on an exceptional basis, a financial benefit will be provided in lieu. The beneficiary may elect to be cared for by nonprofessional caregivers—usually a sister, mother, or wife—as long as the home meets specified standards and the arrangement is preapproved. In fact, there are 119,542 nonprofessional caregivers in Spain, of whom 112,561 are female and 6,981 are male (Social Security Treasure 2010). As these examples illustrate, social and labor market policies in many European member states have not yet attained the lofty ambitions of EU policymakers to create structures within which women and men enjoy equal access to the labor market, equal support for reconciling their professional and private lives and equal experience of utilizing the opportunities that EU and state-level policies seek to provide. Whether we are likely to see labor market practices become more family friendly at the same time that work relationships are becoming more contingent is an open question. Indeed, some observers have suggested that the policies of EU member states on work-life balance have gradually shifted from promoting equal treatment of women and men at work toward increasing overall economic growth and employment.

Work and Family Balance Under Best Corporate Practices Should we be concerned that EU and national policies have not yet achieved what their proponents hoped and promised? Should we instead be more closely examining corporate self-regulation as a primary site of progressive social policymaking? Transnational corporations are after all major drivers of global economic development. They are strategically located, therefore, to contribute to—or frustrate—attempts to en-

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able their employees to enhance their capabilities, and to make their working lives more family friendly. This section examines how issues of equality, work-life balance, and co-responsibility are dealt with in company-level, self-regulatory instruments.2 In approaching the corporate context, the great variation in attention paid to gender and family issues stands out. Corporate efforts often fall short of society’s growing expectations on these issues. However, if not all corporate practices, then at least best practices provide reasons for optimism. A number of corporate initiatives reveal some potential for promoting role-change and co-responsibility for caregiving and domestic work by men and women. In particular, although one of the major obstacles to advancing co-responsibility through legislation and public initiatives is the lack of coordination between gender-equality and family policies, in the corporate context, both are usually addressed together under the rubric of diversity, along with other topics. Time management is a key factor in enabling women to reconcile their competing priorities in ways that will allow them to realize their full professional and personal potential. Consequently, flexwork is perceived not only as an efficiency-enhancing instrument but also as a major driver of work-family balance. It takes different forms, including home-working, telecommuting, working from satellite offices, and part-time arrangements. Many companies, such as IBM, consider flexwork a distinctive mark of their corporate style. Adidas promotes gender equality fueled by employees’ involvement through its Central Works Council, a body representing all of the company’s sites in Germany, which plays a critical role in the development, support, feedback, consultation and approval of, among other initiatives, the implementation of long-term work-life accounts to optimize life-time working hour flexibility (Adidas 2010, 62). An initiative at American Express permits employees who want to reduce their hours temporarily to shift into a consulting role, with no loss of benefits or status (American Express Company 2007/2008, 31). This may encourage male employees to take on greater caregiving roles. Some companies in the consulting sector offer sabbaticals to their employees. Deloitte provides a four-week unpaid period for any reason, including family care work and enhancing possibilities for women to participate in the labor market.3 Other companies have set up educational and training initiatives, including non-job-related education, partially paid time off to pursue career-enhancing opportunities, and parenting seminars, such as the Managing Your Career Through Parenthood program for new mothers at Deutsche Bank. Stress-relief programs foster general capabilities and enhance work-family balance. IBM and Credit Suisse now offer wellness action plans and General Mills offers free career counseling to its employees’ unemployed family members. There

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are also programs for primary caregiver employees, such as AstraZeneca’s Relieving Caregiver Stress, which uses yoga. Some companies’ practices go beyond the general empowerment of both sexes to target female employees. These initiatives include supporting women through leave policies, education and training programs, membership in global initiatives, and awards and recognitions. There are also interesting tone-setting initiatives in top management. In Ernst & Young, partners and senior managers employed on reduced schedules emphasize their commitment to flexible working time and share their success stories (Bitcdiversity 2011). And, by way of a further example, many companies promote women’s educational development in their communities. In 2007, Nokia joined an EU-wide effort to promote careers in information and communication technologies among girls through a program in which schoolgirls shadow female engineers during a typical working day. Other initiatives to shift social views toward co-responsibility include parenting seminars such as Maternity Coaching (Credit Suisse), a quarterly program that prepares women for maternity leave; managers and the new fathers also attend these sessions. Such developments raise the broader question of whether businesses will ultimately institute gender equality measures by themselves with no need of government regulation. In addition, it seems very likely that corporate membership in global initiatives helps raise societal awareness about gender issues and advance women’s empowerment. By way of example, the Global Reporting Initiative—whose members include IBM, Telefónica, and AdidasSalomon—commits member firms to reporting their economic, social, and environmental performance according to gender-friendly and workfamily balance indicators, among others.4 Another example is the International Women’s Group, which provides assistance to the integration of international employees and their families in German-based companies, such as Puma, Siemens, and Adidas-Salomon. And, most famously, the UN Global Compact initiative uses similar strategies to secure corporate commitment to family-friendly and other socially responsible policies. Thus the motto for the 2011 UN Women Empowerment Principles, a joint initiative of the UN Global Compact and UNIFEM (United Nations Development Fund for Women), is Equality Means Business. Proponents of such initiatives claim that they are also good for business. Two recent studies on gender diversity and corporate performance, conducted by McKinsey and Company in partnership with the Women’s Forum for the Economy & Society, suggest that companies where women are most strongly represented at the board or top-management level are those that perform best (Desvaux, Devillard, and Baumgarten 2007; Desvaux and Devillard 2008). Similarly, Deloitte’s 2010 Women’s Initiative

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Report notes that companies with more women board directors achieve a 53 percent higher return on equity and a 42 percent higher return on sales (Deloitte 2010, 4). Indeed it is fair to say that many scholars regard the business case for corporate social responsibility to be well established (Tombs 2005; Orlitzy, Schmidt, and Rynes 2003; Waddock, Bodwell, and Graves 2002; Dorman 2000; Griffin and Mahon 1997; for an overview, see Carroll and Shabana 2010; Salzmann, Ionescu-somers, and Steger 2005; Margolis and Walsh 2003). One might almost say that to link a firm’s financial performance to its gender-equality practices has become trendy (Browne 2004; Bilimoria 2000; Dickens 1999; Campbell and MínguezVera 2008). Managers are starting to encounter the manifold positive impacts of gender-friendly measures on trust-building, reduction of sick leaves, improvements in the working climate, enlarging the pool of job applicants, or heightening efficiency in delivering solutions to a diverse customer base (Heckl, Enichlmair, and Pecher 2010, 120; see also Lee 2008; Vogel 2005a). However, although these findings might be construed as supporting voluntary approaches rather than state regulation to the empowerment of women, from a conceptual point of view, to justify gender equality on the basis of business outcomes undermines the very foundations of social rights as having an inherent and unconditional value. As Trevor Colling and Linda Dickens have argued, the “exclusive reliance on management action risks promoting conceptions of equality that are partial and insecure” (1998, 403). Moreover, some claim that the business case for gender equality and family-friendly policies has been overstated, and that studies that correlate social and financial performance are largely inconclusive (Weber 2008; McWilliams, Siegel, and Wright 2006; Margolis and Walsh 2003; McWilliams and Siegel 2001) or even show a negative correlation (Preston and O’Bannon 1997). Thus, at a minimum, although there may be a business case for corporate social responsibility, particularly in the domain of gender equality, it is not as strong as it is often claimed to be (Vogel 2005b). A complementary approach that includes state regulation is necessary. Social justice and economic efficiency can and should be—and increasingly are—seen as complementary (Dickens 2006; Hart 2010).

Family-Friendly Policies as Democratic Principles Much progress has been made on equality and nondiscrimination issues in the EU, in its member states and in some of its most important corporations. However, there still is a long road to traverse. The coordination of policies contributes importantly to the reduction of inequality (EspingAndersen and Regini 2000, 340). These policies must include not only

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antidiscrimination measures but also training, social security, and other welfare-state policies, and the family-friendly reforms relating to maternal and parental leave and caregiving arrangements described above. And these policies must benefit not only workers with standard employment contracts but part-time, temporary, and other nonstandard workers as well. What is needed is a gender mainstreaming strategy that integrates in a holistic regulatory framework all policies related to families and gender inequality. If regulations are to enhance capabilities, providing meaningful options to women, and people in general, their design must take into account whether different capabilities are being realized or violated by current policies (Sen 2005, 159). As the capability approach teaches, “both working and caring can be part of a full human life,” and thus employment regulations need to “consider how they affect caring arrangements, and vice versa” (Lewis and Giullari 2005, 97). Our work and caregiving lives are intimately linked through the insight that we are not free because of our ability to choose, but that we can choose because we are actually free: we are the authors of our own actions. Freedom is not necessarily about having greater options; it is about the bringing of people’s decisions closer to the realization of their capabilities (Sen 2002, 514). Disregard by an individual of some available options (career development, maternity, caregiving, and so forth) should not inevitably be read as entrenchment in traditional roles, and may be an expression of one’s true commitment (Sen 2002, 126). As the data on the sharing of household work by gender suggest, in all EU countries women and men think, with greater or lesser intensity, that women do more than their fair share of household work. This complicity of men and women in their perceptions can be a starting point for designing policy instruments for change (Posner and Sunstein 2010). The EU is committed with both hard and soft instruments to progress in equality and nondiscrimination policies, but the challenge for standard and nonstandard women as workers is to expand the positive interaction of the instruments and policies in ways that create a synergy between equality and nondiscrimination. Family-friendly policies are necessary but not sufficient to achieve equality between women and men in the universe of diversification imposed by the ongoing evolution of employment relations. Ultimately, the ability of new employment relations to positively influence the aggregate level of employment is a function not only of their direct effect but also of their indirect influence via changing social arrangements connecting work to family life and caregiving (Esping-Andersen 1999). The themes and policies we examine in this chapter are relevant not only for the normative goal of enhancing human capabilities but also for the very practical objective of creating socially sustainable new forms of employment. We argue that attending

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to the gender implications of employment arrangements and caregiving strategies is good policy and can be expected to enhance employment levels.

Notes 1. Bulgaria, Belgium, Spain, the United Kingdom, Ireland, Portugal, Luxembourg, the Netherlands, Slovenia, Italy, Estonia, Malta, the Czech Republic, and Denmark. 2. In our analysis, we have considered companies that are well known to the public due to their global footprint. Industry is also expected to determine the degree of corporate involvement in gender issues with a greater commitment in knowledge-based industries, such as communications, finance, pharmaceuticals, and so forth. In these cases intellectual talent and skills are keys to performance regardless of gender. Our selection is generated from the 2010 Working Mother Magazine’s Top Ten Companies, plus sixteen from the rest of the 100 Best Companies listed by the same magazine. Based on that selection, we chose forty-nine transnational companies (TNC) from ten industries and thirteen countries. 3. Available at: http://careers.deloitte.com/united-states/students/csc_general. aspx?CountryContentID=16412. Accessed July 27, 2011. 4. The Global Reporting Initiative (GRI) is a network-based organization that has pioneered the development of the world’s most widely used sustainability reporting framework. Available at: http://www.globalreporting.org/ AboutGRI/WhatIsGRI/. Accessed July 27, 2011.

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Social Rights in Changing Labor Markets     347 portunities, edited by Ronald J. Burke and Mary C. Mattis. New York: Springer Verlag. Bitcdiversity. 2011. “Case Study: Women Returners – Ernst and Young.” London: Bitcdiversity. Available at: http://www.bitcdiversity.org.uk/best_practice/ exemplar_employers/women_returners/case_studies/ernst_and_young. html. Accessed July 27, 2011. Browne, Jude. 2004. “Resolving Gender Pay Inequality? Rationales, Enforcement, and Policy.” Journal of Social Policy 33(4): 553–71. Campbell, Kevin, and Antonio Mínguez-Vera. 2008. “Gender Diversity in the Boardroom and Firm Financial Performance.” Journal of Business Ethics 83(3): 435–51. Carroll, Archie B., and Kareem M. Shabana. 2010. “The Business Case for Corporate Social Responsibility: A Review of Concepts, Research, and Practice.” International Journal of Management Reviews 12(1): 85–105. Colling, Trevor, and Linda Dickens. 1998. “Selling the Case for Gender Equality: Deregulation and Equality Bargaining.” British Journal of Industrial Relations 36(3): 389–411. Deloitte. 2010. “Women’s Initiative Annual Report 2010.” Publication no. 100107. New York: Deloitte Development LLP. Available at: http://www.deloitte. com/assets/Dcom-UnitedStates/Local%20Assets/Documents/WAR_sm%20 FINAL.pdf. Accessed July 27, 2011. Desvaux, Georges, and Sandrine Devillard. 2008. Women Matter 2: Female Leadership, a Competitive Edge for the Future. Paris: McKinsey & Company. Available at: http://www.mckinsey.com/locations/paris/home/womenmatter/pdfs/ women_matter_oct2008_english.pdf. Accessed July 27, 2011. Desvaux, Georges, Sandrine Devillard, and Pascal Baumgarten. 2007. “Women Matter: Gender Diversity, A Corporate Performance Driver.” Paris: McKinsey & Company. Available at: http://www.mckinsey.com/locations/swiss/news_ publications/pdf/women_matter_english.pdf. Accessed July 27, 2011. Dickens, Linda. 1999. “Beyond the Business Case: A Three-Pronged Approach to Equality Action.” Human Resource Management Journal 9(1): 9–19. ———. 2006. “Re-Regulation for Gender Equality.” Industrial Relations Journal 37(4): 299–309. Dorman, Peter. 2000. “If Safety Pays, Why Don’t Employers Invest in It?” In Systematic Occupational Health and Safety Management: Perspectives on an International Development, edited by Kaj Frick, Per Jensen, Michael Quinlan, and Ton Wilthagen. Amsterdam: Pergamon. Esping-Andersen, Gøsta. 1999. Social Foundations of Postindustrial Economies. Oxford: Oxford University Press. ———. 2009. The Incomplete Revolution. Cambridge: Polity Press. Esping-Andersen, Gøsta, and Mario Regini. 2000. Why Deregulate Markets? Cambridge: Cambridge University Press. European Commission. 1997. “Council Directive 97/81/EC Concerning the Framework Agreement on Part-Time Work.” Amended by Council Directive 98/23/EC of 2 April 1998. Official Journal L 014 , 20/01/1998 P. 0009-0014. Brussels: European Commission. Available at: http://eur-lex.europa.eu/Lex UriServ/LexUriServ.do?uri=CELEX:31997L0081:EN:HTML. Accessed July 27, 2011. ———. 2010. Women’s Charter. Brussels: European Commission. Available at:

348     Rethinking Workplace Regulation http://europe.eu/legislation_summaries/employment_and_social_policy/ equality_between_men_and_women/em0033_en.htm. Accessed July 27, 2011. ———. 2011. Europe 2020. Brussels: European Commission. Available at: http:// ec.europa.eu/europe2020. Accessed July 27, 2011. European Community. 1997. “Council Directive 97/81/EC of 15 December 1997 concerning the Framework Agreement on Part-Time Work concluded by UNICEF, CEEP and the ETUC.” OJL14, 20.1.1998, pp. 9–14. European Parliament. 2000. “Presidency Conclusions.” Lisbon European Council. Lisbon (March 23–24, 2000. Available at: http://www.europarl.europa.eu/ summits/lis1_en.htm. Accessed July 27, 2011. ———. 2007. The Cost of Childcare in EU Countries. Employment and Social Affairs Committee. Milan: Istituto per la Recerca Sociali. European Union. 2000. “Charter of Fundamental Rights of the European Union (2000/C 364/01).” Brussels: European Union. Available at: http://www .europarl.europa.eu/charter/pdf/text_en.pdf. Accessed July 27, 2011. ———. 2009. “Charter of Fundamental Rights of the European Union. OJ (2010/C 83/02).” Brussels: European Union. ———. 2010. “Council Directive 2010/18/EU of 8 March 2010 implementing the Framework Agreement on parental leave and repealing Directive 96/34/EC.” Brussels: European Union. Available at: http://eur-lex.europa.eu/Lex UriServ/LexUriServ.do?uri=OJ:L:2010:068:0013:0020:EN:PDF. Accessed July 27, 2011. Eurostat. 2006. “How Is the Time of Women and Men Distributed in Europe.” Statistics in Focus, Populations, and Conditions 4/2006. Brussels: European Commission. ———. 2010. “European Union Labour Force Survey—Annual Results 2009.” Data in Focus 35/2010. Brussels: European Commission. Griffin, Jennifer J., and John F. Mahon. 1997. “The Corporate Social Performance and Corporate Financial Performance Debate.” Business and Society 36(1): 5–31. Hart, Susan. 2010. “Self-Regulation, Corporate Social Responsibility, and the Business Case: Do They Work in Achieving Workplace Equality and Safety?” Journal of Business Ethics 92(4): 585–600. Heckl, Eva, Christina Enichlmair, and Ingrid Pecher. 2010. “Study on NonLegislative Initiatives for Companies to Promote Gender Equality at the Workplace.” Vienna: Austrian Institute for SME Research. INSS (National Institute of Social Security). 2010. Spain. Madrid, Spain: National Institute of Social Security. Jacobs, Antoine, and Marlene Schmidt. 2001. “The Right to Part-Time Work.” International Journal of Comparative Labour Law & Industrial Relations 17(3): 371–84. Lee, Ming-Dong Paul. 2008. “A Review of the Theories of Corporate Social Responsibility.” International Journal of Management Reviews 10(1): 53–73. Leibfried, Stephan. 1994. “The Social Dimension of the European Union: En Route to Positively Joint Sovereignty?”  Journal of European Social Policy 4(4): 239–62. Leibfried, Stephan, and Paul Pierson. 1995. “Institutions Multi-Niveaux et Production des Politiques Sociales” In European Social Policy: Between Fragmenta-

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350     Rethinking Workplace Regulation Vogel, David J. 2005a. “Is There a Market for Virtue?” California Management Review 47(4): 19–45. ———. 2005b. The Market for Virtue: The Potential and Limits of Corporate Social Responsibility. Washington, D.C.: Brookings Institution Press. Waddock, Sandra A., Charles Bodwell, and Samuel B. Graves. 2002. “Responsibility: The New Business Imperative.” The Academy of Management Executive (1993-2005) 16(2): 132–48. Wattis, Louise, Mara Yerkes, Susana Lloyd, Manuela Hernandez, Louise Dawson, and Kay Standing. 2006. “Combining Work and Family Life: Removing the Barriers to Women’s Progression.” Experiences from the UK and the Netherlands. Liverpool: European Social Found and Liverpool JMU. Available at: http://search.livjm.ac.uk/SOC/SOC_docs/WorkFamily_Web.pdf. Accessed July 27, 2011. Weber, Manuela. 2008. “The Business Case for Corporate Social Responsibility.” European Management Journal 26(4): 247–61.

Part VI Learning Without Borders

Chapter 19 Cross-National Legal Learning: The Uses of Comparative Labor Knowledge, Law, and Policy harry arthurs

P

revious chapters offer ample evidence that advanced economies are responding to the growing incidence of nonstandard employment by experimenting with new approaches to labor market regulation. This chapter asks the crucial question: What can we learn from these experiments?

The Expansive Insights and Modest Ambitions of Cross-National Legal Learning No doubt some economists still believe that immutable, scientific laws govern all labor markets; some industrial relations and management experts remain convinced that one size of state regulation and one style of management practice fits all economies; and some legal scholars retain their faith in the universal relevance and unfailing efficacy of core labor rights. However, the contributors to this volume make no claim for a single set of optimal responses to the rapidly changing labor markets of the early twenty-first century. On the contrary, the interdisciplinary nature of our project works against the analytical rigidities and prescriptive certainties sometimes associated with traditional scholarship in economics, law, and other social sciences. And, more important, the fact that our project documents a broad array of experiments in national and regional labor laws, policies, and institutions necessarily leads us to emphasize their idiosyncrasy, complexity, and contingency. These features of our project inoculate us against the perils of parochialism. However, paradoxically, they also complicate our efforts to learn from each other and to develop sensible policy and legal responses to the issues raised by the significant and widespread changes in employment relations that inspire this volume (see chapter 1). 353

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This paradox is rooted in changing understandings of what law is and does. In an earlier age, law was conventionally perceived as an array of formal, fixed rules promulgated, interpreted, and enforced by the constitutionally authorized agencies of the state. It was therefore relatively easy to compare “the law” in various countries governing, say, the formation of employment contracts, protection against redundancy, or entitlement to severance pay. Comparative studies, it was thought, would allow countries to identify the legal and regulatory strategies that achieved the social outcomes they desired, and to transplant those rules into their own system. The results were decidedly mixed, for a variety of reasons (Berkowitz, Pistor, and Richard 2003). Now we have a very different notion of what law is, of what must be compared, and of the difficulty of meaningful comparison. Law is understood no longer simply as the formal expression of state policy, as produced exclusively within national borders by national institutions, as fixed in its meaning or modalities. Rather, law is understood to emanate from multiple sources, some domestic some foreign, some public some private; it is hard or soft, tightly prescriptive or loosely persuasive; and it is interpreted by a miscellany of state, nonstate, and hybrid agencies that promote compliance by means ranging from sanctions to rewards, from frequent and proactive regulatory initiatives to occasional and reflexive interventions, from top-down command-and-control structures to virtual self-regulation (Zumbansen 2010). This is especially true of labor law (Arthurs 1996, 1997a). Moreover, not only does labor law exemplify these new understandings of legal normativity; it does so precisely because its transformative or ameliorative aspirations often place it in a state of tension with the dominant trends in national and global political economy, with the traditional social values and cultural practices that shape workplace relations and therefore with the rest of state law. This in turn leads some scholars to argue that labor law should enjoy partial or complete autonomy from the general legal system (for example, Wedderburn 1987). However, to the extent that autonomy is achieved, it is usually in modified form. Most systems of labor market regulation in the advanced economies are corporatist in the metaphoric, if not literal, sense that they originate in or bring to fruition tacit or explicit bargains among labor, management, and government. Most likewise include not only formal enactments of the state but rules imposed unilaterally by employers, negotiated between the social partners or produced as an incident of quotidian work routines. Most announce norms in language that is not only prescriptive and precise but also often hortatory and vague and even—in the case of workplace custom and usage—by means that are entirely nonverbal. Most rely heavily on negotiation and mediation rather than legislation and adjudication to adjust both conflicts of interests and conflicts of

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rights. And when adjudication is required, most systems of labor law entrust the task only in the last resort to courts of general jurisdiction, preferring to rely initially on specialized state tribunals or forums established jointly or unilaterally by the social partners. Labor law scholars, then, are highly sensitive to the indeterminacy and ambiguity of their field, to its intertwining with politics, economy, sociology, and culture, and to the infinite variability of its normative sources and institutional arrangements. For all these reasons, they tend to approach with considerable caution, if not outright skepticism, what once appeared to be the most obvious use of cross-national legal learning: legal transplantation. Otto Kahn-Freund—a founding father of comparative labor law—famously rejected the use of comparative law as a tool of law reform, and specifically condemned legislation that imported an American-style model of labor regulation into the United Kingdom: “It would indeed be an almost unbelievable hazard, an unexpected coincidence, if substantive rules wrenched out of their American constitutional, political and industrial context could successfully be made to fit the needs of a country with institutions and traditions so different from those of the United States” (1974, 26–7). Likewise, Benjamin Aaron, organizer and editor of an early, ambitious, and exemplary series of studies in comparative labor law: “Institutional arrangements for the conduct of labor-management relations are products of the unique geographic, demographic, historical, political, economic and social factors within each country; they can rarely, if ever, be transplanted to alien soil” (2007, 405). However, Kahn-Freund and Aaron to the contrary notwithstanding, during the postwar period numerous attempts actually were made to transplant labor law norms and institutions—holus bolus or selectively—from one country to another. In some cases, these attempts were successful in that they produced systems of labor law that took root in their new environment. Important examples include Canada’s adoption of the American Wagner model of collective bargaining legislation (Fudge and Tucker 2001), postwar Japan’s adoption of elements of American labor law (Gould 1984), post-apartheid South Africa’s “bending and borrowing” from the constitutions and industrial relations statutes of a number of countries (Thompson 1993), the emergence of a recognizable Nordic family of labor law institutions (Wahlgren 2002), and the establishment of German-style works councils in EU-wide enterprises (European Union 1994). But at least as frequently, attempts at transnational transplantation were rejected outright or failed after a short interval. Cases in point are the United Kingdom’s 1971 attempt to replicate the Wagner model (Sandison 1979), the recent campaign to use Canadian enhancements to the original Wagner model as a template for reforms to U.S. labor law (Specter and Nguyen 2008), and the adoption by postcolo-

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nial and postcommunist states of labor law systems borrowed from the advanced economies (Arthurs 2010a). However, while the evidence is mixed, many comparative labor law scholars seem to agree that merely studying the rules of state labor law is not an intellectually sustainable project, nor is the ambition of transplanting legal rules holus bolus from one country to another one likely to succeed (Aaron and Stone 2007). Instead, they have developed more modest, but multifaceted, justifications for cross-national legal learning. Two, in particular, inspire this volume. The first is to gain a new and critical perspective on their own system by seeing it through the eyes of others. Comparativism, in this view, operates much like interdisciplinarity: by providing us with an external perspective, it forces us to set aside the discourse, value assumptions, and intellectual repertoire that constrict the imagination and confine the actions of participants within a closed system (see, for example, Sullivan 2001–2002; Vick 2004). A second, equally modest, ambition is to identify issues likely to affect all advanced economies confronting broadly similar developments such as the demise of the standard employment contract, the subject of this volume. By identifying countries that have been the first to respond to such issues, cross-national learning provides an early warning signal to others (see, for example, chapters 12 and 13, this volume), and by reminding laggards that they have failed to deal with matters most countries have already deemed worthy of attention, comparative studies help prevent them and their workers and employers from suffering the consequences (see, for example, chapter 3, this volume). These are commonplace approaches to policy formation in fields as different as banking, public health, national security, and environmental protection, where countries observe and learn from each other, indeed cooperate in finding common solutions, without necessarily adopting each other’s regulatory approach or legal technologies. The third modest ambition of cross-national learning—addressed only occasionally in preceding chapters—is to lay the intellectual foundations of a system of labor market regulation that might one day extend across national borders. The need for such a system arises because of the emergence of regional and global trade regimes, of global enterprises and transnational value chains, and, some argue, of a new international division of labor. These developments in turn have led to the proliferation of transnational management cadres and professional consulting firms, of peripatetic foreign legions of skilled and unskilled workers, of transnational union coalitions and social movements, and of institutions and agencies that promulgate or promote transnational—even universal—norms of human and labor rights. Cross-national or comparative learning facilitates the development of a common analytical vocabulary,

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enables identification of common problems, and makes possible the search for common—or at least coordinated—responses to the challenge of regulating the new transnational labor markets created by these developments.

Cross-National Learning in a Global Economy Cross-national learning is a process, not an outcome. For better or worse, much of what states and scholars, practitioners and protagonists, have learned from each other in recent decades—the virtues of open markets, deregulation, and flexibilization, for example—has tended to destabilize rather than reinforce the Fordist compromise that shaped postwar systems of labor law and industrial relations (Fieldes and Bramble 1992). If these lessons are to be unlearned in the future, if a new post-Fordist compromise is to emerge, we will have to understand better than we now do how cross-national learning has developed in the global era. Arguably, globalization may be creating more favorable conditions for cross-national legal learning than have ever existed. After all, by promoting the integration of advanced economies, convergence of their trade, monetary, and fiscal policies, and a common conceptual repertoire of economic analysis, market regulation, and human rights, “globalization of the mind” has reduced or eliminated some of the unique features of national labor law systems (Arthurs 1997b). To take the most pertinent example, in this volume we have presented considerable evidence that points to the existence of a widespread trend away from stable and longlasting employment relationships based on strong internal or enterprisespecific labor markets and toward more transient and ambiguous arrangements forming and dissolving within the context of ever-expanding and ever more flexible regional, national, and transnational labor markets (see chapter 4, this volume). The evidence also suggests that in many advanced economies, public policies and legal norms that once established, promoted, regulated, and protected stable and long-term employment relationships are less and less able to do so. Consequently, as the employment relationship is increasingly perceived to be an unsuitable platform on which to construct workers’ rights or from which to project their entitlements, states have been forced to search for alternatives. That search and those alternatives are the subject of the chapters of this volume; and they reveal some degree of policy convergence—at least at the conceptual level (see chapters 3 and 6, this volume). To convert that observation into an hypothesis: if labor markets in most advanced economies are increasingly interconnected, if they are changing in rather similar ways, if laws and institutions governing employment relations are experiencing similar stresses, one might sensibly infer that prospects for cross-national legal learning are improving.

358     Rethinking Workplace Regulation

Of course, employment relations do not just happen to change spontaneously. Change is driven by forces and facilitated by arrangements that today extend across national boundaries but were barely contemplated by earlier generations of comparativists. Multilateral and bilateral treaties bind states to enact—or force them to abstain from—certain kinds of protective labor legislation. Global economic integration in effect puts workers in different countries into competition with each other for available work and invites coercive comparisons among workplace systems and employment standards. Transnational corporations, unions, and social movements are agents that themselves transmit ideas, values, strategies, and best practices from one country to another. And new regulatory technologies that shape workplace relations are disseminated, criticized, and redesigned by worldwide discursive communities and through global media. In all these respects, agents and processes of change—already operating across the global economy—are covertly transplanting legal ideas, institutions, and practices (Arthurs 2010a). Fortunately, the technology of legal and policy transplantation is also improving, in the sense that states can now more easily work within institutional frameworks specifically designed to promote cross-national legal learning. A prime example is the European social dialogue, now sanctioned by the Lisbon Treaty of 2009, whose success depends upon the so-called open method of coordination. In many areas of labor law, EU member states are neither obliged to adhere to community-wide labor standards nor subject to community-level regulation or adjudication. However, EU members are expected to coordinate their social and labor policies in order to achieve compatible outcomes (Heidenreich and Bischoff 2008). The means they adopt to achieve this end need not involve the enactment of identical national legislation, so long as they result in the promised degree of policy convergence. Moreover, intensified dialogue, improved research, and better dissemination of information about outcomes ensure that community members borrowing or building on the experience of others will understand both the potential and the limitations of transplantation. Nor is the EU the only site of crossnational legal learning. The International Labour Organization (ILO), for example, is a sophisticated learning community. Drawing on expertise developed at the national level, it conducts research, debates the need for new labor standards, adopts conventions, monitors compliance, disseminates technical know-how to developing countries, trains their labor officials, and through its investigative committees intervenes with national governments to promote labor rights and a commitment to “decent work” (ILO 1999). In all of these ways, the ILO promotes cross-national legal learning. Other international bodies concerned with specific labor market issues such as gender relations or child labor do likewise (United Nations 2007, 2008). So too do international and domestic agencies that

Cross-National Legal Learning     359

deal with freedom of association and related issues in the context of human rights, rather than labor law (Hilgert 2009; Ewing and Hendy 2010). Moreover, the growth of transnational epistemic communities arguably both facilitates cross-national legal learning and enhances its quality. These communities comprise overlapping, sometimes informal and often evanescent networks: graduates of elite global business schools and law faculties, members of transnational law and consulting firms, subscribers to international professional journals and participants in international seminars and conferences, members of the management cadres of transnational corporations, leaders of transnational union and social movements, international associations of academics, policy analysts, judges and legislators, and ad hoc collaborators in projects such as this one. As contact within and among these communities grows, as they become used to using each other’s professional vernacular, as they exchange narratives of their experiences, a process of knowledge transfer almost certainly occurs. Moreover, the process has been aided, abetted, and even incited by the growing presence of sophisticated global publics, sensitized by global news media to developments in domestic and transnational political economy and to the responses developed by other states to global and foreign developments. And finally, as noted earlier, understanding of the need for so-called decentered or soft approaches to labor law is increasingly widespread. These approaches are particularly appropriate to a global economy in which individual states are often unable—for practical or legal reasons— to address the causes or consequences of employment relations, corporate structures, or labor market conditions that extend beyond their physical boundaries or their jurisdictional reach. Cross-national learning ought to be enhanced at a moment when all states are experimenting with new approaches whose success depends on the cooperation or acquiescence of other states that themselves are seeking to overcome similar constraints. Thus, given that most advanced economies are dealing with roughly comparable problems, and that opportunities have improved for the exchange of ideas and information, there ought to be a great deal more cross-national legal learning than seems to be taking place. In the next section I offer some possible explanations.

Obstacles to Cross-National Legal Learning About Labour Law and Policy Three related structural constraints inhibit cross-national legal learning: The first is that for liberal market economy (LME) states like the United Kingdom or the United States to draw inspiration from the policies of coordinated market economy (CME) states like Germany or the Nether-

360     Rethinking Workplace Regulation

lands, or vice versa, is to embark on a process of conversion from one variety of capitalism to another (Hall and Soskice 2001). But conversion on this scale is not an exercise exclusively or primarily for expert or official learners. It is fundamentally and intrinsically a political process; it involves the reexamination of a country’s fundamental beliefs, the rebalancing of power relations, and often the reconstruction of the processes and institutions of governance. That said, CME states are probably better situated and more inclined to engage in cross-national learning than LME states. To the extent that LME states mistrust all intervention in labor markets, they are particularly unlikely to regard the activist policies of CME states as having much to teach them. By contrast, CME states, having fewer inhibitions about such intervention, are more likely to routinely canvass the experience of other states with a similar outlook on public policymaking in general and labor market regulation in particular, not least because they are generally embedded in the institutional matrices of the European Union. On the other hand, too much can be made of contrasts between varieties of capitalism. CME and LME states are ideal-types rather than precise descriptors of actual countries, and countries tend to be in constant if incremental movement along a spectrum between the ideal-types, rather than any precise and unvarying instantiation. Nonetheless, in the context of globalization, CME states do frequently feel themselves under pressure to learn from their LME competitors: to ratchet down labor costs and increase productivity by liberalizing their labor markets, disempowering their unions, and reducing their workers’ social entitlements (Howell 2003; Thelen 2009). A second constraint is that labor law and policy are seldom given high priority these days in the deliberations of governments. Unions and union-friendly political parties have lost members, power, and influence in most advanced economies; in many, labor ministries have been downgraded or disbanded; and labor concerns have come to be regarded as incidental to larger policy domains such as the economy or social inclusion (Arthurs 2010b). Indeed, it can fairly be argued that changes in labor laws that protect wages, working conditions, and job tenure will only have their desired effects if they are integrated with broad policy ini­ tiatives dealing with education and training, social reproduction and ­immigration, retirement security and health care, and especially inno­ vation, productivity, and competitiveness. However, cross-national learning across such a broad spectrum of issues is difficult to achieve even among CME states. Third, the regulatory technology adopted by any given state is sometimes said to be path-dependent on its legal-systemic origins (LaPorta et al. 1997; Knuth 2009). Changes cannot be imported, the argument runs, if

Cross-National Legal Learning     361

they are inconsistent with the historical tendency that has become embedded in existing legal rules and regulatory institutions. This is a plausible hypothesis insofar as the path down which change proceeds is often the path of least resistance. Of course countries will more likely opt for an approach to labor market regulation that seems, or can be made to seem, compatible with their previous labor market policies, their policies in other domains of economic decision-making, their familiar legal and regulatory arrangements, and what they have learned from their own historical experience. And of course they will avoid approaches likely to engender resistance by interest groups that have benefited from previous arrangements (Bebchuk and Roe 1999). On the other hand, the empirical evidence in support of the path-dependency hypothesis has been strongly challenged insofar as it relates to labor market regulation (Deakin 2008; Teague 2009). Moreover, path-dependency arguments may be too easily appropriated by entrenched interest groups quick to claim that particular innovations are unworkable because they are inconsistent with a nation’s cultural, social, or legal traditions. The frequency with which such traditions are invented and reinvented makes such claims dubious indeed. Nonetheless, in some countries no objection to a new regulatory strategy is as damning as the claim that it has a foreign provenance and is contrary to “our” way of doing things. Path dependency may persist, in other words, long after the path in question has reached a cul de sac. But not all obstacles to cross-national learning are structural. Some are epistemological and methodological. It is notoriously difficult for experts, legislators, and government agencies to evaluate the effects of the domestic laws and policies they design, enact, and administer. Indeed, they are often deterred from doing so by methodological difficulties, lack of resources, or the absence of an express mandate for self-study, not to mention a reluctance to generate data that might lead to criticism of the systems for which they are responsible. All of these problems are compounded with regard to nonstate or hybrid systems of regulation. Absent reliable and readily available information about a country’s labor laws, foreign experts and policymakers can hardly be expected to learn from them. And even if reliable information about the content and effect of specific laws and policies were readily accessible to foreign observers, it is extremely difficult for them to place such information in the broader context necessary to permit evaluation. Finally, learning from the experience of others is particularly difficult when that experience is still unfolding and its significance is as yet unclear. In sum, formidable obstacles stand in the way of cross-national learning, even though the logic of contemporary developments makes such learning more desirable and, arguably, more possible than ever before.

362     Rethinking Workplace Regulation

Conclusion: Cross-National Learning: An Idea Whose Time Has Come? The ultimate ambition of this volume is not merely to afford readers new perspectives on their own systems of labor market regulation, nor to identify features commonly found in other systems, nor to lay the conceptual foundations of a system of transnational labor law—though it is all those things as well. It is above all to remind ourselves, and ultimately to persuade readers, of two things: first, that changes in the employment relation may require root-and-branch reconstruction of labor market regulation and labor law; and second, that cross-national learning can play an important role in the process of reconstruction. These are not, I confess, the modest ambitions I initially identified. However, as Daniel Rodgers has shown in his remarkable book, Atlantic Crossings, cross-national learning has a unique potential to launch labor market regulation on a new path (1998). He reminds us that from the 1870s to the 1940s, progressive European and American intellectuals, journalists, politicians, and citizens closely studied each other’s responses to the social question. In general, he notes that America was far slower to learn from Europe than Europe from America. But, as Rodgers allows us to see, legal learning—like all learning—is cumulative. In the first decade of the twentieth century, John R. Commons, America’s pioneering industrial relations scholar and a progressive activist, covered the walls of his seminar room with translated texts of the world’s labor legislation. Over the next twenty or thirty years, the ideas exchanged in that seminar room were debated, refined, adapted to American circumstances, and on occasion actually implemented in small-scale experiments at the state level. Ultimately, Commons, his colleagues, students, and intellectual heirs—and other experts well versed in comparative labor law and policy—helped draft the social security, employment standards, and collective bargaining legislation that constituted an important part of the New Deal’s lasting legacy. Rodgers also implicitly reminds us that all learning—legal learning not least—depends on strong motivation. As he notes, with the onset of the Great Depression and the advent of Roosevelt’s New Deal administration, America’s willingness to learn from others increased exponentially. The explanation lies, he says, in the “intellectual economy of catastrophe”: Crises . . . sustained long enough . . . can bring the established structure of responses into deep discredit. . . . By eroding the conventional wisdom, extended crises may create room into which innovations can flow. [However] the paradox of crisis politics is that at the moment when the conventional wisdom unravels, just when new programmatic ideas are most urgently

Cross-National Legal Learning     363 needed, novel ones are hardest to find. . . . One of the most important consequences of crises is that they ratchet up the value of policy ideas that are waiting in the wings, already formed though not yet politically enactable. (1998, 413–16)

The New Deal, Rogers argues, drew heavily on imported ideas that had long been waiting in the wings—incorporated into the repertoire of American intellectuals and political analysts—but not yet deemed plausible as mainstream policies that could solve the country’s problems. Only when the deep crisis of 1930s capitalism “altered the conditions of the politically possible” by “devaluing and delegitimizing certain agendas, and shifting. . . [t]he grid of powers, patrons, interests and institutions that control political outcomes” was it possible for America to seriously consider new labor market and other policies that had been tried and proven abroad (Rodgers 1998). Rodgers does not suggest, nor do I, that the New Deal literally reenacted the labor law and labor market policies of other countries, or even that its innovations depended primarily foreign inspiration and example. However, Atlantic Crossings reminds us that even sophisticated countries—countries that instinctively favor intellectual autarky—can in the right circumstances be motivated by the “intellectual economy of catastrophe” to engage in what we are calling “cross-national legal learning.” It remains to be seen whether in the first decades of the twenty-first century we are experiencing a catastrophe comparable to the Great Depression, or better yet, whether our intellectual economy will react to a mere crisis, or, best of all, whether we will simply adopt the sensible habit of learning as much as we can from the experience of others.

References Aaron, Benjamin. 2007. “The Comparative Labor Law Group: A Brief History and a Personal Evaluation.” Comparative Labour Law & Policy Journal 28(3): 393–406. Aaron, Benjamin, and Katherine Stone. 2007. Rethinking Comparative Labor Law: Bridging the Past and the Future. Lake Mary, Fla.: Vanderplas Publishing. Arthurs, Harry. 1996. “Labour Law Without the State?” University of Toronto Law Journal 46(1): 1–46. ———. 1997a. “‘Landscape and Memory’: Labour Law, Legal Pluralism, and Globalization.” In Advancing Theory in Labour Law in a Global Context, edited by Ton Wilthagen. New York: North Holland Press. ———. 1997b. “Globalization of the Mind: Canadian Elites and the Restructuring of Legal Fields.” Canadian Journal of Law and Society 12(2): 219–46. ———. 2010a. “Extraterritoriality by Other Means: How Labor Law Sneaks Across Borders, Conquers Minds, and Controls Workplaces Abroad.” Stanford Law & Policy Review 21(3): 527–53.

364     Rethinking Workplace Regulation ———. 2010b. “Labour Law after Labour.” In What Is Labour For? edited by Guy Davidov and Brian Langille. Oxford: Oxford University Press. Bebchuk, Lucian, and Mark Roe. 1999. “A Theory of Path Dependence in Corporate Ownership and Governance.” Stanford Law Review 52(1): 127–70. Berkowitz, Daniel, Katharina Pistor, and Jean-Francois Richard. 2003. “The Transplant Effect.” American Journal of Comparative Law 51(1): 163–204. Deakin, Simon. 2008. “Legal Origin, Juridical Form, and Industrialization in Historical Perspective: The Case of the Employment Contract and the Joint-Stock Company.” Socio-Economic Review 7(1): 35–65. European Union. 1994. “Council Directive 94/95/EC of 22 September 1994.” Brussels: European Union. Available at: http://eurlex.europa.eu/smartapi/ cgi/sga_doc?smartapi!celexapi!prod!CELEXnumdoc&lg=EN&numdoc=3199 4L0045&model=guichett. Accessed November 26, 2012. Ewing, Keith D., and John Hendy. 2010. “The Dramatic Implications of Demir and Baykara.” International Law Journal 39(1): 2–51. Fieldes, Diane, and Tom Bramble. 1992. “Post-Fordism: Historical Break or Utopian Fantasy?” Journal of Industrial Relations 34(4): 562–79. Fudge, Judy, and Eric Tucker. 2001. Labour before the Law: The Regulation of Workers’ Collective Action in Canada, 1900–1948. Toronto: Oxford University Press. Gould, William B., IV. 1984. Japan’s Reshaping of American Labor Law. Cambridge Mass.: MIT Press. Hall, Peter A., and David Soskice. 2001. Varieties of Capitalism: The Institutional Foundations of Comparative Advantage. Oxford: Oxford University Press. Heidenreich, Martin, and Gabriele Bischoff. 2008. “The Open Method of Coordination: A Way to the Europeanization of Social and Employment Policies?” Journal of Common Market Studies 46(3): 497–532. Hilgert, Jeff. 2009. “Mapping the Boundaries of Human Rights At Work: Questioning How the ILO Defines Labor Rights and Social Justice.” Labor Studies Journal 34(1): 21–38. Howell, Chris. 2003. “Varieties of Capitalism: And Then There Was One?” Comparative Politics 36(1): 103–24. International Labour Organization (ILO). 1999. Report of the Director-General: Decent Work. Geneva: International Labour Organization. Available at: http:// www.ilo.org/public/english/standards/relm/ilc/ilc87/rep-i.htm. Accessed November 26, 2012. Kahn-Freund, Otto. 1974. “On Uses and Misuses of Comparative Law.” Modern Law Review 37(1): 1–27. Knuth, Matthias. 2009. “Path Shifting and Path Dependence: Labor Market Policy Reforms Under German Federalism.” International Journal of Public Administration 32: 1048–69. LaPorta, Rafael, Florencio Lopez-De-Silanes, Andrei Sheleifer, and Robert W. Wishny. 1997. “Legal Determinants of External Finance.” Journal of Finance 52(3): 1131–50. Rodgers, Daniel. 1998. Atlantic Crossing: Social Politics in a Progressive Age. Cambridge, Mass.: Belknap Press of Harvard University Press. Sandison, Hamish. 1979. “A Rejected Transplant: The British Industrial Relations Act (1971–1974).” Industrial Relations Law Journal 3(2): 247–320.

Cross-National Legal Learning     365 Specter, Arlen, and Eric Nguyen. 2008. “Regulation Without Intimidation: Securing Workers’ Right to Choose Under the National Labor Relations Act.” Harvard Journal on Legislation 45(2): 311–34. Sullivan, Kathleen. 2001–2002. “Foreword: Interdisciplinarity.” Michigan Law Review 100(6): 1217–26. Teague, Paul. 2009. “Path Dependency and Comparative Industrial Relations: The Case of Conflict Resolution Systems in Ireland and Sweden.” British Journal of Industrial Relations 47(3): 499–520. Thelen, Kathleen. 2009. “Institutional Change in Advanced Political Economies.” British Journal of Industrial Relations 47(3): 471–98. Thompson, Clive. 1993. “Borrowing and Bending: The Development of South Africa’s Unfair Labour Practice Jurisprudence.” In The Changing Face of Labour Law and Industrial Relations: Liber Amicorum for Clyde W. Summers, edited by Roger Blanpain and Manfred Weiss. Baden-Baden: Nomos. United Nations Economic and Social Council (United Nations). 2007. “ECOSOC Resolution 2007/2: The Role of the United Nations System in Providing Full and Productive Employment and Decent Work for All.” New York: United Nations. Available at: http://www.un.org/en/ecosoc/docs/2007/resolution%20 2007–2.pdf. Accessed November 26, 2012. ———. 2008. “ECOSOC Resolution 2008/18: Promoting Full Employment and Decent Work for All.” New York: United Nations. Available at: http://www .un.org/en/ecosoc/docs/2008/resolution%202008–18.pdf. Accessed November 26, 2012. Vick, Douglas. 2004. “Interdisciplinarity and the Discipline of Law.” Journal of Law and Society 31(2): 163–93. Wahlgren, Peter. 2002. Stability and Change in Nordic Labour Law. Stockholm: Stockholm Institute for Scandinavian Law. Wedderburn, Lord. 1987. “Labour Law: Autonomy from the Common Law.” Comparative Labour Law Journal 9(2): 219–52. Zumbansen, Peer. 2010. “Transnational Legal Pluralism.” Transnational Legal Theory 10(2): 141–89.

Appendix The Decline in the Standard Employment Contract: A Review of the Evidence katherine v.w. stone

T

his volume is premised on the proposition that labor markets in advanced industrialized countries have changed profoundly over the past three decades. We refer to this change as the decline of the standard contract of employment—using that term to describe a social practice that was widespread, if not paradigmatic, in most advanced economies. The essence of the standard contract of employment was the longterm employment of an employee by a single employer over a working life. The origin of that practice, its content and its implications, are described in more detail in chapters 1 through 4 of this volume. Several other chapters present data relating to changes in labor market practices in specific countries. This appendix presents comparative data from a number of countries where the standard employment contract was once dominant but has now declined. It addresses three of its specific features: the growth of nonstandard employment, the decline in job tenure, and the decline in union density and collective bargaining coverage. I use standard published data sources such as the Organisation for Economic Co-operation and Development (OECD), the U.S. Department of Labor’s Bureau of Labor Statistics (BLS), the Japanese Ministry of Health, Labour, and Welfare, and Jelle Visser’s comprehensive dataset on union density and collective bargaining.1 I also include comparative data on income inequality. The latter trend may or may not be causally related to the decline in the standard contract of employment, but it certainly correlates closely with it. Overall, the data confirm the changes in national labor markets described in previous chapters, and in particular show an increase in many forms of nonstandard employment in Europe, Japan, and Australia. In 366

Appendix     367

the United States, the trajectory concerning nonstandard employment is less clearly demonstrated, due to definitional issues that will be discussed. Nonetheless, the U.S. data reveal an increase in nonstandard employment among mid-career and older workers. The data also show that while there has been no overall decline in job tenure in the United States, there has been a decline in the job tenure of mid-career males, the group that personified the paradigm of the standard contract of employment in the past. In Europe, there has been a decline in some countries but not in others; however, there too, mid-career male workers have experienced a significant decline in job tenure. The data also show a marked pattern of decline in union density and collective bargaining coverage in all the countries studied.

Growth of Nonstandard Employment One development that testifies to the decline in the standard model of employment is the increasing presence of workers with nonstandard employment relationships. There are many types of nonstandard employment relationships, and the terminology used to describe them varies from country to country. Among the more common descriptors are: fixed-term employment contracts, temporary work, in-house temps, dispatched employees, temporary agency workers, leased employees, short-term contracts, project work, on-call work, zero-time work, parttime work, training contracts, mini-jobs, semi-autonomous workers, and quasi-independent contractors. Some forms of nonstandard employment are unique to particular countries. For example, the German “minijob” does not have an obvious analog in other countries (see chapter 7, this volume), nor does the Japanese category of “arbeiter” (see chapter 14). Moreover, for many types of nonstandard employment, data simply do not exist. While differences in actual employment arrangements, in terminology, and in the availability of information make inter-country comparisons difficult, harmonized data from the OECD strongly suggest that nonstandard employment in most industrialized countries has grown significantly over the past two decades. In the following subsections, I discuss trends in three of the most prevalent forms of nonstandard employment—temporary employment, temporary agency employment, and part-time employment. There are some overlaps between these categories, but they are analytically, and often empirically, distinct.

Temporary Employment As with nonstandard work in general, there are many types of temporary work—including fixed-term contracts, on-call work, zero-time

368     Appendix

work, day labor, and replacement work. Also, as with nonstandard work in general, some forms of temporary work are unique to specific countries (see OECD 2002). However, one type of nonstandard employment relationship that has been studied and measured in many countries is employment formally defined as limited in duration, in contradistinction to employment of open-ended duration. In many industrial countries, explicitly short-term work is called work on fixed-term contracts. In the United States, for reasons explained below, it can be misleading to characterize work on open-ended employment contracts as either temporary or on fixed-term contract, so many scholars and analysts use the term “contingent work” instead. United States  In the United States, measuring temporary work is conceptually problematic due to the near universal use of the at-will employment relationship. An at-will employment relationship is one that can be terminated by either party at any time for any reason. Employees who are employed on an at-will basis are temporary in the legal sense because they have no enforceable claim to ongoing employment. Most employees in the United States are employed at-will (for a more detailed discussion of the at-will rule in the United States, see Stone 2007). Despite the at-will rule that makes almost all U.S. workers temporary in the technical/legal sense, there are some workers whose jobs are explicitly designated as temporary or who understand their jobs to be of short duration. Some of these are employees hired by firms on a provisional or probationary basis; others fill in when an employer has a shortterm need for extra staff, such as in retail stores during holiday periods. Some firms designate specific workers as temporary to signal that they will be receiving fewer employment benefits and enjoying less favorable working conditions than regular workers. Measuring these differing types of temporary workers is difficult precisely because they cannot easily be distinguished from regular at-will employees. The BLS attempts to address the taxonomic problem by defining and measuring what it calls “contingent employment.” It had collected data for this category periodically between 1995 and 2005. The BLS defines contingent employment as follows: Contingent workers are those who do not have an implicit or explicit contract for ongoing employment. Persons who do not expect to continue in their jobs for personal reasons such as retirement or returning to school are not considered contingent workers, provided that they would have the option of continuing in the job were it not for these reasons. (U.S. Bureau of Labor Statistics 2005)

Under the BLS definition, contingent work depends upon the worker’s expectation of employment, not its actual duration or the formal

Appendix     369

contractual terms on which the worker was hired. Workers who are dispatched from an employment agency may or may not be classified as contingent depending on whether they have “an implicit or explicit contract for ongoing employment.” For such temporary help workers, “contingency is based on the expected duration and tenure of their employment with the temporary help or contract firm, not with the specific client to whom they were assigned” (U.S. Bureau of Labor Statistics 2005, 2; see also Hipple 1998). In addition, the BLS Technical Note explains that “jobs were defined as being short term or temporary if the person was working only until the completion of a specific project, temporarily replacing another worker, being hired for a fixed time period, filling a seasonal job that is available only during certain times of the year, or if other business conditions dictated that the job was short term.” The BLS Note gives an example of a student holding a part-time job in a fast-food restaurant while in school. It says that whereas students “might view those jobs as temporary if they intend to leave them at the end of the school year,” the jobs would not be classified as “contingent” because “the jobs themselves . . . would be filled by other workers once the students leave” (U.S. Bureau of Labor Statistics 2005, 2). In other words, the BLS counts as contingent only those workers who took a job with the explicit understanding that the job itself would end in a relatively short time. If people believed they could be fired or might decide to leave their job, they would not be contingent under this definition. That is, an individual who was at risk of losing his or her job would not necessarily be contingent. Hence the BLS category of contingent work does not correspond to job insecurity as the term is customarily understood. The BLS presents three different estimates of contingent work, each measuring a slightly different population. Estimate 1 comprises “wage and salary workers who expect their jobs will last for an additional year or less. Self-employed workers and independent contractors are excluded.” Estimate 2 includes those in Estimate 1 plus “self-employed and independent contractors who expect their employment to last for an additional year or less and who had worked at their jobs . . . for one year or less.” Estimate 3 expands the definition further to also include “workers [including self-employed and independent contractors] who do not expect their jobs to last. . . . even if they already had held the job for more than one year and expect to hold the job for at least an additional year” (U.S. Bureau of Labor Statistics 2005, 2). Using its highly subjective and imprecise definition, the BLS Contingent Worker Surveys show that the overall rate of contingent employment declined between 1995 and 2005 (U.S. Bureau of Labor Statistics 1999, 2001, 2005). The numbers are shown in Table A.1. However, when the data is broken down by age group, a different pat-

370     Appendix Table A.1  Percent U.S. Workforce in Contingent Employment

1995 1997 1999 2001 2005

Estimate 1

Estimate 2

Estimate 3

2.2 1.9 1.9 1.7 1.8

2.8 2.4 2.3 2.2 2.5

4.9 4.4 4.3 4.1 4.1

Source: Author’s compilation based on U.S. Bureau of Labor Statistics (1999, 2001, 2005) and Hipple (2001).

tern emerges. The data reveal that contingency is no longer confined to younger workers, but instead, an increasing percent of older workers are now contingent under each of the three definitions. For example, using Estimate 3, the percentage of all contingent workers who were between the ages of forty-five and fifty-four grew from 12.6 percent in 1995 to 15.3 percent in 2005—an increase of nearly 3 percentage points. Similarly, the percentage of all workers over the age of forty-five who were contingent under Estimate 3 grew from 22.2 percent in 1995 to 29.2 percent in 2005— an increase of 7 percentage points. Figure A.1 shows the pattern for all workers over age forty-five using all three BLS contingency estimates. Contingency of employment has been moving up the age distribution and many middle-age and older workers, whose employment previously was secure, are experiencing significant changes. The BLS data has been criticized for being based on workers’ selfreporting and the use of a highly specialized definition. One study estimated that if the survey results included those who were uncertain as to their status, contingent employment would be considerably larger (Belman and Golden 2000). Other economists have attempted to derive a better estimate of the extent of temporary and contingent work in the United States using another BLS dataset that measures alternative employment arrangements (for an overview of the attempts to measure contingent employment in the United States, see Gleason 2006). One economist reports that if these categories are included, then about 10.7 percent of the workforce would have been termed contingent in 2005 (Gleason 2006). Another scholar includes temporary workers, part-time workers, business service workers, and the self-employed to conclude that between 25 and 30 percent of the workforce consisted of contingent workers in 1988 (Belous 1989, 16, table 2.1). However, Belous has been criticized for including many workers whose employment relations may be of long duration. In contrast, Deputy Secretary of Commerce Rebecca Blank has developed an estimate of “problem contingent workers,” in which she includes those part-time workers, temporary help workers, and independent contractors who

Appendix     371 Figure A.1  Contingent U.S. Workforce Forty-Five and Older, 1995–2005 30 28

Percentage

26

Definition 3 Definition 2 Definition 1

24 22 20 18 16 14 12

1995

1997

1999

2001

2005

Year Source: Author’s compilation based on Hipple (2001); U.S. Bureau of Labor Statistics (2001, 2005).

would prefer other employment arrangements of longer duration. Blank finds that between 4.6 and 8.5 percent of the workforce is a problem contingent worker (1998). Clearly the measure of contingent employment varies depending on how survey questions are framed and which categories of nonstandard work are included. However, two conclusions can be drawn from the data. First, the narrowly defined BLS contingent worker data show a change in stability of employment for middle-age and older workers. Second, if we look at nonstandard work more broadly, we see it represents a large and growing feature of the U.S. labor market. Europe and Japan  Temporary employment in Europe and Japan has increased overall during the past two decades. The OECD has collected data on temporary work in most European countries and Japan over the past twenty-five years, using a much broader definition than the BLS in the United States. According to the OECD, a job may be regarded as temporary if it is understood by both the employer and the employee that the termination of the job is determined by objective conditions such as reaching a certain date, completion of an assignment, or the return of another employee who has been temporarily replaced. In the case of a work contract of limited duration, the condition for its termination is generally mentioned in the contract. The term “temporary” includes persons with a

372     Appendix Figure A.2  Workforce in Temporary Employment, Selected European Countries 30

1985 2009

Percentage

25 20 15 10 5

gd K

U

ni

te

d

et N

om

n ai

he

in

rla

Sp

s nd

n pa Ja

ly Ita

y an m er

Fr

an

ce G

D

en

m

ar

k

0

Source: Author’s compilation based on OECD (2012a). Note: Data from Spain are for 1987 through 2009. All numbers in percentages.

seasonal job, persons engaged by an employment agency or business and hired out to a third party to carry out a work mission (unless there is a work contract of unlimited duration with the employment agency or business), and persons with specific training contracts. If no objective criterion for the termination of a job or work contract exists, the worker is regarded as permanent or of unlimited duration (OECD 2012). Figure A.2 shows changes in the percentage of total temporary employment in selected European countries and Japan since 1985.2 Between 1985 and 2009, the percentage of workers on fixed-term contracts more than doubled in France, the Netherlands, and Italy. There were also substantial increases in the percentage of workers with temporary jobs in Germany, Japan, and Spain, but not in Denmark or the United Kingdom. It is also important to appreciate the orders of magnitude involved. Temporary employment in Germany increased from 10 percent of the workforce in 1985 to 14 percent in 2009; in Italy from 5 percent in 1985 to 12 percent in 2009; and in Spain from 16 percent in 1987 to 33 percent in 2005, before falling to 25 percent in 2009 (OECD 2012a). Moreover, it is likely that figure A.2 understates the trend because its

Appendix     373 Figure A.3  Young Persons in Permanent Employment, Selected OECD Countries 100 90 80

Percentage

70 60 50 40 30 20 10 0

1985

1990

1995

2000

2005

2010

Year United Kingdom Denmark Japan

Italy France Germany

Netherlands Spain

Source: Author’s compilation based on OECD (2012b). Note: Ages fifteen through twenty-four. Years 1985 to 2010. Numbers in percentages.

terminal date is 2009—the most recent year for which data were available. Because 2009 fell in the midst of the Great Recession and because in recessions, temporary workers are the first to be let go, it is likely that when there is a recovery, the percentage of the workforce in temporary employment will prove to be even greater. The OECD also collects data in which individual workers are asked whether they have temporary or permanent jobs. It defines permanent employment as “employees with paid leave entitlements,” and excludes employees on a fixed-term contract or whose expected job duration was less than one year (OECD 2012b). Using this definition, the OECD data

374     Appendix

show significant declines in permanent employment, particularly for young people, in most European countries. As shown in figure A.3, the percentage of all people with permanent jobs age twenty-five and younger—that is, those just entering the workforce—in Germany, France, Italy, the Netherlands, Japan, and Spain has declined since 1985. Denmark saw a slight increase. Spain showed a large increase but still remains far below all of the other countries. The trend for permanent workers between age twenty-five and fiftyfour shows a similar but less pronounced trend. Since 1985, all countries, except Denmark and Spain, show a declining share of employees in permanent employment. Australia  The OECD data on temporary employment do not include Australia, but other sources reveal a similar story there. In Australia, casual work is defined as work that lacks paid leave entitlements. According to John Buchanan, the deputy director of research for Australia’s Centre for Industrial Relations Research and Training, “Between the late 1970s and the late 1990s, the proportion of the work force engaged on a casual or self-employed basis rose from just over a quarter [27 percent] to around two in five [40 percent]” (2012, 5–6). Furthermore, Buchanan writes, “Over the course of the 1980s and 1990s, precarious categories of employment have grown at a faster rate than full-time permanent jobs. Between 1988 and 1998, 69 percent of net growth in the number of employees was in casual employment” (5–6). Another group of Australian labor economists noted that the percentage of casual employment nearly doubled between 1982 and 2004, and that the category of full-time casual work grew by more than 200 percent between 1992 and 2007 (Buchanan 2004; Campbell and Brosnan 2005, 33, 35; Campbell, Whitehouse, and Baxter 2009, 10, figure 4.1).

Temporary Agency Employment Temporary help agencies, also known as staffing firms, hire workers whom they place on temporary assignments with their clients or user firms. Assignments can be of short or long duration, but in either event, the assigned workers are considered employees of the temporary help agency, not of the user firm where they are placed (Gonos 1997). Temporary agency employees may or may not fit the definition of contingent worker discussed earlier, depending on the employee’s perception of the likelihood of continuing with the agency. United States  In the United States, employment in the staffing industry grew from 1.1 million in 1990 to 2.3 million in 2008—a considerably faster

Appendix     375

rate than employment overall. This indicates that user firms are relying more on temporary help and moving away from hiring long-term employees. However, as shown in figure A.4, the employment numbers in temporary agency employment has fluctuated with changes in the business cycle due to the fact that temporary employees are typically the first to be let go during downturns. For example, agency employment nearly doubled between 1990 and 2000, declined by 20 percent during the recession of 2001—2003, but by 2007 had almost returned to the 2000 level. Although temporary agency employment is a minor feature of the U.S. labor market—1.7 percent of total U.S. employment as of 2008—the trends are significant (Luo, Mann, and Holden 2010). BLS economists explain: The temporary help services industry is considered an indicator of the overall economy because movements in temp employment often have been a precursor to changes in the broader labor market. As firms have increased their use of temporary workers over the past two decades, the use of temp help services has become an indicator of how businesses operate. (3–4, figure 1)

The type of work provided by temporary help agencies has also changed since the early 1980s. Whereas temporary help previously filled in during periods of peak workloads, it is now used for routine firm staffing requirements (Osterman and Burton 2004). This too suggests a decline in the standard employment contract. Europe  Europe has reportedly experienced a more dramatic increase in temporary agency employment than the United States over the past two decades. However, reliable data about the extent of temporary agency employment in Europe are difficult to find. The OECD explains the paucity of data as follows: Measuring employment mediated by temporary work agencies raises particular difficulties. For example, the turnover of agency workers is very high and it is important to distinguish between stock and flow measures. Another complexity is that the employment contract of agency workers can be with either the agency or the employer in whose establishment they are working at a given time. In the former case, it is even possible that these workers will have an open-ended contract with the agency (i.e. might be considered as a permanent worker using the terminology of this chapter). This is possible in Austria, Finland, Germany, the Netherlands and Sweden (Storrie, 2002). As a result of the special nature of agency work, the most reliable data on temporary agency workers in many OECD countries are collected by the means of special surveys, rather than the general labour force surveys analysed . . . for most countries. (OECD 2002, 136)

Year

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008

Temporary help services Total

Source: Reprinted with permission from Luo, Mann, and Holden (2010).

80

100

120

140

160

180

200

220

240

Index [1990 = 100] 260

Figure A.4   Indexed Employment Growth of Temporary Help Services and of All Industries in the United States, 1990–2008

Appendix     377

Notwithstanding the difficulties, the OECD analyzed the available country reports and concluded that between 1992 and 2002, “the number of agency workers has increased at least five-fold in Denmark, Spain, Italy and Sweden and just under four-fold in Austria” (OECD 2002). The European Foundation for the Improvement of Living and Working Conditions conducted a study in 2002 that examined national surveys and qualitative studies from Denmark, Finland, France, Germany, the Netherlands, Spain, and Sweden, and found a rapid increase in the numbers and economic importance of temporary agency work in the preceding two decades (Pedersen, Stener, Hansen, and Mahler 2007, 14). In addition, the labor economists Manfred Antoni and Elke Jahn analyzed data from the International Confederation of Private Employment Agencies (CIETT) in 2009 and found that, since the late 1990s, “in the Scandinavian countries, [temporary agency employment] has increased four-fold; in all other countries of the European Union it has at least doubled, employing about 1.8% of the EU working population in 2006” (Antoni and Jahn 2009, 226). Part of the growth in temporary agency work in Europe can be explained by changes in labor laws. Until the mid-1980s, the laws in most European countries placed severe restrictions on the use of temporary workers, but since then, many countries have liberalized their laws considerably (for a summary of European laws on temporary employment, see Trades Union Congress 2005). For example, in Germany, a series of legislative reforms has expanded the type of work that could be performed by temporary agency workers and the length of time such workers could be utilized (see Antoni and Jahn 2009; see also chapter 7, this volume). Similar developments occurred in other European countries. Japan  Temporary agency work has also expanded dramatically in Japan over the past twenty-five years. Until the mid-1980s, Japan placed strict limitations on the ability of firms to utilize temporary agency workers. These laws were modified through a series of enactments beginning in 1985 with its new Worker Dispatching Law, which opened the door to the use of temporary agency workers for specific categories of employment for up to one year. Subsequent amendments in 1999 and 2003 expanded both the types of temporary agency workers firms could hire and the permissible duration of their employment. As a result, the use of temporary agency workers (“dispatched employees”) in Japan has mushroomed, as shown in figure A.5 (see chapter 10, this volume). A 2004 survey by the Japanese Ministry of Health, Labour, and Welfare found that the use of dispatched employees increased with firm size; large firms reported that they were likely to increase their utilization of dispatched employees, whereas small firms were likely to increase their utilization of part-time employees (Morishima and Shimanuki 2005). For

1994

1995

1996

1997

1998

1999

Year

2000

2001

2002

2003

Source: Reprinted with permission from Japanese Ministry of Health, Labour, and Welfare (2008).

(thousands) 2000 1900 1800 1700 1600 1500 1400 1300 1200 1100 1000 900 800 700 600 500 400 300 200 100 0

Figure A.5  Trends in Number of Registered Dispatched Workers in Japan, 1994–2005

2004

2005 (FY)

Appendix     379 Table A.2  Percent Employed Workers Employed Part-Time, Men and Women

Canada Denmark France Germany Italy Netherlands Spain United Kingdom United States

1985

1995

2005

2009

Change

17.1 21.1 11.7 10.6 8.2 19.7 4.1 20.1 14.7

18.8 17.5 14.8 14.2 11.5 29.2 6.8 22.5 14.0

18.4 17.6 13.9 21.8 15.6 36.1 10.9 23.0 12.8

19.3 19.4 14.0 22.4 16.9 37.7 12.3 23.8 14.1

2.2 –1.7 2.2 11.8 8.7 18.0 8.2 3.7 –0.6

Source: Author’s compilation based on OECD (2012a). Note: Data from Spain from 1990 to 2009. Numbers in percentages.

example, dispatched workers make up 20 percent of all workers in the Japanese auto industry. Thus, the very firms that have been the mainstay of Japan’s lifetime employment system are now shifting some of their workforce to temporary agency employment. Australia  Temporary agency employment in Australia since the early 1990s has also increased rapidly. The Australian Government Productivity Commission conducted a study of temporary agency employment, that it terms the “labour hire employment,” in 2005 and concluded that Based on consistent and comparable survey estimates, the number of labour hire workers in workplaces with 20 or more employees grew from 33 000 in 1990 to 190 000 in 2002, an increase of 15.7 per cent per year. Further, the proportion of labour hire workers among all employees of these workplaces grew almost fivefold, from 0.8 per cent in 1990 to 3.9 per cent in 2002. These estimates support claims of a rapid expansion in labour hire employment over the 1990s and early 2000s. (LaPlange, Glover, and Fry 2005, 4)

Part-Time Work Another type of nonstandard employment that has increased in industrialized countries in the past twenty-five years is part-time work. The OECD has collected data on the prevalence of part-time work in Europe and the U.S. since 1985. The OECD defines part-time workers as “persons who usually work less than 30 hours per week in their main job” (OECD 2011). Table A.2 shows that part-time work as a percentage of total employment increased substantially in Germany, Italy, the Netherlands, and Spain; increased a small amount in Canada, France, and the United Kingdom; and slightly declined in Denmark and the United States.

380     Appendix Table A.3  Percent Employed Workers Employed Part-Time, Men, All Ages

Canada Denmark France Germany Italy Netherlands Spain United Kingdom United States

1985

1995

2005

2009

Change

8.8 8.0 4.5 1.7 3.8 6.1 2.4 4.3 8.6

10.8   9.7   5.6   3.4   4.8 11.8   2.4   7.4   8.3

10.9 11.7   5.0   7.3   5.3 15.3   3.8   9.6   7.8

12.0 13.6   5.1   8.0   5.9 17.0   4.4 10.9   9.2

  3.2   5.5   0.6   6.2   2.1 10.8   2.0   6.5   0.6

Source: Author’s compilation based on OECD (2012a). Note: Data from Spain from 1990 to 2009. Numbers in percentages.

Tables A.3 and A.4 break down the data by gender and reveal two important trends. First, the percentage of men working part time increased in every country, more than doubling in Germany, the Netherlands, Spain, and the United Kingdom. Second, for women, the increases were less dramatic but nonetheless significant in Germany, Italy, the Netherlands, and Spain. The OECD did not publish data on part-time employment in Japan before 2005, but the Japanese Ministry of Health, Labour, and Welfare conducts its own employment surveys, which include data on part-time work. The Ministry defines part-time workers as people who work less than thirty-five hours during the reference week. This definition is different than that used by the OECD, but it is nonetheless useful for measuring trends in Japan. Using its definition, the ministry found that parttime employment increased from 10 percent of the workforce in 1980 to Table A.4  Percent Employed Workers Employed Part-Time, Women, All Ages

Canada Denmark France Germany Italy Netherlands Spain United Kingdom United States

1985

1995

2005

2009

Change

28.3 35.2 21.6 25.4 16.6 45.5 12.0 41.1 21.6

28.5 25.8 24.8 29.1 21.1 55.1 15.8 40.8 20.2

27.2 23.9 22.6 38.8 28.8 60.7 21.5 38.5 18.3

27.1 24.8 22.4 38.1 30.5 59.9 21.4 38.8 19.2

–1.2 –10.4 0.8 12.7 14.0 14.3 9.4 –2.3 –2.4

Source: Author’s compilation based on OECD (2012a). Note: Data from Spain from 1990 to 2009. Numbers in percentages.

Appendix     381

26.1 percent in 2006. In that same period, the percentage of women in part-time employment increased from 31 percent in 1980 to 42 percent in 2000 and has remained substantially stable at that level ever since. Over the entire period, slightly more than two-thirds of part-time workers were women (Japanese Ministry of Health, Labour, and Welfare 2010). The OECD data on part-time employment in Australia goes back only to 2000. It shows that part-time employment there has been a stable 7 percent of the workforce between 2000 and 2009. This percentage comprised 5 percent of men and 9 percent of women in the workforce.

Decline in Job Tenure Because a central feature of the standard employment contract is the prospect of long-term employment, trends in job tenure are often used to measure the extent to which a new form of employment relationship is displacing the previous standard. Job tenure—the length of time a worker has held his or her current job—is usually measured in one of two ways. The first measures the average length of time individual workers have been employed at their current job. The second measures the percentage of workers who have been in their current job for ten years or longer. Job tenure studies typically disaggregate both measures by gender, age cohort, and other variables. Although job tenure is a useful indicator of changes in long-term job attachment, it can be an imperfect and potentially misleading one. There are three types of reasons why job tenure requires careful parsing and interpretation—reasons I call recession effects, age effects, and gender effects. Recession effects are operative when workers in an establishment are protected by seniority, either contractually, or by law or custom. If such an establishment reduces the size of its workforce, the average job tenure will increase because the more senior workers will be the ones who remain. The larger the reduction in force, the more the average job tenure will increase. Nonetheless, a large reduction in its workforce would reflect not stability but its opposite—the loss of stable jobs by a large number of workers. If this scenario is sufficiently widespread, and if the workers who lose their jobs remain unemployed, become independent contractors, or leave the labor market, aggregate labor market data would show a rise in average job tenure even though the labor market experience of a large number of workers would no longer conform to the standard contract of employment. Second, the interpretation of job tenure data is complicated by age effects. If young workers, who would have secured long-term secure jobs when they entered the labor market in the past, are now able to find only temporary or intermittent jobs, the job tenure data will not reflect the trend. For example, someone who has been working in a long-term job

382     Appendix

for two years will look exactly the same as someone who has held a temporary job for two years. Most workers in their twenties simply have not had enough time in the labor market to be on any job for five or ten years. Even those workers destined to obtain a stable job will appear to have short job tenure during their twenties.3 Hence the difference between those who have long-term jobs and those who have casual jobs does not show up in the data until workers reach approximately age thirty. Thus changes in young workers’ labor market experiences will not show up in the job tenure data even if the changes are widespread. And the larger the proportion of younger workers in the workforce, the less reliable the aggregate job tenure data will be. Other complications affect job tenure data for older workers. When older workers—those over age fifty or fifty-five—lose their jobs, they often leave the labor force altogether. Employers are reluctant to hire them, and it is difficult for them to find alternative employment. Many out of work older workers therefore retire or give up searching for another job. If those older workers who exit the labor force are those who had less ­secure jobs to begin with—a reasonable assumption because those in insecure jobs are by definition more likely to lose them—the remaining workers in their age group would have, on average, longer job tenure. Consequently, as the workforce ages and many workers become eligible for retirement, labor market statistics will tend to report a lengthening in average job tenure for those older workers who actually retain their longterm standard jobs, but fail to account for the significant percentage of older workers who lose their jobs and, for statistical purposes, disappear from view. The gendered nature of the standard employment contract is a third reason aggregate job tenure data does not adequately reflect changes in patterns of long-term employment. For most of the twentieth century, the standard contract of employment largely benefitted male workers. Women’s labor force participation was far below that of men, although it has grown steadily since World War II. More significantly, although participation rates grew, the length of women’s labor force attachment did not increase significantly until the late 1970s. Before then, women workers tended to move in and out of the labor force rather than hold steady jobs. (Blau, Ferber, and Winkler 2001, 84–91). Hence women did not typically hold long-term jobs during the heyday of the standard employment contract (Stone 2004, 158–63). And when women did enter internal labor markets, they entered on the bottom rungs and were the first to be laid off during business downturns. As a result of this history, women have consistently experienced shorter job tenure than men in every age cohort and educational grouping. Accordingly, statistics on women’s job tenure do not depict the same dramatic trends as those relating to men’s job tenure. Moreover, data that aggregate the job tenure of women and men

Appendix     383 Figure A.6   Median Job Tenure in the U.S., Men 18

Ages 25 to 34 Ages 35 to 44 Ages 45 to 54 Ages 55 to 64

16 14

Tenure

12 8 6 4 2 0

1983 1986 1989 1992 1995 1998 2001 2004 2007 2010 2012 Year

Source: Author’s compilation based on U.S. Bureau of Labor Statistics (1998, 2008, 2012).

mask the extent of changes for men and is thus misleading to those interested in understanding trends in the standard contract of employment.

Job Tenure Trends For the foregoing reasons, aggregate job tenure data is an imperfect measure of trends in the standard contract of employment. Instead, the labor market experience of men in their middle earning years provides more accurate insight into changes in the standard contract of employment than job tenure data overall. United States  Labor economists have debated whether there has been a change in job tenure in the United States over the past three decades (Osterman and Burton 2004; Farber 1995, 1998; Jaeger and Stevens 1999; Neumark 2001) On the one hand, aggregate data—for women and men of all ages—show very little change in job tenure since 1983. On the other, job tenure for mid-career men has been declining in the United States since 1980, both in terms of average tenure of individual workers in their present jobs (figure A.6), and in terms of the percentage of workers who

384     Appendix Figure A.7  Workers with Ten or More Years Tenure with Current Employer, U.S. Men 70

Percent Workers

60 50 40 30 20 10 0

1983

1986

1989

1992

1995

1998

2001

2004

2007

Year Ages 25 to 29 Ages 30 to 34 Ages 35 to 39

Ages 40 to 44 Ages 45 to 49 Ages 50 to 54

Ages 55 to 59 Ages 60 to 64

Source: Author’s compilation based on U.S. Bureau of Labor Statistics (1998, 2008, 2012).

have held the same job for more than ten years (figure A.7). And significantly, job tenure of men over age forty has declined most dramatically. At the same time, those in the twenty-five to thirty-four age group did not decrease—a likely illustration of the age effect discussed earlier. By contrast, job tenure for women in the United States has not changed substantially over the years (figures A.8 and A.9). This trend reflects a gendered phenomenon. As I explain in chapter 4, the standard contract of employment in the United States was a social practice found primarily in large firms that established internal labor markets. These internal markets, which offered stable long-term jobs, were largely closed to women for most of the twentieth century. When women entered the core labor force, beginning in the late 1970s, the long-term employment system was already in decline. Thus, the best indicator of the trend away from longterm employment is the change in the labor market experiences of midcareer men. And by that measure, we see significant decline.

Appendix     385 Figure A.8   Median Job Tenure, U.S. Women 12 10

Tenure

8 6 4 2 0

1983

1986

1989

1992

1995

1998

2001

2004

2007

Year Ages 25 to 34 Ages 35 to 44

Ages 45 to 54 Ages 55 to 64

Source: Author’s compilation based on U.S. Bureau of Labor Statistics (1998, 2008, 2012).

Europe  The OECD publishes job tenure data for European countries. Although organized differently, the OECD data reveals trends that parallel those in the United States. That is, although overall job tenure has not changed dramatically, it has changed for specific groups. Table A.5 shows changes in the percentage of male workers in a job lasting more than ten years in selected European countries between 1995 and 2009. In all the countries depicted except Germany and the Netherlands, the share has declined. As in the United States, the percentage of women of all ages who have held a job for more than ten years in Europe has not shown the same downward trend. Instead, as table A.6 shows, the percentage of women holding their jobs for ten years or longer has been either flat or increasing in all of the countries except Denmark, where women’s job tenure declined 4.7 percent. The largest increases have been in Germany and the Netherlands—the same countries that saw increases in the rates for men. The increases in Germany and the Netherlands could be part of a larger

386     Appendix Figure A.9  Workers with Ten or More Years Tenure with Current Employer, U.S. Women 60

50

Percent Workers

40

30

20

10

0

1983

1986

1989

1992

1995

1998

2001

2004

2007

Year Ages 25 to 29 Ages 30 to 34 Ages 35 to 39

Ages 40 to 44 Ages 45 to 49 Ages 50 to 54

Ages 55 to 59 Ages 60 to 64

Source: Author’s compilation based on U.S. Bureau of Labor Statistics (1998, 2008, 2012).

trend in those countries that has affected both men and women. Alternatively, because job tenure data does not distinguish between part-time and full-time employment, the increase for women could be attributable to policy changes over the past two decades that have made part-time work more attractive for women in Germany and the Netherlands. When we look at job tenure of workers in Europe by age, we see a trend everywhere except in Germany. Table A.7 shows that the share of workers in the thirty-five to thirty-nine age group, including both men and women who have been in the same job for ten years or more, has

Appendix     387 Table A.5  Workers at the Same Job Ten Years or More, Selected European Countries, Men

Denmark France Germany Italy Netherlands Spain United Kingdom

1995

2009

Change

34.3 44.8 40.5 51.3 39.3 41.8 36.5

29.4 43.6 44.8 49.3 44.4 40.7 32.9

–4.9 –1.2 +4.3 –2.1 +5.1 –1.0 –3.6

Source: Author’s compilation based on OECD (2012c). Note: All ages. Numbers in percentages.

Table A.6  Workers at the Same Job Ten Years or More, Selected European Countries, Women

Denmark France Germany Italy Netherlands Spain United Kingdom

1995

2009

Change

29.3 41.3 31.5 44.0 26.0 31.0 25.1

24.5 42.8 39.7 42.2 35.8 31.4 28.4

–4.7 +1.5 +8.2 –1.8 +9.8 +0.3 +3.4

Source: Author’s compilation based on OECD (2012c). Note: All ages. Numbers in percentages.

Table A.7  Workers at the Same Job Ten Years or More, Selected European Countries, Men and Women

Denmark France Germany Italy Netherlands Spain United Kingdom

1995

2009

Change

30.2 48.7 34.9 51.7 40.1 42.2 32.9

18.5 41.5 38.3 39.2 36.9 32.3 27.9

–11.7 –7.2 +3.4 –12.5 –3.2 –10.0 –5.0

Source: Author’s compilation based on OECD (2012c). Note: All ages. Numbers in percentages.

388     Appendix Table A.8  Average Years on Job, Selected European Countries, Men and Women Country

1992

2009

Change

Denmark France Germany Italy Netherlands Spain United Kingdom

  7.94   9.95 10.31 10.75   8.31   8.48   7.77

  7.63 11.64 11.12 11.72 10.86   9.61   8.53

–3.9% 17.0%   7.9%   9.1% 30.8% 13.3%   9.8%

Source: Author’s compilation based on OECD (2012c). Note: All ages. Table A.9  Change in Job Tenure 1992 to 2009, Men

Denmark France Germany Italy Netherlands Spain United Kingdom

Ages Ages 25 to 30 to 29 34

Ages 35 to 39

Ages 40 to 44

Ages 45 to 49

Ages 50 to 54

Ages 55 to 59

Ages 60 to 64

–26.8    5.4 –10.0   –4.9   14.5   24.2   –9.0

–24.5 –12.2   –4.6 –13.4 –11.1 –13.1 –13.6

–22.9   –7.1   –7.1 –13.6 –14.5 –11.3 –13.9

–14.8    0.8   –8.4   –8.6   –9.5   –2.5 –13.0

–21.4    8.2   –5.7    0.1   –3.5    7.7   –5.1

–9.3 15.4 –6.4   8.3   7.7 13.8 –7.7

–13.3    3.6   –5.2   –3.0   19.0    5.5 –13.6

–20.5   –5.2   –6.0 –10.9   –8.1 –12.6 –15.5

Source: Author’s compilation based on OECD (2012c).

declined significantly—over 10 percent in Denmark, Italy, and Spain, and 5 percent or more in France, the United Kingdom, and Australia. This suggests a change in the labor market experience for those in the age cohort who entered the labor market fifteen to twenty years ago—just as the heyday of the standard contract of employment was ending. The OECD also has collected data on workers’ average length of time on the job since 1992. Table A.8 shows the average job tenure of men and women combined for all ages. It evidences no decline, instead showing an increase in average job tenure between 1992 and 2009 in all countries except Denmark. However, when the data is disaggregated, a striking pattern emerges. Table A.9 shows the decline in job tenure for men by age group between 1992 and 2009. Note that for mid-career men—those between the ages of thirty and fifty—job tenure has declined in all of the selected European countries with the exception of France. Even in France, job tenure declined for those age thirty to forty-five, and had less than a 1 percent increase in the forty-five to fifty age group.

Appendix     389

However, for men over age fifty-five and those under age thirty-five, the OECD data show considerable variation among countries. These findings are consistent with the age effects discussed earlier. What is most striking in the European countries studies, and most parallel to the U.S. experience, is that job tenure for men in mid-career is declining. Canada  The aggregate OECD job tenure data for Canada, like that in the United States and Europe, shows little change over time. However, if we look at the data for men in their mid-career years, we see dramatic changes similar to those observed in the United States and most of Europe. Figure A.10 shows the time on the job for men in the forty-four to forty-nine age group since 1985. It shows that the percentage of men in that age group, with ten years or more tenure in their current job, has declined from over 50 percent to 35 percent. Figure A.11 shows the number of men in different age groups who held their jobs for ten years or more in 1985 and 2009. For example, it shows that the number of men in the age group of thirty to thirty-four declined from 23.5 percent to 10.8 percent between 1985 and 2009—a decline of more than half. Substantial declines occurred for men in each age group, although, consistent with the age effect, the magnitude of the decline diminishes for those over fifty. Figure A.10  Employed by Job Tenure, Canadian Men Age 44–49 55 50

Percentage

45 40 35 30 25 20 15 10

19 85 19 90 19 95 20 00 20 01 20 02 20 03 20 04 20 05 20 06 20 07 20 08 20 09 20 10

5

Year 10 or more years 5 to 10 years Source: Author’s compilation based on OECD (2012c).

3 to 5 years 3 years or less

390     Appendix Figure A.11  Percent Employees Holding Current Job for Ten Years or More, Canadian Men 80 70

Percentage

60

1985 2009

50 40 30 20 10 0

Ages 30 to 34

Ages 35 to 39

Ages 40 to 44

Ages 45 to 49

Ages 50 to 54

Ages 55 to 59

Source: Author’s compilation based on OECD (2012). Note: Numbers in percentages.

Figure A.12  Workers in Current Jobs Ten Years or More and Five Years or Less, Australia 70 60

Percentage

50 40 30 20 10

Five years or less, percentage of total Ten years or more, percentage of total

0 2001

2004

2006

2007

2008

Year Source: Author’s compilation based on OECD (2012c). Note: Age twenty-five to fifty-four.

2009

Appendix     391

Australia  The OECD has collected job tenure data for Australia only since 2000. The data show that between 2000 and 2009, average job tenure for men of all ages declined 12 percent, for women not at all. Data also show a decline of nearly 19 percent for men and women combined between the ages of thirty-five and thirty-nine (OECD 2012c). Finally, they show a decline in the percentage of Australian workers who have held their jobs for ten years or more and an increase in the percentage of those who have held their job five years or less (figure A.12). Japan  Japan is not represented in the OECD data, and it does not systematically collect data on job tenure. However, as Keisuke Nakamura and Michio Nitta discuss in chapter 14 of this volume, with the decline of the strong postwar norm of lifetime employment within a single enterprise, declining job tenure in Japan has become a subject of increasing concern for academics and policymakers. Nonetheless, distinctive Japanese employment practices and the terminology used to describe them make international comparisons difficult. For example, Japanese workers are sometimes transferred to other companies, ostensibly on temporary loan, but in fact on an open-ended basis. Additionally, some workers are induced to take early retirement rather than being subjected to the embarrassment of a termination. Such practices conceal the departure of significant numbers of mid-career and older workers from both labor markets and labor market statistics (see chapter 14, this volume).

Decline in Union Density and Collective Bargaining Coverage Another feature of contemporary labor markets, closely associated with the long-term decline in the standard contract of employment, is the decline in union density and collective bargaining coverage. Figure A.13 tracks changes in union density in selected OECD countries between 1970 and 2005, and shows dramatic declines in union density in all countries except Germany over the past three decades. And, in Germany, if we look at union density since 1980 rather than 1970, we also see a decline of nearly 7 percentage points.4 In many countries, union membership is neither the only, nor the best, measure of union strength. Several European countries have mechanisms by which the terms of collective agreements negotiated by unions are applied to nonmembers. Some countries, such as Germany and France, have formal extension laws pursuant to which the Ministry of Labor applies collectively bargained terms to all employers in a given sector when specified conditions are met. In other countries, employers’ associations or unions, as a matter of practice, extend the terms of collective bargaining agreements to nonmembers. In some countries, such as Japan, national unions insist on the application of collective agreements

392     Appendix Figure A.13  Change in Union Density 20

Percentage Points

0 −20

−40

−60

−80

es at St

te

ni U

d te U

ni

d

gd in

K

he et N

om

n ai

s

Sp

nd

n

rla

pa

ly

Ja

Ita

y an

m

ce

er

an

G

Fr

ar

k

a

m

ad

en

D

an C

A

us

tr

al

ia

−100

Source: Author’s compilation based on Visser (2009).

to nonmembers. And in Australia, until 2005, federal arbitration awards secured by unions effectively operated to fix the terms of employment throughout the relevant sectors and within all states (for a good summary of these mechanisms, see OECD 1994). However, collective bargaining coverage, like union density, has declined in almost all industrialized nations since the late twentieth century. Figures A.14 to A.24 show the trends in union density and collective bargaining coverage in eleven countries over the past fifty years. Since 1970, union density in the Netherlands, the United States, and Japan has steadily declined. In Australia, Canada, Denmark, France, Germany, Italy, and the United Kingdom, union density rose until the late 1970s or mid-1980s and then went into decline. The data on collective bargaining coverage shows a similar decline since the 1970s, although on a slightly different timetable. The decline has been relatively consistent since the 1970s in Japan, the United States, and Italy, and since the early 1990s in the United Kingdom, Canada, Germany, and the Netherlands. Australia saw a steep decline in award coverage (the Australian analogue to collective bargaining coverage) beginning in 1960.

Appendix     393

Percent of Eligible Working Population

Figure A.14  Union Density and Collective Bargaining Coverage, Australia 90 80

Union density Collective bargaining coverage

70 60 50 40 30 20 1960

1965

1970

1974

1980

1985

1990

1996

2001

2007

Year Source: Author’s compilation based on Visser (2009).

Figure A.15  Union Density and Collective Bargaining Coverage, Canada

Percent of Eligible Working Population

80 70 60 50 40 30 20

Union density Collective bargaining coverage 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2009 Year

Source: Author’s compilation based on Visser (2009).

394     Appendix

Percent of Eligible Working Population

Figure A.16  Union Density and Collective Bargaining Coverage, Denmark 65 60 55

Union density Collective bargaining coverage

50 45 35 25 15

1960 1965 1970 1975 1980 1985 1990 1995 2000 2007 2010 Year

Source: Author’s compilation based on Visser (2009).

Figure A.17  Union Density and Collective Bargaining Coverage, France

Percent of Eligible Working Population

95 85 75 65 Union density Collective bargaining coverage

55 45 35 25 15 5

1960

1965

1970

1975

1980

1985

Year Source: Author’s compilation based on Visser (2009).

1990

1995

2000

2008

Appendix     395 Figure A.18  Union Density and Collective Bargaining Coverage, Germany

Percent of Eligible Working Population

80 75 70 65 60 55

Union density Collective bargaining coverage 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2009 Year

Source: Author’s compilation based on Visser (2009).

Figure A.19  Union Density and Collective Bargaining Coverage, Italy

Percent of Eligible Working Population

92 82 72 62

Union density Collective bargaining coverage

52 42 32 22

1960 1965 1970 1975 1980 1985 1990 1995 2000 2006 2009 Year

Source: Author’s compilation based on Visser (2009).

396     Appendix

Percent of Eligible Working Population

Figure A.20  Union Density and Collective Bargaining Coverage, Japan 35

30

25

20

15

Union density Collective bargaining coverage 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2008 Year

Source: Author’s compilation based on Visser (2009).

Percent of Eligible Working Population

Figure A.21  Union Density and Collective Bargaining Coverage, Netherlands 90 80 70 60

Union density Collective bargaining coverage

50 40 30 20

1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2008 Year

Source: Author’s compilation based on Visser (2009).

Appendix     397

Percent of Eligible Working Population

Figure A.22  Union Density and Collective Bargaining Coverage, Spain 100 80 60

Union density Collective bargaining coverage

40 20 0

1977

1980

1986

1990

1995

2000

2004

2008

Year Source: Author’s compilation based on Visser (2009).

Percent of Eligible Working Population

Figure A.23  Union Density and Collective Bargaining Coverage, United Kingdom 75 70 65 60 55 50 45 40 35 30 25

Union density Collective bargaining coverage 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2009 Year

Source: Author’s compilation based on Visser (2009).

398     Appendix Figure A.24  Union Density and Collective Bargaining Coverage, United States

Percent of Eligible Working Population

35 30 25 20 15 10

Union density Collective bargaining coverage 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 Year

Source: Author’s compilation based on Visser (2009).

In sum, despite variations in institutional arrangements and in timing, all of the countries discussed have experienced a decline in both union density and collective bargaining coverage. It is unclear whether the trend in union density and collective bargaining coverage is a cause of, or a result of, the erosion of the standard contract of employment. Several stories are plausible. For example, it is possible that the decline of unions led to the decline in the standard contract of employment because weakened unions were unable to achieve or retain job security protection either in bargaining or the legislative arenas. Further, as unions decline, nonunion employers no longer feel obliged to offer their workers long-term employment to dissuade them from joining unions. On the other hand, it is possible that the decline of unions is a result of the decline in the standard contract of employment. As workers change jobs more frequently, employer-centered unions may seem less effective or important to one’s career, so workers may be less likely to join. Alternatively, union density and collective bargaining may have declined because changes in modes of production and management techniques have eroded the conditions that fostered union solidarity in the era of the standard employment contract. Or, arguably, the decline in the

Appendix     399

standard employment contract and the decline in union density are both attributable to neoliberal, antiunion government policies that deregulated labor markets and repealed labor protective arrangements. These changes, in turn, are very likely related to the increasingly globalized nature of production and commerce. This is not the place to explore causal hypotheses. At the very least, the data show a parallel between the decline in the standard contract of employment and the decline of unions. Whatever the causal explanation, the fact that these trends coincide in time suggests that the developments in global trade, production, and economic arrangements over the past few decades have undermined many key features of the previous employment paradigm.

Rise of Income Inequality Another trend in contemporary labor markets that has operated in parallel with the decline in the standard contract of employment and the decline of unions is an increase in income inequality. In most industrialized countries, the share of national income going to labor has been declining for the past two decades. Figure A.25 uses the Gini coefficient as a measure of income inequality, and it shows an increasingly unequal Figure A.25  Change in Gini Coefficient Between Mid-1980s and Late 2000s for Working Age Population 25

Percentage

20 15 10 5 0

es at St d

gd om

ni te

d ni te U

U

ai n

K in

Sp

ds

et h

er

la n

pa n Ja N

Ita ly

y an m

er

Fr

an

ce G

D

en m

ar k

−5

Source: Author’s compilation based on OECD (2012d), using data for working age population.

400     Appendix

distribution of income between the mid-1980s and the late 2000s in all the countries discussed, with the exception of France. The increases in Germany and Denmark have been particularly dramatic. The question of what has caused the increase in inequality is hotly debated among scholars and policy analysts (see, for example, Harrison, McLaren, and McMillan 2011). Most economists attribute the increase in inequality to three factors: skill-biased technological change, globalization, and a decrease in employment protection and other equality-promoting institutions (see, for example, Guscini 2006). Although it is unlikely that the decline of the standard contract of employment is the sole or leading cause of rising inequality, it is likely a contributing factor. Without job security, nonunion and precarious workers are poorly situated to demand higher wages and benefits, and weak unions are unable to achieve equalizing legislative protections. Thus, as labor strength is eroded, workers receive a smaller share of their firms’ gains.

Conclusion To conclude, the data presented here document profound changes in labor markets in advanced industrialized countries over the past three decades. In the United States, Japan, Canada, Australia, and many European countries, growth in several types of nonstandard employment and the decline in job tenure for men in their mid-career years have been sizeable. These developments illustrate what the decline of the standard contract of employment. In addition, the data show a decline in union density and collective bargaining coverage and an increase in income inequality in most of the countries studied. This result suggests a causal relationship between changes in countries’ employment practices and the deterioration of living and working standards for their working populations. Several of the chapters in this volume also suggest the existence of such a link. Nonetheless, additional country-specific studies and further qualitative research would be useful to fully explore and understand the social consequences of the demise of the standard contract of employment.

Notes 1. I concentrate on a particular group of advanced economies, most of which are the subject of analysis in one or more of this volume’s chapters. Moreover, because of gaps in the data and definitional discrepancies between different countries, I offer the best available data, although the data are not always comparable. 2. Here and throughout this appendix, when I present OECD data, I include

Appendix     401 data from the seven European countries whose labor practices are discussed in this book: Denmark, France, Germany, Italy, the Netherlands, Spain, and the United Kingdom. Where OECD data includes Japan, Australia, Canada, and the United States, I present that as well. 3. A Department of Labor longitudinal survey found that in the United States, young men and women age eighteen to twenty-four had held an average of five jobs between 1998 and 2008. Of these, 56 percent had job durations of one year or less, 13 percent had job durations of one to two years, and only 9 percent had job durations of more than two years (U.S. Bureau of Labor Statistics 2012). 4. Union density in Germany rose from 1960 until 1980, and then it began a steady decline that has persisted to this day (Visser 2009).

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Index

Boldface numbers refer to figures and tables AAA (American Arbitration Association), 201 active labor market policy: and decentralization, 159; in Denmark, 214, 221–22, 225–26, 228–29; in Sweden, 44 Act on Flexible Work (1999) (Netherlands), 214 Act to Promote Resolution of Individual Labor Relations Disputes (2001) (Japan), 178 adjustment assistance programs, 33, 37 ADR (alternative dispute resolution), 174, 197–201, 203 aging of workers, 25 agriculture, forestry, and fishing industry, 64 á la carte collective bargaining agreements, 142 alternative dispute resolution (ADR), 174, 197–201, 203 American Arbitration Association (AAA), 201 American Express, 342 antidiscrimination laws, 69–71, 318–28 antipoverty programs, 278–79, 281, 294, 297 apparel sector, supply chain regulation in Australia, 236–40 Apple, 55 Araki, Takashi, 174 “arbeiter,” 254–55, 367

arbitration, 197, 200–201, 206–7 Arthurs, Harry, 1, 246, 353 Association for Conflict Resolution, 199 Atlantic Crossings (Rodgers), 362–63 at-will employment contracts, 58, 62– 63, 70, 219, 368 Australia: collective bargaining, 392, 393; Fair Work Ombudsman, 207; Higher Education Contribution Scheme, 282–83; job tenure, 391, 390; parental leave, 279; part-time employment, 381; pensions, 296, 298–99; Road Safety Renumeration Act (2012), 241; social assistance, 273–91; supply chain regulation, 233–52; temporary employment, 374, 379; union density, 392, 393 Austria: pension credits for working mothers, 316 automatic enrollment, 308 autonomous employment contracts, 101, 102–8 bargaining units, 66, 73–74 Belgium: temporary agency employment, 8 Biagi reforms, 98–99 bidding process, government contractors in Australia, 244–45 Birmingham-Solihull-Black Country Territorial Employment Pact, 161– 62

406     Index Bismarckian social insurance, 300 BLS (Bureau of Labor Statistics), 71, 366, 368–70, 383, 384, 385 Bredgaard, Thomas, 213 Bretton Woods, 53–54 Britain. See United Kingdom (U.K.) Bureau of Labor Statistics (BLS), 71, 366, 368–70, 383, 384, 385 Burlington Industries v. Ellerth, 201 business firms, fragmentation trends, 234–35. See also corporations business services, 139, 370 call centers, 166 Canada: collective bargaining coverage, 393; job tenure, 389, 390; labor law, 355; part-time employment, 379, 380; pensions, 296, 297, 298–99; poverty rate, 297; sector councils, 34–36, 38; social assistance, 277; supply chain regulation, 237; unemployment insurance, 34; union density, 392, 393 capabilities approach to familyfriendly policy, 333, 345 capitalism, 53, 54, 284–85 capture of regulatory process, 30–31 career counseling, 342 career planning, 343 caregiving pension credits, 314–15, 316, 320–26 Carman v. McDonnell Douglas, 199 Caruso, Bruno, 92, 95 case law, 181, 191 cash transfers, 286 Castles, Francis, 279, 284, 285 casual employment, 27, 234, 374. See also nonstandard employment Center for American Progress, 9 CEO compensation, 50–51 certification commissions, 99–100 Charter of Fundamental Rights (EU), 327, 334 Charter of Nice, 106, 107, 108 chemical industry, 123–29 child care, 337, 339–41 child poverty, 282

child-rearing pension credits, 314–15, 316, 320–26 China: competitive pressure from, 55 Circuit City v. Adams, 200 Civil Code (Italy), 97–98 civil law systems, 101 civil procedure, 184 CJEU (Court of Justice of the European Union), 108–9n3 CMEs (coordinated market economies), 217, 285, 359–60 codes, 238 collective bargaining: in Denmark, 48, 222, 394; in Japan, 266, 392, 396; legal employment standard contract role, 89–90; in Netherlands, 135, 140–45, 146, 396; in U.S., 65–67, 73–74, 398; Wagner model, 355 collective bargaining, in Germany, 115–34; conclusions, 129–32; coverage rates, 115, 117, 120, 395; current status of renewal, 122–27; derogation clauses, 121–32; erosion and exhaustion of (1990s-), 119–22; features of, 117–19; introduction, 115– 17; new forms of, 127–29; terms applied to nonunion members, 391–92 collective bargaining coverage rates: decline in, 391–92; Germany, 115, 117, 120, 395; Netherlands, 140–42 college loans, 282–83 Colvin, Alexander J.S., 194 common law, 90–91 Commons, John R., 362 communication methods, collective bargaining, 128 community-benefit agreements, 75 community of interest test, 66 Community Union National Network (CUNN), 262 community unions in Japan, 261–67 comparative law: as legal reform tool, 355; standard employment contract, 85–92; supply chain regulation, 245–47. See also cross-national learning competency-based organizations, 69

Index     407 complaints, 174–75, 178–82, 196–97. See also labor dispute resolution confidentiality, 199 constitutionalization, of employment relationship, 90, 106–8, 107–8 construction industry, 64–65 contingent work, 368–71. See also temporary employment continuing vocational training (CVT), 222, 226–27 contract work, 138, 254, 255–56, 258. See also nonstandard employment coordinated market economies (CMEs), 217, 285, 359–60 corporations: family-friendly policies, 341–44; fragmentation trends, 234– 35; social responsibility, 343–44; welfare programs, 60–61 corporatism and corporatist regimes: Denmark, 224, 227; examples of, 296; Germany, 130–32; labor market, 43, 274; Netherlands, 227; pensions, 296, 297, 298–99 cost shifting, 31, 37 Cour de cassation, 322–25 Court of Justice of the European Union (CJEU), 108–9n3 craft unions, 64–65 craft workers, 59, 62 cross-national learning: ambitions for, 353–57; flexicurity, 227–29; in global economy, 357–59; historical basis for, 362–63; limitations of, 353–56; obstacles to, 359–61; role of, 356–57; social assistance programs, 284–86; supply chain regulation, 245–47 CUNN (Community Union National Network), 262 CVT (continuing vocational training), 222, 226–27 Czech Republic: pensions, 296, 298– 99 decentralization: of Dutch collective bargaining, 143–44; of German collective bargaining, 118, 119, 120–21, 123; regional and local initiatives,

171; of social assistance, 225, 226; trends, 158–59, 233 decommodification, 294, 295 defined benefit pension plans: decline of, 71, 292–93; definition of, 311n1; legislative protection, 30; in U.K., 302; in U.S., 301 defined contribution pension plans: definition of, 311n1; growth of, 30, 71; risks of, 309; in U.S., 293 demand-side pressures, on employment contract, 24–25 democracy, 54 demutualization of employment relations, 93 Denmark: active labor market policies, 214, 221–22, 225–26, 228–29; child care, 340–41; collective bargaining, 48, 222, 394; flexicurity, 213–32; income inequality, 399; income security, 221, 224–25; job tenure, 387, 388; labor dispute resolution, 224; labor law, 217, 224; labor market characteristics, 217–21; labor market regulation, 46, 48–49; low-wage work in, 47; nonstandard employment, 219; parental leave, 338–39; part-time employment, 219, 379, 380; pensions, 225, 296, 298–99; poverty rate, 297; social assistance, 225; social services for elderly and disabled, 341; standard employment contract, 213; temporary employment, 372; unemployment, 226; unemployment insurance, 221, 224–25; union density, 392, 394; young workers in permanent employment, 373 dependent care, 341 deregulation: arguments for, 10–11; in Japan, 182; labor market impact, 24; in Netherlands, 150–51 derogation clauses, 121–32 disability payments, 144–45 disabled people, 70, 341 Dismissal Protection Act (2003) (Germany), 174

408     Index displaced workers, 24–25 dispute resolution. See labor dispute resolution Domei (Japan Confederation of Labor), 268n2 domestic work, 337, 345 earnings. See wages and earnings East Germany, 119, 120, 123–24 ECHR (European Convention on Human Rights), 108, 323, 324 ECHR (European Court of Human Rights), 108n3 ECJ (European Court of Justice), 52, 104, 319, 321 economically dependent workers, 104–5, 108 economic efficiency-social equality tradeoff, 44–47 economic independence, right of, 147 economic performance, and flexicurity systems, 229 education: college loans, 282–83; compulsory school-leaving age, 26; corporate initiatives, 342–43; high school dropouts, 25–26. See also training educational attainment, and part-time employment, 139 efficient market hypothesis, 44 elderly workers, 177, 297, 341. See also pensions embedded liberalism, 53 Employee Polygraph Act (1988) (U.S.), 70 employees: definition under NLRA, 67; peer review panel membership, 197–98; power of, 208–9; representation in labor disputes, 208; status as, 204–5, 237 employers: definition under NLRA, 67; family-friendly policies, 341–44; fragmentation trends, 234–35; labor law enforcement, 32–33, 47; social responsibility, 343–44; welfare programs, 60–61 employers’ associations: cooperation with unions in Spain, 163; in Ger-

many, 115, 117–21; in Japan, 256; in Netherlands, 139–41; trust of unions, 227–28 employer-sponsored health insurance, 71–72 Employment Act (2002) (U.K.), 174, 202 employment contracts: future of, 92– 93; mandatory arbitration clauses, 200–201, 206–7; trends, 95–97. See also nonstandard employment; standard employment contract (SEC) employment discrimination, 146, 196 employment growth, regional and local-level programs, 167 employment law. See labor law employment pacts, 160–63, 167 employment pools, 163–65, 168 Employment Portfolio Strategy (Japan Federation of Employers’ Association), 256 employment protection legislation (EPL), 149–50, 218–21, 222, 224. See also specific laws and regulations employment rate: cross-national comparison, 218; and family-friendly policies, 345–46; gender differences in Netherlands, 139–40, 141; minimum wage impact, 30 employment relationship: at-will employment contracts, 58, 62–63, 70, 219, 368; changes in, 3–7; definition of, 136–37; instability of, 1; in Netherlands, 137–38; trends, 195–96. See also nonstandard employment; standard employment contract (SEC) enforcement of labor laws, 32–33, 37, 47 enterprise-based unions in Japan, 257–61, 263, 266, 267 entire contract doctrine, 62 EPL (employment protection legislation), 149–50, 218–21, 222, 224. See also specific laws and regulations equal pay for women, 319 Esping-Andersen, Gøsta, 274, 295, 334, 336–38

Index     409 EU (European Union). See European Union (EU) Europe: job tenure, 385–87; temporary agency employment, 8, 375–77; temporary employment, 371–74. See also European Union (EU); specific countries European Civil Code, 106–7 European Commission: employment law reform, 104, 105–6, 107; flexicurity, 214–15; labor market indicators, 218; pensions, 310, 317; territorial pacts, 160 European Community, 52 European Convention on Human Rights (ECHR), 108, 323, 324 European Council, 214 European Court of Human Rights (ECHR), 108n3 European Court of Justice (ECJ), 52, 104, 319, 321 European Expert Group on Flexicurity, 228 European Foundation for the Improvement of Living and Working Conditions, 377 European Social Funds, 167 European Union (EU): Charter of Fundamental Rights, 327, 334; familyfriendly policies, 334–36; FixedTerm Directive, 151–52; flexicurity, 214–15; gender discrimination laws, 319–20; labor market indicators, 218; labor market regulation, 52; Lisbon Strategy, 334, 339; temporary agency employment, 375– 77; Treaty of Amsterdam, 158; Treaty of Lisbon, 106, 107, 358; unemployment rates, 136. See also European Commission Eurostat, 138, 222, 337 exhaustion, institutional, 116 Fair Labor Standards Act (1937) (U.S.), 76n2, 237 Fair Work Act (2009) (Australia), 244 Fair Work Amendment (2012) (Australia), 239

Fair Work Principles (FWP), 236, 242– 45, 246 family assistance, in Australia, 280–82 family-friendly policies, 333–50; capabilities approach, 333, 345; conclusions, 344–46; corporate initiatives, 341–44; EU directives, 334–36; EU member states, 336–41; introduction, 333–34 family structure, 275 Farrager v. City of Boca Raton, 201 favor, principle of, 107 financial crisis, 42–43, 92–93, 131–32, 215 Finland: parental leave, 338 fixed-term contracts: in Australia, 234; definition of, 368; in Denmark, 219; in EU, 301; in Italy, 99; in Netherlands, 135, 137, 138, 148–49, 151–52. See also temporary employment Fixed-Term Directive (EU), 151–52 Flexibility and Security Act (1999) (Netherlands), 147–48, 149 Flexibility and Security Agreement (1996) (Netherlands), 143 flexible labor markets: and continuing vocational training, 222; in Denmark, 219, 222, 224, 225; in Italy, 98; trends, 96; in U.K., 302. See also flexicurity flexible work schedules, 342 flexicurity: cost benefit analysis, 228– 29; definition of, 214, 215–17; forms of, 43; implementation challenges, 227–29; origins of, 213–15 flexicurity, Danish system, 213–32; challenges of, 222–27; features of, 217–22; history of, 214; introduction, 213–17; policy lessons from, 227–29 flexicurity, Dutch system, 135–54; collective bargaining system, 140–45; history of, 213–14; introduction, 135–38; nonstandard employment, 138–40, 145–52 flextime, 119 Fordism, 101, 102, 158, 357 foreign workers, 25, 75, 177

410     Index 401(k) plans, 309 fragmentation of production, 103 framework collective bargaining agreements, 142–43, 165–66 France: antidiscrimination laws, 319, 320–26; child-care pension credits, 314–15, 316, 320–26; collective bargaining coverage, 394; employment pools, 163–64, 165; income inequality, 399; job tenure, 387, 388, 389; labor disputes, 181, 207; labor law system, 87, 91–92; labor market regulation, 49; new employment contract, 102; nonstandard employment, 318; part-time employment, 318, 379, 380; pensions, 296, 298–99, 310, 314–15, 317–18, 320–26; poverty rate, 297; temporary employment, 372; union density, 392, 394; young workers in permanent employment, 373 Freedland, Mark, 81 freelance workers, 165–66. See also nonstandard employment full employment, 33 full-time employment. See standard employment contract (SEC) GATT (General Agreement on Tariffs and Trade), 53, 54 GdE (groupements d’employeurs), 163– 64, 165, 168 GDP (gross domestic product), 157 gender differences: child care, 337; domestic work, 337; employment rate in Netherlands, 139–40, 141; job tenure, 382–89; part-time employment, 379–80, 381 gender discrimination, 316, 320–28, 334–35 gender equality: corporate initiatives, 343–44; EU policies, 334–35; gender-neutral rules, 327–28; standard employment contract decline and, 314 gender-neutral policy, 324–28, 336 gender pension gap, 314–32; and anti-

discrimination laws, 318–26; benefits to nonstandard workers, 327– 28; caregiving credit programs, 314–15, 316, 320–26; conclusions, 328–29; in France, 315–16; introduction, 314–15; pension reforms mitigating, 317–18; reasons for, 316; in U.S., 315 General Agreement on Tariffs and Trade (GATT), 53, 54 General Council of Trade Unions of Japan (Sohyo), 267–68n2 General Old Age Pensions Act (Netherlands), 146 German Trade Union Federation, 117 Germany: child care, 337; collective bargaining, 115–34, 391, 395; Dismissal Protection Act (2003), 174; domestic work, 337; employment discrimination lawsuits, 196; globalization impact, 55; income inequality, 399; job tenure, 387, 388; labor disputes, 174, 175, 181; labor law system, 87; labor market indicators, 218; labor market regulation, 46, 49–50, 52; nonstandard employment, 115, 122, 367; outsourcing in, 119; part-time employment, 379, 380; pension credits for working mothers, 316; pensions, 296, 298–99, 300; poverty rate, 297; real wages, 119–20; temporary employment, 8, 115, 122, 372; territorial pacts, 160; unemployment, 50; unions and unionization, 115, 117, 118, 119, 128–31, 391, 392, 395; young workers in permanent employment, 373 Gilmer v. Interstate/Johnson Lane, 200 global economic crisis, 42–43, 92–93, 131–32, 215 globalization of labor law, 246 globalization of labor markets, 3–4, 51–56, 233, 357–59. See also supply chain regulation Global Reporting Initiative, 343 government: role of, 235; trust of by

Index     411 social partners, 227–28. See also regulation government contractors, 242–45 Great Britain. See United Kingdom (U.K.) Great Depression, 53 Greece: pensions, 330n13; temporary agency employment, 8 grievance procedures, 198, 202, 203 gross domestic product (GDP), 157 groupements d’employeurs (GdE), 163– 64, 165, 168 Gunderson, Morley, 23, 58 Haipeter, Thomas, 115 HALDE (Haute autorité de la lutte contre les discriminations et pour l’égalité), 323, 327 Hartz reforms, 49 Harvard Business Review, 67–68 Haute autorité de la lutte contre les discriminations et pour l’égalité (HALDE), 323, 327 health care industry, 138, 139 Health Care Security Ordinance (San Francisco, Calif.), 75 health insurance, 70–72, 75 health issues, displaced workers, 24–25 HECS (Higher Education Contribution Scheme) (Australia), 282–83 Higher Education Contribution Scheme (HECS) (Australia), 282– 83 high school dropouts, 25–26 Holland. See Netherlands home-based work, 27. See also nonstandard employment hotel industry, 138, 139 “hot goods” provisions, 237 household structure, 275 Howe, John, 233 human resource management, 59, 195–96, 204 ICMS (integrated conflict management systems), 199–200

ILO (International Labour Organization), 214, 245, 358–59 IMF (International Monetary Fund), 53 immigrants and immigration, 25, 75, 177 imperative integration, principle of, 107 income inequality, 47, 50–51, 399, 400 income redistribution, 278–79, 281, 294, 297 income security, 221, 224–25 income smoothing, 282–84 income-tested benefits, 276–81, 286 independent contractors, 74, 135, 204– 5, 234 independent employment contracts (IWC), 101, 102–8 industrial relations. See collective bargaining industry-focused labor tribunals, 207 inequality of income, 47, 50–51, 399, 400 information systems, investment in, 167 institutional pressures, on employment contract, 26 integrated conflict management systems (ICMS), 199–200 integration of labor standards, legal standard employment contract variable, 83, 84–92 intellectual property disputes, 205–6 interest groups, capture of regulatory process, 30–31 internal labor markets, 2, 61, 66, 67– 68, 195 International Confederation of Private Employment Agencies (CIETT), 377 International Labour Organization (ILO), 214, 245, 358–59 International Monetary Fund (IMF), 53 International Women’s Group, 344 in-work benefits, 280–82

412     Index Ireland: pensions, 294; social assistance, 277; temporary agency employment, 8 Italy: antidiscrimination laws, 319; Biagi reforms, 98–99; Civil Code, 97–98; collective bargaining coverage, 395; job tenure, 387, 388; labor law system, 87; labor market regulation, 49, 97–100, 105–6, 165–66; new employment contract, 102; part-time employment, 379, 380; pensions, 296, 298–99, 300, 330n13; poverty rate, 297; temporary employment, 164–65, 372; territorial pacts, 160, 162–63; unions and unionization, 165–66, 392, 395; young workers in permanent employment, 373 Japan: collective bargaining, 266, 392, 396; economic bubble (early 1990s), 177; income inequality, 399; job tenure, 391; judicial reform, 182; labor dispute resolution, 175–82; labor law, 178, 181, 189, 190–91, 256, 355; nonstandard employment, 7–8, 177, 178, 253–70, 371–74, 377–79, 380; old age poverty rate, 297; part-time employment, 254– 55, 257, 258, 380; pensions, 296, 298–99; unions and unionization, 177, 253, 256–67, 392, 396; young workers in permanent employment, 373 Japan Business Federation (Nippon Keidanren), 183, 186 Japan Community Union Federation (JCUF), 262 Japan Confederation of Labor (Domei), 268n2 Japanese Employment Status Survey, 253 Japanese Federation of Textile, Chemical, Food, Service, and General Workers’ Unions, 258 Japanese Institute for Labour Policy and Training, 180 Japanese Ministry of Health, Labour,

and Welfare, 178, 257, 258, 366, 377–79, 380 Japanese Trade Union Confederation (Rengo), 183, 186, 262–67 Japan Federation of Employers’ Association (Nikkeiren), 256 JCUF (Japan Community Union Federation), 262 job ladders, 61 job security: and at-will employment contracts, 62–63, 70; definition of, 166–67; in Denmark, 217, 224; in fixed-term ­employment contracts in Netherlands, 148–49; U.S. trends, 72. See also flexicurity job security, regional and local experiments, 155–73; classification based on objectives, 166–70; conclusions, 170–71; employment pools, 163–65; evaluation challenges, 171; introduction, 155–59; regulation by contract, 165–66; territorial pacts, 160– 63 job stability, and employment contract changes, 26–27 job tenure: in Australia, 391, 390; in Canada, 389, 390; decline in, 6, 68, 381–83; definition of, 381; in Denmark, 387, 388; EU average, 229n1; in Europe, 385–87; in France, 387, 388; gender differences, 382–89; in Germany, 387, 388; history of, 3; in Italy, 387, 388; in Japan, 391; measurement of, 381–83; in Netherlands, 150, 387, 388; in Spain, 387, 388; in U.K., 150, 387, 388; in U.S., 367, 383–84; young workers, 6, 68 job training. See training judges, Japanese labor tribunal system, 175, 185–86, 189, 190 judicial reform, in Japan, 182 jurisdictional issues, 206–7, 237 Kahn-Freund, Otto, 88–91, 246, 247, 355 Kuttner, Robert, 42, 58

Index     413 Labor Contract Act (2007) (Japan), 181, 191 labor dispute resolution, 194–210; Australian government contractors, 244; in Denmark, 224; in Europe, 174, 175; in France, 181, 207; in Germany, 174, 175, 181; introduction, 194–95; in Japan, 175–82; in poststandard contract world, 207–9; in Sweden, 198; trends, 196–204; in U.K., 174, 175, 181, 202–3, 207; in U.S., 174, 197–203. See also labor tribunal system of Japan labor disputes, 174–75, 178–82, 194, 196–97, 204–7. See also labor dispute resolution labor force participation: crossnational comparison, 218; and nonstandard employment, 157; women, 25, 137, 275 Labor Foundation, 146 labor law: of Australia, 245; of Canada, 355; cross-border transfers, 245–46; cross-national comparisons, 85–92, 354–56; of Denmark, 217, 224; employment basis, 7; and employment relationship, 65–67; enforcement of, 32–33, 37, 47; expansion of, 69–70; of France, 87, 91–92; of Germany, 87; globalization of, 246; governments’ lack of concern for, 360; of Italy, 87; of Japan, 178, 181, 189, 190–91, 256, 355; of Netherlands, 143–44, 146–47, 149; nonstandard employment, 28; reform of, 73–75, 235; temporary employment, 377; of U.K., 87, 89–90, 93, 355; of U.S., 87, 93 labor market institutions, models of, 43–44, 47–50. See also collective bargaining labor market intermediaries, 74, 99 labor market regulation. See regulation labor-market transitions during life course, 170–71 labor policy design: alternatives to laws and regulations, 33–34, 37–38;

attention to details, 34; Canadian sector councils, 34–36, 38; cost shifting, 31; enforcement issues, 32–33, 37; forum shopping, 31–32; targeting, 29, 36–37; unintended consequences, 29–31, 37 Labor Relations Commissions, 191n3 labor rights, 25, 69–70, 190–91, 353 Labor Standards Law (Japan), 259–60 Labor Tribunal Committee (LTC), 183–84, 186, 191, 192n8 labor tribunal system of Japan, 174– 93; conclusions, 189–90; dispute resolution effectiveness, 186–87; establishment, 176, 184; features, 183– 84; history, 175–82; introduction, 174–75; judges, 175, 185–86, 189, 190; labor law impact, 190–91; procedural issues, 184–85, 190; reasons for, 177; reputation of, 185; resolution-oriented justice, 187–89; use of, 184–85 labour hire employment, 379. See also temporary agency workers laissez-faire, 53, 54 laws and legislation: definition of, 354; role of, 354; supply chain regulations in Australia, 236–42. See also specific legislative acts lay judges, Japanese labor tribunal system, 175, 185–86, 189, 190 layoffs, 70 legal aid, 185, 189 legal standard employment contract, 81–94; conclusions, 92–93; crossnational comparison, 85–92; definition of, 83; introduction, 81–82; theoretical considerations, 82–85 lex mercatoria, 103 liberalization, 45, 53, 132 liberal market economies (LMEs), 130, 285, 359–60 liberal regimes, 284–86, 296, 297, 298– 99 life courses, 170, 273–75, 278–79, 282– 83, 287 lifelong learning, 222 life-support centers (LSCs), 264, 265

414     Index Lisbon Strategy, 334, 339 Lisbon Treaty, 106, 107, 358 litigation, in Japan, 181, 183, 184–85 living wage ordinances, 75 local-level interventions in labor-market policy. See job security, regional and local experiments López, Julia, 333 Los Angeles, Sweat Free Procurement Ordinance, 246 low-wage work and workers: in Australia, 280–81; definition of, 47; in Denmark, 47, 221, 225; in Germany, 122; offshoring of, 4, 10, 24; in U.S., 47; worker centers, 75 LSCs (life-support centers), 264, 265 LTC (Labor Tribunal Committee), 183–84, 186, 191, 192n8 majorations de durée d’assurance (MDA), 316–17, 320, 322–26 male breadwinner model, 275, 301, 308, 314, 316 mandatory arbitration, 200–201, 206–7 manufacturing, 64, 72, 139 market mechanisms, 33–34, 37, 43 maternity leave, 316, 335–39 maternity pension credits, 314–15, 316, 320–26 means-tested benefits, 276–81, 286 mediation, Japanese labor tribunals, 186–87 mediators, 199 men: discrimination against, 320–25; domestic work, 337, 345; employment rate in Netherlands, 140; job tenure, 68, 382–89; part-time employment, 147, 380 mercantilism, 55 metalworking industry, in Germany, 123–29, 130 methodological limitations, of crossnational learning, 361 middle class, 9, 10, 24–25 mini-jobs, 122, 367 minimum wage, 30 mining, 64

misclassification of workers, 47 mobility, employee, 195, 219, 221 mobilization of employees, 127–28 moral hazard, 228 Nakamura, Keisuke, 253, 391 National Arbitration Forum (NAF), 201 National Council of Worker’s Welfare (Japan), 268n3 National Employment Savings Trust (NEST) (U.K.), 306–8 National Exhibition Centre (NEC), 161–62 national income, wage share of, 9 National Labor Relations Act (NLRA) (1935) (U.S.), 47, 66, 67, 76n2 National Labor Relations Board (NLRB), 66, 73–74 National Pensions Savings Scheme (NPSS) (U.K.), 305 NDC (notional defined contribution) plans, 300, 311n3 NEC (National Exhibition Centre), 161–62 neoliberalism, 46, 52 Netherlands: collective bargaining, 135, 140–45, 146, 396; employment rate, 139–40, 141; flexicurity, 135– 54; income inequality, 399; job tenure, 150, 387, 388; labor laws, 143– 44, 146–47, 149; labor market indicators, 218; nonstandard employment in, 137, 138–40, 145–52, 339–40; part-time employment, 135, 137, 138–39, 144, 145–47, 151, 339– 40, 379, 380; pensions, 146, 296, 298–99; temporary employment, 8, 138, 139, 141, 147–48, 149, 151, 152, 372; unemployment rate, 135, 136, 145; unions and unionization, 142, 143, 151, 392, 396; young workers in permanent employment, 373 New Course Agreement (1993) (Netherlands), 143 New Deal, 65, 362–63 new employment contract, 100–108

Index     415 New Zealand: pensions, 294; social assistance, 277 NGOs (nongovernmental organizations), 247 Nikkeiren (Japan Federation of Employers’ Association), 256 Nippon Keidanren (Japan Business Federation), 183, 186 Nitta, Michio, 253, 391 NLRA (National Labor Relations Act) (1935) (U.S.), 47, 66, 67, 76n2 NLRB (National Labor Relations Board), 66, 73–74 nongovernmental organizations (NGOs), 247 nonstandard employment: characteristics of, 4, 27–28; definition of, 27, 136–37; in Denmark, 219; familyfriendly policies, 335–36; in France, 318; in Germany, 115, 122, 367; growth of, 67, 155–57, 275, 367–80; in Japan, 7–8, 177, 178, 253–70, 371– 74, 377–79, 380–81; in Netherlands, 137, 138–40, 145–52, 339–40; pensions, 292–93, 308–11, 327–28; reasons for, 287; regulatory challenges, 29–36; risks of, 157–58; types of, 367; in U.K., 302–3, 304, 305, 306; unionization, 28, 165–66, 256–67; women, 27, 138, 156, 177, 315, 339– 40. See also specific types on nonstandard employment such as temporary employment, part-time employment, etc. nonstandard employment, in Japan, 253–70; conclusions, 267; introduction, 253; trends, 7–8, 177, 178, 253– 56, 371–74, 377–79, 380; union response, 256–67 Nordic countries: labor law institutions, 355; labor market model, 43; labor market regulation, 274; productivity and wages, 43; tax-transfer system, 278; universal child care, 340; welfare state, 217, 278. See also specific countries normativity, legal, 354 Norris-LaGuardia Act (U.S.), 76n2

notional defined contribution (NDC) plans, 300, 311n3 NPSS (National Pensions Savings Scheme) (U.K.), 305 Oakwood Care Center and N&W Agency case, 76n2 occupational safety and health, 70 O’Donnell, Anthony, 273 OECD (Organisation for Economic Cooperation and Development). See Organisation for Economic Cooperation and Development (OECD) Office for National Statistics (ONS), 303, 304, 305, 306, 307 offshoring, 4, 10, 24 old-age security, 293–94. See also pensions older workers, 25 ombudspersons, 198–99, 207 on-call work, 27, 148–49. See also nonstandard employment ONS (Office for National Statistics), 303, 304, 305, 306, 307 open-ended employment contracts: employment pools, 163, 165; EU Charter of Fundamental Rights, 108; in Netherlands, 137, 138, 147, 149–52. See also standard employment contract (SEC) Organisation for Economic Co-operation and Development (OECD): flexicurity, 214; income inequality, 47, 399; job tenure, 385–90; member countries, 311n2; part-time work, 152n2, 379–80; pensions, 294–95; temporary employment, 371–74, 375–77; union density, 391–92; wage share of national income, 9 organizational practices, 196 organization-centric dispute resolution in U.S., 194–210; alternatives to, 207; conclusions, 208–9; dispute resolution procedures under, 196– 204; introduction, 194–95; self-regulatory approaches, 203–7; trends, 195–96

416     Index outsourcing: business structure impact, 234; in Germany, 119; impact on vulnerable workers, 233; prevalence of, 47. See also supply chain regulation outwork and outworkers, 236–42. See also nonstandard employment pacts, territorial, 160–63 paid leave, 279–80, 282, 373 parental leave, 279, 287, 334–39 part-time employment: in Australia, 381; in Canada, 379, 380; defined as nonstandard employment, 27; definition of, 379; in Denmark, 219, 379, 380; discrimination against, 316; in France, 318, 379, 380; gender differences, 379–80, 381; in Germany, 379, 380; growth of, 379–80; in Italy, 379, 380; in Japan, 254–55, 257, 258, 380–81; in Netherlands, 135, 137, 138–39, 144, 145–47, 151, 339– 40, 379, 380; in Spain, 379, 380; in U.K., 302–3, 304, 306, 379, 380; unionization efforts, 258; in U.S., 379, 380. See also nonstandard employment path dependence, 284–86, 297, 360– 61 peer review panels, 197–98 pensions, 292–332; and antidiscrimination laws, 318–26; in Australia, 296, 298–99; benefits, 296–97; in Canada, 296, 297, 298–99; caregiving credit programs, 314–15, 316, 320–26; coverage rates, 303–5; in Czech Republic, 296, 298–99; decline in, 71, 292–93; in Denmark, 225, 296, 298–99; earnings history used in determination, 318, 327; employment link, 293–95; in France, 296, 298–99, 310, 314–15, 317–18, 320–26; future research, 310; gender gap, 314–32; in Germany, 296, 298–99, 300; in Greece, 330n13; insurance in U.S., 70; introduction, 292–302; in Ireland, 294; in

Italy, 296, 298–99, 300, 330n13; in Japan, 296, 298–99; and labor market change, 294; models of, 293–95; in Netherlands, 146, 296, 298–99; in New Zealand, 294; for nonstandard workers, 292–93, 308–11, 327–28; in Poland, 296, 298–99, 300; reform trends, 297–302, 310–11, 314, 317– 18, 322–23; regulatory impact, 30; retirement age, 317–18, 328; in Slovak Republic, 296, 298–99; structure of, 295–96; in Sweden, 296, 298–99, 309–10; in U.K., 296, 298–99, 302–8, 309; in U.S., 70, 296, 298–99, 300– 301, 309, 315; by welfare regime typology, 295–302 permanent employment, 373–74 personal employment contracts, 101, 102–8 personnel management movement, 60–61 Pforzheim Agreement, 124 Piore, Michael, 69–70 plant-level collective bargaining, 118– 19, 123, 124, 128–29, 131 Poland: pensions, 296, 298–99, 300 portable employment-based entitlements, 284 post-socialist regimes, 296, 297, 298– 99 poverty, 30, 278–79, 281–82, 286, 295 power, of employees vs. organization, 208–9 precarious work and workers, 167–68, 233, 234, 236–42. See also nonstandard employment; supply chain regulation pregnant workers, 70 privatization, 115, 235 probationary employment, 91–92 procedural issues, in Japanese labor tribunal system, 184–85, 190 procurement policies, Australian supply chain regulation, 242–45 productivity, and nonstandard employment, 157 Prohibition of Discrimination by

Index     417 Working Hours Act (1996) (Netherlands), 146 project contracts, 99 promotion pathways, 61 public employees, 64, 65, 72, 207 public sector supply chain regulation in Australia, 242–45 rank-and-file participation, 128–29, 130 rational choice theory, 309 Rawling, Michael, 233 real wages, in Germany, 119–20 recovery rights, Australian supply chain regulation, 240–41 redistribution of income, 278–79, 281, 294, 297 Regalia, Ida, 155 regime theory, 285–86 regional interventions in labor-market policy. See job security, regional and local experiments regional labor tribunals, 207 regional unions in Japan, 261–67 Regoverning the Workplace (Estlund), 203 regulation, 42–57; conclusions, 56; cross-national comparison, 43–44, 47–50; decline of postwar regimes of, 7–10; in Denmark, 46, 48–49; and economic security, 274; employment contract impact, 26, 29– 31, 69–73; EU law, 52; in France, 49; in Germany, 46, 49–50, 52; globalization impact, 51–56; introduction, 42–44; in Italy, 49, 97–100, 105–6, 165–66; as legal standard employment contract variable, 83–92; new approaches, 1–2; new model for, 10–12, 102–6; path dependency, 360–61; self-regulation, 144, 203–7; and skills-biased technology shift, 50–51; social equality–economic efficiency tradeoff, 44–47; of supply chain, 233–52; in U.K., 105; in U.S., 47–48. See also labor policy design Rengo (Japanese Trade Union Confederation), 183, 186, 262–67 Rent-a-Center West v. Jackson, 206–7

resolution-oriented justice, 187–89 restaurant industry, 138, 139 retail industry, 31, 130, 138, 139, 236– 40. See also supply chain regulation retirement, 25. See also pensions retirement age, 317–18, 328 risk management, social assistance as, 273–74, 287–88 Road Safety Renumeration Act (2012) (Australia), 241 sabbaticals, 342–43 sanctions, Australian supply chain regulation, 238–39, 244 San Francisco Health Care Security Ordinance, 75 savings programs, 282–84 scientific management, 59–60 seasonal work, 27. See also nonstandard employment SEC (standard employment contract). See standard employment contract (SEC) secondary boycotts, 66 sector councils, in Canada, 34–36, 38 self-employment: age distribution, 139; defined as nonstandard employment, 27; in Denmark, 219; in Japan, 254; in Netherlands, 135; regulation of, 165–66. See also nonstandard employment self-regulation, 144, 203–7 semi-mandatory law, 144, 151 seniority, 63, 208 September Compromise, 222 SERPS (State Earnings-Related Pension Scheme) (U.K.), 302 sex discrimination, 316, 320–28, 334–35 sexual harassment, 201–2 SHRM (strategic human resource management), 195–96, 204 sick pay, 144–45 skilled workers: at-will employment contracts, 62; shortages of, 24, 25, 44; and strategic human resource management, 195; and Taylorism, 59–60

418     Index skills-biased technology shift, 50–51 Slovak Republic: pensions, 296, 298– 99; poverty rate, 297 social assistance: corporate programs, 60–61; in Denmark, 225; history of, 273–75; policy recommendations, 275–76; vs. social insurance, 276– 80 social assistance, in Australia, 273–91; conclusions, 286–88; cross-national learning potential, 284–86; family assistance, 280–82; features of, 276– 80; history of, 276–77; introduction, 273–76; in-work benefits, 280–82; savings programs, 282–84 social contract model of labor relations, 43, 46 social democratic regimes, 296, 297, 298–99 social equality-economic efficiency tradeoff, 44–47 social insurance, 60–61, 71, 276–80, 286–87, 300 social movement unionism, 130 social risk management programs, 273–74 Social Security, U.S., 288n5, 301, 315 Social Security Code (France), 322–23 social security programs, 144–45, 340 South Africa: labor law, 355 Spain: child care, 337; collective bargaining coverage, 397; dependent care, 341; domestic work, 337; job tenure, 387, 388; maternity leave, 338; part-time employment, 379, 380; supply chain regulation, 237; temporary employment, 372; territorial pacts, 160, 163; union density, 392, 397; young workers in permanent employment, 373 staffing agency workers. See temporary agency workers standard employment contract (SEC): cross-national comparison, 85–92; definition of, 2, 82–83, 137, 155, 213, 366; in Denmark, 213; features of, 2–3, 233; fragmentation of, 233; fu-

ture of, 92–93; heterogeneity of, 88– 92; history of, 2; in Japan, 178, 253; job security from, 3, 166–67; as legal concept, 81–94; in Netherlands, 150–51; theoretical considerations, 82–85 standard employment contract, decline of, 23–41; causes of, 1, 3–4; conclusions, 36–38; cross-national learning, 356; and decentralization, 195; definition of, 366; demand-side pressures, 24–25; in Europe, 155–56; evidence of, 5–7; and gender equality, 314; institutional pressures, 26; introduction, 23; in Japan, 253; and job instability, 26–27; and nonstandard employment, 27–28; regulatory implications, 26, 29–36; supply chain impact, 234–35; supply-side pressures, 25–26; theoretical considerations, 82–85; in U.K., 301–2; in U.S., 67–69 standard employment contract, in Italy, 95–111; history of, 97–100; introduction, 95; new employment contract, 100–108; trends, 95–97 standard employment contract, in U.S., 58–78; conclusions, 75; decline of, 67–69; history of, 59–65; introduction, 58–59; labor law reform to handle decline of, 73–75; labor market regulation trends, 69–73; law’s role in, 65–67; nature of, 59 standby employment, in Netherlands, 148–49 State Earnings-Related Pension Scheme (SERPS) (U.K.), 302 State Pension (U.K.), 302 Statistics Bureau, 254 statutory law, 90–91 Stone, Katherine V.W., 1, 58, 301, 327, 366 strategic human resource management (SHRM), 195–96, 204 Strauss, Kendra, 93, 292 stress management, 342–43 strikes, 128, 196

Index     419 student loans, 282–83 substantive law, 191 Sugeno, Kazuo, 182 Suk, Julie C., 314 supply chain, standard employment contract breakdown impact, 234–35 supply chain regulation, 233–52; introduction, 233–35; legislative schemes, 236–42; policy lessons, 245–47; public sector, 242–45 supply-side pressures, on employment contract, 25–26 Supreme Court, Japan, 191–92n4–7 Sweden: child care, 337; domestic work, 337; labor dispute resolution, 198; labor market indicators, 218; labor market institutions, 44; labor market regulation erosion due to globalization, 52; pensions, 296, 298–99, 309–10; poverty, 310; social assistance, 288n3; temporary agency employment, 8; unemployment, 44 taxation, in Australia, 278 Taylorism, 59–60 Teamsters, 64 technological change, 3–4, 24, 50–51 telecommuting, 27. See also nonstandard employment temporary agency workers: advantages of, 164; in Australia, 379; in Europe, 8, 375–77; in Italy, 164–65; in Japan, 7–8, 254, 255–56, 258, 377– 79; nature of work, 374; in Netherlands, 147–48, 149; skill acquisition, 74; in U.S., 374–75 temporary employment: in Australia, 374, 379; defined as nonstandard employment, 27; in Denmark, 372; and employment protection legislation, 218; in Europe, 371–74; in France, 372; in Germany, 8, 115, 122, 372; in Italy, 164–65, 372; in Japan, 7–8, 254, 255–56, 258, 371–74, 377–79; in Netherlands, 8, 138, 139, 141, 147–48, 149, 151, 152, 372; in

Spain, 372; temporary workers’ status as employee, 204–5; types of, 367–68; in U.K., 303, 305, 372; unionization, 258; in U.S., 67, 368– 71, 374–75; young workers, 139. See also fixed-term contracts; nonstandard employment tenure, job. See job tenure termination of employees: dispute resolution in U.K., 202; disputes over, 181; employment protection legislation in Netherlands, 149–50; EU Charter of Fundamental Rights, 108; Japanese labor tribunal system, 188–89; Japanese law, 256 territorial pacts, 160–63, 167 total quality management (TQM), 69 tradeoffs, social equality–economic efficiency, 44–47 Trade Union Law (Japan), 261, 266 training: Denmark, 222, 226–27; labor market intermediaries’ provision, 74; local initiatives, 167; minimum wage impact, 30 transnational impact, of Australian supply chain regulation, 239–40 transnational labor market regulation, 356–59 Treaty of Amsterdam, 158 Treaty of Lisbon, 106, 107, 358 Triffin Dilemma, 54 trucking industry, 240–41 trust, 227–28 two-class labor system, 49–50 unemployment: cross-national comparison, 218; in Denmark, 226; in Germany, 50; in Netherlands, 135, 136, 145; nonstandard employment risk, 157; regional and local-level programs, 167; in Sweden, 44. See also active labor market policy unemployment insurance: in Australia, 286–87; in Canada, 34; in Denmark, 221, 224–25; moral hazard problem, 228; in U.S., 47–48

420     Index unintended consequences, regulatory challenges arising from, 29–31, 37 union density: decline in, 390–99; in Germany, 121; in Japan, 177, 392, 396; in Netherlands, 142; in U.S., 9, 72–73 unions and unionization: in Australia, 247; and flexicurity systems, 227– 28; in Germany, 115, 117, 118, 119, 128–31, 391, 392, 395; as government regulation alternative, 34, 37– 38; in Italy, 165–66, 392, 395; in Japan, 177, 253, 256–67, 392, 396; membership trends, 26, 72–73, 115, 196–97, 257; in Netherlands, 142, 143, 151, 392, 396; nonstandard workers, 28, 165–66, 256–67; reform of laws, 73–74; strikes, 128, 196; trust of employers, 227–28; in U.K., 130, 392, 397; in U.S., 9, 47, 63–65, 67, 72–73, 392, 398. See also collective bargaining United Kingdom (U.K.): BirminghamSolihull-Black Country Territorial Employment Pact, 161–62; collective bargaining coverage, 397; employment discrimination lawsuits, 196; income inequality, 399; job tenure, 150, 387, 388; labor disputes, 174, 175, 181, 202–3, 207; labor law system, 87, 89–90, 93, 355; labor market indicators, 218; labor market regulation, 105; nonstandard employment, 302–3, 304, 305, 306; part-time employment, 302–3, 379, 380; pensions, 296, 298–99, 302–8, 309; social assistance, 277, 281, 288n3; temporary employment, 303, 305, 372; unions, 130, 392, 397; Workplace Employment Relations Surveys (WERS), 196; young workers in permanent employment, 373 United Nations Global Compact, 343 United Nations Women Empowerment Principles, 343 United States (U.S.): collective bar-

gaining, 65–67, 73–74, 398; crossnational learning, 362–63; economic recovery, 48; employment discrimination lawsuits, 196; income inequality, 399; job security, 72; job tenure, 367, 383–84; labor dispute resolution, 174, 194–210, 197–203; labor law system, 87, 93; labor market regulation, 47–48; low-wage work in, 47; nonstandard employment, 67, 367, 368–71, 374–75, 379, 380; part-time employment, 379, 380; pensions, 70, 296, 298–99, 300– 301, 309, 315; social assistance, 281; Social Security, 288n5, 301, 315; standard employment contract, 58– 78; supply chain regulation, 237; temporary employment, 67, 368– 71, 374–75; unemployment compensation, 47–48; unions and unionization, 9, 47, 63–65, 67, 72– 73, 392, 398 unskilled workers, 62, 227 Uruguay Round, 54 variable pay, 142 Veneto pact, 162–63, 167, 168 Visser, Jelle, 135, 366, 392, 393–98 Vizcaino v. Microsoft Corp., 204–5 vocational training, 167, 222, 226–27 wage bargaining, 45, 142, 143 wage inequality, 47, 50–51, 399, 400 wage penalty, for temporary workers in Netherlands, 152 wage premium, 33 wage restraint, 43 wages and earnings: displaced workers, 24; earnings, used in pension determination, 318; in Germany, 119–20; payroll tax impact, 31 Wassenaar Agreement (1982) (Netherlands), 143, 146 welfare programs. See social assistance welfare regime typology, 274, 295–302 welfare state, 221, 274, 284, 295–302

Index     421 whistleblower protections, 70 women: board members, 344; corporate initiatives targeting, 343–44; domestic work, 337, 345; employment rate in Netherlands, 140, 141; job tenure, 68, 384, 385–89; labor force participation, 25, 137, 275; nonstandard employment, 27, 138, 156, 177, 315, 339–40, 380; part-time work, 380; pension coverage, 304–5; pension gap, 314–32. See also family-friendly policies; gender differences Women’s Forum for the Economy & Society, 343 Worker Adjustment and Retraining Notification Act (WARN) (1988) (U.S.), 70 worker centers, 75 worker displacement, 24–25 workers’ rights, 25, 69–70, 190–91, 353 work-family balance, 25, 325–26 workforce, characteristics of, 25–26 work hours, 118–19, 144, 146–47, 254 working conditions, 191, 239, 246. See also supply chain regulation

Working Hours Act (1996) (Netherlands), 144 Working Hours Adjustment Act (2000) (Netherlands), 146–47 working mothers, gender pension gap. See gender pension gap working time regulation, 118–19, 144, 146–47 Workplace Employment Relations Surveys (WERS), 196 work requirements, Australian social assistance, 277, 280–82 works councils: in Germany, 117–18, 121–22, 127–28, 355; in Netherlands, 143. See also collective bargaining work sharing, 146 World Bank, 53, 293, 294–95, 297 World Trade Organization (WTO), 54 WTO (World Trade Organization), 54 young workers: job stability outlook, 26–27; job tenure, 6, 68; in permanent employment, 373–74; temporary employment, 139; unemployment, 218