1. Repairing the Social Contract at Work Steven P. Vallas Department of Sociology and Anthropology Northeastern University

2. An Overview Historical Background: The New Deal Social Contract at Work Signs of the Contract’s Demise The Aftermath: –Decay of Job Ladders –Rise of Non-Standard Work Arrangements Some Solutions –Employee Free Choice Act? Vallas --Repairing the Social Contract-- Open Classroom

3. Historical Background Seeds of Personnel Management after WW I Democratic Party Mobilizes Urban Workers, 1920s New Deal Legislation: Wagner Act, July 1935 WW II: Labor militancy during war Result: –Growth of Labor Organization and Collective Bargaining; –Inclusive, Wage-led Economic Growth, 1945-1975 Vallas --Repairing the Social Contract-- Open Classroom

4. Demise of the Social Contract Decline of Trade Unions: (See Table 1) Why? –Globalization –Technology: Reduction of mass production workforce –Growth of Labor Force in Service, White Collar Industries Partial truths –but some data: Vallas --Repairing the Social Contract-- Open Classroom

5. Trends in Union Membership Vallas --Repairing the Social Contract-- Open Classroom

6. Wage and salary earners in unions in selected countries Vallas --Repairing the Social Contract-- Open Classroom General decline in union membership Most pronounced in USA, by far

7. Alternative Explanations US South Cordoned Off From Labor –Failure of Operation Dixie, 1946-1953 Unfavorable Legal-Political Environment –Taft-Hartley Act of 1947 –McCarthyism Weakens Labor Rise of Employer Hostility, Post-1975 Vallas --Repairing the Social Contract-- Open Classroom

8. Consequences? Most obvious: Deteriorating Job Rewards –Stagnant Wages, esp. post-1975 –Rising Hours of Employment –Erosion of Defined Pensions Two Points to Stress: –Decay of Internal Labor Markets (Job or Promotion Ladders) –Rise of “Non-Standard Work Arrangements” Vallas --Repairing the Social Contract-- Open Classroom

9. Hourly Earnings of Production & Non- Supervisory Workers, 1947-2005 Vallas --Repairing the Social Contract-- Open Classroom

10. Decay of Internal Labor Markets Previously: Firms “sheltered” workers from the external labor market ILMs established systems that governed promotion “from within” Provided incentives for acquiring “asset-specific” knowledge; Helped in motivation, retention of workforce Now: An “implosion” of market forces into the firm Vallas --Repairing the Social Contract-- Open Classroom

11. Decay of Internal Labor Markets Downsizing, Outsourcing: –Dismantling of ILMs for Many Workers A Shift in US Labor Market Structure: For educated and professional workers: Attachment to the firm grows weak; attachment to the occupation grows strong –For less educated workers: Attachment to firm weakens, with few occupational ties to replace it Vallas --Repairing the Social Contract-- Open Classroom

12. Results? Declining motivation, commitment for important segments of the workforce –1995 survey by the New York Times: 75 percent of respondents felt that “companies were less loyal to their workers than they used to be”; Similarly, 64 percent felt that “workers were less loyal to their companies” than previously –Richard Sennett, others: Loss of meaning in one’s career Vallas --Repairing the Social Contract-- Open Classroom

13. Rise of “Non-Standard” Work Arrangements Growth of “contingent” jobs far outstrips growth of the labor force –Temporary agency jobs grew at annual rate of 11% from 1972 to late1990s –Involuntary part-time employment too has grown rapidly –Especially so in academia (the “last great job in America”) –see table Result: growing sense of job insecurity (see table); erosion of benefits; “precarity” Vallas --Repairing the Social Contract-- Open Classroom

14. Trends in Perceived Job Security, 1977-2002 Vallas --Repairing the Social Contract-- Open Classroom

15. Trends in Academic Employment, 1975-2005 Vallas --Repairing the Social Contract-- Open Classroom

16. Taking Stock US Employment relations system is showing stress and contradiction New forms of work organization: Can they suffice? –The Paradox of Team Systems: Higher commitment despite deteriorating job rewards and rising income inequality within the firm –Result: Growth of Suspicion and Distrust among workers; Perception of Employer Hypocrisy Vallas --Repairing the Social Contract-- Open Classroom

17. Economic Consequences Weakened Employment Relations System –reduces workers’ willingness to share their knowledge –undermines firms’ ability to harness tacit skills Lost productivity, since innovation depends on much more than R & D spending Vallas --Repairing the Social Contract-- Open Classroom

18. Implications and Solutions Keynesian economic policy not enough –The structure of the employment relationship needs to be addressed Ideas? –Revisit debate over economic democracy, e.g., extending equity rights to employees –Institute incomes policy, limiting firm-level inequality (maximum wage!) –Reform labor law: Employee Free Choice Act Vallas --Repairing the Social Contract-- Open Classroom

19. Employee Free Choice Act Three Provisions: –Facilitates union formation, foregoing certification elections using card check system –Invoke arbitration where contract negotiation fails –Put teeth into NLRB efforts to enforce labor law violations (strengthen fines, punitive damages) Vallas --Repairing the Social Contract-- Open Classroom

20. Effects of EFCA? Much debated One view –It would: –Level the playing field in private sector –Reinvigorate union formation, especially in service industries –Raise wages –and likely, productivity –Reaffirm worker faith in US economic institutions Vallas --Repairing the Social Contract-- Open Classroom