Explaining The Growth of The Precariat: Global Commodification, Flexibility, Precarity Trap and The Subsidy State
This is another installment in a series of posts (here and here) I intend to write as I work my way through Guy Standing‘s The Precariat: The New Dangerous Class. In this section, the main topic will be the causes of the growth of the precariat. Standing identifies several causes.
“A central aspect of globalisation can be summed up in one intimidating work, ‘commodification‘. This involves treating everything as a commodity, to be bought and sold, subject to market forces, with prices set by demand and supply, without effective ‘agency’ (a capacity to resist). Commodification has been extended to every aspect of life – the family, education system, firm, labour institutions, socia protection policy, unemployment, disability, occupational communities and politics.”
In the drive for market efficiency, barriers to commodification were dismantled. A neo-liberal principle was that regulations were required to prevent collective interests from acting as barriers to competition. The globalisation era was not one of de-regulation but of re-regulation, in which more regulations were introduced than in any comparable period of history.” (26)
This sounds a lot like Jurgen Habermas’s idea of colonization of the lifeworld by the system.
According to Standing, firms and companies themselves have been commodified through accelerating and multiplying mergers and acquisitions. This means an end to Ronald Coase’s conception of firms as reducing costs and risks of doing business while increasing trust and long-term relationships. In investing frenzies, there is no incentive to building up long-term relationships based on trust and deep knowledge. This, of course, makes life more insecure for employees as overnight mergers and acquisitions can completely disrupt organizations and individual careers through offshoring (within firms) and outsourcing (to other firms). The relationship between employer and employee is then also one of limited trust and short-term in outlook and careers and skill acquisition become individualized projects:
“The disruption feeds into the way skills are developed. The incentive to invest in skills is determined by the cost of acquiring them, the opportunity cost of doing so and the prospective additional income. If the risk increases of not having the opportunity to practise skills, investment in them will decline, as will the psychological commitment to the company. In short, if firms become more fluid, workers will be discouraged from trying to build careers inside them. This puts them close to being in the precariat.
For a growing number of workers in the twenty-first century, it would be folly to regard a firm as a place for building a career and gaining income security. There would be nothing wrong with that, if social policy were adapted so that all those working for companies are able to have basic security. At present, this is far from the case.” (30-1)
Flexibility: Commodification of Labor
Anyone who has paid attention to what neo-liberal globalists have been saying for the past thirty years knows that flexibilization of labor has been their mantra. The idea is that labor, especially in the Global North, was too rigid and regulated and protected to be truly efficient. Remove these cumbersome regulations and the firms’ power to compete on the global stage would be unleashed. Flexibility of labor relations is a necessary condition for Western countries to be able to compete with emerging countries. Needless to say, much flexibility has already been accomplished but flexibilization is a work-in-progress, a never-ending project as there are always pockets of labor that have not been completely subjected to the neo-liberal regime (in the US, for instance, the time has come for public workers). Obviously, this has been a major cause of growth of the precariat. For Standing, flexibility is the commodification of labor, or rather re-commodification of labor – that is, the progressive dismantlement of labor protections that had been fought for over the past hundred and fifty years or so.
This flexibility of labor relations is multi-faceted. It involves numerical flexibility through what used to be called non-traditional forms of labor that are now becoming the norm such as temporary labor, underemployment, offshoring and outsourcing, unpaid furloughs, “zero-hour contracts” and the expansion of internships (something discussed here). In the well-known division between primary and secondary labor market and there is no doubt that the secondary labor market is growing with the loss of training opportunities, benefits and pensions. Walmart is the future of work but it is a global trend.
“In the 1960s, a typical worker entering the labour market of an industrialised country could have anticipated having four employers by the time he retired. In those circumstances, it made sense to identify with the firm in which he was employed. Today, a worker would be foolish to do so. Now, a typical worker – more likely to be a woman – can anticipate having nine employers before reaching the age of 30. That is the extent of the change represented by numerical flexibility.” (36)
Another form of labor flexibility is functional flexibility, that is, a change in the division of labor and shifting workers between positions. Functional flexibility creates job insecurity (as opposed to numerical flexibility which generates employment insecurity) through contractual individualization (or contractualization, as opposed to collective bargaining) and the general casualization of work. This also involves what Standing calls tertiarisation:
“Tertiarisation summarises a combination of forms of flexibility, in which divisions of labour are fluid, workplaces blend into home and public places, hours of labour fluctuate and people can combine several work statuses and have several contracts concurrently.
The flexibility involves more work-for-labour; a blurring of workplaces, home places and public places; and a shift from direct control to diverse forms of indirect control, in which increasingly sophisticated technological mechanisms are deployed.” (38)
Another source of the growth of precariat is wage flexibility. The precariat is especially reliant in wage income in the whole social income typology, so any shift in income – from fixed to flexible or through different schemes such as variable pay or merit pay. For instance,
“As workers in China agitated for higher wages and better conditions, multinationals grandly conceded large money wage increases but took enterprise benefits. Foxconn’s penned workers in Shenzhen had received subsidised food, clothing and dormitory accommodations. In June 2010, on the day he announced a second big rise in wages, the head of Foxconn said, ‘today we are going to return these functions to the government’. The company was shifting to money wages, giving the impression that workers were gaining a lot (a 96 per cent wage increase), but changing the form of remuneration and character of labour relationship. The global model was coming to China.” (43)
And this, of course, means greater insecurity at a time where globalization also shatters community ties that also constituted part of social income.
Unemployment is also re-construed through neo-liberal filters, and individualized as personal characteristics:
“In the neo-liberal framework, unemployment became a matter of individual responsibility, making it almost ‘voluntary’. People came to be regarded as more or less ‘employable’ and the answer was to make them more employable, upgrading their ‘skills’ or reforming their ‘habits’ and ‘attitudes’. This made it easy to go to the next stage of blaming and demonising the unemployed as lazy and scroungers.” (45)
And the logical next step is a call for a reduction of unemployment benefits which leads to a vicious circle: a insecure and part-time employment rose especially for the low-en of the labor market, then unemployment benefits represented a higher percentage of income replacement. The conclusion should be that work does not pay enough, but no, media commentators would harp that benefits were too high and should be cut further and that the unemployed should be forced to take lower-paying jobs. But as Standing puts it, “the rich world’s job-generating machine is running down” (46) and this predates the 2008 recession. If anything, the recession has accelerated this trend by creating more zones of precariat:
“The unemployed also experience a form of tertiarisation. They have multiple ‘workplaces’ – employment exchanges, benefit offices, job-search training offices – and have to indulge in a lot of work-for-labour – filling in forms, queuing, commuting to employment exchanges, commuting in search of jobs, commuting to job training and so on. It can be a full-time job being unemployed, and it involves flexibility, since people must be on call all the time. What politicians call idleness may be no more than being on the end of the phone, chewing nails nervously hoping for a call.” (48)
The Precarity Trap
To live in precarious conditions means to have a lot of expenses that will keep one there, or what Standing call high transaction costs (time spent applying for benefits, temporary job loss and search for new ones, time and cost of learning on the new job and adjustment of all the other activities – such as child care – around that new job) that may very well gobble up a greater share of income. This is the precarity trap. And that is not counting the fact that living in the precariat means experiencing the full force of the risk society individually.
The Subsidy State
The global economy is a heavily subsidized economy (so much for free market) and again, that is without counting the bailouts triggered by the recession. These subsidies can take the form of tax holidays, various forms of tax relief or tax credits. For instance, schemes such as the Earned Income Tax Credit were subsidies offsetting low wages (gotta keep people consuming, even and especially at the bottom of the social ladder).
“Labour subsidies, including earned-income tax credits and marginal employment subsidies, are also in reality subsidies to capital, enabling companies to gain more profits and pay lower wages. They have no economic or social equity justification. The rationale for the main labour subsidy, tax credits, is that as the poor and less educated in countries face the stiffest competition from low-cost labour in developing countries, governments need to subsidise low wages to provide adeequate incomes. But while intended to offset wage inequality, these subsidies encourage the growth or maintenance of low-wage precariat jobs. By topping up wages to something like subsistence, tax credits take pressure off employers, giving them an incentive to continue to pay low wages.” (55)
Along with easy credit, and additional household income through women work, one can file subsidies are “ways in which we can keep people consuming and demand high with declining wages” which has come crashing down in 2008. That is also part of the may ways in which the state is VERY involved in sustaining the economy.
Under these conditions, of course, the precariat has an ultimate recourse: the shadow economy, no matter how dangerous or exploitative.
Or there can be riots.