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Work, work organization, labour market and
employment policy
1. Introduction.
This paper deals with the development of work and its organization during the last 40 years and the related employment and labour market aspects and problems. Both qualitative and quantitative aspects will be discussed. Furthermore the paper will analyse labour market measures taken to deal with different employment problems and types of unemployment. In the second part of the paper future trends of work and work organization will be discussed, taking globalization of economy and broad diffusion of advanced technology as most important facts of influence. Those new developments represent a major challenge to the labour market and employment policies of regional actors concerned.
2. Changes of work and work organization.
2.1 The Fordist production model and the labour market.
Until the beginning of the 1970s Fordism has been the dominant production model in the highly industrialized regions of Europe. The logic of rationalization, on which this production model is based, has determined the quantitative and qualitative demand of human labour. The Fordist production model proceeds from the assumption of an unlimited demand on standardized mass products. A stable market can be seen as a prerequisite for applying organizational principles, characteristic for the Fordist model such as to divide and specialize at most productive tasks, to centralize decisions about production, to minimize skill demands of productive tasks and to establish hierarchical control (Boyer 1989). Human labour is seen mainly as a risk factor and a source of uncertainty, which either has to be eliminated by technology or - if not possible or too costly - has to be reduced in its contribution to the production process to simple operations, which can easily be controlled by management. The semi-skilled worker became the dominant figure in the Fordist production model. Qualified workers were usually under-used. Companies applied the policy of "hire and fire", which means that they immediately fired workers when an economic downswing started and they hired workers as soon as an economic upswing could be seen on the horizon. This strategy could be applied because it took workers only a few days to learn their tasks. The cost for training were minimal.
Dismissal of workers, caused by technical rationalization, has been more than compensated by the increased demand for standardized goods triggered by reduced prices as consequence of this rationalization process. Due to this self-stabilizing process during the period of Fordism hardly any employment problem occured. The cost reducing effect of economies of scale resulted in lower prices, which on their part have stimulated new demand. The need to increase production capacity has created new jobs.
Only cyclical fluctuations could cause some employment problems of a temporary nature. This could be the case if the enlargement of the production capacity has been too fast leading to overproduction or if the demand weakened leading to underconsumption. In general both developments occured at the same time; so it is difficult to decide whether overproduction or underconsumption was the main factor which caused employment problems. However cyclical unemployment during the time of the Fordist production regime never lasted for a long time; it disappeared with the next economic upswing.
During the 1970s the Fordist production model run into a deep crisis due to some major socio-economic changes. In the literature the following new megatrends are mentioned which can be seen as the main factors causing the collapse of this production model: changes in the value system and particularly in work values, changes in the tastes and demands of customers and the broad diffusion of modern production technology.
- Young workers can be seen as carriers of the new
post-materialist social values including also new work
values. The young and better educated workers rejected
boring jobs and authoritarian management. They were no
longer satisfied with high wages only but demanded more
interesting work, participation in organizational design
processes, more autonomy in decision making and
particularly more sovereigny to dispose about time.
- On the market also dramatic changes occured. The
demand for standardized mass products approached its
peak in some branches. The taste of consumers became
more diversified, they were more and more interested in
high quality products and their needs and preferences
began to change more rapidly. The fact that the market
became more volatile and heterogeneous had a major
impact on the fact that Fordism became obsolete.
- The new technical opportunities (IT) must also be mentioned here. Due to the use of advanced manufacturing technology companies were able to make their production process more flexible and thereby to respond more quickly to frequently changing markets and a dynamic environment. Not only production, but the whole company are effected by this revolutionary technology: scientific and market research, design and development, machinery, instruments and process plant, production system and delivery systems, marketing, distribution and general administration (Freeman et. al. 1995: 588). In addition to this trumbling prices for microelectronics, computers and telecommunication have a significant influence on the wide spreading of a huge number of products and services. Furthermore information technology has contributed to the development of many new products and services.
2.2 New production concepts and their impact on the labour market.
During the 1970s information technology has been introduced mainly to restructure the production process. On the basis of advanced technology new production concepts have been developed. These on the one hand met the demand of the market for a diversification of products and more flexibility but they also complied with the desire of many workers for more interesting and demanding work. Basic for the new post-Fordist production concept, which during the beginning of the 1980s has been introduced by many companies, was the understanding, that workers should not be seen as a risk factor but as an important source for flexibility, productivity and innovation, which should be used by companies. To make efficient use of this source the restrictive work organization, developed in the Fordist model became a hindrance. Increasing job enrichment, a reduction in the division of labour, integration of some management functions into production jobs and decentralization of production decisions are the key elements of the new post-Fordist production model.
The use of advanced manufacturing technology, new organizational structures and new strategies of human resource management had a significant impact on the demand of labour and the labour market. For those qualified workers, which were underused in the Fordist production structures, new opportunities of more demanding work opened. They tried to find jobs which matched with their skills and qualifications. However such changes could not always be managed without any problems; it often took some time, before they could find a better job. So even highly qualified workers became unemployed; this kind of unemployment can be called search unemployment.
When discussing the consequences of the broader use of information technology we must have in mind, that this technology besides creating more demanding jobs also destroys old jobs. Because of the automation of more routine tasks many un- and semi-skilled workers have been dismissed.
This process of creating and destroying jobs at the same time has caused a new typ of unemployment, which has been called frictional unemployment. The term frictional refers to the fact that techno-organizational changes never occur without problems of adaptation. In this context the changing demands concerning skills and qualifications are of particular importance. Old knowledge and skills are becoming obsolete while new and other skills are now demanded. One can speak of a skill bias. For example when workers do no longer interfere directly into the production process traditional craft skills are becoming less important, while at the same time, to be able to control automated production processes, information technology related skills are becoming more important. Even more serious is the mismatch of demanding jobs on the one side and un- and semi-skilled workers on the other side.
Because of the fact that we are confronted with another megatrend: the rise in the ration of old people to total population and work force, frictional unemployment can have even more serious effects. Older people are in general less qualified and often have traditional, now obsolete qualifications and they are also less eager and/or capable to learn and change their attitudes and behaviour. Therefore it is very difficult to reduce skill bias within this group. Older people also often oppose the introduction of new production concepts to protect their skills and qualifications.
2.3 Open economies and global markets as new developments.
In the 1980s the discussion about the introduction of new production concepts and the skill bias as a barrier for the restructuring of the production process has taken place under the assumption of a closed economy. This means that immigration of foreign workers as well as the export of jobs into foreign countries were excluded as possible reaction to these problems. Such assumption of a closed economy however cannot be sustained any longer. On the contrary, today we must take into account another megatrend: the globalization of markets and of the economy. This means that because national boundaries, which have been a hindrance for the unrestricted flow of row material, products, workers, information and capital are pulled down, a single world market is emerging. Of course up to now we cannot speak of a global economy and a single world market; it is more adequate to speak of a triad economy with North America, Southeast Asia and Europe as important segments. But more countries in Middle Asia, South America and North or South Africa are on the point to become a visible player in the global competition.
Globalization clearly leads to increased competition as national monopolies are smashed. Companies from all over the world can sell their products and services world- wide. Particularly companies from Southeast Asia and recently from the USA have demonstrated that they are more than a match for European companies concerning productivity, quality, innovativeness and time. The loss of global competition has caused European companies to totally restructure their production process according to the principles of Lean Production. This process of restructuring often included a drastic cut-back of the work force. Not only the shop-floor but also technical specialists and the middle management were affected by the reduction of the work force. Besides this the need for more customer orientation as well as increased innovation activities have caused a dramatic change in the labour force: the staff for internal and external services and for knowledge work has been growing while at the same time the number of workers in the material production has been reduced. So the pressure of gobal competition has caused major employment problems.
Another aspect of globalization must be taken into account: the transfer of production. Due to the increased competition not only big but also medium sized companies have started to search for new production sides world-wide to make use of specific advantages regions can offer. The global organization of the production process has been supported by processes of liberalisation of foreign direct investments and of deregulation. The dematerialization of production together with the world-wide diffusion of information technology has made the global transfer of jobs even more easy. Knowledge is much easier to transfer than machines and factory buildings. The fact that today capital too is searching for profitable investment world- wide also adds to the process of globalization of production and business services.
In the global competition of regions for foreign direct investment and new jobs countries in Southeast Asia and more and more from the former socialist countries in East- and Middle Europe have particular advantages because of low wages but also because of a well trained work force. These factors are attractive for companies from high wage countries in Europe; they bring permanent pressure to bear on companies to transfer production and services, particularly in those industries which are personnal intensive and were tranport costs are low.
The settlement of foreign companies and increasing exports not only create new jobs in the newly developing industries, more jobs are created through the setup of a supporting information and communication infrastructure and through a multiplier effect in other industries. This countries develop to growth and knowledge centres which makes them even more attractive for foreig direct investment. No doubt investment is shifting from the high wage countries in Europe and elsewhere to these newly industrializing countries.
In this situation highly industrialized countries in Europe are forced to continuous innovation to keep their position on the global market. They cannot choose the low way strategy but must stick to a high way strategy (Sengenberger and Pyke 1992). One important consequence of such a strategy is, that the standard of qualification will continuously be raised. A permanent flow of innovations cannot be produced without a highly skilled and continuously retrained work force. Hence more and more un- and semi-skilled workers will lose their jobs and will be excluded from the labour market.
The pressure of global competition causes a new typ of unemployment, the so called structural unemployment. The precise boderline between structural and the more usual frictional unemployment however is not easy to define, but the existence of some fairly severe problems of structural unemployment in the highly industrialized countries in Europe is now universally recognized. This process of emerging structural unemployment has already started in the 1980s but becomes clearly visible in the 1990s. Both the high level of unemployment ad the raising ratio of long term unemployed to the total group of unemployed clearly indicates a new quality of employment problems. We can already identify a process of segmentation within society. A division of the work force into a segment of highly qualified knowledge workers and a segment of un- or semi-skilled employees or employees with outdated qualifications, partly without job, partly with temporary or very unstable employment, is taking place. Sometimes the term of a 2/3 society is used to characterize this kind of segmentation.
Freeman et. al. point to another serious employment problem, related to the diffusion of information technology. What is indeed typical of the most recent set of ICT technologies is the substantial growth and employment potential of networking. At the same time, however, not being linked up to information networks necessarily implies being locked out of the efficiency gains associated with the use of ICT. Moreover, it implies being prevented from participating in the learning activities associated with new and more efficient uses of IC (1995). What is stressed here is the exclusion of larger groups of employees caused by the networking effect of information technology. Thoses employees, which are not integrated into such information and communication networks are threatened to be excluded from the labour market. This process of exclusion can be related to whole regions, which have been detached from the nodel points of knowledge and information flows. This process of segmenation having started already in the 1980s will probably continue and even accelerate within the next years due to more severe global competition.
Social exclusion of larger groups of employees from the labour market has fostered the development of illicit work and a grey or informal economy. Of course reduced working hours and increasing taxes and social contributions have had a major impact as well. Not only in countries such as Italy or Spain, which traditionally had a large grey economy illicit work is nowadays widespread, Germany too has a rapidly growing grey economy. Of course to calculate the exact size of a grey economy within a country is rather difficult and estimations differ significantly. In Germany the portion of illicit workers on the whole work force is supposed to be around 10%. About 15% to 25% of the GDP is produced in the grey economy (240 milliards to 1 billion DM).
Illicit work does not only exist in traditional sectors such as hotel and restaurant industry or building trade. It is assumed that in the German building trade we can find more than 500 000 illicit workers. Also among dental technicians, photographers, compositors, butchers and hairdressors illicit employment seems to be quite high. There is no doubt that the elimination of the grey economy would reduce the official number of unemployed people quite significantly.
Picture 1. Relationship between work, work organization. employment aspects and type of unemployment.
3. The labour market, type of unemployment and employment policy.
Corresponding to the emerging problems and different types of unemployment the labour market and employment policy has developed in different steps during the last 40 years. In the 1950s and 1960s, when cyclical unemployment was predominating, a "passive labour market policy" has been applied. It was seen as the main task, to financially support those people which were temporary unemployed, as during the next upswing full employment would be restored. To reintegrate the dismissed workers into the production process did not prove to become a problem as for the very restricted work no specific qualifications were needed. Besides this passive labour market policy the state persued an anticyclical economic policy, spending more money to stimulate growth.
The new type of unemployment, which occured during the 1970s and 1980s made it necessary to develop new instruments of labour market and employment policy. The occurrence of search und frictional unemployment led to the development of a more active labour market policy. To reduce search unemployment the information system about the labour market has been improved; it was assumed that more and better information would reduce the process of searching for a new job.
The two most important instruments of an active labour market policy are "training" and "wage subsidies". Training was intended to solve the problem of "skill bias". By acquiring additional qualifications and skills already qualified workers would be enabled to work more efficiently within the new less restricted production structures. Bringing as many as possible workers into such training programmes was seen as a strategy to overcome possible barriers of the modernization process of the economy. For less or unqualified unemployed workers the instrument of wage subsidies has been used. It was assumed that it could be more attractive for comapnies to hire less qualified people if labour costs would be reduced. It was hoped that companies, after a period of probation, would give these people an unlimited contract. To overcome the stigma of unemployment was one of the main aims of the instrument of wage subsidies. For elder workers, not willing or not capable to be retrained, the instrument of early retirement was applied.
Because of emerging structural unempoyment the instruments of the active labour market policy do not become obsolete, on the contrary, because of the fact that more and more less and unqualified workers become unemployed, training measures as well as job creation programmes become even more important. A labour market and employment policy must not only embrace intensive training programmes for long- term solutions but also job creation programmes for unskilled workers in community and personal services which have a high growth potential. Though ICT will be used in this non-traded sector of the economy, the criteria and imperatives of international competition will not exert the same pressure to conform to the need of the international markets (Freeman et. al. 1995: 602)
It is obvious that because of the high numbers of unemployed people together with a huge state deficit active labour market policy will reach its limits. Besides this training hardly does create new jobs, it mainly enables to stay employed or get a better job. By only relying on measures of an active labour market policy it is impossible to substantially reduce structural unemployment. For this a coordinated policy approach is needed, which integrates different policy fields. Three important concepts should be mentioned here.
- To establish more flexible transitions from employment
to other social spheres such as education, leisure, family
or community and retirement. This will be demonstated by the
following picture.
Picture 2. Flexible transition from employment into other social spheres of society.
The idea of such a concept is, that if people have the choice between different activities the supply of labour will be reduced and work can be distributed to more people.
- The creation of a regional innovation system can be seen as a
more pro-active employment policy. It is assumed that close cooperation
between the key regional actors (companies, research institutes, training
institutions, universities, banks, local government, social partners
etc.) within economic and policy networks will lead to more economic
activities and therefore create new jobs. The fact that those
agglomeration economy can stimulate economic growth and more employment
can be linked to the following factors:
- the co-presence of many different kinds of producers offering specialized inputs and services in timely and flexible response to needs as and when they arise;
- the learning effects that are engendered by the constant interaction of producers within transactional networks;
- the emergence of local labour with agglomeration-specific skills and forms of habituation;
- the cultural and institutional infrastructures that invariably come into being in and around industrial districts, and that are often critical to the effective operation of the entire local socio-economic system (Sengenberger and Pyke 1992).
- Closely related to the concept of regional innovation systems is the concept of information society, because information technology is seen as a nearly unlimited source for innovations. However regions must find their own way into information society; based on a well developed information and communication infrastructure, regions have to choose their own development path taking different industries such as health care technology, environmental technology, multimedia, automation technology, bio-technology or others as their leading sector and specific strength.
Picture 3. Relationships between the type of unemployment and employment policy measures.
4. What is the future of work and work organization?
Although it is not quite clear, how modern industrial societies in Europe will develop, there is a wide agreement, that work contents, work organization, skill demands, working time as well as the status of workers and employment relationship will change significantly in the years to come. It is also accepted, that these changes are related to major changes in technology, particularly the broad diffusion of information technology. And there is no doubt that globalization of markets will have a major impact on the emerging forms of work organization and employment relationships.
We will probably see the process of job transfer from high wage industrialized to low wage industrializing regions continuing and even accelerating. High wage regions have to concentrate on quality products and services and have to speed up innovation activities; elementary commodities and services will be made and offered in these countries only, if their production is extraordinary capital-extensive and technologically advanced. But also in the segment of specialized high quality products and services Europian regions will face hard competition from other regions, which are engaged into the same transformation process (Japan, USA).
The process of globalization however also offers some chances of economic growth and job creation for the highly industrialized countries, as companies more and more persue the strategy of moving close to the customer and dezentralizing production, particularly in the high quality segment of the market. But theses new work places will hardly compensate job losses in mass production. We can expect that the process of job transfer from high to low wage countries will continue and may even include more knowledge jobs.
Changes in the structure of the work force will also continue. Quicker and more frequent innovations entail that a far greater proportion of the production process must be accounted for by a "knowledge intensive design process" and a smaller proportion by the "material labour process" (Lash 1994: 119). On the other end of the production process similar developments will occur; here the shift of employees from the "material labour process" to the "customer oriented service process" will continue. We can speak of a general trend towards knowledge work and people centredness. But again one can doubt whether on balance more jobs will be created through this transformation process.
Concerning the manufacturing process we can also identify some important trends. Here work no longer means direct interference into the manufacturing process, the trend is towards: supervision (actively overseeing the process), optimization (improving the performance of the technical system) maintanence, and flow management (close matching of production with orders). The system controller, a highly qualified, multiskilled worker will become the key person within the manufacturing process. We are no longer talking of the worker performing a task but of the operative who can handle uncertainty and will solve problems.
Workers at all levels are having to become versatile, but their autonomy is limited by a new interdependency with members of the work group. The introduction of group work adds to the trend towards greater functional integration and fewer layers of hierarchy, which also means that workers are becoming more envolved in management tasks (decisison making, coordinating, control etc.). At the same time functional integration and flatter hierarchy generally enhances organizational flexibility. Sooner or later work groups will directly interact with customers and suppliers outside the company.
All of the changes in the organization of work that have been described require departures from conventional job classifications, carreer-progression ladders, working time systems, training and policies on employment security. Most important is to point to new skill requirements; the following trends have to be mentioned here: multiskilling, increasing importance of theoretical knowledge as well as intellective and social skills and also the need of international qualifications. The term multiskilling means that because of the process of functional integration a broader technical knowledge is needed which oversteps the boundaries of single professions. Theoretical or abstract knowledge is defined as a body of codified concepts and principles applied to a particular endeaver. Intellective skills involve reasoning based on abstract cues, explicit interference, synthesis and systemic thinking. Social skills on the other hand are purposeful actions oriented towards elicitating particular responses from others on a continuing basis. These include the capacity to organize and communicate with, to learn from, work with and impart knowledge to others. (Frenkel et al. 1995: 780).
The pocess of organizing the business globally will call for a range of new skills. Companies will have to cultivate knowledge of other languages, customs, tastes, legal systems and regulations: they will need to develop a new set of international sensitivities (Dertouzos et. al. 1994: 141).
Besides new skill requirements the concept of qualification and skill is gradually shifting towards that of competence: anticipating and handling unexpected and critical situations and solving newly emerging problems are the new competences that are needed in complex and networked production processes. Furthermore innovativeness, creativity and entrepreneurship can be mentioned as important dimensions of new skills and knowledge.
To be able to meet the new technical, organizational and social demands in work employees must be enabled to develop their capability for planning, judgement, collaboration, and the analysis of complex situations. In this context Dertouzos et. al. speak of a new "economic citizenship" (1994: 135). All members of the company will be continually and broadly trained, masters of their technology, in control of their work environment, and envolved in shaping their firmsï objectives. If the ability to solve problems is becoming an important skill, the idea of long life learning will be of immediate interest. This means that in working life periods of employment will alternate with periods of training. Furthermore learning on the job and im- plant training will aquire new importance. One can assume that learning becomes a regular part of the job and retraining a normal part of work life (Dertouzos et. al. 1994: 136).
When talking about the future of work we also have to take into account changes in the status of workers and in the organization of working time. We will probably see that the traditional work contract of indefinite duration will at least partly be replaced by more flexible forms of organizing working time. We can expect that only a small group of core workers will have a secure work status and contracts of indefinite duration. On the periphery there are two other categories of workers: The first comprises employees with fixed-term contracts or part time work; the second workers external to the enterprise, generally service suppliers, subcontractors or self employed workers. Already today it becomes evident that self employment, fixed-term contracts and temporary work increase at the expense of wage-earning employment under contract of indefinite duration (Perspectives 1996. 104). Not least the practice of outsourcing has add to this trend. One can expect that in future temporary work in projects on the basis of a contract of work and labour will increase very rapidly.
In this respect the idea of an activity contract is of particular interest. This contract is intended to encourage a form of mobility that implies neither precariousness, nor insecurity nor yet exclusion. An activity contract would be concluded between an individual and a number of employers (enterprises, associations, local authorities, training institutions) organized in a network, for a period of time (five years for example), during which periods of employment under a conventional contract would alternate with periods of self-employment, training or leave devoted to community or social service activities (Perspectives 1996).
But even core workers may have more flexible working hours. More and more workers will have their individual working time based on the concept of yearsï working time. At the beginning only the amount of hours per year will be fixed while about the concrete working time decisions will be made according to actual demand and the request of workers.
Some authors have already predicted the end of the work society. It is argued that the technical revolution, currently taking place will destroy many jobs but there is no other sector that can provide the dismissed people with new jobs. Only the newly developing knowledge sector will create some new jobs: the - so called - new professionals in such fields as engineering, management, consultancy, teaching, marketing, media, and entertainment. While their number will continue to grow, they will remain small compared to the number of workers who will be replaced by the new generation of "thinking machines" (Rifkin 1995). To avoid the danger of social exclusion for major parts of the working people, concepts such as delinking income from work or "full activity" as a substitute for full employment are discussed. Basically the idea is that since jobs cannot be created in suffient numbers, the labour market could be cleared and social exclusion prevented if everybody were given a minimum income, allowing them to choose freely between full- or part time work, casual work, non- commercial or leisure time (Perspectives 1996: 109).
Still there is some hope, that the fostering of information society will lead to more employment. If we analyse the overall creation and destruction effect of ICT more closely, we can come to the following conclusion:
-
"
- process innovations (operating mainly at the
organisational level) directly increases labour productivity
leading to a reduction in labour requirements, but this
together with increases in the productivity of other inputs in
the production process leads to lower prices and other
improvements which in turn can result in greater demand,
turnover and thereby GDP. Depending on organisational
structures and management strategies, more jobs can thus be
created.
- product innovation (operating both at the economic sector
and organisational level) directly creates new markets and
increases turnover and thereby GDP. A net creation of jobs
can be the result as, depending upon overall economic
conditions, the markets and jobs created are greater than
those lost.
- network benefits (operating at the network level) are
generated by advanced communications and related to the
size of, and numbers of subscribers on the network. Such
benefits are not captured directly by market prices but can,
under suitable conditions, lead to increased economic activity
and hence GDP and thereby to the net creation of jobs."
(sterreichische Akademie der Wissenschaften 1995: 1f).
References:
Boyer, R. (1989): New Directions in Management practices and Work Organization, Paper presented at the OECD Conference "Technological Change as a social Process, Helsinki.
Dertouzos, M., Lester, R. K., and Solow, R. M. (1989): Made in America. Regaining the Productive Edge, The MIT Commission on Industrial Productivity, MIT Press Cambridge, Mass. and London.
Freeman, Ch., Soete, L, and Efendioglou, U. (1995): Diffusion and th employment effects of information and communication technology. In: International Labour Review 134, 4-5: 587-603.
Lash, S. (1994): Reflexivity and its Doubles: Structure Aesthetics, Community, in: Beck, U., Giddens, A. and Lash, S. (eds.): Reflexive Modernisation. Politics, Tradition and Aesthetics in the Modern Social Order, Oxford, 110-173.
Österreichische Akademie der Wissenschaften, Institutu fuer Technikfolgen-Abschätzung (1995): Ad-Employ, Employment trends related to the use of advanced communications, Synopsis Report, Wien.
Perspectives (1996): In: International Labour Review, 135, 1.: 94-110
Rifkin (1995): The end of Work: The decline of global labor force and the dawn of the post-market areaNew York: G.P. Putmans's Sons.
Sengenberger und Pyke (1992): Industrial Districts and Local Economic Regeneration: Research and Policy Issues, in: dies. (Hg.): Industrial Districts and Local Economic Regeneration, ILO Genf.