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The Fissured Workplace

The Fissured Workplace

Copyright Date: 2014
Published by: Harvard University Press
Pages: 424
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  • Book Info
    The Fissured Workplace
    Book Description:

    In the twentieth century, large companies employing many workers formed the bedrock of the U.S. economy. Today, on the list of big business's priorities, sustaining the employer-worker relationship ranks far below building a devoted customer base and delivering value to investors. As David Weil's groundbreaking analysis shows, large corporations have shed their role as direct employers of the people responsible for their products, in favor of outsourcing work to small companies that compete fiercely with one another. The result has been declining wages, eroding benefits, inadequate health and safety protections, and ever-widening income inequality. From the perspectives of CEOs and investors, fissuring--splitting off functions that were once managed internally--has been phenomenally successful. Despite giving up direct control to subcontractors and franchises, these large companies have figured out how to maintain the quality of brand-name products and services, without the cost of maintaining an expensive workforce. But from the perspective of workers, this strategy has meant stagnation in wages and benefits and a lower standard of living. Weil proposes ways to modernize regulatory policies so that employers can meet their obligations to workers while allowing companies to keep the beneficial aspects of this business strategy.

    eISBN: 978-0-674-72612-3
    Subjects: Economics, Business, Political Science

Table of Contents

  1. Front Matter
    (pp. i-vi)
  2. Table of Contents
    (pp. vii-x)
  3. PART I Vignettes from the Modern Workplace

    • [PART I Introduction]
      (pp. 1-6)

      A maid works at the San Francisco Marriott on Fisherman’s Wharf. The hotel property is owned by Host Hotels and Resorts Inc., a lodging real estate company. The maid, however, is evaluated and supervised daily and her hours and payroll managed by Crestline Hotels and Resorts Inc., a national third-party hotel management company. Yet she follows daily procedures (and risks losing her job for failure to accomplish them) regarding cleaning, room set-up, overall pace, and quality standards established by Marriott, whose name the property bears.

      A cable installer in Dayton, Ohio, works as an independent contractor (in essence a self-employed...

    • 1 The Fissured Workplace and Its Consequences
      (pp. 7-27)

      The modern workplace has been profoundly transformed. Employment is no longer the clear relationship between a well-defined employer and a worker. The basic terms of employment—hiring, evaluation, pay, supervision, training, coordination—are now the result of multiple organizations. Responsibility for conditions has become blurred. Like a rock with a fracture that deepens and spreads with time, the workplace over the past three decades has fissured. And fissuring has serious consequences for the bedrock that people depend upon from employment: the share of the economic pie available to workers and their families; their exposure to health and safety and other...

    • 2 Employment in a Pre-fissured World
      (pp. 28-42)

      During much of the twentieth century, the critical employment relationship was between large businesses and workers in major sectors of the economy. Large employers—General Motors, U.S. Steel, and Alcoa—dominated much of the manufacturing economy. Emerging industries also spawned huge companies: Kodak, IBM, and Xerox grew to be giants in their product markets and in the labor markets from which they drew their workforces. While the service sector operated at a more local level, the national players that did emerge—Hilton and Marriott in hotels, Macy’s and Sears in retail—similarly employed thousands.¹

      To understand fissured workplaces, we must...

    • 3 Why Fissure?
      (pp. 43-75)

      The large corporation of days of yore came with distinctive borders around its perimeter, with most employment located inside firm walls. The large business of today looks more like a small solar system, with a lead firm at its center and smaller workplaces orbiting around it. Some of those orbiting bodies have their own small moons moving about them. But as they move farther away from the lead organization, the profit margins they can achieve diminish, with consequent impacts on their workforces.

      It would seem that businesses would always have an incentive to shift out activities that were not core...

    • 4 Wage Determination in a Fissured Workplace
      (pp. 76-92)

      Compelled by capital markets and enabled by technology and new organizational forms, companies in a growing number of industries transformed the way they organized themselves to undertake business. The movement of activities from inside to outside the boundaries of a company alters employment and, as discussed in Chapter 3, leads to both a deepening and a spreading of the fissured workplace. The consequences for employment are profound.

      Chapter 2 described how complicated internal labor markets emerged in large businesses of the twentieth century. How does shifting activities to other parties alter the nature of employment? The answers are subtle and...

  4. PART II The Forms and Consequences of the Fissured Workplace

    • [PART II Introduction]
      (pp. 93-98)

      In his bookThe Big Squeeze,New York Times reporter Steven Greenhouse recounts a cavalcade of woes facing people in their daily work life. Drawing on hundreds of interviews, Greenhouse summarizes the worsening conditions at the workplace faced by millions of workers:

      One of the least examined but most important trends taking place in the United States today is the broad decline in the status and treatment of American workers—white-collar and blue-collar workers, middle-class and low-end workers—that began nearly three decades ago, gradually gathered momentum, and hit with full force soon after the turn of this century. A...

    • 5 The Subcontracted Workplace
      (pp. 99-121)

      There is nothing new about subcontracting as a form of organizing business, production, and the workplace. It is how the construction industry in the United States has been organized since the 1800s. It has long been a distinctive feature of women’s garment manufacturing, for example. And it has been a basic part of the movie industry since the early days of Hollywood.

      All of these old-school applications of subcontracting reflect sectors where a substantial part of producing goods requires specialized activities, often combined in different ways to fit highly diverse end uses. Construction is driven by its end use: a...

    • 6 Fissuring and Franchising
      (pp. 122-158)

      Lead companies retain activities that are central to their competitive strategy while shedding activities where doing so reduces costs, increases flexibility, and shifts liabilities. But this decision is guided by the constant balancing of the potential impact of shedding an activity that might in the long-term undermine the core competitive strategy. Franchising is an organizational form used to connect the lead company with subsidiary organizations that provides the required glue to keep the pieces of the fissured strategy together. Franchising is an old form of business organization. It historically solved the unique problems faced by manufacturers in finding effective ways...

    • 7 Supply Chains and the Fissured Workplace
      (pp. 159-178)

      Manufacturing supply chains are composed of the network of businesses companies draw on for the components used in making products. Retail supply chains are composed of the broad network of manufacturers that sell their products through retailers. Strictly speaking, the firms making up a supply chain relate through market transactions: suppliers provide parts, assemblies, and inputs to their customers: retailers or manufacturers. Characterized in this way, supply chains are a very old phenomenon: most producers rely on purchases of inputs from other companies. And, going back to the Phoenicians, these supply relationships often existed internationally as well as within national...

  5. PART III Mending the Fissured Workplace

    • [PART III Introduction]
      (pp. 179-182)

      The labor economist and policy reformer John R. Commons described an effort to mend a fissured workplace more than a century ago.

      In the year 1902 the City of New York was building its first subway along Fourth Avenue. The contract for construction and operation was made with a syndicate of bankers headed by August Belmont and Company of New York and including the House of Rothschild. About 30,000 Italian subway workers went out on strike, demanding that they should be paid directly “at the office” of the syndicate and not indirectly through the labor contractors. They did not ask...

    • 8 Rethinking Responsibility
      (pp. 183-213)

      The modern employment relationship bears little resemblance to that assumed in our core workplace regulations. Improving conditions where the most vulnerable people in the economy work requires navigating the complicated, fissured environment laid out in this book. Some aspects of the fissured world have desirable aspects—consumers benefit when companies try to market goods and services that conform to their tastes, and there are productivity gains from many aspects of firms focusing on core competencies.¹ Many of the cases in previous chapters illustrate the painstaking systems that lead companies put in place to ensure that suppliers, contractors, and franchisees do...

    • 9 Rethinking Enforcement
      (pp. 214-242)

      Responding to the fissured workplace requires rethinking workplace laws, their narrow definitions of “who the employer is,” and the structure of liability implied by them and other relevant statutes. But it cannot stop there. The fissured workplace requires new approaches to enforcing existing workplace statutes in order to change employer behavior and begin to tip the careful balancing of core competencies and shedding employment that underlie it in a way that once again protects workers. This requires new approaches very different from those that characterize traditional state and federal workplace policy.

      Economics is the study of achieving objectives in the...

    • 10 Fixing Broken Windows
      (pp. 243-267)

      In a famous article on reducing crime, James Q. Wilson and George Kelling argued that the focus of traditional policing was misplaced given its emphasis on responding to serious crimes. “Broken windows,” as the notion became popularly known, demanded that policing should deal with reducing disorderly behavior and small crimes that created fear among the public, because fear of crime in turn leads citizens to withdraw from their critical role as the true guardians of civic peace. By using community policing and focused efforts to “fix broken windows” through the reduction of panhandling, graffiti, low-level crimes, and other activities that...

    • 11 The Fissured Economy
      (pp. 268-285)

      Like cracks in rocks, once fissuring starts it deepens and spreads. It deepens in the sense that fissuring of one activity—such as janitorial services, security, or staffing operations—leads to further fissuring of that activity. Janitorial services are split out from the regular activities of lead companies. Once outside the boundaries of the firm, they become part of a self-standing market which splits further apart. Contractors use subcontractors, who in turn farm out work to individuals who operate as so-called independent contractors. Or, transferred to a franchising model, lead franchisors create regional franchisors, who then sell to local franchisors....

    • 12 A Path Forward
      (pp. 286-290)

      Economic history runs in one direction. As much as we might like aspects of the past, the age of the large corporation directly employing a very wide cross section of American workers has passed. Absent public policies that rebalance the benefits and costs facing businesses, fissuring will continue to deepen in those industries where it has already taken root and will expand to new industries like finance and law. The fissured workplace is here to stay.

      The ethos of fissuring has become embedded in how companies think and how markets operate. Share prices of companies respond positively to news of...

  6. Notes
    (pp. 291-374)
  7. References
    (pp. 375-396)
  8. Acknowledgments
    (pp. 397-400)
  9. Index
    (pp. 401-410)