Monday, September 10, 2012

The Great Labor Reset: Labor Laundering, Self-Sourcing, and Other Tales of Woe

From Rick Bookstaber:
In a recent post I discussed the potential for long-term, structural unemployment, the possibility that some of what we are seeing in the unemployment picture will not be resolved by an economic upturn. The focus of the post was on how robots and computers are increasingly replacing labor as a factor of production. One question, though, is why should we see this strongly manifest in the labor market now. The move toward robotics might be inexorable, but it also is gradual. So certainly it should not be the source of sky rocketing unemployment in the wake of the 2008 crisis. This gets to other effects of the crisis on the labor market.

The Great Labor Reset
The most opportune time to do a structural home renovation is after a fire has gutted the house. The crisis of 2008 did the same for the labor market. As much as anything else, the 2008 crisis provided the cover for making changes in the labor market that would have been fraught with institutional push-back in a normal environment. There are institutional barriers to outsourcing labor, reducing benefits and wages, and moving full time workers to part time, even if a purely neoclassical analysis suggests these changes can be absorbed by the supply and demand equations of the labor market. So some of what we have seen in terms of shifts in the labor market is not simply a reduction in hiring, but a change in the labor-employer contract that would not have sat well outside of the fog of war coming from the 2008 crisis.

Labor Laundering
One change in the labor market is what I call labor laundering. Many employers need to protect good will with their customers and cannot be seen as bullying workers. So they outsource their labor pool to contractors, most commonly operating in other countries, but also domestically through what are basically next-generation temp agencies. For example, warehouse packing is the sweatshop job of our time. The article “I Was a Warehouse Slave” gives a day-in-the-life view of these workers, effectively paid for piece-work, without benefits, with one-day notice job security, in physically grueling conditions. More than 20 percent of the American workforce is now “contingent” – temporary workers, as well as contractors and independent consultants....MORE