Low-Wage Work in the Wealthy World

CHAPTER 5: Institutions, Firms, and the Quality of Jobs in Low-Wage Labor Markets

CHAPTER 5 Institutions, Firms, and the Quality of Jobs in Low-Wage Labor Markets Eileen Appelbaum The case studies in this volume suggest that European employment models are under considerable pressure. Efforts to reduce wages have led some employers to take advantage of various loopholes that can enable them to escape the institutions and social norms that govern the employment relationship in their countries, leading to what one observer has come to call “varieties of institutional avoidance”—in a play on the term “varieties of capitalism.” The United Kingdom, for example, moved some considerable distance toward the United States during the Thatcher years. More recently , the national employment models in the Netherlands and Germany have also begun to fray, a development most evident in hotel and retail employment. These efforts at institutional avoidance have been most successful in Germany, where the low-wage share has soared and now exceeds rates in the United Kingdom and is fast approaching those of the United States. Despite strong competitive pressures in every country, however, and the desire of many employers to reduce wages, institutions still matter. Where unions retain much of their traditional strength and influence, where employment regulations provide workers with protections against layoffs, or where a national minimum wage provides an effective floor, employers have seen these escape routes closed off. In Denmark, employers voluntarily comply with union agreements. A high reservation wage combined with extensive union coverage in the Danish economy means that a company that rejects the extension of collectively bargained wages will face problems recruiting and retaining workers, as well as a union campaign of disapproval that might damage its reputation with customers. In the Netherlands, access to quality health care is enshrined in the nation’s constitution. Under the pressure of an aging population and rising health care costs, the reform of the financing mechanism for hospitals has forced 185 the health care system to evolve. The adaptation involved further integration of the health care system, however, and a rethinking of the training, qualifications, and allocation of nursing staff to preserve the quality of care. The institutional frameworks governing employment relations in all of the high-income economies has come under intense pressure as the effects of increased globalization, heightened capital mobility, new intra- and inter-firm relationships, and advances in information and communication technologies have strengthened the position of employers relative to workers. The case studies in this volume document employers’ efforts to evade institutional constraints, as well as to reshape national labor market institutions, so as to increase their ability to lower wages and reduce employment security. In countries where labor market institutions have been inadequate to protect workers’ interests (as in the United States and the United Kingdom) or where workers’ interests have more recently come under attack and been weakened (as in Germany and the Netherlands), the result has been a deterioration in the quality of jobs that do not require a university degree, an increase in the incidence of low-wage work, and a widening of the earnings gap between high- and low-paid workers. At the same time, the industry case studies provide evidence of the continuing role played by strong unions, binding minimum wages, undiluted social norms, and strong regulations governing employee layoffs in closing off this low-road behavior, as well as evidence of push-back against the efforts of some employers to drive down wages and degrade working conditions in less-skilled jobs. The chapters in this volume provide an analysis across the six countries of competitive industry dynamics, current employer strategies , and national institutions as they affect the pay and working conditions of cleaners and nursing assistants in hospitals, call center operators , room attendants in hotels, process operatives in food processing, and cashiers and stock or sales clerks in retail. This chapter contrasts the employment conditions faced by similarly situated workers in these same jobs in different countries. The chapter seeks to underscore the influence of variations in national labor market institutions on worker outcomes. The two main goals in what follows are, first, to provide concrete examples of the interaction between institutions , firm strategy, and worker outcomes that are instructive to an American reader and of interest to Europeans as well, and second, to call attention to the evidence that points toward a convergence to 186 Low-Wage Work in the Wealthy World low-road models of employment across countries with...