Anyone who wonders how employers managed to so completely rig the labor market in their favor should familiarize themselves with the research of David Weil, a professor at Boston University who's been nominated by President Obama to lead the Wage and Hour Division at the U.S. Department of Labor. Weil just published a super timely book entitled The Fissured Workplace: Why Work Became So Bad for So Many and What Can Be Done to Improve It, in which he shifts attention away from the usual explanations of why capital enjoys such a strong upper hand over labor. No, Weil doesn't focus on globalization. And no, it's not the fall of unions he's writing about. Or the way that smart machines are taking over jobs that humans once did.
Instead, Weil zeroes in on the disturbingly savvy way that companies have split off the various functions needed to produce products and services. A few decades ago, companies tended to be do everything in house, keeping workers directly on the payroll. But then companies figured out that it was a lot cheaper to shed many of these direct employees and instead have subcontractors bid against each other to take over different functions. For example, Weil cites a major hotel brand that doesn't directly employ the maids that clean its rooms. It hires a contractor to that, while setting the quality standards.
This strategy has worked out great for the owners of companies, driving down costs and yielding more flexibility. But it has been a catastrophe for workers. Imagine you work in the cafeteria of a big company and you've been there for years, as a direct employee of the company just like the people who's food you prepare, enjoying the same benefits package. But then the company contracts out its cafeteria work to the lowest bidder. Next thing you know you're doing the same job for two-thirds the pay and no benefits.
That kind of scenario has played out again and again in big companies over recent decades, but the pace of domestic outsourcing has sped up in just the past decade as more companies have gotten hip to its benefits and figured out how to fissure off more and more functions. In-house accountants? Who needs them when you can play accounting firms off against each other. In-house marketing staff? Hah, that's so early 2000s. You can get freelancers for half the money. And so on.
Yes, the most dramatic form of outsourcing is when companies get people in China or India to do jobs Americans once did. But the truth is that you don't need to ship jobs half away around the world to save big money. You just need to push those jobs outside of your company and then let the efficiency of the free market do the rest, orchestrating a race to the rock bottom.
To put all this in a different way, a good share of today's inequality is not driven by unstoppable seismic forces, as we so often hear, but rather can be traced back to conscious decisions by employers to turn good jobs into bad jobs in order to increase their profits.
And by bad jobs, Weil doesn't only mean contractors who offer low pay and a lack of benefits. He also describes an epidemic of labor violations that rip off workers or put their health and safety at risk. A raft of labor violations have proliferated in the new era of the fissured workplace, and for an obvious reason: It's much harder to police an assortment of subcontractors than a single big and centralized entity.
And unfortunately, today's labor regulation system is designed for yesterday's traditional workplace. That's got to change if regulators want to have any chance of dealing with an epidemic of labor violations. Weil offers some good suggestions for getting more strategic in how sectors are policed and trying to use greater transparency to achieve results, putting company brands at risk if employers don't clean up their act.
Sounds like Barack Obama picked the right guy to help bring DOL's enforcement machinery into the modern era.