Future of work: The labour movement (Part 4: Alternative models)

Future of work: The labour movement (Part 4: Alternative models)

Phuah Eng Chye (13 October 2018)

Though the role of trade unions and the collective bargaining process have diminished, there is no shortage of alternative models that can be used to organise labour.

  • Worker representation and co-determination trade union models. The US firm-level trade union is often compared with the worker representation and co-determination models in Europe. Dylan Matthews notes “a number of European countries require worker representatives to be included in corporate boards, or for councils of workers to be consulted in appointing board members…Typically, German companies have two boards: an executive board composed of the CEO and other senior executives, and a supervisory board representing both workers and shareholders. In large German companies of 2,000 or more employees, half of supervisory board members are elected by workers, with the other half and the chair elected by shareholders. Companies are also required to allow works councils elected to represent workers in day-to-day disputes over work conditions, layoffs, etc”. Dylan Matthews suggests many “studies find that codetermination and works councils lead to higher wages, less short-termism, greater productivity, even higher levels of income equality. They may, however, reduce profitability and lower returns for shareholders, suggesting they lead to a shift in both power and corporate earnings away from shareholders and toward workers”. Matthew Dimick contrasts the decentralised US approach with Europe where ‘collective bargaining tends to be more centralized, taking place at a higher level, typically at the industry or sector level…the level of centralization influences the nature and content of bargaining subjects in ways that have critical consequences for economic productivity. Union structures also affect firms’ incentives to invest in productive capital, as well as how much training firms provide to their workers. Centralization even has potentially positive macroeconomic implications for inflation and unemployment”. He argues decentralized “unions do not have the institutional or organizational means to influence labor market conditions beyond their firm or narrow jurisdiction. Without such influence, a union’s best strategy for addressing labor market risk is to protect the current jobs of its members: seniority-based layoff policies, job definitions and demarcations, internal labor markets, rules limiting employer discretion over technology, manning and staffing requirements, and so forth. In contrast, the rational response to risk is very different for centralized unions. Job control may be one way of protecting workers from the vicissitudes of economic uncertainty and change, but it may come at a significant cost to workplace productivity. More centralized union organization and collective bargaining, which covers a broader and more diverse range of workers, will feel the negative externalities of job control policies – higher unemployment, lower wages in different workplaces or in related, but downstream industries – more acutely than decentralized unions. In addition, more centralized union organization and collective bargaining will have the institutional means – for example, a greater ability to solve coordination problems – to transcend narrow job control tendencies. Thus, more centralized unions will have both the interest as well as the means to bargain for broader responses to labor market risk. Such responses include wage compression (which by reducing the variance of wages, reduces the uncertainty and risk associated with workers’ reemployment prospects) and employer-based job training and retraining, as well as a panoply of more comprehensive public policy solutions, such as more generous unemployment insurance benefits and active labor market policies”. Hence, there are trade-offs. The US model has limited scope but more explicit legal powers to bargain and strike. While the European models are praised for providing workers a consultative voice in the governance process; nonetheless curbs are imposed on their actions. The European work councils is thus often viewed as a “company union”. Matthew Dimick suggests that “even the right to be heard is significant and the lack of strong rights may, perhaps surprisingly, contribute to a more cooperative and collaborative, but certainly no less meaningful, form of worker participation”.
  • Flexicurity. In 2007, Europe adopted the common principles of flexicurity representing an integrated strategy to enhance “flexibility and security in working arrangements”[1]. Flexicurity, practiced in the Netherlands, Denmark and Germany, was intended to assist Europe to “strengthen its economy and create jobs” while reinforcing “the European social models, which are committed to social protection, social cohesion and solidarity”. It has four components: (1) Flexible and reliable contractual arrangements to help outsiders (employed on non-standard contracts or unemployed) to find work and to move into stable contractual arrangements and to help insiders (permanent employees) prepare themselves for job changes ahead of time in the case of redundancy due to economic change. (2) Comprehensive lifelong learning (LLL) strategies to ensure EU citizens have access to high quality education, to develop and upgrade skills throughout their working lives and to ensure enterprises invest more in human capital. (3) Effective active labour market policies to help the unemployed find work through job placement services and labour market programmes such as training and job creation (i.e. efficient job search support, good work incentives, job search courses and job clubs). (4) Modern social security systems to provide broad coverage of social protection provisions (unemployment benefits, pensions and healthcare) and childcare. Hence, flexicurity aims to find a balance between deregulation of labour markets with protection of the labour force by underwriting universal access to healthcare, housing, education and training and sustaining a well-trained and productive workforce. There is concern flexicurity is a trojan horse for employment liberalization. In Netherlands, the increase in temporary employment and alternative working arrangements has been the main driver of low wage growth and a decline in the labour share of income[2]. The other concern about flexicurity is whether there is a leakage of tax resources from platforms and platform workers and whether sufficient fiscal funding will be available to finance the universal provision of benefits.
  • Cooperatives. Carmen Huertas-Noble notes “worker-owned cooperatives have a long history” and tend to be formed during severe economic crises and are intertwined with various movements seeking to evade exploitation and to find job security. The characteristics of these cooperatives is that “ownership is primarily based on labor and…to help ensure capital remains subordinate to labor, shares are also generally kept affordable”. Worker-owned cooperatives also tend to be community-based. The best-known cooperative is Mondragon. Mondragon was formed after the Spanish civil war more than 60 years ago and is “the world’s largest network of worker-owned industrial cooperatives, is the top Basque region industrial group, ranked tenth in Spain with 80,000 personnel, a presence in 70 countries.” Mondragon’s mission “is to generate wealth for society through business development and job creation under the one worker, one vote cooperative framework, where labor is sovereign and capital, while essential, is subordinate to sustainable job creation”. “Workers participate in democratic decision-making in businesses that are economically successful. The workers themselves earn living wages. Mondragon also maintains a small CEO to worker pay ratio.” “Mondragon, while starting out small, has successfully scaled through its unique capitalization strategies, including creating its own bank and creating a network of worker-owned cooperatives that serve to implement its principle of inter-cooperation. By creating its own bank, Mondragon cooperatives were/are able to gain access to loans with non-traditional lending criteria, especially in Mondragon’s early stages and by creating different types of worker-cooperatives that exist and operate in a network that purchases good and services from among its network, they were able to help increase and stabilize demand for their products and services”. Another example is the Cooperative Home Care Associates (CHCA). and “is currently the largest unionized worker-owned cooperative in the US…with over 1,600 members and revenues of $40 million.” CHCA was founded in 1985 on the premise that if healthcare “workers owned their own company they could maximize wages and benefits, and if workers were better trained and better treated, they’d offer better care for their clients.” “CHCA exemplifies a business example that can be started with little capitalization and grow by leveraging union clout and securing government contracts.” Carmen Huertas-Noble notes that “currently, CHCA worker-owners who labor as home health aides earn approximately $16 an hour with benefits, double the industry standard. CHCA’s worker-owners are also guaranteed an average of 36 hours per week – significantly more hours than the 25 to 30 hours that prevail in the industry. Together, guaranteed hours and increased pay promote work-life balance among worker-owners. These increased wage and benefits are made possible, in part, by a relatively equitable income distribution of pay: the CEO earns just 11 times as much as the average worker…Worker-owners frequently note that participation in CHCA allows them to spend more time with their families and be more present in their children’s lives. CHCA worker-owners, many who formerly received public assistance, also note the upward mobility opportunities worker-ownership provides”. The cooperative concept is also extended to the provision of benefits. Under the Ghent system in several European countries, unions rather than the government administer an unemployment-insurance system. Oren Cass suggest “placing worker-controlled and -funded co-ops at the center of training initiatives should keep them focused on the interests of workers…superior to the nation’s largely ineffective current network of job-training efforts. Decision making would shift from government agencies and well-meaning nonprofits to employers and workers – who need each other, understand their requirements best, and will measure their return on investment by how many high-productivity jobs result, not by enrollment or graduation…Co-op-led training would introduce a fair, insurance-like support mechanism, whereby dues from the currently employed help pay for the unemployed to learn new skills”. Examples of union-led training include the North America’s Building Trades Unions (NABTU) and the Las Vegas culinary union’s Culinary Academy. Oren Cass think cooperatives could play a role as “a mediating institution that helps strengthen civil society for poorer and less educated Americans. Formal organization increases the chance that a workplace also becomes a nexus of community. It establishes the infrastructure for workers to build relationships, access resources, and provide mutual aid”. In addition, ‘like the guilds of the past, co-ops could provide structure to otherwise free-floating careers and a valuable signaling mechanism to prospective employers. They would also give workers the scale and security to negotiate with buyers of labor in the marketplace…In the long run, unions might evolve into enormous talent agencies with an economic stake in increasing the wages of members by, for example, taking some small cut of any salary increase and then reinvesting the money into providing workers with the resources to move from sluggish labor markets to booming labor markets…Benefits to scale and expertise-sharing will emerge, but the importance of local relationships and community engagement should place a high premium on local control”.
  • Platform cooperativism. The progress of traditional cooperatives has been limited. There is perhaps greater potential for the technological version of cooperatives to take off. Trebor Scholz notes “at least 150 platform co-ops and initiatives supporting them have developed rapidly over the past two years, challenging the practices of the sharing economy and the often-misogynist culture of Silicon Valley…The cooperative platform ecosystem ranges from alternative funding tools, labour brokerages for nurses, massage therapists, and cleaners, to cooperatively owned online marketplaces and data-protection platforms for patients”. New platform-based cooperativess are evolving their own apps to provide an alternative to the platform giants and offering considerable savings on platform fees. The significance, Trebor Scholz suggests, is that “the Internet can be owned and governed differently. The experiments now underway show that a global ecosystem of cooperatives and unions, along with pro-commons and open source movements, can stand against the concentration of wealth and the insecurity of workers that is the legacy of Silicon Valley’s winner-take-all economy…But building the cooperative platform economy requires innovative organizations, policy work, incubators, experiments, events, research, and community-building work at the grassroots level”. Anna Baum highlights the example of “coopcycle.org, an open source food delivery app licensed under the peer-to-peer foundation and co-operatively managed by its developers and any riders who want to use it…where the profits of the company go to those who are actually driving it, and where workers can enjoy better working conditions, safe contracts, sick pay, holidays and above all, respect.  Co-ownership wouldn’t just mean sharing the profits, it would also mean democratic governance and accountability, as well as transparency on the use of workers’ data, and the functions of the algorithms that dictate couriers’ day to day work”. She argues “these cooperatively run food delivery platforms would present a different vision from that of Silicon Valley, a radical move away from the obsession of attracting venture capital to make short term speculative profits for a rich few…examples emerging from Spain, France and Germany show how the power of unions and cooperatives can be combined to push back against gig employers, and offer a glimpse of hope for the future of delivery platform work”.
  • Technology is indeed opening up new possibilities. George Zarkadakis highlights the features of a ride-sharing, blockchain-based platform called La’Zooz. “Currently anyone can join and begin to earn Zooz tokens – the currency you use to buy a ride, and also a store of value that represents your share of ownership of the business. You earn tokens each time you drive more than 20 km with the app, or by contributing code to the design, or by getting others to join…The dual purpose of Zooz tokens at once democratises the ownership of a platform and allows users to benefit from the value their presence is creating…Funding decisions are decided by vote; profits and losses are distributed to the token owners. Another example he cites is the decentralised autonomous organisation (DAO) on a blockchain-based platform known as Ethereum. “Its goal is to become a leaderless venture capital fund. It had no management structure, no board of directors and no employees. Instead, it spreads ownership to more than 18,000 stakeholders who own DAO tokens, which also gives them voting rights. Every funding decision is decided by vote and automatically executed following the result, after which profits and losses are distributed to the token owners…The DAO has no need of a trusted investment manager; instead, its cycles of operation are embedded in ‘smart contracts’ – agreements written in software code that contain rules regarding their execution. Although the DAO has had serious teething issues, including a major hack, at least it demonstrates in principle how a new type of self-governing organisation might be created”. George Zarkadakis suggests that “in the future, one can imagine an interconnected ecosystem of collectivist groups that provide services and produce goods. Where once there was a corporation, instead we find a network of cells that have expunged hierarchies and collaborate for the common good…if societies can embrace the economics of the platform while shifting its ownership to workers, a more equitable, resilient and democratic society could well be in store”.
  • Municipal socialism. Paul Roberts highlights that Seattle “is now at the forefront of a radical new experiment to see how far a city can go – and should go – to improve the lives of the people who work there… positioning itself almost as a municipal version of a labor union – pushing for precisely the sort of benefits that unions were built to fight for, before globalization undercut labor’s power.” In 2014, Seattle became the first major municipality to adopt a $15 minimum wage and has rolled out laws to shield “workers from the chaos of the fast-changing, technology-disrupted urban job market. Today, Seattle’s workers enjoy a list of on-the-job benefits that feels almost European in its scope – everything from a high minimum wage to a ban on last-minute schedule changes to a city-sponsored retirement savings plan”. In ridesharing, the City Council attempted to cap number of ride-share drivers, passed a law allowing drivers to bargain collectively and is currently considering a law to force ride-share companies to nearly double the base rate paid to their drivers from $1.35 to $2.40 per mile. On July 2018, the Seattle City Council passed an ordinance establishing a comprehensive Bill of Rights for the city’s more than 30,000 nannies, caregivers and housekeepers, who have historically been excluded from labor laws. “Seattle’s new domestic workers’ ordinance, which takes effect in 2019, applies to nannies, house cleaners, home care workers, gardeners and cooks who are employed by individuals or private residences. The bill also covers live-in workers who sleep or reside at their place of employment. The law now entitles domestic workers to Seattle’s minimum wage, and also grants them meal and rest breaks. Workers who live with their employers are entitled to overtime pay and one day off per week…Seattle’s ordinance also includes a first-of-its-kind provision: the creation of a Domestic Worker Standards Board. The standards board will be a forum for workers and employers to dialogue and identify proposals and recommendations that will raise standards for the sector. The Seattle City Council must act on the standards board’s recommendations within 120 days after they’re made”[3]. Paul Roberts notes “Seattle’s role as a national influencer has been embraced by its activists and politicians” as successful novel worker protections become “replicable across the country”. In this context, some see cities as the appropriate testbeds for protyping labour policy models and providing proof-of-concept on their feasibility. Others sees cities as engaging in competitive “virtue signaling” with other progressive cities. But Paul Roberts recognised there were limits to the ability of a city to fight inequality. First, “urban-scale worker protections can only do so much to fix economic challenges that are almost always regional, national or global in nature”. Second, there is a threat of legal pre-emption as the city ordinances may be at odds with state or federal law. In the US, “41 business-friendly state legislatures have enacted laws explicitly barring cities from regulating ride-share firms…Twenty-eight states have laws preempting cities from raising the minimum wage. Twenty-three states bar cities from mandating paid sick leave”. Third, Paul Roberts notes “at a time when many American cities are tripping over themselves to attract the kinds of companies that call this city home, Seattle has saddled itself with a more complicated challenge: how to help workers who have missed out on that prosperity without alienating the firms that make it possible in the first place”. This gives rise to the risks of a political backlash and corporate revolt. Lastly, Paul Robert points out that “urban policymakers face a deeper, paradoxical barrier: As a city becomes more prosperous and high-tech, its population of low-wage workers – the workers these labor initiatives are intended to help – will shrink…by 2016, software developer had surpassed retail salesperson as the city’s most common occupation. Even when low-skilled workers do find jobs in a booming city, it’s increasingly unlikely they can afford to live there”. In addition, municipal socialism is a luxury that is not suitable for “cities that still have large populations of low-wage workers where “policy is focused almost entirely on attracting and retaining companies, often by loosening regulations.”
  • Labour advocate models. A. Schmidt suggests there is a need to establish “independent, trustworthy digital labour organisations, similar to consumer advocate institutions, to test and evaluate the working conditions on the various digital labour platforms, and warn workers, independent contractors and clients of particularly problematic clauses in the terms of service agreements”. An example is FairCrowdWork.org organised by Germany’s largest trade union IG Metall where “trade union legal experts offer assessments and warnings regarding the terms of service agreements of numerous digital labour platforms. However, given that there are hundreds of relevant (and thousands of marginal) digital labour platforms, with constantly changing terms of service and jurisdictions spread across the world, it is hardly possible to keep up with the workload of this legal evaluation in real-time”. Hence, “the evaluation of working conditions on digital labour platforms is easier, at least in principle, because the workers themselves can do this; in other words, it can be crowdsourced”. An example of this is Turkopticon which facilitates crowdworkers to evaluate their clients on Amazon Mechanical Turk. However, F.A. Schmidt notes “cross-platform mobilisation and organisation of crowdworkers turns out to be difficult. It seems that many crowdworkers, even if they are dissatisfied with the working conditions or the remuneration on a specific platform, have little interest in either self-organisation or representation of their interests by trade unions…work on the platforms is temporary and sporadic anyway, a small side-job, not worth fighting for. For them it is much easier and more promising to simply search for a new platform with better working conditions. Professional full-time crowdworkers, on the other hand, fear that regulation of the platforms would not improve their jobs, but destroy them. Although there are forms of self-organisation by crowdworkers and gig workers in various platform-specific forums, they usually revolve around how to get the best out of the difficult working conditions individually; they are less about workers’ participation, collective bargaining and improvement of the digital labour model in general”. F.A. Schmidt notes that while “it is highly questionable whether comparatively small and local coop-platforms can compete economically with exploitative competitors operating on a global scale”, he suggests that the use of fair trade labels or warnings “could foster a willingness in their clients to consciously pay a little more for a service that is guaranteed to have substantially better, more ethical, production conditions”.
  • ESOP and worker funds. There are views that income inequality is caused by distribution bottlenecks and is best addressed by increasing the distribution of profits to workers. Louis Kelso and Mortimer J. Adler[4] proposed programs for broadening ownership such as the Employee Stock Ownership Plans (ESOP) and the provision of financing to workers to purchase equity. Louis Kelso and Mortimer J. Adler argued that “equity-sharing plans should not be built around the concept of retirement…The objective should be to build permanent, diversified capital estates – estates that will enable the new capitalists to shift their participation in production from the employment of their labour to the employment of their capital.” Hence, inequality can be addressed by assisting workers to acquire assets either in terms of establishing businesses, home ownership or other community-based arrangements. Peter Gowan and Mio Tastas Viktorsson note a more ambitious proposal was mooted by the Meidner Group, a Swedish expert commission appointed in 1973. The group proposed the establishment of wage-earner funds, “financed through profit-related payments from firms in the form of voting shares, and administered through union-dominated boards. In this way, as firms produced profits for their shareholders, the wage-earner funds would gain larger and larger stakes in the company until they became the majority owners.” “It was estimated by the Meidner group that wage-earner funds would have majority control over the stock market within a few decades. In order to prepare for this transition, dividends paid to the wage-earner funds would initially be divided between reinvesting in companies, further increasing the share owned by workers, and financing research, expertise, education, and training for workers to assist them in the running of their companies”. Peter Gowan and Mio Tastas Viktorsson added “employers’ resistance to such a plan was intense, sustained, and effective…the proposal had been watered down as a result of retreats and compromises by the labor movement…A form of wage-earner funds were introduced in 1984, but with extremely limited worker involvement, funded only for seven years by a small excess-profits tax instead of through share issues, and they never controlled more than seven percent of the Swedish stock market…The funds were privatized after 1992 by a right-wing government”.

Hence, there is a diverse range of models which can co-exist with traditional trade union models to improve the voice, bargaining power, self-organisation and income share of labour.

References

Anna Baum (23 March 2018) “Resisting the gig economy: The emergence of cooperative food delivery platforms”. Originally published at OpenDemocracy. https://www.nakedcapitalism.com/2018/03/resisting-gig-economy-emergence-cooperative-food-delivery-platforms.html

Carmen Huertas-Noble (8 March 2016) “Worker-owned and unionized worker-owned cooperatives: Two tools to address income inequality”. 22 Clin. L. Rev. 325 (2016). SSRN: https://ssrn.com/abstract=2770136 or file:///C:/Users/user/Downloads/SSRN-id2770136.pdf

Dylan Matthews (6 Apr 2018) “Workers don’t have much say in corporations. Why not give them seats on the board?” Vox. https://www.vox.com/2018/4/6/17086720/poll-corporate-board-democracy-worker-council-codetermination-union-labor

European Commission (2007) “Towards common principles of flexicurity: More and better jobs through flexibility and security”. Directorate-General for Employment, Social Affairs and Equal Opportunities. file:///C:/Users/user/Downloads/ke7807284_en.pdf

F.A. Schmidt (2017) “Digital labour markets in the platform economy”. Friedrich-EbertStiftung, Bonn. http://library.fes.de/pdf-files/wiso/13164.pdf

George Zarkadakis (28 May 2018) “Do platforms work?” AEON. https://aeon.co/essays/workers-of-the-world-unite-on-distributed-digital-platforms

Louis Kelso, Mortimer J. Adler (1958) The capitalist manifesto. Random House. http://www.kelsoinstitute.org/pdf/cm-entire.pdf

Matthew Dimick (2 September 2014) “Productive unionism”. UC Irvine Law Review, Vol.4, No.1, 2014. SSRN: https://ssrn.com/abstract=2312486 or http://dx.doi.org/10.2139/ssrn.2312486

Oren Cass (2017) “More perfect unions – Organized labor’s adversarial approach has failed workers and society: It’s time for a new model”. The Shape of Work to Come. City Journal.  https://www.city-journal.org/html/more-perfect-unions-15258.html

Paul Roberts (July/August 2018) “Seattle flirts with municipal socialism.” https://www.politico.com/magazine/story/2018/06/29/how-cities-became-the-new-unions-218837

Peter Gowan, Mio Tastas Viktorsson (22 August 2017) “Revisiting the Meidner Plan”. https://jacobinmag.com/2017/08/sweden-social-democracy-meidner-plan-capital

Phuah Eng Chye (2015) Policy paradigms for the anorexic and financialised economy: Managing the transition to an information societyhttp://www.amazon.com/dp/B01AWRAKJG

Phuah Eng Chye (30 June 2018) “Labour share of income (Part 6: The missing big picture)”. Economicsofinformationsociety.com. http://economicsofinformationsociety.com/labour-share-of-income-part-6-the-missing-big-picture/

Phuah Eng Chye (22 September 2018) “Future of work: The labour movement (Part 1: Labour 3.0)”. Economicsofinformationsociety. http://economicsofinformationsociety.com/future-of-work-the-labour-movement-part-1-labour-3-0/

Phuah Eng Chye (29 September 2018) “Future of work: The labour movement (Part 2: Labour as a social movement)”. Economicsofinformationsociety. http://economicsofinformationsociety.com/future-of-work-the-labour-movement-part-2-labour-as-a-social-movement/

Phuah Eng Chye (6 October 2018) “Future of work: The labour movement (Part 3: Assessing the social media-based model)”. Economicsofinformationsociety. http://economicsofinformationsociety.com/future-of-work-the-labour-movement-part-3-assessing-the-social-media-based-model/

Sheila Bapat (28 July 2018) “Domestic workers in Seattle win most comprehensive Bill of Rights in the US”. Truthout. https://truthout.org/articles/seattle-domestic-workers-win-most-comprehensive-bill-of-rights-in-us/

Trebor Scholz (2017) “The people’s disruption”. Edited by Graham, M. & Shaw Towards a Fairer Gig Economy. Meatspace Press. http://meatspacepress.org/go/tafge-internet-archive-pdf/

Miroslav Beblavý (August 2017) “The platform economy and industrial relations: Applying the old framework to the new reality”. CEPS Research Report. https://www.ceps.eu/publications/platform-economy-and-industrial-relations-applying-old-framework-new-reality

[1] European Commission.

[2] Phuah Eng Chye (30 June 2018) “Labour share of income (Part 6: The missing big picture)”

[3]Sheila Bapat.

[4] Phuah Eng Chye Policy paradigms for the anorexic and financialised economy: Managing the transition to an information society.

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