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Rethinking Workplace Regulation: Beyond the Standard Contract of Employment (Katherine V.W. Stone & Harry Arthurs eds., 2013).

This book is the result of a project funded by the Russell Sage Foundation that brought all of the contributors together in September 2010 in the outstanding setting of Bellagio, Italy. The contributors were an all-star group of 22 academics and practitioners from around the world. Ten are from law, five from industrial relations, and the rest from various social sciences and business. Despite the idyllic setting for their work, the result of their collaboration is a collection of papers that work very well together to focus on significant development in the world of work, the rise and fall of what they call the “standard employment contract” (SEC). After the end of World War II and until sometime in the 1990s, a large percentage of workers in most of the developed countries had SECs. They had an array of job rights including “decent wages, protections against unfair treatment at work, social insurance provided by the state or the employer and, notably, some degree of job security.” While not all workers had them, SECs “became one of the pillars of the postwar economic system.” The system was the basis of the creation of a substantial middle class made up of workers, mostly male, in large manufacturing enterprises.

What is also made clear is that, while SECs had been the norm, the factors that produced them were substantially different among these different countries. Some SEC systems were driven by legislative mandate, while others, like those in the United States, were the result of labor markets internal to individual enterprises where the mutual expectation of long term employment created an incentive for both the employer and its workers to invest in firm specific skills. While perhaps procrustean, the developed Organisation for Economic Co-operation and Developement (OECD) countries are based on three broad economic traditions— “liberal” market oriented societies like the United States and the United Kingdom; “corporatist” countries in continental Europe like France and Germany, in which the government sits at the bargaining table with labor and management; and “Nordic” social-market economies like Sweden and Denmark that have universal and extensive social benefits with significant wealth redistribution through taxation.

The SEC system, however, has “eroded dramatically over the last two or three decades.” It is being replaced by nonstandard employment “characterized by low pay, modest fringe benefits, little or no job security, limited training, few opportunities for career development and advancement, and little if any protection through unions or labor laws and regulations.” What, if anything, is being done about the resulting increase in insecurity and economic inequality is the focus of the book. “We believe that it is necessary to seek and possibly to find new ways to achieve the array of positive social and economic outcomes previously associated with the standard employment contract.”

The driving force for the erosion of the SEC norm is “[g]lobalization, technology, and new management strategies.” Instead of SECs being the norm, “increasing numbers of workers in advanced economies experience flexible, nonstandard, contingent, or precarious employment relations.” Globalization has resulted in expanded political power of enterprise because the “state has lost regulatory capacity, trade unions have lost influence, [so] private market actors have gained leverage over workers and the rules of the system.”

An extensive Appendix demonstrates beyond peradventure this shift to employment insecurity. An interesting feature of the Appendix, which reviews changes in employment in OECD countries, is that it demonstrates that there is not a single term that captures what this post-SEC employment relation looks like or how to define the employment relationship that has come to predominate. The reason no common term has emerged is that the context in which insecure employment relations develop is specific to the economies, cultures and laws of each country, even neighboring countries. If there ever was the need to convince anyone that labor and employment law is the paradigm of domestic law, the Appendix would be a good place to look. One further conclusion that I draw is that the development of more broadly applicable definitions may be a necessary threshold to addressing a comprehensive and presumably more effective response to the decline of the SEC.

While it is barely mentioned in this era of the dominance of austerity hawks, the best protection of workers in the formal labor market as well as those outside it is to have full employment economies. That is Plan A but it is not developed in the book.

Assuming Plan A is not politically possible in this era where business interests have so much economic and therefore political power, the book describes a number of possible Plan Bs that are already operating in some developed countries. In this era of gridlock politics, this book is a fresh reminder that it is possible for societies to address and hopefully redress serious economic and social problems.

Particularly in Europe, the term “flexicurity” has been thrown around as what Plan B should be. The flexible part of flexicurity is to allow employers to have more or less complete discretion to make employment decisions without regard to the job security of their workers. The security part is to provide workers with permanence in the labor market, even if there is no job security for individual workers with a particular enterprise, as well as providing strong social benefits and useful ongoing vocational training that are available during periods of unemployment. The Dutch and Danish “miracles” are examples of flexicurity at work. The Netherlands has very low unemployment vis-à-vis other OECD countries. It has decentralized collective bargaining down to the local level and has laws that encourage part-time, fixed-term and other non-standard work. About half of all workers hold non-standard jobs, but only 5% to 10% of them describe their situation as involuntary. Most non-standard workers may be satisfied with that status because the law requires equality with SEC workers as to wage rates and benefits.

The Danish version of flexicurity provides no job security by statute or contract. It has the highest percentage of workers in the EU who change jobs. And it has a high labor participation rate and low unemployment. Social benefits, however, are very generous, with workers entitled to unemployment benefits for two years at 90% of their prior income. After unemployment insurance runs out, social welfare benefits that are means-tested kick in with no time limit. The state has very active labor market policies but they impose strict availability criteria. Lifelong continuing vocational training is provided with the highest participation rate in the developed world. All of this is expensive, the highest among OECD countries, with 2.56% of Danish GDP spent on labor market protections. Enterprise gets at-will employment but at the cost of high taxes.

To give a taste of some of the other Plan Bs, Canada has government-funded “sector councils” made up of employers and representatives of workers who work together to expand employment and improve the lives of workers. Italy has some tripartite territorial pacts for some different geographic regions where representatives of the public, employers, and workers are tasked with undertaking numerous development projects with the interwoven goals of economic development and improved employment. Addressing a different problem, several Australian states impose legal liability on Australian enterprises that use supply chains for the labor rights of all workers in the chain, including those at the bottom. The union movements in several countries are trying to cope with the decline of union density and collective bargaining coverage. Japanese enterprise unions have started to recruit non-standard workers of their enterprises. New, community-based unions are being organized in Japan to bring union representation to the workers of smaller employers that have not previously had union representation. German unions are responding to the push by employers for local “derogation” provisions in sector wide collective bargaining by engaging the workers at the local workplaces in local bargaining to try to expand union membership.

The globalized economy of goods, services and investment has resulted in a global labor market. Several authors suggest that labor and employment laws and policies should follow the economy and reach across national borders. For example, it is suggested that the liability of all enterprises that operate supply chains for the workers at the bottom could be expanded transnationally. Only in the final chapter, however, is there a broader claim, not for specific transnational labor and employment law, but as a justification for the kind of cross-national scholarship that the book so ably presents. It is claimed that cross-national learning is valuable “to lay the intellectual foundations of a system of labor market regulation that might one day extend across national borders.” While that is true, it is also true that the increasingly globalized economy has weakened the division of economies on a national basis. The attempts of any one nation to address labor and employment issues, such as the erosion of the SEC, through national laws are very much limited by the impact of a globalized economy and labor market. Nations attempting to protect their workers face “race to the bottom” problems because of the very difficult collective action problem all nations face. Without directly saying so, Rethinking Workplace Regulation demonstrates that it is time to begin to shift the paradigm of labor and employment law as national law to a new transnational approach.

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Cite as: Michael J. Zimmer, What Happened to the “Standard Employment Contract” and What Are Some Countries Doing About It?, JOTWELL (October 1, 2013) (reviewing Rethinking Workplace Regulation: Beyond the Standard Contract of Employment (Katherine V.W. Stone & Harry Arthurs eds., 2013)), https://worklaw.jotwell.com/what-happened-to-the-standard-employment-contract-and-what-are-some-countries-doing-about-it/.