A poster issued by the German Federal Ministry of Economics and Technology proudly announced the "Highest number ever employed — THANK YOU GERMANY". This was the news that Germans had waited years to hear. But it was hard to share this jubilation. You had to ask yourself ― was this true or just a clever public relations trick?
Bearing in mind how unreliable government employment statistics can be* we find that, in fact, two employment records had been broken: yes, the number in work was at an all-time high (November 2011: 41.6 million) but also working conditions had never been so bad. Ten years earlier in 1991 a micro-census showed over three-quarters of wage earners in permanent employment (over 20 hours per week) and in social security schemes; ten years later that figure had dropped to only two-thirds of wage earners: in other words, by 2011 there were 3.8 million less people in regular full-time employment than in 1991.
So that 'good' news from the ministry included special types of employment: namely temporary, part-time (20 hours per week or less), minijobs (low-paid work without social security cover) and agency or 'self-employed' workers. In fact, a recent decision by the German government to raise the qualifying limit of monthly wages for minijobs from 400 to 450 euros may indirectly force even more employees into the low-wage sector. Already social security benefits of around 2 billion euros are being paid to keep full-time low-wage workers above the official poverty level. In other words, 330,000 full-time workers (the working poor) visit government offices each month to collect social security benefits.
Therefore the employment record claimed by the German government is questionable because many more workers are now on minimum earnings with minimum security than ever before. This is a policy failure hidden by selective statistics and meaningless slogans: "Social security is whatever creates work". Indeed, many managers have become very creative at undercutting collectively agreed wages; partly because recently introduced legal minimum wages for agency workers makes Leiharbeit (agency workers) less attractive to employers; and has thus created extra demand for 'self-employed or subcontracted' employees on a so-called Werkvertrag (work contract).
Secure and long-term careers are being replaced by low-paid and insecure jobs. This is a slippery slope with the worse yet to come. In consultant-speak this is called liquid working or cloud working. An internal strategy paper of IBM proposed a 'brave new world' of work with workforces shrunk to a core team that directs business operations, specifies operating processes, is close to customers, and supervises a global auction of development contracts and technical projects. Freelance experts then bid to work on these projects and co-operate with other freelances in a global talent cloud. After each project they may reapply to work on the next project in a new cloud and again work for IBM — without ever being a direct employee. Freelances qualify for the cloud via a certification process. This way IBM can ensure it receives bids only from experts with topic know-how gained from years of academic study or gain from previous work assignments. In other words, this IBM employment model is a kind of global eBay for skilled workers. Whoever qualifies can join the cloud auction and, if accepted, work at home on farmed-out tasks. How these freelances deal with national tax laws and so on is their responsibility, not that of IBM.
So far, the advocates of ever greater labor 'flexibility' believe they are cutting-edge, smart and visionary. However, many long-standing and successful business leaders actually reject these 'progressive' concepts are unworkable: the complex harmonization and gearing of outsourced operational processes such 'flexibility' requires also incurs excessive coordination efforts. They have not only huge financial costs for the employer; but also huge social costs as well: both of which exceed any theoretical economic savings. As with other outsourcing project, creative accounting is then relied upon to 'identify' the claimed productivity savings. These are often achieved simply by excluding or hiding some costs and risks. So do corporate managers question this approach? Probably not. Their job will depend upon not questioning it. After all, every year business management schools are producing tens of thousands of young ambitious managerists with expensively acquired MBAs, all trained and eager to boost profits by cutting fixed costs and forcing employees to be more 'flexible'.
The growing divide between executives and employees is managerism at work: a self-serving 'elite' ignores the truth that work is actually more than a money-earning function, that enterprises have a higher purpose and function in addition to profit-making: enterprises, whether their legal owners intend it or not, actually shape our culture and are fundamental to a sense of a collective identity. Employees in a regular workforce can acquire a complementary sense of identity and feel they 'belong' to the enterprise, even if legally they (just like corporate executives) are mere 'hirees'; this commitment will arise from a shared social experience: from successes jointly achieved and challenges jointly overcome.
In the past, business leaders and entrepreneurs believed committed employees were a valuable asset. Nowadays, managerists regard committed employees as irrelevant and regard a disconnected and alienated workforce as the acceptable norm. First and foremost, employees are considered to be a cost factor.
Once the IBM model has been accepted it could be here to stay. Other similar trends are already well established, such as widespread outsourcing of technical development services as work contracts (Werkvertrag) to self-employed or agency staff: these work assignments are auctioned to bidders on business-to-business platforms. While core staff numbers at manufacturing firms such as Siemens or Volkswagen are fairly stable, the number of cheaper workers they subcontract from engineering service firms (agencies or consultants) is rapidly increasing ― 'cheaper' because contingent workers receive lower wages, benefits, and less job security.
What are the consequences of this trend for core employees? Often technical employees, at first enthusiastic about technology and engineering, find themselves increasingly working as organizers or managers. These engineers must now closely monitor the time and cost budgets of outsourced projects, and hire other professionals on temporary contracts. Many of these project managers at Siemens, BMW, Daimler and VW have excessive workloads. They gradually realize they may not even make the advancing statutory retirement age, even if they manage to hang on to their present job. At the same time, highly qualified temporary staff, now merely follow orders and work as directed (their expertise and creativity is ignored). They never know if they will be 'rehired' for the next project team or not. Their professional creativity is redundant; in fact, a brief exchange of ideas with members of the core workforce can be negatively interpreted as 'time wasting'.
Stable and core workforces are now supported by a reserve army of contingent labor and novel forms of employment. The further an employee is from the core, the greater the 'flexibility' demanded, and the less security provided. Core employees are assisted by temporary project workers: both long-term and short-term leased workers, freelances and, in future, cloudies (teams working on virtual projects). At the same time, company obligations toward employees disappear, and existing worker rights and protection (for example, in Germany, under the Works Constitution Act (Betriebsverfassungsgesetz) are sidestepped. Agency workers whose temporary work contracts (Werkvertrag) expire are offered revised contracts that are 'spun-off' into a so-called cloud.
This flexible and deregulated labor market is justified by a narrow and one-sided definition of freedom characterized by absolute personal responsibility and, strangely enough, total subordination to economic forces. This is a freedom that transfers (externalizes) entrepreneurial and financial risk to employees. Otto Brenner, head of IG Metall trade union in Germany, commented back in 1961 that freedom, defined this way, denies the civic and social aspect of life: it recognizes only the economic freedom of employers and the economic freedom of employees is secondary or absent. Consequently, the political (civic) rights of citizens should be underpinned by a wider economically inclusive definition of freedom; otherwise real freedom will exist only for the economically powerful.
So-called 'free' labor markets have negative consequences for employees: social, geographic and time-based relationships become restricted or are practically impossible. Such employees are less likely to volunteer for civic duties (voluntary work, charities and clubs) not knowing whether, in 12 months time, they will be in the same town; or they have insufficient time and energy. Active membership of sports clubs is replaced by six-month subscriptions to fitness centers; major expenditure (including having children) is delayed or rejected as employees do not know whether they will employed in 6 months time or instead have to spend their savings to pay for regular outgoings. In this way, thriving communities are undermined or fail to develop.
Over the long-term, the consequences for private and family life are dramatic: contingent jobs (hiring and firing) mean people can no longer plan their careers, families or lives: nobody has a secure future. Buying a home becomes a difficult and risky undertaking; also, banks do not lend to contingent employees. The spread of precarious employment and individualization at work also undermines industrial democratic processes such as collectively-agreed rights of participation and security (as exist in Germany). There, in future, industrial democracy that covers pay and conditions via democratically elected works (enterprise) councils will be something employees will know only from tales told by their parents.
Against this background, the global 'free' labor market takes on a different dimension. In the past global sourcing meant only subcontracting (cross-border "extended workbenches"). Today this type of procurement goes further and directly impacts individual employees. One example is global talent sourcing; a euphemism for making everybody compete but leaving nobody with a certain future.
Repeatedly forming and reforming work teams (hiring and firing) to mirror fluctuating new orders prevents work from satisfying a basic human need: the need to belong, to grow a rounded identity, to plan a future (home, family, community and life-planning). Consequently, people (employees) are degraded to human resources (a factor of production) as units of a knowledge pool ― exploitable human resources to be extracted on demand. This managerist view of humanity values people solely according to their economic utility: work is merely a marketable entity whose worth depends on the selling and negotiating skills of its 'owners'. A total absence of solidarity, loyalty and growing remoteness between employer and employee becomes the norm, especially when not just hiring but also firing is outsourced to service providers (outplacement agencies). Managerists should not be surprised if formerly committed employees begin to resign inwardly. After all, they are intentionally turning what were once lifelong careers, professions or trades into contingent jobs.
Under these circumstances, the short-term profit motive becomes not only the master of internal business operations; it also dominates, shapes and even undermines civil society and citizenship.
Sooner than expected, this will have negative consequences not only for businesses but also for national economies, such as Germany, as business locations. Abandoning the northern European heritage of dependable full-time employment will deepen the divide between society and the economy which is supposed to serve it. Citizens will become servants of an economy no longer fit for purpose.
Opportunities to pass on skills, knowledge and experience to successor generations will disappear. Indispensable institutionalized knowledge, needed for work teams, facilities and factories will be sacrificed to short-term cost savings, even though specialist knowledge is increasingly the key success factor in global competition. The skillsdrain, as experienced workers become global 'journeymen', may be discounted by managerists, but given present demographic trends and the emergence of a knowledge-based society, such opportunistic behavior is willfully negligent, no matter how strongly managerists emphasise that everything must be sacrificed for short-term competitive advantage.
To ensure a democratic society and civic community, politicians must oppose total flexibility (deregulation) of employment. The recent consequences of a free-market approach to financial markets and the dire consequences should be a lesson learned. Trade unions (employee representatives) are also called upon to develop and propose more sustainable and practical solutions to economic cycles so that core employees not only have the right to work, but should also accept they have ethical duty toward contingent workers, who depend upon their solidarity.
Is German (northern European) industry willing to sacrifice its world-class technological expertise, employee skills and welfare to managerist dictums of maximum flexibility, short-termism and cost cutting? Are the values that helped to create the economic success of post-war Germany: loyalty, dependability, reliability, belief in quality, cooperation, sharing of skills and knowledge, now really irrelevant?
Dr. Sandra Siebenhüter, 14 June 2012
* Excludes (about) one million people wanting full-time work who are statistically classified as 'under-employed' (ill, on training schemes, over 58 years, without a job offer for over 12 months).
See example of cloudworking at: http://www.clickworker.com/en
German Federal Employment Agency (Bundesagentur für Arbeit) (2012): Der Arbeitsmarkt im März 2012. Frühjahrsbelebung lässt Arbeitslosigkeit sinken, Press release No. 11, 29 March 2012, Nuremberg.
German Federal Office of Statistics (2012): Press release No. 115, 29 March 2012.
(February 2012): Weiterer Anstieg der Zahl der Erwerbstätigen, Wiesbaden.
DGB Deutsche Gewerkschaftsbund (German Confederation of Trade Unions), 2012a/b: Arbeitsmarkt aktuell 2/2012. Licht und Schatten im Beschäftigungssystem – Entwicklung der Erwerbstätigkeit in den letzten 20 Jahren, Berlin. Arbeitsmarkt aktuell 1/2012. Hartz IV – Bedürftigkeit von Erwerbstätigen, Berlin.
DER SPIEGEL (2012): Frei schwebend in der Wolke. No. 6/2012, pp 62 – 64, Hamburg.
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