Corporate restructuring and employment flexibility

Chapter 12

by Line Steenberg and Christelle Schamber

January, the 9th 2008

Roger Hayter: The factory, the firm and the production System

Introduction

1950’s-60’s = long boom of fordism period of sustained growth (MNCs domination)

Early 70’s = volatile global economy restructuring of technology, production, organization, markets, location and employment

Corporate restructuring is a search for “flexibilities”, especially employment flexibility

Contents

Corporate dimensions of restructuring

New locations and flexible workforces

In situ change and flexible workforces

Conclusion: the illusion of the spatial division of labour

I. Corporate dimensions of restructuring

1970’s: winds of economic changeNew technologies: CAD, CAM, NC

Create new products (markets more volatile, competitive and differentiated)

Japan: not based on low labour costs but in the nature of production organisation

Western economies and firms: competitiveness Large-scale lay-offs Core as well as peripheral regions Exple : UK 1976-81 By the mid-1990’s: recession, downsizing(Exple: GM)

In recessionary situations of declining market performance and competitiveness, firms have traditionally sought to reduce costs, especially labour costs (Frederiksson and Lindmark 1979)

Restructuring processes Fordist firm More competitive economy of the ICT techno-

economy

The interrelated faces of restructuring Restructuring = lower costs, enhance productivity, improve market

position Multiple dimensions (restructuring plans differ among corporations):

Labour Reduce costs lay-offs Increase productivity intensifying work practices

Production and technology Close down facilities, rationalization Alternative: introduce new technology (CAD-CAM)

Organization Restructure operations by vertical disintegration (contracting-out…) Joint-ventures, strategic alliances

Product Markets Shift towards more valuable, design intensive, higher quality pdts Shift towards higher income market areas

Relations between the various dimensions of restructuring depend from corporation to corporation

Successful or not : many faces, many case studies (GM, Ford, IBM)

Core firms and segmented labour

Neoclassical vs. dual labour or segmentation theory Segmentation

Dynamic Variation from place to place Taylorism = scientific management (20th)

Fordist-Taylorism vs. Flexible principles labour market segmentation (80’s)

Labour markets in the fordist firm

Doeringer and Piore (1971)

:seniority + job demarcation

Labour segmentation in the flexible firm

Atkinson 1985,87 UK

Flexible labour and geographical strategies

To create a flexible labour force Two basic geographical strategy

New location strategy In situ strategy

Two polar strategies Emphasize the creation of core workforces Emphasize the creation of peripheral workforces

Reality is more complicated Not easy to distinguish the different types of flexibility

(new locations with functional or numerical/financial flexibility; in situ with functional or…)

Flexibility designed to ensure that workers are always working, but there is not always enough skills when tasks are simple

II. New locations and flexible workforces Importance of women

Women are often more attractive to companies due to:

Lower wagesOften they are not unionizedEasier to control womenThese women are mostly within the

secondary sector

Married women

After the second world war women wanted to return to the labour market

Growth and low unemployment rates created a need for female labour force

Supplement family incomes Women as an important location factor:

When firms move to the suburb they are able to find cheap labour force

When located in the suburb it is easier to attract women labour force

Spatial entrapment hypothesis

Focus on the women in the suburbs Women prefer to work close to their homes in

stead of high income Women find jobs after choosing where they want

to live Women are spatially entrapped within specific

labour markets and within specific societies Other studies: England (90ies): be careful of

generalizing because of too many variations

Single women

Focus on developing countries and the female labour force available there

Female workers in the export processing zone Young, single women that are often not

protected by unions Bad working conditions and extremely low

wages Immediate productivity Temporary workers – easy to replace

Child labour

Developing countries (India and China) Reason for high level of child labour: working of

parent’s loans Employed by government and MNC (often

through subcontracting) Nike’s off-shore leaps:

Numerical and financially flexible labour by subcontracting to regions with low wages

Japanese manufacturer through partnerships Has developed a flexible system where minimizing cost

but still keeping a good quality

III. In situ change ans flexible workforces

Employment flexibility easier in new locations

The Chemainus sawmill

Struggle at existing sites to shift towards more flexible operating cultures

Close a mill and replace it with a new one at the same location – new principles

The Powell River papermill:

In case of employment downsizing bargaining over flexibility between firms and unions is necessary

In the 80ies employment conditions kept falling and jobs were lost. Still there was increase in productivity.

Four main point for difficulties in flexibility: Flexibility will always be contentious and unions will fight for

seniority and no wage competition Formal negotiations between the firm and union are important. If

lowering conditions the firm needs to offer something else in return

Changes towards more flexibility can affect the trust, moral and effectiveness of the workers

Not all workers have the qualifications for more flexible operating cultures. Training the workers and replacement of workers are time requiring

Maintaining peripheral work forces In situ change

Decline in union power increases the flexible workforce

Communities without union traditions often have low wages and good possibilities in increasing flexibility

Kitchen knife manufacturer: low wages, young non-unionized female labour force and almost no job training

Skill formation of peripheral work forces:

In developing countries skill formation sometimes occur which calls for a flexible labour force.

Wages going up is a sign of increasing demand for labour force – limits off-the-job-training

Advantages in skill formation of workers through on-the-job-training: Productivity will be bigger than sending workers to off-the job training Workers will be capable of handling both routine problems and new changes The intellect of the workers will increase according to the Enterprise Specific Skill Formation figure

Conclusion: the illusion of the spatial division of labour

The spatial division of labour is a problematical concept Corporate restructuring can involve a variety of

forms Employment flexibility is developing along

different lines in the same place and between places

Reality is always more complex than theory

Thank you for your attention ! ! !

Questions ?