Why do we work? Just for the money? Or do we also work for other reasons such as the ability to socialise with friends and to use and develop skills? According to recent research, we work simply for the money it brings. When we are at work, our thoughts are on the things we could be doing instead and we long for the time when our work is done. In the language of economics, work is a "disutility" that all of us would prefer to do without.
This view of work as a painful activity raises certain issues, however. There is no doubt that much work is experienced as a pain, but to classify all work as painful seems to be stretching things a little too far. Did the authors of the above research really experience their work as all toil and trouble? Or were there periods when they enjoyed the challenges thrown up by their work? During such periods, work may well have proved more alluring than leisure.
The idea of work as a disutility has figured not just in economics but also in Christian and Classical thought. The Bible represents work as the punishment for the original sin of Adam. Ancient Greek philosophy sees exemption from physical work as the route to human fulfilment. These views support the idea that work is to be seen and experienced as a purely instrumental activity devoid of intrinsic satisfaction.
In economics, the disutility of work has at least three separate meanings: (1) the pain of work itself (both Adam Smith and Jeremy Bentham regarded work as an inherent pain); (2) the opportunity cost of work time (in neoclassical economics, the cost of work (time) is defined in terms of the lost opportunity for leisure time: here, paradoxically, the disutility of work is defined without consideration of work itself – instead, it acts as a proxy for the utility of leisure time); (3) the natural laziness of workers (modern principal-agent theory assumes that workers are effort-averse by nature: this definition of the disutility of work shifts attention away from the nature of work and towards the allegedly faulty genes of workers). Each of these meanings carries different implications, but all assume that workers must be goaded to work by some kind of extrinsic reward.
The point I would make is that work means more to us than just the money it brings. Work can be a source of creative expression and a route to self-realisation. Even where work lacks creativity it can still bring the benefits of social interaction. The problem with seeing work as just a disutility is that it fails to capture the dual-sided nature of work in human life. It misses the worth of work both as a means to an end and an end in itself.
To be sure, work is often endured by workers but this does not reflect anything intrinsic to work as such, rather it reflects on the way that work is organised. To see work as just a disutility is to abstract from the influence of the structure and organisation of work on the way that work is experienced by workers. To see workers as incorrigible “shirkers”, likewise, misses the endogenous roots of work resistance. It also lets employers off the hook by blaming workers for low productivity.
There is a deeper issue here with regards to the conception of human nature. The portrayal of work as a disutility presents humans as consumers with no interest in work other than as a means to consumption. It misses the needs of humans as producers. The fact that as human beings we have creative capacities that can be met through the activity of work is not recognised. But it is evident from our own life experiences that work can be so much more than just a way to earn a living. Our fear of unemployment stems in part from the loss of opportunity to participate and contribute in work. Our desire to keep working is related in part to non-monetary factors such as the need to be productive and creative. This speaks to the deeper importance of work in human life. It also highlights the necessity to create and widen opportunities for people to experience their work as fulfilling, rather than as just a disutility. If we accept that work is a disutility, we risk creating a counsel of despair that ultimately undermines the case for progressive work reform.
In sum, work has a profound influence upon the quality of our lives. To reduce work’s importance to a feeling of pain is to miss the fundamental role of work in the fulfilment of our needs both as consumers and producers. The finding that work makes us “unhappy” may be headline-grabbing, but it does not speak to the role that work can and ought to play in human life.
Tuesday, 23 July 2013
Wednesday, 17 July 2013
Labour, Financialisation, and the Nature of Contemporary Capitalism
Frances Coppola has written a thought-provoking piece drawing an eye-catching parallel between wage labour and slave labour to help describe the contemporary phenomenon of “The Financialisation of Labour”. Here I will argue that the major trends noted but not fully explained by Coppola – such as deteriorating labour conditions and the failure of corporate investment – are due to the very nature of contemporary capitalism as a whole, that I will describe as financialised capitalism. I will argue that we need to see the “big picture”, the specific nature of contemporary capitalism, if we want to explain the reality that Coppola keenly observes in her piece, and this big picture is best understood through the notion of “financialisation”.
The term “financialisation” originates in political economy and is used to describe in a systematic way the dramatic rise of financial activities and financial institutions within economy, society, and culture. Financialisation has been a secular and global process over the past 30 years or so, recently encompassing the global financial crisis and ensuing period of austerity in capitalist societies. It has been fuelled by deregulation policies and it has occurred often at the expense of the real economy. Financialisation has been particularly associated with rising levels of household indebtedness and higher levels of inequality. Workers have borne the brunt of financialisation, suffering lower pay, higher unemployment, and worse terms and conditions of employment.
These outcomes reflect the fact that financialisation has weakened the bargaining power of labour. At one level, firms have become more flexible in their investment decisions. They have invested not just in real assets but also in financial assets and have looked to invest beyond the shores of their home country. This increased flexibility has enabled firms to drive much harder bargains with labour: threats of plant closure have been used by footloose capital to check the pretensions and aspirations of workers. At another level, the nature of corporate governance has changed. The claims of shareholders have come at the expense of the interests of workers. The so-called “shareholder value” model has put pressure on firms to treat labour as a cost rather than as an asset. Wage cuts, job losses, reductions in pensions, and the casualisation of work, have been demanded in order to maximise shareholder returns.
The result of these shifts, at the macroeconomic level, has been a decline in the wage share in capitalist economies. Financialisation has been shown to be the key reason for this decline. Those who have benefited from financialisation have been among the 1 per cent at the very top of the income distribution. At the microeconomic level, work has become more insecure and more precarious with the increase in temporary work and latterly “zero-hour” contracts. Involuntary part-time work and enforced self-employment have also risen in recent times. These outcomes are a benefit to capital whereas they represent a clear burden to labour.
Of course, unequal bargaining power between capital and labour is endemic to any form of capitalism, as Coppola explains. But the balance of power has shifted further in favour of capital under financialisation. Capital has gained power in part by creating a workforce that is debt-ridden. Borrowing to consume has become a way of life for many. This has occurred partly due to slowly rising or falling real wages; however, it also reflects on the wider marketing of credit and loans. The demand for and supply of credit has risen giving rise to an explosion of consumer debt. This increase in debt has further eroded the power of labour.
There is also the impact of the financial crisis and the policy responses to it. Workers have faced increased job insecurity and also increased unemployment. They have also had to accept lower real wages to stay in work. The assault on labour has been magnified by austerity policies that have taken away welfare benefits or made them more difficult to access, raising anxiety about unemployment for those in work and increasing the economic hardship of those who are unemployed. Workers did not create the financial crisis, but they are suffering the most from its aftermath.
The fact that life is so hard for the modern “free” labourer reflects on the financialisation of capitalism. A financialised capitalism is both brutal and ruthless towards labour. Firms want to get workers on the “cheap” to maximise shareholder value and prefer not to enter into long-term employment relationships. Many of course are forced to do so, but they face continual pressure to remove entitlements, reduce pay, erode terms and conditions of employment, and shed jobs, in the name of shareholder value.
So, while the processes that Coppola describes in her piece do reflect pressures inherent to capitalism as such, what is novel is the way that these pressures have been intensified under financialisation. It is financialised capitalism that has turned firms into demanders of expendable labour. It is financialised capitalism that has made firms focus on the short-term and neglect the long-term. It is financialised capitalism that has made firms demand that governments enforce austerity policies even if their effect is to reduce economic growth.
If “the major problem with the UK economy” is “a failure of corporate investment”, as Coppola suggests, then the underlying cause is a failure of a financialised system of capitalism. Financialisation has encouraged financial speculation over real investment and has made firms increasingly subject to the maximisation of shareholder value which has biased corporate policies away from the pursuit of long-term productivity and profitability. Any significant revival in corporate investment would require no less than the reversal of financialisation; a prospect that seems highly unlikely at the present time.
The processes of financialisation must be put at the centre of the explanation of the changes in labour in modern capitalism. Employment protection has been eroded and “unstable, insecure and short-term jobs” have risen in number, specifically due to the financialisation of the economy. There is a powerful connection to be made between the processes of financialisation understood in the broadest sense and the immiseration of labour outlined in Coppola’s piece.
Financialisation is not just pernicious but also contradictory. For its ultimate effect is to reduce the prospects for sustainable economic growth and for enhanced well-being. The stress on the financialisation of labour, in short, raises the broader need to challenge and overcome the financialisation of capitalism.
***This post was orginally posted on Pieria. It was then reposted on the Work in Progress blog of the American Sociological Association's Organizations, Occupations, and Work Section.
The term “financialisation” originates in political economy and is used to describe in a systematic way the dramatic rise of financial activities and financial institutions within economy, society, and culture. Financialisation has been a secular and global process over the past 30 years or so, recently encompassing the global financial crisis and ensuing period of austerity in capitalist societies. It has been fuelled by deregulation policies and it has occurred often at the expense of the real economy. Financialisation has been particularly associated with rising levels of household indebtedness and higher levels of inequality. Workers have borne the brunt of financialisation, suffering lower pay, higher unemployment, and worse terms and conditions of employment.
These outcomes reflect the fact that financialisation has weakened the bargaining power of labour. At one level, firms have become more flexible in their investment decisions. They have invested not just in real assets but also in financial assets and have looked to invest beyond the shores of their home country. This increased flexibility has enabled firms to drive much harder bargains with labour: threats of plant closure have been used by footloose capital to check the pretensions and aspirations of workers. At another level, the nature of corporate governance has changed. The claims of shareholders have come at the expense of the interests of workers. The so-called “shareholder value” model has put pressure on firms to treat labour as a cost rather than as an asset. Wage cuts, job losses, reductions in pensions, and the casualisation of work, have been demanded in order to maximise shareholder returns.
The result of these shifts, at the macroeconomic level, has been a decline in the wage share in capitalist economies. Financialisation has been shown to be the key reason for this decline. Those who have benefited from financialisation have been among the 1 per cent at the very top of the income distribution. At the microeconomic level, work has become more insecure and more precarious with the increase in temporary work and latterly “zero-hour” contracts. Involuntary part-time work and enforced self-employment have also risen in recent times. These outcomes are a benefit to capital whereas they represent a clear burden to labour.
Of course, unequal bargaining power between capital and labour is endemic to any form of capitalism, as Coppola explains. But the balance of power has shifted further in favour of capital under financialisation. Capital has gained power in part by creating a workforce that is debt-ridden. Borrowing to consume has become a way of life for many. This has occurred partly due to slowly rising or falling real wages; however, it also reflects on the wider marketing of credit and loans. The demand for and supply of credit has risen giving rise to an explosion of consumer debt. This increase in debt has further eroded the power of labour.
There is also the impact of the financial crisis and the policy responses to it. Workers have faced increased job insecurity and also increased unemployment. They have also had to accept lower real wages to stay in work. The assault on labour has been magnified by austerity policies that have taken away welfare benefits or made them more difficult to access, raising anxiety about unemployment for those in work and increasing the economic hardship of those who are unemployed. Workers did not create the financial crisis, but they are suffering the most from its aftermath.
The fact that life is so hard for the modern “free” labourer reflects on the financialisation of capitalism. A financialised capitalism is both brutal and ruthless towards labour. Firms want to get workers on the “cheap” to maximise shareholder value and prefer not to enter into long-term employment relationships. Many of course are forced to do so, but they face continual pressure to remove entitlements, reduce pay, erode terms and conditions of employment, and shed jobs, in the name of shareholder value.
So, while the processes that Coppola describes in her piece do reflect pressures inherent to capitalism as such, what is novel is the way that these pressures have been intensified under financialisation. It is financialised capitalism that has turned firms into demanders of expendable labour. It is financialised capitalism that has made firms focus on the short-term and neglect the long-term. It is financialised capitalism that has made firms demand that governments enforce austerity policies even if their effect is to reduce economic growth.
If “the major problem with the UK economy” is “a failure of corporate investment”, as Coppola suggests, then the underlying cause is a failure of a financialised system of capitalism. Financialisation has encouraged financial speculation over real investment and has made firms increasingly subject to the maximisation of shareholder value which has biased corporate policies away from the pursuit of long-term productivity and profitability. Any significant revival in corporate investment would require no less than the reversal of financialisation; a prospect that seems highly unlikely at the present time.
The processes of financialisation must be put at the centre of the explanation of the changes in labour in modern capitalism. Employment protection has been eroded and “unstable, insecure and short-term jobs” have risen in number, specifically due to the financialisation of the economy. There is a powerful connection to be made between the processes of financialisation understood in the broadest sense and the immiseration of labour outlined in Coppola’s piece.
Financialisation is not just pernicious but also contradictory. For its ultimate effect is to reduce the prospects for sustainable economic growth and for enhanced well-being. The stress on the financialisation of labour, in short, raises the broader need to challenge and overcome the financialisation of capitalism.
***This post was orginally posted on Pieria. It was then reposted on the Work in Progress blog of the American Sociological Association's Organizations, Occupations, and Work Section.
Friday, 14 June 2013
The jobs and productivity puzzles: not just falling real wages
Despite flat-lining output, employment in the UK has risen. This is good news in the sense that many workers have been saved from unemployment. It is bad news in the sense that labour productivity has fallen. Low labour productivity makes it even less likely that real incomes will rise in the future.
Several different theories have been offered to explain the ‘puzzles’ of rising employment with sluggish output and falling labour productivity. One simple and plausible explanation is that these puzzles can be explained by falling real wages. In the last two years, nominal wages have grown more slowly than inflation. This trend of falling real wages, it is argued, has meant that UK workers have ‘priced themselves back into work’ and in line with the now cheaper price of labour firms have switched to more labour intensive methods of production. Using this argument, it is claimed that the labour productivity slowdown is a temporary phenomenon and will be resolved once demand in the UK economy picks up.
Three problems can be raised with the above explanation. First, the idea that workers have ‘priced themselves back into work’ suggests that workers have some choice over whether they work or not. This idea is a basic premise of the standard economic model of the labour market. Yet, the reality is that employers have driven down real wages. There is no element of choice in UK workers taking work: rather they have been forced to accept lower paid work.
Second, falling real wages mean lower aggregate demand and lower sales for firms. It is a supply-side fallacy to think that firms will necessarily hire more workers when real wages fall. Firms will hire more workers if they expect to sell more output by hiring the additional workers. It is one thing to say that lower real wages have helped firms to retain workers despite stagnant output. It is quite another thing to say that lower real wages have induced firms to hire more workers when there is low confidence about future sales growth. The existence and persistence of low real wages creates a barrier to present and future growth in employment.
Third, if the explanation of falling real wages is true, it should be observed that those occupations with the most pronounced falls in real wages have been growing the fastest in recent years. Yet, there is little evidence that this is happening. Of the fastest growing occupations in the last two years, high paid occupations (e.g. managers and senior officials, and professionals) rank near the top. In these occupations, real wages have not declined by any great amount. Some other occupations (e.g. sales and customer services) have witnessed falling real wages, yet total employment in these occupations has fallen. The fastest growing occupation is personal services encompassing an array of low paid jobs; however, real wages in this occupational group actually rose in the last two years. Overall, there is no clear evidence that falling real wages have been the main driver of the growth in employment across occupations.
The fall in real wages may have helped some firms to hang on to labour for longer. It may have also induced firms to defer investment and to hire more workers in order to meet current sales. But it cannot be the only explanation of rising employment. Some firms have employed more expensive labour – perhaps these firms are hiring more managers in order to restructure production and to cut costs. Employment growth in personal services reflects wider changes in the economy – for example, the growth of low paid care work due to an ageing population.
The shift to a services-based economy more generally may have helped to embed a low productivity environment in the UK. Historically, manufacturing has been the engine of productivity in the economy. Its secular demise may have undermined the ability of the UK economy to deliver and sustain productivity gains.
One final point can be made here. The fall in real wages reflects the broader weakness in the bargaining strength of labour. The decline in union power coupled with the financialisation of labour has made it more difficult for workers to prevent falls in real wages. Employment may be higher than if real wages had not fallen but that is cold comfort to the many millions of UK workers now struggling to make ends meet in a harsh labour market. Until its position is strengthened, it is difficult to see how labour will be able to secure the employment and pay it needs and deserves.
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