TWO WAYS OF RUNNING A BUSINESS
(This essay is part four of the series 'How Jobs Destroyed Work')
PATERNALISM
Some businesses operate what might be called a paternalistic model. Under this model, a company’s ‘stakeholders’- its owners, employees and customers- are all well taken care of. The pay is good, the hours are reasonable, many benefits are included (in 60s America, 40% of those workers who had major medical insurance were covered ‘free’, meaning that policy costs were fully paid by the company.) The thinking behind paternalism is that if all the stakeholders are well looked after, they will feel valued and will have a personal interest in ensuring the company remains viable.
Under paternalism, a job can achieve most if not all of the definitions of true work. An employee working for such a company may feel secure in their job, feel they are rewarded for what they do and that the work has real value. Midway through the last century, the expectation was that paternalism would only grow in strength. As Jeremy Rifkin explained:
“An informal accommodation of sorts was reached which was to last, more or less intact, until the mid-1970s. Labour was to share, at least in part, in the gains in productivity- enjoying better wages and benefits- in return for the promise of labour peace and cooperation”.
LEAN AND MEAN
But, paternalism is not the only model a business can adopt. There is also what might be called the ‘Lean and Mean’ model. According to this way of running a business, the financial bottom line is of utmost importance, and anything that eats into it must be minimised or, ideally, eliminated. As far as the lean and mean model is concerned, the company’s employees are not people to be looked after and rewarded for their loyalty. Rather, they are commodities to be exploited as ruthlessly as can be gotten away with. For example, General Electric’s chief executive, Jack Welch, compared a company’s employees to lemons, claiming there was ‘unlimited juice’ to be squeezed from them, so long as companies pursued a relentless campaign to achieve greater operating efficiencies.
THREE KINDS OF LABOUR
Under the lean and mean model, the owner classes do everything they can to reduce the bargaining power of the working classes, thereby putting them in the worst possible position when it comes to negotiating employment contracts. What this means is that everything you were lead to believe about employment as a child is threatened by such a model. As children, we are asked “what do you want to be when you are older?”. Becoming ‘what you want to be’ implies that you are going to find work that is a ‘calling’, Amy Wrzesniewski’s term for the most satisfying work experience. Like me, she believes we need more categories for employment than just ‘work’. She divides paid work into three kinds: Jobs, careers, and callings. A ‘job’ is employment in which people enjoy little discretion and find minimal engagement or meaning in what they do. People who have careers feel more engaged in their work, enjoy more discretion, and expect to advance, following a trajectory toward promotion, higher salary, and better work. They don’t dislike their current job but equally they are neither content to remain there, nor expect to.
Finally, we have ‘callings’. People who have found employment of this kind get the most satisfaction out of the work they are doing. They consider their occupation to be very important. They love doing it, so much so, in fact, that it becomes a vital part of their identity.
As a basic rule of thumb, I think it’s fair to say that if we find work very satisfying it’s because we are gifted at it. We all have certain special abilities, and if we can find employment that utilises those skills and helps them to flourish, then there is every opportunity to find great satisfaction in one’s working life.
SKILLS COST MONEY, SO REDUCE SKILLS AND SAVE
The problem is that the last thing a lean and mean business wants is skilled employees. The reason why has to do with bargaining power. If you possess valuable skills and a company needs to employ somebody with those abilities, you are in a pretty strong negotiating position. You are going to drive a bargain that is very favourable for you. A lean and mean company wouldn’t like that, because ‘more favourable for you’ means less favourable for the bottom line. Lean-and-meaners really don’t want to be in a position where they have to employ highly-skilled workers who are hard to replace, and can therefore enter negotiations from a strong position. No, they want employees who are less skilled, easier to replace at as short a notice as possible, and therefore in no good position when it comes to negotiating terms of employment.
Now, a question may have arisen in your mind at this point: Given that they sound like such unpleasant places to work, why would anybody seek employment in a lean-and-mean corporation? One reason may be because, however unpleasant they may sound to those of us who are used to the security and benefits that come from working for paternalistic companies, they provide an escape from even worse situations for others. Around the world there are places ravaged by war, affected by disastrous economic policies, ruined by corrupt leaders, and since in such places there will be people who are effectively waving signs that read ‘employ us! We will accept long hours and low wages!’, lean and mean companies are only too pleased to oblige by setting up sweatshop labour in such places.
But what about places that do have paternalistic businesses? Surely, in a free market in which every worker may choose who they will and won’t work for, labour would flow toward businesses that care about their employees, offering job security and multiple benefits. Nobody would want to work for a company that thinks its employees are lemons to be squeezed until all their juice runs dry. So how do lean-and-mean businesses survive in a free market?
IT ALL LOOKS GOOD FROM THE TOP
Well, firstly, lean-and-mean businesses only look bad from the perspective of employees below the executive level. But as far as major stockholders are concerned, they are far superior to paternalistic companies. After all, in places like those, company earnings that could be raising shareholder value are being wasted on high wages for the non-executives, on generous pensions, too many paid vacations, health insurance and other benefits that lean-and-meaners have reduced if not eliminated altogether. The stronger Wall Street and its financial equivalents in other countries becomes, and the more emphasis there is placed on improving the bottom line, the more paternalistic companies will feel pressurised into adopting the lean-and-mean model lest they be taken over by their more aggressive rivals.
So, intimidation from the financial sector are part of the explanation for why employees find themselves in lean-and-mean businesses. But the owner classes don’t just rely on their financial muscle to force the change; they also use technology and propaganda to redefine work in ways that suits them at everybody else’s expense.
At this point it might be worth going into a little more detail regarding the rise of paternalistic companies in the early 50s through to the seventies, and the emergence of lean-and-mean business practices in the 80s and 90s.
THE RISE OF PATERNALISM
If any one thing can be said to have caused the rise of paternalism, it would be the 2nd World War. During the war, the USA achieved full employment for the first time since the 1920s. When the war was over, there was a lot of concern about the possibility of a postwar recession, which the government sought to avoid through various acts and initiatives. The acts included the ‘Employment Act’ of 1946, which “committed the federal government to maintain maximum employment and with it a high level of aggregate demand”. The initiatives included the GI bill, an education initiative that helped upgrade the workforce, thereby providing a large pool of white-collar workers for the administrative and management-type roles that corporations increasingly depended upon.
As well as anxieties about recession prompting the State to push for high employment, conditions enabled by the war played a part in other ways. For one thing, industry in America was still largely intact, unlike that of Europe’s. The government invested heavily in the business sector, particularly through highway construction and defence-related expenditures. Also, wartime research had helped launch an era of technological innovation, such as IBM’s development of the first general-purpose computer. Finally, wage freezes had been put in place during the war, and this had required employers to use fringe benefits with which to attract employees. This favoured the largest corporations, who could afford to offer greater benefits than their smaller rivals.
But those corporate benefit packages were still costly, even forty or fifty years ago. This might have discouraged their mass adoption, had it not been for militant unions during the postwar period. It made sense to the larger corporations that if they treated their employees well, that would improve emotional attachment to the company, and the threat of socialism would be avoided.
And so it came to pass that the early postwar decades enjoyed economic growth and price stability. The large corporations delivered on their promise of long-term employment prospects, meaning that anyone fortunate enough to land a job there felt secure, and expected that their own prosperity would rise along with the company’s fortunes.
But all that was to change in the 80s and 90s.
Coming up in part five: The rise and consequences of 'Lean And Mean' business practice.