The Contingent Workforce and Comprehensive Labor Policy Reform

20 03 2013

First of all, thank goodness for Seth Ackerman. Ackerman saved me a day of writing and a not trivial amount of frustration by writing a response to Matthew Yglesias’s latest bit of masked vulgar libertarianism. You all were saved from my less concise writing style by Ackerman’s neat and tidy takedown of Yglesias’s assertion that the economy suffers not from stagnant wages and income but a lack of productivity innovations sufficient to bring down prices of goods and services (e.g., automated cars so it’d be cheaper to…take buses, I guess?).

Ackerman does the Econ 103 (I assume 101 usually just glosses on labor markets) homework that Yglesias seems to not care for; if incomes were to go up but productivity remain where it is–in other words, if workers were getting paid a larger share of the fruits of their already historically high productivity–then runaway inflation wouldn’t necessarily negate those gains, because all that would be happening is that income would be redistributed, just not by the government, but in the workplace.

It is becoming increasingly evident that the liberal lite-to-neoliberal commentariat, do not really understand labor as a social relation or as a type of market. I want to use another recent discussion to highlight why this misunderstanding is so important, with another tip of the hat to Ackerman for doing jumping on the troll grenade. Specifically, the cool attitude towards the growth of contingent labor (interns, independent contractors, freelancers) and indifference shading towards hostility towards advocates of comprehensive labor law reform.

The use of contingency labor is a means of tipping bargaining power toward employers. Absent enforcement and given the weak labor law regime, employers can classify their employees in such a way that exempts them from statutory rights that would otherwise allow them to affect the redistribution Ackerman describes. Even if labor supply is not tight, bargaining power can be increased through a legal regime which has as its aim strengthening the suite of rights workers enjoy individually and collectively. By cheerleading unpaid and contingent labor, and ignoring the pressing need for labor law reform, the only recourse for addressing stagnant wages and income is a facile division of people into “producers” and “consumers.” This division in turn imagines a model where people live to consume, and cheap consumables makes up the difference.

Yglesias, responding to a drama that erupted at the Atlantic over unpaid journalism, has been arguing for the value of unpaid or lightly paid compensation in journalism, most recently arguing that it has actually improved journalism. The issue of unpaid or lightly paid internships, contracting, and freelance work, and the need to increase the bargaining strength of related, are in fact tightly connected, and not surprisingly, another Yglesias article tightly connects them.

In any given economy, the laws that govern “industrial relations” (what used to be known as “master-servant law”) will contour and define labor’s bargaining power. In other words, our nation’s laws control to a large degree the bargaining strength of labor in groups or as individuals. Labor–as distinct from “unions,” an institutional category–thrives or suffers based in large part on its relative bargaining power. While labor is not monolithic, its bargaining power in general determines the prosperity of working class people. This will be so even if durable goods and services are cheap, because consumption is not the sole purpose of laboring.

So in journalism, the explosion of internships and unpaid or lightly paid freelance work weakens the bargaining power of salaried employees, because they have to compete with a class of laborers who have fewer statutorily defined rights and privileges. The comparative loss of bargaining power thus works a deflationary pressure on employees, in terms of material benefit and job security and quality. If this is so for nominal professionals like journalists, it is certainly so for workers in other sectors of the economy, where interns, freelancers, and independent contractors make up the burgeoning “contingent workers” segment of the labor force who compete with full employees.

This doesn’t have to be so, but is so because the law makes it so.

Thus when Yglesias, verbalizes his eyerolling by writing that “America’s private sector labor unions have always been in decline,” since just after World War II, he misses the point in a profound way. “There was a little uptick associated with the Great Depression,” Yglesias writes, referring to the massive more-than-doubling of the unionized workforce at a time when de jure segregation and massive unemployment were rampant.

Hmm. What legislation was “associated with the Great Depression” that was altered “just after World War II”?

The National Labor Relations Act was passed in 1935. The Taft-Hartley Act, which eviscerated the strongest elements of the NLRA, was passed over Truman’s veto in 1948. He even cites to the Taft-Hartley Act–passed on a wave of anti-Communist hysteria, and in fear of a CIO campaign to organize and desegregate the South–but seems to grant it little efficacy besides a nebulous reference to the “political economy.” The import of the NLRA is that it granted rights, important, positive, substantive rights, that corrected the imbalance in bargaining power between labor and capital. It granted these rights to statutorily-defined “employees.” This suite of rights created an intrinsic pressure on employers to acquiesce to employee demands or face binding collective bargaining agreements. That balance allowed the Fair Labor Standards Act to be passed in 1938.

More importantly and to the point, one side effect of the contingent worker economy is that it increases the number of workers in the broadest sense of that word–“employees”–who have fewer formal and practical rights vis a vis their employers. The larger this class of “exempted” workers, the less pressure on employers to bargain fairly. Collective action is more difficult, even where the majority of employees do have practicable, legal rights. This includes qualifying, per se, for the Fair Labor Standards Act, Title VII, and the National Labor Relations Act. Without those statutory “bottom floor” rights, these classes of employees have more to bargain for, and less to bargain with.

Consider it this way: independent contractors (and in some cases interns) are not covered by Title VII, the National Labor Relations Act, the Fair Labor Standards Act, the Social Security Act, the Age Discrimination in Employment Act, the Americans with Disabilities Act, the Family and Medical Leave Act, the Employee Retirement and Security Act, and possibly others. We can all agree that the provisions of these statutes confer benefits to employees–whether you agree with them not, they are obviously benefits. So those not covered by these acts have to negotiate for these benefits–they don’t automatically get them. Individually as a contingent worker, all that can really be bargained for is compensation. That compensation in turn has to include self-provisioning of, to name a few, your taxes, your health care, your retirement, personal time to care for family or yourself, and the inherent cost of unemployment–this latter because the lack of job security increases proportionately the need to self-insure against unemployment.

Even a right as basic as the right to not be treated differently because of your race or sex isn’t guaranteed if you’re an independent contractor or an intern. The EEOC has detailed a sixteen factor test to determine whether an intern has a right as basic as that.

When this sector of the labor force grows, it has a deflationary effect on the wages and benefits that covered employees can bargain for–it weakens labor. It therefore decreases the capacity for collective bargaining, as well as the aggregate bargaining power of individuals who lack this basic suite of rights in the workplace. This would tend to lower aggregate demand, although we can envision two forces to ameliorate that: credit fueling demand through debt, and supply increased with cheap imported goods and services (themselves made possible by lower labor costs in foreign countries with captive labor forces).

There is no good reason why contingent workers shouldn’t have some or all of these rights. If any employer only has a handful of sporadically used independent contracts, it’s not an issue. But if they have a large number of them who rely on the employer for their living, it obviously is. So why are independent contractors or freelancers not considered “employees” for purposes of the National Labor Relations Act? Or the FLSA? Or Title VII? Because of some Roussean natural law? No; because of a conscious legislative decision to protect employers.

Decreasing the costs of consumables isn’t a substitute for the rights necessary for labor to bargain for itself. The economic security and quality of life that comes with knowing your job is secure unless you’re incompetent, and that you have enough savings to quit your job and pursue your dream, or take time to care for a sick family member or yourself, or take time off to travel and enjoy your brief time on Earth, can never be secured because goods are cheap. These come through bargaining power, and a legal regime that hamper collective bargaining rights or disadvantage labor at the bargaining table.

The fair objection naturally arises: would the alternative–making these workers full employees, at least as far as their rights go–aggravate unemployment, and thus diminish bargaining power anyway?

Two things counsel against that: first, with more bargaining power workers would be able to increase aggregate demand in the marketplace; and second, the presumption that the margin between the price of labor for an intern or freelancer and that of a full employee is great enough to discourage more employment isn’t inherently true. There are efficiency benefits to a stable workforce, and less profit is still preferable to no profit–presuming each employee generates some profit or saves some cost.

Neoliberals shrug this off by pointing to the filibuster. That all may be so, the argument goes, but as long as there is a filibuster, there will be no comprehensive labor law reform. So let’s look to “labor flexibility” and community colleges and whatnot. But does that mean that nominal liberals like Yglesias and others shouldn’t be making the case for labor law reform? For industrial relations policy that encourages collective bargaining, or at least, strengthening the bargaining position of labor in general? Is that what the history of comprehensive labor law reform indicates?

And lest it be thought that this is just an honest disagreement on Yglesias’s part, he lets his spiteful disdain for the pro-labor left leak through with a telling bit of intellectual dishonesty. Yglesias argues that it was two World Wars that accompanied the “slight upticks” in labor organization; the First and Second World Wars.

It is true of course that the First World War created an atmosphere in which the proto-NLRA was passed (creating the National War Labor Board). But to say that the Second World War, which the US began arming for no earlier than 1939, and didn’t fully enter until 1942, was somehow the cause of the “slight uptick” is just flat out disingenuous. The NLRA was passed in 1935, after years of attempts to pass similar legislation, and after the passage of the Norris-LaGaurdia Anti-Injunction Act in 1932 gave labor some breathing space to build social pressure for comprehensive reform. Let’s don’t forget, too, that the first twenty years of the twentieth century are replete with examples of the “political economy” trying, at the local, state, and federal level, to pass labor law reforms that were consistently invalidated by the Lochner-era Supreme Court.* The “political economy” of the United States had been churning towards labor law reform for nearly two generations by the time the NLRA was passed; yet progressive activists didn’t just shrug and point to the Court, or the filibuster, and move on.

The purpose of his erroneous attribution of causality to the Second World War is to score this rhetorical point:

So anyone looking for a peacetime surge in union membership (I don’t see anyone advocating a giant war) to transform the political dynamic is hoping for something essentially unprecedented.

Unless of course, it isn’t war that caused the “slight uptick,” but an economic meltdown triggered by two generations of overly-pro-market policies and sourced to reckless financial speculation and unprecedented accumulation of wealth. If that’s the case, I can think of a number of precedents, one fairly recent, to use as an occasion to agitate for comprehensive labor law reform. And this is of course the objectively correct correlation, since defense spending did not significantly increase until after 1940, five years after the NLRA and eight years after Norris-LaGuardia.

The tightness in labor supply likely accelerated union density; but it doesn’t follow from that that union density would not have climbed, if albeit at a slower pace, without the war. It certainly doesn’t follow that the NLRA, FLSA, and SSA weren’t necessary conditions to provide for that acceleration.

The contingent workforce is growing because it’s cheaper for employers in myriad ways; but the classification exists and is exploited primarily because it exempts workers from substantive rights. Giving people internships or freelance work for “exposure” “experience” or whatever other thing isn’t coextensive with treating them as though they aren’t “real” members of the labor force, entitled to basic rights. The explosion of the contingent workforce at a time of historic concentration of wealth is a mechanism that exploits a legal regime to perpetuate that state of affairs. Redistribution, per Ackerman’s description above, could rectify this problem if workers had a meaningful and enforceable set of substantive legal rights that rebalanced bargaining relationships. They do not; one reason of many is the growth the contingent workforce. Another is the at best defeatist and at worst hostile and myopic attitude of the left’s policy establishment towards labor law reform.

*Just some examples: Lochner v. New York, invalidating working conditions regulations for bakers and confectioners; Coppage v. Kansas, invalidating law prohibiting yellow-dog contracts; the awesomely-named Hammer v. Dagenhart, invalidating federal child labor laws; Adkins v. Children’s Hospital, invalidating federal law mandating minimum wages and maximum hours for women and children in D.C. Not unimportantly, the Court rested its rationale on the exact type of “freedom of contract,” that is the theoretical underpinning for champions of contingent labor like independent contractors.


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