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Why the death of employment is a dead idea

The rise of subcontracting and franchises has allowed employers to enjoy the profits without the responsibility. shutterstock

Why the death of employment is a dead idea

The federal government has proposed that the “future of work” be the main industrial relations battleground in the election.

The current system, it says, is “stuck in the past” and has not kept up with fundamentally different ways of doing business, as represented by “disruptors” such as Uber and Airtasker.

The government plans (though we don’t yet know how) to remove “disincentives to employment” and promote “flexibility” (a word of many meanings). New workers “don’t know what 9-5 means” but “they do know … what 24/7 means”. However, the government says, we will “always have a strong safety net”.

Yet despite all the predictions of the “death of employment” (including a book by that title a few years ago), it has not happened and will not happen. Like the related myth of the surge of independent contracting, it is a zombie idea that won’t quite die.

Employment lives – but hierarchical contracting grows

Employment is still the most efficient way for capital to exert control over labour. Over the past two decades, the proportion of employed persons who are employees in their main job has not declined. In fact, it has increased slightly, from 79% in 1992 to 82.7% in 2014. This chart shows those trends.

Employees and owner-managers of enterprises (incorporated + unincorporated) in their main job, as a proportion of employed persons, 1992-2014. ABS Cat No 6105.0 Table 2, 2013 and ABS Cat 6333.0 Tables 1.1 and 16.1.

Sure, many firms are moving away from direct employment of many of their employees to a “hierarchical contracting” model, in which many functions previously done in-house are contracted out. But they typically contract to others who in turn hire employees (or who subcontract to others, who in turn hire employees).

For example, in mining, direct employment by mines has been partly replaced by many people working as “contractors” – but those contractors are, in turn, employees of the contracting firm. They work on the mine site, but are employees – hired on a casual basis and at much lower cost to the mines.

Likewise, franchising is a way by which the owners of capital (at the top or peak of the hierarchy) contract out to “franchisees” who run the outlets (fast food, retail, whatever) rather that the large firms running them themselves. But most of the people who work in the outlets are employees – now of the franchisees, rather than the capital at the top of the hierarchy.

The franchisors still control the product, but franchisees have responsibility for employment. The franchisees are also small businesses – less likely to comply with labour regulations than large firms – so the franchisors gain the financial benefit from franchisees’ low-cost way of operating.

It’s a great way of avoiding accountability. For example, in the recent 7-Eleven scandal, many franchisees will rightly be prosecuted – but they weren’t making great profits. The money was made by those at the top. And they appear immune from prosecution. They might even avoid full compensation for stolen wages.

In the meantime, the two major owners of 7-Eleven last year, between them, bought a private jet and paid a record amount for a mansion in Melbourne. One of them had to resign as chair, but won’t be losing his private jet over the scandal.

Franchising has been growing: the number of franchise business units increased by 80% between 1998 and 2014 (see chart). Franchise employees went from 4.3% to 4.8% of employees just between 2012 and 2014.

Number of business format franchise units, 1998-2014. Lorelle Frazer, Scott Weaven and Anthony Grace, Franchising Australia 2014, Griffith University.

The employment paradox

So there’s a paradox – the rise of new models like Uber, and the continuing importance of employment – but that is explained by the ongoing efficiency of employment as a means to control worker behaviour, alongside the ongoing urge of capital to cut costs.

The employment contract is open-ended, and it is impossible to put into it every aspect of what an employee must do. That problem is multiplied many times over when you move from an employment contract to a contract for service.

Contracting is a way of reducing costs, increasing profits and avoiding accountability, but it is not effective for maintaining control, so firms use a combination that involves contracting out to others (I call them “mid contractors”) that in turn often (not always) hire employees.

Bear in mind also that many US firms following the Uber model — like Cherry (car washes), Prim (laundry), SnapGoods (gear rental), Rewinery (wine) and HomeJoy (home cleaning) — have failed. As one author argues:

… they provide crummy jobs that most people only want to do as a very last resort. These platforms show their workforce no allegiance or loyalty, and they engender none in return.

In effect, there is a major labour-supply problem that many of these firms have been unable to reconcile.

When firms have tried to turn employees into faux “independent contractors” (such as at Kemalex a few years ago) to avoid paying leave, superannuation and workers compensation, workers and unions have resisted this “sham contracting”. Most employees don’t want to be contractors.

Meanwhile, a lot of the people who end up as the “mid contractors” are the sorts of people who would otherwise have been small-business owners or self-employed anyway.
Still, circumstances differ between industries. For example, people who love trucks might buy one. They’ll then become owner-drivers — and sit at the bottom of the road transport supply chain. In the textiles, clothing and footwear (TCF) industries, workers were forced to be contractors and only a decade ago worked for as little as $2-3 per hour.

That’s been the pattern in those industries for a long time. And most new forms of hierarchical contracting either continue to ultimately rely on employment, or contract to people who would have been self-employed anyway (or, like many Uber drivers, have a “main” job as an employee).

New approaches

This is not to argue that these, often new, “non-standard” models don’t require new responses from unions, or from policymakers.

But to understand what those new approaches should be, we also should recognise that employment will remain the dominant model in capitalism. Hence one US observer suggests:

We need to figure out a way to launch a universal, portable safety net for all … workers.

Beyond that, at the core of the problem is the need to find ways to make capital at the top of the food chain accountable. This is the sort of thing that we have seen attempted and implemented in the TCF industries, in Australia and internationally.

It is what the Road Safety Remuneration Tribunal (RSRT) sought to do, before it was demonised and then abolished by the current government.

While there may be criticisms of the detail of what the RSRT sought to do, such as the difficulty of dealing with backloads, there was no doubt from a mountain of evidence that low pay for owner-drivers was a factor in the industry having the longest working hours and the most deaths – especially bystander deaths – of any industry.

The government’s treatment of the RSRT did not suggest it wanted to extend “a strong safety net” in an area where the legal system had “not kept up” with “different ways of doing business”. Quite the converse appeared the case.

The ways in which capital seeks to introduce hierarchical contracting vary from industry to industry and so responses need to take account of these industry differences. The regulatory responses need to be – dare I say it – innovative.

Using the rhetoric of disruption to cover a weakening of the safety net would not be such a response.