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The New Order

Trade Unions

new internationalist
issue 173 - July 1987

The New Order
Informal workers are playing a key role in the return to
pre-1930s labour relations in the West. Walter Johnson
traces how this has come about - and who benefits.

TWO middle-aged women are busily spraying and scrubbing the telephone booth as I approach.

'We'll be finished in a minute', one says apologetically, and quickly gathers up her paper towels and Windex.

Later I mention this encounter to an old friend who just happens to be a former service supervisor for the phone company.

'We're not going to pay skilled workers $18 an hour to clean phone booths', he says to me in an aggressive tone of voice. 'We have to cut costs or we won't be able to remain competitive.'

The fact that my innocent inquiry had provoked such a defensive, almost hostile response got me thinking about what has been happening to the labour force since the mid-l 970s.

It goes under a variety of names such as sub-contracting, contracting-out, out-sourcing, cost-cutting, but whatever the favoured euphemism the end result is the same: the substitution of cheap labour for previously expensive labour.

Certain sectors are more vulnerable to this process than others. Service occupations such as janitorial work, trucking, cafeteria and security operations are prime targets but increasingly such construction crafts as carpentry, plumbing, masonry, painting, electrical, sheet-metal and iron-trade works are also affected.

The reasons are not hard to discern. A unionized plumber expects to earn anywhere from $18 to $30 for an hour's work changing faucet washers. A handyman from the informal sector will do the same job for less than six dollars.

Unions don't like it but consumers aren't concerned. They feel pinched by rising costs in repairs and housing. Appeal to labour solidarity won't wash either when most of the labour force is non-unionized, many of whom earn only a pittance in the secondary labour market. Union workers are often viewed as privileged 'fat cats' by the growing number of unemployed and underemployed part-time workers.

The trend is not limited to the individual consumer. Private corporations and government are also getting into the act. In the province of Saskatchewan, the government recently passed an act to repeal a section of the labour code which prohibited unionized companies from setting up non-unionized spin-off companies. Within a year of this change virtually every unionized contractor had established spin-off companies. As a result of this 'double-breasting' private sector, construction workers who belong to trade unions have increasingly been shut out of employment. Similar government actions have occurred in Alberta and British Columbia where even public works projects are contracted out to private sector firms unencumbered with unionized government employees.

In this case, the rationale for contracting-out is 'privatization', one of the code words to describe the neo-conservative agenda of the 1980s. The logic is clear and has roots that go back as far as Adam Smith, the father of economic liberalism or free market capitalism.

In the classical liberal view trade unions, like business monopolies, are impediments to competition among producers in the free marketplace. Adam Smith believed that competition among capitalists would give the public the opportunity to compare the quality and prices of goods, so that producers who were inefficient or who charged excessive prices would be put out of business. However, a 'perfectly competitive market' could only exist as long as no one individual or group of individuals could influence prices. If a group of workers combined in an association or union and tried to set wages above their 'natural' level, their actions amounted to 'a conspiracy in restraint of trade' since the price level of goods would be artificially distorted and the competitive market undermined.

To his credit, Adam Smith, unlike the 'neo-conservatives' who invoke his name today, saw the real danger coming from businessmen who would pool their power to regulate prices and output to their own advantage. Thus Smith wrote that 'people in the same trade seldom meet together but the conversation ends in a conspiracy against the public.'

The opposition to business monopolies has always been more muted than the opposition to labour monopolies, which businessmen and women have vociferously denounced as the root of all evil. Since the owners of capital have always had, and continue to have, the ear of government it is their views which prevail in the legislative sphere.

It was left to Karl Marx to strip away the veil of capitalist ideology and reveal the wage system and the 'free labour market' as nothing more than the domination of one class over another. Marx assumed that the capitalist has access to power because of his position as owner of the 'means of production' and therefore 'buyer' of workers' services. The worker, in contrast, has only his labour to sell and receives only wages in return. Because of his superior position the capitalist can take advantage of the worker by speeding up the work process, extending the working day, or even displacing him with machinery. Furthermore, the power of the owner is backed by the political authorities who pass legislation favouring private property and management's rights.

Workers really didn't need Marx to figure out the consequences of this inequality in the distribution of power. Many attempted to organize unions to 'take wages out of competition', limit the length of the working day and gain some security from arbitrary dismissals based on the whim of an employer.

Apart from certain skilled trades, the attempt to unionize was an uphill battle for most workers until the Great Depression of the 30s. It was only after the failure of the economic system had undermined the free market ethos that unions finally gained legitimacy, if not acceptance, and largely because of government legislation giving workers the right to form unions and engage in collective bargaining.

For 20 years after World War Two it seemed possible that the dog eat dog 'survival of the fittest' brand of free market capitalism had been supplanted by a social contract between employers and workers, with only occasional mediation by the state.

But by the mid-1960s it had become evident that the post-war promise of unlimited prosperity and the reduction of class conflict was illusory.

Increased competition in the international economy put the squeeze on North American and Western European producers and forced them to cut costs and improve productivity. Sub-contracting or contracting out was but one of a number of cost-cutting strategies. Others included speeding up the work process, automation, the increased reliance on part-time workers and female workers, and the lowering of pollution controls and safety standards.

Government also jumped on the bandwagon, first with wage-restraint policies and later with restrictive monetary policies to reduce inflationary pressures. Large-scale unemployment was deliberately generated as marginal firms could no longer find credit and went bankrupt. The resulting fall in demand also forced other companies to trim back production and lay off workers. This resulted in downward pressure on wages as many workers competed for scarce jobs. The threat of unemployment also moderated the wage demands of those who still held jobs.

The purpose and the consequence of this policy was to dampen the expectations of workers, weaken the power of organized labour and restore competition to the labour market.

The growth of the informal sector allows this process of 'privatization' to continue in a period of 'recovery'. Business people can argue that the 'realities' of the new competitive marketplace prevent them from being burdened again with expensive labour contracts, health and safety regulations and pollution controls.

To adequately deal with the rise in the informal sector and the return of the competitive labour market, organized labour would have to start asking some fundamental questions about the distribution of wealth and power in capitalist societies. Unions are at a disadvantage here because the legal framework which established workers' rights to form unions and engage in collective bargaining was essentially created by government. To gain recognition unions had to accept the logic and rules of the capitalist system. As a result of the legal constraints on established unions, their response to the growth of the informal sector has often been narrowly defensive. Questions which were abandoned in the complacent post-war era - such as who controls the production process, for what purpose and for whose benefit - must once again be raised. The alternative is an increasingly fragmented and isolated working population open to the same types of abuse which characterized an earlier era of unbridled free market capitalism.

Canadian Walter Johnson is the author of two books on work. He lives In Quebec.

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New Internationalist issue 173 magazine cover This article is from the July 1987 issue of New Internationalist.
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