Blog: The Death of Job Stability

JANUARY 2, 2019

THIS SUMMER, Jane Fonda, Lily Tomlin, and Dolly Parton announced that they will star in a sequel to 1980’s second-highest grossing film, 9 to 5. The original movie was about a woman who, after a divorce, enters the labor force as a secretary and into a world of low pay (some of the lowest in the nation), wage disparity, and sexist employers. Their jobs weren’t secure either, because they could always be replaced by a temp.

9 to 5 reemerges into a work culture in which little has changed. As Fonda told Vanity Fair, “‘I’m sorry to say the situation is worse today,’ particularly in terms of the harassment that people in the workplace face. ‘Today, a lot of the workforce [is] hired by an outside company, so if there’s a problem, who do you complain to? Who do you fight with?’” Add to this list of worthwhile questions: where did this chronic job insecurity come from?

Louis Hyman, a professor of economic history at Cornell University, offers an answer. In his latest book, Temp: How American Work, American Business, and the American Dream Became Temporary, he attempts to explain the origins of what is often called the “gig economy,” the “sharing economy,” or “platform capitalism,” exemplified by companies like Uber, Airbnb, Etsy, and Upwork.

Temp covers a century of economic history in which a dismal dynamic emerges. First, corporations grow immense and finance becomes central to their operation. Unions fight to harness them, and succeed. This creates stable, “good” jobs for the first time in history. Corporations then abandon immensity, self-immolate, and shrink. They slip labor’s collar. Free of unions, businesses embrace risk-taking, and hire temporary workers that don’t require benefits. Businesses fare the transition fine. Workers do not. Wages stagnate in the 1970s and continue to do so to this day.

Toward the end, Hyman presents what is, one can only guess, his raison d’être for writing this book: “We are all terrified that the coming of Uber means the end of security, but we shouldn’t fear that: it is already gone. We already live in that world.”

The tale of General Motors is instructive. In 1916, GM bought the Hyatt Roller Bearing Company and with it, acquired the electrical engineer Alfred Sloan, who centralized the finances and implemented a rigid, corporation-wide, hyperrational hierarchy. Technocratic and centralized managers at GM would decide where money would be best spent, not people on the production line.

As Hyman explains, corporations like GM were growing ever larger and ever more complex in the 1920s. They needed armies of lawyers and white-collar workers to help them keep everything straight. Bureaucracy bloomed.

After the economic calamity of the 1929 crash, the federal government softened its stance toward labor. Leaders like John Lewis of the United Mine Workers exploited an obscure provision in Franklin Roosevelt’s National Industrial Recovery Act to organize workers legally. As Hyman notes, “[Job stability] had come not from the goodwill of employers, but from workers using law and strategy to demand better lives.” Child labor was banned. Workers developed new expectations of pay. United Auto Workers fought GM for and won contracts that included provisions American workers had never seen before: cost-of-living adjustments, health insurance, and pension funds.

The marriage of unions and Sloan’s rigid corporations created stable work, for the first time in history of America. Even corporations agreed that stability, not innovation or disruption, was paramount. GM said at the time that “rewards gained from stability will outweigh” the increased labor costs. A corporation would be flayed by its shareholders today for uttering a sentiment like that. And as Hyman reminds us: “The foundation of the postwar economy was heavy manufacturing, which required incredible capital investment.” Corporations needed people to run the machines they had invested in. Their hands were tied.

As brilliant economist John Kenneth Galbraith theorized in his 1967 book The New Industrial State, stability might continue unabated forever. This was because massive corporations had neutered the market. Everything was planned. Prices, wages, productivity, employment, and growth were all accounted for and steadily going upward; annual economic expansion hit highs of eight percent. But Galbraith, in time, turned out to be wrong.

The seeds of stability’s demise were under the surface. In 1948, Elmer Winter founded Manpower Inc., in Milwaukee, Wisconsin, with the idea that antsy housewives, who possessed clerical skills but had yet to have kids, could be on-call for offices that needed last-minute help. Manpower Inc. rapidly expanded. What started as on-demand secretaries grew to cover every imaginable task. On-call workers unloaded trucks full of everything from timber to televisions. They were janitors and security guards. At the outset, full-time workers embraced temps because it gave them the opportunity to take advantage of a brand-new workplace perk: vacation time.

Drunk on the stability of the United States’s postwar economy, businesses of the 1960s borrowed to expand, often recklessly. An electrical contractor named James Ling, Hyman’s prime example, accumulated firms in scattered fields, and formed what was known as a “conglomerate.” The theory that emerged to rationalize this behavior was that centralized hybrids would do better because they could divert money from stable, cash-rich business to more risky and profitable ones. Just as Sloan had intended, financials came first, not any particular business acumen. At one point, Ling bought Wilson & Company, the pork processor and basketball maker. What did he know about pigs and sports? It didn’t matter.

The reality was that conglomeration was not efficient; it was a disaster. Ling’s financial machinations, and many other conglomerates, were little more than pyramid schemes. Their collapse took markets down with them.

In Hyman’s formulation, the reaction would set the stage for a permanent change in American business — and employment. In Search of Excellence, a best-selling book, written by Robert Waterman and Tom Peters, two McKinsey and Co. business consultants, argued that instead of inflating administrative staff and buying more factories, the best companies pared down. They went “lean.” As Hyman notes, lean “is a fundamental doubt about bigness,” and a doubt about the value of hierarchy. Corporate staff were slashed to the bare minimum. Instead of buying a factory, a company could just contract out the work (and maybe do it in another, cheaper country). This is still the overweening business theory of our time.

What remained from the conglomerate era was a newfound love of risk and debt. Finance, as the central element of the corporation, was back at the helm. Stable businesses like GE and GM, with their planning and reliable profits, were passé. This seismic shift in business culture is the crux of the book, but unfortunately Hyman is not clear about what caused the transition. Why did risk become so seductive, when postwar stability yielded such high growth? Was it because women and minorities were fed up being effectively shut out of these good jobs? Why did corporations abandon workers for shareholders? Was it loosened financial regulations beginning in 1973?

Either way, in an era of tumult and risk, temp work exploded. Temps didn’t need benefits, weren’t governed by New Deal–era labor laws like overtime, and could be fired and hired at a moment’s notice. Silicon Valley took advantage of temp labor. Hewlett-Packard prided itself on almost guaranteeing employment for life, but this was because they relied so heavily on temps who were guaranteed nothing. HP used temps so often that by the 1980s they started their own in-house temp agency, as did Apple.

Hyman’s history is incisive when it comes to Silicon Valley’s questionable labor practices. Through the ’80s, people like Steve Jobs boasted that their computers would be made entirely by robots. Hyman drills down: “To understand the electronics industry is simple: every time someone says ‘robot,’ simply picture a woman of color.”

Silicon chips and other electronic components are extraordinarily toxic to make. Santa Clara County has 23 Superfund sites from electronics production alone. This work was done by migrants and undocumented workers. And as Hyman mentions, this allowed electronics manufacturers to threaten employees who spoke up. If they complained about pay or working conditions, they could be deported at a moment’s notice.

In the 1980s, Apple, like many companies, adopted lean principles. It cut inventory and staff to free up capital to be spent elsewhere. This was often known as “downsizing.” But this is paradoxical, like pawning everything you own to pay your rent. Sure, you get to keep your apartment, but what are you going to do there? Apple almost downsized itself out of existence. And strangely, when the company did bounce back, the downsized positions never reemerged. This became a trend. The end of the 1991 recession was called the “jobless recovery” because when the recession concluded, jobs didn’t return.

Hyman notes that many temps would have been unemployed without the option of temporary jobs. But all this means is that temp employment is the spackle that smooths over the real cracks in the foundation of employment. Workers might technically be employed, but they weren’t secure. Their futures were unpredictable and hazy. Job security was, by the early ’90s, a relic of the past.

As the digital economy got underway, things didn’t get any better for workers. But Hyman wants to emphasize that Uber is not the villain. “The digital economy made visible what was hidden,” he says, “Uber did not cause this precarious economy, Uber was possible because of a precarious economy. It is the waste product of the service economy.” The crash of 2008 only revealed how insecure work already was. It revealed how reliant many were on the rising value of home prices — instead of rising wages — to fund their lives.

What is now called the “gig economy” is the result of the failure of American business and policymakers. Wages have stagnated for the last 50 years, in part, because temps gave companies a way to avoid negotiating with labor, and digital businesses requires lower investment in physical things like machines and warehouses. The renunciation of stability and the embrace of risk means that profits aren’t used to pay more to workers.

Hyman has suggestions. He wants portable benefits paid into by different employers that remain intact from job to job. A universal basic income removes the burden from those who can’t find decent work. Labor laws, which almost all date to the 1930s and are designed for heavy manufacturing, need to be rewritten to apply to digital economies. And defining part-time work as less than 29 hours a week doesn’t make sense anymore. Small business loans should be as easy to get as mortgages. Corporations need to be accountable to the public, who shoulder the burden of their default.

The concluding chapter is brisk, dark, funny, and limpid all at the same time. He writes: “If the only answer to rural downward mobility is to turn everyone into software engineers, then there is no hope.” We can’t all be Google bros. But his solution is still digital. He believes we need to train people in rural areas to use Upwork and Etsy; “platforms” that don’t require proximity. And ultimately, platforms like Uber, Airbnb, Etsy, and TaskRabbit need to be worker-owned, because the current owners of platforms are pointless. Uber, for example, is a broker in the middle of an automated transaction (i.e., a broker with very little to do). Automation makes the broker obsolete. Cab drivers pay Uber a third of their income. Why? They don’t need Uber and their executives — they just need the technology.

So now to the important question: what will Jane Fonda go back to work as in 2019’s incarnation of 9 to 5? Will she be a freelance structural engineer plying her trade on Upwork? Or maybe she’ll be a cobbler selling custom shoes on Etsy. Considering popular culture’s limited imagination, Fonda will be driving for Lyft.

In any case, it’s unlikely she will be working from nine to five. Possibly we will see the ultimate conclusion of lean thinking to come to pass in the coming decades: for corporations to finally become so lean that they melt into air and cease to exist.

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Robin Kaiser-Schatzlein is a journalist living in Brooklyn, New York.