Home > Uncategorized > The Workplace — a few charts

The Workplace — a few charts

from Peter Radford

I have tried to use diagrams to explain the vast impact that the never ending search for higher shareholder value has had on the American workplace. Here is my attempt to show what the old workplace looked like in terms of the benefits to a worker …

This diagram demonstrates that a traditional job brought with it a package of “compensation” far beyond a basic wage. It also helps us understand why, as the cost of parts of the package rose rapidly — healthcare costs being the best example — businesses found themselves ever more keen to eliminate parts of the package, or at least to contain the cost by limiting that part of the package paid as cash wages.

Now let us look at the same arrangement as it exists in the contemporary workplace where so-called “contingent” work dominates. This is what the new arrange,ent looks like from the corporate point of view …

Think of how dramatic this change is.

The corporation, in its pursuit of shareholder value, has shed from its cost base a whole slew of ancillary benefits and has reduced its focus simply to the wage. In has, in other words, achieved an ability to zero in on the immediate value of the worker in terms of the work being done. Peripheral costs have been carved away. Profits can rise. The risks inherent in providing long term compensation such as a retirement benefit have been shed altogether.

Now look at the worker side of this …

The worker, who once received a variety of forms of compensation, all of which added to her sense of security, now receives only a wage. The rest of the old package is gone. More to the point she has to provide all that other stuff out of the wage. If she takes time off for vacation: that’s on her. If she wants to save for retirement: that’s on her, and so on.

This complete re-invention of the package included in the overall compensation paid to workers in the new workplace — a re-invention driven by the pursuit off shareholder value — is what David Weil calls the “fissuring” of the workplace. So let me end with a quote from him to articulate our challenge:

“Federal and State policies are based on a model of employment with a single, well-defined employer with direct responsibility in hiring and firing, managing, training, compensation and development of its workforce.”

“Economic history runs in one direction. As much as we might like aspects of the past, the age of the large corporation directly employing a very wide cross section of American workers has passed”

–David Weil, “The Fissured Workplace”, 2014

  1. robert locke
    October 4, 2017 at 8:33 am

    Old system: consider your employee a company asset, New System: Consider your employee a cost, which must be reduced in order to maximize ROI.

  2. October 4, 2017 at 3:23 pm

    Welcome, all workers to the Financialization of the Economy where Money is King and all else is superfluous.

  3. October 4, 2017 at 3:57 pm

    Thank you for this.

  4. Risk Analyst
    October 4, 2017 at 5:44 pm

    I like the graphic but it does not show the focus on shareholder value directly. You could instead have a balance scale of costs on the left and goals on the right, and the above could show the left over time and the right could show the massive increase in interest of raising stock prices and firm size over other goals of profits and workmanship. That’s just what I jumped to when thinking about enhancements to your nice graphic.

  5. Grayce
    October 5, 2017 at 1:18 am

    As well, it would be informative to see a graphic of the changing ratio of “average worker wages” to “CEO wages” that were once 40x, then 400x-700x, and now are higher, even in not-for-profit organizations.

  6. October 8, 2017 at 11:09 am

    Capitalists don’t learn quickly. They’re generally not the sharpest tools in the shed. But in the 19th century they learned (generally with much pain) that their success depended on well-functioning society whose members had basic education, safe and peaceful housing, and sufficient leisure time. The 20th century all-inclusive corporation provided these directly or supported their provision through government. In many ways the American corporation created the American version of the welfare state. Intended ultimately to benefit the corporation, of course. Even with this proviso, however, corporations and the American economy remained stable for nearly 50 years (1930-1980). Before 1930 the “money guys” ruled America. They nearly destroyed the nation, creating financial crises after financial crisis. During the 1980’s the nation returned to the pre-1930 world, mainly due to greedy bankers, inept politicians and business leaders, and the crude theories of economists that played on this greed and ineptitude. Capitalism is very much like a cocked pistol. It can explode at any time. Contrary to its own needs and wellbeing capitalism exploded beginning in the 1980’s. That explosion has grown larger and more violent every year since. Until in 2017 we have the situation described by Wells and here by Radford. Considering this history, I believe Wells asked and answers the wrong question in his book. Per Wells, “From the perspectives of CEOs and investors, fissuring–splitting off functions that were once managed internally–has been phenomenally successful. Despite giving up direct control to subcontractors and franchises, these large companies have figured out how to maintain the quality of brand-name products and services, without the cost of maintaining an expensive workforce. But from the perspective of workers, this strategy has meant stagnation in wages and benefits and a lower standard of living.” Weil proposes ways to modernize regulatory policies so that employers can meet their obligations to workers while allowing companies to keep the beneficial aspects of this business strategy. I reject the notion of changing regulatory strategies to accommodate this fissuring. We’ve already spent too much time and resources serving the needs of corporations. With little of societal value to show for it.

    • Rob Reno
      November 25, 2017 at 10:46 pm

      Per Wells, “From the perspectives of CEOs and investors, fissuring–splitting off functions that were once managed internally–has been phenomenally successful. Despite giving up direct control to subcontractors and franchises, these large companies have figured out how to maintain the quality of brand-name products and services, without the cost of maintaining an expensive workforce. But from the perspective of workers, this strategy has meant stagnation in wages and benefits and a lower standard of living.”

      Is this quotation from Weil’s “The Fissured Workplace”? I am reading now but cannot find the citation.

    • robert locke
      November 26, 2017 at 12:29 pm

      Could not agee more, because shedding firms meant shedding community and creating rust belts.

      • Rob Reno
        November 28, 2017 at 8:40 pm

        “[S]hedding firms meant shedding community and creating rust belts.” ~ Robert Locke

        I wonder if you meant “shedding employees meant shedding community”?

        “The rise of the KBEs also illustrates that the distinction between white collar and blue collar workers is an archaic concept because both categories are subjected to the same conditionalities of business cost reduction and profit maximization. (Yahya 2011, 621)”

        It was only after I used technology to disarticulate the global supply chain used by the big technology companies to feed them highly educated and highly skilled “contingent” workers that I started studying economics in an effort to understand how the field of economics describes this situation. David Weil’s “The Fissured Workplace” made sense given what I was uncovering and observing. It shows how Yahya is right, that the distinction between white collar and blue collar is now somewhat archaic. Reality on the ground given the actual manipulation and deception built into this global supply chain is the other side, the hidden side, of Weil’s analysis and is described to a tee by George A. Akerlof’s “Phishing for Phools.”

        Big technology firms are now doing to white collar workers what the big manufacturing firms once did to the blue collar workers. As for community, there is none as far as I can see. Each worker is ultimately an island alone fending for themselves (and their family). If these highly educated and highly skilled workers can be so easily turned into precarious “contingent” workers en mass (which I have personally witnessed when an entire group was wiped out and laid off, including so-called “top performers”), and assuming they are the upper-middle class, what kind of “rust belts” are corporations creating today that someday will be in the news like the manufacturing “rust belts” of yesterday? And what will be the social consequences of such massive economic disenfranchisement of this class?

        “Old system: consider your employee a company asset, New System: Consider your employee a cost, which must be reduced in order to maximize ROI.” ~ Robert Locke

        In my research I found HR articles that described this transition with HR of viewing employees as an asset to one of viewing them as a “unit of cost.” It was variously described as the corporate transformation of the HR function from a “cost center” to a “profit center,” another demand made by investors and the new “managerial” philosophy sweeping MBA programs and Wall Street investors.

    • Rob Reno
      November 26, 2017 at 7:11 pm

      “Weil proposes ways to modernize regulatory policies so that employers can meet their obligations to workers while allowing companies to keep the beneficial aspects of this business strategy. I reject the notion of changing regulatory strategies to accommodate this fissuring. We’ve already spent too much time and resources serving the needs of corporations. With little of societal value to show for it.” ~ Ken Zimmerman

      “There’s class warfare, all right, but it’s my class, the rich class, that’s making war, and we’re winning.” ~ Warren Buffett, Chairman and CEO of Berkshire Hathaway, quoted in the New York Times, 26 November 2006

      “The American middle class is facing an existential crisis. For more than three decades, declining wages, fraying benefits, and the rising costs of education, housing, and other essentials have stressed and squeezed middle-class Americans. But by far the biggest threat to middle-class workers—and to our economy as a whole—comes from the changing nature of employment itself. Gone is the era of the lifetime career, let alone the lifelong job and the economic security that came with it, having been replaced by a new economy intent on recasting full-time employees into contractors, vendors, and temporary workers.” ~ Nick Hanauer & David Rolf, Evonomics blog.

      “Modern economics is sick. Economics has increasingly become an intellectual game played for its own sake and not for its practical consequences for understanding the economic world. Economists have converted the subject into a sort of social mathematics in which analytical rigor is everything and practical relevance is nothing [Blaug 1997:3].” ~ Lars Pålsson Syll 2016, On the use and misuse of theories in mainstream economics

      “A society where we allow the inequality of incomes and wealth to increase without bounds, sooner or later implodes. A society that promotes unfettered selfishness as the one and only virtue, erodes the cement that keeps us together, and in the end we are only left with people in the ice cold water of egoism and greed.” ~ Lars Pålsson Syll 2016, On the use and misuse of theories in mainstream economics

      I too “reject the notion of changing regulatory strategies to accommodate this fissuring,” and wholeheartedly agree we’ve “already spent too much time and resources serving the needs of corporations. With little of societal value to show for it.” Several years ago I personally encountered Wiel’s “fissured workplace” resulting from the predatory nature of Wall Street’s and Corporate America’s “never ending search for higher shareholder value.” In the mid 1990s – 2000s I left Microsoft* and created my own software company. In those days when I contracted with a corporation it was corp-to-corp. I knew exactly what the market value of my services were because I knew exactly what the client was paying for those services. There was no middleman to hide or obfuscate the direct bill rate for the purpose of using asymmetric information in an attempt to wage scalp me. I built into the direct bill rate the cost of my benefits package. When our company contracted with an overseas client and moved our family abroad first to Japan and then to the Nederland the same calculations applied. Fast forward to 2015 and companies like Microsoft only work through staffing firms that provide their contingent workforce. Consider that all the major tech firms do the same and that there are only a finite number of providers are competing for the clients (i.e., Microsoft, Facebook, etc.) and one gets a feel for the quasi-monopolistic such a predatory middle-tier of so-called “staffing” companies can hold over a given market (e.g., here in the Seattle area). No doubt there is an economic term for this type of market, but it eludes my amateur understanding at the moment.

      After my wife helpfully posted my resume on Monster, Dice, and CareerBuilder I found myself the target of a deluge of cold calls and mass emailings. Mind you at the time my wife was FTE at Micosoft and managed such “vendors” providing contingent wokers, hence, we could see both sides of the transaction (direct bill rate vs. pass-through rate for contingent workers) at least as concerned Microsoft. People talk; grapevines share information, such as what the “vendor” is paying their workers. We knew the “staffing” companies were negotiating the benefit package overhead (~30%) into the direct bill rate but neglecting to pass it through to their W-2 workers. We watched our friends and co-workers be “shed” (i.e., laid off and rehired via a “preferred vendor”) and go from a decent family wage earner to a desparate precarious worker with little or no benefits. The majority of these “staffing” companies extract the 30% overhead as profit for their highest paid executives leaving the working in a very precarious postion financially.

      I decided to try to disarticulate the supply chains used by Microsoft, Facebook, Amazon, etc., and discovered some disturbing realities. To accomplish this I setup a Cloud Honeypot to stealthly gather data on each contact by these so-called “staffing” company third party agents. What I discovered was systematic lying on the part of these “recruiters” and that manipulation and deception (see Akerlof et. al., Phishing for Phools) were actually built into their business model and that platforms like LinkedIn facilitated this massive and global valueless chain built upon manipulation and deception, even employer delegated deception, for the sole purpose of the exploitation and wage scalping of high-tech workers forced into the contingent market (typically older workers, in their late 40s early 50s, with family and children in college). Over 90% of these “recruiters” were actually outgoing call center employees working for what is known in the industry as “recruiting process outsourcing” (RPO) services based in India. These RPOs tell their employees to lie and not just about where they are calling from. They all ply the same script meant to get the candidate to accept W-2 status with their client – the US “staffing” firm – at a wage scalping rate. Sometimes there is vertical integration of the supply chain with the the US “staffing” firm also owning the Indian RPO. These RPOs use technological smoke screens spoofing IPs and phone numbers and using relay servers in the US to strip out and hide an email’s X-Originating-IPs so they can appear to be local. What started as “business process outsourcing” (BPO) inwhich jobs were moved overseas has now evolved into RPO-Staffing-Firms that no longer need to move the jobs overseas to wage scalp the workers and turn them into precarious workers, since they can now do the same on US soil (e.g., HCL that has a huge and empty office sitting conveniently right next Microsoft’s campus building). Faizal bin Yahya (2011) in “India and Its Maturing BPO IT Sector” (Journal of Asian and African Studies 47(6) 620 –633) writes,

      “The emergence of knowledge-based economies (KBEs) in developing countries has the potential to leapfrog these economies to compete in the globalized services sector (Rooney et al., 2003). While reducing labour costs is a main reason for outsourcing, it is not the only driver: other determinants include the need to improve quality of service and providing new services for customers (Kaplan, 2002). The rise of the KBEs also illustrates that the distinction between white collar and blue collar workers is an archaic concept because both categories are subjected to the same conditionalities of business cost reduction and profit maximization. The advance of technological developments increased their commonalities, which made white collar service employment just as vulnerable as blue collar work. The convergence of the Information and Communications Technology (ICT) sector has fuelled economic growth but has increased the displacement of service jobs from developed to developing economies (Rooney et al., 2003). The rise of the global IT industry and the outsourcing of various services to lower-cost developing countries are performed through the spatially unbundling of tasks and relocating them to the most productive locations (Wilson, 1998). (Yahya 2011, 621)”

      Many of the same technologies used to create these manipulative and deceptive smoke screens in this supply chain are the same ones used by cyber criminals. Some of these “recruiters” ask for the job candidates SSN and DOB (sometimes in full). I have been able to collect a massive amount of data on this global valueless supply chain (reverse originating IP geolocation, ISP providers, etc.) so as to be able to reveal the nature and relationships of the various “third party agents.” I have found extensive manipulation and deception, even outright employer delegated deception and massive identity deception facilitated by LinkedIn. And all this is largely hidden and ignored by economists. The ugly side of this exploitative global supply chain is virtually invisible to economists it seems. The high-tech firms are crying wolf when they claim there is a shortage of talent. In reality there is a vast reservoir of skilled high-tech talent that having been abused by such a supply chain are choosing to leave the industry rather then be so blatantly exploited. And sick and twisted economists like Lucas and such ilk deny there is such a thing as “involuntary unemployment,” sweeping under the rug the ugly reality of manipulation, deception, and exploitative global supply chains (Farmer 2017, 47-48).

      * As a FTE in Microsoft in the 90s I witnessed the “contract” workers initiate a law suit against Microsoft; they argued Microsoft treated them like employees (they did) and therefore they should be paid like fulltime employees. They won. Thereafter Microsoft no longer contracted with small individual contractors deciding to only work with “preferred vendors” that meet certain standards.

      Reference List

      1. Farmer, Roger E. A. Prosperity for All [How to Prevent Financial Crises]. Oxford: Oxford University Press; 2017; pp. 47-48.
      Notes: LET’S STOP PRETENDING UNEMPLOYMENT IS VOLUNTARY

      Unless you have a PhD in economics, you probably think it uncontroversial to argue that we should be concerned about the unemployment rate. Those of you who lost a job, or who have struggled to find a job on leaving school, college, or a university, are well aware that unemployment is a painful and dehumanizing experience. You may be surprised to learn that, for the past thirty-five years, the models used by academic economists and central bankers to understand how the economy works have not included unemployment as a separate category. In almost every macroeconomic seminar I attended, from 1980 through 2007, it was accepted that all unemployment is voluntary. (Farmer 2017, 47)

      In 1960, almost all macroeconomists talked about involuntary unemployment and they assumed, following Keynes, the quantity of labor demanded is not equal to the quantity of labor supplied. That view of economics was turned on its head, almost single-handedly, by Robert Lucas. Lucas persuaded macroeconomists that it makes no sense to talk about disequilibrium in any market and he initiated a revolution in macroeconomics that reformulated the discipline using pre-Keynesian classical assumptions. (Farmer 2017, 47)

      The idea that all unemployment is voluntary is called the equilibrium approach to labor markets. Lucas wrote his first article on this idea in 1969 in a coauthored paper with Leonard Rapping. His ideas received a big boost during the 1980s when Finn Kydland, Edward C. Prescott, Charles Long, and Charles Plosser persuaded macroeconomists to use a mathematical approach, called the Ramsey growth model, as a new paradigm for business cycle theory. The theory of real business cycles, or RBCs, was born. According to this theory, we should think about consumption, investment, and employment “as if” they were the optimal choices of a single representative agent with superhuman perception of the probabilities of future events. (Farmer 2017, 47-48)

      • Rob Reno
        November 27, 2017 at 1:47 am

        Correction: The majority of these “staffing” companies extract the 30% overhead as profit for their highest paid executives leaving the workers in a very precarious position financially.”

        Addendum: After seeding their core data stores with my information, which I knew how to innocuously do, I simply watched the traffic and gathered digital forensic data and applied AI/ML to analyze it. Outlook client was fitted with an AddIn that allowed me to control the data flow and extract real-time information from their email headers. Before the email reaches me the cloud resume service has already added meta information about the X-Originating-IP, geolocation, etc.

        These “recruiters” that are actually employees of an outbound call center and “sourcers” in India who use tools to collect resumes and “source” them (aka make cold calls and send out mass emails with script). One part of the script these call center jockeys must try to accomplish is acquiring fresh meat — current resumes — and enter the new information into their system. Here is the perfect opportunity to gather some critical information. This is done by sending them to my cloud resume service (e.g., mysafecv.com) and have them enter a key to receive by email my most recent CV. They attempt this butt-in-seat in India and my cloud service extracts their X-Originating-IP before I ever (should I choose to do so) speak to them. I interject a passive information gathering step while providing them something they value (which good well be a seed) and want. I know they are lying immediately but they don’t know I know.

  7. Rob Reno
    November 25, 2017 at 12:32 am

    One of the biggest corporate abusers implementing this strategy of “shedding employment” and turning their workforce into “contingent” workers is the high-tech industry. Companies like Microsoft have some groups that are comprised of 50% contingent workers. LinkedIn, purchased by Microsoft, has literally thousands and thousands of recruiters working for Indian “recruiting process outsourcing” (RPOs) companies that are little more than outbound call centers that use resume scraping services like JobDiva to pull down profiles from Monster, Dice, and CareerBuilder. These Indian call center employees then use web tools to send out mass email using JobDiva that then strips out the X-OriginatingIP so the country of origin cannot easily be determined. These call center employees are told to lie not only about where they are calling from but about more important information that should be transparent to the job seeker sitting in the US (or UK, or anywhere else in the world).

    These “contingent” workers are employed by so-called “preferred vendors” that are recruiting and staffing companies, many setup up by Indian companies (e.g., HCL) and comprise a transnational network of high-tech body shops that wage scalp (and provide little or no benefits, violate local employment laws, etc.) “contingent” workers forced to enter into a W-2 relationship with these predatory body shops. These RPOs actively engage in employer delegated deception. They use technological smoke screens to hide the true nature of this manipulative and deceptive global supply chain setup by companies like Microsoft.

  8. November 26, 2017 at 10:21 pm

    Rob Reno says: “a predatory middle-tier of so-called “staffing” companies … No doubt there is an economic term for this type of market, but it eludes my amateur understanding at the moment.”

    “Wow!” for the comment as a whole. On this, I’ve given up looking for economic euphemisms, and see this intermediary type market no different in kind to wholesaling, real estate agencies and banking. For me its a casino-type market, where the competition for prizes is guaranteed to benefit only the casino operator. Perhaps that’s too gentile: sleazy bookmakers running a betting shop might provide a more apt image.

    • November 26, 2017 at 10:24 pm

      Spelling correction: for ‘gentile’ read ‘genteel’.

      • Rob Reno
        November 27, 2017 at 1:29 am

        Oops, meant to quote you on, “casino-type market,” gimmie an amen!

  9. Rob Reno
    November 27, 2017 at 1:27 am

    Amen to that, except the odds are considerably stacked ;-) (aka rigged)

  10. November 27, 2017 at 7:06 am

    Making and selling things 1500. Production and member in the trades controlled by craft guilds. Exchange, trade, and overall pricing controlled by the central government and church. The poor are cared for by the church and the government inspired by the church. Making and selling things 1700. Guilds still powerful but corporations for trading (e.g., East India Company) and insurance companies beginning to exercise greater control over trade and economics, including employment. By 1900-2000 the guilds are destroyed the “working man” is invented to staff the new factories and trading ships. Unions of working men emerge with industrialization. The church is pushed out of the economic sphere, but remains involved in charitable work. The newly powerful business organizations inspire the invention of liberalism to explain and justify the role of business in society. The scholarly discipline economics is invented to provide a science for business in society. The monarchies fight fiercely against all this but in the end, capitulate to business and business-oriented democracy. The socialists and fascists also push back but eventually lose because neither can offer anything other than physical violence and force as an alternative. The Christian and communal socialists offer the most effective opposition but are poorly organized and generally involve too few people. Dozens of rebellions happen in opposition to capitalism, industrialization, and the government-capitalism partnership. None change the direction of the west. Today, anti-capitalism is a fun hobby for rich liberals, but not much else. With the assistance of economists, the “free-market” ideology is invented to bolster business and capitalism against anti-capitalism. And efforts to ensure government collaboration become top priority. After nearly 200 years capitalism is triumphant in most of the world. At the same time, this success has revealed the many shortcomings of capitalism. From environmental degradation to resource depletion to societal collapse. And the response of capitalists? To invent additional scholarly and economic theories to explain and justify capitalism’s current problems.

    • robert locke
      November 27, 2017 at 7:51 am

      Ken, we discuss the evolution of society within the explanatory world of anglo-saxonia. I learned this when I tried to explain the world within contexts of societies outside Anglo=Saxonia. The first thing I learned was that the highly developed globalized world of late 19th and early 20th century was not the creation of the societal context of the French Revolution. Marx was wrong. My insight: those societies that had not experienced democratization before 1850 were not hampered in their industrialization during the late 19th century; they just modernized in nondemocrfatic ways. That is not anachronistic or anormal; it is just different. Examples: Germany & Japan. To understand that you need to separate high industrialization from the liberal-democratic transformation c. 1800-1850. The discussions on this blog do not do this: hence they fundamentally disallow a process of modernization in Germany, Japan, and China, that did not follow the patterns of development in Anglo-saxonia.

      Once I learned this, I looked at the world and tried to explain its transformation differently that the way Americans do. And I had to learn about the resistance in Anglo-saxonia to “other” explanations.

      I’ve been writing about the “other” perspectives in advanced industrial societies for 40 years, with a lack of comprehension, even on this blog, of what I am saying. Take ‘managerialism.” Americans are so much a victim of it, that they are not aware of this victimization. And they spread their noncomprehension and victimization everywhere they can. I encountered this US managerialist mentality in the European Institute for Advanced Studies in Management, 1982-84. That institute was funded by Esso and its first directors were trained in American management schools. So, at this “European” institute, I found nothing European. I had just finished writing a book about German business economics, only to find at the EIASM that no Germans were there, neither were any Frenchmen. How could one have a European Institute without the participation of Germans and Frenchman. I asked myself. We had Dutch, Finns, Belgians, Danes, Swedes, in the EIASM, moreover the networking was between people from these countiries and Americaan management education circles. “Europeans” at the institute communicated with each other through the world of US managerialism. I made myself useless and unpopular by pointing this out. As I do here, although more and more people, since the center of wealth and modernization is moving away from Anglo-saxonia, get the message these days.

      • November 27, 2017 at 10:02 am

        Thanks, Robert for covering my deficiencies. My knowledge of European history not related to relations with Russia is very limited. Between the two of us we cover the history of capitalism reasonably well.

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