Work in the New Economy
Work in the New Economy: Flexible Labor Markets in Silicon Valley: by Chris Benner. Review by Andreas Ramos.
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Computerization has brought about changes in the structural nature of the economy, which has reshaped the nature of companies, workers, and other groups. Benner, Castells, and other economists are trying to identify and describe the nature of globalization and computerization, so we can have some idea of where things will lead. Chris Benner's book investigates the new form of work and finding jobs in Silicon Valley (SV.)
The Industrialized Economy
The nature of the traditional industrialized economy was based on several economic factors. Factories and machines were large, expensive, and could not be moved. The nature of industrialization meant stability.
Similarly, workers learned their skills as apprentices in a hands-on workplace. Since the machines slowly changed, a skill once learned could be practiced for several decades. Factories were difficult to move around so workers stayed with the company for life. Since companies couldn't move their equipment, they were obligated to deal with unions.
Effect of Computerization on Companies
Computerization has changed the fundamental nature of the economy. The computerization of the economy is forcing a restructuralization of all entities and relations within the economy: this includes companies, workers, and the relations between them.
The computerization of products has turned most consumer products into hardware or software products. For example, cameras and vacuum cleaners were once based on different technologies and had literally nothing to do with each other. Today, both of these are driven by computer chips. Cameras are digital and now a part of a computer system. Vacuum cleaners will soon be robots with artificial intelligence. Computerization is merging many diverse markets into a general market. Sony, which once made radios, now also makes cameras, robots, and many other devices.
Companies are embedded within broad market strategies, forming clusters of specialization, where workers, skills, and processes are often shared laterally among companies. Companies subcontract or outsource so much of their activities that they often become little more than a coordination center for projects and the actual work is performed by smaller companies.
Computerization has turned companies into small units that can be quickly set up, repurposed, and shut down. Whereas companies could once exploit a market for decades, companies now pick up new tools and processes and drop them quickly as a market evaporates. This also means that workers are added and dropped quickly. If a market begins to slow down, the company begins to shed workers in order to lower the costs. This also means that SV recessions are dramatic. In the 1975 recession, the SV workforce was reduced by 33%. In the last two years, SV shed 11% of its jobs.
Effect of Computerization on Workers
Computerization also changes the nature of workers, their skills, their jobs, and their professional relationships.
Because high tech work is so technical and specialized, workers are often closer to subvendors than to their own managers or coworkers in other divisions within the company. The hardware engineers, for example, work with the semiconductor chip manufacturing suppliers to coordinate designs, materials, and processes. They will have little contact (and few shared interests) with other divisions within their company, such as marketing, human resources, and so on. The chip design work is so technical that the board of directors can't understand it.
Because they have learned to collaborate in teams and they know how to use technology, they are extremely effective at carrying out their efforts.
Companies have outsourced much of their production to a wide range of smaller companies that deliver development, engineering, marketing, billing, and other services. Up to 40% of SV workers are in nonstandard employment relationships (contracting, outsourcing, self-employed, consultants, temp agencies, and so on.)
Job tenure is short. SV companies structure their market strategies around projects, and staff employees, contractors, and outsourced companies are brought aboard to perform their roles in these projects. When the project is over, the team is disbanded. Staff workers themselves are often treated as contractors; they are hired for projects and let go after the project is finished. Due to rapid change, many current SV skills did not exist five years ago and will not exist five years from now.
SV workers use the technology to communicate with each other. Because the market constantly shifts, they are aware of trends and opportunities. Since the companies aren't loyal to the workers, workers will take advantage of opportunities elsewhere.
In the crash, companies and recruiters have been basically indifferent to workers. Workers are relying on each other for information, advice, support, and help. This is creating deep, strong social relations that will last into the next recovery.
Old Ideas Still Roam the Valley
Many of our concepts of company, worker, skills, job, retirement, and so on are from the industrial era. These are no longer applicable in a world where a company can last less only a few years, skills evaporate with the next software release, and companies offer no job security or pensions.
Government employment offices arose during the industrialized period, where workers were trained to work in specific companies and where they stayed for life. Due to business cycles, workers sometimes lost jobs, but unemployment checks kept them afloat until the market improved and they returned to their old companies and markets.
But in our computerized economy, we've learned that when markets go down, they don't return. The floppy disk market grew, became large, and disappeared. It will never return again. The website boom of 1995-2000 also will never return again.
Instead of hire and fire, we have a new vocabulary: downsize, rightsize, delayer, layoff, RIF (reduction in force,) restructure, repurpose. These words describe constant adaptation to a shifting economic environment.
Companies Vs Workers: Intermediaries
If the economic world is made up of companies vs. workers, then there are a number of groups that mediate the contact between companies and workers. Intermediaries help companies to find workers. Or they help workers to find companies.
Benner identifies three types of intermediaries that function in the SV labor market:
Each of these types is made up of hundreds of companies or groups.
As companies moved towards the idea of project-based strategies and temporary workers, the recruiting industry skyrocketed. There were nearly a thousand SV recruiting agencies at the top of the boom.
By 2003, most of these are gone and the survivors have radically downsized. In 2003, Dice.com, which was the SV insider's job board for more than a decade, is on the verge of bankruptcy.
A recruiting agency is in business to make a profit. The more they take care of their interests, the greater their profits. However, this is not to the favor of the companies or workers. For example, recruiters screen workers to find workers whom they can profitably rent to companies again and again. They prefer highly-skilled and flexible workers and they ignore low-skilled workers. For low-skilled workers, recruiting agencies are a barrier to a job. Recruiters also urge workers to be contractors, not staffers, which makes the worker more expensive to companies and the recruiters earn more.
The agencies do not want workers to create social networks, which might lead to greater leverage in negotiations. Workers must sign nondisclosure agreements that forbid discussion of salaries and wages.
Agencies have an impact on wages that is not beneficial to workers or companies. Agencies earn their fees as a portion of the wages, both from the company and the worker. Companies must pay more for a worker ($10-20,000 per year in agency fees per worker) and workers earn less because often, the recruiters take a portion of the worker's wages as well, usually 30-50%, and often as much as 75%.
Thus in a downturn, when both workers and companies are cutting costs to survive, the recruiting industry is suffering near extinction.
In the discussion of for-profit labor intermediaries (recruiters, job websites, etc.), Benner points out that contracting begin in SV in the 70s, and the first contractors were women. They liked the flexible hours, they weren't committed to the idea of lifetime employment, and their husbands had the benefits. Men preferred "real jobs." By the 90s, the situation reversed and contractors were generally the most highly-skilled men.
Member-based intermediaries include guilds, professional associations, and labor unions. Due to their position in the company/worker relation, these groups have a natural advantage over other intermediaries.
These groups include the SysAdmin Guild, the HTML Writers Guild, the Web Guild, STC, the NWU, Graphic Artists Guild, United Association of Plumbers, and the South Bay AFL-CIO Labor Council.
Chapter five is a fascinating account of these organizations and how they articulate their interests. These organizations perform services and understand their situation in a way that no other group (corporate, recruiters, educational, or government) can.
Companies can be created and dismantled, but a worker spends his lifetime with his skills. During the boom, some 5000 companies and 1000 recruiting agencies were created, and in the crash, more than half of these have disappeared. But the professions of sysadmins, web developers, technical writers, and others will continue. The workers associations are more enduring than companies. Since companies tend to act self-centered and self-interested, workers associations may become stronger than individual companies.
These intermediaries cover a range of groups: government, educational, industry-sponsored associations, private industry councils (PICs,) and so on. This chapter is an excellent systematic overview of the bewildering array of job training or education opportunities.
In general, these intermediaries try to understand the situation and needs of employers, and then train workers to work for those employers. For example, NOVA PIC produces employment outlook handbooks that describe the current state of jobs and try to forecast future opportunities.
Funding comes from government (both national and local) plus grants from industry and foundation, including donations. NOVA PIC gets its funding from 35 sources.
Are these groups serving the companies or the workers? Since these organizations get their funding and cooperation from corporations, they have an incentive to see things from the corporation's side. They are not going to encourage workers to ask for wage increases, take on lobbyist actions to improve worker conditions, and so on. In effect, they act as a hiring department of the corporations.
As the chancellor of Foothill-De Anza College puts it, the companies request certain skills, the college creates workers with those skills, the companies consume them, throw them out, and request new workers with new skills. It takes six months to two years go bring a student through the pipeline until she has a job, but her job may not last as long as her training. The problem isn't the length of the pipeline; maybe the problem is that the companies are consuming workers too fast.
Here are some interesting items from Benner's book.
There are widespread ideas that SV is based on a meritocracy of skills, racial equality in the computer industry, technology workers are highly rewarded, and increased productivity leads to higher wages. Anyone, regardless of race or sex, can do well in SV if they work hard. Here are some facts.
The book is recommended if you are interested in economics, globalization, the SV recruiting industry, or the nature of the SV job market.