The political economy of flexible employment
Creators: name: Weisstanner, David
Publisher: name: Universität Bern
Year: 2018
Subjects: 320 Political science

description: Over the past decades, many Western democracies have deregulated flexible employment. At the same time, income inequality has increased. This dissertation explores the association between these two trends. It focuses on two types of wage-related risks that regular workers are exposed to: low-wage competition and adverse income prospects. I argue that flexibilization spreads risk disproportionally towards workers in the middle of the earnings distribution. These workers then face pressure to defend their wage levels against low-wage competition from the cheaper alternative of temporary workers. They also frequently lack the mobile, high-skilled profiles conducive to secure career advancement and long-term wage growth in flexible work environments. This argument departs from several influential accounts in the literature. First, it disputes a core premise of the dualization literature: that “insiders” employed in secure jobs are insulated against adverse labor market changes. Because labor market policies “at the margins” have repercussions on insiders, it is important to consider the heterogeneity of wage prospects among workers in regular employment. Second, the policy changes towards flexible employment provide an explanation of the widespread rise of inequality in coordinated market economies in Europe. Third, it introduces a new aspect to the debate about the “declining middle class”: the focus on wage-related risks. These risk types encompass developments such as long-term wage stagnation, which arguably are crucial to understanding contemporary electoral shifts. Wage-related risks are mostly omitted from theories on the welfare state that focus exclusively on employment-related risks. Comparing 25 OECD countries between 1985 and 2015, I find that flexible employment policies affect earnings inequality among regular workers as well as subjective perceptions of labor market risks. The macro-level analysis based on LIS data shows that flexibilization is associated with earnings losses for middle-income workers, while it has neutral effects on low-wage earners and positive effects on top earners. The micro-level analysis based on ISSP data shows that flexibilization increases middle-income workers’ levels of subjective job insecurity relative to low-income workers. In deregulated contexts, risk spreads towards middle-income workers. Finally, the in-depth analysis of the crucial case of Germany, where major flexibilization reforms took place, reveals that flexibilization results in long-term wage stagnation for middle-income workers. This dissertation provides multi-faceted data on the position of workers in the middle of the earnings distribution over the past three decades. Aside from “objective” developments of earnings inequality, it provides detailed data on workers’ subjective perception of economic risks. The findings contribute to understanding the various consequences of flexible employment for income inequality. The trajectories of pivotal middle-class voters suggest that political support for flexible employment is built up on shaky ground.