The Coming Crisis: The dangers of indecent work

Genevieve LeBaron - Research Fellow at SPERI and Senior Lecturer in Politics

The exacerbation of already depressed wages through ‘wage theft’, the illegal underpayment of workers by employers, has become widespread – even in rich countries with strong regulatory infrastructure like the United Kingdom, United States, and Canada. Low-paid workers are especially vulnerable to exploitation.  One recent study of the garment sector in Leicester found that ‘standard workers earn just £3 an hour’ (less than half of the UK minimum wage). Another study of low waged workers in three US cities – Chicago, Los Angeles, and New York City – found that the average worker is losing $2,634 annually due to wage theft, roughly 15% of their earnings. In the US, in 2012 alone, the government and private attorneys recovered nearly US $1 billion in wages stolen by employers. Wage theft and withholding is also an endemic feature of global supply chains.  In the footwear industry alone, the practice is estimated to cost workers US$27 million per year.

In addition to ‘regular’ labour exploitation, severe forms of labour exploitation including forced labour and human trafficking are thriving. The ILO estimated in 2012 that 21 million people in the global economy are victims of forced labour, producing annual profits of US$150 billion for businesses making and selling electronics, World Cup stadiums, shrimp and dozens of other commodities. Although forced labour is illegal in almost every country, it seems to be becoming a stable and predictable feature of many types of supply chains.

These are but a few signs of the escalating global employment crisis – a crisis that is increasingly acknowledged by politicians and global governance organizations, who agree that things are getting worse fast and that this poses real and long-term dangers to global economic stability.

Sparking the recent wave of cautions, the International Labour Organization warned in 2014 that ‘the global employment outlook will deteriorate in the coming five years,’ particularly in emerging and developing economies. A recent joint report by the ILO, OECD, and World Bank warned that if current trends continue, the lack of good quality jobs in both rich and poor countries would create ‘many more years ahead of weak economic growth and a ‘vicious cycle’ that would prove hard to break out of‘. Even McKinsey, a global management consulting firm, has recently noted, ‘Strains on the global labor force are becoming painfully evident. Market forces will fail to resolve demand and supply imbalances for tens of millions of skilled and unskilled workers.’

As such governments and international organizations are busy discussing the mounting dangers that the scarcity of decent work poses to the global economy – including downward pressure on consumer spending and growth, rising inequality, and lower living standards for the majority of the world’s population. But surprisingly little attention is being dedicated to the causes of the crisis, which need to be faced head-on if it is to be stopped in its tracks.  I’ll mention two of the most important causes here.

The first is that even amidst surging corporate profits, workers are taking home a smaller and smaller percentage of the pie. For instance, The New York Times reported in 2014 that ‘corporate profits are at their highest in at least 85 years’ at the same time as ‘employee compensation is at the lowest level in 65 years.’ One recent study of value distribution along Apple’s iPhone supply chain found that while Apple takes home 58.5% in profit, all of the workers in its global labour force share a mere 5.3%. In other words, corporations are posting record profits and are passing a tinier and tinier fraction of those profits onto workers.

The link between soaring corporate profits and the spread and normalization of indecent work is rarely acknowledged, but lies at the heart of the crisis. The stockpiling of mind-blowing sums of cash by global manufacturing and retail corporations’ is a key cause of the mounting subsistence crisis amongst the workers in their global supply chains. The jobs crisis cannot be averted without redistributing value away from corporations and into workers’ pockets.

Second, the lack of government enforcement of labour standards—across both rich and poor countries— is creating a context in which businesses can enact labour exploitation with impunity. In the US today, according to the Economic Policy Institute, ‘the average employer has just a 0.001 percent chance of being investigated in a given year.’ Most other countries fare little better.

Although governments frequently portray the employment crisis to be a result of abstract market forces, the reality is that it is rooted in national and global political economic policy implemented over recent decades. Most states have gutted their labour inspectorates, eliminating a crucial source of protection for workers’ rights, as well as other institutions that protected workers from exploitation, and have empowered businesses to reduce their own responsibility and liability for workers.  That work has become less secure, less well paid, and more exploitative in the face of such policies is hardly surprising. Indecent work thrives where governments do not enforce the laws that make it decent – such as those protecting the payment of the minimum wage, health and safety laws, and collective action.

Two crucial starting points, then to address the escalating employment crisis, are to enforce the rules that are already on the books, and to create new ones that redistribute profit from corporations to workers – putting an end to the corporate welfare regime. Of course, these are only starting points and they would be of most help those already in work.  We need to confront wealth distribution, inequality, and unemployment in much broader terms if we are to decelerate the spread of indecent work.  Failure to address its spread, and the dangers it poses to the global economy, make the coming of the next crisis a certainty.