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Preliminary version 03-06-2013
After the end of work:
Self employment as a keystone of an innovative society?
ILERA Symposium 2013
Towards sustainable labour market participation
Dutch employers’ association AWVN
Arjen Verhoeff PhD
(contact e-mail: [email protected], or via Researchgate)
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Introduction
In terms of socio-economic policy ‘the Netherlands is expected to see growth resume only
slowly, implying further increases in unemployment in the short term’, according to the
recent OECD country report (2012). The report concluded that in the medium term the Dutch
economy faces serious challenges because of continued globalisation and ageing of the labor
force. In order to face the socio-economic challenges in spring 2013, the ‘Sociaal Akkoord’
has been concluded - a social pact between the government and social partners on a central
level. The social pact was initiated after a decade absence of polder pacts, as the author has
analyzed in a separate ILERA-paper. The pact includes many elements that are assumed to
improve the labor market.
Before presenting a statement for this symposium, some preliminary remarks are relevant.
The fact that the measures of the recent social pact will take several years to be executes
illustrates the labor market is perceived as rather complex in terms of policy impact. As a
representative of employers it would be easy to explain what are the interests of employers to
cooperate in the making of the social pact. However, such a focus on the short term might
contribute little to a debate on sustainable labor market participation. On the other end, a
labor market exhibits too many deficiencies to assume that in the long term unemployment
will be solved only by an invisible hand. A final preliminary remark regards the debate
whether or not there will be a shortage of the labor market within a foreseeable future (De
Beer, 2009). If not in general, the labor market will be facing partial shortages in course of
time.
The Dutch definition of gross participation indicates the percentage of the potential labor
force (population of 15-64) executing paid work, or with the ambition to work at least 12
hours a week. The net participation expresses the number of persons having paid work of 12
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hours/week or more (as a percentage of the gross participation). For 2011 the net
participation is illustrated in Figure 1.
Figure 1: Net participation in the Netherlands in 2011 (blue = men, orange = women).
Source: CBS.
In the future, due to recent changes in government policy the net participation will be
calculated up to 67 years.
For employers, sustainability of talent comprises the development of individual persons in
(un)paid working relations leading to continuity in added value for companies or society
(Verhoeff, 2007).
Manifest ‘Towards new labor relations’
In 2011, employers’ association AWVN - together with trade unions FNV Bondgenoten,
CNV Vakmensen and De Unie - has published a Manifest ‘Towards new labor relations:
people make the difference, people achieve growth’ (Van der Steen, 2012). The vision as
contained in the Manifest of social partners comprises the following elements:
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Sustainable entrepreneurship is a must in modern society, given important global
challenges in food, energy and socio-economic issues.
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Society will draw attention for the effort of people in personal care of family. Paid and
unpaid work will compete in the labor market
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Sustainable employability of employees is important because of the structurally
changing labor market
In the operationalization of the manifest these elements will requires not only the market
mechanism, but also organizational qualities and social structure. At the moment, AWVN is
discussing the options for implementation in the perspective of scenario’s for 2025. For this
occasion, an evaluation of the structural changes in employment in society is explored using a
framework a la Ouchi (1980).
Market, Bureaucracy and Clan
Ouchi (1980) departs from the assumption that an organization aims to operate in the most
efficient way. In addition to the economic models of market and bureaucracy, Ouchi has
identified the clan as a third model. Although the framework of Ouchi has been developed for
the analysis of individual companies, his concept will now freely be applied on the labour
market.
Labour market
In a market model the value of a product or service is set by the interaction between supply
and demand, resulting in a price. A price conveys clear and simple information for
stakeholders, so the market model is efficient regarding the low performance ambiguity and
an absence of goal incongruence. The commitment of stakeholders to act is based on self
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interest. In addition to this original explanation of a market, the imperfections of a labour
market will impose transaction costs.
Effect of the change in market structure
About fifty years ago the average lifespan of companies was 60 years, while today it
is less than 15 years (Foster and Kaplan, 2000). This rapid decline implies that a
longer careers at the same company will be less and less likely to occur. For persons
active on the labor market this implies a autonomous higher level of mobility. This
will bring along extra transaction costs for individuals and firms.
Bureaucracy
When market competition is low, a price is difficult to establish. A bureaucracy is an
administrative model which controls by a hierarchical structure and a set of rules and
procedures. The bureaucracy model is efficient at the expense of a relatively high goal
incongruence and performance ambiguity. It requires an activity of the employer to satisfy
the employee for the exchange of his or her labor value.
An agreement between employer and employees expresses the value of the transaction as
equitable. The commitment in a bureaucracy is induced by supervision, requiring a limited
amount of information. In more general terms, transaction costs comprise the efforts to
mediate exchanges between stakeholders. Although a contract in a hierarchical system is
incomplete by definition, a trustful working climate may contribute that goals are in line
between an organization and its employee.
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Effect of changes in organizing work
After Rifkin (1995) proclaimed the end of work, indeed life time employment has
diminished at a rapid pace in organizations in the Netherlands. The changing context
for work was a cocktail of globalization, ICT and open innovation (Chessbrough,
2003). As a major effect this changing context required flexibility of employees. This
implied also a challenge to sustain the employability of an ageing workforce. Recent
studies illustrate that older workers have a higher risk on loosing their job (CPB,
2013). Moreover, a fixed contract might seem normal in the Netherlands (or Europe),
but within the global economy it is rather unique institution (Van der Linden, 2012).
Clan
A clan can be seen as a social group by those who share, for instance, the same commitment
in a long term perspective. In a clan evaluation of efforts of their members is not necessary
because it has socialized its members beforehand to accept the goals of an organization. The
members of a clan identify with the values and beliefs through mutual acquaintance. An
example of a clan is professional craftsmanship, including the typical master –apprentice
relation. An apprentice would be socialized into the traditions of the trade. Socializing
requires a high investment in the exchange of information compared to a market or a
bureaucracy. Commitment of the members stems from self interest in common values. When
the members of a clan are involved in a transaction then goal incongruence and performance
ambiguity is low.
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Effect of change in societal values
The concept of ‘master-apprentice ‘ has been a tradition for many centuries in the
Netherlands. It was part of a corporatistic society with, for instance, many kinds of
religious pillars. In the last decades, this closed society has become open, under the
influence of individualization, internet, social media, and the like. An open society
requires individuals to explore their options to sustain employability themselves in
their own networks.
Implications for sustainability
This birds eye view on the changing structure of labor market by Ouchi’s framework yields
three key words: mobility, flexibility and networks. These words have a common ground that
Rifkin (1995) has already pointed out long ago when he maintained the end of work was
reached: the employee with a fixed contract is in danger. In the past decades, in the
Netherland not only parttime work has flourished, but also many employed have decided to
become self employed (zelfstandige zonder personeel, zzp). The following Figure 2.
Illustrates this latter development in comparison with other European countries.
Figure 2: Development of self employment in European countries (CPB, 2011)
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In total nowadays one out of three persons active in the labor market has some form of
flexible working arrangement or is self employed.
In the framework of Ouchi efficient transactions can be obtained by balancing two factors,
performance ambiguity and goal congruence. Performance ambiguity implies a lack of clarity
in how a task or a product is valued. How exact is the way in which the value of labor or a
product is established? Goal incongruence occurs when the behavior of the stakeholders is
inconsistent with a goal. For instance, when stakeholders are not committed to the same
objective they will act more according to their own interest than a common interest. A
symptom of incongruence is a lack of cooperation among the stakeholders. When these two
criteria for efficiency are applied for self employment, then they indicate in an interesting
direction. Of course, this light exercise with the framework of Ouchi is merely a thinking
aloud. But only think back some ten years ago: has the world of work structurally changed
since then? Our little experiment does point in that direction. So it is not merely daydreaming
that the Dutch working panorama might change in the next ten years fundamentally in the
direction of self employment. This might even be one of the scenario’s in the project on labor
relations 2025 that AWVN currently is executing. Scenario’s are projections of a future that
might become reality, even if nobody – inclusive employers - would embrace such a world.
This brings me to a statement.
Statement
Promoting and supporting self-employment will lead to a society with sustainable work
arrangements.
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At the symposium several angles might be relevant for debate, such as:
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Why is self employment important for (social) innovation?
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What are the necessary conditions for an individualized society to coordinate the
sustainability of common economic and social interests?
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How to cope with a risk of free riders when pursuing sustainability for all?
References
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CPB (2011). Older workers often self-employed.
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