Employee Organization In High-Velocity Labor Markets

By Alan Hyde(1)

Presented to the New York University 50th Annual Conference on Labor, May 29-30, 1997. All rights reserved by the author.

The rise of contingent labor markets is an enormous opportunity for labor organization, though it remains to be seen whether existing or new employee organizations will rise to the challenge. Usually, increases in job insecurity, downsizing, and the decline of internal labor markets, are regarded as threats to union organization, as of course they often are. But they are opportunities, too: opportunities

--for organizations that will cross class and craft lines to unite contingent employees in shared problems;

--to develop organizational forms for highly-skilled and compensated professionals nevertheless coping with uncertainty, and then adapt those forms for less-skilled workers;

--to draw on traditional unions for workers who move from employer to employer, such as unions in the construction or entertainment industries, and adapt these successful forms to new work.

This paper sketches a new form of employee organization to protect employees in high velocity labor markets, that draws on these older union traditions, to address newer problems, and reviews some recent efforts to organize along these lines. Such employee organizations would:

--administer retirement savings and health insurance plans;

--disseminate information about employers of contingent labor, through chat groups and web sites in addition to more traditional formats, in some cases rating or evaluating employers;

--in some cases, train and certify employees;

--in some cases, operate hiring halls or employment agencies;

--advise employees on self-directed retirement savings;

--represent employee political interests.

They might or might not bargain with employers at all. They might seek only to uphold labor standards against employers, not through bargains with them. Where they do bargain with employers, these organizations will probably be understood as the representative only of their members. They will not be elected; they will not be certified; they will owe nothing to governments or employers. They will be truly independent employee organizations. Largely for this reason, they will present few legal problems, although sensitivity to the existence of these new employee groups may occasionally shape interpretation of existing labor law. They will provide an organizational basis for employee groups to link up with other employee groups, ultimately, for political action.

The Paper that follows summarizes current developments in the rise of contingent labor markets; identifies problems experienced by employees in such markets, drawing in part on interviews that I have been conducting in Silicon Valley on various issues in high velocity labor markets; and finds models, mostly in existing union practice, for new forms of employee organization to address these employee problems.(2)

I. The Rise of High Velocity Labor Markets

I call a "high velocity labor market" a market in which individuals will work for several different employers over the course of a year; all such relationships are understood as terminable at will, in practice, not merely in legal theory; and normally come without implicit promises or entry into internal labor markets. The individuals working in high velocity labor markets may be statutory employees or independent contractors; if the following discussion ever refers to them as "employees" it is in this generic, nonstatutory sense. For purposes of this study, a more rigorous definition is not necessary, as I will not be collecting any statistical data. Probably I mean about what other people mean when they speak of "contingent" labor or, in some cases (often European), "flexible" or "nonregular" employment. I don't much like these last terms because this kind of labor market is not new, not limited to janitors and temporary office help, and not always a bad thing for employees.

In the United States, many markets for construction work, actors and actresses, and musicians are high velocity labor markets as I use the term: individuals work for many employers; all relationships terminate free of continuing obligations; there are few internal labor markets. Not coincidentally, all are labor markets in which unions operate and which are not necessarily degrading or oppressive to employees, though there is uncertainty, and some individuals will not do well in these labor markets.

It is also not necessary for me to take any position on whether high velocity labor markets are increasing in importance, whether lifetime jobs and internal labor markets are disappearing from America, or related empirical issues. So long as there are any high velocity labor markets, the question of the forms of employee organization is an interesting one.

However, I happen to believe that high velocity labor markets are increasing in importance, and that almost no one hired today believes explicitly or implicitly that he or she is entering a 1950's style internal labor market, with defined hierarchies, in which upper levels are filled exclusively through orderly promotions from lower levels, and in which ordinary employees may anticipate lifetime careers with a single employer. This conclusion is based on my reading of the empirical data, and my unsystematic conversations with people I happen to talk to, including my part-time law students, most of whom are currently employed at just the large corporate employers once famous for their internal labor markets. However, I am aware that the claim that lifetime jobs are disappearing is controversial. As it is not necessary to this paper, readers uninterested in the empirical claim may skip to the next section.

In order to understand the difference between something "everyone knows" is happening and something for which there is data, I would ask the reader to test the proposition, about the decline of lifetime jobs, against the market for legal jobs. There's nothing special about the market for law jobs as opposed to any other job market except that it is subject to certain specialized statistical reports, and, I assume, the readers of these remarks are disproportionately lawyers. Has there been a decline of lifetime jobs in the legal profession? Consider the following statements, all versions of statements frequently made over the past decade (indeed, the first two come from a semiofficial publication of the profession):

--"These days, changing law jobs --even getting out of the practice of law entirely--is more the norm than the exception."

--"I am probably a rarity among lawyers graduating from law schools since the early 1980s. I have practiced law with the same law firm since graduating in 1985."(3)

--Law firm partnerships were once regarded as unbreakable lifetime commitments. Today, forcing resignations and even discharges are common.

--Many fewer of today's graduates than their predecessors of ten or twenty years ago will join a firm on graduation, make partner in year 6 or so, and remain there until voluntary retirement.

--Today, it is common for young law graduates to combine several part-time employments. For example it is typical to have a few private clients serviced out of one's living room and simultaneously be of counsel to a firm on a particular matter, while consulting on an hourly basis with a corporation on another.

Well, you get the idea. People--even official organs of our profession--say things like this all the time. I say things like this all the time. I believe every one of these statements is largely true (although I wouldn't go so far as to say that staying with one firm for the first ten years out of law school is a "rarity"). However, if you were challenged to produce the data supporting any of these statements as true of the profession generally (not just anecdotally), could you?

I've spent a fair amount of time in libraries and on the net trying to get that data, and as of May 1997, I don't believe it exists.(4) The best data, when it is fully analyzed soon, will be from the Chicago Lawyers survey of 1994, which did ask questions about career histories in a way that will permit comparisons with a 1975 survey, as well as comparisons within age cohorts in the 1994 survey.(5) However, I know how these charged debates work in law school settings. Even if the data show an apparent decline in lifetime lawyer jobs, people resisting this conclusion will have many clever arguments on how atypical Chicago is, postulating a vast slumbering nonurban sector of lifetime jobs. The legal profession should be a uniquely well-documented illustration of the decline, or not, of lifetime jobs. Lawyers list themselves in Martindale-Hubbell directories, which are analyzed periodically; the American Bar Foundation and other groups study the profession, and so on. I am not aware of any published dissent to the general statements listed above. Yet the story shows the gap between things that "everyone knows" are true, and the kind of data that are sometimes demanded.

Naturally, when one moves one's focus from the legal profession to the American workforce as a whole, a cloudy picture is unlikely to become clearer. The most powerful recent argument that there has indeed been a decline in stable, lifetime employment relations there too, is the book by Peter Cappelli and five associates.(6) Their chapter on labor market data summarizes the following uncontroversial and uncontroverted evidence for declines in job security, before venturing into more controversial areas:

--Reports of layoffs and downsizing are up in every survey and are increasingly described as strategic or structural, rather than responses to particular short-term events.(7)

--Direct employment in the temporary help industry has increased.(8)

--Surveys asking people whether they changed jobs within a preceding period show increasing positive responses.(9)

On the other side from the large mass of data collected by Cappelli there is one study which (I know from experience) is always cited in order to show that lifetime jobs are not declining: Professor Henry Farber's NBER paper.(10) Farber examined answers on the Current Population Survey to questions asking how long the respondent had been on his or her present job. He found two striking changes. First, "the quantiles of the job duration for the least educated workers, and especially the least educated men, have declined substantially." However, offsetting this, "the quantiles of the job duration distribution for women, and especially women with more education, have increased substantially." Of course, one can add up these two trends and conclude that there has been no decline in lifetime jobs, only a change in their distribution. I would prefer to ask: of the two trends identified by Farber, which do we expect to continue? We're guessing here, of course, but wouldn't it be a big mistake to assume that each trend will keep pace with the other? I would suggest that the trend on women has probably already peaked. Not long ago, there were, as Farber says, very few lifetime jobs for women. Women were often expected or required to quit when they married or had children. For various reasons, this changed in the 1970s and after, so comparison over time will indeed show women in lifetime jobs today (typically, I would suppose, hired in the 1970s) where once there were few. Is there any reason at all to think that this trend will continue, hasn't, in fact, already peaked? On the other side are the figures for men, particularly less educated men, once often in lifetime jobs, decreasingly so, now. Is there any reason to suggest that this trend has peaked? Don't we think, from the careers we can observe every day, that it continues? This is speculation, not data, but explains why I think it would be a mistake, given Farber's data, to cite his study too quickly for the proposition that there is no reason to anticipate declines in lifetime jobs.

All this may be just a particularly narrow labor market perspective. From another perspective, a trend from internal labor markets to high velocity labor markets is just a specific example of a larger trend in the structure of business firms, from internal contracting with owned divisions to market-mediated purchases, a trend much analyzed by transaction-cost economists.(11) From their perspective, firms buying what they need from other firms in markets is the normal way of doing things, because of all the things markets are normally assumed to do very well; firms making what they need through owned divisions is unusual, and normally signals "situations where people cannot write good contracts and where the allocation of power or control is therefore important."(12) I don't want to push the application of this work to labor contracts too hard in the present paper, but want rather to use it to reshape the labor economist's usual question about lifetime jobs. All around us today, we see employers purchasing services in a short-term labor market that were once characteristically purchased only through long-term implicit contracts: secretarial and clerical services, lawyer services purchased by the hour, adjunct teachers, editorial and writing services. It turns out that--just as transaction-cost economists would predict--all kinds of services can be purchased in spot markets without presenting insuperable difficulties of writing contracts, monitoring, or complimenting existing assets.

This fact may suggest that the question is not, whether lifetime jobs are declining, but rather, why the practice of lifetime jobs ever arose in the first place? Why did employers ever believe that it was efficient for them to purchase labor by offering implicit contracts that in practice lasted for a long time, and included bonding devices, such as backloaded retirement and health benefits, designed to make the relationship expensive for employees to break?

My tentative answer to this is historical, not economic: that implicit contracts for lifetime employment made a kind of sense in the 1950s and 60s that they are unlikely to make again any time soon. This is the most speculative part of this already speculative section, but as I am eager for responses that will shape the development of this idea, I put it forward here as a bit of speculation in hopes that it will engender comments. (Readers continue to have the option of skipping to the next section).

The model to be explained is a model, more common in the 1950s and 60s than now, in which corporations purchase substantial quantities of labor services through implicit contracts for lifetime employment. The contracting devices through which this was done are well-known and well-analyzed: the internal labor market and the implicit employment contract. In the internal labor market, firms are organized as hierarchies with defined promotion ladders. Managerial and professional positions are normally filled only by promotions from within the firm.(13) Even in nonunionized establishments, promotions often reflected simple seniority.(14) In the 1950s American variant, for example, professional positions, to a degree surprising in retrospect, were often filled by experienced line personnel, in preference to outside candidates with more schooling or degrees.(15) From another perspective, as Mark Roe has said, an internal labor market is just a cartel arrangement in which firms agree not to hire each other's employees.(16) However, the American corporation of the 1950s and 60s relied on more than this cartel to bind employees over the long term. One device much analyzed by economists and lawyers over the last few years is the implicit contract for lifetime employment, in which employees were supposedly induced to undertake lengthy and expensive firm-specific training, and thereafter to accept wages below their productivity immediately following this training period, by an implicit promise that they would be compensated above their opportunity wage in their later years, partly through wages increasing with seniority, and partly through other backloaded benefits more valuable to senior employees, such as health and retirement benefits.(17)

The efficiency advantages of such long-term contracts are not self-evident and there is no accepted historical account of their origin or development. The conventional explanation, that assumes that these employees were being induced to undertake extensive firm-specific training, has a hard time coping with the recent realization that most skills can be purchased on markets, suggesting that firm-specific training was not as important to firm economic success as it may have seemed at the time.

I would suggest that implicit employment contracts developed as an efficient way of organizing employment for the generation of men who saw military service in World War II. It did not require unusual perspicacity to organize their employment around themes of loyalty to the organization, internal promotion for hard work, and lifetime commitment. Other arrangements were theoretically possible at the time, but this one worked well enough, particularly in the sheltered American economy of those decades.

There were no signficant internal or external challenges to the system until the mid-1960s. Then three events took place over the span of a decade or so. First, the reform of the immigration laws in 1963 opened up job markets to Asian professionals excluded under the old immigration quota system, and thousands of Asian engineers, accountants, and scientists immigrated and sought employment. (Their children are today prominently overrepresented in university enrollment). Second, the Civil Rights Act of 1964 came, not at once, but over a decade, to be applied to segregated internal promotion ladders. Third, formal protection against sex discrimination, illegal since 1964, became more important in practice, as women entered the labor force in increased numbers, often demanding consideration for professional, managerial, and supervisory positions.

A depressingly small handful of American employers, mostly then-monopolists such as Xerox and IBM, attempted to diversify their upper ranks. Most employers continued to maintain their old promotion ladders. However, by the early 1970s, these firms now had to justify, to the public, to their employees, and to regulators, why they were continuing to reserve professional and managerial positions to senior white men without a lot of education, who had spent their lives with the firm, working their way up from entry-level position, in preference to, say, African-American employees who had been restricted to less desirable career ladders, or Asian immigrant engineers, or young women with professional degrees.

The "internal labor market" arose as an academic explanation of why Black employment lagged, but was then adopted as a self-justificatory concept at this time in order to rationalize what might appear to have been discrimination.(18) The "internal labor market" explained that a white male managerial corps was not the result of discrimination, but was the fulfillment of an implicit bargain in which these men were now being paid back for their years of low pay for firm-specific training (though it was often hard to determine just what this training had consisted of).

If I am right, not much will be heard about internal labor markets in the coming years. The generation they protected, the white men veterans of World War II, has largely retired. Other ways of purchasing labor, specifically, short term market-mediated relationships, are both feasible and efficient. The training that supposedly justified the internal labor market turns out to have been dispensible. The historical conditions that gave rise to so-called internal labor markets are over.

II. What Successful Employees in High Velocity Labor Markets Need from Organization

Designing organization for low-wage service workers has inspired powerful recent scholarship. Dorothy Sue Cobble's historical work on the organization of waitresses has drawn attention to worker organizations that organize a craft, even one requiring little initial specialized skill or training, over a geographic area.(19) In later work, Cobble has discussed ways of organizing such regional craft organizations.(20) Drawing expressly on Cobble's work, Howard Wial has produced a careful and illuminating study of the forms of work organization of low-wage service workers and the possible corresponding modes of employee organization.(21) While I agree with these authors' concern for low-wage service workers, this focus creates a problem for testing their ideas about organization. Low-wage service workers are difficult to organize even in stable labor markets. If unions don't offer something to employers, employers will fight them, bitterly and usually successfully. The main thing that unions offer employers is potential reduction in labor turnover, thus enabling returns to seniority.(22) If an organization has no potential returns to stability or seniority, it will probably resist unions strongly. (23)

I thought it would be interesting to test some of Cobble's and Wial's proposed organizations, in a labor market of well-trained, well-compensated professionals who nevertheless move rapidly among jobs. This seemed interesting, not because of any particular fondness for these professionals (though many are in fact my friends), but because it seemed likely to me that modes of employee organization might be emerging among these individuals that would help refine and test the Cobble or Wial theses and help in the design of organizations for low-wage workers. I had already written about some interesting and novel aspects of the organization of professionals in high technology, nonunion employment. These professionals are linked through networks, user groups, chat rooms, and electronic mail, to colleagues at their own and perhaps other establishments, and this has permitted rapid and spontaneous, albeit reactive, employee action.(24) For another, these workers commonly join "identity caucuses" such as women's, African-American, Latino and Latina, Asian, and gay and lesbian caucuses, even though they could never imagine themselves in a union, and indeed employers have accommodated such caucuses who would have fought unions.(25) At least some professionals might advance their issues through engineering or scientific societies, although I knew that such affiliations are rare in Silicon Valley.(26) A combination of geographic, craft, professional, and identity representation in some ways suggested Charles Heckscher's proposed "associational unionism."(27)

In order to learn more about organization, formal and inchoate, among high technology professionals in Silicon Valley, I conducted a series of interviews in March 1996 on these and other issues. I conceived these as pilot interviews preparatory to a larger, more formal survey that I have not undertaken. My subjects were not a representative sample of anything but reflected my personal contacts in the area. My object was to learn more about the kinds of organization currently operating among employees (including such odd forms of "organization" as chat or user groups or caucuses) and about the needs and grievances of these successful people that might provide the basis for further experiments in organization, again, with a particular eye toward organizations that might some day also serve janitors and waitresses.

Briefly, my search for new organizations was largely disappointing. Employee organization on the net does not seem to have figured much recently; identity caucuses seem quite limited(28); and few new organizations have emerged to meet the needs of these professionals. On the other hand, my interviews confirmed a tremendous latent demand for organizations that would provide benefits, training, information, and political representation. I believe that existing labor unions and professional organizations would be successful in attempts to organize such groups among these professionals. Before discussing the interviews, however, some background on work organization in Silicon Valley would be helpful.

A. The Growth and Dynamism of High Velocity Labor Markets

For simplicity, I will adopt the analysis of Silicon Valley's labor market of AnnaLee Saxenian, who identifies Silicon Valley's comparative advantage, over the computer industry around Massachusetts' Route 128, with Silicon Valley's organization into many small firms, as opposed to Route 128's domination by a few firms. Saxenian's book has come up in numerous conversations I have had in Silicon Valley, and her analysis seems to make sense to everyone with whom I spoke.(29)

Saxenian seeks to explain why Silicon Valley decisively passed Route 128 in the 1980's. Each region was a well-known center of the computer industry by the early 1970's. Each had strong ties to local universities, grew strong on defense contracting, but diversified into civilian production. Each employed workforces of roughly equal size in 1975. Yet between 1975 and 1990, California generated three times as many jobs as Massachusetts; in that year Silicon Valley-based producers exported electronics products worth more than twice as much as Route 128's. What accounts for the difference? In Saxenian's words:

Silicon Valley has a regional network-based industrial system that promotes collective learning and flexible adjustment among specialist producers of a complex of related technologies. The region's dense social networks and open labor markets encourage experimentation and entrepreneurship. Companies compete intensely while at the same time learning from one another about changing markets and technologies through informal communication and collaborative practices; and loosely linked team structures encourage horizontal communication among firm divisions and with outside suppliers and customers. The functional boundaries within firms are porous in a network system, as are the boundaries beween firms themselves and between firms and local institutions such as trade associations and universities.

The Route 128 region, in contrast, is dominated by a small number of relatively integrated corporations. Its industrial system is based on independent firms that internalize a wide range of productive activities. Practices of secrecy and corporate loyalty govern relations between firms and their customers, suppliers, and competitors, reinforcing a regional culture that encourages stability and self-reliance. Corporate hierarchies ensure that authority remains centralized and information tends to flow vertically. The boundaries between and within firms and between firms and local institutions thus remain far more distinct in this independent firm-based system.(30)

Although Silicon Valley has many more firms, and many more small firms, these firms are linked by informal ties. High labor mobility among firms is central to the formation of these ties, dwarfing other sources (such as Stanford University School of Engineeering). "During the 1970s, average annual employee turnover exceeded 35 percent in local electronics firms and was as high as 59 percent in small firms. It was rare for a technical professional in Silicon Valley to have a career in a single company. An anthropologist studying the career paths of the region's computer professionals concluded that job tenures in Silicon Valley averaged two years."(31) Because professionals know and have worked with peers at other firms, there is a great deal of informal know-how sharing across firm boundaries.(32) Saxenian's book includes a number of specific comparisons in which small, nimble Silicon Valley firms, working with subcontractors and customers, were able to steal a march on the few large firms dominating Route 128.

While this is not the only way to organize a labor market, and is not for everybody, it is obvious that some firms and employees can do very well in such a labor market (which further fortifies my conclusion in Part I above that the coming decades will see more high velocity labor markets and fewer internal labor markets). Obvious advantages to employers include the high flexibility that comes when labor can be hired on very short-time basis, without implicit promises or benefits of any kind; less obvious advantages, also stressed by Saxenian, include the ability to use employee mobility to acquire and share information, and the increasing returns to scale that come when firms are able to use employee mobility to converge on particular protocols or specifications that could not become standardized as rapidly through any other method. (That is, antitrust laws might inhibit firms from agreeing on standard programs or operations, and a consumer market might give rise to such standardization only very slowly or not at all--consider Betamax and VHS, or Nintendo and Sega--, but engineers, programmers, and designers flowing freely across firm boundaries, might help firms converge on standardized programs and operations, from which all will benefit. Conversely, this does not happen in a Route 128-style labor market, a traditional set of internal labor markets, in which one can be confident that managers at Digital or Wang are not familiar with other firms' products or operations). Such labor markets are not entirely cost-free for employers. In a companion paper I argue that California employers are unable to maintain effective protection of trade secrets in such a high velocity labor market, but that on balance this is a good thing for them and an excellent thing for society.(33)

It is also obvious that such labor markets force employees to live with a great deal of uncertainty. How they do so was the subject of my interviews.

B. What Employees Can't do for Themselves in High Velocity Labor Markets

In two focus groups of six people each, I interviewed people working in the software industry around Palo Alto who have changed jobs repeatedly. These interviews were supplemented by twenty or so individual interviews. One group was composed mainly of professional employees, mainly engineers; the other, of marketing consultants who I figured would not even have potential ties to any professional organizations. However, there turned out to be little difference between the groups; like other professionals in the Valley, my interviewees did not participate in professional organizations.(34)

Nearly all had worked at several different employers, sometimes as an employee, sometimes as a consultant or on contract, and nearly all had also worked in the computer industry around Boston or in Europe or Asia. All confirmed Saxenian's basic thesis that the dynamic growth of Silicon Valley rests in large part on the ease with which new firms start up, hire only labor as needed, and interact with other firms. All felt there was something wrong with a resume that showed five years at the same employer, with occasional exceptions, such as IBM or Hewlett-Packard, known as traditional employers in the sense of maintaining internal labor markets and promoting from within. Firms can now find subcontractors to do almost anything that needs to be done, and the process of hiring a subcontractor is relatively quick and efficient. Hiring an employee, by contrast, is a lengthy process involving substantial search time, less available information, substantial recruiting and negotiation--for an individual who may not even be there in a year. It also may look bad for a manager expected to reduce "headcount." Even when employers want to hire a specific individual, it is often more efficient to send that individual to a temporary help agency and then hire her or him through that agency. Jobs have been easy to find, particularly on the Web.

For all, their only retirement savings were in individually-directed 401(k) plans into which employers contributed. Everyone's dream is to be paid in employer stock that turns out to increase in value. People have health insurance when they're working, and none when they're not.

Training, particularly for management functions, seemed haphazard to all my respondents, including high corporate executives interviewed individually. The old model of selecting a promising young person for an eventual managerial career and putting him (typically) on a fast track of exposure to the firm's entire business, has broken down entirely. Finding good managers is difficult and many firms of creative people are poorly managed. It isn't clear where the next generation of managers will come from. Firms seem to do only the training needed for particular tasks in shop, and even then only when they can't just hire a subcontractor or consultant to do what needs to be done.

Unions receive uniformly unfavorable responses, rarely based on actual experience as few have worked in unionized workplaces. Unions seem to symbolize work "back East", as Californians say, a world of job descriptions and hierarchy that my respondents affect to believe they are escaping.(35)

Suppose, I said, that there were an organization of Silicon Valley professionals generally, or perhaps just of marketing professionals or graphics designers or software engineers, that did the following things. It contracted with the large health maintenance organizations in your area for coverage for you and your family whether or not you were employed at that minute. It provided advice and perhaps administrative services on your 401(k) retirement plan. It lobbied in Washington and Sacramento on issues related to professional employment, such as tax aspects of 401(k) plans. It maintained a web site, user lists, and chat groups for exchange of information about employers, where the jobs were, what was the employer's reputation, did it sue departing employees. Finally, it might provide training or offer other courses. Most of my respondents said they would join such an organization in a minute.

III. Models for Organizing Employees in High Velocity Labor Markets

The union that tried to organize these professionals would derive three fairly clear benefits. First, it would gain in its ranks educated, motivated members. Second, it would gain expertise in designing organizational forms for this labor market that might be adapted to lower-paid workers. Third, it could integrate into political coalitions key employees, with no inherent disposition to unionism or political liberalism, but who could be made to feel the advantages of organizations with political clout.

While there is no single successful organization that combines the relevant organizational functions just as I think they ought to be combined in Silicon Valley, each individual function can be illustrated with models from existing union practice and, in some cases, from the spontaneous organization of computer professionals themselves.

A. Information about firms

Temporary employees and consultants who change employers frequently have a particular need to learn about each employer's reputation, strengths, and weaknesses. This fact buts right up against a lively if unresolved debate in the law reviews and economics journals about reputational sanctions in employment markets, in which conservatives have argued that reputational sanctions would effectively prevent employers from reneging on implicit employment contracts (thereby making formal judicial enforcement unnecessary), while liberals have argued that this is a naive view of employment markets, in which employees take jobs under considerable information disparities, cognitive dissonance, and wealth constraints.(36) In the course of my interviewing on the portion of my study dealing with postemployment trade secrets constraints, I received some unexpected confirmation of the salience of reputational sanctions, at least in this market.

Around 1993, Intel, the well-known chip manufacturer, cultivated a reputation as an aggressive litigator.(37) Its refusal to share technology under a technology-sharing agreement with Advanced Micro Devices eventually ended up in an arbitrator's major damage award for AMD.(38) In an equally well-publicized suit, Intel both sued and brought criminal charges against an employee who departed for a start-up, taking what Intel alleged were its secrets, though both juries eventually found otherwise.(39) I was curious to learn what lessons Intel had taken away from the incident and was able to interview someone with access to the highest levels there. On condition that I not reveal his name, he told me that Intel had paid for that suit in decreased internal morale and poor recruiting. Chat groups lit up all over the Valley, I was told, and job applicants that year frequently asked whether they would be sued if they left Intel after a few years. Intel has recently let two vice-presidents depart for competitors without litigation, and my source thought that Intel would continue to let people go.

I suppose this story impressed me because I had already written about the use of electronic mail and internet groups to mobilize action among computer professionals.(40) The Intel story confirmed my sense that, whatever may be the ultimate significance of electronic networks for society, on which I am fairly skeptical, they do permit rapid diffusion of information among affected employees, and thus may make reputational sanctions meaningful.

A recent news story notes that the South Bay Labor Council in San Jose, California, as part of efforts to organize temporary clerical employees in Silicon Valley, "is launching a Web page on which contingent workers can register complaints about agencies and work sites."(41) This seems like an inexpensive and useful service that organizations could provide workers in high velocity labor markets.

An employee network that was successful in gathering and disseminating information about employers might be able to take an additional step: to evaluate and rate employers. An organization could rate certain employers as "blue ribbon" employers, or others as "unfair", purely as an exercise of its own constitutional rights of free speech, without being any sort of recognized representative of employees. If employees trusted the network, such ratings might effectively change corporate behavior--as existing networks are said to have changed Intel's.

B. Benefits

Nearly all the commentary on American contingent workers of all types notes the insecurity of having no health insurance or retirement savings in a country in which regularly-employed people look to their employers for both these things. It is seldom appreciated that labor unions in the construction trades and entertainment industries have long administered these and other benefit programs, for employees (broadly defined to include many independent contractors, managers, and professionals) who work for many different employers over time.(42) In fact, because these services are so useful to employees and employers, unions in these industries have the benefit of comparatively easy rules of legal recognition. For example, they may be recognized negotiating partners even for employers who have not yet hired employees, and typically negotiate standard agreements with employers' associations that bind employers who did not actively participate.(43) For knowledge workers such as Silicon Valley scientists, an interesting model might be the long experience of unions like the Writers' Guild of America and Screen Actors Guild in collecting, distributing, and otherwise administering complicated residual payments.(44)

These models do involve employers. They require that some group of employers recognize the union as the exclusive representative, however loosely chosen, of a defined group of employees, and thereafter participate in the administration of the benefits trust. This is not unreasonable where the employer funds the benefits by paying into the trust, and would therefore be the only feasible model for organizations protecting contingent workers such as janitors, waitresses, and clerical workers. However, my emphasis on well-compensated engineers and marketing professionals raises an intriguing theoretical possibility, that organizations of such employees, like the old friendly societies, might attempt to run their own benefit programs without dealing with employers at all, entirely from employee contributions.(45) This avoids even mild questions of exclusive representation and employer recognition. I believe, however, that for an employee organization without employer recognition, to get the full tax advantages of benefits trusts, would require federal legislative change.

C. Political representation

Much was written during the last election about a new spirit of political activism among Silicon Valley employers on such issues as securities law liability for new stock offerings.(46) Of course, there is no analogous political representation for employees, consultants, and contractors. It is unlikely that the voices of 401(k) plan participants as such receive much recognition in the legislative process concerning retirement plans.

An interesting model of political representation might be unions of physicians. An interesting new book on the Union of American Physicians and Dentists emphasizes its role as a political representative of doctors in the legislative process, in which role it unites the sixty percent of its membership that is self-employed with the forty percent that is salaried.(47) Similar negotiating concerns drive the recent creation of the first nationwide doctors union, to assist podiatrists in negotiating with health maintenance organizations.(48)

D. Training

Construction unions might also be a model for organizations that train, test, and certify employees at certain levels of competence. This is a valuable service to employers that employers in any high velocity labor market are unlikely to undertake on their own.(49)

Eileen Silverstein and Peter Goselin, in a most valuable recent article, suggest that unions might function as employment agents for contingent workers in high velocity labor markets, referring trained employees.(50) While they discuss situations in which the organization operates an exclusive hiring hall recognized byemployers under a prehire agreement authorized by Section 8(f) of the National Labor Relations Act, there is no need to limit their proposal to just that situation. Employee groups might compete in a market of employment agents, referring members to work because they do so efficiently and competently, not as exclusive agents.(51) I can see this becoming an important union function in areas such as home health care, clerical, and janitorial services, and perhaps even for professional and managerial positions.


I have written before about the power of automobile unionism as a prototype in the minds of industrial relations scholars.(52) "For most of us, when we talk about 'collective bargaining' or 'labor relations,' the prototypes come from the automobile industry. For half a century, the 'worker' has been a male automobile worker, 'work' an automobile factory, 'contracts' automobile contracts. This is a complex psychological phenomenon that reflects generic American fascination with the automobile, the high levels of achievement of the automobile workers in militant action and in their collective agreements, and the high quality of many individuals associated with labor relations in the automobile industry. I do not, in other words, think there is any conspiracy here. I do think it is time to reexamine whether adherence to this prototype may disable us from understanding today's workplaces."(53)

If employee organizations are to survive, they will have to figure out how to meet the needs of contingent workers in high velocity labor markets. They could do worse than to learn from the successes, and failures, of existing unions in the construction and entertainment industries.

1. - -- -- -

2. I have been researching some other issues in high velocity labor markets that are addressed in other work in progress available from the author, including posttermination issues of the ownership of intellectual property such as trade secrets, see Alan Hyde, Some Efficiency Advantages of Recognizing Intellectual Property in Employees (with particular reference to Silicon Valley)[also known as How Silicon Valley Abolished Trade Secrets (and why this is efficient), presented to conference Make or Buy: the Boundaries of the Firm, Columbia University, November 1997; and the current activities of identity caucuses such as Latino or women's caucuses, see Alan Hyde, Employee Identity Caucuses in Silicon Valley: Can They Transcend the Boundaries of the Firm?, presented to Industrial Relations Research Association, Spring Meetings, New York, NY, April 17-19, 1997.

3. This and the preceding statement are from Heidi L. McNeil, Introduction, to Changing Jobs: A Handbook for Lawyers for the 1990s (1994) at 3, a book published jointly by the Young Lawyers Division and Section of Law Practice Management of the American Bar Association.

4. We know just a few things. I found two surveys, published a year apart in the mid-1980's, on lawyer job changes. A 1986 survey of Wisconsin lawyers found that 65% of male and 56% of female graduates who had graduated within the previous twelve years had changed jobs. Christy A. Brooks, Research Survey Report of the State Bar: Special Committee on the Participation of Women in the Bar, Wis.Bar.Bull. (March 1987) at 8, 14. This doesn't make it seem that staying with one employer is really a "rarity." The best-regarded study of career paths is the 1985 survey of the Harvard Law School Program on the Legal Profession, which found that three-quarters of those surveyed who had graduated before 1980 had not remained on their first postgraduate placement, and the same was true of half of those graduating in the five years before the study. Leona M. Vogt, From Law School to Career: Where Do Graduates Go and What Do They Do? A Career Paths Study of Seven Northeastern Law Schools (1986). It is not possible from these studies to show whether job mobility is increasing or decreasing.

The most recent analysis of Martindale-Hubbell directory records covers the year 1991. Lawyers in "of counsel" positions more than doubled, but the numbers remain very small (5270 lawyers "of counsel" in 1980 to 13,150 in 1991; this is dwarfed by the number of lawyers who describe themselves as partners). An intriguing fact though is that in 1980, 62% of lawyers describing themselves as "of counsel" were aged 65 or older. By 1991, only 42% of "of counsel" lawyers were aged 65 or older. Barbara A. Curran & Clara N. Carson. The Lawyer Statistical Report: The U.S. Legal Profession in the 1990s (1994).

5. My thanks to Professor John Heinz and Ms. Kathleen Hull for keeping me informed.

6. Peter Cappelli, Laurie Bassi, Harry Katz, David Knoke, Paul Osterman, & Michael Useem, Change at Work (1997).

7. Id. 176-77, citing American Management Association, 1994 AMA Survey on Downsizing; Louis Harris and Associates, Laborforce 2000 Survey (1991).

8. Id. 75-76, 180-81, citing, e.g., Polly Callaghan & Heidi Hartmann, Contingent Work (1991); National Association of Temporary and Staffing Services, various surveys.

9. Id. 178-79, citing, e.g., Stephen J. Rose, Declining Job Security and the Professionalization of Opportunity, Research Report No 95-04, National Commission for Employment Policy (May 1995); Kenneth Swinnerton & Howard Wial, Is Job Stability Declining in the U.S. Economy?, 48 Indus.& Lab.Rel.Rev. 293 (1995).

10. Henry S. Farber, Are Lifetime Jobs Disappearing? Job Duration in the United States: 1973-1993, Working Paper No. 5014, National Bureau of Economic Research, February 1995. The quoted passages are at 17. This paper is not at all easy to find. It is not contained in the library systems of Columbia, New York University, or Rutgers University for example. When I returned to Rutgers in fall 1996 after a visit, I asked our librarians to get me a copy; they ended up borrowing a copy from Pennsylvania State University (thanks). It makes you wonder how many of the people who have cited this paper to me at conferences have actually read it.

11. This literature always speaks of "firms", as in theory of the firm, and so on. It is a useful term for my purposes as it covers all purchasers of labor power, not just "employers", which if understood technically is a narrower category. It is not much concerned with, let alone limited to, law firms

12. Oliver Hart, Firms, Contracts, and Financial Structure 1 (1995). A useful anthology of empirical studies is Case Studies in Contracting and Organization (Scott E. Masten ed. 1996).

13. A good literature review is Paul S. Osterman, Internal Labor Markets: Theory and Change, in Labor Economics and Industrial Relations: Markets and Institutions 303 (Clark Kerr & Paul D. Staudohar eds. 1994).

14. D. Quinn Mills, Seniority versus Ability in Promotion Decisions, 38 Indus.& Lab.Rel.Rev. 421 (1985).

15. Cappelli, supra n.5, at 16-19. The origins of concern with promotions and internal careers are discussed in Sanford M. Jacoby, Employing Bureaucracy: Managers, Unions, and the Transformation of Work in American Industry, 1900-1945, at 85-97 (1985).

16. Ronald Gilson & Mark Roe, Trade-offs Between Flexibility and Commitment in the Japanese Corporation (unpub. ms, April 1996).

17. This is well-known to legal readers. Legal implications are explored in Paul C. Weiler, Governing the Workplace 134-68 (1990) and Stewart J. Schwab, Life-Cycle Justice: Accommodating Just Cause and Employment at Will, 92 Mich.L.Rev. 8 (1993). The standard legal version emphasizes the stability of these arrangements and normally deemphasizes the extensive monitoring, administrative, and other information costs with which they are associated, Alan Hyde, In Defense of Employee Ownership, 67 Chi.-Kent L.Rev. 159, 183-84 (1991).

18. Peter Doeringer & Michael Piore, Internal Labor Markets and Manpower Analysis (1971). The concept of internal labor market came from earlier work by Clark Kerr, The Balkanization of Labor Markets, in Labor Mobility and Economic Opportunity (E. Wright Bakke ed. 1954), and John Dunlop, e.g., Job Vacancy Measures and Economic Analysis, in The Measurement and Interpretation of Job Vacancies (National Bureau of Economic Research, 1966). Doeringer and Piore showed how the rules of blue-collar labor markets kept African-Americans from advancing. It is indeed ironic that this story, when grafted onto the rationale that the white workers inside the internal labor market had paid for firm-specific training, became a kind of defense of that system.

19. Dorothy Sue Cobble, Dishing It Out: Waitresses and Their Unions in the Twentieth Century (1991), uses the term "occupational unionism" to describe the attempts of unions of waitresses, earlier in the century, to organize an occupational title in a geographic area, with less emphasis on workplace presence than has been normal for mass-production unions. It has been a powerful influence on this work.

20. Dorothy Sue Cobble, Making Post-Industrial Unionism Possible, in Restoring the Promise of American Labor Law (Sheldon Friedman et al. ed. 1994).

21. Howard Wial, The Emerging Organizational Structure of Unionism in Low-Wage Services, 45 Rutgers L.Rev. 671 (1993). Wial and coauthors further explore the relationship between work organization and employee organization in a book in progress, Stephen Herzenberg, Howard Wial, John Alic, Ken Freeman, Frank Gallo, & Margaret Hilton, A New Deal for the Services: Real Jobs in a Virtual Economy (tentative title).

22. See, e.g., Richard B. Freeman & James L. Medoff, What Do Unions Do? (1984); Freeman, Is Declining Unionization of the U.S. Good, Bad, or Irrelevant, in Unions and Economic Competitiveness 143 (Lawrence Mishel & Paula B. Voos eds. 1992)(reviewing further research on themes of the book).

23. For example, the immigrant janitorial and maintenance workers discussed in Christian Zlolniski, The Informal Economy in an Advanced Industrialized Society: Mexican Immigrant Labor in Silicon Valley, 103 Yale L.J. 2305, 2315-16 (1994), join unions mainly when the firm that hires the maintenance contractor is vulnerable to consumer pressure, such as Apple Computer.

24. Elizabeth L. Bishop and David I. Levine, Computer-Mediated Communication as Employee Voice: A Case Study (Jan. 16, 1993)(unpublished paper presented at IFIP WG 9.1, Working Conference on NetWORKing); summarized and discussed in Alan Hyde, Employee Caucus: A Key Institution in the Emerging System of Employment Law, 69 Chi.-Kent L.Rev. 149, 155-58 (1993), reprinted The Legal Future of Employee Representation 152-55 (Matthew W. Finkin ed. 1994); Elena N. Broder (student author), (Net)workers' Rights: The NLRA and Employee Electronic Communications, 105 Yale L.J. 1639 (1996).

25. Raymond A. Friedman & Donna Carter, African American Network Groups: Their Impact and Effectiveness (An Executive Leadership Council Study)(1993); Alan Hyde, supra n.2; Alan Hyde, supra n.23, at 172-90; Maureen Scully, Managing the Legitimacy of Controversial Issues: The Role of Gay Employee Groups in the Adoption of Domestic Partner Benefits, forthcoming in Proc. Spring Mtg, Indus. Rel.Res. Assn. (1997).

26. AnnaLee Saxenian, Regional Advantage: Culture and Competition in Silicon Valley and Route 128 at 30-49 (1994) discusses the institutional bases of the creation of an industrial district in Silicon Valley, stressing job mobility, informal socializing, information exchange and know-how sharing among firms, informal clubs, technology sharing and licensing, educational institutions, and manufacturers organizations. Conspicuous by their absence are professional societies of engineers, and formal employee organizations such as unions tend to be despised, id 55-56.

27. Charles C. Heckscher, The New Unionism: Employee Involvement in the Changing Corporation 177-91 (1988).

28. I will not further discuss identity caucuses in this paper. See my IRRA paper, cited supra n.2.


0AnnaLee Saxenian, supra n.25. See also Paul Milgrom & John Roberts, The Economics of Modern Manufacturing: Technology, Strategy, and Organization, 80 Am.Econ.Rev. 511 (1990).

30. 0AnnaLee Saxenian, supra n.25, at 3-4.

31. 0Saxenian, supra n.25, at 34-35, quoting American Electronics Association, Technical Employment Projections (1981)(statement of Pat Hill Hubbard). See also David P. Angel, The Labor Market for Engineers in the U.S. Semiconductor Industry, 65 Econ. Geog. 99, 103 (1989). In this nationwide survey of semiconductor engineers, half the job changes reported were moves in which both the old and new employers were located within Silicon Valley. 65 Econ. Geog. at 106.

32. 0There is increasing recognition in the economics literature that, in the real world, firms share significant information and knowledge across firm boundaries, and that willingness to do so can play a significant role in economic growth. The most important study is Eric von Hippel, The Sources of Invention 76-92 (1988), on "informal know-how training", engineers asking their counterparts at rival firms questions, that will be answered unless the answer is both secret and crucial to the firm. For a historic study, see Robert C. Allen, Collective Invention, 4 J.Econ.Behav.& Org. 1 (1983)(19th Century British iron and steel), which von Hippel suggests (at 84) may more accurately depict "informal know-how trading" than genuine "collective invention." See also Charles F. Sabel, Learning by Monitoring: The Institutions of Economic Development, in Handbook of Economic Sociology (Neil Smelser & Richard Swedberg eds. 1994); Walter W. Powell, Inter-Organizational Collaboration in the Biotechnology Industry, 152 J.Inst.& Theoret. Econ. (1996), and the interesting comment by Henry Hansmann, What Determines Firm Boundaries in Biotech?, 152 J.Inst.& Theoret.Econ. (1996).

33. Alan Hyde, Some Efficiency Advantages of Lodging Intellectual Property Rights in Employees (with particular reference to Silicon Valley), supra n.2.

34. Supra n.25.

35. Saxenian's respondents agree. Saxenian, supra n.25, at 55-56.

36. See, e.g., Sherwin Rosen, Implicit Contracts: A Survey, 23 J.Econ.Lit. 1144 (1985); Edward P. Lazear, Why Is There Mandatory Retirement?, 87 J.Pol.Econ. 1261, 1271 (1979); Paul C. Weiler, Governing the Workplace: The Future of Labor and Employment Law 73-78 (1990); David Charny, Nonlegal Sanctions in Commercial Relationships, 104 Harv.L.Rev. 373, 417-20 (1990); Susan Rose-Ackerman, Progressive Law and Economics--And the New Administrative Law, 98 Yale L.J. 341, 355-57 (1988); Carl Shapiro & Joseph E. Stiglitz, Equilibrium Unemployment as a Worker Discipline Device, 74 Am.Econ.Rev. 433, 442 (1984).

37. See, e.g., Don Clark, Intel Lawyer Commands Chip War--Rivals Say Dunlap is a Darth Vader Guarding a Microchip Empire, San Francisco Chronicle, June 28, 1993, at E1 (review of Intel's large quantity of mostly unsuccessful litigation; charges that Intel had stolen litigation exhibits).

38. Advanced Micro Devices, Inc. v. Intel Corp., 885 P.2d 994 (Cal. 1994 ).

39. Victoria Slind-Flor, Charges Fly in Chip War, 15 Nat.L.J.(April 12, 1993) at 1; Slind-Flor, More Trade Secrets Wars, 15 Nat.L.J. (March 22, 1993) at 1; James Bennet, Who Owns Ideas, and Papers, Is Issue in Company Lawsuits, NY Times, May 30, 1994, at 1, col. 5; Brian Fuller, Cleared, ULSI's Hwang picks up pieces, Elec.Eng.Times, Sept. 30, 1993 (avail. on Westlaw, ALLNEWSPLUS database); Third Blow for Intel, 15 Nat.L.J. (June 28, 1993),at 19, col. 1.

40. Supra n.23.

41. Laurel Wellman, Temporary Solidarity, 15 SF Weekly (No. 43, December 4-10, 1996) at 13, 16.

42. The technical device is the so-called Taft-Hartley trust (as distinct from trusts regulated only under the Employee Retirement Income Security Act). Its technical workings lie beyond this paper.

43. National Labor Relations Act 8(f). Employers in the construction industry have a variety of legal privileges that permit them to decide whether to operate on a unionized or nonunionized basis, either overall or for each particular project. On the interrelated set of doctrines that effectively preserve the privilege to remain nonunion, see Jan Stiglitz, Union Representation in Construction: Who Makes the Choice?, 18 San Diego L.Rev. 583 (1981). However, one should not overlook the doctrines that permit an employer to deal with a union, if it chooses, including the availabilty of prehire agreements that do not require a union majority, and very relaxed standards for the showing of a union majority, enabling union recognition, particularly if this is demonstrated on a regional basis.

44. Alan Paul & Archie Kleingartner, Flexible Production and the Transformation of Industiral Relations in the Motion Picture and Television Industry, 47 Indust. & Lab.Rel.Rev. 663 (1994), reprinted in Under the Stars: Essays on Labor Relations in Arts and Entertainment 156 (Lois S. Gray & Ronald L. Seeber eds. 1996).

45. John Foster, Class Struggle and the Industrial Revolution: early industrial capitalism in three English towns 216-18 (1974); E.P. Thompson, The Making of the English Working Class 418-29 (1963). James Hinton bemoans the eventual National Insurance Act of 1911 (U.K.) "constructed in such a way as to subordinate the participatory democracy of the most successful of all nineteenth-century working-class institutions--the friendly societies--to the bureaucratic procedures of the commercial insurance industry." James Hinton, Labour and Socialism: A History of the British Labour Movement 1867-1974 (1983), at 76.


47. Grace Budrys, When Doctors Join Unions 73-85 (1997).

48. Steven Greenhouse, Podiatrists to Form Nationwide Union, New York Times, Oct. 25, 1996, at A1, col. 6. The union, affiliated with the Office and Professional Employees International Union, had already enrolled the state podiatric associations of Pennsylvania and New Hampshire, and their counterparts were expected to follow.

49. Joel Rogers, in recent work that I believe is still unpublished, has discussed potential roles for employee organizations in training. Peter Cappelli, et al, supra n.5 at 218-26, discuss possible reforms of worker training in a high velocity economy but frankly admit their own internal division over policy recommendations.

50. Eileen Silverstein & Peter Goselin, Intentionally Impermanent Employment and the Paradox of Productivity, 26 Stetson L.Rev. 1, 36-51 (1996).

51. On the evolution of Actors' Equity Association's referral functions into something resembling a hiring hall, but without the protection of Section 8(f), see Mark D. Meredith (student author), From Dancing Halls to Hiring Halls: Actors' Equity and the Closed Shop Dilemma, 96 Colum.L.Rev. 178 (1996).

52. I use "prototype" as used by cognitive psychologists. The usual illustration is that, if asked to think of a bird, most people in our culture will picture a robin, not an ostrich. An entertaining introduction for general audiences is George Lakoff, Women, Fire, and Dangerous Things: What Categories Tell Us About the Mind (1987).

53. Hyde, supra n.23, at 191-92 [69 Chi.-Kent L.Rev], 189 [Finkin volume].