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Article Excerpt
Introduction
Since the 1980s, social scientists and economic geographers have examined how 'standard' forms of employment have been displaced by non-standard arrangements such as part-time and temporary employees (e.g., Atkinson 1987; Noyelle 1987; Betcherman 1995; Allen and Henry 1997; Carnoy et al. 1997; Harrison 1997; Peck and Theodore 1998; Christopherson 2002; Theodore and Peck 2002). Underlying much of this literature is the argument that these changes represent a secular, if not epochal, shift towards a post-Fordist regime with declining employment tenures and the dissolution of internal labour markets (ILMs) in favour of contingent workers recruited on the external labour market (ELM) (e.g., Allen and Henry 1997; Christopherson 2002).
However, other observers are critical of the assumptions of a universal shift in firm employment strategies and stress continuing significant national differences in employment tenures and standard/non-standard employment arrangements (Bowers and Martin 2000). As importantly, narratives of a 'golden age' of secure employment often ignore the majority of women and people of colour who laboured under highly insecure conditions (Smith 1999; McDowell 2002). Other researchers argue that in the United States, there may be structural and spatial limits to the extension of temporary and contingent work; they maintain that although ILMs have been significantly restructured, they have by no means been replaced by contingent work arrangements but remain an important, if not central, part of many firm employment strategies (Moss et al. 2000; Theodore and Peck 2002).
In this paper, I focus on the contemporary role of ILMs. The paper is based on a postal survey and interviews conducted with ninety firms and institutions in Kitchener-Waterloo and Sault Ste. Marie, Ontario, in 1995-1996 that assessed changes to firm employment practices during the first half of the 1990s. This period was characterized by severe economic recession in the Canadian and especially Ontario economy followed by a slow recovery in output and employment (see Rutherford 1996; Gertler 1999). Although the survey reveals important changes in employment practices towards nonstandard arrangements, it also shows that employers are clearly aware of the need to maintain if not develop ILM structures.
I also argue that geographers need to reconceptualize the relationship between ILMs and ELMs. Geographers have often focused on contingency and ELMs as phenomena analytically separated from the ILM and firm work organization. Employment contingency is driven primarily by lower labour costs and more permissive regulatory environments (see Allen and Henry 1997; Harrison 1997). There has been less attention to the role ILMs play in the organizational integration required for innovation and other firm goals. Following Grimshaw and Rubery (1998), my central argument is that firms do not use external/ contingent labour markets and ILMs in exclusion to each other but rather as part of a continuum of strategies which is leading to increased blurring of the ILMs and ELMs and a renewed emphasis on social and cultural skills. Second, rather than a simple ILM/ELM dichotomy, restructuring is leading to a number of different ILMs, each with its own relationship with ELMs. Finally, although less directly exposed to local labour market conditions, ILMs are not 'space-less' and through what Manwaring (1984) terms the extended internal labour market (EILM) are often strongly linked to the local labour market. Indeed, ELMs continue to be a determinant of the substitutability of labour within ILMs in ways that cannot be completely controlled by firms. Thus in both Kitchener and Sault Ste. Marie, geography continues to be an important determinant in ILM-ELM change, even though restructuring may have an eroded, some of the more distinctive heartland-hinterland employment contrasts which characterized their labour markets before 1980.
Flexibility, Risk and the Demise of the Internal Labour Market?
Throughout the 1970s and early 1980s, ILMs were the object of intense theorizing and empirical research (Doeringer and Piore 1971; Osterman 1984; Marsden 1986). Classic dualist theories of labour market segmentation viewed the ILM as linked to differences in economic structure between large oligopolistic primary firms and smaller firms subject to more intensely competitive market conditions. Primary sector firms and the public sector sought to lower turnover and develop needed skills through strong ILMs for both white-collar professional employees and blue-collar workers in unionized firms. Seniority was the main criterion for employee advancement up vertical job ladders, and firms only hired externally if they failed to fill vacancies internally. This practice had significant gender, racial and class implications, because ILMs were dominated by white male workers, whereas women and workers of colour were either occupationally segregated or overwhelmingly employed by secondary sector firms (Milkman 1983). Thus radical or second-generation labour market theorists in the United States viewed ILMs as an institution of labour control designed to segment an otherwise increasingly homogenous industrial workforce (Peck 1996).
ILMs also posed a significant challenge to neoclassical economic theory that claimed that wages were narrowly determined by accumulated human capital and supply and demand market conditions. ILMs' bureaucratic procedures and use of seniority and custom and practice in determining wages, conditions and advancement, diluted the effect of human capital and provided alternatives to the wage-clearing mechanism for firms (Peck 1996, 55). Moreover, this impact was not simply confined to firms utilizing ILMs but influenced medium term wage determination and overall levels of employment in ELMs. Thus broader institutional processes were seen as more determinant of labour market outcomes than markets.
However, recently, with some exceptions (e.g., McDowell 1997; Grimshaw et al. 2001) social scientists and economic geographers have become less interested in the ILM as an object of study. Instead, attention has focused on flexible employment strategies and the increased outsourcing of formerly secure employment to contingent labour markets. The decline of ILMs is viewed, as both supply and demand led. Noyelle (1987) links this trend to the availability of a more educated workforce such that skilled workers can be obtained on ELM, whereas Harrison (1997) sees contingent employment resulting from firms taking advantage of increased unemployment, the weakening of unions and employment de-regulation to lower labour costs. For Christopherson (2002, 10), the development of contingent work arrangements is due largely to capital markets which emphasize short-run profit maximization and rapid flows of capital. This regime is facilitated by relatively high quit rates by employees, the use of labour market intermediaries (see Benner 2003) and the development of project-based production systems which do not require longer-term employment strategies or a developed ILM. (1)
Employment outsourcing also means that segmentation is no longer based primarily on sector (i.e., primary/secondary) but between core and periphery workers (Atkinson 1987; Noyelle 1987; Christopherson and Noyelle 1992). Thus Harrison (1997) argues that employment regimes in the United States are characterized by a 'new dualism [which] differs from the original version in at least one important way: even high level jobs are no longer secure. In the age of flexibility, even the most profitable big firms are inclined to shed even white collar employees. The shrinkage in the number of safe, stable, secure occupations seems to be keeping pace with the big firms' downsizing' (Harrison 1997, 199). This new dualism increasingly characterises also significant segments of public sector employment (see Reimer 1999) and a growing share of US manufacturing jobs (Peck and Theodore 1998; Theodore and Peck 2002).
It is not surprising, given these trends, that Cappelli et al. (1997) find that the breakdown of 'traditional methods of managing employees and developing skilled workers inside companies ...' This trend, they argue, reflects 'pressures from product and labor markets [which] are brought inside the organization ... [establishing] market-mediated employment relations' (Cappelli et al. 1997, 4). Such developments also challenge theory for 'the current fragmentation and weakening of traditional socio-political practices in the labour market appears in conflict with economic theories which stress the role of institutional structures in determining patterns of pay and employment' (Grimshaw and Rubery 1998, 199).
However, recently, there has been a growing critique of this focus on contingent employment. For Smith (1999), this focus over-estimates both Fordist employment security and the extent to which workers are now less secure. As importantly, Moss et al. (2000) note that some aggregate indicators of ILMs such as job tenure and estimates of the firm-specific component of wages in the United States have not changed significantly over the last twenty years. They argue that such findings are not necessarily at odds with increased contingent employment but are 'consistent with a world in which firms alternately tear down and rebuild internal labor markets, averaging out to little change' (Moss et al. 2000, 96), and ILMs are still required to meet both employees' needs for job security and employers' needs for predictable supplies of adequately skilled workers. Furthermore, the employment of contingent workers does not necessarily lead to a reduction in labour costs nor, as Theodore and Peck (2002) emphasize, are ILMs necessarily less flexible than contingent ones. Finally, contingent employment arrangements can be at odds with the needs of firms for organizational integration of the workforce for learning/innovation (Lazonick 1991; Lowe 1999). Even high-tech firms in Silicon Valley have found that turnover rates of highly skilled employees are above optimal levels and have developed more internal training and compenzation packages to keep key employees (Carnoy et al. 1997, 8; Hudson 2001).
Although still relevant to firms, ILMs have been significantly restructured. In the United Kingdom, Grimshaw et al. (2001) see traditional ILM structures replaced by a greater reliance on market solutions. However, Salzman et al. (1998) and Moss et al. (2000) argue that after downsizing, many firms begin to organize for growth and innovation and often need to rebuild ILMs. Reconstituted ILMs differ from earlier ILMs, because jobs have often been redesigned into broader functional categories that eliminate highly graded hierarchies (Lovering 1990). Job movement is more likely to be horizontal than vertical, because 'skill barriers to entry are greater and the gaps between job functions are greater, but skill development and responsibilities as well as wage progression are also greater within each broad functional area' (Salzman et al. 1998, 17-18). Similarly, although ILMs have long been segmented with restricted access, current restructuring is also exclusionary and polarizing (see Yates 1999 on the automobile industry). Thus lower-skilled workers are often given little access to training or advancement, or their jobs may be outsourced or eliminated altogether (Salzman et al. 1998; see also Carnoy et al. 1997; Lundvali 2001).
Yet, the most important development is that although ILMs have always had some social or cultural skill component (Blackburn and Mann 1979), they have become increasingly important, organizationally driven and based on firm-specific knowledge (Thrift 1997; Salzman et al. 1998; McAdam and McCreedy 2000). In addition, 'knowing how to get on' is critical (Hudson 2001, 111; McDowell 1997). This imperative reflects factors both within and outside the firm. The first is that leading edge firms, especially in the growing service sector, are increasingly attempting to develop individual and especially group, continuous learning environments, which demand 'soft' communication skills (Lundvall 2001; Tomlinson 2002). Second, many technical skills are often available on the ELM because of overall rising educational standards and downsized skilled workers and thus perceived socio-cultural abilities become more decisive to firms when recruiting (Saizman et al. 1998).
The continued viability of ILMs and the enhanced role of socio-cultural skills indicate a need to re-theorize classic dualistic theory and contingent employment research which often assumes a static division between ILMs and ELMs. Instead, Grimshaw and Rubery (1998, 200) argue that ILMs and ELMs should be viewed as integrated entities, because 'internal and external competitive pressures mutually interact to shape employer strategy and the labour market positions of employees'. Drawing on Osterman (1994), they argue that labour market change is based on the interaction between technology and competitive strategy; customs, norms and politics which are historically specific to particular firms and ELM institutions such as minimum wage legislation and social security systems. Although related, these processes do not necessarily move in synchronization. Thus internal norms and customs of the firm are often highly path dependent and structured in part by employee perceptions of fairness (Grimshaw and Rubery 1998, 215).
Although insightful, Grimshaw and Rubery pay relatively little attention to the relationship between ILMs and local labour markets. Although some economic geographers have implied that ILMs are intrinsically less geographic than other labour market phenomena (see Clark 1981; Peck 1996), ILMs have always...
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