Recognizing the salience of waged labor and labor-force characteristics for regional development, this paper proposes a framework for analyzing local or regional labor processes and underscores the potential utility of that framework for effecting change in regional labor (re)production, “quality,” allocation, and wages.
Labor figures prominently in all explanations of and prescriptions for
regional growth and development, traditionally as a key “factor” of production
and industrial location. The heterogeneity of labor has been recognized,
and increasing the “quality” of labor through education and training has
become an important tool of national and regional development policy.
However, most regional-development writing has lacked explicit attention
to the reproduction of labor, the structuring of labor markets, the process
of employment search, labor control, and the design of work — referred
to collectively as “labor processes.” Such explicit attention should
allow better informed interregional comparisons, leading eventually to
structural assessment of economic development policy with respect to region-specific
labor processes. This paper provides an overview of these processes
with two purposes: establishing a basis for regional assessment and
comparison, and pointing to potential interventions that may affect the
outcomes of regional labor processes. Out of recognition of the importance
of formal and informal institutions in the structure of labor processes,
we use concepts and terms from institutionalist study in economics and
sociology.
Rationales
Institutional Analysis in Regional Development
Labor Processes
Overall Implications
Notes
References
Labor Income Is Important
Wage, salary, and proprietors’ income are the major sources of
personal income (79 percent of total personal and corporate income in the
U.S.). In modern economies that are increasingly dominated by formal
markets for goods and services including health care and child care, personal
income is an important indicator of well-being. Therefore, the ability
of people to find gainful employment (including self-employment in the
formal economy) in their local areas, and the wage levels thereby achieved,
are crucial standards by which regional economic development can be measured.
The structure and operation of labor markets, including the availability
of people for employment and employment for people, the job-search and
-hiring processes, and the organization of workers and work, are important
structural features of regional economies.
Labor Processes Define Regions in the Midst of Economic Globalization
The advent of electronic communications and computing, and the
transport and logistics advances they engendered, have rendered the other
factors of regional development — capital, resources, and technology —
increasingly mobile. In a world where financial capital is highly
mobile, resources are easily transported, and much technical capability
is readily diffused, what remains local? For one thing, much production
remains local or national, especially the provision and delivery of services.[4]
More importantly, even “global” corporations and inter-corporate networks
seek out, not just any places, but the best places in the world for particular
functions, based on some combination of: (1) transitory localized
characteristics and (2) long-term, hard-to-replicate localized characteristics.
The transitory characteristics are the simple cost factors of low wages, low taxes, and limited government regulation. These hardly anchor productive activities, and unless they are matched with developmental policies of infrastructure and educational investment, they represent a dead end of competition for the lowest of the low, a competition that provinces, regions, or localities in wealthy countries are not likely to win. To add to the downward spiral, the substantial proportion of local economic activity that is local, that is not directly subject to international competition, suffers in direct proportion to the reduction in local real wages and public services. The longer-term, hard-to-replicate characteristics are the supply factors of communications and transport infrastructures, educated and innovative workforces, and environmental amenities, and the demand factors of growing household, commercial, and government markets for high-quality goods and services. These characteristics are not only hard to replicate, and thus earn high economic rents, but are hard to sustain, and require large economic investments [Storper 1995; 1997]. Labor processes and labor-related institutions are important components of these truly localized characteristics.
Labor Processes and Endogenous Growth
Information embodied in workers, combined with inter-organizational
mobility of workers, provides key routes for the localization of technical
and market learning and consequent regional economic growth. In addition,
publicly implemented arrangements for training, employment security, employment
mobility, and entrepreneurialism affect the rate of employment creation
and labor productivity within regions.
“Endogenous” growth theory provides a neoclassical-economics basis for modeling these influences on growth. It incorporates technological advance, long seen as an important contributor to economic growth. Romer [1986] provided an explicit function for the production of new knowledge by application of capital and labor inputs, and making existing knowledge an argument in the aggregate production function. His primary postulates were: (1) there are increasing returns in the use of knowledge inputs in production; (2) increased knowledge is produced directly through the allocation of inputs, but that there are diminishing returns to the allocation of resources to knowledge production; and (3) some portion of the returns to new knowledge can be appropriated by the actors that invest in its production. The interpretation of these stylized facts is flexible. “Knowledge” can be interpreted as disembodied, embodied in capital inputs, in labor inputs, or as all three (see Lucas [1988]). Institutional arrangements such as patents and licensing, and the creation of firm-specific applications, allow the appropriation of returns to knowledge [Teece 1986]. The externalities of knowledge production reflect the possibilities of reverse engineering, industrial intelligence gathering, and the mobility of skilled and technical workers among employers and self-employment. The labor component of these externalities is often partially localized, because of the greater job mobility within the same local area. The resultant model allows for endogenous modeling of knowledge creation, allows knowledge inputs to serve as a fixed cost in production of goods and services (i.e, the quantity of output is not a function of the quantity of information), allows unconstrained increases in per capita output, and maintains a competitive equilibrium (via the decreasing returns to allocating resources to knowledge creation and via the inability of actors to appropriate all the returns from increased knowledge). The model also generates welfare implications based on the likely private under-investment in new knowledge. Romer thus explained persistent or increasing inter-locational disparities in growth rates not by differences in the externalized knowledge available (which is presumed to flow freely) but by differences in cumulative investment in knowledge inputs (disembodied or embodied) that allow full use of available knowledge. While Romer did not recognize locational stickiness in the externalities of knowledge creation, this theme continues in the literature.
The phrase “labor process” has been used to refer to the institutionally
derived relationship among workers, material, and machinery: the
process of transforming human labor into marketable products [Braverman
1974]. However, additional processes determine labor characteristics
and employment trends in regional economies: the reproduction of
a labor force, the creation of employment demand, and the allocation of
people to jobs (by occupation, wage level, and employment security).
We will use the phrase “labor processes” to refer to all of the social,
political, and economic processes by which people become employees and
the source of productive capability.
INSTITUTIONAL ANALYSIS IN REGIONAL DEVELOPMENT
Before discussing the major conceptualizations of institutions, it is important to distinguish “institutions” and “organizations”. Institutions are collectively held beliefs, values, mores, and rules which condition or constrain individual action. Organizations are tangible groups or entities. Organizations have particular interests and supporting institutions, including a collectively held belief in their raison d’etre. Organizations are often referred to as “institutions,” which generates considerable confusion in the literature. A labor union, for example, itself is an organization insofar as one is referring to the “brick-and-mortar” facilities, the assemblage of people and equipment, and its everyday operation. The labor union as an organization, however, reflects a number of underlying institutions, chief among them a particular philosophy behind employment and employee representation. It should be noted that these beliefs about the purpose and legitimacy of the organization’s purpose distribute (and limit) the politico-economic power of that organization. The way in which social and economic power is distributed (often unequally) in a community is, essentially, a characteristic outcome of its complex of institutions.
Economic Approaches to Institutions
In the current state of institutional economics, one may distinguish
two general approaches: Original (or “Old”) Institutional Economics
(OIE), and New Institutional (or “Neo-institutional”) Economics (NIE).
Both OIE and NIE are grounded in the recognition that institutions condition
economic behavior. The OIE approach is highly critical of the approach
taken by conventional or “mainstream” economics in explaining economic
behavior, while NIE is more of a broadening of mainstream economics, through
a reliance on the notion of transactions costs, to include considerations
of the role of institutions in that pursuit. While both OIE and NIE
are grounded in the explicit recognition of the importance of institutions,
they differ considerably in their scope and method [Stanfield 1998].
Before offering a framework for analyzing the institutional underpinnings
of labor processes, it will be useful to trace the scope and method of
each approach to institutional analysis.
Original Institutional Economics. The theoretical roots of OIE are varied. Important roots of the school can be found in the work of Karl Polanyi, Thorstein Veblen, John R. Commons, and Clarence Ayres. The scope of OIE is perhaps best articulated through a brief retracing of Polanyi’s work in economic anthropology, and can be summed up in his phrase: “the economy is an instituted process” [Polanyi et al. 1957: Ch. 13]. To sustain and reproduce itself materially, any society must develop ways to organize the provisioning of its material needs and wants. The cohesion and continuity of a community requires some degree of durability of this economic organization, which amounts largely to an organization of the division of labor or work, of planning ahead, and dealing with uncertainties or unforeseen events. Communities inherit and develop systems of moral beliefs, values, and ideologies — in short, “cultures” — in which this organization of material provisioning — the “economy” — is integrated. It is important to note here that the possibilities for different configurations for this integration are numerous, if not infinite, which is captured in the notion of cultural relativity [Mayhew 1987] and/or institutional indeterminacy [Peck 1996] and further discussed below.
The study of how the economy is instituted is the subject of what Polanyi called the “substantive” meaning of economics; this is clearly an anthropological approach to setting the scope of economic inquiry. This is a major departure from the scope defined by conventional economic theory, which Polanyi argued is grounded in the “formal” meaning of the word “economic.” The scope of this formal meaning of economic is limited to the study of individual choice subject to the logics of scarcity, hedonic calculation, and maximizing behavior [Polanyi et al. 1957]. The substantive meaning recognizes that economies and individual economic actions occur within a cultural context, where that context articulates what kinds of actions are socially allowed, expected, encouraged, or prohibited — that is, the social context is articulated by institutions.
Much has been made of this notion of “embeddedness” in recent scholarship in regional and economic geography. While the notion itself was first developed by Polanyi in his distinction between pre-capitalist and capitalist economies, its use has become more narrowly specified in attempts to distinguish the more subtle regionally and culturally specific variations in the interdependencies between “non-market” and “market” transactions in what are basically advanced market economies [Granovetter 1985]. These applications of the concept argue that local “embeddedness” of economic transactions can produce quasi-rents to the extent that the subordination of market transactions to socialized reciprocal interdependencies (e.g., those founded on “trust” [Sabel 1992] result in greater flexibility, efficiency, and hedges against uncertainty. This use of the concept clearly represents an evolution beyond Polanyi’s application.
Equally important to the origins of OIE is the work of Thorstein Veblen [1899], who articulated the central role of institutions in economic life. Of great significance is the “Veblenian dichotomy,” or his observation that institutions derive from two broad bases of legitimation or valuation: “ceremonial” and “instrumental.” Ceremonial institutions are inherited beliefs which socially legitimate social status, class, and distribution of power, via a naturalized logic of invidious distinction. Instrumental institutions are the beliefs and systems which legitimate and motivate problem-solving action or skills acquisition — the source of technical progress, industriousness, and inquiry. Many behaviors are results of a mixture of ceremonial and instrumental validation, and the question of what roles particular institutions play in patterning action is largely a question of identifying the degree of ceremonial or instrumental “dominance” [Bush 1987]. Veblen proposed that institutional evolution is continual, cumulative, indeterminate (non-teleological), and conflictual. The conflict arises from the resistance of those accorded power through ceremonial validation, operating through ceremonial institutions, to changes which are brought about by the unfolding of problem-solving which may challenge the very legitimacy of ceremonial values. An important part of institutional analysis is uncovering the relative power of institutional actors to establish, to change, or to ignore conventions. This uncovering can be accomplished by investigating the reaction of ceremonial institutions in the face of exogenous change, or by comparing the pervasiveness and longevity of identifiable components of institutions.
The scope of OIE does not simply “widen” the net cast by conventional economics to include “culture” and “society.” It begins with placing institutions at the center of economic behavior and stresses evolution, cumulative change, and indeterminacy in the functioning of economic systems. Economic institutions which regulate provisioning, once identified, are not evaluated according to a priori notions of rationality. This provides the basis for OIE’s rejection of conventional economics as a science of choice under assumptions of insatiable, exogenously-determined wants and the rule of a maximizing mentality. While it would be redundant to repeat the critique of conventional economics which is by now well known amongst social scientists (except perhaps neoclassical economists) (e.g., see Hodgson and Screpanti [1991]), it is worth briefly reviewing the difference in method which corresponds to OIE’s difference in scope.
Much of the past rejection of OIE by conventional economics has been, presumably, partly due to the non-quantifiable nature of OIE inquiry. Conventional economics has developed a tradition of using positivist, quantitative inferential methods for hypothesis testing. In contrast, the methodology of OIE has consisted mainly of qualitative, context-sensitive empiricism, with a greater reliance on the descriptive rather than inferential use of quantitative information. More profound than just this empirical difference in methodology, however, is a philosophically disparate approach to research. By virtue of the questions it sets out to answer — what is the nature and implication of the interdependence between economic institutions and economic processes in a place and time? — OIE method is comparative and inductive, proposing what appear to be general rules from collected information, such as ethnographies, from groups. This comparative method has relied on case studies and field studies of “the activities, the rules, and the applicable understandings or cultural underpinnings that comprise human behavior unfolding in an institutional context. The summation of these field studies is the ethnographic record, the codified assemblage or what we know of human behavior in place and time” [Stanfield 1998].
Neo-Institutional Economics. The “beginning point”
of NIE is an a priori acceptance of conventional economic theory as the
science of choice, including its axioms and assumptions questioned by OIE.
As proposed by North [1990: 3], the project of NIE is then to develop an
“analytical framework to integrate institutional analysis into economics
and economic history.” This approach views institutions in
a functionalist light, and accepts the methodological individualism of
conventional economic theory.
Defining institutions as the constraints that human beings impose on
themselves makes the definition complementary to the choice theoretic approach
of neoclassical economic theory. Building a theory of institutions on the
foundation of individual choices is a step toward reconciling differences
between economics and the other social sciences. The choice theoretic
approach is essential because a logically consistent, potentially testable
set of hypotheses must be built on a theory of human behavior ... hence,
our theory must begin with the individual [p.5].
For NIE, institutions function as constraints on the “choice sets”
of individuals. But the real reason for institutions is that they
reduce uncertainty about the individual actions that require cooperation
from others to be successful, which we can think of as “transactions.”
In NIE, the focus is on the cost of acquiring information about exchange
transactions and the evolution of institutions to reduce these costs.
As economies grow in scope and in the diversity of exchanges, that growth
must be matched by appropriate institutional change to assure adequate
economic performance [North 1990].
Key Dimensions of Institutions: Toward a Framework for Regional
Analysis
Regionalists and economic geographers have invoked the institution
concept in a variety of ways and for a number of different purposes.
Drawing from original and neo-institutionalist economics, as well as the
variety of sociological and political insights encapsulated in regional-science
and economic-geographic writing, we suggest a simple framework from which
to conduct institutionalist analysis of labor processes in sub-national
regions.
Our framework defines the attributes of institutions along four continuous dimensions. First, formality refers to the continuum of the social codification of institutions, that is, whether they evolve informally or are the result of deliberate creation. Second, domain refers to the discursive origin of institutions, that is, whether they represent an attitude for intervention (or "philosophy of intervention") derived through a conscious “public” deliberation among organizations (especially within the state), or whether they derive from traditional habit or custom. Third, institutions exhibit spatial scale to the degree to which they "reach" across distances or territorial boundaries. For example, the administration of economic security or welfare programs can vary locally or regionally while the establishment of workplace safety rules may occur on a national scale. Fourth, temporality recognizes that institutions can be of a longstanding or transitory quality. Racial or gender discrimination in hiring or firing may stem from long-lasting (e.g., intergenerational) social attitudes, but may wax or wane in practice, depending on the circumstances governing the restructuring of labor demand. Thus, “undercurrents” of racism or sexism may be long-standing institutions within a society, while the incidence of discrimination will vary temporally. All institutions fall within these dimensional bounds, which can now be discussed in greater detail.
Formality. Institutionalists often describe institutions as being "formal" or "informal" (e.g., North [1990: Ch. 5-6]). The formality of an institution refers to its place within a continuum of codification, or "explicitness." For example, in a job interview, both the interviewer and interviewee will most likely be aware of informal rules of behavior and etiquette, including exchanges of greetings, dress, allowable topics of conversation, and so on. These informal rules will vary by situation and context—by size and type of firm, type of work and occupation, etc.—and play a part in "signaling" to the interviewer the possible fit of the interviewee in the company. At the same time, the interview may be regulated by formalized rules, whether established within the firm or externally, for example by public anti-discrimination laws specifying the bounds for the kinds of questions that may be asked. Both of these examples of formal and informal institutions flow from the broader society’s values toward privacy, (prospective) workers’ rights, and attitudes toward the relative bargaining strength of employers and workers.
In general, institutions evolve from informal to formal, more-or-less rapidly becoming formalized within both the social and public spheres once they are legitimated. Informal institutions tend to be more fluid and responsive than formal ones to changes which require a reshaping of the "way things are done"—changes in norms, conventions, and practices. With regard to innovation, technical advance, and response to shifting market demands for products, regions and localities that have the capacity for greater institutional fluidity, both informally and formally, are thought to have a competitive advantage. At the same time, institutional fluidity may contradict the institutional thickness of a place—especially with regard to the density and depth of the social institutional "fabric," which we commonly identify as distinctive culture—a question which requires closer analysis than simple references to institutions as “culture” or “tradition.” .
The significance of this dimension is made clear by Nee [1998:
87]:
"When the formal rules of an organization are perceived to be congruent
with the preferences and interests of actors in subgroups, the relationship
between formal and informal norms will be closely coupled. The close
coupling of informal norms and formal rules is what promotes high performance
in organizations and economies."
In other words, if formal and informal rules are “coupled," or individuals and groups within the organization or polity “buy in” to the institutions which underlie formal rules, then greater productivity, harmony, or success is the result. An example might be the relationship between informal and formal work rules, where tension often appears between the formal, corporate rules for task assignment, work speed, and use of equipment (e.g., personal use of office telephones and electronic mail) and the informal norms established by convention or tacit agreement. Coupling or congruence applies to entire institutions as well as to individual rules, as in the incongruence between formal, corporate governance and goals (directors maximizing profit for shareholders) and the actual system of incentives in place for managers and workers in their multiple contexts of laborers, co-workers, and members of households. Assessment of institutional congruence (between formal and informal institutions, as well as public and social, or local and non-local) is a part of the institutional assessment to which we turn at the end of this paper.
Domain. The domain of an institution refers to whether it is public or social (or non-public) in nature. "Public" institutions are formulated out of a “conscious” or deliberative discourse and are politically implemented. Public institutions are the “official” articulations of normative values, as opposed to social institutions which are largely “unofficial” in the sense that they derive from unquestioned belief or taken for granted rules or norms. The meaning of "public" institutions can often be conflated with the physical "brick and mortar" facilities, and associated organizational bureaucracies, rather than their philosophy of intervention within the economy. The reason public (intangible) institutions are often conflated with public organizations is that their interventions are easily attributed to the physical organizational form. The operationalization of public institutions can be clearly identified in terms of their intervention: in the development process, in providing services to small businesses, or by way of providing capital to business ventures which are rejected in private capital markets, etc. Behind each of these interventions, however, and defining their actual meaning, is a socially-negotiated mandate, or "philosophy," such as attitudes about the definition and reasonable mix and rate of economic growth, beliefs surrounding the value of small business enterprises, and ideas about the need to direct resources to particular activities. It should be kept in mind that such policies are implemented or administered according to formal and informal institutions.
Social, or "non-public," institutions refer to "cultural norms" toward accepted behavior and conduct, beliefs, values, ideals, and aesthetic appreciation, which are both the product and wellspring of tradition, customs, and cultural-historical distinction. Social institutions are not articulated by a conscious, deliberative discourse, but by incremental adaptation and reinterpretations of tradition, myth, socially-constructed cultural memory. At the level of individual rules, we can have "social" rules as distinct from "public" rules. In the example of the job interview above, social rules suggest the boundaries of the social aspects of the interaction—attitudes about proper behaviors regarding gender, appearance, language, and so on—while public rules are represented in large part by legal sanctions and allowances defining the bounds of the interaction according to public ideals (institutions) regarding equal opportunity, equality, and fairness, etc. It is easy to conflate formality with domain, or "public" with "formal" and "social" with "informal," because public institutions are most easily observed in terms of formal codification—laws, ordinances, and other "official" statements. In fact, however, social institutions may well be formal (having the "weight" of being codified, yet not derived via a deliberative public discourse), such as those following religious doctrines. Public institutions may also be informal, the basis of attempts to create or persuade social behavior; the "state" cannot effectively impose attitudes on society, but can only attempt to govern them through a mix of "formal" and "informal" actions. For example, formal welfare laws are created, but welfare services are administered largely according to a set of informal attitudes and beliefs. Recently, New York City's mayor has begun a campaign to instill attitudes of "courtesy" on the citizens of New York City, justified by the belief that such a change would improve the quality of life in the city, which has taken form through an number of formal rules (ordinances against jaywalking and discourteous cab drivers) and informal attempts at persuasion.
The significance of the domain dimension is the utility of separating the deliberative and “taken for granted” character of beliefs, or institutions, from which action ultimately springs or is constrained. An institutional analysis which focuses on public institutions only (because they can be more easily observed), uninformed by ethnographic information about social institutions, is likely to be incomplete and lead to misguided recommendations for action.
Spatial scale. Many institutions are localized—values, mores, beliefs, and philosophies behind the way "things are done" in a given place—while others reach across boundaries. For most people, the everyday lived world is local, and distinctly local institutions develop and evolve in the unfolding of everyday life. Local institutions—formal and informal, public and social—articulate local culture and distinguish it from other places. We thus see institutional differences between rural, urban, and suburban places, and among subnational regions. These differences may be punctuated by language, dialect, nationalism, regionalism, and "sense of place."
In addition to the localization of everyday life and its institutions, supra-local institutions develop, often under unifying or centralizing public institutions negotiated in the political sphere. Thus we have supra-local, or "national" norms, which often bound the variability of local institutions. As a very simplistic but illustrative example, "American" institutions can be distinguished from "French," "Iranian," and "Japanese" institutions, and further distinctions can be drawn among "Yankee," "Southern," and "Midwestern" institutions, and so on. As with the recursive change between public and social institutions, change is also recursive across scales, with the local feeding change in the supra-local, and vice versa. In some literatures, this is often conceptualized as "bottom-up" or "top-down" institutional change. As the world economy globalizes, more effective global vectors of institutional change emerge. The concept of "glocalization" [Swyngedouw 1992] refers in part to the negotiation of divergent local institutions, partly mediated through supra-local norms, in particular contexts, and the resulting institutional adaptations and changes. The "local-global" tension is largely located in institutional renegotiation and change. Returning to the example above, a global economic linkage bringing together, say, "American-southern" and "French-Occitan" institutions will lead to renegotiation and adaptation before the interaction can be "successful," thus certain linkages may be favored over others, depending on what is meant by success.
The institutional context of economic change is very much defined by the spatial scales of the institutions implicated in the economic process(es) under question. Keeping in mind that institutions distribute power, institutional negotiation or "glocalization" is a working out of new rules which distribute power to organizations and individuals.
Temporality of institutions. Some institutions are long-lasting, and deeply embedded in culture, while others are transitory. With regard to labor processes, a long-standing institution would be that of wage labor—or more specifically, the system by which one enters into contract with an employer to sell his or her labor power, which involves a widespread acceptance of beliefs about the proper work ethic, distribution of wealth and income, property rights, and so on. This long-standing institution of wage labor, however, is supported by a changing “understructure” of beliefs about the fair terms of labor contracts—including expectations about workplace conditions, wages, status, autonomy, etc., which are more temporal and a point of adaptation to changing technology and regimes of accumulation. The distinction is that we have long-standing institutions which articulate the division of labor, integrated with other "non-labor" institutions regarding other social relationships, while shorter-term institutions incrementally adapt and adjust, allowing for changing "terms" by which the overall division of labor persists. In this example, it is important to note that expectations about the terms of labor contracts must become congruent with the fabric of the whole. For example, even if the unfolding of technological change pushes towards a recasting of the “typical” individual labor contract toward widespread home working, other institutions implicated by that change (the gendering of household responsibilities, formal rules governing home production, even neighborhood zoning) must first allow for it or later adapt to it. Identifying the temporalities within the set of economic institutions implicated by the economic process in question is important, as these together signify the degree of stability or durability of that process.
Much of the regional literature has emphasized the role of regional institutional differences. One way to capture the dimensions of spatial scale and temporality is by the concept of "regional memory." Regional memory refers to the local social construction of social and public institutions, formal and informal, which involves collectively shared interpretations of place-bound experience. Regional memory is cumulative, as it is grounded in the shared interpretation of local history, while at the same time it is “selective," in the sense that the interpretations of more powerful organizations and institutions are dominant.
What Makes a Local Labor Market Local?
The concept of the local labor market is central to regional
economic analysis. Unfortunately, it is a very difficult concept.
The definition of local labor markets is subject to the difficulty of all
delineations based on potential interaction, though practicalities of data
availability generally drive the implementation of the concept [Schubert
et al. 1987]. Regardless of the delineation method, the scale
of local labor markets is totally dependent upon the individual’s temporal
and transport relationship between home and work, which can be generalized
to bear relationships with gender, income, social networks, and occupation.
Most importantly, the delineation and use of the local labor market
concept should allow the specification of localized labor practices [Saxenian
1994; Peck 1996: Ch.4]. The following section presents four
types of labor processes that operate through identifiable institutions.
The processes are localized by the ways in which institutional development
and interaction are unique to individual regions, even though many of the
institutions exist at a spatial scale larger than the region. The
role of institutionalist analysis of local labor processes, then, is to
identify the components and overall nature of these institutional ensembles,
to understand their congruence or incongruence, to relate a localized ensemble
to perceived problems in regional labor processes, and to identify potential
institutional interventions. The remainder of this paper provides
an introductory overview of these analytic and prescriptive elements.
LABOR PROCESSES
For our purposes, and following other overviews of local or regional
labor analyses [5], an institutional approach
to labor markets entails four large processes: production and reproduction
of labor and labor characteristics from a regional population, the generation
of employment demand, allocation of potential workers to specific employment
situations, and the control of labor under employment or other contract.
Reproduction: The “Creation” of a Regional Labor Supply
The characteristics of region-specific labor supply relies on
the interaction of a number of processes. This section relates the straightforward
economic processes to the localized institutional ensembles that shape
the processes and their outcomes, proceeding through three linked dimensions
of regional labor supply: quantity, qualities, and organization.
Exploring the institutional bases for these processes facilitates both
interregional comparison and attempts to intervene in these processes.
Quantity. The neoclassical economic explanation of labor supply relies on the relationship between the prevailing wage level and the reservation wage to elicit labor-force participation within a region, and the relationship between real (or cost-adjusted) wage levels across regions to elicit migration among regions. Institutional analysis benefits our understanding the role of waged work versus other forms of livelihood, and the consequent determination of the reservation wage.
The individual’s choice between (a) waged work and (b) non-waged work in a household or other family setting is mightily influenced by formal and informal social institutions’ sanction of particular divisions of labor within households or extended families, typically attaching and supporting particular roles according to sex and age. Relevant social institutions include religion, cultural tradition, and the arrangements and expectations that differ by socio-economic class. In each case, what we term “institutions” are broader than a single convention about the role of women, children, or grandparents, but are interlocking arrangements for childcare, domestic duties, labor in a family business, restaurant meals, etc. Individual conventions, capabilities, and beliefs are the components of these institutions, but the institution is their interaction. (Indeed, an important motivation for change in social institutions is incongruence among the institutional components). Public institutions play a large role in the basic supply of waged labor, through explicit labor regulation (of wages, child labor, employment practices), through the provision of alternatives to waged labor (full-time education, compulsory education, support for mothers of young children), and through support for waged labor (tax or direct support of child care, transportation, tax policy). These public and private, formal and informal institutional arrangements vary across local and especially national regions. Analysis of these institutions is messier than a statistical determination of the reservation wage and its relationship to locally prevailing wages, but the messier analysis provides a better basis for (a) intervention in the labor-supply process and (b) comprehension of the effects of a particular, unplanned change in technology, labor demand, or cost of living.
Analogously, interregional (or international) migration responds in part to real-wage differentials. However, the degree of responsiveness depends on social institutions (especially in the origin locations), social connections, and public institutions that affect the ability and attractiveness of migration.
Quality. Labor “quality” is a highly contentious and ultimately political term. There are at least two very different meanings: work-relevant skills and autonomy, and worker practices related to work (see Standing [1992]). The specific skills that are useful in a particular employment relationship cross many dimensions: craft expertise, technical knowledge, written expression, interpersonal management, abstract analysis. Regional and industrial-location analyses generally simplify these dimensions into “skilled” (in possession of any of these identifiable skills) and “unskilled” (in possession of none of these skills insofar as they are relevant to a particular set of tasks) [6] — or at times, make use of occupational designations (managerial, professional, technical, clerical, operative, and so on) [7]. Merely determining the availability and trend of workers and potential workers in these categories is difficult, and individual employers as well as regional analyses often resort to indicators or proxies such as high-school diploma, university education, prior work experience, and the self-identified occupational affiliations of population surveys. The wage premia attached to these indicators presumably reflect their relative (and changing) importance in the production process, should affect the willingness of individuals to gain specific skills or proxies. [8]
Institutional factors also affect the premia paid (in the form of monetary compensation and work conditions) for certain skills or characteristics, and affect the individuals’ access and incentives for skill or proxy acquisition. Formal procedures to admit limited numbers of specially-prepared candidates to medical or legal professions, supported by public support or recognition only of formally-certified professionals, forms a largely ceremonial, institutional determinant of the wage premium and access to certification — a determinant that is increasingly global. Informal, social conventions, operating through the family, peer group, educational system, and mass culture, affect skills acquisition by gender, race, and class — these conventions are potentially more localized. The ability of individuals to make autonomous decisions on the job is a function of institutional reproduction of both individual characteristics (decision-making, technical ability, and assertiveness) and the design of work, which is a function of convention and of relative power of employer/manager and employee. Institutional analysis allows interregional and intertemporal comparison of these institutional arrangements, as well as suggesting points of intervention to increase the production of particular labor qualities in a place or the recognition of performance-relevant skills over indirect indicators.
The second meaning of “quality” refers to the package of general attitudes and capabilities brought to and used in employment. Workers’ relative attachment to waged work versus household or informal-sector tasks affects their flexibility with respect to work hours and locations, their concern for employment ladders, their ability to get consistently to a particular place at a particular time. These attachments reflect social institutions of family relationships and duties and public institutional support for transportation availability and pricing. Workers’ social and cultural backgrounds influence (often, in ways distinct by gender) their communication and interaction styles and expectations regarding work conditions.
Organization and expectations. Labor organization
into guilds, professions, or collective-bargaining units is at once a key
institutional component of labor supply and a characteristic of region-
and sector-specific labor. These institutions (some clearly
identified with single organizations, some more complex sets of conventions
and rules) can determine labor supply, influence the characterization of
labor quality, and influence the determination of wage levels and conditions
of work. The presence and nature of labor organization are critical
institutional arrangements affecting localized employment, work practices,
and the transmission of non-traded information (in the form of tacit knowledge).
Despite the centrality of labor and its organization in regional economic
change, traditional regional analysis faces a paucity of concepts for labor
organization. [9] If labor organization
were simply a matter of unionization or not, the empirical decline in unionization
might explain the silence on labor issues. However, the expectations,
relative power, and internal divisions of workers are more complex than
one dichotomous variable (whether that variable be “skilled/unskilled”
or “unionized/non-union”). A beginning point for regional, institutional
analysis of labor organization is the public allowance for and recognition
of specific forms of organization, formal institutions for labor and professional
representation and quantity control, and the social practices (e.g., of
exclusion) of the organizing institutions.
Labor Demand
The level and trend of labor demand are critical components of
regional economic analysis and policy. The typical approach is to
assume a causal relationship from external demand for regional production
to derived demand for regional labor. The precise nature of the relationship
is expressed via a production function that describes technology and labor-capital
elasticities (or, in the case of a simple input-output model, via fixed
production coefficients). This relationship prescribes policy interventions
of increasing external demand and reduction of effective wages, via wage
subsidies or wage regulation. Incentives for capital investment are
also common components of regional policy, on the assumptions that newer
or larger capital stocks will increase external demand for regional production
and that capital-labor complementarity will outweigh the substitution of
capital for labor.
The very different employment-growth trajectories of the U.S. and western Europe suggest the importance of institutional differences in translating economic trends into job growth or decline. Analysis and resolution of the European employment “problem” depends on the institutional arrangements that are investigated and emphasized. Most policy-oriented treatments of these differences emphasize public institutional differences in labor supply and demand: on the supply side, provisions for public assistance to unemployed people that maintain a higher real reservation wage in Europe than in the U.S.; on the demand side, regulation of corporate labor shedding and requirements for employee benefits that increase the long-term cost of similarly waged labor in Europe over the U.S. In addition, however, individuals in some regions of Europe may have greater support through non-waged work in the home or farmstead than has become the norm in the U.S. (a difference that does not beg for intervention into either setting). Institutional barriers to skills or occupational upgrading include the structure of and restrictions to formal education, and informal social expectations and prejudices based on class and sex. Thus does the nature of and the very need for intervention depend on the analysis made of slower employment growth.
The nature of technological change, and the translation of innovation adoption into employment change, are both institutionally determined. The widely noted tendency toward labor-displacing technological change within a production process reflects both a general capitalist tendency toward capital investment and intensification, and a response to variable institutional characteristics of a place, a set of occupations, or a time. The analysis of technological change changes tremendously when reliance on economic signals (wage and interest levels and trends) is supplemented with an explicit recognition of (a) the power of technological change to disrupt institutional arrangements (gender divisions of labor, occupational structures, career ladders, labor organization) and (b) the relative power of institutional actors to force, withstand, or benefit from change.
“Employment” itself is, of course, an institutional arrangement
among worker, organization, and the state, involving regulations and conventions
of control and exit. The concept of employment is expanding via increased
options for payment (such as tying compensation to individual or organizational
performance), contracting (indirect employment through personnel agencies,
contracts with independent sole proprietors), and work location (in the
home or in clients’ facilities). The employment impact of increased
production is mediated by employers’ ability to determine the terms of
employment via changing the employment institution. This ability
hinges on the relative power of employers in institutional regulation,
and on the ways in which labor can be deployed in production [Salais 1992].
The flexibility of these arrangements has increased with improvements and
cost reductions in computing and communications technology, with implications
for the incomes, public-service needs, and support-service needs in suburban,
exurban, and rural locations [Beyers and Lindahl 1997a&b; Nelson
1997a&b] as well as for urban residents who may not benefit from decentralized,
flexible contracting arrangements. The technology, however, is not
the driver but the enabler of work relationships: institutional arrangements,
cost structures, and social goals of firms, workers, and governments determine
the ultimate trends in particular places [Castells 1996: 220-1].
Allocation: Employment Searching
The economic conception of labor markets requires only information
about jobs and applicants, and the absence of government or other institutional
floors or ceilings for wages, to determine at what wages and quantities
markets will clear. Regional scientists have explored the effects
of regional differences in labor supply, demand, and information availability.
Formal and simulation approaches have modeled the relationship between
local job search and interregional migration [Rogerson and MacKinnon 1981],
interregional migration and stylized information flows about labor-market
conditions [Amrhein 1985] or wage levels [Maier 1987], and searching and
hiring in labor markets permeably segmented by occupation [Amrhein and
MacKinnon 1985]. These approaches allow us to model the effects of
labor-market segmentation and employment institutions on vacancy and unemployment
rates, wage levels, and regional disparities. It remains for other
research approaches to theorize and measure labor-market segmentation and
employment institutions.
Labor markets are obviously segmented into submarkets, distinguished by occupation, skill, organization, and norms for pay, tenure, and control [Doeringer and Piore 1971]. It is a fairly straightforward exercise to model segmented labor markets by allowing limited movement of workers between segments (for example, through training) and limited substitution of workers from different segments. However, the creation of labor-market segments and the allocation of individuals to segments entail each of the labor processes presented in this paper: social and public institutions for labor reproduction, the development and channeling of labor demand, the allocative process, and the experience of firms, regions, and individuals with different forms of labor control. Regional analysis is primarily focused on the allocative (searching, matching, and temporary equilibrium) process in the short run, and on the formation of segments (with their differential effects of personal and regional well-being) in the long run.
Institutional approaches entail conceptualization and measurement of the social, legal, and technological bases of information flow and institutional arrangements for job search, hire, and tenure. Indicators such as university education provide crude distinctions among people, and very imperfectly predicts the abilities and performance of individuals in a given work context. In settings where individuals’ capabilities have tremendous impact on the success of firms, as in some of the producer services, the crudeness of this widely used signal increases the incidence of two observed outcomes: hiring (or even internal promotion [10]) on the basis of prior observation or information from professional or personal networks [Granovetter 1988; 1995]; and entrepreneurial activity by those who feel undervalued by the employment market. On the other hand, in settings where the capabilities of importance are timing and attitude rather than training or background knowledge, employers make use of signals such as gender and ethnicity, particularly when these signals have been widely used in the particular industry and region, becoming part of the local expectations.
Extended social networks have been shown to be a dominant source
of information about job openings and job seekers [Granovetter 1995;
U.S. Department of Labor 1975; Corcoran et al. 1980]. The type
of network (purely social versus work related) that is most relevant, and
its importance relative to impersonal information routes vary with occupation
and employment experience. The geographic scale of the job search and/or
personal network of the searcher, and the scale of the recruitment mechanisms
(formal, work-network, or personal network) of the employer varies tremendously
by gender, race, and occupation [Hanson and Pratt 1991; 1992].
Labor Control
For our purposes, “labor control” is the process by which the
labor time offered by individuals becomes productive labor output.
This involves the incentives to perform, monitoring of performance, control
of the pace of work, and design of work tasks. Perhaps the most politically
contentious part of the production process, the components of labor control
take shape from formal and informal institutions of employment, pay, and
divisions of labor. The outcome of these interactions affects regional
economic development in at least three ways:
1. influencing labor productivity in the region’s economic sectors,
thereby affecting wage levels, wage increases, and regional attractiveness
for capital investment;
2. becoming key components in the quality of work life for the employed
population of a region; and
3. shaping the reproduction of labor practices and labor expectations,
with implications for skills acquisition, adaptability, and entrepreneurship.
The basic neoclassical conception of labor markets assumes that the performance of assigned tasks is immediately observable, and is reflected in the payment made to labor. “Shirking” becomes a possibility when the productivity of each worker is dependent on the actions of others, so that individuals’ performance cannot be gauged, or when the outcomes of each worker’s actions is unobservable directly or immediately. The role (and economic contribution) of supervisors is to observe shirking and/or to impose sanctions.
Instititionalist analysis of labor control has yielded the concept of internal labor markets for “core” workers [Doeringer and Piore 1971], through which employee performance is monitored within an organization, determining the rate and nature of pay raises and promotions. More broadly, public regulation of employee terminations and employee representation, informal conventions regarding wage reductions, and formal agreements between employer and employee organizations interact to determine the forms of labor control used in particular sectors, occupations, and nations or regions.
The design of work tasks, and the distribution of power over that design, has received much attention in industrial sociology, but little in analysis of regional productivity or regional development. Yet these issues are critical for the embodiment and development of skills and knowledge in a region’s workforce. Traditional labor process theory [Braverman 1974] postulates that capitalist development entails continually finer divisions of labor and embodiment of technology in machinery, for the purpose of reducing reliance on worker-embodied skills. Employers are thus able to change to less-skilled and less-experienced workers, by replacing workers in situ or by geographic relocation, paying for only minimal worker skills. Labor-process theory holds this goal to be a major motivation of technological change. The outcome of this process, especially insofar as that outcome is systematically supported by institutions, affects the reproduction of labor skill and autonomy in the region.
Despite the conforming pressure of international competition, there may be very different routes toward managing labor and work in the information age [Standing 1992; Castells 1996]. While most industrial sociology has based its concepts and study in manufacturing, Coombs and Green [1989] and Kuhn [1989] provided organization-specific observations of work processes in health and financial services, respectively. These very different cases draw explicit attention to the roles of institutional context and change (labor markets, competitive strategy, modes of client payment) in determining how new technologies affect the occupational division of labor. The result, dependent on institutional arrangements, is the redundancy of workers, the reskilling of those same workers, or the replacement of clerical workers with others (perhaps with accompanying shifts in location, tenure, gender, and work conditions). Is it possible to modify institutional arrangements so that the microeconomic outcome of technological change corresponds to local employment needs?
Institutional “Ensembles”
Thus far, it should be obvious that these several labor processes
are interrelated, and co-determine each other’s outcomes. In addition,
the public and social, formal and informal institutions that shape these
processes interact. Some of these institutions are national or supra-national
— some increasingly so, such as firms’ placing local labor forces in competition
with one another through flexible sourcing arrangements. Other institutions
are local, and movements toward national-government programmatic devolution
provide some capacity for increasing localization, within the context of
powerful national and global forces [Staeheli et al. 1997]. The combination
can be understood as the institutional ensemble that creates the localness
of labor processes and outcomes.
The task of an institutional regional analysis is to generate guidelines for assessing the key institutions and interactions underlying each of the labor processes. Accomplishing this in an exhaustive fashion would be difficult or impossible. However, analysis can begin with an assessment of the outcomes of these labor processes: sex- and age-group-specific labor force participation rates; distribution and unemployment rates by occupation; prevailing wage levels by sex and occupation, relative to national averages; proportion of employment under terms negotiated with labor organizations; cyclicality of employment by sector and occupation; numbers and numerical trends of self-employed or independent-contractor residents, by sex and occupation. Institutions that are formalized into or organized by organizations (religious doctrine, patterns of formal schooling and training, regulation of and by labor unions) and the state (tax and social-assistance policies; official rules for hiring and employment relationships) are readily identifiable, and provide the broad outlines of the overall institutional context for regional labor processes.
Key to such a regional analysis is a non-functionalist view of institutiuonal arrangements. Institutions relevant to labor processes may be incongruent, especially institutions that exist at different degrees of formality, public domain, spatial extensiveness, or temporality. To the extent feasible, analysis of regional institutional ensembles should identify points of incongruence, and develop interventions that reduce the incongruence.
Routes of intervention, then, depend on (a) the assessment of
labor outcomes and (b) the understanding of the institutions influencing
each of the key processes. The purpose of an intervention strategy
is to induce institutional changes to bring the outcomes closer to desired
goals. Again, simple measures may be attempted without a full assessment
of outcomes or any attention to institutional relationships. However,
measures such as changing the minimum wage, increasing training subsidies,
or changing workers’ rights to group negotiation can and do have unforeseen
(or insufficient) effects when (changing) local institutional contexts
are ignored.
Opportunities for Intervention
Public recognition of inappropriate or undesired labor outcomes
(unemployment, wages, participation, household relationships, skills, productivity)
yields calls for action. What routes can such action take?
Interventionist government policy has fallen out of favor, except insofar
as local and national governments have been restricting the power of labor
organizations and providing subsidy to local capital investment.
However, national and subnational governments worldwide have begun to pay
increased attention to “active intervention through schemes such as support
for small firm networks, upgrading of work conditions and industrial relations,
and industrial innovation” [Amin and Thrift 1995:46]. Public organizations
(government and NGO, at local, regional, and national scales) comprise
a key point at which to engage and modify local institutional practices,
but must recognize the salience of the institutions themselves, which are
the province of public and social organizations and “non-organizations.”
A first step is the recognition of a problem. As discussed above, comparison of labor-process outcomes — comparison with goals, over time, or with other places — eases the identification of problems in the institutional arrangements underlying these processes. The issues may be raised by some public organization of the parties injured by the problem: political representatives or grassroots organizations concerned about maintenance of real wages; or large firms or organizations of firms concerned about rising productivity-adjusted wages or wages relative to other places. However, the absence of labor-sensitive politicians or public organizations may be a manifestation of the lack of labor representation. Large firms may opt for a “spatial fix” rather than engaging localized institutions. Wages and job security are often used by either side as a rallying point, while other aspects of labor outcomes go unaddressed. Thus, one component of an assessment of localized labor and labor-related institutions may be understanding the organizational outlets for problem identification.
Labor issues are politically charged, as they affect the power of individuals within households, of individuals and households vis-á-vis potential employers, and of organizations that play a role in labor processes. Power is augmented by a party’s explicit recognition that labor markets themselves are structured by institutional interactions, and that institutions can be modified. Following that step, organizations can assess their individual power to enforce institutional change, or can enter into alliance relationships to accomplish change. In either case, institutional roles must be perceived clearly.
There are innumerable levers for institutional change. As
implied in this and the previous sections, the search for effective actions
entails:
1) assessing of the problem(s);
2) attributing the problem as an outcome of a particular labor process;
3) assessing the institutional relationships underlying that localized
process;
4) attributing the outcome to some particular relationships;
5) determining which institutional elements are formal versus informal,
public versus social, local versus broader-scaled, and less- versus more-temporally
embedded in local practice; and thereby
6) determining which elements can be more easily affected by actions
that can be taken by organizations or individuals that can be motivated
to do so; and finally,
7) implementing any actions that are feasible and promise effectiveness.
Even if this presentation of points of intervention were longer
and more detailed, it would remain vague of necessity. A fundamental
characteristic of institutionalist analysis and, thus, institution-based
intervention, is its context dependence. What we have called “institutional
ensembles” define the uniqueness of local labor processes, and any intervention
must act on those unique ensembles. Further, the interventions will
inevitably be indirect and negotiated [Boekema and Nagelkerke 1990].
For example, the state can only act through its organizations and its work
with other entities, none of which are the actual institutions [Amin and
Thrift 1995]. The private, not-for-profit (or “third”) sector must
also be engaged for its non-public, quasi-capitalist role [Morgan 1997],
but it too is composed of organizations that reflect and potentially affect
the institutions relevant to labor processes and regional development.
Evolution of Regional Institutions and Labor Processes
Just as institutional components interact to yield region-specific
labor processes in the midst of supra-regional regulation and movement
of capital, labor, and technology, change in these local, regional, or
larger practices or regulation affect the local processes. The change
as well as the status of local labor-related processes is jointly determined.
Therefore, generalization and prediction are impossible: that is
why this paper has adopted a regional-case-study approach to analyses of
labor processes. However, the joint determination does raise the
clear possibility for change to originate at the local scale, despite powerful
supra-regional forces. Labor relationships and their change are ultimately
local, through many of the institutional operations presented in this paper.
The institutionally focused analysis proposed in this paper provide
many points of possible intervention by private, public, and quasi-public
organizations. It is even likely that some of the interventions,
undertaken by different entities for different purposes, will have countervailing
influences. Of necessity, assessments of regional labor processes
and attempts at intervention aim at moving targets, and interact with trends
and forces outside the region. All of this makes the task more difficult,
but it may also make the outcomes more forgiving: there cannot be
a one-to-one correspondence between actions taken and ultimate results.
NOTES
1. Presented at "Theories of Regional Development: Lessons
for Policies of Regional Economic Revival and Growth," an international
workshop organized by the Jonkoping International Business School, 14-16
June 1998 in Uddevalla, Sweden.
2. Contact information: jwh@u.washington.edu;
http://weber.u.washington.edu/~jwh
3. Contact information: deronf@u.washington.edu;
http://weber.u.washington.edu/~deronf
4. While total trade flows have grown from 14% to 20% of
the U.S. economy between 1986 and 1996, that leaves 80% of the U.S. formal
economy not accounted for by imported supply or export demand.
5. See Peck [1996: Ch.2] and Villa [1986] for two characterizations
of the processes that regulate labor markets; we have adopted a characterization
closer to Villa’s.
6. Storper and Walker [1983] provided examples of this problematic
treatment in industrial location studies, and suggested the bias and shortcomings
this introduces in industrial location models, practice, and policy.
7. Standing [1992: 258] distinguished occupation (“involving
a career of learning and the mastery, or possession, of the mysteries of
a craft or profession”) from skill, which reflects both the ability to
make productive decisions autonomously and a set of characteristics bound
up with social status.
8. With widespread knowledge of these premia, some individuals
will obtain more schooling than they might need to perform the tasks for
which they are best suited or most interested (see Arrow [1973], Stiglitz
[1985]).
9. In a discussion focused on the study of economic globalization,
particularly in manufacturing sectors, Herod [1995: 346] wrote “the overwhelming
emphasis in the literature has been on capital as the producer of industrial
landscapes in the global economy.... Workers have been rendered invisible
and relegated to the status of little more than an afterthought in conceptualizing
the making of economic landscapes.”
10. Pfeffer [1977] and Rosenbaum [1981] noted empirical relationships
between (a) socio-economic background and proxy measures for the closeness
of social interaction with top management and (b) rate of promotion within
hierarchical organizations. Pfeffer suggested that this effect was
greater in organizational settings where quantitative measures of employee
productivity or skill was more difficult to observe (e.g., positions without
direct responsibility for profitability and positions in service sectors).
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