Ulrike Muehlberger

Workers on the Border Between Employment and Self-Employment

The number of workers on the border between self-employment and employment strongly increased across Europe over the last decade. This paper investigates whether and in what respect these workers differ from employees and self-employed and analyses whether these work relationships are a stepping stone to more stable employment in the short-run using Italian data. Depending on the data source the para-subordinates represent between 1.8% and 5.3% of the Italian labour force. Since most of them work only for one company and are strongly integrated into the firm of the contract partner, we argue that labour and social security law discriminates against these workers who are in fact very close to employees. We find that they are not low qualified workers, but young, highly educated professionals. At the same time these contracts are not a port of entry into the labour market nor do we find that they are a vehicle to more stable jobs. However, they are a possibility for women to work part-time.

HIERARCHIES, RELATIONAL CONTRACTS AND NEW FORMS OF OUTSOURCING

We observe that economic restructuring is significantly changing organizational governance. On the one hand, we witness an increase in mergers & acquisitions, which substitutes markets for hierarchies and, on the other hand, we see an increase in outsourcing and subcontracting activities, appearing to replace hierarchies by markets. However, there is evidence that an increasing part of outsourcing activities mix hierarchies with market forms of governance. The key argument of this paper is that firms have established governance structures based on markets, hierarchies and self-enforcing relational contracts so that they are able to keep a substantial amount of control despite of sourcing out labour. Furthermore, we argue that such hierarchical forms of outsourcing produce dependency. Using empirical evidence of the Austrian insurance industry, it is demonstrated that dependency is created, firstly, by the contractual restriction of alternative uses of resources, secondly, by support measures that bind the upstream party closely to the downstream party, thirdly, by relationship-specific investments made by the upstream party, and fourthly, by authority elements.

The Creation of Dependent Self-Employment in Comparative Perspective

The following qualitative research aims at analysing dependent outsourcing and the creation of dependent self-employment in three industries in the UK, Italy and Austria. It does not aim at representativity but it will illustrate the logic of dependent outsourcing by looking at the mechanisms governing this special form of labour relations. Our main aim is to empirically demonstrate horizontal disintegration, the blurring of firm boundaries by mixing hierarchical and market elements in one distinct form of governance, namely dependent outsourcing. Moreover, we analyse how dependency is created and which role trust and power have in such business relations.

The Blurring Boundaries Between Employment and Self-Employment

The focus of this book is work relationships where the worker is formally self-employed but the conditions of work are similar to those of employees. Although they work exclusively (or mainly) for a specific firm (i.e. the outsourcing firm), workers are neither clearly separated from the firm they contract with nor clearly integrated. These work relationships are not based on employment contracts, but on private contracts between a self-employed worker and the outsourcing firm.

The Organisational Governance of Dependent Forms of Self-Employment

Research on dependent forms of outsourcing has to focus on both formal organisational structures and, even more importantly, on informal organisational structures. Analysing only formal structures and relations would not reveal the actual organisation of dependent long-term business relationships. We argue that business relationships based on dependent forms of outsourcing rely on relational contracts that are additionally strengthened by the dependent element of such business relationships. In this context, dependency basically means that the subcontractor (i.e. the upstream party) is restricted in his or her alternative actions by both formal and informal agreements.

The Institutional Factor: Labour Law and Regulations Across Europe

Changes in the organisation of work over the last two decades have shown that the personal scope of labour law and parts of social security law in European countries, which have focused on permanent full-time employees, are too narrow. Thus, legal scientists have argued that the traditionally personal scope of labour law and parts of social security law no longer reflect the organisation of work in today’s society (Sciarra 1991, 2004;Burchell et al. 1999;Supiot 2001;Engblom 2003;Freedland 2003;Perulli 2003). National legal discourses, however, are divided between the approach that a broader scope of labour law with a dominant role of contracts of employment would strengthen social justice, while the other approach sees labour law measures as a limit to economic efficiency and incentives, favouring the expansion of possible work arrangements governed by the principles of civil and commercial law (Freedland 2003: Chapter 1;Perulli 2003: 6;Sciarra 2004: 17).

The Supply Side: Identifying Workers on the Border Between Employment and Self-Employment

As already stressed in the introductory chapter of this study, the rise of self-employment is closely linked to the general restructuring process in industrial organisation observed since the 1970s. Research on the determinants of self-employment suggests that the greater stress on outsourcing and numerical flexibility is important explanation for the rise of self-employment (e.g. Rubery et al. 1993;Meager 1998;OECD 2000;Eiro 2002). These developments have, moreover, been intensified by governmental efforts to foster self-employment using various regulatory tools such as the tax system or supported direct credits. Both economists and sociologists have argued that new technologies and more specialised and variable patterns of consumer demand have influenced the re-emergence of small scale businesses and network forms of production (e.g. Piore and Sabel 1984;Powell 1990;Semlinger 1991; Zagler 2003).