Marketization,inequality,and institutional change: Toward a new framework for comparative employment relations

Abstract

This article develops a framework for analyzing the social effects of marketization, defined as the imposition or intensification of price-based competition. The conceptual background is debates in comparative employment relations over the liberalization of markets and its consequences across Europe. Our central proposition is that marketization in its diverse forms leads to increased economic and social inequality via its effects on non-market institutions. We outline two mechanisms through which this happens. First, the means used by managers and investors to seek influence shifts from voice to exit, leading to the disorganization of industrial relations and welfare institutions. Second, economic activity shifts from productive toward non-productive activities, leading to changes in market regulation that are insulated from public scrutiny.

Keywords

Comparative industrial relations European Union institutional disorganization marketization reregulation social inequality

Since the 1980s, comparative employment relations (CER) scholars have examined the consequences of global competition for governments, unions, and employers in different countries. CER research has typically focused on cross-national divergence in management practice and worker outcomes and their embeddedness in stable and varying national systems or models. In this tradition, continental Europe was long regarded as representing an alternative social model, or series of models, to the more liberal, market-oriented Anglo-American model. As European countries experience common trends toward liberalization and growing inequality, however, CER researchers have shifted their focus to examining the factors driving different patterns of erosion or maintenance of traditional coordinating non-market institutions.

This new wave of CER literature is rich in insights into the micro-politics of workplace and institutional change, but it lacks a unifying framework to explain the heterogeneous outcomes researchers observe. In this article we outline such a framework. Our central focus is on the process of marketization, defined as the imposition or intensification of price-based competition. We propose that marketization in its diverse forms drives institutional change via two mechanisms. First, the means that managers and investors use to seek influence shifts from voice to exit, leading to the disorganization of the non-market institutions of industrial relations and welfare provision, or the erosion of their redistributive functions. Second, economic activity shifts away from productive and toward non-productive activities, leading to the expansion of new forms of undemocratic private and public regulation. Both mechanisms have the effect of increasing economic and social inequality.

We develop our argument in five steps. First, we discuss the turn away from the analysis of stable national models in CER research and toward analysis of common trends of liberalization and growing inequality. Second, we define marketization and discuss the different forms it can take, drawing on employment relations studies from Europe. Third, we outline the two mechanisms through which marketization leads to institutional change. Fourth, we show how and why these processes contribute to growing inequality. We conclude by discussing consequences for CER research.

Markets in CER

CER is a field of study focusing on the comparative political economy of labor. Its core concepts are derived from the 1970s–80s literature on ‘production regimes’ and ‘neo-corporatism’, usually in Europe, Japan, and Anglophone countries, and on ‘comparative business systems’, which also included African and Asian countries. The most influential synthesis of this work is varieties of capitalism (VoC) (Hall and Soskice, 2001) and its subsequent amendments. VoC has been criticized as excessively static, employer-centric, structuralist, functionalist, and Eurocentric; as neglecting within-country variation and transnational linkages; and as oversimplifying between-country diversity. A review of these debates is beyond the scope of this article. However, recent reviews of the CER literature show the continued dominance of the VoC classification scheme along with the broad acceptance of its argument that national systems display at least some degree of coherence and path dependence (see Bamber et al., 2015; Hauptmeier and Vidal, 2014; Wilkinson et al., 2014).

VoC developed during the 1990s to deal with a particular puzzle. Mainstream economists and policy makers believed that liberal institutions were the ‘one best way’ to achieve competitiveness in a global economy; however, large exporting firms in Europe and Japan were successful despite these countries' decidedly non-liberal institutions. Hall, Soskice, and collaborators argued that globalization was instead leading to dual convergence toward either ‘coordinated market economies’ (CMEs, exemplified by Germany) or ‘liberal market economies’ (exemplified by the US). Hall and Soskice (2001) grounded this typology in two game-theoretic equilibria of employer strategies and complementary institutions governing labor–management relations, training, social insurance, and interfirm contracting relations. This model has also been applied to explain different national models of trade unionism, albeit with some softening of its structural-determinist claims (Frege and Kelly, 2004).

The VoC view of markets reflected the conventions of the 1980s and 1990s, in which scholarly attention focused on within-country responses to external market pressures. While global markets were shown to have transformative effects on industrial relations institutions, as in Kochan et al.’s (1986) account of the US, comparative research found that this effect was uneven. Studies identified greater institutional stability where worker participation rights were institutionalized (Turner, 1991), bargaining decentralization was coordinated (Traxler, 1995), and where countries and sectors experienced less exposure to global competition (Western, 1999). Petit (1998) defined the regime of post-Fordism as a proliferation of institutional changes that increased competition, but that continued to display international diversity due to structural and historical differences. Hall and Soskice (2001) argued that the institutions themselves were stabilized by the self-interest of employers benefitting in global competition from alternative production regimes.

As disconfirming evidence accumulated from the mid-2000s, CER debates shifted to explain the overall decline in egalitarian wage setting and welfare arrangements in CMEs. Germany experienced widespread erosion of collective bargaining coverage and union membership, as well as liberalizing reforms to employment protection and social welfare institutions. The incidence of low-wage work came to exceed that of Britain as employers restructured and outsourced work (Bosch and Weinkopf, 2008), and unions responded by developing new campaigns to organize contingent workers (Benassi and Dorigatti, 2015). One set of analyses used stylized ‘insider–outsider’ arguments to explain resulting patterns of inequality: the CME model allegedly persisted for the well-protected and highly productive core workforce and benefitted from cost savings associated with a growing unregulated periphery with a precarious workforce (Emenegger et al., 2012). Public policy, together with the self-interested behavior of large firms and their unions, was held responsible for promoting selective liberalization and driving broader institutional change (Thelen, 2014).

Comparative political economy’s theorization of markets has also evolved to take into account observed liberalization. The literature on institutional change initially emphasized the Polanyian insight that markets are socially constructed and societies tend to protect themselves against competition (Streeck and Thelen, 2005). Later work, however, pointed to the disruptive face of institutional change driven by ‘unruly capitalists’ (Streeck, 2008), which weakened the effects of formally stable institutional protections and resulted in similar trends of liberalization in collective bargaining arrangements (Baccaro and Howell, 2011).

CER theory today sits uneasily between two main reference points. The first is the VoC model and its pre- and post-cursors, grounded in the field’s traditional concern with identifying and describing alternative national models. The second is contemporary debates on liberalization and dualization in comparative political economy. This second group of scholars seeks to analyze national-level dynamics of institutional change, but via identifying converging or diverging responses of major employers, policy-makers, and unions to common trends of intensified competition, market integration, and financialization.

These theoretical reference points are convenient for macro-level ER research relying on national datasets and interviews with national-level actors. However, they are awkward tools for CER scholars whose research relies on sector- and firm-based case studies to study the micro-political dynamics of employment relations. Comparative studies in this tradition have advanced a heterogeneous set of critiques of both VoC models and dualization, pointing to the more differentiated political dynamics associated with negotiating institutional change in the context of rapidly changing power resources for labor and capital (Benassi et al., 2016). This allows closer attention to those difficult to quantify aspects of institutional change that are not deregulatory but rather institutionally thick (MacKenzie and Martinez Lucio, 2007). Below we draw on recent European research in this tradition to develop an alternative framework, which we argue presents a more robust set of conceptual tools for analyzing processes of institutional change and their social effects. At the center of our framework are the common features of and dynamics associated with a pervasive shift to increasingly marketized or market-based transactions, within different spheres of economic and social exchange.

Marketization: Definition and variation

Marketization refers to an increase in competition at the level of the transaction. It is distinct from liberalization, which typically refers to pro-market public policies such as privatization, reduction in subsidies, or the loosening of product-market and labor-market regulations (Höpner et al., 2009). Marketization is also distinct from neoliberalism, which can refer to an influential intellectual tradition, to a market-friendly political-economic ‘regime’ with antidemocratic tendencies, or to an overall bias toward deregulation.

Our focus on marketization shifts attention away from these broader policy or ideological matters to the concrete change they typically promote: an increase in competition. A fully marketized transaction is one with intense price-based competition, in which actor choices are made purely on the basis of price, the good or service in question is standardized, exchanges are frequent, and competition is open to a wide range of participants. Defining it in this way allows us to assess the degree of marketization based on how closely transactions approach this ideal, and to examine variation and change in market situations in a more direct way than macro-level approaches allow.

Our definition of marketization draws on two main sources. The first is institutional economics, which treats the transaction as the main unit of analysis, and which has developed fine-grained tools for analyzing how transactions are governed (e.g. Williamson, 1985). The second is economic sociology, which focuses on the norms and power relations that shape the regulation of markets (Beckert, 2007) and which rejects efficiency-based, functional explanations for market evolution. A key insight of economic sociologists is that deregulation has unintended consequences for the internal mechanics of exchanges. Removing rules imposed from the outside can lead to intensified competition, but is neither necessary nor sufficient to achieve this outcome.

We differentiate forms of marketization along two dimensions: the primary actors involved (organizations or individual workers) and the geographic scale of exchange (domestic or international). This produces a fourfold typology, which we illustrate in Table 1 and with the following four empirical examples.

Internationalization of trade. The expansion of ‘free trade’ between countries is the most commonly examined development contributing to increased competition between organizations. It can be structured in any number of ways, from producers or service providers offering their goods and services abroad, to multinational enterprises organizing production and exchange simultaneously across the globe, to networks of firms that all carry out a specialized function in a different country (Hürtgen, 2016). The opening of national markets to global competition increases the number of competing organizations serving a given consumer market, which tends to push down prices. The dominant players in global production systems also create markets for investment and force managers and worker representatives in different locations to compete for jobs. There remains variation in extent and potential for marketization by sector and activity: for example, apparel has weaker limits on capital mobility relative to auto manufacturing, while maritime transport has the most intense conditions of price-based competition for labor due to the hypermobility of capital (Anner et al., 2006). However, technological change and organizational strategy can reduce these differences. In capital-intensive sectors like auto manufacturing, production relocation has become easier as processes and technology are increasingly standardized (Greer and Hauptmeier, 2016).

Vertical disintegration. Another development leading to intensified marketization at the interorganizational level is the introduction of market-mediated boundaries in an existing production process for goods or services. In the private sector, this commonly takes the form of outsourcing, agency work, or the hiving off of operations into subsidiaries, joint ventures, or spin-offs (Doellgast et al., 2016). In the public sector it takes the form of service contracting or transferring assets to the private sector (Hermann and Flecker, 2012; Greer et al., 2013a); here, rules governing public purchasing play an increasingly important role (Jaehrling, 2015). Vertical disintegration leads to intensified marketization via the growing importance of a price mechanism in investment and allocation decisions, increase in the number of competing providers, and/or fixed-term contracting or accreditation. In social services around Europe, for example, the governance of funding for service providers increasingly focuses on price comparisons, using competitive tendering (Jantz et al., forthcoming). This process often involves the shift of work between domestic organizations; however, vertical disintegration can also involve cross-border restructuring, via offshoring or offshore outsourcing, and so may overlap with the internationalization of trade.

International labor migration. Liberalizing the movement of labor is perhaps the most controversial form of deregulation associated with intensified competition in labor markets. Freedom of movement of labor is closely bound up in Europe with the freedom of establishment and service mobility (Lillie, 2010), with ambivalent consequences for EU citizens as workers (Ciupijus, 2011). The opening of national labor markets entails a high degree of state regulation. This is most evident with visa programs, but also with Europe’s regime of free labor mobility and the European Commission’s efforts to standardize professional qualifications across member states (Brockman et al., 2011). There is also considerable private regulation. Under worker posting, employers make their staff hypermobile by sending them on assignments to different countries. Absent functioning transnational regulation, ‘spaces of exception’ emerge in which wages and social security contributions diverge from the norms of the host countries (Lillie, 2010). This dynamic, seen in construction, transportation, and manufacturing, has been reinforced by the European Court of Justice in the so-called Laval Quartet of decisions requiring countries to balance prerogatives of social protection against the free mobility of services.

Labor-market reforms. Over the past three decades, governments have been encouraged to loosen workers’ statutory employment protections, introduce temporary employment contracts, and reform the welfare state to encourage work and discourage unemployment. Policymakers have sought to increase the dynamism and flexibility of the labor market, and increase labor-market participation, by enabling both hiring and firing by employers (Heyes, 2011). This entails detailed state intervention, including administering financial penalties for welfare claimants not meeting job-search requirements, complex changes in benefit levels and tax credits to increase incentives to work, and services to improve claimants’ employment chances (Greer, 2016). These pressures on claimants to enter the labor market can be augmented by new kinds of employment contracts such as German mini-jobs or subsidized contracts in France, or by regulations to increase incentives to work such as minimum-wage increases or wage subsidies. Harsh conditionality is typically extended to standardize the expectations toward claimants’ labor market behavior. Examples include Germany’s ‘Hartz IV’ benefit that combined groups that had previously been covered by social assistance and unemployment insurance (Knuth, 2006) and the British Work Programme that combined active labor market schemes for mainstream jobseekers and disabled people and Universal Credit that does the same for its out-of-work benefits (Wiggan, 2015).

Table 1.

Drivers of marketization, based on different competitors and scales.

	Organizations	Workers
International	1. Internationalization of trade	3. International labor migration
Domestic	2. Vertical disintegration	4. Labor market liberalization

These four examples illustrate the diverse forms that marketization can take. While they appear to be different phenomena, their common feature is that they contribute to the creation or altering of market-based transactions in such a way that these transactions become more frequent, more governed by price, with the commodity in question more standardized and/or the access to new competitors increasingly open.

Marketization and institutional change

In this section we develop two mechanisms through which marketization drives institutional change. First, the means by which managers and investors seek influence shifts from voice to exit, leading to the ‘disorganization’ of the non-market institutions of industrial relations and welfare provision. Second, economic activity shifts away from productive and toward non-productive activities, leading to the expansion of new forms of undemocratic private and public regulation.

Exit and institutional disorganization

The marketization of transactions changes the basis for decision-making, or the means by which actors assert their preferences. Under conditions of marketization, the principal mechanism for influencing these decisions shifts from ‘voice’ to ‘exit.’ Hirschman (1970) used these terms to distinguish between different responses to the declining performance of an organization by its members: withdrawal or ‘exit’ from the relationship versus exercising ‘voice’ through participation in decision-making. We apply it here to describe change in the behavior of management and capital. The fundamental issue is the growing availability of exit options; their actual use may matter but is secondary to the enhanced ability to threaten exit.

Transaction cost economics proposes that the decision to internalize transactions into non-market modes of organization occurs under particular conditions favoring long-term commitments among parties (Williamson, 1985). Under marketization, the marginal costs of alternatives become increasingly important factors driving investment and purchasing decisions. Large organizations that establish internal markets or that outsource work to third-party firms are more likely to threaten to withdraw resources from underperforming firms or establishments as a means of encouraging efficiency, rather than intervening to influence strategy via negotiation and compromise. In financial markets, as shareholding becomes more dispersed and a market for corporate control develops, investors’ primary means of disciplining management shifts from one of exercising ‘voice’ on corporate boards to the threat of ‘exit’ through selling shares.

This shift from voice to exit in how managers and investors seek influence leads to broader changes in non-market institutions in two ways. First, expanding ‘exit options’ are associated with new opportunities and incentives for avoiding employment relations or protective labor market institutions altogether – for example, by leaving employers’ associations or adopting precarious employment contracts exempt from different social protections. Second, where these institutions persist, the expanding willingness and ability to threaten exit weakens their democratic or redistributive functions by undermining traditional participative structures and labor’s power within those structures.

Together, these changes within organizations and in their broader institutional context undermine more democratic or administrative decision-making structures at different levels. At the workplace-, firm-, and sector- (or intersectoral production network) levels, the basis for securing labor cooperation shifts from negotiated compromise to competition for jobs and investment (Prosser, 2014). At the national or macro-level, the growing disorganization of non-market institutions contributes to the decline of the kinds of market regulation and collective organization that characterized the Fordist regime of accumulation (Vidal, 2013).

German industrial relations illustrate these dynamics well. Marketization has led to expanding exit options via not only the offshoring of work from Germany to low-wage locations elsewhere (enabled by trade liberalization), but also via outsourcing of work to other firms, internationally, domestically, or even on the same worksite. The increasing ability of and willingness by employers to exercise exit rather than voice in their relationship with employee representatives drives significant change in industrial relations institutions, despite formal stability in legislation or bargaining structure. In the German telecommunications industry, for example, privatization and liberalization policies have created a landscape of competitors with no history of sectoral collective bargaining (Doellgast, 2012). In commonly outsourced services such as cleaning, security, or catering, where there is sectoral collective bargaining, managers can choose whether to use in-house staff, a provider using a low-wage collective agreement, or a provider without a collective agreement.

Management’s ability to benchmark costs and threaten to expand outsourcing significantly weakens unions’ or works councils’ ability to oppose management demands for wage and working time concessions (Pulignano et al., 2016). In the automotive sector, firms develop increasingly sophisticated whipsawing techniques to introduce new practices, like multi-tier wage structuring in Germany during the 1990s imported by General Motors. In the construction sector, where unions are far weaker, contractors use freedom of movement of services in the EU to evade collective bargaining arrangements and social insurance contributions. To give an example from the field: it is not straightforward to regulate the workplace at a firm that is based in Austria, recruits its workers using a Hungarian subsidiary, is working on a site in England, and organizes work and housing in such a way to prevent its workforce from coming into contact with English trade union activists (Greer et al., 2013b). As non-market institutions like collective bargaining cover a shrinking portion of the economy, the costs associated with avoiding them decline and workers find themselves in situations where representation is absent and protective rules are unenforceable.

Profiting without producing and new regulation

Marketization leads in some ways to the erosion of political or bureaucratic control, but in others to its expansion. Intensified competition in product and service markets increases market uncertainty and constrains profit margins. Managers and investors respond by seeking to reduce or mitigate associated risks and to identify new sources of profits. This process is at the core of a second mechanism through which marketization affects non-market institutions: it contributes to a shift in the primary focus of economic activity away from generating profits through productive activities and toward extracting profits through non-productive activities. This reconfigures power and interests within public policy domains, and increases pressure to change regulation of financial, labor, and public contracting markets in such a way to further support profit extraction. One form that this takes is lobbying and other political activities aimed at establishing or reinforcing institutions that enable new forms of ‘rent seeking’, or income derived predominantly through the power of suppliers rather than the value of products (Hacker and Pierson, 2016).

Financialization is an important example of non-productive profit extraction. Firms respond to the squeeze on profits and growth in their productive activities by expanding into finance, while the financial services sector has grown significantly in terms of employment and share of gross domestic product in most advanced economies. Other examples include firms specializing in management and market intermediary activities, or in bidding for government funding, organizing financing, and managing contracts (Crouch, 2009). More broadly, the growing economic importance of these activities within economies is associated with a power shift within capitalism, in which the circulation of commodities becomes dominant and production of them subordinate (Lapavitsas, 2014).

It is beyond the scope of this article to review the literature on finance and corporate governance. One useful insight from this literature for our analysis is that financialization has been accompanied by extensive changes in state and private regulation of financial markets, much of which is hidden from public scrutiny (Culpepper, 2011; Macartney, 2011). Since transactions take place extremely rapidly in ways that are largely outside of government control, regulation expands to restore stability, often in ways that both mitigate investment risks and bolster rents to financial institutions. After the 2008 financial crisis, for example, the European Commission and European Central Bank intervened in a sustained and detailed way to prevent increasing public sector debt from destabilizing the financial system. This technocratic exercise quickly spilled over into politically contentious demands for labor market deregulation, cuts to statutory wage minima, and the gutting of collective bargaining systems in heavily indebted countries.

Marketization has also led to the expansion of market intermediaries and professional services firms that derive profits primarily from exchange-based activities. In the public sector, for example, profit making takes place through taking over public sector management activities or managing the process of privatization. An organizational split exists, or is created, between the purchaser and provider, which implies an exchange of money for services. Some regulation of these transactions protects users of services, for example via public service obligations that electricity, phone service, or health services have to be supplied to the entire population at a reasonable cost. But much of it concerns winning and managing contracts, price setting, and delivering services, often using quantitative techniques copied from finance, with the overall goal of ensuring a return for investors.

The British public sector is an extreme case. Public–private partnerships are the best-known examples of the government using techniques and expertise from the financial sector. These are risky deals for the public sector due to long-term obligations to pay, leading to cost overruns and lock-in to the contracting relationship (Grimshaw et al., 2002). ‘Black-box’ contracting is another example, pioneered for welfare-to-work schemes. Management of the market is contracted out to a large private firm, which selects and manages contractors. A one-sided focus on hitting targets is encouraged by a mixture of payment for performance and light-touch government regulation. Here a commercial logic of service provision prevails, including a very detailed and tight management of services by the private firm in an attempt to ensure that performance, and financial, goals are met. This is extended to local government and non-profit subcontractors using sophisticated IT systems (Greer et al., 2014).

Both of these examples show how the growing importance of extractive activities, and thus the power of business interests involved in those activities, can result in systematic changes in the public and private regulation of markets that directly support profit extraction by private firms. Such decisions are political, with severe distributional consequences. However, they are often made in the realm of ‘quiet politics’ (Culpepper, 2011) or presented as rational measures designed by experts to avoid further crisis. In both cases the effects are contested, but the fundamental regulatory mechanics develop, by design, in a technical, de-politicized way. The firms involved extract further profits through policies that asymmetrically redistribute the risks of volatile markets, either to workers via government deregulation of labor markets and outsourcing of public sector jobs, or to the broader public via financial market deregulation, government bailouts, and public transfers.

Economic and social inequality

The previous discussion has shown that marketization alters the structure and functioning of non-market institutions, leading to the disorganization of socially protective and redistributive institutions and the strengthening of institutions in the private and public realms that support profit extraction. Both forms of institutional change have consequences for levels and patterns of inequality.

Economic inequality, measured by the distribution of income and wealth, has been driven by an increase in the share of income going to capital compared to labor and of wages for top earners compared to the rest of the workforce. An accompanying trend has been the growth of the proportion of employees in low-wage and insecure jobs across Europe (Gautié and Schmitt, 2010). At the organizational level, institutional disorganization associated with marketization has been linked in several studies to declining wages and job quality within industries and across production chains, both within countries (Flecker and Meil, 2010; Jaehrling and Méhaut, 2013) and internationally (Crinò, 2009; Taylor et al., 2013). Increasing dependence on financial income also has been found to drive increased earnings dispersion and decreased wage share at organizational and sectoral levels (e.g. Alvarez, 2015; Lin and Tomaskovic-Devey, 2013). Government transfers to financial institutions and reconfigured rules facilitating profit extraction support the famously high salaries and bonuses in the financial services sector (Bell and Reenen, 2013).

Social inequality, characterized by unequal access to social status and rights, can be observed in the core concern of CER: the declining collective power and voice of workers. Institutional disorganization weakens the traditional power resources of European labor unions, based on high bargaining coverage and strong coordination at sectoral or national level. Changes in market regulation that support profit extraction are associated with shrinking transparency and scope for democratic public debate on these policies, but also narrow unions’ scope for participating in meaningful social dialog at national level or within their traditional stronghold of the public sector.

Few unions have succeeded in expanding their membership or bargaining coverage in the face of these challenges. Alternatives such as worker centers, information and consultation bodies in the workplace, and union-sponsored nonprofits do not fill the resulting void. Unions are often inclusive in their response, but also commonly balk at expensive but untested organizing techniques (Greer et al., 2013b). The weakening of employment protection rules and welfare entitlements by government policy undermines the rights and status of workers even further. The overall consequence is a decline of meaningful social and industrial citizenship, even for supposed ‘insiders’ – for example, the German core industrial workforce (Brinkmann and Nachtwey, 2013).

Patterns of gender inequality in both economic and social spheres are also affected by marketization and the different forms of institutional change it generates. Outsourcing disproportionately affects female-dominated occupations and jobs. For example, in public services, the male-dominated core ‘command and control’ functions are far less likely to be externalized than female-dominated frontline and auxiliary services (Lethbridge et al., 2014). This then leads to expanding wage inequality as women experience shrinking access to collective bargaining and standard employment contracts relative to men. Labor market intermediaries that have emerged to connect workers in post-Socialist countries with jobs in Northern and Western Europe rely on a high degree of informality, with the terms of exchange strongly shaped by gender roles and expectations (Samaluk, 2016). The gender implications of labor market reforms are particularly complex. On the one hand, marketizing labor market reforms are supposed to increase access of women to the labor market; on the other hand there is a strong element of compulsion, and under conditions of austerity supports are underfunded and care work is shifted from state-subsidized paid work to unpaid work in the family (Mabbett, 2013). Together, these dynamics contribute to the gender wage gap, exacerbated by declining access to collective bargaining and social entitlements.

Economic and social inequality can be mutually reinforcing. Magdalena Bernaciak’s (2015) discussion of social dumping in Europe illustrates this well. While policy discourse emphasizes the danger that job flight to poor countries poses to workers in rich countries, she points to EU-level policy makers and multinational firms as key agents that use competition to drive down labor standards. The politics of EU integration are biased toward market integration and against upholding social regulation, and multi-national corporations, mostly based in rich countries, organize production in a way that exploits the different social standards that result. The literature on precarity provides another example. Robert Castel (1995) charts the historic rise in France of work as an engine of social integration, and the increased vulnerability of workers at the bottom of the labor market in the late 20th century. Increasing numbers of workers thus fall outside of the welfare and industrial relations arrangements that constituted national models and shaped the life course of citizens.

Conclusion

In this article we have proposed a framework to analyze the relationship between marketization in diverse areas of the economy, institutional change, and economic and social inequality. Seemingly disparate changes in the institutional regulation of work, markets, and welfare states have a common cause, with wide-ranging effects on the distribution of resources and status, as well as on ideology, politics, and the quality of democracy. In place of disconnected research agendas on international trade, outsourcing, privatization, labor migration, financialization, precarious work, gender inequality, and so on, we are calling for a recognition of their commonalities.

This framework can be applied by CER researchers in two ways. First, as emphasized in this article, it provides an alternative model for discussing the common underlying dynamics associated with diverse processes of institutional change of interest to CER researchers. Second, it provides new tools for explaining variation in the micro-politics of restructuring at organizational or sectoral level within national models. CER researchers typically argue that VoC or dualization arguments are incomplete or flawed in explaining varying patterns of inequality within countries, or question why unions succeed or fail in combating expanding precarity – often pointing instead to the effects of heterogeneous power resources and actor strategies. A focus on processes of marketization suggests these differences can usefully be traced to a common underlying factor: the form and extent of competition in markets. Most of the research on marketization we have examined looks at an increase in competition in one or more countries, as in most of the examples given here. But these tools are also used for exploring within-country variation in competition and the causal links to workplace outcomes, for example in contracted-out public services, where there is strong within-country competition for contracts to carry out what is a shared set of tasks (Greer et al., 2014).

We have illustrated our model’s usefulness in understanding contemporary changes in Europe. Several questions remain open, including the conditions under which different parts of our model apply. What are the conditions under which marketization takes place, and what factors influence the degree and form of marketization? It is likely to be relevant beyond Europe, since its components are generic phenomena that could appear in a range of contexts. To what extent is marketization a cause or effect of – or linked in reinforcing feedback loops with – neoliberalism, financialization, and processes of institutional change? These questions can serve as the basis for a broader research agenda that moves CER scholars away from their traditional focus on employment relations institutions, building on the recent work, for example, of Thompson (2013) on financialization, Appelbaum and Batt (2014) on private equity, and Baccaro and Pontusson (2016) on growth models.

In terms of research methods, CER may need to change the kind of data it uses in order to understand exactly how transactions operate. International-comparative quantitative datasets and interviews with the traditional industrial relations actors reveal important outcomes, but to capture marketization as a cause it is also necessary to talk to others, such as trade bodies, industry regulators, purchasing professionals, and managers operating at the strategic level. Shifting attention beyond the usual industrial relations variables could improve the power of explanations used in CER while strengthening the field’s relevance to workplaces facing various kinds of market pressure.

Footnotes

Declaration of conflicting interests

The author(s) declared no potential conflicts of interest with respect to the research, authorship, and/or publication of this article.

Funding

The author(s) received no financial support for the research, authorship, and/or publication of this article.

Biographical notes

Ian Greer is a Senior Research Associate in the ILR School at Cornell University. He uses qualitative comparative methods to examine marketization and its effects in industrial relations and welfare states. His early work explored how German and US trade unions were coping with intensified price-based competition, through international solidarity, collective bargaining, coalitions with civil society, and organizing the unorganized. Over the years he has extended this line of questioning to examine the way that managers and policymakers stage competition across Europe, in multinational automakers, welfare-to-work schemes, social work, health care, ports, and music.

Virginia Doellgast is an Associate Professor of Comparative Employment Relations in the ILR School at Cornell University. Her research examines how employment relations institutions at national, industry, and organizational levels affect organizational restructuring and HRM policies, as well as the impact these policies have on pay and job quality. Her book Disintegrating Democracy at Work: Labor Unions and the Future of Good Jobs in the Service Economy was published by Cornell University Press in 2012.

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