Outsourced racism in Italy

Introduction

This article argues that in some sectors a structural relationship may exist between new forms of work organization deriving from the outsourcing of production through subcontracting and the embedding of racial discrimination in the workplace. Focusing on the metalworking, shipbuilding and construction sectors in Italy, it is based primarily on interviews conducted by the European Union research project CRAW (Challenging Racism At Work), ¹ on a literature review, and on trade union migration and anti-discrimination policies. The fieldwork for CRAW involved 16 interviews with trade unionists at national, regional and local levels and with migrant workers, and holding three focus groups. The article also makes use of data collected in three other research projects: ‘A survey on the impact of the Racial Equality Directive on trade unions and employers’ (funded by the EU Agency for Fundamental Rights) ² , ‘Undocumented workers’ transitions’ (funded under the EU’s Sixth Framework Programme) ³ , and ‘Trade unions, economic change and active inclusion of migrant workers’ (funded by DG Employment of the European Commission) ⁴ .

The first section underlines how, over the past two decades, outsourcing has become a global practice covering all production sectors, and how such ‘globalization by tender’ has contributed to reshaping labour market stratification and to creating new potential for the spread of discrimination. The second section focuses on the features of the subcontracting system and work organization in the three sectors. We conclude by discussing the effects of the crisis on the inferred systematic discrimination linked with subcontracting in those sectors and of union countermeasures.

The increase in the use of tendering over the past two decades is directly associated with the global spread of outsourcing. Although outsourcing is no new practice for capitalist production (Goldstein, 2006; Huws and Podro, 2012), together with other processes in the neoliberal era it has played a decisive role in transforming the international division of labour and in further subordinating workers to company interests. In this sense, it may be considered a structural element of the reorganization of production, with increasingly global and across-the-board dimensions: ‘global’, since outsourcing includes countries in both hemispheres, and has developed at transnational level in the form of international offshoring and at intra-national level as regional offshoring and increased subcontracting; and ‘across-the-board’, as it has spread beyond the limits of the industrial sector to become standard practice in agriculture and services in both the private and public sectors (Huws and Podro, 2012).

The ‘globalization’ of outsourcing and the subcontracting system springs from processes which, though converging on the aim of lowering production costs (in primis labour costs), have developed separately. First, it derives from the application of lean production principles, formulated in sector-specific and national contexts. The shift from Fordist to Toyotist factories has brought about a remarkable drop in the volume of production carried out by the parent company ⁵ through its transfer to the production chain – including contractors and subcontractors – and the spread of the ‘reduced and diffuse factory‘ (Antunes, 2006). The reorganization of production under the flexible accumulation model has entailed a marked segmentation of the labour market and, thus, a stratification of working conditions, constantly worsening the deeper the level of subcontracting is – as seen in the Italian textile sector (Zanin and Wu, 2009) and in the US ⁶ (Bernhardt et al., 2009).

Secondly, especially in the services sector, the spread of ICT has enabled the outsourcing of functions involving its use, creating new stratifications within the workforce based on the multiplication of employment contract forms for the same job and on their spatial reorganization, as seen in call centres (Huws and Podro, 2012).

Thirdly, it derives from the restructuring policies of welfare systems carried out through the privatization of public services, adopted in Western countries to limit public expenditure and to lower labour costs through acting on indirect wages. Their application has favoured the proliferation of outsourcing, making subcontracting a structural element of work organization and promoting the dualism of its labour market, as is evident in the health care sectors in France, Italy and the United Kingdom (Bernardotti et al., 2007).

This fragmentation of the production process has gone hand-in-hand with a resetting and reconfiguration of inequalities on grounds of nationality, race, gender and age, forcing increasingly broader layers of workers to work in conditions that are not only worse, but also more precarious, with fewer rights and increased exploitation, even resulting in de facto forced labour.

The linkages between production organization, labour market stratification, and discrimination are well exemplified by the subcontracting system. Enabling discrimination to thrive, the key role played by new forms of the division of labour and work organization such as cascade tenders and on-site outsourcing can be seen in several sectors. Discrimination can nestle in the new spaces opened by changes to the work process: ‘as the recent processes of deregulation of the labour market and of relations between contractor and contractee fall upon the work factor, though differently, they may weaken the system of employment protection and guarantees’ (Carchedi, 2010). Thus discrimination can intensify as ‘decent work’ retreats and undeclared and severely exploited work advances (Ceschi and Mazzonis, 2003).

Subcontracting and discrimination

The reorganization of production has thus contributed to generating a new stratification of the labour market – formally based on contract status – and a fragmentation in protection, paving the way for discriminatory practices (Ferrero and Perocco, 2011; Wrench et al., 1999). This is evidenced in particular in the construction, metalworking and shipbuilding sectors, where the introduction of subcontracting has been associated with the growing insertion of migrant workers employed under extreme working conditions.

The construction sector is an interesting example of the linkage between the stratification of the labour force along racial lines and the fragmentation of the production process. On the one hand, as underlined by Geddes and Balch (2002), ‘the sector has been an important one for foreign workers because of its often large-scale requirement for low-skilled labour and its association with informal employment practices’. It has been a fully fledged global laboratory for new forms of exploitation, as seen with posted workers (Lillie, 2012; Eldring et al., 2012). On the other hand, construction has also been affected by the disintegration of the vertical production process and the fragmentation of building firms, fuelled by the evolution of working and organizational techniques (moving from craft to industrial manufacturing and component assembly, technical specialization and subcontracting) in the wake of market liberalization, internationalization and competition).

These trends have led to extreme flexibility in the recruitment process and to a remarkable decrease in labour costs. Moreover, they have produced a marked polarization of the business structure, with massive impacts on the labour market and on working conditions, as witnessed by the Spanish case before the crisis, where the whole construction sector was controlled by six huge companies focused on management and coordination, and based on a system with up to five or six levels of subcontracting, on the undeclared work of undocumented immigrants, on temporary contracts (which applied to almost two-thirds of the workforce) and on ‘dependent’ self-employment (ILO, 2001; Recio et al., 2006).

Such work organization has helped create exploitation differences based on race which, as illustrated by the example of Italy, have increased since the crisis. The Italian construction sector employs a high percentage of migrant ⁷ workers: in 2012, 19.2 per cent of the workforce (346,000 migrants). They perform the more difficult and dangerous tasks ⁸ and are employed mainly at lower-skilled levels, despite the fact that many have been working for several years within the industry and are capable of performing higher-skilled jobs. In 2012 the accident rate was slightly higher among migrant workers while, on average, they earned €133 a month less than locals. Moreover, migrant workers were hit greatly by the crisis, with wage differentials between them and Italian workers rising from 4.1 per cent to 10.5 per cent between 2009 and to 2012 and with them having greater recourse to the redundancy fund (Ires – Fillea Cgil, 2012).

The Italian metalworking sector similarly presents interesting examples. During the 1990s the government privatized many state-owned enterprises and they, along with many other private companies, began to outsource production to eastern Europe, resulting in a reduction in the number of companies and employees. The larger and more dynamic enterprises that maintained production in Italy lowered their production costs through increasing their use of subcontracting, which helped stratify the labour market on the basis of company size and employment contracts. This paved the way for increasingly differentiated working conditions between migrant and native-born workers. A 2008 survey highlighted that most migrant metalworkers were employed as semi- or unskilled manual workers, although many had higher levels of education. Similarly, their average monthly net wages were lower than the sector average (€1186 vs. €1246), and the migrant workers considered themselves to be the victims of both discrimination and intimidation at work, experiencing high levels of aggression from their management, superiors and fellow workers (Fiom-Cgil, 2008).

The linkage between racial discrimination and labour market stratification on the basis of employment contracts is evident at Electrolux-Zanussi, a major European producer of appliances, and at Fincantieri, a state-owned shipbuilding company. In the 1980s, Zanussi was acquired by the Swedish multinational Electrolux, which introduced a production model based on Toyotism. As a result of the crisis, Zanussi-Electrolux cut its Italian workforce from about 9000 workers in 2006 to 5715 employees in 2012, working in plants in Solaro, Porcia, Pordenone, Forlì and Susegana. ⁹ The hiring freeze, the stabilization of the workforce and the company’s introduction of an Ethical Code providing for zero tolerance of discrimination, led Electrolux-Zanussi to improve the working conditions of its existing permanent immigrant workforce and even to implement seniority increments and career progression. However, as pointed out to us by a trade union delegate from the Susegana (Treviso) plant, in the cooperatives to which Electrolux-Zanussi has outsourced its loading and unloading operations, and which mainly hire temporary migrant workers, there are now higher levels of precariousness and contract infringements, together with significant inequalities and discrimination. Temporary workers are paid less, are often obliged to work overtime, and are not paid production bonuses (permanent workers have monthly bonuses). These differences occur even when the temporary migrant workers work side by side with permanent (native-born or migrant) workers.

In 2013, Fincantieri had 8367 direct employees in Italy ¹⁰ , though if allied industries composed mainly of subcontractor companies are included, the figure rises to about 30,000. It is among the world leaders in the production of cruise ships, a niche market it targeted after the crisis of the 1970s and in the face of growing competition from the Far East. In terms of work organization, between the second half of the 1980s and the first half of the 1990s, Fincantieri underwent major restructuring, resulting in a 75 per cent reduction of its direct employees and halving labour costs. The whole production process was simplified, facilitated by the computerization of design and planning and the introduction of a flexible work organization based on the use of direct employees in building the hull and the on-site outsourcing of ship assembly operations using subcontractors whose employees primarily originated from Africa, eastern Europe and southern Italy (Zanin, 2002; Basso, 2007).

The so-called ‘Fincantieri model’ model led to the coexistence, in the same shipyard, of working conditions which were very different but closely interdependent – and generally worse. Interviews with migrant workers, employee representatives and unionists have revealed that working conditions in the subcontracting system are characterized by strong racial segmentation in the workplace, by extensive use of undeclared work, failure to respect workers’ rights and safety standards, working hours of up to 10–12 hours per day, lower wage levels through piecework pay and the use of ‘global pay’ ¹¹ , as well as a ban on joining a union, the signing of undated resignation letters at the time of hiring ¹² , blackmail and violence.

A similar work organization is found at Saint-Nazaire in France: in the Chantiers de l’Atlantique, a company also specialized in building cruise ships. Here the montage exotique system was introduced, based on outsourcing and the hiring of immigrants considered to be more willing to accept low wages, longer working hours and fewer rights (Patron, 2004). Subcontracting is also to be found in the shipbuilding sector in other countries, such as China, Turkey and to a great extent South Korea, where the ratio between direct employment and subcontractor employment is 4:1 (Thorsten and Jochen, 2006).

Unions face a major challenge to come up with a new strategy against the discriminatory system of subcontracting, covering both the racial segmentation of the labour market and the stratification of rights created by the work organization. In Italy, such strategy has been implemented, though in a piecemeal manner. Before the crisis, particularly at Fincantieri, collective bargaining was used to reaffirm the principle of equal treatment for workers in tenders, but this principle has been melted away by the crisis and increasing attacks on unions. Employers’ associations and unions are currently primarily confronted with issues related to the impact of the crisis, and there have been growing difficulties in signing national agreements. These are now almost always signed very late, and small companies have often been granted small wage concessions after already obtaining concessions from the unions on flexible working hours and fewer rights.

The crisis, together with a tightened up migration policy, has also affected anti-discrimination strategies. The unions now largely focus their interventions and demands on combating the effects of the crisis on the labour market as a whole, tending to give low priority to specific support for migrants. Protesting against the discriminatory system as a whole has been put on the back burner and, when it does take place, is less intensive than in the rallying phase of the first half of the 2000s. The practical commitment by unions to tackle discrimination at work has been limited to specific local contexts backed by individual union officials, and to a number of specific national-level campaigns, though not always with unanimous support (Carrera and Galossi, 2014: 370). This was the case over the demand to extend resident permits for those awaiting employment to up to one year, helping to prevent immigrants who had lost their jobs from losing their residence permits and becoming ‘undocumented’, and over the campaign ‘Stop caporalato’ (stop the gangmaster system) of the Flai-Cgil (the agro-industrial workers’ union) and Fillea-Cgil (the construction workers’ union) against severe exploitation in agriculture and construction, which led to the new criminal offence of illicit labour intermediation via Decree No. 138/2011.

Discrimination at work and union responses in time of crisis

In the Italian metalworking sector there are now two sets of working conditions (and therefore of discrimination): those in big enterprises, where unions are present, and those in SMEs where unions are hardly present at all or totally absent. As highlighted by a Uil national representative and a Cgil local representative, in this sector the crisis has not only caused a general worsening of working conditions and industrial relations, but has also increased the difference between the two tiers.

Within unionized factories, there are no reports of any serious discrimination, since union interventions have largely resulted in equal treatment, as in the above-mentioned case of Electrolux. By contrast, our interviewees reported that in the SMEs migrants continue to be given heavy menial work exposing them to adverse conditions. Their wages are lower, they are often classified at lower levels than their actual work deserves, and they do not benefit from seniority increments. In some cases they are exposed to situations of severe exploitation, which one Uil unionist even termed ‘brutal’. Their precariousness and contractual weakness is further worsened by institutional discrimination, such as migration policies linking a residence permit to the employment contract and social rights to migration status. One local Cisl representative stated that workers in large companies often enjoyed contractual stability, thus gaining access to long-term residence permits and in some cases citizenship, and running fewer risks of becoming ‘over-stayers’. But with the crisis, workers at SMEs have lost or risked losing their residence permits, and have also faced greater difficulty in accessing social security benefits. Moreover, cases of non-payment of wages have multiplied. As reported by one migrant interviewee, workers are reluctant to report these to the unions for fear that their employer might retaliate by dismissing them, thus causing them to lose their residence permits as well.

After many direct workers’ campaigns, an agreement was signed at Electrolux on social security provisions. It introduced incentivized job mobility, solidarity contracts, and the possibility of accessing redundancy payments. Migrant interviewees and a Fiom-Cgil delegate reported that taking voluntary redundancy has put some migrant workers in difficulties, especially single-income families or families with mortgages. But there was no unequal treatment between migrant and national workers. Access to voluntary redundancy concerned about 180 workers of whom one-third were migrants and was based on seniority. According to a Uilm trade unionist, migrant workers who quit their jobs with this kind of agreement were the ‘less rooted’ ones:

‘In some cases, the crisis has triggered a selection process among who is rooted and who is not. Those who have deep roots in our country do not consider it convenient to accept the incentive, preferring to remain in the factory, perhaps because they have a mortgage to pay. The crisis is sending back home those who are less rooted in our country. This is what happens in factories where there are unions.’

In the shipbuilding sector, discrimination is closely connected to work organization, which, in combination with Fincantieri’s hiring freeze, has resulted in racial segregation, with workforce segmentation dividing the Marghera site into ‘two workplaces’. For nearly two decades, permanent workers have been almost exclusively native-born workers, whereas the workforce in the subcontracting system is largely composed of migrant workers. ¹³ The worsening of their conditions is also the result of national migration policy: a migrant interviewee and a Fiom-Cgil local representative both argued that the link between residence permits and employment contracts puts migrant workers in an extremely vulnerable position for blackmail by their employer. It can lead them to accept the precariousness inherent to the subcontracting system, and can also involve permanent workers whose continued contracts depend on the tender being renewed.

Falling orders and the crisis have caused a general deterioration of working conditions, in particular for subcontracted workers. Job cuts feature major inequalities in access to the collective agreements over redundancy benefits. While permanent workers at Fincantieri had immediate and automatic access to the redundancy fund, this was not the case for subcontracted and temporary workers, as highlighted by a Fim-Cisl local union representative:

‘The first to pay the consequences (of the crisis) were workers in the subcontracting system; they disappeared in total silence. Some firms ended up in bankruptcy; here, nothing: workers were simply kicked out, often without redundancy provisions. Sure, agreements had been made for the redundancy fund: but while in bigger firms it is normal, here accessing the redundancy fund is almost impossible.’

In the subcontracting system, wages have been cut further because subcontracting firms are trying to maintain their profit margins in the face of lower-price and lower-volume contracts. The Fim-Cisl representative reported that ‘global pay’ itself – which used to enable subcontracted workers to have higher direct pay than permanent workers at Fincantieri owing to the monetization of their social rights – has been significantly cut back and is now equal to the level of permanent workers’ direct pay. Moreover, the shorter duration of tenders, recurring failures of subcontractors, and the frequent change of company names (often an excuse not to pay wage arrears) are elements used to blackmail migrant workers.

Even permanent workers at Fincantieri report a worsening of their working conditions, suggesting the ‘two sites’ are converging in a race to the bottom. In the years prior to the crisis, opposition to the introduction of less advantageous measures fought off the attacks on rights while maintaining the ‘labour aristocracy’. Now, as a Fiom-Cgil local representative reported, this opposition has been ‘bought off’ using the redundancy fund as blackmail.

This situation has had a major impact on worker relations at the shipyard. On the one hand, tension between ‘the permanent workers’ site’ and ‘the subcontractor site’ is growing, while on the other hand the need for solidarity among workers is becoming more and more important. Migrant workers are the weak link in a chain mirroring the distress and tension at the site, in a sort of ‘war among the poor’. One Fim-Cisl delegate and a migrant interviewee reported that in many cases native workers considered migrant workers as ‘unfair’ competition, ‘stealing work’ in a situation exacerbated by the crisis. They are seen as workers who, by accepting inferior conditions and lower wages, are responsible for the overall worsening of working conditions at the site. Moreover, some permanent workers have a widespread feeling of superiority over workers employed by subcontractors, not as much due to racial prejudice as to the fact of feeling in an objectively superior condition concerning their rights, wages and working hours.

On the other hand, the worsening of living and working conditions, accelerated by the crisis that affects everybody regardless of national origins, is also leading the two groups of workers to grow closer. Through a general race to the bottom the crisis is objectively ‘uniting’ those formerly separated by labour market stratification, as one Fim-Cisl delegate commented:

‘There is mistrust between native and migrant workers which sooner or later will have to disappear because the labour market favours those who cost less. More flexible and scarcely regulated work drives out unionized, regular, and structured work.’

Working conditions vary according to whether the workers are employed by the main contractor or by a subcontractor, and whether the migrant workers actually have employment contracts. Conditions in the subcontracting companies where most migrant workers are concentrated ¹⁵ are worse than average, with employees required to increase their pace of work and to work longer hours, paying less attention to safety measures. Many must eat on-site in precarious conditions instead of in a canteen or in one of the eating places provided for by national contract. As explained by a Fillea-Cgil local representative, the systems of ‘global pay’ and piecework are particularly widespread in subcontracting firms, especially among workers assigned to drilling and scaffolding. A Fillea-Cgil national representative stated that migrants often benefit less from promotions, tend to be classified at lower levels and have fewer possibilities to benefit from training, but with migrants constituting 45 per cent of the official workforce, inequalities between migrant and native workers are slight insofar as immigrants are formally employed. Inequalities and discrimination are however widespread and deeper in the major segment of undeclared work. As the Fillea-Cgil national representative reported, ‘the undeclared worker is not registered in the Construction Fund, does not receive regular pay, and lives in continuous fear of blackmail and subjection to the employer, who very often is a gangmaster’.

The interviews showed that the crisis has hit all construction workers, although migrant workers have suffered more. Many of them have accepted cuts in working conditions just to be able to keep their employment contract. The Fillea-Cgil national representative reported that some have signed part-time contracts despite working 8–10 hours a day, while others have set up their own one-man firms as bogus ‘self-employed’ workers.

We conclude by considering union actions. In the metalworking sector, according to some of the interviewees, migrant workers are more inclined to join unions than native-born ones. Their greater need for protection also leads them to the unions in order to access the services provided. There has been an increase in union representation by migrants in all three unions (Cgil, Cisl, Uil), even though not quite proportional to the numbers of workers registered. Their numbers have increased at the provincial leadership level, though not yet among full-time union officials. Trade union members and delegates reported that their relationships with migrant associations have become more substantial, in the case of Cisl through the coordination role played by Anolf Cisl ¹⁶ ; in the case of Cgil through establishing an internal organization coordinating migrant members.

In the Electrolux factories in Porcia and Susegana with their high percentages of migrant workers there is also a high rate of unionization among migrants. In general, these workers take part in union meetings and have participated in the strikes held in the past years in opposition to the company’s reorganization plans. The trade unionists interviewed did not consider it necessary to intervene in a specific manner to oppose discrimination. ¹⁷ According to a Fim-Cisl unionist and a Fiom-Cgil delegate, union policies are already per se anti-discriminatory since they are based on the principle of equal treatment, and in any case the protection and services provided are considered sufficient. Discrimination was considered less frequent than 10 years ago in unionized companies and relations between migrant and Italian workers are less problematic within factory walls than outside.

But what are trade unions doing in SMEs, or, in the case of Electrolux, in its subcontracting cooperatives? Here, the weakness of union intervention emerges dramatically, as does their loss of ground in the face of labour market transformations and production reorganization. As one Fim-Cisl unionist told us:

‘We have great difficulties in representing these workers because obviously they undergo coercion from their Cooperative. We encounter difficulty with the user firm, the contractor, in negotiating conditions that are not exploitative and which do not reduce the contractual rights of direct employees. It is an evolution in working conditions, in terms of law, and of contractual development.’

In the ‘Fincantieri shipbuilding model’, the unions have to deal with the existence of two distinct but interdependent employment regimes on one single site, and with workforce segmentation. They also have to cope with anti-union policies implemented by the majority of subcontracting firms which dismiss or do not hire anyone in contact with unions. A Fiom-Cgil local representative reported that, unlike permanent workers, subcontracted workers (except for some traditional painting firms) have very low rates of unionization and much greater difficulty in participating in union activities, as reflected by the absence of migrants among union delegates. The Fiom, Fim and Uilm representatives report that when migrants employed in the subcontracting system do join unions it is mainly for protection, for individual (rarely collective) disputes, to gain payment of unpaid wages, to obtain social security provisions or to have their rights acknowledged. As one Fiom-Cgil local representative stated:

‘Sometimes it is difficult to talk with workers about our agreements in non-unionized firms. We have to face up to the limits of the organizational forms, which are very complicated because all union rights are monetized. When Fincantieri workers or unionized company workers attend our meetings, they are paid. However, subcontracted workers risk not being paid for hours spent at union meetings provided for in the Agreement, because ‘global pay’ covers everything.’

Interviewees reported that for some time now migrants have been increasingly joining unions. In addition, their participation is active, with them attending coordination meetings and the conferences, participating in assemblies, collaborating in defining national agreements, joining strikes and demonstrations, taking on representation roles and helping organize various activities. This process has transformed the unions themselves, which have since become the first truly multinational and multiethnic associations in Italy, and are important venues of social and political interaction between migrants and native Italians. However, many trade unionists reported difficulties in organizing specific categories of workers in this sector, in particular seasonal workers, subcontracted workers and undeclared workers. According to a Fillea-Cgil local representative, it is complicated work establishing a continuous and fruitful relationship with seasonal workers since they move from one province to another and from one site to another. Moreover, a Fillea-Cgil national representative reported that it is very difficult to approach and unionize undeclared workers because they do not want to run the risk of being recognized, as this would endanger their stay in Italy.

Unionists use three main strategies against discrimination: raising awareness, both at work and outside; monitoring construction sites to observe immigrants’ working conditions; and offering protection and specific services for migrants. As an example, Cgil in Treviso sent a multilingual letter to migrant workers registered in the Construction Fund to help them check for irregularities in their wages, their payments into the Construction Fund and their employment classification.

Conclusion

Since the 1980s the spread of outsourcing and subcontracting in the sectors examined has promoted the restructuring of production and encouraged the spread of more precarious forms of employment. Over the past two decades the increase in outsourcing in certain areas has gone hand in hand in several European countries with a highly vulnerable model of migrant worker integration. Within this process a labour market stratification appears to have emerged, differentiating between the employment conditions and rights of parent company employees and those of subcontracting companies along both temporary-permanent and racial lines. As the case studies show, the crisis has made union intervention against both employment stratification and racial discrimination particularly difficult, at least in Italy.