Recently many activists, scholars, and political commentators have focused their attention on rising income inequality, stagnating wages, union decline, and the disappearance of steady work. They have proposed a variety of programs to address these trends, such as expanding eligibility for overtime, implementing paid family leave, raising the minimum wage, and investing in more training. While each of these specific proposals are valuable in themselves, they address only a part of the problem and offer only partial solutions. What they miss is that that there has been a fundamental change in the nature of work over the past three decades. Since the late 1980s, the entire context of the work experience has changed profoundly. Gone are the days when individuals (at least white, male individuals) with only a high school education could obtain a steady well-paying job by their late twenties and expect to stay in that job for the remainder of their careers. In the past, many blue-collar jobs provided job security, income stability, and a reliable package of social insurance and retirement benefits. But the steady job with a single employer throughout one’s career is a relic of the past.

Over the past three decades, civil rights laws have made a major contribution to reducing employment discrimination in the workplace in the United States. Since the enactment of the Civil Rights Act of 1964, women and minorities have entered many previously all-white, all-male occupations and have made significant gains in employment levels and pay relative to white males. For example, the pay of white women working full time relative to that of their white male counterparts increased from 57.9 percent in 1965 to 71.3 in 1995. Similarly, the earnings of black males relative to white males increased in the same period from 62.8 to 72.8 per cent. While some of these changes might be the result of changes in general attitudes, mores, and social practices, it is clear that they are, in large part, attributable to the law.

Despite the success of civil rights efforts, discrimination still exists in the workplace, although it now often takes new forms. The diffused and decentralized authority structure of the new boundary less workplace can give rise to bias and favoritism that is more subtle than discrimination in internal labor markets. Women and minorities in formerly white male workplaces often encounter passive hostility and subtle harassment from coworkers as well as glass ceilings and other de facto barriers to advancement. The civil rights laws were designed to eliminate discrimination as it was manifest in the old employment relationship, and therefore may be less effective to redress new forms of discrimination. In particular, the new workplace practices described in Chapter 5 threaten both to make liability for discrimination more difficult to establish and to render many of the old remedies ineffective.

The changes in the employment relationship described in Part II have been accompanied by a marked deterioration in the income distribution. The U.S. income distribution has become considerably more unequal since 1970, a trend that accelerated in the 1980s and 1990s. Despite the economic boom of the 1990s, the working poor now comprise the fastest growing portion of the workforce. The burgeoning inequality threatens the integrity and moral authority of the social order. Those locked out of the world of economic opportunity are locked into a perpetual underclass, and often exhibit antisocial behaviors such as drug use, alcoholism, and crime. The extent of income inequality offends our sense of decency and undermines the possibility of social cohesion. It stands as a quiet but persistent reminder that current economic arrangements are not moving in the direction of economic justice.

The widening of the income distribution has occurred in the same period in which firms have dismantled their internal labor markets and begun to implement boundaryless human resource practices. The correspondence suggests that there may be a relationship between the two developments. This chapter explores the deterioration of the income distribution and its possible relationship to the changing job structures. It argues that one important factor that is driving the trend toward increased income inequality is the changing nature of the employment relationship. It further argues that in evaluating programs designed to promote income equality, we should choose those that help cushion the shocks and ease the transitions of workers as they experience the vicissitudes of the boundaryless workplace.

While it may be true that knowledge is power, in the current era it is more accurate to say that knowledge is value – economic value. In this information age, individual knowledge, expertise, skill, and the ability to acquire additional knowledge, expertise, and skill, are the primary sources of institutional and individual advancement. Most firms believe that the knowledge possessed by their employees is their major asset and their primary source of competitive advantage. In the words of Fortune magazine editor Thomas Stewart, “Information and knowledge are the thermonuclear competitive weapons of our time.”

Today's firms value not merely specific technical knowledge, such as computer code or biotechnical discoveries, but also more mundane types of knowledge, such as how the business operates, how the goods are produced, how paperwork flows, and how files are organized. Employees also have valuable knowledge about the firm's product, the context in which it is produced, and the environment in which the firm competes, including knowledge of business plans, upcoming projects, past projects, and past experience. There is also enormous value in employees' knowledge about customers, markets, and competitors. One particularly valuable type of knowledge is called “negative knowledge” – knowledge of products tested or systems tried that proved to be unproductive. Such knowledge in the hands of a competitor can save huge expenditures in duplicative and wasteful efforts in pursuit of dead ends.

As firms and employees have come to recognize the enormous value of employees' human capital, disputes over ownership of human capital have increased.

It is difficult to comprehend social change when living in the midst of it. It is easier to study periods of social change in the past – to describe the elements, evaluate the impact, search for linkages, and adumbrate the unintended consequences of change. Many historians have mined these rich veins to describe the changes that occurred in employment relationships as production shifted from an artisan-based system in the nineteenth century to the industrial system of the twentieth century. We are now undergoing another fundamental transformation of the workplace, and this book is an attempt to understand this current metamorphosis, to place it in historical context, and to explore its ramifications.

We are accustomed to thinking of history as divided into a series of parallel realms. Economic history, labor history, history of technology, intellectual history, political history, military history, and legal history are usually treated as separate enterprises, each with its own narratives of stability and change, its own moments of necessity and accident, and its own cast of insiders and outsiders. At times, one type of history imports another to enhance its own story, as when social historians weave in events from economic history to support their narratives or when intellectual historians use examples from legal history to strengthen their assertions of intellectual trends. But by and large, each type of history is studied as a separate story that happens to share with other types of history only a common moment in time. This book is based on a different understanding of how histories fit together and how they together bear on the present.

The job structures that emerged as a result of Taylorism and the personnel management movement deviated in several respects from the way the labor market was predicted to work by neoclassical economic theory. In the labor market of neoclassical theory, workers are assumed to move freely between firms and jobs, constantly seeking and seizing new opportunities to maximize their incomes. Firms likewise hire and dismiss workers freely as demand for their products fluctuates. Firms also raise and lower wages to correspond to changes in product and labor market conditions, all the while paying their employees the value of their marginal product at every point in time. In the theory, wage differentials for any given skill level between firms and within firms disappear over time as wages achieve an equilibrium level. At equilibrium, each worker is paid the prevailing market wage for his or her skill level, each employer has equal labor costs, and the amount of labor hired by any particular firm is determined by the demand for its product and its level of technological and administrative prowess.

In the 1940s and 1950s, a group of labor economists studied the operation of the labor market and found that it did not operate according to the predictions of the neoclassical theory. John Dunlop, Clark Kerr, Lloyd Reynolds, Richard Lester, and others became familiar with the actual operation of labor markets by working for the National War Labor Board. Subsequently, they conducted empirical studies of local labor markets from which they concluded it was necessary to revise neoclassical labor market theory.

Mobility is both the bane and the opportunity of the boundaryless workplace. On the one hand, the emerging digital era employment relationship creates a more interesting work environment and offers workers more autonomy and freedom than did the industrial era job structures. Yet on the other hand, for many it creates uncertainty, shifts risk, and fosters vulnerability.

Some of the groups that are disadvantaged in the new work regime can be easily identified. For example, older workers caught in the transition are heavy losers. Having been led to expect a good job and a secure future, they instead discovered that their expectations were chimeral. Another group that has not fared well is the low-skilled – those who have neither the necessary training nor the ability to reinvent themselves, retool, and adapt to new labor market demands. A third disadvantaged group is the risk-averse – those who were comfortable with the stability and certainty that internal labor markets offered, and lack the desire or initiative to seek out opportunities, to network, and to build their own careers.

In addition to the older, the unskilled, and the risk-averse, all workers now face heightened risks at certain points in their working lives. Given the churning and constant change that characterize the new workplace, all face a high likelihood that their working lives will be peppered by occasional periods of unemployment. Therefore every worker requires a reliable safety net to ease the transitions and cushion the fall when they are left behind by the boundaryless workplace.

The new employment relationship and its corresponding job structures were initially constructed in nonunion environments, and they continue to operate almost exclusively in nonunion environments to this day. Hewlett Packard, TRW, and the General Electric Company (GE) are three leading exemplars of the new work practices described in Chapter 5. Hewlett Packard and TRW have always been nonunion, and GE engaged in aggressive deunionization efforts in some of its plants, and then instituted boundaryless workplace practices after the unions had been eliminated. The sequence of deunionization first, workplace restructuring later, was commonplace in many large corporations in the 1980s. As discussed in Part I, the same sequence characterized industrial relations practices in major corporations in the late nineteenth and early twentieth centuries when internal labor markets were first established. At that time, employers first broke the unions and then instituted Taylorism and other work rationalization measures. Like the implementation of scientific management in the early twentieth century, today's boundaryless workplaces are being created in the vacuum left by the deunionization drives of the previous decade.

In the past twenty years, union density in the private sector declined from almost 16.5 percent in 1983 to 9.0 percent in 2001. This decline is particularly striking in light of the fact that during most of that period, workers' real wages were declining, so that one might have expected aggressive organizing activity and union growth. The union decline was most pronounced in large manufacturing firms in which internal labor markets had been the most deeply entrenched.

A 1733 painting by John Heaten depicts eighteenth-century life on the Marteen Van Bergen farm in New York's Hudson Valley. The picture, considered the earliest American genre scene, depicts a family farm set amidst the rolling hills of upstate New York. There is a house and an expansive yard populated by a well-dressed husband and wife, several young children, two black slaves tending livestock, and a white household servant, probably indentured, engaged in a transaction with a Native American. On the roadway in front of the house is a milk-wagon driver, and approaching the house is a well-dressed man followed by two lads, possibly a merchant-craftsman and his apprentices. The painting thus depicts the dominant forms of labor in the early years of the Republic – family members, slaves, indentured servants, craftsmen, and apprentices. There are no wage workers in the picture.

The picture portrays America in its formative years. In the seventeenth and eighteenth centuries, American economic life consisted of the daily travails of people who, like those in the painting, were in relationships defined by fixed legal obligations, such as husband, wife, parent, slave, indentured servant, craftsman, and apprentice. The notion of a labor market in which individuals freely sold their labor did not exist. In fact, until the nineteenth century, there were practically no people in employment relationships. Merchants, artisans, and members of the learned professions all engaged in remunerative activities, but they did not work for wages. Merchants sold their wares, professionals charged fees for their professional services, and artisans were self employed craftsmen who manufactured items such as barrels, rope, horseshoes, bread, clothing, and glass in their own workshops.

One hundred years ago, the eminent British labor historians Beatrice and Sydney Webb identified three goals of working-class collective action and three corresponding roles for labor organizations. They were: (1) to form mutual benefit associations, (2) to create organizations to engage in collective bargaining for job-related protection, and (3) to create organizations that could lobby for legislation favorable to employees. According to the Webbs, English unions, at different times in English history, performed each of these roles.

In the twentieth century, American unions have also played all three roles, but with a heavy emphasis on the second. Both the American Federation of Labor (AFL) and the Congress of Industrial Organizations (CIO) saw their primary function as bargaining for job-related protections. After merging in 1955, the AFL-CIO continued to emphasize collective bargaining and contract administration as the core function of unionism. Over the past fifty years, the individual national and international unions and the AFL-CIO federation have built highly sophisticated research and legal departments to provide support for their bargaining programs, while relegating their legislative, education, and organizing departments to secondary roles. As a result of these efforts, unions have been extremely effective in the collective bargaining arena. The strength of the AFL-CIO at its postwar zenith lay in its achievements at the bargaining table, one employer at a time.

In light of the transformation in the workplace, unions now need to develop new methods of operation. While there are many workers still working in the old employment relationship, evidence suggests that new workplace practices are spreading both across the corporate spectrum and throughout the employment hierarchy.