In recent years, studies on the financialisation of society – the rising impact of financial institutions and motives over the decisions and strategies of individuals and non-financial corporations – have been increasing.
Sociologists of work have been particularly concerned about the shareholder value orientation-labour process nexus. The main argument here is that shareholder pressures have been inducing the managers of non-financial firms to borrow and buy back their own company’s shares to maximise dividends. Then these rising financial payments lead to direct reductions in wages and the extensive use of casualised workers to improve the firm’s balance sheets. Yet, the relationship between the financialisation of households in the form of personal indebtedness and their behaviour at the workplace has been a largely unexplored area.
In my research, I combine insights from the sociology of finance, sociology of work, industrial relations, and political economy to theorise and examine empirically to what extent the fear of defaulting on your debt makes you less militant. More specifically, in a recently published article, I demonstrate that the rise in personal indebtedness in the USA, the UK, Japan, Korea, and Sweden since the early 1970s is strongly associated with the decline in strike participation, strike duration, and the number of strikes taking place.
Why do workers go on (or avoid) strikes?
From the 8-hour workday to the mass strikes that contributed to the fall of the apartheid in South Africa, strikes have been historically the main lever of pressure for working class people. Focusing on today’s society, the question of why people choose to strike or not has been puzzling social scientists over the last decades.
One well-established driver of industrial action is the level of economic activity. When economic activity peaks and unemployment decreases approaching full employment, workers tend to feel safer regarding the risk of getting replaced. Consequently, they have more bargaining power which allows them to strike and demand improvements in working conditions and higher wages.
In addition, as demonstrated by the recent resurgence of strike action across many countries, inflation is another crucial driver of strike activity. This is because inflation is directly linked to the real value of wages: when consumer prices rise faster than nominal wages, workers have incentives to strike and demand wage increases to avoid losing purchasing power. Especially when the labour market is tighter, inflation-induced strike episodes are likely to last longer and participation to be high.
However, while cyclical factors and external events might induce strikes, structural changes in the economy also matter.
One key example is the process of de-industrialisation in advanced economies. The movement of the workforce from the high-unionisation manufacturing sectors to the service sector has been identified as one of the reasons that aggregate strike activity has been on the decline for decades. By the same token, reductions in the size of the public sector under neoliberalism are also important for this trend since traditionally public sector unions are more militant due to the relatively higher job security of their members.
For most advanced economies, the declining power of unions and the sharp decline in union membership rates are also key causes behind the reduction in strike activity. Direct attacks on unions via liberalising the labour law and undermining their role have been disincentivising workers from becoming members or forming new unions in non-unionised workplaces. Consequently, fewer people have the legal right to strike or, even if they have it, they are skeptical about the cost-benefit balance of striking given the undermined role of unions.
More recent work also highlights that the globalisation of production has been a process that has been suppressing industrial action globally. The rise of global interconnected financial markets and the fragmentation of supply chains allow employers to relocate production easily and quickly. This has generated a global race to the bottom for manufacturing wages across the world since workers know that any demand for higher wages or resistance to the deterioration of their working conditions might lead to relocation. Thus, over the alternative of becoming unemployed, not striking is a strategy that might secure your job in the short run.
How debt makes us less militant
The steep rise in personal indebtedness, either for education, healthcare or to purchase a home, has triggered several debates within sociology. Sociologists of finance have been arguing that the financialisation of everyday life generates and reshapes power relations across society. According to Maurizio Lazzarato, debt “…subdues, manufactures, adapts, and shapes subjectivity.” But what does that mean in practice?
Getting indebted entails an obligation to repay the money you owe within a pre-defined period. Failing to meet this commitment is an unwanted situation for several reasons. On the one hand, missing payments involve the risk of default and personal insolvency, which has obvious economic consequences. On the other hand, under neoliberalism, being ‘unsuccessful’ in managing your finances comes with a social stigma of personal failure. Thus, for both reasons, the primary goal of indebted individuals is to finance their debt, even at the expense of any other economic and political demands.
Given that the deregulation of the labour market allows employers to replace workers easily and fast at short notice, the power dynamics generated by personal indebtedness are particularly influential for the employment relationship.
Evidence from advanced and developing countries shows that increases in household debt are closely associated with the aggregated decline in the income share of wage earners, particularly in the manufacturing sectors. This is because indebted workers are reluctant to ask for higher wages or are even willing to accept lower pay due to the fear of losing their job and defaulting. By the same token, in my research, I also show that household indebtedness makes workers involuntarily comply with working under contingent contracts, induces them to find additional precarious jobs to cope with financial difficulties, or even work under conditions that compromise their health.
My latest paper builds on the notion of self-disciplined behaviour induced by personal debt and argues that workers avoid strikes fearing that they may lose their jobs and default. That holds for a wide range of institutionally divergent advanced economies from the USA and the UK to Japan, Korea, and Sweden since the early 1970s. Even in cases where the right to strike is legally protected, striking involves not getting paid for the days you are walking out, therefore, the risk of missing payments remains. Moreover, in the case of unfair dismissal due to striking, litigation can be time-consuming and costly – if not unaffordable for poorer working-class households.
This research agenda has implications for researchers as well as labor movement organizers. Sociologists of work and other labour studies scholars should pay more attention to the linkages between the financialisation of corporations and employees, and workplace behaviour. Union organizers must also realize that mobilizing more workers requires a better understanding of the difficulties workers face outside the workplace and how these shape their workplace decisions.
Giorgos Gouzoulis. “What do indebted employees do? Financialisation and the decline of industrial action” in Industrial Relations Journal 2023.
Image: Mika Baumeister via Unsplash