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Today, much is heard about the need for ‘labour flexibility’ and for necessary employee ‘adaptability’ to the demands of the increasingly globalised economy. Flexibility is often seen as a good thing in itself. To ordinary workers in many Central and Eastern Europe countries such debates sound strange. They have experienced flexibility as a deeply disruptive process of personal dislocation and disadvantage. Nowhere has change been more dramatic, even cataclysmic, than in Eastern Europe. Here a profound transition has occurred, from state planned to market economies. And, here, ‘flexibility’ is experienced coercively in ways in which workers could not previously have considered possible: as a scramble for jobs, as a lack of permanent contracts, as the necessity to work long hours despite poor or even hazardous health and safety, as the deliberate violation of labour rights. Such ‘flexibility’, for many workers, means little more than an ability to accept or endure multiple indignities and personal humiliation on a daily basis without any form of individual or collective recourse. It is the imposition of a new and effective form of labour discipline – the discipline of fear.
Market forces have reconfigured the working lives of the citizens of the former socialist world in ways that were simply unimaginable a decade and a half ago. Workers in the new market economies are still coming to terms with and adjusting to the sheer scale of the changes. The rapid and even uncontrolled release of market forces, in a virtually unrestricted manner, has resulted in social and economic consequences for ordinary workers which were not thought through in any systematic way. The most enduring economic consequence of transition has been the process of privatisation and restructuring of state enterprises and the break-up of formerly large-scale units of production with attendant mass unemployment and for many, impoverishment. In Central and Eastern Europe, the gap between the ‘haves’ and ‘have-nots’ is increasing.
While most workers may not have received high wages and enjoyed material affluence under the previous system, they had something which was lost almost overnight: security. A direct function of radical labour flexibility is new workforce insecurity created by the threat, or actuality, of both unemployment, and for those ‘lucky’ enough to find some form of employment, systematic labour abuse and denial of basic rights at work. The notion of insecurity is sometimes described as ‘precarious’ employment to signal that it is not simply an internal psychological state, but an actual erosion of labour conditions. The ILO has defined informal employment as employment without secure contracts, worker benefits or social protection. It is comprised of two basic components: self-employment in informal enterprises and paid employment in informal jobs. The idea is that both informal self-employed and informal paid workers do not have secure contracts, worker benefits, or social protection and, on average, earn less than their formal counterparts.
It is true that various forms of ‘informal’ economic activity existed in the former Soviet era. A major ILO report on the informal economy notes for example: “The informal economy did exist in the form of undeclared labour… With the transition to a market economy, the informal economy has expanded rapidly”. However, while an extensive informal ‘second economy’ existed in the Soviet era, this does not explain the failure of formal economic policies of capitalist reconstruction.
Today, any possibility of effective labour rights is being undermined through the pivotal role of the ‘informalisation of work’ in the new market economies of Central and Eastern Europe. As a result, significant numbers of the labour force have fallen below any threshold of regulatory protection. These workers are literally ‘invisible’. They subsist and are submerged in the variously described ‘shadow’ ‘grey’ or ‘black’ economies. This growth of illegal or semi-legal employment is as a major factor in nearly all of Central and Eastern Europe, although by definition difficult to quantify. It accounts for somewhere between a half and perhaps up to two-thirds of total GDP of some of these states, according to official estimates. Even in the so-called formal economy, employers will resort to “envelope wages” and under-the- table payments to minimise tax and social security liabilities. So-called ‘legitimate’ businesses will often keep a second set of accounting books, or conduct off-book or direct payment transactions with their customers and employees, thus oscillating between criminal and non-criminal behaviour on a regular basis, and increasingly blurring regulatory avoidance with outright criminality.
In sum, it is difficult to form a picture of the informal economy in any one country, far less to generalise about a region as a whole. Such is the dynamism and variety of forms of ‘infomalisation’ in the post-communist labour market. Workers can be in ‘both’ economies at the same time. Like any simple categorisation, the real complexity and changing nature of employment abuse cannot be parcelled up in a simple neat definitional package, or consigned to one area of the economy alone. What really matters is that in any discussion of informalisation, the key focus should be on the ‘structures of vulnerability’ within which workers are embedded.
This is not simply an end point in the reconfiguration of working conditions in the new market economies. It is a process which is undergoing continuous renewal and even accelerated development under the pressure to compete in a European and global arena. ‘Informalisation’ is like a virus, it spreads to even formerly healthy regulated sectors, undermining previously decent working conditions and contractual arrangements, in a reinforcing downwards spiral.
What we can say with certainty is that significant multiple forms of employment abuse exist throughout Central and Eastern Europe, documented on an ongoing basis by, among others, the ILO and the International Confederation of Free Trade Unions. Such employment abuse undermines the possibility of secure, regulated employment and inhibits the growth of collective forms of labour protection. What is interesting is that where one form of employment abuse is discovered, it often subsists with a whole bundle of other labour abuses.
In some countries, such as the Baltic states of Estonia, Latvia and Lithuania, the imposition of ‘self-employed’ or successive short-term contracts is a rapidly growing feature of the restructuring of the labour market. Employees, afraid of losing their jobs, will even characteristically collude to hide such contract abuses.
At the level of state authorities, profound constraints on effective enforcement have also to be seen against a background of weak employment protection laws and low levels of fines by ‘business-friendly’ regulators. Any notion of criminalising those involved in sustaining systems of abuse is generally limited to occasional exemplary prosecutions of the organisers of its more flagrant forms, such as human trafficking or child labour which attract adverse international attention.
Today, there is little indication, if any, of an identifiable process of ‘normalisation’ of labour markets. Indeed, where the norm for employment conditions will ultimately lie, rests very much in the balance. Trade unions organising in the informal sectors of the economy have to deal with profound challenges at economic, political, regulatory, and other levels. This presents a formidable task, especially as many of the low-paid areas where informalisation is most prevalent are hard for trade union organisers to access: construction, agriculture and forestry, hotels and restaurants, commercial services and retail.
Nevertheless, some advances have been made, including involving responsible employers in social dialogue, since the problems of informalisation also represent ‘unfair competition’. However, such employers are usually the minority of mainly larger companies. The primary task of organising or ‘formalising’ the informalised economy has fallen to national trade union organisations, albeit with considerable support from international trade union bodies. Here, the challenge has been to overcome the hostility to trade unions in general, in part, a legacy of the pervious era.
For its part, the European Commission has spoken of informal employment as “contrary to the European ideals of solidarity and social justice”. Yet the Commission is promoting notions of ‘flexi-curity’ as part of its Lisbon Strategy to enhance European competitiveness. This requires that workers must be ‘flexible’, albeit within protective structures. In Central and Eastern Europe there is flexibility, but virtually no security as promoted, for example, in notions of a European ‘social model’. This unresolved contradiction is now playing out in the older member states as migrant labour from Eastern Europe flows west. Yet the increasing adoption of an ‘exit strategy’ by the workers from the new member states is both understandable and an inevitable consequence of the desire to find a better working life. : “I am not afraid to talk with my supervisor which was the case in Latvia,” said one Latvian worker in Ireland. “Here there is trust, and confidence in the employee. And so the work is done better in such an atmosphere” said another.
As issues of labour migration and the preservation of labour standards come to dominate political agendas across Europe, trade unions potentially could be in a position to advance their demands for regulated employment conditions for workers, irrespective of nationality or country of origin. Failure to do so will leave open the door to dangerous division and even xenophobia.
Charles Woolfson
Marie Curie Chair
University of Latvia
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