Published on Jobs and Development

A typology of employment systems: beyond the binary

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Employment practices define the relations between employers and employees. They include: wages, an employment contract, workplace rules, supervision methods, training, and security of employment. But we need to go beyond a mere listing of employment practices.

For instance, higher-than-market wages, and security of employment are associated with quality circles (QCs). These when workers are involved in incremental improvements in working methods, leading to productivity increases. Workers whose jobs are under threat are unlikely to come up with suggestions for changing production processes. Especially because these changes might well reduce the number of workers required for the production line.
The existence of interlocking and mutually reinforcing elements means that sets of employment practices can be taken to constitute employment systems (as also argued by Richard Locke, Thomas Kochan and Michael Piore in Employment Relations in a Changing World, 1997).
What are the different types of employment systems? In the literature there is a discussion about ‘High performance work systems’, presumably to be contrasted with ‘Low performance work systems’. But the use of the term ‘performance’ to categorize employment systems does not seem appropriate, since the connection between employment quality and work performance is something to be established, and not taken for granted.
The ILO uses the term ‘standard’ and ‘non-standard’, where standard employment refers to employment that is full-time, indefinite, and direct. In the binary definition, non-standard employment, then becomes everything else – part-time or casual, fixed term, indirect employment through an agency or labour broker, and self-employment that is economically dependent in sub-contracted, though own-account, supply.
A quick look at employment in developing economies (and increasingly in developed economies) shows that standard employment is the exception rather than the rule. This raises the question: how useful is it to use a binary categorization in which the negative or non-standard is, in fact, the standard? There is a mismatch between the binary categorization and empirical realities of employment systems.
Further, a look at employment systems in some countries, such as Germany, shows that in between the direct,  indefinite and full-time employment and the indirect and precarious employment there are employment systems of an intermediate category:  direct but for a fixed term, rather than indefinite.
In India, recent investigations by the author of employment systems across different types of manufacturing firms operating in the metallurgy, chemicals, garments and electronics sectors, shows that there does exist a similar intermediate category of employment; direct but fixed term. After the prolonged spate of struggles by indirectly and precariously employed workers (contract workers, as they are called in India) in the auto industry in the National Capital Region, many of the units in the region have announced their intention to switch to direct but fixed term employment.
Thus, there is a case for including a medium-quality employment system, one that includes direct employment, with security for a fixed term. Analytically, is it useful to introduce this medium quality employment system into the discussion of employment systems? In the context of global value chains, there has been a lot of discussion of the high road and low road binary. It looks useful to introduce a middle road category. In terms of government, employer and trade union policy, it would also be useful to introduce a middle road into the discussion. A jump from a low to a high road may be difficult to accomplish; while a more politically feasible option would be, at least as an intermediate step, to try for the middle road.
For the middle road or medium quality employment to become part of the analytical apparatus of employment systems, it would be necessary to establish that it is clearly different from both high-quality and low-quality systems. For instance, with regard to wages one can distinguish three types of workers: with earnings around the minimum wage; earnings around the living wage; and earnings that afford a substantial measure of discretionary spending. Besides such empirical characteristics, we also need to ask why such medium quality systems are emerging, which would then guide empirical research.
A lot of our thinking in economics is based on a binary typology. The nature of employment systems is one area in which there seems to be an analytically advantage in moving beyond a binary typology.
This blog post is based on work being done by the author for the ILO, New Delhi.


Dev Nathan

​Visiting Professor, Visiting Research Fellow

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