How employers work to create and perpetuate inequality

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Inequality
is discussed often and at length, and few would dispute that it is both undesirable
and socially risky. But it is easier to discuss the symptoms than the causes.
One of the causes that needs to be discussed more is the role of the private
sector in perpetuating inequality – and how this can be changed, says Ralph Hamann.

AT THE 2018
World Economic Forum in Davos, Oxfam made world headlines with its call to
action to close the growing gap between the world’s rich and poor. Its newest
report, which revealed that just 42 people worldwide hold as much wealth as the
3.7 billion who make up the poorest half of the globe, caused an international
stir.

A further
shock: billionaires have been created at an eye-watering rate of one every
other day for the past year. In parallel, the bottom 50% of the world’s poorest
saw zero increase in wealth. Moreover, Oxfam added, over 80% of the wealth
generated in 2017 landed in the pockets of the wealthiest 1%.

It called this
both “unacceptable” and “unsustainable”. And certainly it is widely
acknowledged that inequality poses wide social risks. But what, in practice,
can be done to stem the growth of inequality? Oxfam had its own suggestions,
calling on governments internationally to take a harder policy line.

However,
government on its own is unlikely to be able to bring about the required
changes. The private sector too has a significant role to play, as recent research from the UCT Graduate School of
Business suggests. In fact, the agency of employers in establishing and
maintaining unequal systems remains underexplored. While social grants and caps on
executive remuneration go some distance to remedying the problem, they alone
are not enough. The GSB study suggests four points to consider in the employment
sector.

Firstly, it
must be understood that inequality is perpetuated by institutions. In its
analysis of the Oxfam report, the Guardian noted: “Booming global stock markets have been
the main reason for the increase in wealth of those holding financial assets
during 2017. [Amazon founder] Jeff
Bezos, saw his wealth rise by $6bn (£4.3bn) in the first 10 days of 2017
 as
a result of a bull market on Wall Street, making him the world’s richest man.”

We must give
more attention to the institutions – that is, the “rules of the game” – that
maintain inequality. Jean-Jacques Rousseau argued that the privileges of the elite
were attained by “the first person to fence in a piece of land and to say,
‘this is mine,’ and to find people gullible enough to believe him.”

Institutions
are crucial to propping up inequality, and one of these is the employment
relationship. Sociologists have long explained how employers elicit effort from
workers, either using threats or incremental benefits; economists, meanwhile, explain how
“labour-repressive” or “extractive” institutions may be perpetuated even in the
wake of political transitions that ostensibly favour the exploited. This may
involve an “elite pact” between old and new elites. If we are
to address inequality, employment relationships must begin on a more equal
footing.

Secondly – and
this is related – we must recognise that elites actively shape institutions to
perpetuate their own advantage. Social and economic privilege allows elites to
write the rules of the game governing markets and employment relations, a
clear example of which can be seen in the establishment of the South African
diamond and gold mining industries.

These industries profited from ready access
to cheap labour, assisted by the Chamber of Mines, which helped prevent
employers competing for workers. Workers were further disadvantaged by the
imposition of special taxes on black Africans, with employers lobbying
government to increase the supply of cheap black labour. The most prominent
example is Cecil John Rhodes, one of whose legislative accomplishments was to
introduce, in 1895, a tax to force Africans into cheap wage labour.

In answer
to liberal criticism of these measures, Rhodes declared facetiously that the
tax was “not slavery but a gentle stimulus.”

The third point
is that efforts by elites to shape institutions to their advantage are not
always obvious, and neither are the consequences; so, we must be vigilant. This
is particularly true in times of political transition.

South Africa’s transition
to a democratic government in the 1990s, for example, was marked by similar,
though less blatant, efforts by elites to retain their position of advantage.
In the late 1980s, employers in the South African mining industry became aware
of deepening political conflict as well as growing power within the National
Union of Mineworkers.

This was followed by significant changes to the migrant
labour system, which included the payment of a living-out allowance that
enabled workers to live outside the compounds.

These shifts
can be seen not as altruistic moves but rather as being motivated by intrinsic
economic and strategic objectives, in the context of a fundamentally changed
labour market. Labour shortages had been replaced by an over-supply of labour,
which meant it was convenient for employers to dismantle the compounds. Yet
housing around the mines remained dismal.

Lastly, there
are real and unintended consequences to concealment by employers. Our South
African case study revealed that where employers concealed their primary
interests in affecting institutional changes, this deflected attention away
from important issues.

Despite their strategic and financial motives, employers
generally spun a narrative that highlighted the enhancement of human rights and
efforts to “free” workers from the previously controlling and
paternalistic approach of mining companies as a response to demands for change.

But this helped focus
attention on one shared problem (the symptom), that is, the single-sex
compounds, and away from the underlying social system (the cause), in which
employees were becoming increasingly dependent on diminishing employment
opportunities. Long-term, the result is the perpetuation of inequality.

This is not to
say that employers intended for their workers to suffer enormously; rather,
their primary intention was to advance their own interests by reducing their
responsibilities. But these go hand-in-hand, and to forget that is to be
blinded by what Robert Merton called the “imperious immediacy of
interest,” when “the actor’s paramount concern with the foreseen immediate
consequences excludes the consideration of further or other consequences of the
same act.”

Employers,
workers, activists, regulators and scholars must remember that inequality is no
accident. We have the power to create it; we have the power to dismantle it.
Policy changes can be hugely beneficial. But the world of employment must not
be overlooked.

  • Ralph Hamann
    is a professor and research director at the University of Cape Town Graduate
    School of Business. This article draws on research he co-authored with
    Stephanie Bertels and published in the
    Journal of Management Studies. Entitled The Institutional Work of Exploitation:
    Employers’ Work to Create and Perpetuate Inequality.

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