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The Law of the Labour Market: Industrialization, Employment, and Legal

Article  in  Industrial and Labor Relations Review · January 2006

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2006

The Law of the Labour Market: Industrialization,

Frank Wilkinson

Recommended Citation
Review of The Law of the Labour Market: Industrialization, Employment, and Legal Evolution, by
Simon Deakin and Frank Wilkinson. Industrial & Labor Relations Review, Vol. 60, No. 1.
Available at: http://digitalcommons.ilr.cornell.edu/ilrreview/vol60/iss1/83
The Law of the Labour Market: Industrialization, Employment, and Legal
Evolution

This book review is available in Industrial & Labor Relations Review: http://digitalcommons.ilr.cornell.edu/ilrreview/vol60/iss1/83
142 INDUSTRIAL AND LABOR RELATIONS REVIEW

of American scholarship that exists in other parts that predated the industrial revolution persisted
of the world. and were preserved well into the twentieth cen-
For this, ILR Press has surely to be con- tury. The modern employment contract was the
gratulated. Rebuilding Labor is one of a series of product of collective bargaining and the welfare
engaged, provocative, and insightful studies on state, which invested the parties with reciprocal
U.S. labor and employment relations that have obligations. The timing issue is important because
been published in recent years. Together they economists and political scientists routinely assert
comprise a valuable resource for researchers that well-defined property and exchange laws
and progressive reformers not just in the United based on common law and dating from the Glori-
States, but worldwide. ous Revolution were the cornerstone of long-term
growth in Britain, as well as, by extension, in the
Edmund Heery United States and the Dominions. Deakin and
Professor of Employment Relations Wilkinson challenge and successfully undermine
Cardiff University, United Kingdom this simple view of British law.
The first of the three long chapters that com-
prise this book describes the pervasive effects
Labor and Employment Law of state legislation on the employment relation.
Beginning with the first Master and Servant Act
(1743), status (unequal bargaining power) was en-
The Law of the Labour Market: Industrialization, shrined in the employment relation. The second
Employment, and Legal Evolution. By Simon chapter contains a history of the Poor Law, which,
Deakin and Frank Wilkinson. New York: despite its many mutations, consistently acted as
Oxford University Press, 2005. viii, 380 pp. carrot and stick in the employment relation for
ISBN 0-19-815281-7. 500 years. It set a floor to workers’ earnings but
put the onus of unemployment on individuals,
This volume is a compendium of many books. thereby weakening their bargaining position.
While its ostensible objective is to examine changes Although the Poor Law was taken off the books
in employment contract law in contemporary in 1948, reports of its death were exaggerated.
Great Britain, the authors describe the histories of There are traces of it in Tony Blair’s emphasis on
labor market institutions since Elizabeth I; give an individual responsibility—or activation policy—in
account of the rise and demise of trade unionism the 1990s. In the third major chapter, the authors
and the welfare state; trace changes in labor market contend that collective bargaining beginning in
participation of women and part-time workers; the late nineteenth century shaped a new set
and provide an interpretation of liberal economic of rights and obligations for groups of workers,
theory from Robert Malthus to F. A. Hayek. To pushing aside the master and servant model.
round things off, they conclude with a set of Certain of these rights were extended to all work-
policy proposals that they refer to as Neo-Fabian. ers with the creation of the modern welfare state.
They submit that tighter labor standards are not Initially, universality did not apply to women and
incompatible with higher levels of productivity. part-timers, and after the postwar settlement new
With admirable skill, the authors forge the wide- legislation, or its absence, redefined the employ-
ranging elements of this book into a cohesive, if ment bargain.
not always seamless whole. The product is not an True to their evolutionary model, the authors
easy read, but it is certainly profitable. observe in the concluding section that aspects of
The eclectic nature of the volume and its the Old Poor Law, in particular the Speenham-
multiple and overlapping themes and directions land system (an early nineteenth-century relief
stem from the authors’ methodology. Preferring program specifically for poverty abatement in
an evolutionary non-linear line of attack, the rural Britain), can serve as guiding principles in
authors hold to the idea that understanding em- the establishment of a new set of labor rules that
ployment contract law requires a dual approach empower all types of workers in the modern labor
that combines knowledge of the progress of ju- market. Here they rely on the work of Amartya Sen
dicial decisions with a perspective on the role of and, in particular, Sen’s concept of “capabilities”:
law as a social institution. In their emphasis on putative rights are meaningful only to the extent
contingency, open-endedness, and punctuated that the citizen (or worker) has been provided
equilibria, the authors would appear to favor with the wherewithal to exercise it. The current
the social institution perspective. Their main British system has proved costly. Protective rules
conclusion is that modern contract law came that give guarantees to full-time workers and part-
late to Great Britain because concepts of status time workers, skilled and unskilled, and native and
 BOOK REVIEWS 143

immigrant workers alike can ensure higher levels sonnel economics (most notably Edward Lazear’s
of skill formation and greater coordination in the Personnel Economics [1995] and Personnel Economics
supply of and demand for labor. for Managers [1998]) is its focus on labor market
There is much to be admired in this volume. imperfections such as employment protection
Masters of their subject, the authors present a legislation, wage compression, and wage rigidities
compelling case. However, less than obeisant induced by minimum wages or collective bargain-
readers may feel unease with some of their his- ing. Garibaldi is correct in his observation that
torical interpretations and have difficulty judging discussions in personnel economics frequently
their critiques of policy. What are the alternative assume perfectly competitive labor markets. An
explanations? How has the growth of human investigation of how these theories change in the
capital affected and been affected by employment face of labor market imperfections is interesting
law? The authors miss opportunities to present and important. I found the discussion most engag-
international comparisons at many junctures in ing when it focused clearly on the role of labor
the volume. Is their portrait of employment law market imperfections, as in the chapters on job
(and specifically the emphasis on collective bar- destruction, employment protection legislation,
gaining) specific to Britain? The book is strongest training investments in imperfect labor markets,
when the authors step outside Britain, as in their and the question of whether to hire temporary or
illuminating discussion of the adoption by differ- permanent labor. These chapters are useful con-
ent countries of the European Union’s directives tributions and are not covered in Lazear’s earlier
on working time. textbooks. However, I think Garibaldi follows the
These are minor shortcomings. This volume model set by Lazear more closely than necessary,
will find many readers among students of British both in the selection of topics and in their treat-
labor markets, past and present. ment. For example, while any text in personnel
economics must cover incentive pay, Garibaldi
Michael Huberman devotes a detailed seven-page discussion to the
Department of History Safelite Glass case, which was the centerpiece of
CIRANO, CIREQ the corresponding discussions by Lazear.
Université de Montréal
While the role of imperfect labor markets makes
for a very interesting theme, the book does not go
as far as it could in advancing this main theme and
Labor Economics sustaining it consistently. For example, consider
the five case studies that Garibaldi touts as a dis-
tinctive feature of the book: changes in overtime
Personnel Economics in Imperfect Labour Mar- regulation in France in 1982, the introduction
kets. By Pietro Garibaldi. New York: Oxford of incentive pay at Safelite Glass Corporation,
University Press, 2006. xvii, 258 pp. ISBN the role of the temporary help industry in the
0-19-928066-5, $50.00 (cloth). provision of training, relative performance pay
in the context of broiler chicken production, and
This book covers selected topics in personnel the effect on productivity of the introduction of
economics, including the problem of choosing team production in a garment manufacturing
the optimal skill mix of workers in the firm, plant in the Napa Valley. Three of these cases
the hours-employment trade-off, the question do not concern issues of labor market imperfec-
of whether to hire temporary or permanent tion, and four are based on data from the United
workers, managing adverse selection in recruit- States, where we would not expect issues of labor
ing workers, optimal compensation schemes, market imperfection to be particularly relevant.
performance pay with wage constraints, relative Furthermore, whereas in certain chapters (such
compensation and efficiency wages, training and as those on employment protection legislation
human capital investment, job destruction, em- and job destruction) the theme is highly visible
ployment protection legislation, and teams and and is the center of attention, in others (such as
group incentives. In addition to scholars in the those on recruiting and team production) it is
field, the audiences targeted include students in completely absent. This asymmetry is largely a
undergraduate personnel economics courses, in function of the subject matter. Some decisions of
business school programs, and in traditional labor the firm (those involving compensation, training,
economics courses taught in Europe, where the and layoffs, for example) are obviously strongly
labor market imperfections on which the book influenced by labor market imperfections. For
focuses are particularly relevant. other decisions of the firm (such as those involv-
What distinguishes this book from others in per- ing job design and whether to use individual or

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