Paul Osterman - The Disposable Worker: How Firms Learned to Stop Investing in People

We sometimes use terms of formal employment, like W-2, contractor, freelancer, to try to define degrees of job security. But it seems like the target keeps moving. My guest today is the author of the new book, Disposable Workers, which makes the case that American firms have slowly reorganized themselves around workers they don't intend to keep. Paul Osterman is professor emeritus at MIT and one of the most prolific researchers on labor market institutions and job quality. Here's our talk. Welcome to The Economics of Work. I'm excited to welcome Paul Osterman, Professor Emeritus at MIT and someone who brings a lens of justice and fairness to the field of human resources. He just wrote a very thought-provoking new book, Disposable Workers. I have it right here, which I encourage everyone to check out. Paul, welcome to the show.

Thank you, Ben. I'm very happy to be here.

So let's get started with just defining what is a disposable worker? What do you mean by this

new concept of disposability? Sure. So I will subsequently go into detail about different subcategories and ways of thinking about it. because it's kind of a complex set of different kinds of situations. But the big idea is that, whereas it's true that almost all of us are at-will employees, that is to say a firm can fire us for any reason it wants to, unless we are a tenured faculty member or a judge, basically.

Yeah.

Normally, when a firm does hire somebody, they expect to keep them. They may not in the end, but they expect to keep them. They expect them to have a career there. They expect to give them training. They often provide some kind of career ladder. Broadly speaking, a disposable worker is someone who, when a firm puts them to work, they do not expect to keep them. They do not invest much in training. They do not invest anything in career ladders. And so from the very beginning, it's different than at will because from the very beginning, they're disposable. And the firm designs the jobs or organizes the work so it is disposable.

Well, let me ask you, I mean, just to start with like what it's being contrasted to. So, you know, when we think of non-disposable workers, you know, workers that have this expectation of growth and investment, where do you think that comes from? Like, what is the origin of, you know, does the firm want that? Is the firm kind of like imposing this relationship because it advantages the firm? Or is it like coming from the workers that they want this and it's something that's being bargained over? Like, how do you see the emergence of the expectation of more of a more continuity? Right.

Right. So we should talk about down the road in this conversation, preferences, you know, whether people want it, whether there are generational differences and so on. But I think the big picture is bring yourself back to the end of World War II. At the end of World War II, basically a social contract was agreed to. Now, it was underwritten by a very strong union situation, right? Unions accounted for over 30% of the workforce at that time, and plus firms were trying to avoid unions by imitating union practices. But the deal was that firms would keep people on board. And if