Precarious Labor in the Logistics Supply Chain

Draying and Picking:

Precarious Labor in the Logistics Supply Chain

David Jaffee

Department of Sociology and Anthropology

University of North Florida

Paper prepared for presentation at the annual meetings of the American Sociological Association, San Francisco, August, 2014.

Do not quote or cite without permission of author.

Acknowledgement: The author would like to than David Bensman for his helpful comments and suggestions on an earlier draft of the paper.

Revised draft, August 2014.

ABSTRACT

Recent research on labor market conditions and dynamics in the United States point to a rise in “precarious work”. It tends to be characterized by low wages, unstable work arrangements, temporary employment relationships, underemployment, economic insecurity, and an absence of employer provided benefits. As the United States, under neo-liberalism, has restructured the organization of economic production nationally and globally, certain sectors have expanded and reconfigured employment relationships. One of these is transportation and logistics, functioning to move and distribute the goods now produced abroad into US consumer markets. This paper highlights two industries in this sector – drayage trucking and warehouse/distribution centers (W/DCs) – and the conditions that have contributed to the expansion of precarious work. The paper concludes with an overview of recent labor actions taken to improve conditions for workers in this sector.

“Yesterday's manufacturing jobs are today's logistics jobs”.

North Carolina State Ports Authority

A great deal has been written over the past decade about the growth of insecure low paying jobs (Kalleberg, 2011; Kalleberg, 2009; Autor, Katz, and Kearney, 2006) with the terms “precarious ” and the “precariat” (Standing, 2012) now widely used to describe the labor market experiences of a growing number of workers in the United States. These trends have contributed to the rising inequality of income and, since the great financial slump, the number of such workers with insecure employment relations appears to be increasing (National Employment Law Project, 2012). This paper places this development in the larger context of the globalization of production, the restructuring of corporate organization, and the expansion of the transportation and logistics sector in the US economy.

Increasingly, an understanding of local and national socio-economic conditions must be linked to larger international and global forces (Dicken 1998). The global chain/network literature has contributed to this understanding over the past two decades. Much of the focus has been on the shift in manufacturing to offshore and more profitable locations, and the dispersion of production activities taking place in less developed nations. The one part of the chain or network that has received insufficient attention is the transportation and logistics segment (see Bonacich and Wilson, 2008 for a notable exception). This element of the chain has becomes increasingly important as the distance among the segments of the chain has increased. Logistics and supply-chain management is now a dominant focus of corporate strategy and cost containment. In addition, logistics activities – goods movement -- have grown in importance in relation to goods-production within the United States. Today states, regions, and cities in the US are competing with each other for the privilege of becoming logistics nodes, hubs, or clusters (Sheffi, 2012). This paper looks at the labor market conditions in this segment of the value chain – transportation and logistics -- in the context of these larger socio-economic changes and conditions. The focus is on these activities as they are carried out and organized in the United States.

More specifically, the analysis will examine two sectors of the “port logistics cluster” – drayage trucking and warehouse/distribution centers (W/DC) and the conditions of work for drayage drivers and W/DC material handlers (often referred to as “pickers”). A series of questions will be examined. First, what factors have contributed to the growing prominence of the transportation and logistics sector of the U.S. economy? Second, how do the different organizations involved in the logistics segment of the supply chain organize work and contribute to precarious work? Third, what actions have been taken and are being proposed to address the precarious work problem in this sector of the economy?

The first section of the paper will link the growth of transportation and logistics and the associated labor conditions with the larger force of globalization and economic restructuring. The second section will describe the relevant organizational characteristics that contribute to particular employment relations in this sector and highlight features of the working conditions in drayage and W/DCs that reflect the exiting and growing precariousness. The final section will report on some recent labor actions and policy proposals designed to counter the precarious tendencies in these sectors.

GLOBALIZATION AND THE LOGISTICS REVOLUTION

The process of globalization has given rise to the geographic dispersion of production processes and the growing separation of the point of production from both the points of product development and product consumption (Dicken, 1998). As a result, the study of production processes and interorganizational relations among interdependent entities has been conceptualized through commodity chains (Gereffi & Korzeniewicz, 1994), global production networks (Coe, Dicken, & Hesse, 2008) or global value chains (Gereffi, Humphrey and Sturgeon 2005). Each of these concepts is meant to capture the globalized and geographically dispersed phases and sequentially interdependent segments of product development, production, and consumption and the relative economic value and power of the participating activities and parties. Here we would like to emphasize the increasing importance of the transportation, distribution, and logistics segment of the global chains (Hesse and Rodrigue, 2006; Coe, 2014) and their labor market implications (Bensman, 2008).

Global value chains (GVC) are “the full range of activities which are required to bring a product or service from conception, through the different phases of production (involving a combination of physical transformation and the input of various producer services), delivery to final consumers, and final disposal after use” (Kaplinsky & Morris, 2001). The GVC is often viewed as a sequence of activities ranging from research and development to design to production to logistics to marketing (Gereffi, Humphrey and Sturgeon 2005). Logistics is included as a relatively higher value activity in relation to production but of lower value than research and development, or marketing. It is also recognized as an indispensability and necessary condition for the entire value chain enterprise. In this sense logistics operations connect the links in the chain from the point of production to the point of consumption. For the retail sector this has been facilitated by the containerization of cargo (Levinson, 2006) and the associated intermodal system of transportation by truck, rail and container vessels.

Under the globalization project and neo-liberal regime, economic development strategies increasingly revolve around insertion into the extended and far-flung chains of production and intermodal transportation and distribution. Most of the attention has been devoted to the geographic dispersion of economic activities that involve the cost-effective provision of raw materials and primary products, inputs and components, and assembly and manufacturing contributing to the production of a single commodity. Equally critical is the movement of the commodity to the final point of consumption and profit realization. This entails using intermodal logistics to move the goods through maritime container ports that serve as the gateways into national markets (Bonacich and Wilson, 2008; Rodrigue, Comtois, & Slack 2009).

It is no coincidence that as production has been spatially reorganized there has been growing attention to transportation and distribution. In the business literature, these processes are conceptualized as supply-chain management, logistics, and intermodalism. A supply chain is defined as “a set of three or more entities…directly involved in the upstream and downstream flows of products, service, finances, and/or information from a source to a customer.” (Mentzer, DeWitt, Keebler, Min, Nix, Smith, & Zacharia, 2001, p. 4). The same authors define supply chain management as “the systemic, strategic coordination of the traditional business functions and tactics across these business functions within a particular company and across businesses within the supply chain, for the purposes of improving the long-term performance of the individual companies and the supply chain as a whole” (p. 18). Logistics is considered one aspect of supply chain management and is concerned with the planning and management of the movement and distribution of materials through the supply chain. Intermodalism refers to the movement of goods or materials using integrated but different modes of transportation. The shipping container is a technology that has enhanced and facilitated the intermodal transport of goods due to its standard size and the existence of common handling equipment. Thus, in a supply chain, a container holding finished or semi-finished cargo can be transported by and transferred between container ship, truck chassis, and/or rail car.

In the retail or “buyer-driven” commodity/value chain along which the shipping containers are transported, Walmart stands out as the proto-type by setting the standard for supply chain efficiency and cost effectiveness. Walmart-style retail supply chains squeeze costs out of production, transportation and logistics thus impacting workers across a range of occupations (Appelbaum and Lichtenstein 2006; Lichtenstein 2010). Competition among retailers for everyday low prices rests significantly on the costs incurred between the point of production and the point of consumption along the supply chain, and the ability to keep transportation and distribution costs as low as possible so that they do not nullify the labor cost advantage of offshoring. This places downward pressure on costs, and intense competition among the logistics providers to retain contracts with the largest retailers. The net result plays out in the externalization of costs reflected in the working conditions, arrangements, and compensation of logistics workers.

Cities and regions are now competing with each other, and attempting to leverage their geographic location, in order to establish “logistics clusters” that can capture the goods-moving activities that can potentially serve as engines of economic development. The advantages of these clusters have recently been trumpeted to include agglomeration effects that concentrate logistics businesses and service in geographic locations thus stimulating further investment and job growth through “positive feedback loops” (Sheffi, 2012). Promoting logistics as an economic strategy – particularly for port cities – has also involved advocating for massive coastal and transportation infrastructure projects funded from federal public and local sources. In order to convince the public of the wisdom of such “mega-projects” – which can exact a heavy cost in terms of environmental impacts and increasing noise and congestion -- there is the inevitable promise of jobs and expanded employment opportunities. Typically, this will include claims about the number of jobs supported and expanded by the port activities, but far less regarding the quality of employment. It is here where some analysis of the good jobs/bad jobs balance is warranted and sociologists can play a role in these community-based deliberations.

ORGANIZATIONAL AND WORKING CONDITIONS IN DRAYAGE AND WAREHOUSE/DISTRIBUTION CENTERS (W/DC)

This section considers the organizational characteristics and working conditions in the drayage and W/DC industries that make up the majority of employment opportunities in the logistics sector and contribute to precarious work. For the purposes of this analysis, precarious work is defined as work characterized by low wages, unstable work arrangements, temporary employment relationships, underemployment, economic insecurity, and an absence of employer provided benefits.

While the purpose of this section is to describe current organizational and working conditions in the two sectors, it is important to situate this state of affairs in the context of broader trends in corporate restructuring. This entails both a spatial and structural component (Jaffee, 2001). On the spatial dimension, as indicated above, there has been a dispersion of economic activities based upon the calculation of advantages derived from geographic variations in labor costs and regulatory constraints. The strategic separation of the point of production from consumption is one element in this calculus. On the structural dimension, there has been a shift toward a more vertically disintegrated organizational form where the ownership of upstream and downstream enterprises is abandoned in the name of lean flexibility and core competencies. Lichtenstein (2014) chronicles this process as the historical movement from the visible hand of the vertically-integrated firm to the predominance of supply-chain relationships with a network of legally independent firms. He notes, significantly, that while the supply-chain is “composed of a disparate set of legally and organizationally autonomous ‘vendors’”, they are as “well controlled and as hierarchical as the most vertically integrated corporation of the old economy” (p. 13). Despite this control, there are no personnel, human resource management, or “other social, legal, and contractual obligations that have increasingly been attached to employer status since the New Deal” (Lichtenstein, 2014, p.15). Importantly, under this externalization arrangement, the lead firms have control and command over competing venders/suppliers, but no managerial responsibility or legal liability for the conditions of work.

A further advantage of the organization outsourcing arrangement, identified by Weil in The Fissured Workplace (2014, p. 76-77), is based on a modification of the wage determination process. “Fissuring changes how gains are shared in a fundamental way: by shifting work out, lead firms no longer face a wage determination problem for that work but rather a pricing problem in selecting between companies vying for it. That change is critical because it results in fewer gains going to the workers who undertake those activities. It instead shifts those gains to investors.” This process reduces worker compensation in two ways. First, it eliminates the wage “demonstration effect” that results in efforts and negotiations by lower-paid workers to obtain levels of compensation provided to more highly skilled employees within the same firm or location. Second, with work outsourced to firms that are now competing with each other for the business of the lead company, there is a downward pressure on labor costs.

We can now see how these organizational strategies have played out for workers in the port drayage and W/DC sectors of transportation and logistics. For drayage, this involves outsourcing to independent contractors; for W/DCs it involves outsourcing through several different firms.

Port drayage

In the retail dominated, or buyer-driven, commodity chain, consumer goods reach the US by large container vessels. The containers are unloaded at port container terminals and transferred to another transport mode for movement off the terminal and on to a W/DC facility or further transport mode (e.g. rail). The most common mode of short-haul container transport is by truck. This is known as “drayage”. Drayage entails the hauling of containers on a detachable trailer chassis. Drayage is an essential link in the intermodal movement of goods from container terminal to rail or W/DC and ultimately to the shelves of the retail sector. The drayage sector is characterized by a large number of logistics and trucking firms, many quite small, which contract with shippers for the movement of containers. Drivers in this sector may be employees of the firm, but more commonly are classified as “independent owner-operators”.