Emerging Trends in The Social and Behavioral Sciences

Transformation of the Employment Relationship

Item

Title

Transformation of the Employment Relationship

Author

Kalleberg, Arne L.

Marsden, Peter V.

Research Area

Social Institutions

Topic

Work and the Economy

Abstract

Employment relations are implicit or explicit contractual arrangements that specify the reciprocal expectations and obligations linking employers and employees. They encompass a wide range of phenomena, including work organization, governance, evaluation, and rewards. During the past quarter century, the standard employment relationship that was normative in much of the world during the twentieth century declined in favor of various nonstandard employment relations involving more tenuous employer–employee linkages. The transformation of employment relations has been associated with a wide range of phenomena including growth in economic and social inequality, shifting career patterns, and changes in the organization of work.

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Identifier

etrds0364

extracted text

Transformation of the Employment
Relationship
ARNE L. KALLEBERG and PETER V. MARSDEN

Abstract
Employment relations are implicit or explicit contractual arrangements that specify
the reciprocal expectations and obligations linking employers and employees. They
encompass a wide range of phenomena, including work organization, governance,
evaluation, and rewards. During the past quarter century, the standard employment
relationship that was normative in much of the world during the twentieth century
declined in favor of various nonstandard employment relations involving more tenuous employer–employee linkages. The transformation of employment relations has
been associated with a wide range of phenomena including growth in economic and
social inequality, shifting career patterns, and changes in the organization of work.

INTRODUCTION
Employment relations are implicit or explicit contractual arrangements that
specify the reciprocal expectations and obligations linking employers and
employees. They encompass a wide range of phenomena, including work
organization, governance, evaluation, and rewards. Work and employment
are vitally important to individuals, organizations, and societies, so the study
of employment relations is central to numerous subjects in the social sciences,
including the origins and maintenance of economic inequality and social
stratification; the operation of labor markets; mechanisms of skill acquisition
and career mobility; recruitment, selection, hiring, and promotion processes;
and the governance and control of work activities within organizations. As
the link between individuals and their employing organizations, employment relations provide a theoretical linchpin connecting multiple levels of
analysis: macrostructures such as economic, political, legal, and social institutions; mesoscopic (middle-range) aspects of work groups, firms and interfirm
networks; and microlevel features of employment including individual work
experiences and rewards.

Emerging Trends in the Social and Behavioral Sciences. Edited by Robert Scott and Stephen Kosslyn.
© 2015 John Wiley & Sons, Inc. ISBN 978-1-118-90077-2.

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EMERGING TRENDS IN THE SOCIAL AND BEHAVIORAL SCIENCES

As employment relations are shaped by and embedded in the social, psychological, economic, political, historical, spatial, and legal linkages between
employers and employees (Baron, 1988), research about them requires a
multidisciplinary standpoint incorporating insights from sociology, economics, social psychology, law, political science, social geography, history,
industrial relations, and management. Moreover, employment relations
are highly context-dependent, making comparative studies indispensable.
For example, well-developed firm-internal labor markets in Japan reflect
both cultural understandings of the importance of the group in Japanese
life and essential features of Japanese management practices (Lincoln &
Kalleberg, 1990). Historical and cross-national analyses of employment
relations highlight limitations of universal models of employment systems,
helping us to understand better how labor markets and other institutions
interact with culture and worker agency to produce changes in the structure
and processes of work and employment.
During the past quarter century, understanding employment relations took
on increasing importance in the United States and other industrial countries,
as some linked growing polarization between “good” and “bad” jobs and
increasing inequality in income, job, and employment security, hours worked
and other labor market outcomes to changes in employer–employee work
arrangements. These changes are also associated with transformations in the
organization of work, especially shifts away from arrangements that internalize jobs within bureaucratic organizations toward ones involving external contracting and other interorganizational relations (Kalleberg, 2011). We
outline the nature and consequences of these recent developments in employment relations.
FOUNDATIONAL RESEARCH
Employment relations range in scope from broadly defined relational
exchanges to narrowly delimited transactional ones. Close relational linkages between organizations and their employees reflect mutual commitment,
often having open-ended duration and providing training as well as welfare
supports for employees such as health insurance and retirement benefits.
Transactional relations are more exclusively instrumental, entailing little
commitment and often only the exchange of money for work performed
within a fixed time frame. They lack elaborations—such as training, welfare
provisions, or an expectation of ongoing employment—that are typical
of relational exchanges. Theories and research on labor markets document over-time swings between transactional and relational employment
relations.

Transformation of the Employment Relationship

3

STANDARD EMPLOYMENT RELATIONSHIP
Much foundational research on employment relations takes the standard
employment relationship (SER) as a reference point. SERs involve relational
exchanges and were the norm in industrial nations for much of the twentieth
century, emerging in the United States in the 1930s and blossoming in the
post-World War II years as part of the social contract that accompanied
the spread of Fordist mass production and the ascendancy of large organizations. SERs carry appreciable overhead costs because of the range and
duration of the commitments they incorporate. Although the SER was
normative during this period, it was far from universal within the United
States labor force then; it was found mainly in larger organizations and
concentrated among white-collar employees (usually men) in managerial
occupations and blue-collar workers in certain organized industries. The
“permanent employment” regime in Japan—also generally limited to men
working in large organizations—resembles the SER.
Accounts of the emergence of the SER attribute it to factors linked to the
interests of both employers and employees. Some Marxist authors contend
that the SER is a form of bureaucratic control used by capitalists to divide
the working class, while non-Marxists emphasize the efficiency gains and
reduced transaction costs that accrue to employers by virtue of the internal
training and firm-specific capabilities deriving from bureaucratic employment relations. Unions favored the development of SERs as a means toward
providing greater due process and achieving equity in their relations with
employers, thereby limiting the arbitrary exercise of authority by foremen in
“drive systems” of personnel management that pressured workers to work
hard through fear and intimidation. Nonunionized firms often created SERs
in an effort to forestall future unionization efforts.
Features that typify the SER include the exchange of employee labor
for monetary compensation, performance of work on a preset schedule
at the employer’s place of business and under its control and direction,
and jobs having well-defined boundaries and descriptions. It often, but
not always, involves full-time employment and a shared expectation of
continued employment contingent on satisfactory employee performance.
SERs amount to a psychological contract in which employers pledge job
security in exchange for employee loyalty.
SERs were the normative foundation of the framework within which labor
law, collective bargaining, social security systems, and other features of welfare regimes developed. These institutions assumed models of employment
relations and the family having a full-time, primary-breadwinner husband,
and a wife who cared for children and the home. Post-World War II welfare

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EMERGING TRENDS IN THE SOCIAL AND BEHAVIORAL SCIENCES

regimes sought to address risks associated with the SER, namely unemployment for the main source of income. Unemployment insurance schemes provided support for the breadwinner (and hence the family) predicated on the
assumption that periods of joblessness would be relatively short and associated with generally brief business-cycle downturns.
The SER provides a basis for much theory and research in organizational
sociology, institutional economics (e.g., transaction cost economics), industrial relations, and other fields. Models define internal labor markets, for
example, as within-firm employment systems having job ladders, with entry
restricted to the bottom rungs and upward movements associated with the
progressive development of skills and knowledge. Careers within internal
labor markets assumed extended employee commitment to an organization.
Stratification research examines rates and patterns of individual mobility
along job ladders within large corporations. SERs also were a foundational
concept in theories of the design, division of labor, and control of work
within bureaucratic organizations. They are key features in accounts of the
process of internalization, which altered organizational boundaries by transforming former contractors and others outside the organization into regular
employees. The development of modern personnel and human resource
management systems accompanied the internalization of employment
relations.
NONSTANDARD EMPLOYMENT RELATIONS
Beginning in the mid-1970s (in the United States, often the 1980s in many
European countries and the 1990s in some Asian nations), changing
conditions in political, social, technological, and economic environments
prompted governments and organizations to seek greater flexibility in
employment systems. Increased price competition and more fluid capital
markets put greater pressure on firms to maximize profitability and to
respond to rapidly changing consumer tastes and preferences. Sluggish economic growth triggered high unemployment and made it clear, especially in
Europe, that economies could not generate enough jobs to assure all workers
of full-time wage employment. Rapidly proliferating computer-based
technologies made quick adaptation to changing market opportunities both
possible and necessary. Together, these changes made the fixed costs and
overhead obligations associated with the SER less viable for employers,
ushering in an emerging new economic order fundamentally distinct from
the bureaucratic model of work.
While some employment systems modeled on the SER certainly remain
in place, others were dismantled in favor of new ones resting on what has
come to be known as nonstandard employment relations (Kalleberg, 2000).

Transformation of the Employment Relationship

5

While these take several distinct forms, in general they tend to be more
transactional exchanges than the SER, and they provide less employment
security than the SER. Among them are contract work and temporary
employment—both direct hires engaged on a fixed-term basis and workers
procured via intermediary organizations including contract companies
and temporary help agencies. Some analysts regard part-time work as a
nonstandard relation. Labels including alternative work arrangements,
market-mediated arrangements, nontraditional employment relations,
flexible staffing arrangements, atypical employment, precarious employment, disposable work, and contingent work also refer to nonstandard
employment relations.
Nonstandard employment relations depart from the SER in one or more
ways. First, in some, the employer–employee relationship is mediated via a
third party rather than direct. Such arrangements “externalize” administrative control and legal responsibility for employees who may perform work
activities for several work organizations. The worker’s de jure employer is
an intermediary organization rather than the de facto employer that pays for
and makes use of the worker’s labor. In these nonstandard employment relations, the meanings of the terms employer and employee become ambiguous
because facets of employment that are intertwined in the definition of the
SER are distributed across different organizations. In temporary help agency
employment, for example, the intermediary agency is the worker’s legally
defined employer, but actual work is performed at and for—and directed
by—distinct client organizations. Workers employed by contract companies
often perform their activities at a client’s site but take direction from the
contract company itself. In both forms, the duration of worker–client engagements can vary widely. These arrangements are products of social and political negotiations: in the United States, for example, temporary help agencies
and their corporate backers fought for over four decades to designate such
agencies as employers in legal terms, rather than merely as employment brokers that connect job seekers with employers.
Second, some nonstandard work carries no assumption of continued
employment, in contrast to the SER in which the expectation is that
employment will be at least open ended with an indefinite future, if not
“permanent.” While some temporary workers transition into regular
employment with a client after a provisional short-term engagement,
temporary employment is usually just that. Apart from workers procured
via intermediary agencies, organizations may hire temporaries directly for a
fixed term, or on an on-call basis to cover absences of regular employees or
to manage high but transient workloads. Fixed-term contracts have become
particularly important in countries where legal provisions make it difficult

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EMERGING TRENDS IN THE SOCIAL AND BEHAVIORAL SCIENCES

for employers to terminate indefinite-duration contracts, such as France,
Germany, Italy, and Spain.
Third, still other nonstandard work arrangements, including self- employment and independent contracting, collapse the employer–employee distinction. In these situations, workers administer and direct their own activities
and are paid by clients for services performed or goods provided, not as
employees providing labor power.
Finally, some work arrangements deviate from the norm of full-time
employment. Controversy exists as to whether all part-time work should be
considered nonstandard, because many less-than-full-time jobs incorporate
all other features of the SER. Some part-time arrangements represent
employer accommodations to employee preferences for reduced hours and
more flexible schedules. Other part-time jobs, however, are highly insecure,
lacking enhancements such as benefits, training opportunities, and the
expectation of continuity. Many employees in such part-time arrangements
would prefer full-time positions.
A principal driver of movement away from SERs toward these forms of
nonstandard work was employer desires for greater flexibility in relations
with employees—transforming labor into a variable rather than fixed cost,
thereby facilitating adaptability. As well, technological improvements in
communication and information systems made it easier for organizations
to specialize their production, assemble temporary workers quickly for
projects, and rely more on outside suppliers. New legal regimes contributed
to the growth in nonstandard work by constructing employment relations
that allow employers to avoid the mandates and costs associated with
labor laws that provide protection for permanent employees. So too did
demographic shifts in labor force composition involving growth in worker
groups—such as married women and older people—who sometimes prefer
the flexibility that nonstandard arrangements offer, although not necessarily
the associated insecurity.
Not all nonstandard employment relations are disadvantageous for all
employees relative to SERs. Certain high-skilled workers can garner higher
economic rewards as independent contractors or consultants than they
might as employees. In these instances, nonstandard arrangements allow
workers to capitalize on abundant market opportunities and demands for
their skills.
It is tempting to interpret the growing prominence of nonstandard
employment relations in recent years as an “evolution” beyond the SER,
but nonstandard employment relations are by no means new. Producers
have always been able to choose between internally “making” (i.e., hiring,
training, and directing) workers within organizations and “buying” them
in external labor markets via formal or informal contracting, a classic

Transformation of the Employment Relationship

7

choice central in transaction cost economics theory (Williamson, 1985).
History is replete with examples of flexible labor markets characterized by
unstable, temporary work and peripheral labor force attachment, and many
employment relations that do not involve full-time work accompanied by
open-ended employer–employee commitments. For instance, under the
“inside contracting” system in nineteenth-century U.S. manufacturing,
management engaged contractors, provided them with machinery and
factory space, supplied raw material and capital, and sold products, while
the contractors were responsible for organizing production and hiring,
paying, and directing the actual workers. Indeed, the historical anomaly
may be the efficiencies associated with SERs and internal labor markets
in the post-World War II period, not the use of nonstandard employment
relations. Nonetheless, the latest incarnation of nonstandard employment
relations does have novel features that distinguish it from earlier ones. Contemporary nonstandard employment relations increasingly involve labor
market intermediaries, and expansion in their use leads toward production
systems that can be termed aptly as network organizations.
CUTTING-EDGE RESEARCH
A transition in the organization of work from bureaucratic to more flexible
forms accompanied the shift from the SER to nonstandard employment relations. Several central strands of research examine these interrelated changes
and consequences ensuing from them.
First, some debate the extent to which recent growth in nonstandard
employment relations constitutes a structural transformation, as opposed
to an episodic upturn due to business-cycle fluctuations. Advocates of a
cyclical interpretation observe that small decreases in the use of nonstandard
work arrangements (such as temporary agency work) tend to accompany
declining unemployment rates. By contrast, those contending that expansion in nonstandard relations signals a fundamental transformation argue
that temporary and contract employment are now well institutionalized
and therefore legitimated as “best employment practices” that enhance
effectiveness and efficiency, especially in the face of changed conditions brought about by increasing globalization and rapid technological
change.
Second, the growth of organizational forms such as contract companies,
subcontractors, and temporary help agencies underscores the increasing
prominence of network relations among organizations within contemporary
production systems. These lead to interorganizational forms of cooperative
endeavor characterized by reciprocal communication and exchange governed by relations of mutual trust between parties, rather than either the

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EMERGING TRENDS IN THE SOCIAL AND BEHAVIORAL SCIENCES

market logic of price or the hierarchical command and control regimes that
internally coordinate self-contained organizations. Similar to nonstandard
employment relations, network forms of organization are not new. Many
claim that they now are more common, however, because global and
segmented markets provide a fertile environment for networking, and
cheap information technology enables the creation and maintenance of rich,
multifaceted interorganizational ties.
The turbulent environments that led nonstandard employment relations to
emerge also encourage employers to manage resource dependencies, cope
with rising uncertainty, and enhance competitiveness by developing greater
interconnectedness with other organizations. Some organizational networks
form when large, vertically integrated firms achieve greater flexibility by
spinning off or divesting themselves of former parts of themselves and
instead establishing collaborations with other firms. Two examples of ongoing network arrangements involving close collaboration are multinational
joint ventures and producer-supplier alliances. Other shorter term systems
are constructed to accomplish single projects, after which they disband;
examples include the temporary organizations organized by home-building
contractors and film production companies. These systems rely on trust,
sharing of implicit knowledge, and strong economic incentives to complete
their joint projects efficiently. Firms such as consulting companies also
organize internal project teams, combining and recombining both specialists
and multiply skilled staff members to suit the circumstances of a task or
engagement.
Organizational networks incorporating diverse types of nonstandard
employment relations can help organizations achieve both numerical
flexibility (i.e., calibrating workforce size to changing demand levels) and
functional flexibility (adjusting their complement of available skills and
capabilities and shifting assignments of employees to tasks depending on
demand). Outsourcing functions such as production, maintenance and
repair, clerical support, and other activities to contract companies—rather
than using employees within the organization to perform them—is one
means of obtaining numerical flexibility. Functional flexibility can be
achieved via collaborative relations among specialized suppliers and producers, as illustrated by networks for specialized garment production in
the Emilia-Romagna industrial district of Italy, or the networks formed
within regions in which computer-oriented firms are concentrated, such
as the vicinity of Route 128 in Massachusetts or Silicon Valley, California.
Close, trust-based relations among organizations in these networks enable
producers to reconfigure their relationships with suppliers and to develop
interorganizational competencies, thus achieving “flexible specialization”

Transformation of the Employment Relationship

9

by acquiring and redeploying resources as needed to adapt to changes in
environmental circumstances.
The growth of network organizational forms and nonstandard employment
relations holds important consequences for individuals’ careers. Research
on “boundaryless” careers underscores the unraveling of firm-internal labor
markets, so that career mobility increasingly takes place via movements
between rather than within organizations. Such career patterns require
adaptable and flexible skill sets. The pace of change in product/service
markets requires that workers possess diffuse skills suitable to performing
multiple tasks, rather than acquiring only those needed to perform the
activities specified by a stable, well-defined job description. As careers
more often unfold between rather than within particular organizational
settings, employers may increasingly rely on external hiring as a means of
acquiring workers with needed skills and capabilities, instead of developing
them internally via training programs. Employer investments in developing
both general and firm-specific skills are placed at risk when employees are
apt to move to another organization after completing training programs,
prompting employers to shift responsibility for skill acquisition to workers.
KEY ISSUES AND CHALLENGES FOR FUTURE RESEARCH
Changes in employment relations are key elements in a number of
key research questions on agendas for future investigations of work,
employment, social stratification, organizations, and related topics.
KEY ISSUES
Many macrostructural forces that prompted the recent expansion of nonstandard employment relations will likely to continue to influence the nature
of employer–employee ties. Economic pressures such as price competition
among producers distributed across the globe will encourage employers to continue seeking flexible relations with employees. Technological
innovations will facilitate this by reducing further the costs of contracting,
enhancing its efficiency, and enabling organizations to outsource more of
their activities (e.g., professional and customer services).
The rising exposure of workers to market forces that ensues from employers’ search for greater flexibility renders them more vulnerable and may lead
to demands for greater social security and welfare provisions that better protect workers. Increased calls for such social protections seem especially likely
to arise in places in which SERs, and hence security, were widespread in the
past—such as the United States and Europe. New social protections need

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EMERGING TRENDS IN THE SOCIAL AND BEHAVIORAL SCIENCES

not be tied to particular employers, as health and retirement benefits currently are in some places. One alternative model may be found in the various
“flexicurity” systems that provide employers with flexibility and employees
with security, as in employment systems found in Denmark and the Netherlands. In Denmark, employees have few job protections but the availability of
generous unemployment benefits and active labor market policies provides
considerable opportunities for retraining that facilitate employees’ transitions to new jobs. In the Netherlands, workers in nonstandard employment
relations enjoy many of the same social protections as those who work in
SERs.
It is also likely that employers, especially large ones, will attempt to
develop open-ended employment relations in an attempt to retain highly
skilled workers. It is unlikely that these will approach the stability and
permanence of SERs, in view of the enhanced opportunities for interfirm
mobility that the global economy and technological advances of recent years
have unleashed. Rather, occupational labor markets segmented according
to possession of particular skill sets are apt to exercise increasing influence
on career paths, permitting people to move between employers in order
to best utilize and enhance their skills. In addition, growing emphasis
on entrepreneurship will probably fuel rises in the numbers of high-skill
independent contractors willing and able to sell their services and products
to a wide market of producers requiring their specialized capabilities.
A central issue for the future concerns the implications of changing
employment relations for social and economic inequality. Rising inequality
constitutes a major challenge for the United States and many other industrial
countries. Much of it is attributable to the enormous growth in the wealth
and income of the top 1% or 2% of households within the population, some
of this in turn reflecting the financialization of the economy and returns
to stocks and investments rather than disparities in earned income. The
close linkage between employment and earnings suggests that changes in
employment relations are also an essential part of the explanation, however.
In particular, growth in nonstandard employment relations increasingly
exposes some workers to market opportunities and pressures, allowing
those with more education and certain highly marketable skills to realize
high returns to their human and social capital while severely limiting the
options and security of others. The growing marketization of employment
relations contributes to rises both in high-wage jobs for workers with more
education and skills and in low-wage, low-quality ones for vulnerable
workers who lack institutional protections. Such polarization in job quality
is, of course, of greater consequence in liberal market political economies
such as the United States, where many benefits are tied to employment
rather than provided by the state.

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The growing legitimacy of temporary help agencies raises several vital
questions about future configurations of employment relations. Among these
is that of the role such agencies play in shaping individuals’ careers. Employers are increasingly using temporary help agencies to screen prospective
employees during a trial probationary period that involves no commitment
to a continued employment relationship. To what extent do temporary
help agencies provide bridges to permanent and rewarding employment
for workers, rather than confining them to a series of short-term, dead-end
jobs? Working in temporary help agencies is likely to be more beneficial in
countries where social insurance and welfare benefits are not contingent
upon particular forms of employment. The triadic employment relationship
that arises in much temporary employment—involving the worker, the de
jure employer (the temporary help agency) and the de facto employer (the
client organization)—similarly poses several important dilemmas. Among
them is that of the locus of responsibility for training—whether it is provided
by the agency or the client or acquired by workers outside of the employment relation via educational organizations or private providers. Finally,
rises in temporary employment raise questions about the organization of
work, which commonly requires that agency-supplied workers and regular
employees in an SER work alongside one another. Under what conditions
will they be able to cooperate with each other, when are conflicts likely to
arise, and how can they be managed effectively?
The transformation of employment relations also raises significant research
questions about interactions between work and other societal institutions. In
particular, the decline in the SER and the continuing weakening of unions
(in the United States and in industrial nations generally) have been accompanied by vast changes in the legal framework of the employment relationship. Much past labor law assumed an SER-like relationship involving one
employer and one employee. The emergence of triadic employment relations calls for revisiting and updating these laws to address, among many
other things, quandaries such as the locus of liability for harms encountered
by workers during employment. Which organization—the client or agency
supplying labor—bears responsibility in the case of injuries ensuing due to
accidents (e.g., in cell tower work or in the petrochemical industry)? Which
of them is responsible for unemployment and health insurance and other
forms of social protection, if the government does not provide these as benefits of employment? As well, industrial unionism and collective bargaining
was modeled on the SER, so union decline raises questions of who—lawyers,
government officials, union leaders, or employees themselves—now is best
able to represent workers’ interests in their relations with employers? Are
new forms of unionism/worker power viable and appropriate in view of
increased worker mobility among firms?

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EMERGING TRENDS IN THE SOCIAL AND BEHAVIORAL SCIENCES

Finally, it is important to ask about the impact of changing employment
relations on family dynamics, and vice versa. The increased uncertainty and
unpredictability introduced by nonstandard employment relations hold
negative consequences for career development in many industrial countries
and in turn may lead to postponement of marriage and childbearing, among
other impacts on the family. This is especially acute in countries such as
Japan, for example, where declining economic opportunities among men
are associated with reductions in marriage and below-replacement fertility
levels. U.S. evidence indicates that marriage rates have declined among
less-educated whites and that marriage may be becoming deinstitutionalized as a framework for family formation. At the same time, other changes
including the growth in dual earner families may pressure employers to
accommodate the careers of skilled women by developing mechanisms that
facilitate work–family balance, potentially introducing further polarization
by skill in employment conditions.
These issues raised by changing employment relations will preoccupy
researchers in a variety of social science disciplines. The focus of such
research needs to encompass the full range of job rewards that workers seek—extending beyond earnings to consider flexible schedules or
control over work, for example—and that employers therefore should
consider when organizing workplaces. Understandings of how employer
and employee visions of the psychological employment contract have
changed—from relational ones resting on mutual loyalty and commitment
to transactional ones in which employers regard workers as a source of
short-term benefit and employees view the skills and experiences they
acquire as a basis for obtaining jobs elsewhere—need to be refined. Public
policy faces the issues of how to address problems ensuing from the growing
precariousness of work and the uncertainties built into new employment
relations and how to promote employability security if job security is elusive.
Moreover, labor law must address the new risks and challenges posed by
the greater movement of employees among workplaces.
CHALLENGES
Future research on employment relations will require improved data on
organizations and their employees. Organizations will continue to be key
actors in shaping the nature of employment relations, but declines in the
length of employee–employer attachments and the increasing complexity
and variety of contemporary employment relations pose challenges about
how best to gather and record information about them. We need, for
example, better information on the nature and scope of employer–employee
contracts and on employees’ duration of employment and mobility between

Transformation of the Employment Relationship

13

employers. The U.S. Census Bureau’s Longitudinal Employer-Household
Dynamics data on firms and employees are a very promising data resource
in this regard, as it tracks the movement of workers both within and between
employers, thereby clarifying career patterns and permitting assessments of
hypotheses about changing rates and correlates of interfirm mobility. Other
useful data sets for analyzing career patterns in the United States include
the Panel Study of Income Dynamics and the National Longitudinal Survey
of Youth.
Some countries, notably in Scandinavia, assemble registry data on individuals and often their employers. These repositories of administrative data
provide valuable, comprehensive information on the nature of employment
relations. Similar information would also be very helpful in studying
employment relations in the United States, but creating and disseminating
such data bases—which include such highly sensitive material as income
tax records—would have to surmount serious privacy challenges. Among
other exemplary international data efforts relevant to studying employment
relations are the longitudinal data sets assembled and harmonized by the
Luxemburg Income Study, and the Measuring the Dynamics of Organizations and Work (Meadow) project that coordinates the collection of data
on organizational change and work across more than a dozen European
countries. In addition, repeated cross-sectional surveys of adult populations,
such as the U.S. General Social Survey and its counterparts elsewhere,
provide important information about trends in the subjective correlates of
employment relations, such as job satisfaction, perceived security in jobs
and employment opportunities, and other work orientations.
CONCLUDING COMMENTS
Employment relations link individual workers to their organizations and
other economic and social institutions. Changes in social, economic, political,
historical, spatial, and legal institutions have profound effects on employment relations—and thereby on individuals—and reciprocally are affected
by these institutions. The past quarter century has witnessed a transition
in the normative form of the linkages between employers and employees,
moving away from the SER toward a variety of nonstandard employment
relations. While nonstandard employment relations are not new, they depart
from the relative certainty and growth that typified employment relationships during the three decades following World War II. Expansion in nonstandard employment relationships is associated with, and poses questions
regarding, a wide range of phenomena including the growth of economic
and social inequality, shifting career patterns, and changes in the organization of work. Better understanding of the nature and consequences of these

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EMERGING TRENDS IN THE SOCIAL AND BEHAVIORAL SCIENCES

changes is a major priority for social scientists seeking to enhance the quality of individual work experiences and the competitiveness of organizations
and societies alike.
REFERENCES
Baron, J. N. (1988). The employment relation as a social relation. Journal of the Japanese
and International Economies, 2(4), 492–525.
Kalleberg, A. L. (2000). Nonstandard employment relations: Part-time, temporary,
and contract work. Annual Review of Sociology, 26, 341–365.
Kalleberg, A. L. (2011). Good jobs, bad jobs: The growth of polarized and precarious employment systems in the United States, 1970s to 2000s. New York, NY: Russell Sage Foundation.
Lincoln, J. R., & Kalleberg, A. L. (1990). Culture, control and commitment: A study of work
organization and work attitudes in the United States and Japan. Cambridge, England:
Cambridge University Press.
Williamson, O. E. (1985). The economic institutions of capitalism: Firms, markets, relational contracting. New York, NY: Free Press.

FURTHER READING
Barker, K., & Christensen, K. (Eds.) (1998). Contingent work: American employment relations in transition. Ithaca, NY: Cornell University Press.
Cappelli, P. (1999). The new deal at work: managing the market-driven workforce. Boston,
MA: Harvard Business School Press.
Jacoby, S. M. (1985). Employing bureaucracy: Managers, unions, and the transformation
of work in the 20th century. New York, NY: Columbia University Press.
Kalleberg, A. L., Reynolds, J., & Marsden, P. V. (2003). Externalizing employment:
Flexible staffing arrangements in U.S. organizations. Social Science Research, 32(4),
525–552.
Osterman, P. (Ed.) (1984). Internal labor markets. Cambridge, MA: MIT Press.

ARNE L. KALLEBERG SHORT BIOGRAPHY
Arne L. Kalleberg is a Kenan Distinguished Professor of Sociology at the
University of North Carolina at Chapel Hill. He has published more than
120 articles and chapters and 11 books on topics related to the sociology of
work, organizations, occupations and industries, labor markets, and social
stratification. His most recent book is Good Jobs, Bad Jobs: The Rise of Polarized
and Precarious Employment Systems in the United States, 1970s-2000s (Russell
Sage Foundation, 2011). He served as President of the American Sociological
Association in 2007-8 and is currently the editor of Social Forces
Personal Web page: https://arnekalleberg.web.unc.edu

Transformation of the Employment Relationship

15

PETER V. MARSDEN SHORT BIOGRAPHY
Peter V. Marsden is the Edith and Benjamin Geisinger Professor of Sociology and Dean of Social Science at Harvard University. His research interests center on social organization—especially formal organizations and social
networks—and social science methodology. He has served as a coprincipal
investigator of the General Social Survey since 1998. His most recent books
are (editor) Social Trends in American Life: Findings from the General Social Survey since 1972 (Princeton University Press, 2012), and (coeditor, with James
D. Wright) Handbook of Survey Research, Second Edition (Emerald Group Publishing, 2010).
Personal Web page: http://scholar.harvard.edu/pvmarsden/
RELATED ESSAYS
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David B. Grusky
Globalization: Consequences for Work and Employment in Advanced
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Labor Market Instability, Labor Market Entry and Early Career Development
(Sociology), Michael Gebel
The Reorganization of Work (Sociology), Charles Heckscher
Technology Diffusion (Economics), Adam B. Jaffe
Maternal and Paternal Employment across the Life Course (Sociology),
Michaela Kreyenfeld
How Do Labor Market Networks Work? (Sociology), Brian Rubineau and
Roberto M. Fernandez
Sociology of Entrepreneurship (Sociology), Martin Ruef
Impact of Limited Education on Employment Prospects in Advanced
Economies (Sociology), Heike Solga
US Union and Workers’ Movements, Past and Future (Sociology), Daniel
Schneider and Judith Stepan-Norris
Transnational Work Careers (Sociology), Roland Verwiebe



Transformation of the Employment
Relationship
ARNE L. KALLEBERG and PETER V. MARSDEN

Abstract
Employment relations are implicit or explicit contractual arrangements that specify
the reciprocal expectations and obligations linking employers and employees. They
encompass a wide range of phenomena, including work organization, governance,
evaluation, and rewards. During the past quarter century, the standard employment
relationship that was normative in much of the world during the twentieth century
declined in favor of various nonstandard employment relations involving more tenuous employer–employee linkages. The transformation of employment relations has
been associated with a wide range of phenomena including growth in economic and
social inequality, shifting career patterns, and changes in the organization of work.

INTRODUCTION
Employment relations are implicit or explicit contractual arrangements that
specify the reciprocal expectations and obligations linking employers and
employees. They encompass a wide range of phenomena, including work
organization, governance, evaluation, and rewards. Work and employment
are vitally important to individuals, organizations, and societies, so the study
of employment relations is central to numerous subjects in the social sciences,
including the origins and maintenance of economic inequality and social
stratification; the operation of labor markets; mechanisms of skill acquisition
and career mobility; recruitment, selection, hiring, and promotion processes;
and the governance and control of work activities within organizations. As
the link between individuals and their employing organizations, employment relations provide a theoretical linchpin connecting multiple levels of
analysis: macrostructures such as economic, political, legal, and social institutions; mesoscopic (middle-range) aspects of work groups, firms and interfirm
networks; and microlevel features of employment including individual work
experiences and rewards.

Emerging Trends in the Social and Behavioral Sciences. Edited by Robert Scott and Stephen Kosslyn.
© 2015 John Wiley & Sons, Inc. ISBN 978-1-118-90077-2.

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EMERGING TRENDS IN THE SOCIAL AND BEHAVIORAL SCIENCES

As employment relations are shaped by and embedded in the social, psychological, economic, political, historical, spatial, and legal linkages between
employers and employees (Baron, 1988), research about them requires a
multidisciplinary standpoint incorporating insights from sociology, economics, social psychology, law, political science, social geography, history,
industrial relations, and management. Moreover, employment relations
are highly context-dependent, making comparative studies indispensable.
For example, well-developed firm-internal labor markets in Japan reflect
both cultural understandings of the importance of the group in Japanese
life and essential features of Japanese management practices (Lincoln &
Kalleberg, 1990). Historical and cross-national analyses of employment
relations highlight limitations of universal models of employment systems,
helping us to understand better how labor markets and other institutions
interact with culture and worker agency to produce changes in the structure
and processes of work and employment.
During the past quarter century, understanding employment relations took
on increasing importance in the United States and other industrial countries,
as some linked growing polarization between “good” and “bad” jobs and
increasing inequality in income, job, and employment security, hours worked
and other labor market outcomes to changes in employer–employee work
arrangements. These changes are also associated with transformations in the
organization of work, especially shifts away from arrangements that internalize jobs within bureaucratic organizations toward ones involving external contracting and other interorganizational relations (Kalleberg, 2011). We
outline the nature and consequences of these recent developments in employment relations.
FOUNDATIONAL RESEARCH
Employment relations range in scope from broadly defined relational
exchanges to narrowly delimited transactional ones. Close relational linkages between organizations and their employees reflect mutual commitment,
often having open-ended duration and providing training as well as welfare
supports for employees such as health insurance and retirement benefits.
Transactional relations are more exclusively instrumental, entailing little
commitment and often only the exchange of money for work performed
within a fixed time frame. They lack elaborations—such as training, welfare
provisions, or an expectation of ongoing employment—that are typical
of relational exchanges. Theories and research on labor markets document over-time swings between transactional and relational employment
relations.

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3

STANDARD EMPLOYMENT RELATIONSHIP
Much foundational research on employment relations takes the standard
employment relationship (SER) as a reference point. SERs involve relational
exchanges and were the norm in industrial nations for much of the twentieth
century, emerging in the United States in the 1930s and blossoming in the
post-World War II years as part of the social contract that accompanied
the spread of Fordist mass production and the ascendancy of large organizations. SERs carry appreciable overhead costs because of the range and
duration of the commitments they incorporate. Although the SER was
normative during this period, it was far from universal within the United
States labor force then; it was found mainly in larger organizations and
concentrated among white-collar employees (usually men) in managerial
occupations and blue-collar workers in certain organized industries. The
“permanent employment” regime in Japan—also generally limited to men
working in large organizations—resembles the SER.
Accounts of the emergence of the SER attribute it to factors linked to the
interests of both employers and employees. Some Marxist authors contend
that the SER is a form of bureaucratic control used by capitalists to divide
the working class, while non-Marxists emphasize the efficiency gains and
reduced transaction costs that accrue to employers by virtue of the internal
training and firm-specific capabilities deriving from bureaucratic employment relations. Unions favored the development of SERs as a means toward
providing greater due process and achieving equity in their relations with
employers, thereby limiting the arbitrary exercise of authority by foremen in
“drive systems” of personnel management that pressured workers to work
hard through fear and intimidation. Nonunionized firms often created SERs
in an effort to forestall future unionization efforts.
Features that typify the SER include the exchange of employee labor
for monetary compensation, performance of work on a preset schedule
at the employer’s place of business and under its control and direction,
and jobs having well-defined boundaries and descriptions. It often, but
not always, involves full-time employment and a shared expectation of
continued employment contingent on satisfactory employee performance.
SERs amount to a psychological contract in which employers pledge job
security in exchange for employee loyalty.
SERs were the normative foundation of the framework within which labor
law, collective bargaining, social security systems, and other features of welfare regimes developed. These institutions assumed models of employment
relations and the family having a full-time, primary-breadwinner husband,
and a wife who cared for children and the home. Post-World War II welfare

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EMERGING TRENDS IN THE SOCIAL AND BEHAVIORAL SCIENCES

regimes sought to address risks associated with the SER, namely unemployment for the main source of income. Unemployment insurance schemes provided support for the breadwinner (and hence the family) predicated on the
assumption that periods of joblessness would be relatively short and associated with generally brief business-cycle downturns.
The SER provides a basis for much theory and research in organizational
sociology, institutional economics (e.g., transaction cost economics), industrial relations, and other fields. Models define internal labor markets, for
example, as within-firm employment systems having job ladders, with entry
restricted to the bottom rungs and upward movements associated with the
progressive development of skills and knowledge. Careers within internal
labor markets assumed extended employee commitment to an organization.
Stratification research examines rates and patterns of individual mobility
along job ladders within large corporations. SERs also were a foundational
concept in theories of the design, division of labor, and control of work
within bureaucratic organizations. They are key features in accounts of the
process of internalization, which altered organizational boundaries by transforming former contractors and others outside the organization into regular
employees. The development of modern personnel and human resource
management systems accompanied the internalization of employment
relations.
NONSTANDARD EMPLOYMENT RELATIONS
Beginning in the mid-1970s (in the United States, often the 1980s in many
European countries and the 1990s in some Asian nations), changing
conditions in political, social, technological, and economic environments
prompted governments and organizations to seek greater flexibility in
employment systems. Increased price competition and more fluid capital
markets put greater pressure on firms to maximize profitability and to
respond to rapidly changing consumer tastes and preferences. Sluggish economic growth triggered high unemployment and made it clear, especially in
Europe, that economies could not generate enough jobs to assure all workers
of full-time wage employment. Rapidly proliferating computer-based
technologies made quick adaptation to changing market opportunities both
possible and necessary. Together, these changes made the fixed costs and
overhead obligations associated with the SER less viable for employers,
ushering in an emerging new economic order fundamentally distinct from
the bureaucratic model of work.
While some employment systems modeled on the SER certainly remain
in place, others were dismantled in favor of new ones resting on what has
come to be known as nonstandard employment relations (Kalleberg, 2000).

Transformation of the Employment Relationship

5

While these take several distinct forms, in general they tend to be more
transactional exchanges than the SER, and they provide less employment
security than the SER. Among them are contract work and temporary
employment—both direct hires engaged on a fixed-term basis and workers
procured via intermediary organizations including contract companies
and temporary help agencies. Some analysts regard part-time work as a
nonstandard relation. Labels including alternative work arrangements,
market-mediated arrangements, nontraditional employment relations,
flexible staffing arrangements, atypical employment, precarious employment, disposable work, and contingent work also refer to nonstandard
employment relations.
Nonstandard employment relations depart from the SER in one or more
ways. First, in some, the employer–employee relationship is mediated via a
third party rather than direct. Such arrangements “externalize” administrative control and legal responsibility for employees who may perform work
activities for several work organizations. The worker’s de jure employer is
an intermediary organization rather than the de facto employer that pays for
and makes use of the worker’s labor. In these nonstandard employment relations, the meanings of the terms employer and employee become ambiguous
because facets of employment that are intertwined in the definition of the
SER are distributed across different organizations. In temporary help agency
employment, for example, the intermediary agency is the worker’s legally
defined employer, but actual work is performed at and for—and directed
by—distinct client organizations. Workers employed by contract companies
often perform their activities at a client’s site but take direction from the
contract company itself. In both forms, the duration of worker–client engagements can vary widely. These arrangements are products of social and political negotiations: in the United States, for example, temporary help agencies
and their corporate backers fought for over four decades to designate such
agencies as employers in legal terms, rather than merely as employment brokers that connect job seekers with employers.
Second, some nonstandard work carries no assumption of continued
employment, in contrast to the SER in which the expectation is that
employment will be at least open ended with an indefinite future, if not
“permanent.” While some temporary workers transition into regular
employment with a client after a provisional short-term engagement,
temporary employment is usually just that. Apart from workers procured
via intermediary agencies, organizations may hire temporaries directly for a
fixed term, or on an on-call basis to cover absences of regular employees or
to manage high but transient workloads. Fixed-term contracts have become
particularly important in countries where legal provisions make it difficult

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EMERGING TRENDS IN THE SOCIAL AND BEHAVIORAL SCIENCES

for employers to terminate indefinite-duration contracts, such as France,
Germany, Italy, and Spain.
Third, still other nonstandard work arrangements, including self- employment and independent contracting, collapse the employer–employee distinction. In these situations, workers administer and direct their own activities
and are paid by clients for services performed or goods provided, not as
employees providing labor power.
Finally, some work arrangements deviate from the norm of full-time
employment. Controversy exists as to whether all part-time work should be
considered nonstandard, because many less-than-full-time jobs incorporate
all other features of the SER. Some part-time arrangements represent
employer accommodations to employee preferences for reduced hours and
more flexible schedules. Other part-time jobs, however, are highly insecure,
lacking enhancements such as benefits, training opportunities, and the
expectation of continuity. Many employees in such part-time arrangements
would prefer full-time positions.
A principal driver of movement away from SERs toward these forms of
nonstandard work was employer desires for greater flexibility in relations
with employees—transforming labor into a variable rather than fixed cost,
thereby facilitating adaptability. As well, technological improvements in
communication and information systems made it easier for organizations
to specialize their production, assemble temporary workers quickly for
projects, and rely more on outside suppliers. New legal regimes contributed
to the growth in nonstandard work by constructing employment relations
that allow employers to avoid the mandates and costs associated with
labor laws that provide protection for permanent employees. So too did
demographic shifts in labor force composition involving growth in worker
groups—such as married women and older people—who sometimes prefer
the flexibility that nonstandard arrangements offer, although not necessarily
the associated insecurity.
Not all nonstandard employment relations are disadvantageous for all
employees relative to SERs. Certain high-skilled workers can garner higher
economic rewards as independent contractors or consultants than they
might as employees. In these instances, nonstandard arrangements allow
workers to capitalize on abundant market opportunities and demands for
their skills.
It is tempting to interpret the growing prominence of nonstandard
employment relations in recent years as an “evolution” beyond the SER,
but nonstandard employment relations are by no means new. Producers
have always been able to choose between internally “making” (i.e., hiring,
training, and directing) workers within organizations and “buying” them
in external labor markets via formal or informal contracting, a classic

Transformation of the Employment Relationship

7

choice central in transaction cost economics theory (Williamson, 1985).
History is replete with examples of flexible labor markets characterized by
unstable, temporary work and peripheral labor force attachment, and many
employment relations that do not involve full-time work accompanied by
open-ended employer–employee commitments. For instance, under the
“inside contracting” system in nineteenth-century U.S. manufacturing,
management engaged contractors, provided them with machinery and
factory space, supplied raw material and capital, and sold products, while
the contractors were responsible for organizing production and hiring,
paying, and directing the actual workers. Indeed, the historical anomaly
may be the efficiencies associated with SERs and internal labor markets
in the post-World War II period, not the use of nonstandard employment
relations. Nonetheless, the latest incarnation of nonstandard employment
relations does have novel features that distinguish it from earlier ones. Contemporary nonstandard employment relations increasingly involve labor
market intermediaries, and expansion in their use leads toward production
systems that can be termed aptly as network organizations.
CUTTING-EDGE RESEARCH
A transition in the organization of work from bureaucratic to more flexible
forms accompanied the shift from the SER to nonstandard employment relations. Several central strands of research examine these interrelated changes
and consequences ensuing from them.
First, some debate the extent to which recent growth in nonstandard
employment relations constitutes a structural transformation, as opposed
to an episodic upturn due to business-cycle fluctuations. Advocates of a
cyclical interpretation observe that small decreases in the use of nonstandard
work arrangements (such as temporary agency work) tend to accompany
declining unemployment rates. By contrast, those contending that expansion in nonstandard relations signals a fundamental transformation argue
that temporary and contract employment are now well institutionalized
and therefore legitimated as “best employment practices” that enhance
effectiveness and efficiency, especially in the face of changed conditions brought about by increasing globalization and rapid technological
change.
Second, the growth of organizational forms such as contract companies,
subcontractors, and temporary help agencies underscores the increasing
prominence of network relations among organizations within contemporary
production systems. These lead to interorganizational forms of cooperative
endeavor characterized by reciprocal communication and exchange governed by relations of mutual trust between parties, rather than either the

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EMERGING TRENDS IN THE SOCIAL AND BEHAVIORAL SCIENCES

market logic of price or the hierarchical command and control regimes that
internally coordinate self-contained organizations. Similar to nonstandard
employment relations, network forms of organization are not new. Many
claim that they now are more common, however, because global and
segmented markets provide a fertile environment for networking, and
cheap information technology enables the creation and maintenance of rich,
multifaceted interorganizational ties.
The turbulent environments that led nonstandard employment relations to
emerge also encourage employers to manage resource dependencies, cope
with rising uncertainty, and enhance competitiveness by developing greater
interconnectedness with other organizations. Some organizational networks
form when large, vertically integrated firms achieve greater flexibility by
spinning off or divesting themselves of former parts of themselves and
instead establishing collaborations with other firms. Two examples of ongoing network arrangements involving close collaboration are multinational
joint ventures and producer-supplier alliances. Other shorter term systems
are constructed to accomplish single projects, after which they disband;
examples include the temporary organizations organized by home-building
contractors and film production companies. These systems rely on trust,
sharing of implicit knowledge, and strong economic incentives to complete
their joint projects efficiently. Firms such as consulting companies also
organize internal project teams, combining and recombining both specialists
and multiply skilled staff members to suit the circumstances of a task or
engagement.
Organizational networks incorporating diverse types of nonstandard
employment relations can help organizations achieve both numerical
flexibility (i.e., calibrating workforce size to changing demand levels) and
functional flexibility (adjusting their complement of available skills and
capabilities and shifting assignments of employees to tasks depending on
demand). Outsourcing functions such as production, maintenance and
repair, clerical support, and other activities to contract companies—rather
than using employees within the organization to perform them—is one
means of obtaining numerical flexibility. Functional flexibility can be
achieved via collaborative relations among specialized suppliers and producers, as illustrated by networks for specialized garment production in
the Emilia-Romagna industrial district of Italy, or the networks formed
within regions in which computer-oriented firms are concentrated, such
as the vicinity of Route 128 in Massachusetts or Silicon Valley, California.
Close, trust-based relations among organizations in these networks enable
producers to reconfigure their relationships with suppliers and to develop
interorganizational competencies, thus achieving “flexible specialization”

Transformation of the Employment Relationship

9

by acquiring and redeploying resources as needed to adapt to changes in
environmental circumstances.
The growth of network organizational forms and nonstandard employment
relations holds important consequences for individuals’ careers. Research
on “boundaryless” careers underscores the unraveling of firm-internal labor
markets, so that career mobility increasingly takes place via movements
between rather than within organizations. Such career patterns require
adaptable and flexible skill sets. The pace of change in product/service
markets requires that workers possess diffuse skills suitable to performing
multiple tasks, rather than acquiring only those needed to perform the
activities specified by a stable, well-defined job description. As careers
more often unfold between rather than within particular organizational
settings, employers may increasingly rely on external hiring as a means of
acquiring workers with needed skills and capabilities, instead of developing
them internally via training programs. Employer investments in developing
both general and firm-specific skills are placed at risk when employees are
apt to move to another organization after completing training programs,
prompting employers to shift responsibility for skill acquisition to workers.
KEY ISSUES AND CHALLENGES FOR FUTURE RESEARCH
Changes in employment relations are key elements in a number of
key research questions on agendas for future investigations of work,
employment, social stratification, organizations, and related topics.
KEY ISSUES
Many macrostructural forces that prompted the recent expansion of nonstandard employment relations will likely to continue to influence the nature
of employer–employee ties. Economic pressures such as price competition
among producers distributed across the globe will encourage employers to continue seeking flexible relations with employees. Technological
innovations will facilitate this by reducing further the costs of contracting,
enhancing its efficiency, and enabling organizations to outsource more of
their activities (e.g., professional and customer services).
The rising exposure of workers to market forces that ensues from employers’ search for greater flexibility renders them more vulnerable and may lead
to demands for greater social security and welfare provisions that better protect workers. Increased calls for such social protections seem especially likely
to arise in places in which SERs, and hence security, were widespread in the
past—such as the United States and Europe. New social protections need

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EMERGING TRENDS IN THE SOCIAL AND BEHAVIORAL SCIENCES

not be tied to particular employers, as health and retirement benefits currently are in some places. One alternative model may be found in the various
“flexicurity” systems that provide employers with flexibility and employees
with security, as in employment systems found in Denmark and the Netherlands. In Denmark, employees have few job protections but the availability of
generous unemployment benefits and active labor market policies provides
considerable opportunities for retraining that facilitate employees’ transitions to new jobs. In the Netherlands, workers in nonstandard employment
relations enjoy many of the same social protections as those who work in
SERs.
It is also likely that employers, especially large ones, will attempt to
develop open-ended employment relations in an attempt to retain highly
skilled workers. It is unlikely that these will approach the stability and
permanence of SERs, in view of the enhanced opportunities for interfirm
mobility that the global economy and technological advances of recent years
have unleashed. Rather, occupational labor markets segmented according
to possession of particular skill sets are apt to exercise increasing influence
on career paths, permitting people to move between employers in order
to best utilize and enhance their skills. In addition, growing emphasis
on entrepreneurship will probably fuel rises in the numbers of high-skill
independent contractors willing and able to sell their services and products
to a wide market of producers requiring their specialized capabilities.
A central issue for the future concerns the implications of changing
employment relations for social and economic inequality. Rising inequality
constitutes a major challenge for the United States and many other industrial
countries. Much of it is attributable to the enormous growth in the wealth
and income of the top 1% or 2% of households within the population, some
of this in turn reflecting the financialization of the economy and returns
to stocks and investments rather than disparities in earned income. The
close linkage between employment and earnings suggests that changes in
employment relations are also an essential part of the explanation, however.
In particular, growth in nonstandard employment relations increasingly
exposes some workers to market opportunities and pressures, allowing
those with more education and certain highly marketable skills to realize
high returns to their human and social capital while severely limiting the
options and security of others. The growing marketization of employment
relations contributes to rises both in high-wage jobs for workers with more
education and skills and in low-wage, low-quality ones for vulnerable
workers who lack institutional protections. Such polarization in job quality
is, of course, of greater consequence in liberal market political economies
such as the United States, where many benefits are tied to employment
rather than provided by the state.

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11

The growing legitimacy of temporary help agencies raises several vital
questions about future configurations of employment relations. Among these
is that of the role such agencies play in shaping individuals’ careers. Employers are increasingly using temporary help agencies to screen prospective
employees during a trial probationary period that involves no commitment
to a continued employment relationship. To what extent do temporary
help agencies provide bridges to permanent and rewarding employment
for workers, rather than confining them to a series of short-term, dead-end
jobs? Working in temporary help agencies is likely to be more beneficial in
countries where social insurance and welfare benefits are not contingent
upon particular forms of employment. The triadic employment relationship
that arises in much temporary employment—involving the worker, the de
jure employer (the temporary help agency) and the de facto employer (the
client organization)—similarly poses several important dilemmas. Among
them is that of the locus of responsibility for training—whether it is provided
by the agency or the client or acquired by workers outside of the employment relation via educational organizations or private providers. Finally,
rises in temporary employment raise questions about the organization of
work, which commonly requires that agency-supplied workers and regular
employees in an SER work alongside one another. Under what conditions
will they be able to cooperate with each other, when are conflicts likely to
arise, and how can they be managed effectively?
The transformation of employment relations also raises significant research
questions about interactions between work and other societal institutions. In
particular, the decline in the SER and the continuing weakening of unions
(in the United States and in industrial nations generally) have been accompanied by vast changes in the legal framework of the employment relationship. Much past labor law assumed an SER-like relationship involving one
employer and one employee. The emergence of triadic employment relations calls for revisiting and updating these laws to address, among many
other things, quandaries such as the locus of liability for harms encountered
by workers during employment. Which organization—the client or agency
supplying labor—bears responsibility in the case of injuries ensuing due to
accidents (e.g., in cell tower work or in the petrochemical industry)? Which
of them is responsible for unemployment and health insurance and other
forms of social protection, if the government does not provide these as benefits of employment? As well, industrial unionism and collective bargaining
was modeled on the SER, so union decline raises questions of who—lawyers,
government officials, union leaders, or employees themselves—now is best
able to represent workers’ interests in their relations with employers? Are
new forms of unionism/worker power viable and appropriate in view of
increased worker mobility among firms?

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EMERGING TRENDS IN THE SOCIAL AND BEHAVIORAL SCIENCES

Finally, it is important to ask about the impact of changing employment
relations on family dynamics, and vice versa. The increased uncertainty and
unpredictability introduced by nonstandard employment relations hold
negative consequences for career development in many industrial countries
and in turn may lead to postponement of marriage and childbearing, among
other impacts on the family. This is especially acute in countries such as
Japan, for example, where declining economic opportunities among men
are associated with reductions in marriage and below-replacement fertility
levels. U.S. evidence indicates that marriage rates have declined among
less-educated whites and that marriage may be becoming deinstitutionalized as a framework for family formation. At the same time, other changes
including the growth in dual earner families may pressure employers to
accommodate the careers of skilled women by developing mechanisms that
facilitate work–family balance, potentially introducing further polarization
by skill in employment conditions.
These issues raised by changing employment relations will preoccupy
researchers in a variety of social science disciplines. The focus of such
research needs to encompass the full range of job rewards that workers seek—extending beyond earnings to consider flexible schedules or
control over work, for example—and that employers therefore should
consider when organizing workplaces. Understandings of how employer
and employee visions of the psychological employment contract have
changed—from relational ones resting on mutual loyalty and commitment
to transactional ones in which employers regard workers as a source of
short-term benefit and employees view the skills and experiences they
acquire as a basis for obtaining jobs elsewhere—need to be refined. Public
policy faces the issues of how to address problems ensuing from the growing
precariousness of work and the uncertainties built into new employment
relations and how to promote employability security if job security is elusive.
Moreover, labor law must address the new risks and challenges posed by
the greater movement of employees among workplaces.
CHALLENGES
Future research on employment relations will require improved data on
organizations and their employees. Organizations will continue to be key
actors in shaping the nature of employment relations, but declines in the
length of employee–employer attachments and the increasing complexity
and variety of contemporary employment relations pose challenges about
how best to gather and record information about them. We need, for
example, better information on the nature and scope of employer–employee
contracts and on employees’ duration of employment and mobility between

Transformation of the Employment Relationship

13

employers. The U.S. Census Bureau’s Longitudinal Employer-Household
Dynamics data on firms and employees are a very promising data resource
in this regard, as it tracks the movement of workers both within and between
employers, thereby clarifying career patterns and permitting assessments of
hypotheses about changing rates and correlates of interfirm mobility. Other
useful data sets for analyzing career patterns in the United States include
the Panel Study of Income Dynamics and the National Longitudinal Survey
of Youth.
Some countries, notably in Scandinavia, assemble registry data on individuals and often their employers. These repositories of administrative data
provide valuable, comprehensive information on the nature of employment
relations. Similar information would also be very helpful in studying
employment relations in the United States, but creating and disseminating
such data bases—which include such highly sensitive material as income
tax records—would have to surmount serious privacy challenges. Among
other exemplary international data efforts relevant to studying employment
relations are the longitudinal data sets assembled and harmonized by the
Luxemburg Income Study, and the Measuring the Dynamics of Organizations and Work (Meadow) project that coordinates the collection of data
on organizational change and work across more than a dozen European
countries. In addition, repeated cross-sectional surveys of adult populations,
such as the U.S. General Social Survey and its counterparts elsewhere,
provide important information about trends in the subjective correlates of
employment relations, such as job satisfaction, perceived security in jobs
and employment opportunities, and other work orientations.
CONCLUDING COMMENTS
Employment relations link individual workers to their organizations and
other economic and social institutions. Changes in social, economic, political,
historical, spatial, and legal institutions have profound effects on employment relations—and thereby on individuals—and reciprocally are affected
by these institutions. The past quarter century has witnessed a transition
in the normative form of the linkages between employers and employees,
moving away from the SER toward a variety of nonstandard employment
relations. While nonstandard employment relations are not new, they depart
from the relative certainty and growth that typified employment relationships during the three decades following World War II. Expansion in nonstandard employment relationships is associated with, and poses questions
regarding, a wide range of phenomena including the growth of economic
and social inequality, shifting career patterns, and changes in the organization of work. Better understanding of the nature and consequences of these

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EMERGING TRENDS IN THE SOCIAL AND BEHAVIORAL SCIENCES

changes is a major priority for social scientists seeking to enhance the quality of individual work experiences and the competitiveness of organizations
and societies alike.
REFERENCES
Baron, J. N. (1988). The employment relation as a social relation. Journal of the Japanese
and International Economies, 2(4), 492–525.
Kalleberg, A. L. (2000). Nonstandard employment relations: Part-time, temporary,
and contract work. Annual Review of Sociology, 26, 341–365.
Kalleberg, A. L. (2011). Good jobs, bad jobs: The growth of polarized and precarious employment systems in the United States, 1970s to 2000s. New York, NY: Russell Sage Foundation.
Lincoln, J. R., & Kalleberg, A. L. (1990). Culture, control and commitment: A study of work
organization and work attitudes in the United States and Japan. Cambridge, England:
Cambridge University Press.
Williamson, O. E. (1985). The economic institutions of capitalism: Firms, markets, relational contracting. New York, NY: Free Press.

FURTHER READING
Barker, K., & Christensen, K. (Eds.) (1998). Contingent work: American employment relations in transition. Ithaca, NY: Cornell University Press.
Cappelli, P. (1999). The new deal at work: managing the market-driven workforce. Boston,
MA: Harvard Business School Press.
Jacoby, S. M. (1985). Employing bureaucracy: Managers, unions, and the transformation
of work in the 20th century. New York, NY: Columbia University Press.
Kalleberg, A. L., Reynolds, J., & Marsden, P. V. (2003). Externalizing employment:
Flexible staffing arrangements in U.S. organizations. Social Science Research, 32(4),
525–552.
Osterman, P. (Ed.) (1984). Internal labor markets. Cambridge, MA: MIT Press.

ARNE L. KALLEBERG SHORT BIOGRAPHY
Arne L. Kalleberg is a Kenan Distinguished Professor of Sociology at the
University of North Carolina at Chapel Hill. He has published more than
120 articles and chapters and 11 books on topics related to the sociology of
work, organizations, occupations and industries, labor markets, and social
stratification. His most recent book is Good Jobs, Bad Jobs: The Rise of Polarized
and Precarious Employment Systems in the United States, 1970s-2000s (Russell
Sage Foundation, 2011). He served as President of the American Sociological
Association in 2007-8 and is currently the editor of Social Forces
Personal Web page: https://arnekalleberg.web.unc.edu

Transformation of the Employment Relationship

15

PETER V. MARSDEN SHORT BIOGRAPHY
Peter V. Marsden is the Edith and Benjamin Geisinger Professor of Sociology and Dean of Social Science at Harvard University. His research interests center on social organization—especially formal organizations and social
networks—and social science methodology. He has served as a coprincipal
investigator of the General Social Survey since 1998. His most recent books
are (editor) Social Trends in American Life: Findings from the General Social Survey since 1972 (Princeton University Press, 2012), and (coeditor, with James
D. Wright) Handbook of Survey Research, Second Edition (Emerald Group Publishing, 2010).
Personal Web page: http://scholar.harvard.edu/pvmarsden/
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David B. Grusky
Globalization: Consequences for Work and Employment in Advanced
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Labor Market Instability, Labor Market Entry and Early Career Development
(Sociology), Michael Gebel
The Reorganization of Work (Sociology), Charles Heckscher
Technology Diffusion (Economics), Adam B. Jaffe
Maternal and Paternal Employment across the Life Course (Sociology),
Michaela Kreyenfeld
How Do Labor Market Networks Work? (Sociology), Brian Rubineau and
Roberto M. Fernandez
Sociology of Entrepreneurship (Sociology), Martin Ruef
Impact of Limited Education on Employment Prospects in Advanced
Economies (Sociology), Heike Solga
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Schneider and Judith Stepan-Norris
Transnational Work Careers (Sociology), Roland Verwiebe


Transformation of the Employment
Relationship
ARNE L. KALLEBERG and PETER V. MARSDEN

Abstract
Employment relations are implicit or explicit contractual arrangements that specify
the reciprocal expectations and obligations linking employers and employees. They
encompass a wide range of phenomena, including work organization, governance,
evaluation, and rewards. During the past quarter century, the standard employment
relationship that was normative in much of the world during the twentieth century
declined in favor of various nonstandard employment relations involving more tenuous employer–employee linkages. The transformation of employment relations has
been associated with a wide range of phenomena including growth in economic and
social inequality, shifting career patterns, and changes in the organization of work.

INTRODUCTION
Employment relations are implicit or explicit contractual arrangements that
specify the reciprocal expectations and obligations linking employers and
employees. They encompass a wide range of phenomena, including work
organization, governance, evaluation, and rewards. Work and employment
are vitally important to individuals, organizations, and societies, so the study
of employment relations is central to numerous subjects in the social sciences,
including the origins and maintenance of economic inequality and social
stratification; the operation of labor markets; mechanisms of skill acquisition
and career mobility; recruitment, selection, hiring, and promotion processes;
and the governance and control of work activities within organizations. As
the link between individuals and their employing organizations, employment relations provide a theoretical linchpin connecting multiple levels of
analysis: macrostructures such as economic, political, legal, and social institutions; mesoscopic (middle-range) aspects of work groups, firms and interfirm
networks; and microlevel features of employment including individual work
experiences and rewards.

Emerging Trends in the Social and Behavioral Sciences. Edited by Robert Scott and Stephen Kosslyn.
© 2015 John Wiley & Sons, Inc. ISBN 978-1-118-90077-2.

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EMERGING TRENDS IN THE SOCIAL AND BEHAVIORAL SCIENCES

As employment relations are shaped by and embedded in the social, psychological, economic, political, historical, spatial, and legal linkages between
employers and employees (Baron, 1988), research about them requires a
multidisciplinary standpoint incorporating insights from sociology, economics, social psychology, law, political science, social geography, history,
industrial relations, and management. Moreover, employment relations
are highly context-dependent, making comparative studies indispensable.
For example, well-developed firm-internal labor markets in Japan reflect
both cultural understandings of the importance of the group in Japanese
life and essential features of Japanese management practices (Lincoln &
Kalleberg, 1990). Historical and cross-national analyses of employment
relations highlight limitations of universal models of employment systems,
helping us to understand better how labor markets and other institutions
interact with culture and worker agency to produce changes in the structure
and processes of work and employment.
During the past quarter century, understanding employment relations took
on increasing importance in the United States and other industrial countries,
as some linked growing polarization between “good” and “bad” jobs and
increasing inequality in income, job, and employment security, hours worked
and other labor market outcomes to changes in employer–employee work
arrangements. These changes are also associated with transformations in the
organization of work, especially shifts away from arrangements that internalize jobs within bureaucratic organizations toward ones involving external contracting and other interorganizational relations (Kalleberg, 2011). We
outline the nature and consequences of these recent developments in employment relations.
FOUNDATIONAL RESEARCH
Employment relations range in scope from broadly defined relational
exchanges to narrowly delimited transactional ones. Close relational linkages between organizations and their employees reflect mutual commitment,
often having open-ended duration and providing training as well as welfare
supports for employees such as health insurance and retirement benefits.
Transactional relations are more exclusively instrumental, entailing little
commitment and often only the exchange of money for work performed
within a fixed time frame. They lack elaborations—such as training, welfare
provisions, or an expectation of ongoing employment—that are typical
of relational exchanges. Theories and research on labor markets document over-time swings between transactional and relational employment
relations.

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3

STANDARD EMPLOYMENT RELATIONSHIP
Much foundational research on employment relations takes the standard
employment relationship (SER) as a reference point. SERs involve relational
exchanges and were the norm in industrial nations for much of the twentieth
century, emerging in the United States in the 1930s and blossoming in the
post-World War II years as part of the social contract that accompanied
the spread of Fordist mass production and the ascendancy of large organizations. SERs carry appreciable overhead costs because of the range and
duration of the commitments they incorporate. Although the SER was
normative during this period, it was far from universal within the United
States labor force then; it was found mainly in larger organizations and
concentrated among white-collar employees (usually men) in managerial
occupations and blue-collar workers in certain organized industries. The
“permanent employment” regime in Japan—also generally limited to men
working in large organizations—resembles the SER.
Accounts of the emergence of the SER attribute it to factors linked to the
interests of both employers and employees. Some Marxist authors contend
that the SER is a form of bureaucratic control used by capitalists to divide
the working class, while non-Marxists emphasize the efficiency gains and
reduced transaction costs that accrue to employers by virtue of the internal
training and firm-specific capabilities deriving from bureaucratic employment relations. Unions favored the development of SERs as a means toward
providing greater due process and achieving equity in their relations with
employers, thereby limiting the arbitrary exercise of authority by foremen in
“drive systems” of personnel management that pressured workers to work
hard through fear and intimidation. Nonunionized firms often created SERs
in an effort to forestall future unionization efforts.
Features that typify the SER include the exchange of employee labor
for monetary compensation, performance of work on a preset schedule
at the employer’s place of business and under its control and direction,
and jobs having well-defined boundaries and descriptions. It often, but
not always, involves full-time employment and a shared expectation of
continued employment contingent on satisfactory employee performance.
SERs amount to a psychological contract in which employers pledge job
security in exchange for employee loyalty.
SERs were the normative foundation of the framework within which labor
law, collective bargaining, social security systems, and other features of welfare regimes developed. These institutions assumed models of employment
relations and the family having a full-time, primary-breadwinner husband,
and a wife who cared for children and the home. Post-World War II welfare

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EMERGING TRENDS IN THE SOCIAL AND BEHAVIORAL SCIENCES

regimes sought to address risks associated with the SER, namely unemployment for the main source of income. Unemployment insurance schemes provided support for the breadwinner (and hence the family) predicated on the
assumption that periods of joblessness would be relatively short and associated with generally brief business-cycle downturns.
The SER provides a basis for much theory and research in organizational
sociology, institutional economics (e.g., transaction cost economics), industrial relations, and other fields. Models define internal labor markets, for
example, as within-firm employment systems having job ladders, with entry
restricted to the bottom rungs and upward movements associated with the
progressive development of skills and knowledge. Careers within internal
labor markets assumed extended employee commitment to an organization.
Stratification research examines rates and patterns of individual mobility
along job ladders within large corporations. SERs also were a foundational
concept in theories of the design, division of labor, and control of work
within bureaucratic organizations. They are key features in accounts of the
process of internalization, which altered organizational boundaries by transforming former contractors and others outside the organization into regular
employees. The development of modern personnel and human resource
management systems accompanied the internalization of employment
relations.
NONSTANDARD EMPLOYMENT RELATIONS
Beginning in the mid-1970s (in the United States, often the 1980s in many
European countries and the 1990s in some Asian nations), changing
conditions in political, social, technological, and economic environments
prompted governments and organizations to seek greater flexibility in
employment systems. Increased price competition and more fluid capital
markets put greater pressure on firms to maximize profitability and to
respond to rapidly changing consumer tastes and preferences. Sluggish economic growth triggered high unemployment and made it clear, especially in
Europe, that economies could not generate enough jobs to assure all workers
of full-time wage employment. Rapidly proliferating computer-based
technologies made quick adaptation to changing market opportunities both
possible and necessary. Together, these changes made the fixed costs and
overhead obligations associated with the SER less viable for employers,
ushering in an emerging new economic order fundamentally distinct from
the bureaucratic model of work.
While some employment systems modeled on the SER certainly remain
in place, others were dismantled in favor of new ones resting on what has
come to be known as nonstandard employment relations (Kalleberg, 2000).

Transformation of the Employment Relationship

5

While these take several distinct forms, in general they tend to be more
transactional exchanges than the SER, and they provide less employment
security than the SER. Among them are contract work and temporary
employment—both direct hires engaged on a fixed-term basis and workers
procured via intermediary organizations including contract companies
and temporary help agencies. Some analysts regard part-time work as a
nonstandard relation. Labels including alternative work arrangements,
market-mediated arrangements, nontraditional employment relations,
flexible staffing arrangements, atypical employment, precarious employment, disposable work, and contingent work also refer to nonstandard
employment relations.
Nonstandard employment relations depart from the SER in one or more
ways. First, in some, the employer–employee relationship is mediated via a
third party rather than direct. Such arrangements “externalize” administrative control and legal responsibility for employees who may perform work
activities for several work organizations. The worker’s de jure employer is
an intermediary organization rather than the de facto employer that pays for
and makes use of the worker’s labor. In these nonstandard employment relations, the meanings of the terms employer and employee become ambiguous
because facets of employment that are intertwined in the definition of the
SER are distributed across different organizations. In temporary help agency
employment, for example, the intermediary agency is the worker’s legally
defined employer, but actual work is performed at and for—and directed
by—distinct client organizations. Workers employed by contract companies
often perform their activities at a client’s site but take direction from the
contract company itself. In both forms, the duration of worker–client engagements can vary widely. These arrangements are products of social and political negotiations: in the United States, for example, temporary help agencies
and their corporate backers fought for over four decades to designate such
agencies as employers in legal terms, rather than merely as employment brokers that connect job seekers with employers.
Second, some nonstandard work carries no assumption of continued
employment, in contrast to the SER in which the expectation is that
employment will be at least open ended with an indefinite future, if not
“permanent.” While some temporary workers transition into regular
employment with a client after a provisional short-term engagement,
temporary employment is usually just that. Apart from workers procured
via intermediary agencies, organizations may hire temporaries directly for a
fixed term, or on an on-call basis to cover absences of regular employees or
to manage high but transient workloads. Fixed-term contracts have become
particularly important in countries where legal provisions make it difficult

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EMERGING TRENDS IN THE SOCIAL AND BEHAVIORAL SCIENCES

for employers to terminate indefinite-duration contracts, such as France,
Germany, Italy, and Spain.
Third, still other nonstandard work arrangements, including self- employment and independent contracting, collapse the employer–employee distinction. In these situations, workers administer and direct their own activities
and are paid by clients for services performed or goods provided, not as
employees providing labor power.
Finally, some work arrangements deviate from the norm of full-time
employment. Controversy exists as to whether all part-time work should be
considered nonstandard, because many less-than-full-time jobs incorporate
all other features of the SER. Some part-time arrangements represent
employer accommodations to employee preferences for reduced hours and
more flexible schedules. Other part-time jobs, however, are highly insecure,
lacking enhancements such as benefits, training opportunities, and the
expectation of continuity. Many employees in such part-time arrangements
would prefer full-time positions.
A principal driver of movement away from SERs toward these forms of
nonstandard work was employer desires for greater flexibility in relations
with employees—transforming labor into a variable rather than fixed cost,
thereby facilitating adaptability. As well, technological improvements in
communication and information systems made it easier for organizations
to specialize their production, assemble temporary workers quickly for
projects, and rely more on outside suppliers. New legal regimes contributed
to the growth in nonstandard work by constructing employment relations
that allow employers to avoid the mandates and costs associated with
labor laws that provide protection for permanent employees. So too did
demographic shifts in labor force composition involving growth in worker
groups—such as married women and older people—who sometimes prefer
the flexibility that nonstandard arrangements offer, although not necessarily
the associated insecurity.
Not all nonstandard employment relations are disadvantageous for all
employees relative to SERs. Certain high-skilled workers can garner higher
economic rewards as independent contractors or consultants than they
might as employees. In these instances, nonstandard arrangements allow
workers to capitalize on abundant market opportunities and demands for
their skills.
It is tempting to interpret the growing prominence of nonstandard
employment relations in recent years as an “evolution” beyond the SER,
but nonstandard employment relations are by no means new. Producers
have always been able to choose between internally “making” (i.e., hiring,
training, and directing) workers within organizations and “buying” them
in external labor markets via formal or informal contracting, a classic

Transformation of the Employment Relationship

7

choice central in transaction cost economics theory (Williamson, 1985).
History is replete with examples of flexible labor markets characterized by
unstable, temporary work and peripheral labor force attachment, and many
employment relations that do not involve full-time work accompanied by
open-ended employer–employee commitments. For instance, under the
“inside contracting” system in nineteenth-century U.S. manufacturing,
management engaged contractors, provided them with machinery and
factory space, supplied raw material and capital, and sold products, while
the contractors were responsible for organizing production and hiring,
paying, and directing the actual workers. Indeed, the historical anomaly
may be the efficiencies associated with SERs and internal labor markets
in the post-World War II period, not the use of nonstandard employment
relations. Nonetheless, the latest incarnation of nonstandard employment
relations does have novel features that distinguish it from earlier ones. Contemporary nonstandard employment relations increasingly involve labor
market intermediaries, and expansion in their use leads toward production
systems that can be termed aptly as network organizations.
CUTTING-EDGE RESEARCH
A transition in the organization of work from bureaucratic to more flexible
forms accompanied the shift from the SER to nonstandard employment relations. Several central strands of research examine these interrelated changes
and consequences ensuing from them.
First, some debate the extent to which recent growth in nonstandard
employment relations constitutes a structural transformation, as opposed
to an episodic upturn due to business-cycle fluctuations. Advocates of a
cyclical interpretation observe that small decreases in the use of nonstandard
work arrangements (such as temporary agency work) tend to accompany
declining unemployment rates. By contrast, those contending that expansion in nonstandard relations signals a fundamental transformation argue
that temporary and contract employment are now well institutionalized
and therefore legitimated as “best employment practices” that enhance
effectiveness and efficiency, especially in the face of changed conditions brought about by increasing globalization and rapid technological
change.
Second, the growth of organizational forms such as contract companies,
subcontractors, and temporary help agencies underscores the increasing
prominence of network relations among organizations within contemporary
production systems. These lead to interorganizational forms of cooperative
endeavor characterized by reciprocal communication and exchange governed by relations of mutual trust between parties, rather than either the

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EMERGING TRENDS IN THE SOCIAL AND BEHAVIORAL SCIENCES

market logic of price or the hierarchical command and control regimes that
internally coordinate self-contained organizations. Similar to nonstandard
employment relations, network forms of organization are not new. Many
claim that they now are more common, however, because global and
segmented markets provide a fertile environment for networking, and
cheap information technology enables the creation and maintenance of rich,
multifaceted interorganizational ties.
The turbulent environments that led nonstandard employment relations to
emerge also encourage employers to manage resource dependencies, cope
with rising uncertainty, and enhance competitiveness by developing greater
interconnectedness with other organizations. Some organizational networks
form when large, vertically integrated firms achieve greater flexibility by
spinning off or divesting themselves of former parts of themselves and
instead establishing collaborations with other firms. Two examples of ongoing network arrangements involving close collaboration are multinational
joint ventures and producer-supplier alliances. Other shorter term systems
are constructed to accomplish single projects, after which they disband;
examples include the temporary organizations organized by home-building
contractors and film production companies. These systems rely on trust,
sharing of implicit knowledge, and strong economic incentives to complete
their joint projects efficiently. Firms such as consulting companies also
organize internal project teams, combining and recombining both specialists
and multiply skilled staff members to suit the circumstances of a task or
engagement.
Organizational networks incorporating diverse types of nonstandard
employment relations can help organizations achieve both numerical
flexibility (i.e., calibrating workforce size to changing demand levels) and
functional flexibility (adjusting their complement of available skills and
capabilities and shifting assignments of employees to tasks depending on
demand). Outsourcing functions such as production, maintenance and
repair, clerical support, and other activities to contract companies—rather
than using employees within the organization to perform them—is one
means of obtaining numerical flexibility. Functional flexibility can be
achieved via collaborative relations among specialized suppliers and producers, as illustrated by networks for specialized garment production in
the Emilia-Romagna industrial district of Italy, or the networks formed
within regions in which computer-oriented firms are concentrated, such
as the vicinity of Route 128 in Massachusetts or Silicon Valley, California.
Close, trust-based relations among organizations in these networks enable
producers to reconfigure their relationships with suppliers and to develop
interorganizational competencies, thus achieving “flexible specialization”

Transformation of the Employment Relationship

9

by acquiring and redeploying resources as needed to adapt to changes in
environmental circumstances.
The growth of network organizational forms and nonstandard employment
relations holds important consequences for individuals’ careers. Research
on “boundaryless” careers underscores the unraveling of firm-internal labor
markets, so that career mobility increasingly takes place via movements
between rather than within organizations. Such career patterns require
adaptable and flexible skill sets. The pace of change in product/service
markets requires that workers possess diffuse skills suitable to performing
multiple tasks, rather than acquiring only those needed to perform the
activities specified by a stable, well-defined job description. As careers
more often unfold between rather than within particular organizational
settings, employers may increasingly rely on external hiring as a means of
acquiring workers with needed skills and capabilities, instead of developing
them internally via training programs. Employer investments in developing
both general and firm-specific skills are placed at risk when employees are
apt to move to another organization after completing training programs,
prompting employers to shift responsibility for skill acquisition to workers.
KEY ISSUES AND CHALLENGES FOR FUTURE RESEARCH
Changes in employment relations are key elements in a number of
key research questions on agendas for future investigations of work,
employment, social stratification, organizations, and related topics.
KEY ISSUES
Many macrostructural forces that prompted the recent expansion of nonstandard employment relations will likely to continue to influence the nature
of employer–employee ties. Economic pressures such as price competition
among producers distributed across the globe will encourage employers to continue seeking flexible relations with employees. Technological
innovations will facilitate this by reducing further the costs of contracting,
enhancing its efficiency, and enabling organizations to outsource more of
their activities (e.g., professional and customer services).
The rising exposure of workers to market forces that ensues from employers’ search for greater flexibility renders them more vulnerable and may lead
to demands for greater social security and welfare provisions that better protect workers. Increased calls for such social protections seem especially likely
to arise in places in which SERs, and hence security, were widespread in the
past—such as the United States and Europe. New social protections need

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EMERGING TRENDS IN THE SOCIAL AND BEHAVIORAL SCIENCES

not be tied to particular employers, as health and retirement benefits currently are in some places. One alternative model may be found in the various
“flexicurity” systems that provide employers with flexibility and employees
with security, as in employment systems found in Denmark and the Netherlands. In Denmark, employees have few job protections but the availability of
generous unemployment benefits and active labor market policies provides
considerable opportunities for retraining that facilitate employees’ transitions to new jobs. In the Netherlands, workers in nonstandard employment
relations enjoy many of the same social protections as those who work in
SERs.
It is also likely that employers, especially large ones, will attempt to
develop open-ended employment relations in an attempt to retain highly
skilled workers. It is unlikely that these will approach the stability and
permanence of SERs, in view of the enhanced opportunities for interfirm
mobility that the global economy and technological advances of recent years
have unleashed. Rather, occupational labor markets segmented according
to possession of particular skill sets are apt to exercise increasing influence
on career paths, permitting people to move between employers in order
to best utilize and enhance their skills. In addition, growing emphasis
on entrepreneurship will probably fuel rises in the numbers of high-skill
independent contractors willing and able to sell their services and products
to a wide market of producers requiring their specialized capabilities.
A central issue for the future concerns the implications of changing
employment relations for social and economic inequality. Rising inequality
constitutes a major challenge for the United States and many other industrial
countries. Much of it is attributable to the enormous growth in the wealth
and income of the top 1% or 2% of households within the population, some
of this in turn reflecting the financialization of the economy and returns
to stocks and investments rather than disparities in earned income. The
close linkage between employment and earnings suggests that changes in
employment relations are also an essential part of the explanation, however.
In particular, growth in nonstandard employment relations increasingly
exposes some workers to market opportunities and pressures, allowing
those with more education and certain highly marketable skills to realize
high returns to their human and social capital while severely limiting the
options and security of others. The growing marketization of employment
relations contributes to rises both in high-wage jobs for workers with more
education and skills and in low-wage, low-quality ones for vulnerable
workers who lack institutional protections. Such polarization in job quality
is, of course, of greater consequence in liberal market political economies
such as the United States, where many benefits are tied to employment
rather than provided by the state.

Transformation of the Employment Relationship

11

The growing legitimacy of temporary help agencies raises several vital
questions about future configurations of employment relations. Among these
is that of the role such agencies play in shaping individuals’ careers. Employers are increasingly using temporary help agencies to screen prospective
employees during a trial probationary period that involves no commitment
to a continued employment relationship. To what extent do temporary
help agencies provide bridges to permanent and rewarding employment
for workers, rather than confining them to a series of short-term, dead-end
jobs? Working in temporary help agencies is likely to be more beneficial in
countries where social insurance and welfare benefits are not contingent
upon particular forms of employment. The triadic employment relationship
that arises in much temporary employment—involving the worker, the de
jure employer (the temporary help agency) and the de facto employer (the
client organization)—similarly poses several important dilemmas. Among
them is that of the locus of responsibility for training—whether it is provided
by the agency or the client or acquired by workers outside of the employment relation via educational organizations or private providers. Finally,
rises in temporary employment raise questions about the organization of
work, which commonly requires that agency-supplied workers and regular
employees in an SER work alongside one another. Under what conditions
will they be able to cooperate with each other, when are conflicts likely to
arise, and how can they be managed effectively?
The transformation of employment relations also raises significant research
questions about interactions between work and other societal institutions. In
particular, the decline in the SER and the continuing weakening of unions
(in the United States and in industrial nations generally) have been accompanied by vast changes in the legal framework of the employment relationship. Much past labor law assumed an SER-like relationship involving one
employer and one employee. The emergence of triadic employment relations calls for revisiting and updating these laws to address, among many
other things, quandaries such as the locus of liability for harms encountered
by workers during employment. Which organization—the client or agency
supplying labor—bears responsibility in the case of injuries ensuing due to
accidents (e.g., in cell tower work or in the petrochemical industry)? Which
of them is responsible for unemployment and health insurance and other
forms of social protection, if the government does not provide these as benefits of employment? As well, industrial unionism and collective bargaining
was modeled on the SER, so union decline raises questions of who—lawyers,
government officials, union leaders, or employees themselves—now is best
able to represent workers’ interests in their relations with employers? Are
new forms of unionism/worker power viable and appropriate in view of
increased worker mobility among firms?

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EMERGING TRENDS IN THE SOCIAL AND BEHAVIORAL SCIENCES

Finally, it is important to ask about the impact of changing employment
relations on family dynamics, and vice versa. The increased uncertainty and
unpredictability introduced by nonstandard employment relations hold
negative consequences for career development in many industrial countries
and in turn may lead to postponement of marriage and childbearing, among
other impacts on the family. This is especially acute in countries such as
Japan, for example, where declining economic opportunities among men
are associated with reductions in marriage and below-replacement fertility
levels. U.S. evidence indicates that marriage rates have declined among
less-educated whites and that marriage may be becoming deinstitutionalized as a framework for family formation. At the same time, other changes
including the growth in dual earner families may pressure employers to
accommodate the careers of skilled women by developing mechanisms that
facilitate work–family balance, potentially introducing further polarization
by skill in employment conditions.
These issues raised by changing employment relations will preoccupy
researchers in a variety of social science disciplines. The focus of such
research needs to encompass the full range of job rewards that workers seek—extending beyond earnings to consider flexible schedules or
control over work, for example—and that employers therefore should
consider when organizing workplaces. Understandings of how employer
and employee visions of the psychological employment contract have
changed—from relational ones resting on mutual loyalty and commitment
to transactional ones in which employers regard workers as a source of
short-term benefit and employees view the skills and experiences they
acquire as a basis for obtaining jobs elsewhere—need to be refined. Public
policy faces the issues of how to address problems ensuing from the growing
precariousness of work and the uncertainties built into new employment
relations and how to promote employability security if job security is elusive.
Moreover, labor law must address the new risks and challenges posed by
the greater movement of employees among workplaces.
CHALLENGES
Future research on employment relations will require improved data on
organizations and their employees. Organizations will continue to be key
actors in shaping the nature of employment relations, but declines in the
length of employee–employer attachments and the increasing complexity
and variety of contemporary employment relations pose challenges about
how best to gather and record information about them. We need, for
example, better information on the nature and scope of employer–employee
contracts and on employees’ duration of employment and mobility between

Transformation of the Employment Relationship

13

employers. The U.S. Census Bureau’s Longitudinal Employer-Household
Dynamics data on firms and employees are a very promising data resource
in this regard, as it tracks the movement of workers both within and between
employers, thereby clarifying career patterns and permitting assessments of
hypotheses about changing rates and correlates of interfirm mobility. Other
useful data sets for analyzing career patterns in the United States include
the Panel Study of Income Dynamics and the National Longitudinal Survey
of Youth.
Some countries, notably in Scandinavia, assemble registry data on individuals and often their employers. These repositories of administrative data
provide valuable, comprehensive information on the nature of employment
relations. Similar information would also be very helpful in studying
employment relations in the United States, but creating and disseminating
such data bases—which include such highly sensitive material as income
tax records—would have to surmount serious privacy challenges. Among
other exemplary international data efforts relevant to studying employment
relations are the longitudinal data sets assembled and harmonized by the
Luxemburg Income Study, and the Measuring the Dynamics of Organizations and Work (Meadow) project that coordinates the collection of data
on organizational change and work across more than a dozen European
countries. In addition, repeated cross-sectional surveys of adult populations,
such as the U.S. General Social Survey and its counterparts elsewhere,
provide important information about trends in the subjective correlates of
employment relations, such as job satisfaction, perceived security in jobs
and employment opportunities, and other work orientations.
CONCLUDING COMMENTS
Employment relations link individual workers to their organizations and
other economic and social institutions. Changes in social, economic, political,
historical, spatial, and legal institutions have profound effects on employment relations—and thereby on individuals—and reciprocally are affected
by these institutions. The past quarter century has witnessed a transition
in the normative form of the linkages between employers and employees,
moving away from the SER toward a variety of nonstandard employment
relations. While nonstandard employment relations are not new, they depart
from the relative certainty and growth that typified employment relationships during the three decades following World War II. Expansion in nonstandard employment relationships is associated with, and poses questions
regarding, a wide range of phenomena including the growth of economic
and social inequality, shifting career patterns, and changes in the organization of work. Better understanding of the nature and consequences of these

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EMERGING TRENDS IN THE SOCIAL AND BEHAVIORAL SCIENCES

changes is a major priority for social scientists seeking to enhance the quality of individual work experiences and the competitiveness of organizations
and societies alike.
REFERENCES
Baron, J. N. (1988). The employment relation as a social relation. Journal of the Japanese
and International Economies, 2(4), 492–525.
Kalleberg, A. L. (2000). Nonstandard employment relations: Part-time, temporary,
and contract work. Annual Review of Sociology, 26, 341–365.
Kalleberg, A. L. (2011). Good jobs, bad jobs: The growth of polarized and precarious employment systems in the United States, 1970s to 2000s. New York, NY: Russell Sage Foundation.
Lincoln, J. R., & Kalleberg, A. L. (1990). Culture, control and commitment: A study of work
organization and work attitudes in the United States and Japan. Cambridge, England:
Cambridge University Press.
Williamson, O. E. (1985). The economic institutions of capitalism: Firms, markets, relational contracting. New York, NY: Free Press.

FURTHER READING
Barker, K., & Christensen, K. (Eds.) (1998). Contingent work: American employment relations in transition. Ithaca, NY: Cornell University Press.
Cappelli, P. (1999). The new deal at work: managing the market-driven workforce. Boston,
MA: Harvard Business School Press.
Jacoby, S. M. (1985). Employing bureaucracy: Managers, unions, and the transformation
of work in the 20th century. New York, NY: Columbia University Press.
Kalleberg, A. L., Reynolds, J., & Marsden, P. V. (2003). Externalizing employment:
Flexible staffing arrangements in U.S. organizations. Social Science Research, 32(4),
525–552.
Osterman, P. (Ed.) (1984). Internal labor markets. Cambridge, MA: MIT Press.

ARNE L. KALLEBERG SHORT BIOGRAPHY
Arne L. Kalleberg is a Kenan Distinguished Professor of Sociology at the
University of North Carolina at Chapel Hill. He has published more than
120 articles and chapters and 11 books on topics related to the sociology of
work, organizations, occupations and industries, labor markets, and social
stratification. His most recent book is Good Jobs, Bad Jobs: The Rise of Polarized
and Precarious Employment Systems in the United States, 1970s-2000s (Russell
Sage Foundation, 2011). He served as President of the American Sociological
Association in 2007-8 and is currently the editor of Social Forces
Personal Web page: https://arnekalleberg.web.unc.edu

Transformation of the Employment Relationship

15

PETER V. MARSDEN SHORT BIOGRAPHY
Peter V. Marsden is the Edith and Benjamin Geisinger Professor of Sociology and Dean of Social Science at Harvard University. His research interests center on social organization—especially formal organizations and social
networks—and social science methodology. He has served as a coprincipal
investigator of the General Social Survey since 1998. His most recent books
are (editor) Social Trends in American Life: Findings from the General Social Survey since 1972 (Princeton University Press, 2012), and (coeditor, with James
D. Wright) Handbook of Survey Research, Second Edition (Emerald Group Publishing, 2010).
Personal Web page: http://scholar.harvard.edu/pvmarsden/
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Transformation of the Employment Relationship