Unstable Work in a Fissured Economy: Tracking Employment in Subcontractor Establishments in France

Abstract

Many jobs in the twenty-first century have become short-term, precarious, and unstable. To help explain this phenomenon, I consider the fragmentation of economic activity across networks of transacting organizations—a trend known to affect pay, but with unknown implications for the stability of work. I focus on a key part of this trend: the growing role of subcontracting. Combining research on the reasons for subcontracting with organizational theories of dependence and diversification, I argue that many subcontractor establishments face volatile demand and have few margins to cut costs other than labor. These factors compound to destabilize work for employees. Drawing on restricted-access French microdata, I show that employment at subcontractor establishments is substantially more unstable than elsewhere. I then trace this instability to key features of their organizational structure. Subcontractors employ a narrower range of occupations, are less profitable, and spend a greater share of their total expenses on labor than do non-subcontractors. Together, these attributes can account for almost two fifths of subcontractors’ excess employment instability. Finally, I show how subcontractor establishments are less able to insulate their employees from swings in demand. Following a drop in revenue, the employees of subcontractor establishments are more likely to exit than are those of non-subcontractor establishments. These findings demand a richer view of employment instability, entailing not only the demise of conventional employment practices—the focus of much recent research—but also the function and structure of organizations.