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Theodore, Weber / SMAPLLEMANUFACTURERSNovember 2001

Changing Work Organization in Small Manufacturers: Challenges for Economic Development

Nik Theodore Rachel Weber University of Illinois at Chicago

This review article examines the growing literature on the changing employment prac- tices of small and medium-sized manufacturers. Specifically, the authors examine the literature in three areas: (a) hiring practices, (b) employment security and retention, and (c) career ladders. Observers disagree about the extent to which restructuring has taken place in smaller firms, the nature of workplace change, and the impact of this change on employees and firms. The policy arena is just as contentious; a host of dif- ferent strategies have been proposed to provide employment opportunities in manufac- turing, particularly for low-income populations. By synthesizing the research to date and evaluating the key debates in this area, this literature review will assist economic development researchers and practitioners in making the leap to workforce issues.

The economic expansion of the 1990s created conditions in labor markets that would have seemed inconceivable even a few years earlier. Job growth and accompanying declines in unemployment finally reached some of the most disadvantaged job seekers who entered employment in record numbers. At the same time, the booming economy sent mixed signals. Processes of workplace restructuring transformed labor markets and eliminated pathways for worker advancement, partic- ularly in manufacturing.

Increased competition placed pressure on small and medium-sized manufacturers to lower costs and rein in new investments. Traditional methods of hiring, managing, and promoting work- ers inside many enterprises broke down and were replaced by workforce systems that relied heavily on low-wage, temporary, and subcontracted labor. At the same time, the shortage of skilled production workers reinforced the “low-road” hiring practices of many companies, encouraging employers to poach employees from their competitors rather than train their own. To keep their labor needs flexible and costs low, many small companies now offer only low-wage, low-skilled employment.

Because these labor practices reduce the potential gains from job creation, they pose a growing challenge to economic development practitioners. Economic development practitioners are also beginning to recognize that labor market conditions play an integral role in their ability to attract, retain, and nurture businesses. If the workforce needs of businesses cannot be met by the supply of local job seekers and if the needs of job seekers cannot be met by the provision of decent jobs, then even the most well crafted economic development policies will founder.

AUTHORS’ NOTE: The authors would like to thank the Economic Development Administration for provid- ing the support for this project through its National Technical Assistance, Training, Research, and Evaluation program. Thanks to Debbie Rodman, who researched various aspects of this review. The authors are greatly indebted to Kelly Robinson, Davis Jenkins, Wim Wiewel, Marie Howland, and Ned Hill for reviewing and commenting on earlier drafts of this review.

ECONOMIC DEVELOPMENT QUARTERLY, Vol. 15 No. 4, November 2001 367-379 © 2001 Sage Publications

Nik Theodore is an assistant professor in the Urban Planning and Policy Program and research director of the Center for Urban Economic Development at the University of Illinois at Chicago. His research focuses on the restructuring of urban labor markets.

Rachel Weber is an assistant professor in the Urban Planning and Policy Program at the University of Illinois at Chicago where she conducts research in the fields of development finance and municipal government law.

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