some of us are brave

Marxism, Student Loan Debt, and Alienation of Labor

One of the ideas I’ve been working out on Twitter is a conflict analysis of student loan debt. I’m not sure when the idea originated but I distinctly remember asking if anyone could recommend a Marxist take on student loans and their pacifying effect on workers. Actually, it may have started with a conversation with Sara Goldrick-Rab.

Anyway, I’ve had reason to re-visit that idea. I spent the last 16 hours drafting an almost complete idea. This is the gist of the latter part of the argument as it pertains to the primary labor market and human capital costs. It owes the “company store” analogy to a tweet from Douglas Edwards:

As the manufacturing sector declined in the 1980s the consensus was that the U.S. was moving towards a “knowledge” economy. Capitalism had found large bureaucratic organizational forms “intolerable” (Adler, 2001: 229). Rather than an economy focused on producing things, this new economic form would prioritize information (Powell & Snellman, 2012). “The key components of a knowledge economy include a greater reliance on intellectual capabilities than on physical inputs or natural resources, combined with efforts to integrate improvements in every stage of the production process, from the R&D lab to the factory floor to the interface with customers. (Powell & Snellman, 2012: 201)” The question for the knowledge economy became who would subsidize the cost of producing those intellectual capabilities? After cycling through iterations of paternalistic capitalist investment in labor, the market form responded by effectively outsourcing the production of human capital to colleges and individuals.

The organizational logic that had incentivized the “company store” (Grossman, 1978) relationship between worker and owner waned along with the declining dominance of the manufacturing sector. The original company store was an actual store common in industrial work centers. Owned by the owners of the company, these stores allowed workers to purchase necessary goods like food and medicine by borrowing against their next paycheck. Later, even as actual company stores declined the ethos lived on in paternalistic benefits provided by corporations to their workers. This included “feel-good” benefits like on-site laundry service that not only eliminated a chore for the worker but also generated loyalty and longer worker hours that benefitted the company. These arrangements were also characterized by capitalistic investment in the production of the human capital it required to produce the task it needed done. This typically manifested as corporate new-hire training programs and classes delivered on-site or subsidized by the company through an arrangement with a local college or training firm. The motivation was self-interested – trained labor was more efficient labor – but it also provided some return to workers by way of an increase in skills. The worker retained those skills even after he had traded his material output for a wage. The accumulation of this skill provided workers with some form of control over their position in the labor market. He could auction his skills for higher wages with a new employer. That risk for owners was minimal when the complexity of the training was relatively low, as it was with low skilled manufacturing work. In the knowledge sector and in the shrunken manufacturing sector where complex machinery was becoming more common, training labor became an increasingly more expensive proposition. Capitalists responded first by outsourcing human capital training to less-expensive vendors who provide in-person training at a lower cost (Gilley, Greer, & Rasheed, 2004), then by using temporary, contingency labor that has acquired necessary skills through other employment (Slaughter & Ang, 1996), and finally by corporatizing formal training altogether through partnerships with for-profit colleges (Pietrykowski, 2001). The latter allows capitalists to “double dip” in the exploitation of labor. First, in reducing its investment in subsidizing the development of human capital and, second, by turning the credentialism on which they rely for labor allocation into a profit center.

Outsourcing the responsibility of training labor to the tertiary education system makes strict fiscal sense, but it also makes sense in the Marxian class conflict paradigm. Not only could organizations write off the expense of training labor but by shifting the burden of skill development to workers, capitalists also retained a critical means of control. In the paternalistic company store relationship that characterized the industrial economy, workers relied upon owners for important material needs.  Workers, often isolated by long work hours and remote physical locations, could borrow against future wages to purchase food and other goods at on-site stores owned by the employer. This reliance on debt created docility among workers and stymied the development of a class consciousness, a critical precursor to the inevitable class conflict Marx theorized.

The modern  knowledge economy produced an interesting problem. Not training its own workforce would serve the ultimate aim of capitalists: greater profit. But, if workers owned the means of acquiring their skills at a relatively low financial burden and the skills themselves, they could be empowered to negotiate for higher wages, which then threaten those profits. If, however, the expense of acquiring the credentials to qualify for employment so taxed worker’s economic security that they could not afford the risk of auctioning their skills to a higher bidder, capitalists could retain control of the price of labor. For a student with the average student loan debt of $26,000 whose repayment begins immediately upon graduation (as opposed to after a six month grace period which was once the norm), there is powerful incentive to take the first job offered to her at whatever wages it is being offered (Cofers & Somers, 1998). Debt functions the same in the knowledge economy as it did in the industrial economy. The only difference is in how that debt is structured organizationally. It is now the purview of the public sector instead of the capitalist owner but all the same, workers are borrowing against their future earnings and subverting the primary means available to them to extract control over their labor and lives.

I post it here because some of you geeks are into this and because the feedback generally furthers my thinking. I also have a whole section the rise of college tuition post-1970s, faltering minimum wages, and the transformation of the point of origination of work-labor contracts.

Keep in mind it is a first draft. It didn’t exist 6 hours and 15 minutes ago. As such, it’s got plenty of problems. Also? To steal it you have to work on it. Just a friendly reminder. 🙂


3 comments on “Marxism, Student Loan Debt, and Alienation of Labor

  1. Albert Myles
    December 15, 2012

    Its funny you posted this. I’ve been trying to bounce it around in my head for a while now. You might remember my rantings against advanced education to further the career. I am all for working toward a degree but NOT for the sake of employment. Coming out of University with a huge mound of debt really takes the luster off of the achievement. But back to your point. Its been weighing heavily on my mind how much the cost of a college degree has gone up. And as colleges and universities move toward more commercial styling, this can only get worse. But then I think about it: If I am a person in power (whether it be politician or corporate entity) it is in my best interest to have folks in financial slavery. Money is a dandy control mechanism. And now that we are seeing the return of debtors prisons……..things just get more fun form there.

  2. Pat
    December 4, 2012

    I remember the feeling when I got my first mortgage. I thought, “I can never quit my job now.”

    I was exaggerating, because when I think about it I can save up extra money to cover a period off work, I can ask the bank to capitalise interest, sell the house or go bankrupt.

    But the debt certainly increases the threshold of what I’ll put up with before I quit or go on strike.

  3. Barry Eidlin
    December 3, 2012

    Can you provide the full citation for the Grossman 1978 piece you mention? It might be helpful for a paper I’m working on about Walmart’s role in restructuring labor markets over the past four decades. That aside, this piece on student loan debt as a new form of market compulsion/subordination sounds very promising. Thanks for posting!

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This entry was posted on December 2, 2012 by in Uncategorized and tagged , , , , .
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