History 167cb
Capitalism and Class

Report
Due March 16

The two-page report works in the following fashion. Find a newspaper article or
reputable blog post on a current issue relevant to this course. The article you will be
writing the report on is “Starbucks Fires Memphis Workers.”

Write a two-page report that does the following. First summarize in a paragraph those
aspects of the story you want to highlight. Then lay out an argument that connects the
present with the past, discussing any material from the course that has given you
insights into the contemporary meaning and historical background of the news event in
question.

For example, if you are boning up on the history of the United Farm Workers Union, then how
does that inform your understanding of why First Lady Jill Biden chose to visit the headquarters
of a small and struggling union? Or if you are reading about the fissured workplace, then what
does this say about a news article entitled “The Fast-Food Model Lets Corporations Escape
Liability?” Likewise, some of the readings and lectures in the course that discuss why wages
have stagnated in recent decades could inform a news report entitled “Most Kroger Workers are
Struggling.”

Include only sources from class, that have been provided.

Put a title on your two-page report! It should announce your topic and point of view like a banner
or picket sign or leaflet. Examples: “Is Amazon the Second Coming of U.S. Steel?” or “The Heirs
of Cesar Chavez,” or “Starbucks Against Free Speech.”

Footnote properly.

The Rise and Fall of Finance and the End of the Society of Organizations
Author(s): Gerald F. Davis
Source: Academy of Management Perspectives, Vol. 23, No. 3 (Aug., 2009), pp. 27-44
Published by: Academy of Management
Stable URL: https://www.jstor.org/stable/27747524
Accessed: 08-11-2018 23:39 UTC

JSTOR is a not-for-profit service that helps scholars, researchers, and students discover, use, and build upon a wide

range of content in a trusted digital archive. We use information technology and tools to increase productivity and

facilitate new forms of scholarship. For more information about JSTOR, please contact [email protected]

Your use of the JSTOR archive indicates your acceptance of the Terms & Conditions of Use, available at

Terms and Conditions of Use

Academy of Management is collaborating with JSTOR to digitize, preserve and extend access
to Academy of Management Perspectives

This content downloaded from 128.111.121.42 on Thu, 08 Nov 2018 23:39:06 UTC
All use subject to https://about.jstor.org/terms

2009 Davis 27

ARTICLE

The Rise and Fall of Finance and the End of the

Society of Organizations
by Gerald F. Davis

Executive Overview
Large corporations were a dominant force in American society for generations through their employment
practices, expansion choices, and community connections. As the United States has shifted to a postin
dustrial economy, however, finance has increasingly taken center stage. This article documents shifts in
corporate employment, institutional investment, corporate organization, financial services, governments,
and household ties to financial markets over the past three decades. I argue that all these shifts can be seen
as part of an interconnected movement toward a finance-centered economy, and that the recent economic
downturn can be viewed as one outcome of this broader movement.

The global economic downturn that closed the
first decade of the 21st century revealed the
centrality of finance to American society.

Problems with arcane securities traded by obscure
financial institutions rapidly spun out of control,
potentially putting global capitalism itself at risk.
Like a loose thread that manages to unweave an
entire sweater, the mortgage crisis evolved into a
credit crisis and ultimately into an economic crisis
that is rivaling the Great Depression of the 1930s.

The economic crisis in turn has forced us to grap
ple with the fact that the United States is now a
fully postindustrial economy. By March 2009, more

Americans were unemployed than were employed in
manufacturing, and all signs pointed to further dis
placement in the goods-producing sector.

The disappearance of manufacturing employ
ment has corresponded to another change: large
corporations have lost their place as the central

This article is largely based on my book Managed by the Markets: How
Finance Reshaped America. Oxford, U.K.: Oxford University Press, 2009. 1
thank Garry Bruton and two anonymous reviewers for wise suggestions for
improving the argument, and Lynn Selhat for expert editing.

pillars of American social structure. For most of
the 20th century, social organization in the

United States orbited around the large corpora
tion like moons around a planet. Understanding
the workings of the corporation was the key to
understanding our “society of organizations.” Peter
Drucker described this vision of society in 1949:
“In the industrial enterprise the structure which
actually underlies all our society can be seen.. . .
It symbolizes the new organizing principle of an
industrial society in the purest and clearest form,
just as the perfect crystal in a mineralogical mu
seum presents in perfect form the organizing prin
ciple which the mineral always tends to follow in
whatever shape it is found” (Drucker, 1949, pp.
28-29). But today, as this paper argues, corpora
tions are no longer the organizing principle of

U.S. society. As a result, we are left to pick up the
pieces of an economic crisis saddled with institu
tions and a conceptual model of society suited for
an era that has passed.

In this article, I describe how we got here and
suggest some of the implications for management

Gerald F. Davis ([email protected]) is the Wilbur K. Pierpont Collegiate Professor of Management at the Ross School of Business, the
University of Michigan.

Copyright by the Academy of Management; all rights reserved. Contents may not be copied, e-mailed, posted to a listserv, or otherwise transmitted without the copyright holder’s express written
permission. Users may print, download, or e-mail articles for individual use only.

This content downloaded from 128.111.121.42 on Thu, 08 Nov 2018 23:39:06 UTC
All use subject to https://about.jstor.org/terms

28_Academy of Management Perspedives_August

scholarship. The argument has many moving
parts, and each component could be (and has
been) the subject of a book-length treatment. The
risk of such a 30,000-foot view is that important
details are left out. But the parts are interlock
ing?it is more like a novel than a short story
collection. In short, I argue that the shift from an
industrial to a postindustrial economy in the United

States was decisively shaped by finance, and that the
ascendance of finance effectively ended the reign of
the society of organizations. Societies of organiza
tions still exist outside the United States, particu
larly in East Asia. But I argue here that events

unfolded in the United States to favor finance at the

expense of organizations.
The argument is as follows. As manufacturing

employment gave way to services and the largest
employers shifted from firms such as GM to those
such as Wal-Mart, the nature of the employment
relation changed: The long-term mutual obliga
tions of old were replaced by expectations of more
temporary attachments. Changing employment
ties were facilitated by the advent of relatively
portable defined-contribution pensions, which
provided a vast source of new investment for mu
tual funds?particularly the half-dozen largest
fund families that captured the bulk of these in
flows. The growth of pension investment helped
concentrate ownership in the hands of institu
tional investors, which abetted an overriding cor
porate focus on shareholder value as the ultimate
measure of corporate and managerial performance.
This orientation toward share price led corpora
tions to restructure toward a flexible original
equipment manufacturer (OEM) or network

model of corporate organization, which further
encouraged more tentative employment ties.

At the same time, securitization (turning loans
and other assets into tradable bonds) changed the
nature of banking and finance, allowing more
kinds of assets to be traded on markets and open
ing new avenues for households to participate in
financial markets. Households increasingly be
came both investors (through pension plans and
retail mutual funds) and issuers (through securi
tized home mortgages, credit card debt, student
loans, and insurance payoffs). As ties to particular
corporate employers waned, ties to financial mar

kets waxed. The old model of the organization
man was increasingly replaced by a model of the
investor trading in various species of capital (fi

nancial, human, social). This model, it is safe to
say, has failed, but management scholars and prac
titioners are yet to fully adapt our theories or
policies as business moves to its new incarnation.

The Arrival of Postindustrial Society
In 1973 sociologist Daniel Bell published a book

titled The Coming of Post-Industrial Society: A
Venture in Social Forecasting to speculate on the

implications of broad trends in economy and so
ciety, primarily in the United States. One of the

most visible trends?and the source of the book’s
title?was “postindustrialism,” defined most sim
ply as a situation in which “the majority of the
labor force is no longer engaged in agriculture or

manufacturing but in services” (Bell, 1973, p. 15).
At the time he wrote the book, the United States
was the only “postindustrial” society by this crite
rion, with about 60% of its labor force in services;
the vast majority of other countries’ economies

were still dependent primarily on agriculture and
natural resource extraction.

Today the transition to postindustrialism is
nearly complete in the United States, as agricul
ture and manufacturing account for less than 10%
of the total labor force (and that percentage con
tinues to fall). Figure 1 shows the relative propor
tions of the nonfarm labor force engaged in retail
and manufacturing and documents a continuous
decline in manufacturing’s share since the Second

World War, and an absolute decline in manufac
turing employment since the late 1970s. The 21st
century has seen an acceleration in this trend:
Between December 2000 and May 2009, the
United States lost 5.25 million manufacturing

jobs, or more than 30%.1 Troubling signs in du
rable goods industries?particularly auto manufac
turing, where two of the three U.S.-based manu
facturers had fallen into bankruptcy?indicated
that there was more bad news to come.

1 Labor statistics by industry and sector are available from the Bureau
of Labor Statistics, http://data.bls.gov/PDQ/outside.jsp?survey=ce and
http://www.bls.gov/news.release/ecopro.t01.htm. News releases on unem
ployment are posted at http://www.bls.gov.

This content downloaded from 128.111.121.42 on Thu, 08 Nov 2018 23:39:06 UTC
All use subject to https://about.jstor.org/terms

2009 Davis 29

Figure 1
Percentage of U.S. Nonfarm Workforce in Manufacturing and Retail, 1939-2008

Manufacturing
-~^~~ . Retail

Source: Bureau of Labor Statistics.

The loss of jobs in manufacturing prior to the
downturn was often attributed to offshoring?the
use of foreign contractors for production. There is
clearly a great deal of offshoring, as the near
disappearance of industries such as textiles dem
onstrates. But a more fundamental source of lost

manufacturing employment is expanded produc
tivity. The United States still leads the world in

manufacturing value added, with a global share of
about 22%. Japan is number two, with 14%, and
China trails with 11% (Hilsenrath & Buckman,
2003).2 But the manufacturing sector’s productiv
ity is such that relatively few employees are re
quired. This became evident during the downturn,
when many American manufacturers found that it
was impossible to find anyone to lay off because
their remaining employees accounted for such
high revenues. The Wall Street Journal in March
2009 quoted the CEO of Parker Hannifin3 as
saying: “Because of productivity gains, every one
of my people carries more dollars in sales today
[i.e., $200,000 per worker compared to $125,000
in 2000]. If I need to cut back, I have to cut back
fewer people to achieve the same goal” ( Aeppel &
Lahart, 2009). Like modern industrial agriculture,
with which a comparatively minuscule labor force

2 Time series data on manufacturing value added by country is avail
able at http://www.nationmaster.com/graph/ind_man_val_add_cur_us
manufacturing-value-added-current-us.

3 Parker Hannifin is a manufacturer of motion and control technolo

gies and systems, providing precision-engineered solutions for a wide
variety of mobile, industrial, and aerospace markets.

can produce all the food a nation needs, IT
enabled manufacturing requires only a minimal
workforce. Postindustrialism, in other words, is
less about moving jobs around the globe than
about the inevitable effects of productivity im
provements in a capitalist economy (cf. Koll
meyer, 2009).

One of the most visible manifestations of the

new postindustrial American economy is the
change in the composition of the largest corporate
employers. Table 1 lists the 10 largest U.S. em
ployers in 1960, 1980, and 2009. In the two earlier
periods, the list was dominated by a handful of
large manufacturers, AT&T, and Sears. Many
of these companies dated their origins to the wave
of industrialization and consolidation around the

Table 1
10 Largest U.S. Corporate Employers, 1960-2009

Source: Compustat for 1960 and 1980; Form 10-K for 2009.

This content downloaded from 128.111.121.42 on Thu, 08 Nov 2018 23:39:06 UTC
All use subject to https://about.jstor.org/terms

30_Academy of Management Perspedives_August

turn of the 20th century. The typical workplace of
these firms was both large and interconnected.
Ford’s famous River Rouge plant employed 75,000
workers when it was completed in 1927, and grew
from there. A visitor to the Rouge in the late
1960s could have followed a shipment of iron ore
from one end of the complex through its process
ing into steel and ultimately into the body of a

Ford Mustang that rolled off the assembly line at
the other end.

Large-scale workplaces facilitated labor organi
zation, and for decades the largest firms were in
the vanguard of progressive human resource man
agement practices, often at the behest of unions or
in an effort to forestall them. During the Second

World War, many large manufacturers attempted
to skirt wage restrictions by offering expansive
benefits packages to lure scarce labor. These
“academy employers” set the standard for other
employers with systems of internal labor markets,
job security, health insurance, and retirement
benefits, and thus had a substantial influence on
the nature of the employment relation in the

United States (Cappelli, 1999; Jacoby, 1997).
Today, the largest employers are overwhelm

ingly in retail, where wages, benefits, and tenures
are substantially lower. The shift has been stark:
By 2009, Wal-Mart employed about as many
Americans (1.4 million) as the 20 largest U.S.
manufacturers combined, and 9 of the 12 largest
employers were retail chains.4 The wage and ten
ure differences between the old guard and the new
are striking. On average, production workers in
motor vehicle manufacturing earned $27.43 per

4 I estimated the largest manufacturing employers using firms’ annual
10-K statements, accessed at http://www.sec.gov. “Manufacturers” were
those deriving most of their revenues from manufacturing, an increasingly
uncertain determination. IBM would have been classified as a manufacturer

when most of its sales were in hardware such as mainframes, but it now

derives the large majority of its revenues from global services and software.
GE derives roughly half its revenues from GE Capital Finance (36.7% in
2008) and NBC Universal (9.3%). Moreover, some firms report U.S.
employment directly; others (such as GM and Ford) report North Ameri
can employment?presumably including Canada and Mexico?while oth
ers do not break out employment but do report revenues by geographic
segment, allowing a rough approximation. Given these caveats, estimated

U.S./North American employment for the 10 largest manufacturers at year
end 2008 are (in thousands) Boeing (162), Lockheed Martin (131),

Northrop Grumman (124), GM (116), Tyson (99), General Dynamics
(92), Ford (89), United Technologies (78), Emerson Electric (70), and
Pepsico (64). For comparison purposes, grocery chain Supervalu, number
10 on the list of largest employers, had 192,000 workers in 2008.

hour in February 2009, while those working in
general merchandise retailing made $10.78. The
Current Population Survey for January 2004 re
ported that the median employee in auto manu
facturing was 44 and had been with his current
employer for 8 years, while the median worker in
electrical equipment and appliance manufacturing
was 46 and had 10 years’ tenure. Retail employees,
in contrast, averaged three years’ tenure with their
current employer, even though they were 38 years
old on average (see Davis, 2009, p. 201 ff.).

In a retail economy, workplaces are both
smaller and less overtly interdependent than in

mass-production manufacturing. Even Wal-Mart
Supercenters, perhaps the largest organisms in the
retail ecology, typically employ fewer than 350
people. Yet like the auto assembly line, retailers
are susceptible to a postindustrial form of Taylor
ism thanks to the pervasive use of information and
communication technologies (ICTs) such as
“workforce management” software systems. These
systems automate the time-and-motion studies of
Frederick Taylor’s Scientific Management, track
ing the minute-by-minute productivity of sales
associates and monitoring how many milliseconds
it takes cashiers to scan each SKU in a grocery
cart. Managers in remote locations can monitor,
compare, and discipline every salesperson in a
retail chain with the aid of real-time standardized

comparison charts and discreet wireless headsets.
Scheduling can be automated to reward the pro
ductive with prime hours and punish the weak
with less-desirable opening and closing times
(O’Connell, 2008). With less need for direct su
pervision and middle management, such retail
outlets might optimistically be called a “flat” hi
erarchy. But the flip side of a flat hierarchy is
limited room for advancement beyond the sales
floor.

Large-scale employers that provided job secu
rity, career mobility through job ladders, and gen
erous health and retirement benefits seem to have

been artifacts of the corporate-industrial age in
the United States. Many of the so-called academy
employers have explicitly renounced the former
practices that tied employees to their firms,
through freezing company pensions and phasing
out retiree health benefits. General Motors, for

This content downloaded from 128.111.121.42 on Thu, 08 Nov 2018 23:39:06 UTC
All use subject to https://about.jstor.org/terms

2009_Davis_31^

instance, notified its white-collar retirees in July
2008 that in the new year they and their depen
dents would no longer be covered by GM-fi
nanced private health insurance because it had
become too costly. Instead, they would be com
pensated with a $300 increase in their monthly
pension checks (Bunkley, 2008).

GM was simply following the path blazed by
some of its peers. GE’s former CEO Jack Welch
earned the nickname “Neutron Jack” in the early
1980s by shrinking GE’s payroll of ^0,000 by

more than one-quarter. In 2001, Welch summa
rized the new employment compact he had helped
usher in for a group of Harvard MBA students: “If
there’s one thing you’ll learn?and dot-coms have
learned it in the last year?is no one can guaran
tee lifetime employment.. . . You can give life
time employability by training people, by making
them adaptable, making them mobile to go other
places to do other things. But you can’t guarantee
lifetime employment” (Lagace, 2001, p. 1). And if
corporate employers have abandoned the vestiges
of long-term employment as anachronistic, so too
have employees. Contemporary workers are too
sophisticated to invest in developing firm-specific
skills for a company that might go from good to
great to liquidation, as Circuit City did. In a
service economy, it’s best to keep one’s skills suf
ficiently generic so that one is “mobile to go other
places to do other things”?say, selling sweaters
instead of cell phones.

The result of the shift from manufacturing to
service, in short, has been a disaggregation of
employment in which the attachments of workers
to particular firms is more tenuous, expected ten
ures are shorter, and workplaces themselves are
often on a smaller scale. The traditional rationale

for maintaining long-term employment relations
was in part to encourage the development of in
vestments in firm-specific skills. Greater employee
mobility thus goes hand in hand with lower firm
specific investments.

The Rise of Institutional Investment
The disaggregation of employment that accom

panied postindustrialism had another, less ob
vious effect, namely, the promotion of greater

aggregation in corporate ownership by financial

intermediaries. This happened through a change
in pension financing that channeled a large por
tion of household savings into a very small num
ber of mutual fund complexes, which ultimately
ended up holding concentrated ownership posi
tions in hundreds of U.S. corporations.

Most companies that provided pensions prior
to the early 1980s did so through so-called “de
fined-benefit” plans that paid retirees benefits ac
cording to their tenure with the company. In a
defined-benefit plan, the employer is responsible
for creating an investment pool sufficient to fund
the stream of pension income promised to its
employees when they retire. Defined-benefit plans
provided employees strong incentives to spend
their careers with particular employers. With the
advent of the 401 (k) in the early 1980s, however,
the large majority of employers that still provided
pensions began a shift toward funding relatively
portable plans in which employees and firms both
contribute to an individually owned pension that
can be rolled over if the employee changes jobs.
These “defined-contribution” plans effectively
transferred risk from employers to workers, who

were now responsible for making sensible invest
ment choices on their own behalf from among the
options offered by their employer (see Cobb,
2008; Hacker, 2006). Although employers were

motivated in part by cost considerations, the ef
fect was to loosen the ties that bound employees
to firms, further reinforcing the trends described
in the previous section.

The growth in defined-contribution pension
plans helped fuel the growth of the mutual fund
industry. Those 401 (k) plans most commonly in
vest in mutual funds. Some plans offer options
other than mutual funds?Enron famously
matched its employee contributions with Enron
stock that employees were forbidden to shift to
other investments?but mutual funds are perhaps
the dominant destination for employee contribu
tions. The mutual fund industry thus grew enor

mously during the 1980s and 1990s, both through
401 (k)s and through retail investment, as house
holds found mutual funds to offer better returns

than other savings vehicles. The Investment
Company Institute reported that there were 564
mutual funds in 1980, 3,079 in 1990, and 8,155 in

This content downloaded from 128.111.121.42 on Thu, 08 Nov 2018 23:39:06 UTC
All use subject to https://about.jstor.org/terms

32_Academy of Management Perspectives_August

2000. Assets under management increased from
$135 billion in 1980 to $12 trillion in 2007. And
where only 6% of households were invested in
mutual funds in 1980, 45% were in 2008. Inflows
were particularly pronounced in the 1990s: Ac
cording to author and historian Steve Fraser:
“More was invested in institutional funds be
tween 1991 and 1994 than in all the years since
1939” (Fraser, 2005, p. 583). The bull market
and investment by households were mutually
reinforcing during the subsequent decade, as
retail investors are typically “momentum inves
tors” (putting money into the stock market in
the wake of price increases). By 2001, according
to the Federal Reserve, 52% of households
owned stock?the highest proportion in U.S.
history?and most did so directly or indirectly
through mutual funds.5

The broad spread of stock ownership among
the American populace left some commentators
rapturous about the new “democratization of own
ership” and its potential benefits (e.g., Duca,
2001; Hall, 2000). An electorate attuned to the
financial markets had incentives to become more

economically literate and might be more readily
persuaded by fiscal arguments that appealed to
their interests as shareholders. But the democra

tization of ownership is clearly a representative
democracy, channeled through intermediaries.
Fewer than one in five households owned shares

directly in companies in 2007, about the same rate
as three decades earlier. Moreover, the value of
the average family’s portfolio in 2009 was under
$23,000 (see Bucks et al, 2009, p. A27). Stock
ownership was broad but not deep among the

American populace. The real significance of this
movement was in its effect on the structure of
corporate ownership.

The growth in the mutual fund industry was
highly uneven. Although the number of funds and
their assets under management grew in the aggre
gate, the biggest beneficiaries of the flood of new
retail investment were the half-dozen or so well

5 Figures on mutual funds are from the 2009 Investment Company
Institute Factbook, accessed at http://www.icifactbook.org/. Data from the
Federal Reserve’s triennial Survey of Consumer Finances, including house
hold ownership data, and related publications are available at http://
www.federalreserve.gov/PUBS/oss/oss2/scfindex.html.

known fund complexes, which maintained nearly
40% of the industry’s assets under management
over the past two decades. As a result, a few fund
families?Fidelity, Vanguard, and the American
Funds in particular?grew to become the most
prominent owners of corporate America. (They
have since been joined by Barclay’s through the
enormous popularity of its iShares exchange
traded funds.) At any given time during the past
15 years, Fidelity was the largest shareholder of
roughly 1 in 10 U.S. corporations. Because most of
Fidelity’s funds are actively managed and rely on
the research of in-house analysts, Fidelity often
ends up being the biggest shareholder of several
competitors in the same industry. In early 2001,
for instance, Fidelity’s parent owned 6.9% of

Wendy’s International and 6.4% of McDonald’s,
where it was the largest single shareholder. And
although not an “owner” in the traditional sense,
Fidelity has the power to buy, sell, and vote shares,
giving it great potential power in corporate gov
ernance (Davis, 2008).

Yet while corporate ownership has become
more concentrated in the United States than at
any time since perhaps the First World War, this
has not resulted in a revival of the sort of finance

capitalism that reigned a century ago, when J. P.
Morgan’s henchmen served as directors on dozens
of boards of companies he had financed (Brandeis,
1914). If anything, mutual funds are remarkably
passive in corporate governance, even though
fund families routinely gather ownership blocks of
over 10%. The reasons for this are up for debate,
but one is clear: The largest mutual funds are also
among the largest providers of pension fund ser
vices to corporate employers, and Fidelity con
tracts for benefits outsourcing with hundreds of its
portfolio firms. In a highly interconnected finan
cial world, there are good reasons not to offend
actual or potential clients with unseemly share
holder activism.6

6 For a description of the growth in concentrated ownership by mutual
funds and a comparison with early 20th-century finance capitalism in the

United States, see Davis, 2008. The classic account of early 20th-century
finance capitalism in the United States is found in Brandeis, 1914. For an
analysis of conflicts of interest in proxy voting by mutual funds, see Davis
and Kim, 2007.

This content downloaded from 128.111.121.42 on Thu, 08 Nov 2018 23:39:06 UTC
All use subject to https://about.jstor.org/terms

2009_Davis_33

Shareholder Value, Corporate Restructuring,
and the “OEM Model”

When corporate executives look out at their
investors today, they don’t see the dispersed

widows and orphans of times past?they see
a relative handful of financial institutions. Nearly
three-quarters of the average Fortune 1000 corpo
ration’s shares were owned by institutional inves
tors in 2005, with mutual funds making up the

most concentrated block. Fidelity, one of the big
gest fund families, held blocks of 10% or more in
hundreds of corporations at the same time. The
outcome of three decades of increased individual

participation in financial markets, through mutual
funds and 401 (k)s, has been a reconcentration of
ownership in the hands of a few financial inter
mediaries. This was precisely the opposite of what
had happened during the first wave of individual
stock market participation in the 1920s, where the
quadrupling of shareholders in a few short years
had broadly dispersed ownership, creating the fa
mous “separation of ownership and control.”7

The rise of relatively concentrated institutional
ownership has corresponded with an increased
focus on share price as the most relevant measure
of corporate performance. This is by now a famil
iar story, told in a number of books such as Mi
chael Useem’s (1996) Investor Capitalism. The cul
tural result is all around us. By the late 1990s, the
financial news media were pervasive, financial
analysts such as Mary Meeker and Henry
Blodgett were household names, and firms faced
high levels of scrutiny for their share price per
formance. It became difficult to walk through a
public place, or to browse the Web, without
being made aware of how the stock market was
doing. Talking heads on CNN and the various
financial news networks were inevitably accom
panied by a stock ticker crawl at the bottom of
the screen, so that CEOs (or even American
presidents) were tethered to the market reac
tions to their every word. CEOs had personally
compelling reasons to attend to their company’s
share prices, as executive compensation came to

7 On patterns in household ownership during the early part of the 20th
century, see Cox, 1963. The phrase “separation of ownership and control”
is primarily associated with Berle and Means (1932).

be overwhelmingly paid in the currency of stock
options during the 1990s.

By the end of the decade, any lingering doubt
about the purpose of the corporation, or its com
mitment to various stakeholders, had been re
solved. The corporation existed to create share
holder value; other commitments were means to
that end. Mission statements posted on corporate

websites in the late 1990s made this clear: “We
exist to create value for our share owners on a

long-term basis by building a business that en
hances The Coca-Cola Company’s trademarks.”
And “Sara Lee Corporation’s mission is to build
leadership brands in consumer packaged goods

markets around the world. Our primary purpose is
to create long-term stockholder value.”

For manufacturers in particular, the relentless
focus on share price promoted the spread of the
network or “OEM model” of corporate organiza
tion.8 Ironically, the name “original equipment

manufacturer” implies precisely the opposite of
what it means in practice. Nike is a prototypical
OEM: It focuses on the design and marketing of its
products while leaving their production and dis
tribution largely to others. Coca-Cola is another:

Although an outsider might see its business as
selling sugary carbonated beverages, the Coca

Cola Company itself is primarily in the brand
management business, while manufacturing and
distributing the product is done by dispersed bot
tlers.9 The value added by Nike or Coca-Cola is
through intellectual property?brands, patents,
advertising copy, distribution know-how. Nike
and Coke, like pharmaceutical companies and
universities, are in the ideas business.

Share price is both a consequence and a cause
of corporate structure: a consequence because the
market values firms with different structures dif

ferently, and a cause because executives adopt
strategies and structures with an eye toward the
expected market reaction. One of the best-docu

mented regularities is the so-called “conglomerate

8 What 1 here call the OEM model is akin to the network models

described elsewhere, e.g., Scott and Davis, 2007. Sturgeon (2002) similarly
described a “modular production network.”

9 The Coca-Cola Company does, however, own 35% of Coca-Cola
Enterprises, its largest bottler, responsible for 16% of Coca-Cola’s global
volume.

This content downloaded from 128.111.121.42 on Thu, 08 Nov 2018 23:39:06 UTC
All use subject to https://about.jstor.org/terms

34_Academy ot Management Perspectives_August

discount,” in which firms operating in more than
one industry suffer lower market valuations than
comparable focused firms. For a conglomerate, the
stock market value of the whole is often worth

much less than the sum of the parts if they were
freestanding companies. Beatrice was an example:

At the beginning of the 1980s, the company’s
portfolio of products included various branded
foods (e.g., La Choy), Culligan plumbing equip

ment, Airstream travel trailers, Samsonite lug
gage, and dozens of others. Conglomerates offered
a tempting target for outside raiders, who could

make a quick profit by buying such chronically
undervalued firms, splitting them up, and selling
the parts off to buyers in related industries in the
newly relaxed antitrust environment provided by
the Reagan administration. As a result, about one
third of the 1980 Fortune 500 disappeared during
the 1980s, largely due to bust-up takeovers that
collectively redrew the American industrial map
(Davis, Diekmann, & Tinsley, 1994)?

By the 1990s, corporate executives were in
tensely aware of the stock market consequences of
diversifying outside of their “core competence,”
and this helped drive their restructurings. For in
stance, when Ford CEO Alex Trotman an
nounced the firm’s spinoff of its financial division
Associates First Capital in 1997, he said: “We
believe the market value of the Associates is nei

ther fully nor consistently reflected in Ford’s stock
price. Because the market views Ford as an auto
motive company, it has not fully recognized or
rewarded us for our diversification in nonautomo

tive financial services businesses” (Bradsher, 1997,
p. Dl). ITT’s CEO announced a plan to split his
venerable conglomerate into three freestanding
parts (insurance, industrial products, and hotels
and casinos) with this explanation: “We just think
that having these three companies acting and
operating and being evaluated in their own busi
ness environments will provide investors, analysts,
and those who deploy debt a simpler, more clear
way to evaluate us” (Strom, 1995, p. Dl). The
boundaries of the firm, in other words, were
shaped less by considerations of transaction costs
and asset specificity than by the cognitive capac
ities of Wall Street (cf. Zuckerman, 1999).

Over time, share price concerns drove more

radical forms of restructuring. For example, “board
stuffers” in electronics?generic manufacturers
such as Flextronics and Solectron, capable of as
sembling and delivering virtually any electronic
product from cell phones to servers?allowed
high-tech versions of the Nike model across a
wide variety of electronic products. A Hewlett
Packard vice president explained why it turned
over its computer manufacturing and distribution
to a board stuffer: “We own all of the intellectual

property; we farm out all of the direct labor. We
don’t need to screw the motherboard into the
metal box and attach the ribbon cable” for an
HP-branded computer to be an HP (Hansell,
1998, p. 3:1). The rationale for restructuring ulti

mately turned on the idea that the stock market
values intellectual property over tangible assets.
CEO John Bryan of Sara Lee, maker of consumer
brands such as Champion, Hanes, and Ball Park
Franks, stated it plainly when he explained why
his firm was divesting most of its manufacturing
capability in order to focus on its core competence
of brand management: “Wall Street can wipe you
out. They are the rule-setters. They do have their
fads, but to a large extent there is an evolution in
how they judge companies, and they have decided
to give premiums to companies that harbor the

most profits for the least assets.”
By now, cell phones, hot dogs, PCs, pet food,

and pharmaceuticals are routinely produced by
contractors, leaving OEM firms to manage the
intellectual property behind these products?pat
ents, brand names, trademarks, and research ca
pabilities. For Sara Lee, as its CEO hinted, a
production line was worth less than the advertis
ing line “Gentlemen prefer Hanes.” The conse
quences of the spread of the OEM model have
occasionally been tragic. In 2007, thousands of
dogs and cats in the U.S. fell ill when their food
turned out to have been tainted with melamine, a
cheap industrial filler that is chemically similar to
protein. More than 100 competing brands, from
Science Diet and lams to Wal-Mart’s OP Roy,
turned out to be manufactured by the same ven
dor, Ontario’s Menu Foods, which in turn relied
on anonymous foreign suppliers for its “meat.” A
few months after that incident hundreds of hu

mans were injured, and 81 killed, when batches of

This content downloaded from 128.111.121.42 on Thu, 08 Nov 2018 23:39:06 UTC
All use subject to https://about.jstor.org/terms

2009_Davis_35

Baxter Healthcare’s blood thinner heparin were
discovered to be toxic. The drug was manufac
tured by a Chinese vendor that in turn relied on

mom-and-pop suppliers for a key ingredient that
appeared to be the source of the taint: pig intes
tines (see Davis, 2009, Chapter 5).

Thanks to two decades of restructuring driven
by a quest for shareholder value, the global supply
chains of contemporary corporations increasingly
resemble the “nexus of contracts” described by the
finance-based theory of the corporation (Jensen &

Meckling, 1976; for more on global supply chains,
see Rivoli, 2005). One consequence of this wide
spread restructuring is that career ladders ain’t
what they used to be. Horatio Alger stories of
ambitious young people from modest backgrounds
working their way up from the mailroom to the
CEO’s office, always apocryphal, are even more
unlikely now that the mailroom (and the food
service, human resource department, IT depart

ment, and support staff) are all contracted out.
Research suggests that young men entering the
labor market in the 1980s and 1990s were much

more likely to remain in “entry level” jobs 10 years
later than were their predecessors in the late 1960s
and early 1970s. It appears that for many, the
career ladder had been replaced by the career
Roach Motel as another unexpected consequence
of the shareholder value movement (Applebaum
et al., 2003; Bernhardt et al, 1999).

The trends I have described so far were mutu

ally reinforcing. Changes in the largest employers
corresponded to changes in pension financing to
ward defined-contribution plans that facilitated
both the decline in career attachments to partic
ular employers and increased participation in fi
nancial markets through mutual funds. The
growth in institutional investor size and influence
focused firms’ attention onto the share price im
plications of their choices of strategy and structure
and, enabled by information technology, firms
increasingly adopted network forms that further

weakened the bonds between workers and firms.

The increasing importance of finance, however,
did not lead to the dominance of particular finan
cial institutions. Consolidation in some parts of the
financial services industry, particularly commer
cial banking, took place at the same time that

banks were restructuring along lines similar to
other corporations.

Securitization and the Changing Nature of
Banking

Finance itself has not been immune to the allure
of the OEM model. In this case, it is traditional

banking that has been transformed through the
practice of “securitization”?that is, turning assets
(such as loans on the balance sheet) into securities
traded on markets. The traditional model of bank

ing is fairly simple: Banks gather deposits from
savers, who are paid interest, and lend it to bor
rowers, who pay it back at a higher rate of interest.
In the movie It’s a Wonderful Life, banker George
Bailey explains this model to his anxious deposi
tors, who are causing a run on the bank: “No, but
you . . . you’re thinking of this place all wrong. As
if I had the money back in a safe. The money’s not
here. Your money’s in Joe’s house . . . right next to
yours. And in the Kennedy house, and Mrs. Mack
lin’s house, and a hundred others. Why, you’re
lending them the money to build, and then,
they’re going to pay it back to you as best they
can. Now what are you going to do? Foreclose on
them?”

The best-known form of securitization is mort

gage-backed bonds, in which hundreds or thou
sands of mortgage loans are pooled together and
then divided into bonds that, by the law of large
numbers, have more predictable and “safer” re
turns. This practice allows banks to free up funds
for additional lending and generally lowers the
cost of taking out a mortgage. Rather than relying
on a local bank and its depositors to fund their
home purchase, buyers can access funds from dis
persed investors around the world via mortgage
backed securities. A modern-day George Bailey
might have a more difficult time explaining con
temporary banking: “No, but you . . . you’re think
ing of this place all wrong, as if I held your

mortgage on my balance sheet. I sold your mort
gage to Countrywide 10 minutes after we closed
the deal, and they sold it along with 3,000 other

mortgages to Merrill Lynch, which divided it into
bonds that were bought by a Cayman Islands LLC,
which bundled them together with other mort

This content downloaded from 128.111.121.42 on Thu, 08 Nov 2018 23:39:06 UTC
All use subject to https://about.jstor.org/terms

36_Academy of Management Perspectives_August

gage-backed bonds into a collateralized debt obli
gation that Citigroup sold to a Norwegian pension
fund. Now what are you going to do? Stop making
your payments and force those Norwegian retirees
to go back to work?”

Securitization turned expansive during the
1990s, driven by demand from institutional inves
tors seeking outlets for their funds, supply from

Wall Street banks that got paid by the transac
tion, and information technology that enabled the
valuation of ever-more-exotic instruments. From
home mortgages to auto loans to credit card re
ceivables and corporate loans, almost anything
with an income stream seemed to end up as a
bond, and the bond market vastly outstripped the
stock market in value. Innovations in asset
backed securities turned surprisingly postmodern.
David Bowie received $55 million in return for
bonds backed by his future music royalties. J.G.

Wentworth, the nation’s largest purchaser of fu
ture payments, mounted a television ad campaign
to persuade those receiving insurance settlements
for their personal injuries to sign over their

monthly payments in return for a lump sum, with
the claims to be bundled and sold as bonds. And

elderly retirees in Florida were wined and dined by
entrepreneurs seeking to buy their future life in
surance payoffs. Talk show host Larry King sold
the settlement rights to two of his life insurance
policies for $1.4 million, but later thought better
of it: As his lawyer put it, “The insured never
knows if the guy barreling down the highway in a
large truck coming in the opposite direction holds
the insurance policy on his life. We don’t know

whether the owner is a Wall Street hedge fund or
a Mafia don” (Pleven & Silverman, 2007).10

The prevalence of securitization for business
and other loans meant that traditional commer
cial banking and investment banking had become
increasingly difficult to distinguish from each
other. This development was ratified by the con
version to commercial banks of Goldman Sachs
and Morgan Stanley, the two remaining major
investment banks after the disappearance of Bear

10 For a more general discussion of securitization and its effects on the
financial services industry, see Davis, 2009, Chapter 4. On the emergence
of the market for “viatic?is,” see Quinn, 2008.

Steams, Lehman Brothers, and Merrill Lynch in
2008. By this point, many of the largest banks had
become essentially portals to financial markets,
analogous to OEM corporations. Homeowners

might send their mortgage checks to Washington
Mutual or Citibank, but behind the brand, the
real mortgage owners turned out to be dispersed
bondholders around the world. Just as corporate
ownership was becoming more concentrated
thanks to institutional investors, mortgage owner
ship was becoming more dispersed through secu
ritization, in which thin slices of American mort
gages came to be held by global institutional
investors?including Norwegian pension funds.

The global supply chain in finance created a sit
uation in which American mortgages were as
toxic in the portfolios of foreign investors as mel
amine was in the dog chow of American pet
owners.

The tangled web of financial connections
around the world meant that individuals’ eco
nomic ties with their fellows became increasingly
complex. Through my pension plan, I may own
part of my neighbor’s home mortgage, auto loan,
and credit card debt, and be a beneficiary of his
life insurance. “Social capital” has taken on a
more than metaphorical meaning.

As banks and other financial institutions con

solidated and merged across industry boundaries,
finance became a vast meta-industry that included
commercial banking, investment banking, insur
ance, real estate services, student loans, and oth
ers. By 2000, roughly 40% of the profits of the
S&P500 came from financing, and companies as
diverse as GE and Enron were effectively banks or
hedge funds with some intermittent industrial
operations (Ip, 2002).

Meanwhile, traditional commercial banks be
came far more concentrated, as a handful of na
tional titans?in particular, Bank of America,
JP Morgan Chase, and Citigroup?came to con
trol an outsized proportion of the assets and de
posits of the industry, turning a traditionally local
business into an international one. Local and re
gional players were attractive targets for acquisi
tive banks. Charlotte-based North Carolina Na
tional Bank grew to become Bank of America
through two decades of acquisitions that included

This content downloaded from 128.111.121.42 on Thu, 08 Nov 2018 23:39:06 UTC
All use subject to https://about.jstor.org/terms

2009_Davis_37

First RepublicBank of Dallas, C&S/Sovran of Vir
ginia, Boatmens’ Bancshares of St. Louis, Barnett
Banks of Florida, San Francisco-based Bank of
America, and Boston’s FleetBoston, along with
dozens of smaller banks across the nation. In con

sequence of this consolidation, most major cities
in the United States ended up without a major
locally based commercial bank (see Neuman et al.,
2008).

Urban commercial banks had long served as
the center of business elite networks through their
recruitment of the CEOs of major local businesses
and nonprofits to their boards. The latent effect of
this practice was that corporate elites had a regular

meeting place to discuss local affairs and to coor
dinate their philanthropic and political activities,
from pitching in to support a new symphony hall
or make an Olympics bid to financing the elec
tions of Congressional candidates (Mizruchi,
1992). But a decade after the repeal of Glass
Steagall, 7 of the 10 largest American cities no
longer hosted a major financial institution. Mean
while, some of the biggest banks ended up as de
facto wards of the federal government.

The Changing Role of the State
The practices of outsourcing that have swept the

corporate and banking worlds have also spread
to some of the core functions of government.

After several years of attempting to “reinvent gov
ernment” and reduce federal payrolls, President
Clinton signed into law the Federal Activities
Inventory Reform Act of 1998 (the FAIR Act).

The idea was to promote government outsourcing,
which would presumably bring the efficiency of
private-sector organizations such as General Mo
tors to the public sector. The act required heads of
governmental agencies, including the military, to
produce annual lists of functions that were eligible
for outsourcing because they were not “inherently
governmental,” defined by the act as “a function
that is so intimately related to the public interest
as to require performance by Federal Government
employees.”11

During the subsequent decade, government

11 The text of the FAIR Act is available at http://www.whitehouse.gov/
omb/procurement/fairact.html.

contracting grew staggeringly large, to the point
that the government ultimately employs far more
contract workers than federal employees. If the
share price-driven corporation had become a
“nexus of contracts,” then the federal government
increasingly resembled a “nexus of contractors.”

Annual spending on contractors doubled from
roughly $200 billion to more than $400 billion
during the years of the Bush administration, as
tasks from running governmental databases to the
armed protection of diplomats overseas were
handed off to contractors. Indeed, the three larg
est remaining manufacturing employers in the

United States were military contractors: Boeing,
Lockheed Martin, and Northrop Grumman. (The
latter two receive 85% and 90% of their revenues

respectively from the U.S. government.)
The government’s dependence on contractors

was especially acute for the conduct of war, which
many would regard as an “inherently governmen
tal” task (Shane & Nixon, 2007). Critics argued
that employees of Blackwater and other contrac
tors, unlike federal employees, faced divided loy
alties and limited discipline in their conduct in
occupied Iraq.12 But a newly “rightsized” federal
workforce was evidently not up to the task of
maintaining security without outside assistance.
Under-Secretary of State for Management Patrick
Kennedy said in 2008: “We cannot operate with
out private security firms in Iraq. If the contractors
were removed, we would have to leave Iraq”
(Risen, 2008).

In a world in which states have emulated the
practices of the corporate sector, some govern
ments have come to regard their status as sover
eign as a core competence to be exploited in the
global marketplace of laws. In a sense, sovereign
nations have a capacity to sell products?incor
porating businesses, flagging ships, establishing
banks?that other types of business service ven
dors do not. Thus, Bermuda houses dozens of
“brass plate” insurance companies, and is the vir
tual home of hundreds of intellectual property
subsidiaries, where companies park their offshore
earnings for tax purposes. The Cayman Islands
hosts thousands of hedge funds, which organize as

12 For more on Blackwater, see Scahill (2007).

This content downloaded from 128.111.121.42 on Thu, 08 Nov 2018 23:39:06 UTC
All use subject to https://about.jstor.org/terms

38_Academy of Management Perspectives_August

limited liability companies (LLCs) in the Cay
mans but operate their physical presence out of
Greenwich, Connecticut, or London, England.
Tuvalu, a Central Pacific island nation, has leased
its national Internet domain name (.tv) to Veri
sign for several million dollars per year, providing
the government with a substantial part of its rev
enue base. And for years, Liberia has been the
second-largest “flag of convenience” (behind Pan
ama), providing the laws that govern thousands of

merchant ships that transport the world’s physical
trade in goods. Liberia’s lucrative sovereignty busi
ness, in turn, is operated out of an office park in
suburban Virginia.

The Impact on Households
have described several changes in the form and

duration of the employment relation, the struc
ture and ownership of corporations, the format

of the financial services industry, and the nature
of the state. In this section, I briefly examine the
consequences of these changes for households. I
suggest that as the ties that bound employees to
firms were increasingly frayed, new ties were built
that connected the well-being of households to
financial markets. As both “investors” and “issu

ers,” through mutual funds and securitized mort
gages, households increasingly came to rely on
financial markets for their prosperity and security.

As a result, the financial crisis has done far more
damage than it would have otherwise, and it
therefore compels a rethinking of our model of
social organization.

The shift in employment from stable large
scale manufacturers to more ephemeral service
firms changed the nature of the ties between cor
porations and their employees. Barley and Kunda
(2006) analyzed the shift to the so-called “free
agent” contract worker. The initial heady exuber
ance around the new Web-enabled, 401(k)-tot
ing, self-directed contractors was followed by the
subsequent letdown that accompanied the dot
com bust. The escapees from the feudal manor of
the corporation ended up discovering that “inde
pendent consultant” was often simply a euphe
mism for “unemployed.”

At the same time that workers were less tied to

corporate employers, households became more

tied to financial markets than ever before. All

those 401 (k) pension plans and retail mutual
funds connected people to the broad movements
of the stock market, fueling the growth of fi
nancial media and, indirectly, the expansion and
contraction of the retail sector through the so
called “wealth effect.” The securitization of mort

gages and the ease of refinancing attuned a gen
eration of homeowners to once-obscure numbers
like LIBOR (the London Interbank Offered Rate)
and riveted attention on the decisions of the Fed

eral Reserve, which now had immediate pocket
book consequences. Alan Greenspan and James
Kennedy documented that homeowners extracted
about $800 billion per year in equity during the
boom years of the recent housing bubble (Green
span & Kennedy, 2008). Serial refinancers and
those who drew on home equity lines of credit
relied on continuous increases in home prices and
favorable interest rates from the Fed to make up
for stagnant wages. For these households, micro

movements in the local real estate market might
mean the difference between buying a new Pon
tiac and nursing the old car a few thousand more

miles. The Web allowed individuals minute-by
minute access to numbers such as their credit
rating and the purported value of their house,
through sites such as Zillow.com. And individuals

were presented with increasingly novel ways of
accessing funds from the capital markets?for in
stance, by selling their future life insurance payoffs
to vendors who then bundled them with other
insurance contracts and securitized them. Securi

tization thus remade the household budget just as
it had reformatted the banking industry.

The increasing centrality of finance to every
day life also changed people’s understanding of
their place in society. Traditional corporate em
ployers provided more than a job?they provided
a worldview. Economist Carl Kaysen described
this in the 1950s: “The whole labor force of the

modern corporation is, insofar as possible, turned
into a corps of lifetime employees, with great
emphasis on stability of employment.” Through its
enveloping labor practices, “membership in the

modern corporation becomes the single strongest
social force shaping its career members” (Kaysen,
1957, pp. 312, 318). Peter Drucker agreed (1949,

This content downloaded from 128.111.121.42 on Thu, 08 Nov 2018 23:39:06 UTC
All use subject to https://about.jstor.org/terms

2009_Davis_39

p. 28), claiming that the corporation “determines
the individual’s view of his society,” in some sense
providing a template for understanding how soci
ety works. The mass-production model of human
organization pioneered by Henry Ford became a
model for other large-scale tasks, from farming and
scientific research to the D-Day invasion at Nor

mandy. Moreover, according to Drucker, employ
ees brought this cognitive model to bear on basic
tasks of living, such as child-rearing (Drucker,
1949; cf. Kohn, 1969). Consider the Gilbreth
family in Cheaper by the Dozen. Mass production
had become a worldview, a way of life.

Today, a vanishingly small part of the work
force grows food or manufactures tangible objects,
and long-term careers within organizations are an
anomaly rather than a norm. The “society of or
ganizations” is no longer the enveloping force it
was when Drucker and Kaysen wrote. Instead, the
cognitive model that holds sway for many is that
of the investor. Students attending college are “in
vesting in their human capital,” while people who
join a bowling league or the PTA are thereby
“investing in their social capital.” In a portfolio
society, the organization man has been replaced
by the daytrader, buying and selling various spe
cies of capital, from homes reconceived as options
on future price increases, to a college education
whose estimated net present value informs the
choice of school and course of study, to children
whose Little League games might be an apt con
text to cultivate potential clients.

Like corporations, banks, and states, house
holds have discovered the joys of outsourcing.
Nannies and cleaning services have existed for
generations. But the same technologies that
opened offshoring possibilities for corporations
have also made them more readily available for all
households. Services from editing vacation videos
to planning a wedding can be outsourced via the

Web. With Skype and a fast Internet connection,
helping the kids with homework can be con
tracted out to low-wage (but high-skill) profes
sionals elsewhere in the world. And online pro
viders offer “baby branding” services, so that
children can start life with a professionally vetted
name that will enhance their chances at elite
schools and lucrative jobs. To an increasing de

gr?e, parents can leave the low-value parental
tasks of naming, feeding, and educating their chil
dren to global vendors, while reserving the quality
time for themselves.

But what life lessons would these parents pass
on to their children during their quality time? For
generations, the smart advice for making one’s
way in the world was to go to college and take a
job with a reputable company such as General

Motors or U.S. Steel or Westinghouse. Drucker
summarized in 1949 (ironically it is a complete
inversion of what would take place just 30 or so
years later): “Where only twenty years ago the
bright graduate of the Harvard Business School
aimed at a job with a New York Stock Exchange
house, he now seeks employment with a steel, oil,
or automobile company. It is not only that money
has become less important than industrial capac
ity to produce; the old financial powers have also
lost control over money and credit itself, as wit

ness the shift in financial headquarters from Wall
Street to the government agencies in Washing
ton” (p. 27). The path to middle-class prosperity

was clear enough for anyone willing to work hard
and climb the corporate ladder.

Even as the stability of corporate jobs eroded,
the young were advised to gain specialized educa
tion in order to participate in the “knowledge
economy” at the high end of the value chain.
Symbolic analysts such as accountants, computer
programmers, and product designers were still paid
well even if not protected by a corporate umbrella.
But economist Alan Blinder suggests that in a

Web-enabled world, any task that can be sent
over the Internet is open to competition from
suppliers around the globe, no matter what the
level of skill. From completing tax forms and
designing auto parts to reading X-rays and decod
ing the human genome, cognitive tasks are emi

nently offshorable. The service sector, in short,
is not immune to employment volatility, and

Blinder (2006) estimated that perhaps 40 million
jobs in the United States were eligible for offshor
ing.

The news was not all hopeless for those who
wanted to prepare for a job that might last for
more than a few months. According to Blinder,
one’s job stability was enhanced by the level of

This content downloaded from 128.111.121.42 on Thu, 08 Nov 2018 23:39:06 UTC
All use subject to https://about.jstor.org/terms

40_Academy of Management Perspectives_August

personal touch involved. Personal fitness trainers
and home health aides for retired baby boomers
were not likely to be replaced by disembodied
vendors on the Web. On the other hand, for those
baby boomers who had the bad fortune to follow
conventional wisdom prior to the Great Recession
of 2008?buy the biggest house for which you can
get a mortgage, and invest your savings in a mu
tual fund?retirement was going to have to wait.

The pathway to prosperity for the next generation
was increasingly hard to discern.

Moving forward
The argument of this paper has had many mov

ing parts, but the underlying theme is that
finance shaped the transition from an indus

trial to a postindustrial society in the United
States over the past three decades. From a society
of organizations, in which corporations were es
sential building blocks that shaped the daily lives
of their members, we evolved into a portfolio
society in which household welfare was increas
ingly tied to the vagaries of the financial markets.

The economic downturn was amplified by these
ties, as consumers who had relied on increasing

home and portfolio values suffered setbacks that
contracted consumer spending and thus economic
growth. The results reverberated around the
world, from investors that had purchased securi
ties backed by American mortgage payments to
producers that relied on American consumers for
their sales.

The economy will come back, but the society
of organizations will not, and our research and
teaching need to take this into account. Theories
about organizations conceived of a world in
which, as Charles Perrow put it (1991, p. 726),
organizations were “the key phenomenon of our
time, and thus politics, social class, economics,
technology, religion, the family, and even social
psychology take on the character of dependent
variables.” Economic mobility happened through
the hiring and promotion practices of corpora
tions, so understanding how job ladders worked
could explain both class mobility and the mech
anisms behind racial and gender inequality.
Health care and retirement security were the
province of corporate employers. Politics privi

leged those with access to resources, such as cor
porate executives, so examining the political con
tributions of major corporations such as GM or
Citigroup or AIG could explain political out
comes. Urban and regional economic develop
ment was often a collective project of local cor
porate elites who knew each other through
membership on the board of the local bank, indi
cating the most fruitful place to look for elite
cohesion (or its absence). And individuals’ under
standings of their society came from their experi
ence at work, as long years with the same em
ployer imprinted their worldviews.

The view of organizations as the building
blocks of society also informed public policy, as
governmental efforts to deal with social issues
often used corporations as the appropriate levers.
Inequality and discrimination could be fixed
through regulatory demands for equitable hiring
and promotion practices among the largest corpo
rate employers, as the Equal Employment Oppor
tunity Commission did in the early 1970s. Work
places could be made safer and more healthful
through the Occupational Safety and Health Ad

ministration, another product of the early 1970s.
Financial security in old age was strengthened by
the Employee Retirement Income Security Act of
1974, which ensured that corporate employers

would make good on their pension promises to
their retired workers. And the Environmental
Protection Agency, created in 1970, sought to
create a cleaner natural environment in part
through the regulation of corporate emissions.

As this paper has described, the society of or
ganizations unwound in the United States after
the early 1980s, although our conceptual model
has not. For a brief period, the “ownership society”
model proposed by President George W. Bush
provided an alternative. Rather than rely on cor
porate employers for the provision of social wel
fare functions, Bush suggested that individuals
could rely on home ownership and various indi
vidual accounts invested in the stock market to
fund education, health care, and retirement. The
major policy initiative of Bush’s second term was
an effort to partially privatize Social Security by
allowing individuals to put their mandatory pay
roll contributions into the stock market rather

This content downloaded from 128.111.121.42 on Thu, 08 Nov 2018 23:39:06 UTC
All use subject to https://about.jstor.org/terms

2009 _Davis_4[

than into the government trust fund. But the
financial crisis did for the ownership society what
the collapse of the Soviet Union did for state
socialism. By mid-2009, the S&P 500 was 30%
lower than it had been a decade before, and per
haps one-quarter of homeowners with mortgages
owed more on their house than it was worth.
Ownership of index funds and homes no longer
looked like a credible source of economic security
and prosperity; if anything, home ownership had
left millions financially unable to move in order to
pursue new jobs, had any been available.

Nostalgia is not the right response to postin
dustrialism. We cannot go back to a system of
corporate-sponsored welfare capitalism any more
than we can return to feudalism. If anything, we
should be overjoyed that we have the technology
to create the goods that people need with a min
imal input of labor. The agenda for management
scholars going forward should be to help create
institutions that serve the needs for economic
security and health care formerly addressed by the
old system while building new opportunities. But
this will require a new set of conceptual tools.

In a postindustrial economy, the applicability
of several of our existing theories is called into
question. Some scholars have jibed that organiza
tion theory is, to a large extent, the “science of

General Motors.” Consider the evidence for trans

action cost economics. Our understanding of asset
specificity and vertical integration is largely based
on the famous case of GM’s acquisition of Fisher
Body in the 1920s, while the value of the multidi
visional structure was demonstrated by GM’s M
form (e.g., Williamson, 1975). Many studies of the

make-or-buy decision also drew on evidence from
American automakers prior to their divestitures of
Delphi and Visteon (e.g., Walker & Weber,
1984)* But GM’s declaration of bankruptcy in
June 2009 also signified the bankruptcy of the
corporate-industrial model that has been the basis
of much of our theory and research.

Theories that rely on evidence based in man
ufacturing may have limited application in a ser
vice economy. Resource dependence theory, for
instance, draws largely on studies of industry in
put-output tables in manufacturing to understand
the sources of vertical integration and board in

terlocks (Pfeffer & Salancik, 1978). The basic
insights of resource dependence theory into power
dynamics will have lasting value, although the
sources and uses of organizational power will re
quire a reconceptualization.

More broadly, views of organizations that take
the sovereignty and boundaries of the organiza
tion for granted?e.g., those that study birth and
death rates (Hannan & Freeman, 1977)?will
yield a misleading view in an economy where
reconfigurable supply chains in manufacturing
and service are the most critical units of analysis.

As I have described it, the ontological status of
many corporations is closer to that of a Web page
than an organism. It is easy to create a Liberian
corporation over the Internet with a credit card,
and just as easy to disincorporate by failing to pay
the annual fee. Should we be counting birth and
death rates of such entities?

On the other hand, finance-based theories of
the corporation will also not replace manage

ment-based theories. The imagery of the firm as a
nexus of contracts (e.g., Jensen & Meckling,
1976) is appealing in a world of OEM corpora
tions, banks, and states. One might argue that
finance scholars and their fellow travelers with

influence in government helped make this view of
the firm become true (cf. Ferraro, Pfeffer, & Sut
ton, 2005). But the finance-based theory of the
corporation has lost credibility in the wake of the
financial crisis. The central premise of this ap
proach is that financial markets are information
ally efficient, and thus that it is appropriate for
corporate governance mechanisms to guide corpo
rations toward share price as their North Star. The

merits of this view are debatable; less so are the
hazards to the economy when it is broadly ac
cepted by executives, investors, and policymakers.
Indeed, some would go so far as to argue that the
financial view of the corporation helped create
the crisis we are in now. There is no doubt that
finance and financial markets are central to what

public corporations do. What is less clear is that
an ownership society is a workable model for pros
perity and security.

It appears that for many corporations in the
United States, “creating shareholder value” will
no longer be their animating purpose in the years

This content downloaded from 128.111.121.42 on Thu, 08 Nov 2018 23:39:06 UTC
All use subject to https://about.jstor.org/terms

42_Academy of Management Perspectives_August

to come. A fitting epitaph for this view came from
Jack Welch, former CEO of GE, who said to the
Financial Times in March: “On the face of it,
shareholder value is the dumbest idea in the

world. Shareholder value is a result, not a strategy.
. . . Your main constituencies are your employees,

your customers and your products” (Guerrera,
2009). With the partial or complete government
takeover of the country’s largest bank (Citigroup),
insurance company (AIG), and manufacturer
(General Motors), along with mortgage behe

moths (Fannie Mae, Freddie Mac) and other cor
porations deemed too big to fail, it is clear that a
more informed sense of political economy will be
essential to business scholarship in the years to
come. American management scholars and MBA
students are uniquely ill-informed about the oper
ations of a mixed economy. Organizational re
search rooted in the United States traditionally
treats governments as elements of an external
“environment,” to be obeyed or co-opted, or as a
drag on the natural operations of markets. Exam
inations of the corporation going forward will
require insights from scholars outside North

America, where states have long played more ac
tive roles in the operations of business. This will
be a welcome addition to a research tradition that

has for too long taken the American case to be an
exemplar to be documented and exported, rather
than one path among many.

Finally, in light of this discussion, where should
researchers look now? Two domains that merit
greater study than they have received are the
financial services industry and the global shipping
industry. The financial industry has gone through
a spectacular proliferation of types of organiza
tions, with both consolidation and disaggregation
occurring simultaneously. With the repeal of
Glass-Steagall in 1999, the traditional barriers be
tween investment banking, commercial banking,
and insurance were breached, and a number of
very large “financial supermarkets” emerged. We
have seen some of the results of this experiment,
but a systematic assessment is due. On the other
hand, the value chain in banking has also been
subject to disaggregation?consider a mortgage,

which might be arranged by a self-employed bro
ker, originated by a freestanding mortgage firm,

packaged into a bond by a Wall Street bank, and
purchased by a hedge fund. The industry is ripe for
more detailed analyses that might help provide a
postmortem on the financial crisis and insight
into safeguards going forward.

The shipping industry merits greater study for
another reason. The vast majority of the world’s
trade in physical goods is transported by tens of
thousands of commercial ships that might be
flagged in Panama, owned by an LLC registered in

Malta, insured by Lloyd’s of London, and staffed
by a multinational crew of Spaniards, Croatians,
Filipinos, and others (see Langewiesche, 2004)*
Commercial ships are both internationally diverse
(often wildly so) and effectively stateless, and
shipping firms are consummate purchasers of the
goods of “vendor states.” Examining their opera
tions can help inform a world in which states are

more business service providers than sovereign
nations.

Within the economic crisis is a unique oppor
tunity for management scholarship to provide di
rection. With broad sectors of the economy from
finance to defense to health care on the verge of
large-scale reorganization, we have a chance to
inform change and apply lessons learned from
other contexts, from self-organizing collective ac
tivities (e.g., open source software and Wikipedia)
to social movements. Times of major economic
upheaval have also been times of theoretical fer
ment?consider the burst of social theory at the
turn of the 20th century (Adler, 2009). Perhaps
we can draw on this same impulse to yield more
productive contributions to efforts at reform.

References

Adler, P. S. (2009). The Oxford handbook of sociology and
organization studies: Classical foundations. Oxford, U.K.:
Oxford University Press.

Aeppel, T., & Lahart, ]. (2009, March 9). Lean factories
find it hard to cut jobs even in a slump. Wall Street
Journal, p. Al.

Applebaum, E., Bernhardt, A. D., & Murnane, R. J. (2003).
Low-wage America: How employers are reshaping opportu
nity in the workplace. New York: Russell Sage.

Barley, S. R., & Kunda, G. (2006). Contracting: A new
form of professional practice. Academy of Management
Perspectives, 20(1), 45-66.

Bell, D. (1973). The coming of post-industrial society. New
York: Basic Books.

This content downloaded from 128.111.121.42 on Thu, 08 Nov 2018 23:39:06 UTC
All use subject to https://about.jstor.org/terms

2009_Davis_43

Berle, A. A., & Means, G. C. (1932). The modern corporation
and private property (Modern Reprint: 1991 edition).
New Brunswick, NJ: Transaction.

Bernhardt, A. D., Morris, M., Handcock, M. S., & Scott,
M. A. (1999). Job instability and wages for young adult
men. (Working Paper No. 99-01). State College, PA:
Pennsylvania State University.

Blinder, A. S. (2006). Offshoring: The next Industrial Rev
olution? Foreign Affairs, 85(2), 113-128.

Bradsher, K. (1997, October 9). Ford planning to spin off
lending unit. New York Times, p. Dl.

Brandeis, L. D. (1914). Other people’s money: And how the
bankers use it. New York: Frederick A. Stokes Company.

Bucks, B. K., Kennickell, A. B., Mach, T. L., & Moore, K. B.
(2009). Changes in U.S. family finances from 2004 to
2007: Evidence from the Survey of Consumer Finances.
Federal Reserve Bulletin, February, A1-A56.

Bucks, B. K., Kennickell, A. B., & Moore, K. B. (2006).
Recent changes in U.S. family finances: Evidence from
the 2001 and 2004 Survey of Consumer Finances. Federal
Reserve Bulletin, February, A1-A38.

Bunkley, N. (2008, November 10). Some GM retirees are in
a health care squeeze. New York Times, p. Bl.

Cappelli, P. (1999). The New Deal at work: Managing the
market-driven workforce. Boston: Harvard Business
School Press.

Cobb, J. A. (2008). The employment contract broken! The
deinstitutionalization of defined benefit retirement plans. Un
published, Ross School of Business, University of Mich
igan.

Cox, E. B. (1963). Trends in the distribution of stock ownership.
Philadelphia: University of Pennsylvania Press.

Davis, G. F. (2008). A new finance capitalism? Mutual
funds and ownership re-concentration in the United
States. European Management Review, 5, 11-21.

Davis, G. F. (2009). Managed by the markets: How finance
re-shaped America. Oxford, U.K.: Oxford University
Press.

Davis, G. F., Diekmann, K. A., & Tinsley, C. H. (1994).
The decline and fall of the conglomerate firm in the
1980s: The deinstitutionalization of an organizational
form. American Sociological Review, 59(4), 547-570.

Davis, G. F., & Kim, E. H. (2007). Business ties and proxy
voting by mutual funds. Journal of Financial Economics,
85, 552-570.

Drucker, P. F. (1949). The new society: I. Revolution by
mass production. Harper s Magazine, September, 21-30.

Duca, ]. V. (2001). The democratization of America’s cap
ital markets. Federal Reserve Bank of Dallas Economic and
Financial Review, (Second Quarter), 10-19.

Ferraro, F., Pfeffer, J., & Sutton, R. I. (2005). Econom
ics language and assumptions: How theories can be
come self-fulfilling. Academy of Management Review, 30,
8-24.

Fraser, S. (2005). Every man a speculator: A history of Wall
Street in American life. New York: HarperCollins.

Greenspan, A., & Kennedy, J. (2008). Sources and uses of
equity extracted from homes. Oxford Review of Economic
Policy, 24(1), 120-144.

Guerrera, G. (2009, March 12). Welch condemns share
price focus. Financial Times. Retrieved June 26, 2009,
from http://www.ft.com/cms/s/0/294fflf2^0f274 lde-balO
0000779fd2ac.html.

Hacker, J. S. (2006). The great risk shift: The assault on American
jobs, families, health care, and retirement?and how you can
fight back. New York: Oxford University Press.

Hall, J. (2000). The roots of broadened stock ownership:
Report to the Joint Economic Committee of the U.S.
Congress, April 2000. Washington: U.S. Congress, Joint
Economic Committee.

Hannan, M. T., & Freeman, J. (1977). The population
ecology of organizations. American Journal of Sociology,
92, 910-943.

Hansell, S. (1998, July 26). Is this the factory of the future?
New York Times, section 3, p. 1.

Hilsenrath, J. E., & Buckman, R. (2003, October 20). Fac
tory employment is falling world-wide: Study of 20 big
economies finds 22 million jobs lost; even China shows
decline. Wall Street Journal, p. A2.

Ip, G. (2002, June 10). Alternative lenders buoy economy;
will easy terms end hard times? Wall Street Journal, p. Al.

Jacoby, S. M. (1997). Modern manors: Welfare capitalism since
the New Deal. Princeton, NJ: Princeton University Press.

Jensen, M. C, & Meckling, W. H. (1976). Theory of the
firm: Managerial behavior, agency cost and ownership
structure. Journal of Financial Economics, 3, 305-360.

Kaysen, C. (1957). The social significance of the modern
corporation. American Economic Review (Papers and Pro
cee?ngs), 47(2), 311-319.

Kohn, M. (1969). Class and conformity: A study in values.
Chicago: University of Chicago Press.

Kollmeyer, C. (2009). Explaining deindustrialization: How
affluence, productivity growth, and globalization dimin
ish manufacturing employment. American Journal of So
ciology, 114, 1644-1674.

Lagace, M. (2001). Jack Welch Class Day interview?Jack
Welch to HBS grads: “Don’t be a jerk.” Harvard Business
School Working Knowledge, June 11. Retrieved June 18,
2009, from http://hbswk.hbs.edu/archive/2310.html.

Langewiesche, W. (2004). The outlaw sea: A world of free
dom, chaos, and crime. New York: North Point Press.

Mizruchi, M, S. (1992). The structure of corporate political
action: Interfirm relations and their consequences. Cam
bridge, MA: Harvard University Press.

Neuman, E. J., Davis, G. F., & Mizruchi, M. S. (2008).
Industry consolidation and network evolution in U.S.
global banking, 1986-2004. Advances in Strategic Man
agement, 25, 213-248.

O’Connell, V. (2008, September 10). Retailers reprogram
workers in efficiency push. Wall Street Journal, p. Al.

Perrow, C. (1991). A society of organizations. Theory and
Society, 20, 725-762.

Pfeffer, J., & Salancik, G. R. (1978). The external control of
organizations: A resource dependence perspective. New
York: Harper & Row.

Pleven, L., & Silverman, R. E. (2007, November 26). An
insurance man builds a lively business in death. Wail
Street Journal, p. Al.

Quinn, S. (2008). The transformation of morals in markets:

This content downloaded from 128.111.121.42 on Thu, 08 Nov 2018 23:39:06 UTC
All use subject to https://about.jstor.org/terms

44_Academy of Management Perspectives_August

Death, benefits, and the exchange of life insurance pol
icies. American journal of Sociology, 114, 738-780.

Risen, J. (2008, May 10). Iraq contractor in shooting case
makes comeback. New York Times. Retrived June 26,
2009 at http://www.nytimes.com/2008/05/10/world/
middleeast/1 Oblackwater.html.

Rivoli, P. (2005). The travels of a T-shirt in the global
economy: An economist examines the markets, power, and
politics of world trade. Hoboken, NJ: John Wiley & Sons.

Scahill, J. (2007). Blackwater: The rise of the world’s most
powerful mercenary army. New York: Nation Books.

Scott, W. R., & Davis, G. F. (2007). Organizations and
organizing: Rational, natural, and open systems perspectives.
Upper Saddle River, NJ: Pearson Prentice Hall.

Shane, S., & Nixon, R. (2007, February 4). In Washington,
contractors take on biggest role ever. New York Times.

Retrieved June 26, 2009, at http://www.nytimes.com/
2007/02/04/washington/04contract.html.

Sturgeon, T. J. (2002). Modular production networks: A
new American model of industrial organization. Indus
trial and Corporate Change, 11, 451-496.

Useem, M. (1996). Investor capitalism: How money managers
are changing the face of corporate America. New York:
Basic Books.

Walker, G., & Weber, D. (1984). A transaction cost ap
proach to make-or-buy decisions. Administrative Science
Quarterly, 36, 373-391.

Williamson, O. E. (1975). Markets and hierarchies: Analysis
and antitrust implications. New York: Free Press.

Zuckerman, E. S. (1999). The categorical imperative: Secu
rities analysts and the illegitimacy discount. American
Journal of Sociology, 104, 1398-1438.

This content downloaded from 128.111.121.42 on Thu, 08 Nov 2018 23:39:06 UTC
All use subject to https://about.jstor.org/terms

Labor: Studies in Working-Class History of the Americas, Volume 11, Issue 3

DOI 10.1215/15476715-2687664 © 2014 by Labor and Working-Class History Association

37

Title VII in Economic-Historical Perspective

Gavin Wright

The Civil Rights Act of 1964 fully deserves its status as a watershed achievement
in American political and social history, and Title VII merits full marks as a land-
mark in national economic history. Enforcement of Title VII generated major eco-
nomic gains for African Americans, advances that for the most part have been sus-
tained over time. In drawing lessons from this historical record, however, it must be
recognized that the successes reflected a specific set of channels in a particular his-
torical context. The primary driving forces were grass-roots mobilization for racial
justice and pressure from all three branches of the federal government. Most of the
gains were realized in the South, reflecting the low starting point in that region’s
transition from decades of Jim Crow segregation as well as the organizational cohe-
sion descended from the civil rights movement. It is far from clear that the same or
similar approaches can be effective in confronting racial and class inequalities in the
twenty-first century.

The role of political mobilization was important from the beginning. Early
drafts of the Kennedy administration’s civil rights bill did not even include a fair
employment section, perhaps because the issue was already being addressed by the
President’s Commission on Equal Employment Opportunity (overseeing compliance
by federal contractors under John F. Kennedy’s 1961 executive order) and by voluntary
efforts under the Plans for Progress program launched in the same year. This omis-
sion was reversed in response to vigorous lobbying by several groups allied in the civil
rights coalition. These advocates well understood that progress under existing pro-
grams was painfully slow at best. Although the resulting act prohibited employment
discrimination on the basis of race or color (as well as religion, sex, and national ori-
gin), many contemporary observers expected little of significance from Title VII. Not
only did the text contain glaring loopholes (such as protection for “bona fide” seniority
or merit systems), but the newly created Equal Employment Opportunity Commis-
sion (EEOC) had limited powers of enforcement. Because the EEOC could neither
issue “cease-and-desist” orders nor initiate lawsuits, it was described by discrimination

Downloaded from https://read.dukeupress.edu/labor/article-pdf/11/3/37/437013/LAB113_08_Wright_Fpp.pdf
by University of California Santa Barbara user
on 29 March 2018

L A
BO

R 1
1. 3

38

expert Michael Sovern in 1966 as a “poor, enfeebled thing . . . [with] the power to con-
ciliate but not to compel.”1

Nonetheless, passage of Title VII had a galvanizing effect on black job seek-
ers. Emboldened by a sense of legal standing (as well as strength in numbers), black
men and women began to apply for jobs in the southern textiles industry from which
they had long been excluded. The EEOC actively encouraged this assertiveness.
Although textile firms initially resisted and dragged their feet, within a few years
they came to see the advantages of an expanded labor supply. The New York Times
reported in 1969: “Virtually all of the large [textile] companies have begun to preach
a doctrine of equal, color-blind employment.”2

Outside of textiles, progress was slower and more litigious, as workers invoked
Title VII to challenge segregated “lines of progression.” In the higher paying paper
industry, many applications for job transfers were filed almost immediately after the
act came into effect on July 2, 1965. When the transfers were not approved, workers
sued, supported by the National Association for the Advancement of Colored People
(NAACP) Legal Defense Fund. In a landmark 1968 case, the US Justice Department
sued Crown-Zellerbach, a major paper employer based in Bogalusa, Louisiana, along
with its leading union. The outcome was a court determination that even a super-
ficially neutral seniority system could be illegal if it hindered rectification of long-
standing barriers to black advancement opportunities. This decision led in turn to the
Jackson Memorandum of 1968, negotiated by the Office of Federal Contract Compli-
ance, in which International Paper and its southern unions accepted the principle that
blacks could advance to their “rightful place” on the companywide seniority ladder.3

Another landmark decision was Griggs v. Duke Power (1971), which estab-
lished the “disparate impact” test for discrimination in promotion criteria. On March
1, 1966, fourteen janitors from the all-black Labor Department at Duke Power’s Dan
River plant signed a letter of complaint about the absence of promotion opportuni-
ties. The letter requested “promotion [for janitors] when vacancies occur” into any of
four specified job classifications. The instigator, a former tobacco sharecropper named
Willie Boyd, had been active in the NAACP for years and closely followed passage
of Title VII. The company informed the men that standards were being raised and
that they were welcome to take the test required for promotion. The group then for-
warded their complaint to the EEOC, which tried to resolve the matter through con-
ciliation. When this effort also proved fruitless, the workers turned to the NAACP
Legal Defense Fund, which assisted them in filing suit on September 9, 1966. After
setbacks in appeals courts, the Supreme Court ruled unanimously — five years after
the initial complaint — that tests having a disparate impact on minorities could be

1. Timothy J. Minchin and John A. Salmond, After the Dream: Black and White Southerners since 1965
(Lexington: University Press of Kentucky, 2011), 75.

2. Roy Reed, “Industry in South Was Negro Labor,” New York Times, May 19, 1969.
3. Timothy J. Minchin, The Color of Work: The Struggle for Civil Rights in the Southern Paper Industry,

1945–1980 (Chapel Hill: University of North Carolina Press, 2001).

Downloaded from https://read.dukeupress.edu/labor/article-pdf/11/3/37/437013/LAB113_08_Wright_Fpp.pdf
by University of California Santa Barbara user
on 29 March 2018

W r i g h t / T i t l e V I I i n E c o n o m i c – H i s t o r i c a l P e r s p e c t i v e           39

invalid regardless of intent, unless shown to be demonstrable measures of job perfor-
mance. As a result of the decision, the high school graduates in Duke’s Labor Depart-
ment were promoted, and education and testing requirements were waived for the
others. Willie Boyd ultimately became the first black supervisor over white men at
the Dan River plant.4

More fundamentally, Griggs and related rulings gave new credibility to EEOC
guidelines and impelled a much more thoroughgoing change than firms had antici-
pated. Veteran labor lawyer and legal scholar Alfred W. Blumrosen writes: “Griggs
infused Title VII with extraordinary power. . . . Without Griggs, the statute might
have warranted little more than a text note in law case courts.” Citations to the case in
federal courts rose steadily through the 1970s, reaching a peak in 1980 before declin-
ing in the next decade. The Griggs principle went well beyond what could have been
predicted in 1964, but as Blumrosen concludes: “There was no ‘plain meaning’ to
Title VII.”5 It acquired specific meaning only through the ongoing efforts of work-
ers, activists, and lawyers, supported by the courts. Congress added to the impact by
passing the Equal Employment Opportunity Act of 1972, finally giving litigation
power to the EEOC and extending Title VII coverage to state and local governments.

Did this extended struggle to make Title VII operational have any signifi-
cant effect in the real world? Emphatically yes. Figure 1 displays the black share of
white-collar and blue-collar occupations by region, as compiled from EEO-1 reports
from large employers. The picture clearly shows a sharp upward surge in black occu-
pational status after 1965, in all regions but especially in the South. Prior to the act,
black occupational shares were increasing slowly in the North and West (from 1950
and perhaps earlier, according to US Census Bureau figures) but stagnant or declin-
ing within the South. Thus the strong positive growth in southern states after 1965
seems clearly attributable to Title VII.

Most early gains were in southern blue-collar occupations. The South was a
tempting target for Title VII, because discrimination was perpetuated there through
explicit segregation systems. Most of these were dismantled between 1965 and 1980,
with significant benefits for black southerners. James Heckman and his collaborators
show that relative black income gains during this era were overwhelmingly southern,
reflecting primarily a shift from “laborer” into higher-paying “operative” and “crafts-
man” positions.6 Advances were not limited to the South, but elsewhere progress
slowed to a crawl after 1980, roughly coincident with the drastic cutbacks in funding

4. Robert Samuel Smith, Labor and Civil Rights: Griggs versus Duke Power and the Struggle for Equal
Employment Opportunity (Baton Rouge: Louisiana State University Press, 2008).

5. Alfred W. Blumrosen, “The Legacy of Griggs: Social Progress and Subjective Judgments,” Chicago-
Kent Law Review 63 (1987): 1–3; and Modern Law: The Law Transmission System and Equal Employment
Opportunity (Madison: University of Wisconsin Press, 1993), 337.

6. Richard J. Butler, James Heckman, and Brook Payner, “The Impact of the Economy and the State
on the Economic Status of Blacks,” in Markets in History, ed. David Galenson (Cambridge: Cambridge Uni-
versity Press, 1989); and John J. Donohue III and James Heckman, “Continuous versus Episodic Change:
The Impact of Civil Rights Policy on the Economic Status of Blacks,” Journal of Economic Literature 29
(1991): 1603–43.

Downloaded from https://read.dukeupress.edu/labor/article-pdf/11/3/37/437013/LAB113_08_Wright_Fpp.pdf
by University of California Santa Barbara user
on 29 March 2018

L A
BO

R 1
1. 3

40

and staffing at the EEOC and the Office of Federal Contract Compliance Programs
at that time.

What is perhaps most surprising is that growth in the black share of
white-collar employment continued long after the post-1980 political transition, but
almost exclusively in the South. We do not yet know all of the reasons for this pattern,
but the list of likely contributing factors includes long-term gains in black educational
attainment, economic growth in southern cities with large black populations and
political representation, “networks effects” associated with historically black southern
communities, and the impact of black representation in corporate management on
recruitment and retention of new black employees.7 We can say with more confidence
that these gains were not driven by increasingly forceful applications of Title VII to
private employers in the South, because, with rare though important exceptions (such
as Texaco and Coca-Cola), racial employment discrimination cases sharply declined
relative to other types of employment issues as of the 1980s.8

7. Zoë Cullen and I are currently engaged in a study addressing this question, drawing on EEOC data.
8. John J. Donohue III and Peter Siegleman, “The Changing Nature of Employment Litigation,”

Stanford Law Review 43 (1991): 983–1083; and “The Evolution of Employment Discrimination Law in the
1990s,” in Handbook of Employment Discrimination Research, ed. Laura Beth Nielsen and Robert L. Nelson
(Dordrecht, the Netherlands: Springer 2005).

Figure 1. Black share of white-collar and blue-collar occupations, south and elsewhere, 1966–2009.
Source: EEOC EEO-1 reports. Observations for 1966–70 are taken from the annual EEOC publication
Job Patterns for Minorities and Women in Private Industry. Blue-collar occupations include both
operative and skilled crafts, excluding laborer and service jobs.

Downloaded from https://read.dukeupress.edu/labor/article-pdf/11/3/37/437013/LAB113_08_Wright_Fpp.pdf
by University of California Santa Barbara user
on 29 March 2018

W r i g h t / T i t l e V I I i n E c o n o m i c – H i s t o r i c a l P e r s p e c t i v e           41

What then are we to make of the legacy and current status of Title VII in
light of this brief historical survey? The legislation was clearly prompted by the race
issue, and in this realm, it has been a great success, generating lasting gains for Afri-
can Americans through major reductions in racial exclusions and inequities, with few
signs of significant inefficiencies in the process. But even during the era of its great-
est achievements, and certainly since then, Title VII has been soaked in paradox: it
prohibits discrimination on the basis of race or color, yet progress has not come pri-
marily from ignoring race but by taking race systematically into account. Title VII’s
main accomplishments have occurred in a region where racial consciousness remains
strong. The uneasy partnership between universalist rhetoric and race-conscious
mobilization has been historically productive, but it is difficult to see this same for-
mula as the major vehicle in current and future struggles against economic inequal-
ity. Racial prejudice and subtler forms of discrimination no doubt continue, but they
have been overwhelmed by structural changes in the US labor market that could not
have been foreseen in 1964.

The principles of Title VII are still important and should clearly be retained.
They were effectively extended to women in the original legislation and by subse-
quent court ruling to sexual harassment. Later legislation extended protected status
to age, pregnancy, and disabilities, and we may soon see a further extension to sexual
orientation. Individuals in all of these categories deserve protection against discrim-
ination in employment and on the job. But with a majority of the labor force now
in protected status, Title VII can hardly serve as the basis for the racial, ethnic, and
gender- based coalition that our times require. Antidiscrimination laws will not raise
the living standards or life prospects of large numbers of low-income Americans, as
they did during the civil rights era.

It should not be discouraging to acknowledge that reform strategies that were
effective in one historical era do not carry over readily to another time. We can still
look to history for inspiration. In building coalitions across racial, ethnic, and gen-
der lines, we can hardly do better than to draw upon the inclusive values of the civil
rights movement.

Downloaded from https://read.dukeupress.edu/labor/article-pdf/11/3/37/437013/LAB113_08_Wright_Fpp.pdf
by University of California Santa Barbara user
on 29 March 2018

Downloaded from https://read.dukeupress.edu/labor/article-pdf/11/3/37/437013/LAB113_08_Wright_Fpp.pdf
by University of California Santa Barbara user
on 29 March 2018

Consuming Lattes and Labor, or Working at
Starbucks

Bryant Simon
Temple University

Abstract

This is an ethnographic portrait of working at one of the most conspicuous components of
the neoliberal order: the upscale looking, fast-food acting coffee chain, Starbucks. Simon
discusses the emotional labors of being a happy and chatty “partner” (employee), the
difficulties of the uneven scheduling, the unexpected physical aspects of the job, and
the culture of conformity at the nation’s largest seller of coffee and affordable luxury.
The essay assesses the corporations’ reputation for being a good employer and
contains extensive interviews with Wobblies trying to organize the chain. It suggests
how workers are consumed by and with the brand in what the author calls “New Age
welfare capitalism.”

To serve its nearly 50 million weekly customers, Starbucks employs around
150,000 workers around the world.1 (This doesn’t count the people who grow,
pick, load, and sort the beans at origin.) Most of these women and men either
take money at the cash register or make and serve hot and cold drinks. They
wipe down counters and scrub toilets, mop floors and clean the grout between
the tiles in the bathroom, unpack boxes of cups and haul bags of trash out to
the sidewalk, load CD racks and refill half-and-half dispensers, arrange the
scones in the cases in the morning and wash out the coffee machines and blen-
ders at night. But the jobs entail more than taking money, making drinks, and
cleaning up.

The millions––really the middle-class millions––pour into Starbucks every
day for caffeine and milk and sugar fixes, but they don’t just come for the buzz.
They come to Starbucks because the company, in many ways, sells them back
their desires––desires for status, individuality, predictability, and global justice.
Yet nothing is free in the world of money and exchange. Satisfying one
group’s collective desires inevitably costs others. The everyday indulgences
people pay for at Starbucks take something from the environment (all the
cups get burned up or shoved into a landfill), the character of communities (if
every place has a Starbucks, how can you tell one place from another?), and
the minds and bodies of the frontline employees who serve the coffee and
create the company’s comfy couch culture of wish fulfillment and staged authen-
ticity. That is what this article is about: what lattes, what service work in general,
take from the people who make them.

Still, the fact that working at Starbucks has costs doesn’t mean that the job
doesn’t give something back. Let’s get this out of the way. Of course, most
people work at Starbucks for the money and the access to health benefits.

International Labor and Working-Class History
No. 74, Fall 2008, pp. 193–211
# 2008 International Labor and Working-Class History, Inc.

And Starbucks pays okay, if not great. The company pays a bit better than
McDonalds and Wal-Mart, but not as much as the Container Store or UPS.2

One Canadian trade unionist conceded that Starbucks acts like a “pretty
good employer,” quickly adding, however, that is by the “abysmal” standards
of the service sector.3 A former employee put it to me this way: She applied
for a job at Starbucks after a friend told her it was a “decent shit job.” On
average, Starbucks’ workers get paid about $8.00 per hour plus tips––as little
as $1.25 per hour and as much as $2.50 per hour––for their labor.4 With the
money they earn, they become consumers.5 They pay their rent and light,
heat and cool their homes. They purchase Internet access and cell phone
service and kick in for their healthcare. They make car payments and pay
back student loans. They buy six-packs of beer and jugs of milk, jars of
Trader Joe’s spaghetti sauce and packets of Ramen noodles, Gap t-shirts and
Old Navy sweaters, and for work, khaki pants and sensible shoes to protect
their feet.

Clearly Starbucks workers do their part to grease the wheels of the modern
consumer economy. But to get the money to buy the stuff they need and want,
they have to work; they have to sell their labor. That makes Starbucks not just a
consumer of coffee or distinct Main Streets or large tracts of landfill space, but
also a consumer of time, bodies and, even, minds.

Like most people, Starbucks workers spend twenty to forty-five minutes
getting ready for work. It takes them, probably, another half hour to get to
their jobs. On average, Starbucks baristas work twenty-four to thirty hours
per week. So if you add it all up––the amount of time it takes to prepare for
work, get there, and then do the job and come home––Starbucks consumes
3.4 million person-hours per week. Over the course of a year, Starbucks employ-
ees spend more than 143 million hours in the stores making our lattes, asking
customers (us) how our days are going, and cleaning up after us. That’s a lot
of time. Despite all this time and effort, most Starbucks employees don’t get
paid enough or get enough hours to make a living wage, that is, enough to
support themselves or live on their own. For some this bargain is alright.
They see the job as temporary or themselves as voiceless, but others are starting
to raise questions.

Around midnight every day, Google sends me a news alert with a list of
links to articles about Starbucks. That’s where I first learned about the
Starbucks Workers Union––then a group of New York-based employees
trying to organize the world’s largest coffee shop company. Obviously these
stories interested me. But I think I would have been intrigued even if I wasn’t
working on a book about Starbucks. The Starbucks Workers Union was
affiliated with the Industrial Workers of the World, better known as the IWW
or the Wobblies.

During the early part of the last century, the Wobblies, led by union legends
Elizabeth Gurley Flynn and Big Bill Haywood, organized miners and millhands
from Butte, Montana to Baltimore, Maryland around the twin radical faiths
“One Big Union” and the abolition of wage slavery. Everywhere they went

194 ILWCH, 74, Fall 2008

they stood up for working people’s rights to free speech and free association.
After the Knights of Labor and before the CIO, they organized the unorganized.
Between fiery speeches from union leaders, IWW troubadours sang songs about
long hours, dangerous mill shafts, nasty bosses and fallen comrades. The union’s
ranks swelled around the time of the First World War. But that would be the
high watermark. Battered by picket-line violence, blacklisting, and government
and management repression, the IWW disappeared in the fierce wave of
1920s-era antiunionism. At least that’s what I thought. Turns out, the union
never faded away, not entirely. So when a couple of committed militants and
union activists started to organize at Starbucks in New York and turned to
the IWW, the union, by then down to about 2,500 members nationwide, lent
its name to the David vs. Goliath fight. Reporters, not surprisingly, loved the
story, writing articles with headlines like “Baristas of the World, Unite! You
have nothing to lose but your company mandated cheerfulness,” and
“Starbucks Gets Wobbly.”6

By the time I got in touch with Tomer, Daniel, Suley, and Kevin of IWW
Local 600––the retail workers division of the Wobblies––they had been
engaged in their campaign for eighteen months. By this point, they had enlisted
only a few dozen committed members. Despite these modest gains, the union
was clearly getting under Starbucks’ skin. The company paid thousands of
dollars for the advice of a pricey antiunion law firm. But the Wobblies didn’t dis-
appear. The company tried the soft sell. According to a government report,
Starbucks store managers and supervisors gave workers pizzas, gym passes,
and baseball tickets “to encourage [them] to withdraw their support” from
the union. There was a harder-edged response at the same time. Trying to
make the union go away, Starbucks officials allegedly harassed Wobbly suppor-
ters, cutting their hours, threatening dismissal, barring them from talking about
organizing drives even during their off-hours, refusing to allow them to wear
union pins, and citing them, but not others, for a host of petty violations of
the firm’s textbook-sized employee manual. Two workers claimed that the
company fired them for organizing. While the coffee giant denied these
charges, they did agree after a hearing in front of the National Labor
Relations Board to reinstate the pair and pay back-wages.7 While the SWU
never thrived, over the course of 2007 and 2008, a smattering of Starbucks
workers in Boston; Chicago; Pittsburgh, Grand Rapids, Michigan;
San Francisco; and London enlisted in the union organizing campaign.8

I met with union members one Friday night at Alt.Coffee on Avenue A
between St. Mark’s Place and Ninth Street in New York’s East Village. With
its mixed and matched Salvation Army couches, flickering trash-picked table
lamps, and quirky, urban hip “we-won’t-do-anything-for-the-customer”
rules––wall signs announced: “NO SLEEPING: YOU WILL BE RUDELY
AWOKEN AND KICKED OUT” and “DO NOT PLUG YOUR LAPTOPS
INTO THE OUTLETS––NO EXCEPTIONS”––this was an anti-Starbucks
kind of place.9 And it wasn’t really a professor’s hangout either. With my
short spiky graying hair, black Timbuk2 bag, and almost pressed J. Crew shirt,

Consuming Lattes and Labor, or Working at Starbucks 195

I stuck out among the twenty-something service workers and punks drinking
coffee and reading from the leftover sections of the New York Times and the
Village Voice strewn across the side tables and chairs. But the music spilling
out of the speakers put me at ease. As I walked in, the coffee slingers––I
didn’t think they wanted to be called baristas––put on one of my very own
Desert Island Disks, Chris Bell’s obscure and dreamy pop collection from the
1970s, “I Am the Cosmos.” I ordered a coffee––a dollar for a ceramic cup
with hot milk––and told the guy in the worn cords and t-shirt one size too
small and not quite as white as it used to be that I liked the music. He looked
a bit surprised and said, “Right on, man.” Affirmation. I gave him a dollar tip
and took a seat near the door.

Even though I wrote my first book on workers and unions, I had never met
a real life Wobbly in person before that night. Still I had no trouble recognizing
them. Tomer, who I later learned studied labor history at Cornell with a friend of
mine, got there first. He wore baggy pants and a black knit hat with a red and
white IWW patch in the middle. The others arrived shortly after and we
crowded around a tiny rectangular table in the front of the cafe.

I had thought ahead of time about what I would ask them first. Inspired by
Ed Bradley and Morley Safer’s examples, I developed a plan of attack, really a
plan of surprise. Like those Kings of Sunday night television, I thought I might
catch my informants off guard by asking them at the outset what they liked
about the job. It didn’t work for me. No one said anything right away, they
just looked at each other and then at me. Finally Tomer spoke up. (He still
had on the Wobbly cap.) “Sure,” he said. “My coworkers. They are some of
the best people I have ever met. We hang out. They’re my friends.”

After not getting far with my first question, I asked them why they initially
started working for Starbucks. They didn’t jump at this one either, but Kevin,
the youngest of the bunch, responded rather flatly that he “was looking for a
job.” The others nodded their heads in agreement. “During the training,” he
added, he saw a video and heard stuff about the “Starbucks experience” and
thought “it was a cool place . . . it was a cool point of view.” The others didn’t
nod their heads in agreement to this observation.

After the warm-up questions, I switched gears. “So what don’t you like
about the job?” I asked. Again, Tomer led off. “You are encouraged to treat
the customers like celebrities,” he said. He talked about how managers press-
ured him to make eye contact, start up conversations, and act like he cared
about the customer’s stocks woes or plumbing problems.10 But the worst he
said was, “you have to keep a straight face when they order those ridiculous
drinks.” The other three laughed out loud when he said that.

Then I asked about the job itself. What didn’t they like about the work? I
didn’t know what to expect on this front. “SLEEP!” they all yelled at once.

“This job,” Tomer declared, “fucks with your sleep.”
“This especially happens if you work the late shift,” Daniel pointed out,

“and have to return in the morning.” Everyone again nodded. They all talked
about how, although they worked in Manhattan, they couldn’t afford to live

196 ILWCH, 74, Fall 2008

there. That meant long commutes, as much as another hour and a half and three
different trains to get to the job. If you worked the night shift, followed by a
morning shift, that could mean, Daniel and Tomer pointed out, almost no sleep.

“What else?” I asked.
Tomer mentioned the “Starbucks hump.”
“What’s that?” I wondered.
Tomer answered by standing up and pushing his shoulders forward making

it look like there was an invisible weight hanging from his neck pulling the top of
his body down in front of him over his shoes. “That’s how I feel after a six-hour
shift,” Tomer explained. “My back hurts, my feet hurt, my brain hurts. When I’m
finished working,” he continued, “I feel like . . .” He didn’t complete the sen-
tence. Instead he put his finger to his temple, pressed down his thumb, and
made the sound of a gunshot.

Working at Starbucks, the union backers maintained, consumed another
part of them––“their voices.” Kevin and Suley reminded me how noisy it can
get at Starbucks. Blenders whir, customers talk into cell phones, the milk
steamer hisses, and in the background, the music plays and plays. A few hours
of calling out drinks over this blast of sound left their vocal chords raw and
hurting. Each of the workers I talked with told me that they occasionally lost
their voices and could barely talk after work. Several worried about the long-
term impact on their hearing.

Then they all chimed in about the music. Listening to the same songs again
and again, Kevin said, drove him crazy. “It’s like a form of musical torture,” he
joked. Before he started fueling people with caffeine at Starbucks, he played
Bob Dylan songs at home and on his iPod all the time. But then Dylan let the
coffee company release a few of his older live shows, including a classic 1962
session from the New York City club the Gaslight.11 Kevin heard this CD so
many times that now when he hears Dylan’s signature raspy voice or the crisp
folk sound of his harmonica, he starts to think of work, of long lines of jittery
people demanding an “extra hot venti vanilla latte with three pumps of rasp-
berry right now.” In a sense, Starbucks took Dylan from him.

At this point, Daniel took over the conversation. I knew from those Google
news alert articles that he was the leader of this leaderless union. Up to this
point, he hadn’t said much. Behind his dark hair, black pants with holes in the
knees, and three or four days of stumble, he looked tired and pale, like a litera-
ture graduate student in the last push to turn in his dissertation to his cantanker-
ous and unpredictable advisor. Turns out, though, the Los Angeles native didn’t
study Melville on the side and was no accidental trade unionist. His grandfather
drove a truck and belonged to the Teamsters. Before he started serving coffee,
he delivered packages and shelved books at Borders. Everywhere he went, he
preached the gospel of trade unionism.12

As we talked about the IWW’s push against Starbucks, the somber, slightly
distant look on his face melted away. He became animated and engaging. You
could see why other workers would listen to him and follow his lead into the
union. He radiated a determined confidence. Even more, he lived their lives.

Consuming Lattes and Labor, or Working at Starbucks 197

He started talking about what I gathered were familiar and common “barista”
pains. He said that because Starbucks chronically understaffed its stores,
workers suffered from a range of repetitive motion aliments. Making things
worse, none of the stores, he said, used ergonomically sound designs. As a
result, he continued, leaning forward in his chair and tapping his fist into his
palm, workers endured a variety of avoidable back and foot pains. Some days,
he said, he has trouble moving his wrists. At the Gothic Revival church
remade into a Starbucks where he worked, all twenty-dollar bills went into a
cash box on the floor. Every time a customer paid with one of those crisp
ATM twenties, the person on the register had to bend all the way over. After
doing this again and again, Daniel declared, your lower back started to throb.

Working at the espresso machine was worse. Piping hot milk sprayed
Daniel’s hands and splattered on his forearms. Putting finished lattes and cap-
puccinos up on the half-moon bar required a long reach at a weird angle.
Doing this a few hundred times, Daniel insisted, strained muscles you didn’t
even know you had. Slips and falls, he continued, happened all the time. “Not
a week goes by,” Daniel proclaimed, “without burns.” One time, he told me,
he watched as a new employee singed her arm replacing a huge coffee filter.
“She just started shaking like she was having a seizure,” Daniel remembered,
shaking his own head as he recalled the story.13

Before I met Daniel, Kevin, Suley, and Tomer that night, I spent two hours
observing the comings and goings at a Manhattan Starbucks store. Unlike Nike
and Wal-Mart, Starbucks doesn’t try to erase the commodity wall standing
between consumers and the labor that produces the things they buy. Actually
it does just the opposite; it tries to make workers––at least the workers seen
by most customers––and their on-the-job treatment and benefits part of the
company’s story and appeal. Perhaps most important, these factors are cited
as a reason––a reasonable reason––to pay more for the coffee.14 Offering a
hint at how this works, an Indiana journalist wrote in 2007, “It’s worth also men-
tioning [that] Starbucks provides benefits like vacation days, insurance
packages, and stocks plans to any employee who works twenty hours a week
or more, which I think also helps warrant the price tags on the overhead
coffee menu.”15

Most likely, he got his information about Starbucks from Starbucks. On the
door of the Broadway store where I went that day hung a sign. I had seen it
before at other outlets, but I studied it more closely that day knowing I was
talking to the Wobblies later that night. Leisha, a caramel-skinned woman in
a green apron smiles and “says” in bold face print, “Health benefits, a 401K
plan, and growth opportunities.” Under that, she “talks” about how much fun
she has at her Starbucks job and how great it is to love what you do. Another
sign on the door of a Starbucks near Penn Station said simply, “Health Care
Matters: Apply Today.” Another urged prospective employees to “Dream
Venti. Our Careers will Inspire You. Create the Experience.” “Love What
You Do,” declared the sign on the door of a Chicago store I visited some
months later. Under that, it introduced Matt, a regional manager with fifteen

198 ILWCH, 74, Fall 2008

years of experience working at the company. His story went like this: “Like a
good cup of Sumatra, a job at Starbucks is likely to make you feel warm and
inspired. It’s a great pleasure to connect with people. With [the] health benefits
we offer you can feel good about your future.”

Company chairman and CEO Howard Schultz sounds these same themes
all the time. Just about every time he talks to a journalist he tells them––and they
usually write it down or repeat it––how much his company cares about its
employees. Partners, he calls them. As evidence, he points to the free weekly
pound of coffee and stock options––the Bean Stock program––the company
offers its employees. But health benefits are usually Schultz’s key talking
point. Starbucks, he never fails to mention, provides broad medical coverage
for part-timers. He maintains that Starbucks spends more money on health
care than coffee. (What does that say about how much coffee growers and
pickers are getting paid?) But he is quick to add that he remains committed
to this expenditure (although he thinks the government should step in and do
something). He does it, he says, for the workers, but really in honor of his
working-class dad. One day, he recalls, he came home from school and found
his parents in tears. His father had broken his ankle, but he had no health insur-
ance and very little savings. Fear gripped the young Schultz. Once he took over
Starbucks, the company chairman says, he vowed “to build a kind of company
my father never got a chance to work for.”16 Sometimes but not always, he
will add that the availability of health benefits enhances the company’s profit-
ability by limiting turnover, but his real point is about his father.

The story of Schultz and his injured dad has been woven into company lore.
Journalist Alex Frankel went undercover to work at Starbucks and report on the
lives of front-line employees in the service economy. On his first day wearing a
green apron, Marty, his supervisor, sat down with Frankel for a French-pressed,
freshly brewed cup of Ethiopian Sidoma. Marty told him how the beans took on
a citrusy flavor because they grew next to lemon trees. Then he asked, as Frankel
recalled, “what the name Howard Schultz meant to me.” Frankel answered that
he thought he was the chairman of Starbucks. Marty nodded and then contin-
ued, muddling a detail here and there. “He told me,” writes Frankel, “about
Howard growing up in the projects of New York and his father getting hurt
while his mother was pregnant with her fourth child. He said that Schultz’s
father worked for a company that did not have workers’ compensation, so the
family had trouble paying its bills. This is why,” Marty concluded, “Howard
Schultz cares so much about us, the partners.”17

The messages delivered to employees, on the signs of store doors and
through Schultz’s television and radio interviews, all seem to work. They stick
in people’s heads. When I tell people I’m writing about Starbucks, they invari-
ably ask me, “it’s a good company isn’t it?” Before I can respond, they
answer their own question, saying “they provide their workers, even part-
timers, with healthcare, right?” Bill Clinton and the editors of Fortune
Magazine feel the same way. At a White House ceremony during his presidency,
Clinton applauded long-time Democrat Schultz for how well he treated his

Consuming Lattes and Labor, or Working at Starbucks 199

employees. The business magazine regularly singles out the firm in its annual
issue on the nation’s top one hundred companies to work for. Last year, it
ranked Starbucks twenty-ninth. And this, it seems, is part of the appeal of
Starbucks. The company tells you that the person serving your desires likes
what she or he is doing, so you don’t have to feel bad about them serving you.18

“Nothing,” Daniel Gross insisted when I asked him about Starbucks and its
healthcare plan, “is what it appears.” He told me that Howard Schultz isn’t lying;
his company does provide health benefits to part-timers. “But that’s all there are
at Starbucks,” Daniel snapped. Everyone in the stores, except for the managers,
is part-time. And everyone contributes to his or her coverage. There is no free
ride. Starbucks asks workers to kick in $80 to $100––as much as fifteen percent
of the their income––per month for healthcare––and that is for the cheapest
option the company offers, basically, catastrophic health coverage. (One of
the Wobblies I talked with, Suley, had four children and opted out of the
Starbucks’ plan, because, she said, it cost too much. She relied instead on
Medicaid.) Even then, Gross argued, it isn’t that simple. Only about forty to
forty-five percent of Starbucks employees sign up for the company’s coverage.
Wal-Mart, Daniel explained, covers a higher percentage. (Starbucks’ officials
don’t dispute this number. Many baristas, Audrey Lincoff, a company spokes-
woman who has since left the firm, told me as we drove through Seattle in
her bright red convertible, rely on their parents or partner’s benefits. Overall,
she estimated that eighty percent of the company’s employees have some
form of healthcare coverage.19) In order to qualify to pay for Starbucks’
health benefits, employees must work 240 hours per quarter, about twenty
hours per week. That means the schedule––really the control over the
schedule––represents a crucial issue.

Store managers draw up the schedule every two weeks. “You don’t really
know when you are going to work,” Daniel told me, with the others once
again nodding in unison. “You are never guaranteed work or hours and the
length of [your] shifts varies.” Sure, the hours are flexible, as the signs on the
coffee shop door tell prospective employees, but as Daniel explained to journal-
ist Anya Kamenetz, “they are flexible for the boss, not for you.”20

I asked a lot of questions about this. What I learned was that under the
Starbucks system, the store manager possesses tremendous power. There is no
formal seniority nor does anyone have a set schedule. You never know from
week to week when you will work or how many hours you will get. That means,
as one employee put it, “your paycheck is really unstable.”21 If you need time
off, you have to ask. If you have a second job––and at ten dollars per hour with
tips it is hard to pay for food, a place to live, clothes, a car, and phone, especially
if you are on your own or living in a big city like New York or Boston––you
have to ask. If you don’t want to work a late-night shift followed by an early
morning shift, you have to ask. But if you ask too much, you could lose your
hours, and if you lose too many hours, you lose your healthcare coverage. So
healthcare acts as both a carrot and a stick. It gets people to sign up with the
company, and then it keeps them there and keeps them quiet.

200 ILWCH, 74, Fall 2008

As the IWW supporters described to me how the scheduling worked, I kept
thinking of one of my favorite books from graduate school––David
Montgomery’s Worker’s Control in America. With his characteristic thick
description, Montgomery recounts life on the shop floor for workers a
hundred years ago.22 In most places outside of the highly skilled crafts,
foremen held all the cards. They decided who worked and who didn’t, who
made some money and who didn’t. Only the advent of mass trade unionism
in the 1930s loosened the foreman’s daily grip on power. But the Starbucks
experience that the Wobblies described at Alt.Coffee sounded to me like a
throwback to those mean, capricious days that Montgomery wrote about so
clearly.23

The day after I went to New York, I got on my computer and on the phone.
I got in touch with as many Starbucks workers as I could. I asked them about
sleep, injuries, swollen arches, and nagging pains, and even more, about schedul-
ing, managers, and healthcare. I wanted to know about waiting on customers
and dealing with supervisors. I wanted to see––I guess––if the IWW story
checked out. Really, I wanted to learn more.

Symbol Lai wrote back first. Symbol stands just about five feet tall, but with
her buzz haircut and light-up-the-room smile, she is hard to miss. When we sat
down to talk at La Columbe, a “French” coffee shop in Center City,
Philadelphia, she had just completed her fourth year at Temple University
and her fifth year at Starbucks.

“The best thing about Starbucks,” Symbol laughed, talking about one of the
company’s employee benefits, “is the pound of coffee you get each week. I never
run out.” But the job, she volunteered, was taking a toll on her body. Just
twenty-two years old and in pretty good shape from karate workouts, she suf-
fered from back and shoulder pain. Her heels ached all the time and she had,
when we talked, just gotten over a long and painful bout of shin splints.
Symbol worried, moreover, that the noise on the job would result in permanent
hearing loss down the road. Then she laughed again. “But what I am really
dreading,” she chuckled, “is when Starbucks starts playing Hendrix. Because
when they do, they will play him over and over again.” Then she would end
up, she lamented, not liking the bluesy left-handed guitar wizard anymore.

Like Tomer, Symbol also couldn’t stand the “emotional labor,” to borrow
sociologist Arlie Hochschild’s telling phrase, demanded by the job. Like the
flight attendants Hochschild studied, Starbucks’ clerks are called upon to
deliver not just coffee, but also to create through their tone, faces, and moods
“a particular emotional state in others.”24 Starbucks calls this “legendary
service.” According to the Learning Journey Guide, the Starbucks employee
manual, “basic service” creates “satisfied customers” by meeting client’s expec-
tations with “speed, accuracy, quality product, and cleanliness.” Legendary
service goes several steps further by exceeding expectations and creating
“loyal, enthusiastically satisfied customers.”

The manual gets into the nitty-gritty of how to manufacture loyalty:
“Personalization–Knowing customers’ names/or drinks or personal

Consuming Lattes and Labor, or Working at Starbucks 201

preferences.” Unlike at the deli counter, visitors aren’t supposed to be numbers
at Starbucks. Coffee coaches instruct baristas to ask for customers’ first names
when they order. The company put this system in place not just to sort out
who gets what, but also to help employees get to know the regulars as quickly
as possible. That way, they can address them by name when they come
through the door every day.

The employee manual lays out several instructional “legendary service
scenarios.” In one, a worker hands a customer a drink and says, “Tall mocha,
thank you.” “Basic or legendary?” the manual asks baristas in training.
“Basic,” is the answer, “because it what the customer expects. It is a polite
response, but there is no personal connection.” To upgrade the service, the
manual recommends that workers say something along these lines: “Thanks,
John, enjoy your mocha!” By putting it this way, the manual explains, “The
partner recognized the customer by name. There was a personal connection.”25

The Green Apron Book, the shorter, handier company-issued guide for
Starbucks workers, reminds “partners,” to be “welcoming, genuine, considerate,
knowledgeable.” “It is a little forced,” Symbol admitted. “We are judged,” she
elaborated, “if we say hello. You have to smile and make eye contact.” If you
want to go “above and beyond,” she said rolling her eyes as she coughed out
the last phrase from the employee manual and the Green Apron Book, “you
have to start customer conversations.” Sounding just like Tomer, she said that
you have to pretend you care about their vacation plans and car troubles,
what they drank yesterday and what they will eat today.

I asked her if she ever got reprimanded for not engaging enough with cus-
tomers. “Yes,” she cracked, “on a recent report, I got shit for ‘not being friendly
enough.’”

Symbol asked her manager what that meant. He told her to “smile more
with your eyes.” Repeating this phrase made Symbol, who laughs easily, smile
and roll her eyes again. “You know, after you have been working for a while,
it is hard to say ‘Have a nice day’ to the hundredth customer.” It got even
harder when latte lovers made sexist jokes or racist comments or condescending
remarks. “Just because you work at Starbucks,” Symbol told me, “some people
think they are better than you.” After a while, she said, “you just want to tell
them ‘to shut fuck up,’ but you can’t because how else are you going to get
healthcare coverage?”

The emotional labor of the job also requires looking the part. Starbucks
says it encourages workers to be themselves. But not too much. Symbol
knows about this from experience. Like everyone who puts on the green
apron, she made sure not to wear dangly earrings or get a tattoo she couldn’t
cover up. “You cut your hair,” Greg, her manager, used to say to women, “I
cut your hours.” When Symbol shaved her head, Greg groused that she
“didn’t look like a girl anymore” and told her to make sure she wore a hat at
work.

As Symbol told me this, I remembered an article I had read about an
Indo-Canadian woman and Starbucks employee named Asiha Syed. In 2002,

202 ILWCH, 74, Fall 2008

a store manager told Syed to remove her nose stud saying it was against
company policy. (The Starbucks dress code does not allow any “facial
jewelry.”) Syed refused to comply, saying that the nose stud was “part of my
identity as an Indian woman, it connects me to my grandmothers.” Starbucks
officials refused to budge and fired her.26

Still, Symbol maintained, the schedule remained the worst thing about the
job. “It is so erratic,” she stressed, adding, “it is hard to get your life organized.”
Starbucks consumed her days off as well as her days on. “All I do is sleep and
lounge around,” Symbol said of her time away from work, “It is quite a
miracle when I do anything productive . . . Sometimes I sleep twelve hours on
my days off.”

I sat down again with Symbol a few months after our first meeting. She told
me about a couple of confrontations she had had with her manager, Greg. “If
you work, say, holidays,” she said, “you get rewarded” with more hours (and
more pay). But if you request a lot of days off, your hours could get cut.
That’s unless you are one of Greg’s personal favorites. “Then,” Symbol said,
“you can get away with stuff.”27 Symbol, however, wasn’t one of Greg’s favor-
ites. At some point, she recalled, “I wasn’t getting enough hours because of
my school schedule. I went below my 240 hours for a quarter.” She worried
about losing her healthcare. She begged Greg for more shifts, and she got
them––all on Saturdays. Symbol told me she hated working Saturdays
because people who didn’t know how to order packed the store and held up
the lines. Greg knew about her preference but put her on anyway, even while
he let others with less seniority pick their hours. Another time, Greg cut her
hours without notice, again pushing her close to losing her healthcare. When
she asked him about it, he told her that he had hired a bunch of new workers
who needed hours and were willing to work any shift. Symbol thought she
had at least informal seniority, but she quickly found out that this didn’t exist
or matter. Again she had to pick up some weekend and holiday shifts to keep
her healthcare.

A year or so later, with Symbol still in school, Greg kept scheduling her to
close the store at night. On those shifts, she wouldn’t get out until after midnight,
and then, still jacked up from the coffee and the noise, she couldn’t fall asleep.
When the alarm rang in the morning, she had to drag herself out of bed and later
in the day she had to pinch herself to stay awake in class. (She must have pinched
herself pretty hard because Symbol graduated with honors in History and
American Studies.) Symbol asked Greg “to keep an eye out for this” and to
balance out her schedule with a few day shifts. He responded by putting her
on three 5:30 a.m. shifts in a single week. Once again, Symbol went to talk
with him. “You are requesting lots of changes,” he snapped, “You know your
hours will be cut. The more requests you make, the more your hours will be
cut.” Worried that Greg might follow through on his threats and slash her
hours, Symbol backed down. She didn’t want to risk losing her healthcare
coverage.28

Consuming Lattes and Labor, or Working at Starbucks 203

Not long after this confrontation with her boss, Symbol decided to move to
Hawaii for a while to check it out and begin studying Asian culture on the side.
Before she did, she got into another spat with Greg; this time over a prank. As
her shift wound down, she and another coworker Velcroed the last cupcake in
the case to a plate and then Velcroed the plate to the ceiling. Greg didn’t
think it was very funny and he fired her for insubordination. A couple days
after her termination, I talked to Symbol over the phone. “I have been sleeping
nonstop,” she told me. “I guess that’s just how tired I was.” Starbucks, it seems,
continued to consume her time and body even after she left the company.

Symbol introduced me to Beth Johnson, a coworker at the same
Haddonfield, New Jersey, Starbucks. By the time we sat down to talk, she had
been with the company for nine years. Thirtyish with plain-Jane looks, dark
hair, and a quiet, rather reserved manner, she told me that she rarely made any
schedule requests. As a result, she thought, Greg gave her “pretty good hours.”

“What did you work last week?” I asked, trying to get a gauge on her defi-
nition of “good hours.”

On a napkin, she scribbled down her shifts for me:

Monday: 5:30AM–2PM
Tuesday: 2:30PM–11PM
Wednesday: 10AM–6:30PM (She told me she didn’t like this shift because
she really didn’t get off until after 7:30PM.)
Thursday: 5:30AM–2PM
Friday: Off
Saturday: 8AM–4:30PM

Even with these good hours, she felt the job in every part of her body. After
nine years at Starbucks lifting milk jugs and bags of ground coffee and bending
over to pick up cardboard boxes of cups and shelves of lids, Beth said, her back
hurt all the time. On the old semiautomatic machines, she recalled, her wrists
throbbed and she regularly got burned. These days she gets burned a lot less.
(Most of the workers I talked with actually prefer the automatic machines.
Even though these devices took some of the skill away from the job, it saved
them wear and tear on their bodies.) Mostly, however, she felt chronically
tired and sleep deprived. Even with those “good hours,” she barely got a
regular night’s sleep.

I wanted to talk to an employee with a move positive view. Matt Lassiter,
who teaches US history at the University of Michigan, suggested that I contact
one of his students. He described Abe Lorber to me as smart, combative, loqua-
cious, and somewhat conservative. Abe, he said, worked at Starbucks and
occasionally sparred with some of the more liberal students in his History of the
Suburbs class over the role of large corporations in contemporary American
life. By the time I tracked Abe down over e-mail and then by phone, he had left
Starbucks after five years with the company so he could concentrate full time

204 ILWCH, 74, Fall 2008

on law school. Still, he announced right away, “I love capitalism, and Starbucks
has a good business model.” While Starbucks isn’t perfect, Abe conceded, it
isn’t a monster. Instead, he argued, it is “better than most.” Overall, he maintained,
the company treated him well. In fact, he told me he had earned enough money
from the company’s employee stock options program to pay for his fiance’s
engagement ring. Well, I thought, I had found my non-Wobbly.

After talking for a while, I shared with Abe some of the things that the union
members, Symbol, and Beth had told me. About scheduling, Abe, who served as a
shift supervisor, explained: “Starbucks uses an Automated Labor Scheduler
(ALS) which formulates schedules for the week based on employee availability.29

Managers (or assistants, but not shift supervisors like me) have the ability to go
into ALS and make specific schedule changes, giving them absolute power to
determine schedules. Managers do tend to exercise this power with some bias,
giving preferred hours and days off to preferred, senior, or particularly hard-
working employees.” “I have never heard,” he responded to a question I asked
about abuses of the system, “not even a rumor, of a manager accepting bribes
for scheduling favors. I have heard a rumor, however, that managers are strongly
encouraged to let ALS be and that ‘Corporate’ has a way of monitoring the
number of changes they make to the computer-generated ALS schedule.”

When I asked about aches, pains, and other health issues, he explained, “It
is true that burns, cuts and scrapes are extremely common. Less common, but
existent, are repetitive motion injuries.” Then he added an interesting insight.
“In my experience,” Abe wrote in an e-mail, “the burns, cuts, and scrapes are
marks of pride, necessary mementos of doing the job. Employees are known
to show off their ‘barista’s hands,’ the honor going to the one whose hands
are most scarred and torn.” Despite all the bravado, Abe stressed, sleep––and
by implication the unpredictable allocation of shifts and hours––remained a per-
sistent problem and the hardest thing for workers. “The randomness of some of
the scheduling,” he argued, “does sometimes contribute to inconsistent hours of
sleep, a situation that I believe has scientifically been proven to increase risk of
injury and decrease psychological health.”

Sandy Griffin spent five years as a 911 dispatcher before going back to
school at Temple University. To make ends meet and avoid the worst of the
fast-food rut, but mostly to get health coverage, she took a job at Starbucks.
When I spoke to her, she was fed up. Sandy described working at Starbucks
as an almost daily battle to maintain her dignity, individuality, and sense of
herself against the company’s determined psychological incursions and relent-
less self-mythologizing. Starbucks, she claimed, wanted it all: It wanted her
time and her labor. Really, it wanted to consume her, to turn her face, her
words, and her emotions into a commodity.

As I mentioned earlier, I started my academic career as a labor historian.
The very first article I published discussed a benevolent, some said paternalistic,
Greensboro, North Carolina, employer, the Cone family.30 Each year, these
Jewish denim manufacturers gave their workers Christmas hams. During
other seasons, they sponsored company baseball teams and marching bands,

Consuming Lattes and Labor, or Working at Starbucks 205

health clinics and adult education classes. They paid their employees a little
more than their competitors and built sturdier houses for them than the mill
owners down the road. Labor historians in those days––both the Cones’ days
and my first days of graduate school––called these kinds of actions “welfare
capitalism,” and were absolutely clear about the policies’ intention: the employ-
ers wanted their employees to identify with the firm, not with each other.
Welfare capitalism acted as the carrot to the stick of bust-them-in-the-heads
antiunionism on one hand and alarming turnover rates on the other hand.
Trying to navigate between these extremes, companies spent heavily on perks
so that workers would feel grateful and appreciative toward management.
Maybe they would even see the factory owners as motivated by human
concern ahead of profit. But as a bare minimum dividend for their investments,
the owners wanted operatives to stay on the job and out of the union. Welfare
capitalism’s goal, as I wrote back then, was to create “a stable and tractable
labor force.”

It occured to me that Starbucks seems to practice an updated, “new-agey”
version of welfare capitalism––it wants to create a stable and tractable labor
force to dole out coffee and smiles, and it does this by offering workers
“gifts”––not Christmas hams or night classes, but names for jobs like barista
and partner, free coffee each week, stock options, and health benefits. The
company has also added a new twist to the formula. Through Howard
Schultz’s phone messages to workers about the larger social importance of
creating comfortable community gathering centers––or third places31––in the
contemporary world; the postcards, letters, and e-mails from Seattle telling
counter-help about the company’s park building programs in underserved
neighborhoods, grade school literacy efforts, and policies to improve both
farmers’ lives and the environment in the developing world, Starbucks portrays
the job not as a way to make some money but as a social service. Employees are
encouraged to see the firm not as a profit-making machine, but as a churchly
outfit guided by timeless values and missionary leaders. These days labor histor-
ians aren’t heard from very often, so business school professors get to do most of
the analysis. They call what Starbucks does “internal branding,” not welfare
capitalism.

Temple University business school instructor and marketing and brand
consultant Susan Mudambi told me over coffee at the Starbucks on campus
that companies aim internal branding at employees. Most firms think that
good works translate into higher morale, increased loyalty, and better customer
service (presumably smiles with the eyes). Well-publicized efforts to provide
books for underperforming urban schools and water to rural Africans, she
said, helped to recruit new Starbucks workers and keep old ones on the job.
But this is also about money. Each time an employee quits, the company pays
for it. By Mudambi’s quick and rough estimate Starbucks loses as much as
$2,000 every time someone leaves for another position.

Marc Gobé, author of Emotional Branding and Citizen Brand, two key
books for businesspeople looking for advice on how to guide their firms in

206 ILWCH, 74, Fall 2008

the new postneed economic order, agreed about the aim of internal branding.
As we walked through a New York City Starbucks, he maintained that corporate
social responsibility programs made companies look good, but also made their
employees look good. Nobody, he joked in his thick French accent, goes to a
party and brags about working at McDonalds and nobody goes home with
someone just because they work at McDonalds. But working at Starbucks, he
guessed, gave them a shot at love.

Starbucks’ internal branding––telling employees what the company does to
make the world a better place––really served as a battleground for Sandy
Griffin’s heart and mind, and it began before she ever set foot in a store. The
company sent her for training at another location. For one long day, instructors
and videos drilled the gospel according to Starbucks into her. Again and again,
Sandy remembered they talked about Howard Schultz’s rags-to-riches story and
about his commitment to healthcare and his father’s legacy. They detailed the
company’s social responsibility programs, talking about how it provided
day-old scones to the homeless, passed out coffee grounds to composters, and
improved the lives of peasant-like Costa Rican coffee farmers. Starbucks
knew what it was doing. “I’m pretty cynical,” Sandy remarked, “but still I was
impressed by the company’s actions.” She added, “It is hard for me to admit
this.” Many of her coworkers emerged from the training session, Sandy
thought, “fully indoctrinated.” They felt like they now worked for a “superior
company,” that they were better than those poor exploited fools at
McDonalds who handed out fat-laden food and that’s all. They trusted that
they were helping to create community one smile at a time and make the
world a better place––both in terms of taste and justice––by serving handcrafted
lattes from beans grown by well-respected and well-paid families in far-off
places. Sandy called these people “the believers.”

Sandy proudly put herself in the “nonbeliever” camp. “Lots of people,” she
elaborated over a lukewarm cup of thin coffee at the canteen in the basement of
the Temple University library, “think it’s cool or important to work at Starbucks.”
But they don’t see “things for the way they are.” Stripping it down for me, she
declared, “If you work at Starbucks you still have to scrub toilets.” Contrary to
the company’s policy on emotional labor, Sandy tried NOT to chat up customers
or make eye contact. When she did talk to people, she wanted to make sure it was
genuine, really genuine. When Sandy felt like her interactions were contrived or
done to make her supervisor feel like she was following the plotted scenarios from
the employee handbook or Green Apron Book, she felt bad about herself––like
she had lost a measure of personal integrity. When she overheard “believers”
making small talk with customers and smiling at their “stupid comments,”
trying to give them what Starbucks’ officials call “legendary service,” she found
it “disgusting.” It alienated her from them and from her job.

“Believers,” Sandy noted, followed, and even enjoyed, the company’s
scripting. They smiled and laughed at customers on cue, making it all seem
natural, and in part it was. They believed in the company. “If you said something
negative (about Starbucks) around a believer,” she remarked, “they would get

Consuming Lattes and Labor, or Working at Starbucks 207

disappointed.” They had an investment in the image––of the company and of
themselves––generated by internal (and external) branding. One woman she
worked with drank Starbucks coffee, listened to Starbucks CDs, and collected
Starbucks stuffed “Bearista Bears” and decorated her home with them. But
the clearest way to distinguish a believer from a nonbeliever turned out not
to be coffee knowledge or in-store performance; it was, Sandy argued, language.
Believers spoke Starbucks. They didn’t refer to themselves as employees or co-
workers or coffee hacks, but as “partners.” Customers were always “guests.”
They never said small coffee; it was always a “tall Sumatra.” And they didn’t
toil in a coffee shop, but they helped to create a “Third Place . . . experience
for everyone who comes in the door.”32

One time I saw a believer in action. I was sitting in a Starbucks in Austin,
Texas––a newer one along a highway with a drive-thru on one side and a Jiffy
Lube on the other––with John Moore, a thin, earnest, well-informed brander
who had started out at Starbucks as a front-line employee after graduating
from Baylor University and then climbed the corporate ladder to a marketing
position at the company’s Seattle headquarters. He designed in-store wall
signs, the little wedges of information the company puts on tables, and the cus-
tomer feedback brochures above the milk and sugar bar. As we talked, I felt the
guy next to us eavesdropping on our conversation. Eventually, he introduced
himself to Moore as a former “partner.”

Turned out, his name was John as well. I never got his last name. He was
probably in his late thirties or early forties. He looked like he might have
played high school football, but that was long ago, and these days, he was a
tad slow and not in great shape.

John told us that he didn’t work for the company anymore; he had left a few
months earlier to pursue other options. Despite leaving the “Starbucks team,”
he kept referring to the corporation and its employees as “we.” “We opened
a store in South Austin,” he said. “We had good muffins back in the day,” he
pronounced.

“What did you like about working at Starbucks?” I asked.
“Well, first,” John replied, “the friends I made. I made a lot of friends

working there. I got to be friends with the customers and we hung out away
from the store. But you know what, I didn’t like it when I was out and people
said, ‘Hey there’s the Starbucks guy.’”

“What else,” I wondered, “did you like about working for Starbucks?”
“The total pay package was good, really good. The benefits were great.

They covered eye and dental and even alternative forms of medicine.
Recently, they even added a tuition remission plan.”

John Moore interrupted and said, “It is pretty paltry, isn’t it, like only $500
a semester?”

“No, more like $500 a year,” answered John the second, “but you know
what, at least it is something.” “I’m no fan of corporations,” he volunteered,
“I criticize them all the time, but if more of them acted like Starbucks, the
world would be a much better place.” Staying with this theme, he told us how

208 ILWCH, 74, Fall 2008

“proud” he was of “our” community service. He finished by praising Starbucks’
policies toward farmers in coffee-growing countries.

“Why then,” I asked, “do so many people criticize Starbucks?”
Before answering, he made a face and looked at me as if to say, “Are you

one of them?” Continuing, he maintained, “Starbucks is an easy target,” adding,
“I have a story for you.” Not long after the South Austin store opened, he told
me, protesters blasted the building with eggs.

“What were they protesting?” I asked.
“I don’t know. Something. But I’ll tell you what; as soon as the media left,

those same kids came in and bought fucking frappuccinos.”
Maybe the point for John really is whether Starbucks is good or bad in an

absolute sense, but that wouldn’t be the way most labor historians would see
things. Through their eyes––and mine––work represents an economic exchange.
Laborers sell their time, bodies, and feelings to the highest, most attractive, and
convenient bidder. Starbucks, as one of its employees said to me, is a “decent
shit job.” All companies try to buy labor as cheaply as possible. They just
don’t calculate the bargain in the same way. Some firms––especially the ones
with jobs that require little skill and training––buy the absolute cheapest
workers available. They use them for a while and let them drift away.
Starbucks has a different philosophy but not a different mission. For a fast-food
chain, it invests a relatively large amount of time and money in training––about
twenty hours compared to zero at McDonalds––so it needs to hold down turn-
over rates as much as possible.33 Because it sells what it calls an experience––a
careful presentation of authenticity, belonging, and luxury––it requires large
doses of “emotional labor”––hellos, how are yous, and smiles with the eyes.
So to get the right kinds of workers––young, clean-cut, college-looking kids
and twenty-something women and men––Starbucks pays slightly more than its
competitors: McDonalds, Boston Market, and Burger King. To keep these
workers content and limit turnover, it sells them––it doesn’t give them––
health insurance at a discount. That’s enough for most to stay on the job in
this nation of ours mired in a healthcare crisis, really a healthcare travesty.
But to get them to go a step further and tolerate daily ailments and identify
with the firm––to let themselves be consumed by the brand’s own mythmak-
ing––the company sells itself and its values. Like welfare capitalism, internal
branding functions as a kind of corporate mythmaking machine. The point of
it––and of many of the company’s good works––is to make employees like
John feel better about their work, to see it as something bigger and more socially
significant than serving overpriced coffee to java junkies and status seekers.
Once they take that step, the emotional labor is easier and more free flowing.
Clearly, some, like Symbol and Sandy, felt alienated by all the corporate self-
promotion and the steep demands of the daily performance. But partners like
John believed in Starbucks and as a result, played their assigned roles,
tending to their customers’ caffeine and emotional needs. In the old labor
history that would make John a company man, not a working man. And that’s

Consuming Lattes and Labor, or Working at Starbucks 209

just what Starbucks––or any other company––would want in an employee:
someone consumed with and by the brand.

NOTES

1. That number comes from Melissa Allison, “Chin Up, Schultz Tells Workers, Don’t Let
Critics Get You Down,” The Seattle Times, February 14, 2007.

2. For more on service work both in the present and historically, see Dorothy Sue Cobble,
Dishing it Out: Waitresses and their Unions in the Twentieth Century (Urbana, IL, 1992);
Katherine Newman, No Shame in My Game: The Working Poor in the Inner City
(New York, 2000), Barbara Ehrenreich, Nickel and Dimed: On (Not) Getting By in America
(New York, 2001); Eric Schlosser, Fast Food Nation: The Dark Side of the All-American
Meal (Boston, 2001); and Alex Frankel, Punching In: The Unauthorized Adventures of a
Frontline Employee (New York, 2007).

3. Bruce Constantineau, “Last B.C. Starbucks Outlets Cut Ties to Union,” Vancouver Sun,
April 28, 2007.

4. In March 2008, a California judge ruled that Starbucks owed its workers $100 million in
back tips. What the company, he ruled, was doing was sharing the tips with shift supervisors. He
charged that the company was “subsidizing labor costs for shift supervisors by diverting money
from the tip pools to shift supervisors instead of paying more to them out of Starbucks’ pocket.”
Supervisors, he added, should not be in the tip pool because they have authority to hire, fire,
supervise, and direct other workers. What Starbucks was doing was, therefore, illegal.
Starbucks denied that it was acting illegally. See Miriam Marcus, “Starbucks Tips Baristas
$100 Million,” Forbes, March 21, 2008.

5. Kris Maher and Janet Adamy, “Do Hot Coffee and ‘Wobblies’ Go Together?” Wall
Street Journal, March 21, 2006.

6. Tania Padgett, “Wake up and. . .,” Newsday, August 9, 2004; Anya Kamenetz, “Baristas
of the World, Unite! You Have Nothing to Lose But Your Company Mandated Cheerfulness,”
New York, May 25, 2005; Maher and Adamy, “Do Hot Coffee and ‘Wobblies’ Go Together?”;
Mischa Gaus, “Starbucks Gets Wobbly,” In These Times, October 4, 2006; Daniel Gross (no
relation to the other Daniel Gross), “Latte Laborers Take on a Latte Liberal Business,”
New York Times, April 8, 2007; David Segal, “Coffee Break: Top Employer Starbucks Has a
Crack in Its Image,” Washington Post, April 12, 2007; and Brendan Brosh, “Steamed
Workers Taking on Starbucks,” New York Daily News, August 21, 2007.

7. Steven Greenhouse, “Board Accuses Starbucks of Trying to Block Union,” New York
Times, April 3 2007; and Sewell Chan, “Starbucks Accused of Firing Outspoken Barista,”
New York Times, June 19, 2007.

8. “Starbucks workers’ union expands to Chicago,” August 30, 2006: seattlepi.com/
local.6420AP_IL_Starbucks_Union.html. For more information and additional articles, go to,
www.starbucksunion.org.

9. I added to my description by using the following website: http://newyork.citysearch.com/
profile/7098727. Note when I rechecked this website on June 26, 2007, I learned that Alt.Coffee
had closed.

10. For evidence on how managers encourage interaction, see the ode to the company,
Michael Gates Gill, How Starbucks Saved My Life: A Son of Privilege Learns to Live Like
Everyone Else (New York, 2007), 103,109.

11. Aidin Vaziri, “Bob Dylan in Exclusive Deal with Starbucks?” San Francisco Chronicle,
July 2, 2005.

12. Kamenetz, “Baristas of the World, Unite!”; Maher and Adamy, “Do Hot Coffee and
‘Wobblies’ Go Together?”; Gaus, “Starbucks Gets Wobbly.”

13. I filled in some of the details here from an interview with Daniel Gross. See Padgett,
“Wake up and . . .”.

14. From the Rev. Billy quoted in Kevin Penn, “Performance Artist Delivers
Anti-Consumption Message,” Allentown Morning Call, May 1, 2005.

15. Philip Potempa, “Coffee, Tea, or Me?,” nwtimes.com, posted December 29, 2006.
16. Howard Schultz, Pour Your Heart Into It: How Starbucks Built a Company One Cup at

a Time (New York, 2000); Matt Miller, “The Senator from Starbucks,” Fortune, July 26, 2006; “A
Full-Bodied Talk with Howard Schultz,” Business Week, November 22, 2004: http://www.

210 ILWCH, 74, Fall 2008

businessweek.com/magazine/content/04_47/b3909098.htm; and Alex Witchell, “Coffee Talk with
Howard Schultz: By Way of Carnarsie, One Large Hot Cup of Business Strategy,” New York
Times, December 14, 1994.

17. Alex Frankel, “Confessions of a Starbucks Barista,” Brown Alumni Magazine,
September/October 2007; and Frankel, Punching In.

18. See: http://money.cnn.com/magazines/fortune/bestcompanies/2006/snapshots/1267.html.
19. Another Starbucks spokesperson said the exact same thing to a Seattle journalist; see

Melissa Allison, “Union Struggles to reach, recruit Starbucks Workers,” Seattle Times, January
2, 2007.

20. Kamenetz, “Baristas of the World, Unite!”
21. See “Following Public Campaign for Trademark Efforts, Coffee Giant Starbucks Signs

LicensingDeal that Could Bring Millions to Ethiopian Farmers,” May 9, 2007: www.demoracynow.
org/article.pl?sid=07/05/1515200.

22. David Montgomery, Workers’ Control in America: Studies in the History of Work,
Technology, and Labor Struggles (Cambridge, 1979).

23. Just as a side note, since our meeting, Daniel and Suley have lost their jobs with
Starbucks. Daniel got fired after the company claimed he threatened a manager at a union
rally held to support another barista. Out of work, he entered law school at Fordham
University. He continues his union activism. To the best of my knowledge, this is what happened
to the rest: Suley lost her job after refusing to remove a Wiccan pedant. Starbucks said it vio-
lated the company’s dress code; she said it was a matter of religious faith. Tomer remains with
the company and the union. Kevin’s whereabouts are unknown.

24. Hochschild, The Managed Heart: Commercialization of Human Feeling (Berkeley,
1983). See also on emotion work, Robin Leidner, Fast Food, Fast Talk: Service Work and the
Routinization of Everyday Life (Berkley, 1993), 4, 26; Richard Lloyd, Neo-Bohemia: Art and
Commerce in the Postindustrial City (London, 2005), 179–204; and David Grazian, On the
Make: The Hustle of Urban Nightlife (Chicago, 2007).

25. Learning Journey Guide, 98, 122.
26. Sharmistha Choudhury, “Brewing Racism in Canada,” posted October 21, 2004: http://

nation.ittefaq.com/artman/exec/view.cgi/23/13263. Another Candian woman was apparently
fired for wearing a silver stud in the middle of her tongue. Jacquie Miller, “Starbucks Hip to
the Latest Trends––up to a point,” Ottawa Citizen, April 17, 1997.

27. A union source reported that Christina Rosevear asked for time off to deal with severe
morning sickness, only to have her hours severely cut. See Worker Freedom, “Victory For IWW
Barista Against Pregnancy Discrimination at Starbucks!” at www.starbucksunion.org.

28. One company critic wrote to ihatestarbucks.com on June 26, 2006: “False employee
benefits. They give part-time workers (20 hr week) health insurance. However, I have received
hundreds of e-mails from employees that consistently receive 19.75. 15 minutes shy of earning
those costly benefits.” Clearly she/he saw a company conspiracy afoot here.

29. Nowadays the company calls its scheduling software “Star Labor.” This is according to
Taylor Clark, quoted in Taylor Clark, Starbucked: A Double Tall Tale of Caffeine, Commerce,
and Culture (New York, 2007), 240.

30. Bryant Simon, “Choosing Between the Ham and the Union: Paternalism in the Cone
Mills of Greensboro, 1925-1930,” in Jeffrey Leiter, Michael Shulman, and Rhonda Zingaff, eds.,
Hanging by a Thread: Social Change in Southern Textiles (Ithaca, 1991), 81–100. For an excel-
lent account of how welfare capitalism worked, see Gerald Zahavi, Workers, Managers, and
Welfare Capitalism: The Shoeworkers and Tanners of Endicott Johnson, 1890–1950 (Urbana,
IL, 1988).

31. Starbucks’s marketers often call the stores third places. The idea is that home is the first
place, work the second place, and then third places are locations that are neither, but serve as
gathering places. Starbucks borrows this term from the sociologist Ray Oldenburg. See
Oldenburg, The Great Good Place: Cafes, Coffee Shops, Bookstores, Bars, Hair Salons, and
Other Hangouts at the Heart of Community (New York, 1993).

32. For another example of this, see uber-believer, Gill, How Starbucks Saved My Life.
33. Schlosser, Fast Food Nation.

Consuming Lattes and Labor, or Working at Starbucks 211

National Climate & Environment Education Health Innovations Investigations National Security Obituaries Science

A Rhodes Scholar barista
and the fight to unionize

Starbucks

Months after getting a job at a Starbucks in BuAalo, 24-year-old Jaz Brisack started asking other baristas how they
felt about unionizing. (Libby March for The Washington Post)

By Greg JaAe

Today at 6:00 a.m. EST

BUFFALO — The omicron variant was racing through the Starbucks on
Elmwood Avenue so fast that by early January one-third of the store’s 30-
person workforce was sick or isolating at home.

The worried, angry and exhausted workers who remained had asked Starbucks
for KN95 masks, better protocols to inform them when co-workers tested
positive for the coronavirus, and the right to deny service to customers who
refused to comply with their county’s mask mandate.

Their concerns were no different from those of many of the other 383,000
Starbucks employees stuck laboring through the latest wave of the pandemic.
The Elmwood baristas, though, believed that they had leverage that others
lacked.

Three weeks earlier, they had voted to become the first unionized Starbucks in
the country, an improbable victory that overcame stiff resistance from the
coffee giant and caught the attention of baristas in Boston, Chicago, Knoxville,
Seattle and Baltimore, who were requesting their own votes, just like the one in
Buffalo. Congratulations were pouring in from the likes of Sen. Bernie Sanders,
Rep. Alexandria Ocasio-Cortez and former labor secretary Robert Reich, who
called their win “a watershed for the biggest coffee seller in the world” and “a
small step on the long trail toward rebalancing such power in America.”

With the virus tearing through their workforce, the baristas were ready to make
their demands. Michelle Eisen, an 11-year veteran of the company, called their
requests the “bare minimum” Starbucks could do to keep them safe. Starbucks
executives countered that the measures in place at their store and all of the
others in the massive chain exceeded the recommendations of the Centers for
Disease Control and Prevention. They weren’t going to treat Elmwood
differently.

So on a Wednesday morning in early January, just hours after another worker
from the store fell ill, the Elmwood baristas decided to go on strike. There were
a few whispered conversations as the baristas checked to make sure everyone
was on board. A 24-year-old barista named Jaz Brisack, who had been off that
morning, rushed in to pick up a shift so that she could walk out with her co-
workers.

A little before 8:30 a.m., they strode quietly past the store’s glass pastry case,
boxes of vanilla bean powder and an industrial-size ice machine to the storage
room where an unsuspecting manager was working.

“Are you all okay?” she asked.

“We’re really not,” Eisen replied.

The baristas were taking off their green aprons. Eisen was listing the names of
the workers from the store who had recently fallen ill and laying out the
reasoning behind the walkout.

“Is there anything I can do?” the manager asked.

“It’s really not on you,” Eisen replied. “We had a conversation with corporate
yesterday. These things could’ve been resolved, and they said that this was
‘adequate,’ and it’s not.” She turned to leave, and the other workers, who were
putting on their hats, coats, scarves and backpacks, followed her. A pop song
was playing on the coffee shop’s sound system.

“Please clock out!” the manager called out to them as if it were just another day
at work.

“No, let’s go! Don’t clock out,” Eisen told the baristas who didn’t break stride as
they stepped onto the sidewalk, where they would eventually start a picket line
and learn just how much they would be able to shift the balance of power inside
one of America’s largest corporations.

***

A big reason baristas were standing outside on that frigid Buffalo morning was
because a year earlier, Brisack, fresh off a Rhodes Scholarship, had walked into
the Elmwood Starbucks and applied for a job.

For the next eight months, she learned to froth lattes and blend Frappuccinos.
She rose before sunrise to help open her store and picked up shifts at other
Buffalo Starbucks where she met other baristas who told her about their lives,
frustrations and concerns with the company. And she waited.

Brisack had been working toward this moment since she was a home-schooled
teenager in Alcoa, Tenn., and read a speech delivered by the legendary
American socialist Eugene Debs that hit her with the power of a revelation.

“While there is a lower class, I am in it, and while there is a criminal element, I
am of it, and while there is a soul in prison, I am not free,” Debs told a jury that
was about to convict him of inciting resistance to the draft during World War I.

“It was so radical,” Brisack said. “So, in your face.”

Debs’s words sparked an obsession with the great labor battles of the early
1900s — violent tales of avarice, betrayal and sacrifice — and propelled her to a
full scholarship at the University of Mississippi, a part-time job on a failed
campaign to unionize a Nissan plant and, finally, a Rhodes Scholarship. She
was the first woman in University of Mississippi history to win the coveted
prize.

The summer before Brisack left for Britain, Richard Bensinger, a lead organizer
on the Nissan campaign, invited her to come to Buffalo, where he was working
on several campaigns, including one to organize a small, locally owned coffee
chain.

Brisack raced unhappily through her Rhodes in a year — instead of the normal
two — and returned to Buffalo, where she landed the Starbucks job.

“Just because you’re working there doesn’t mean I’m going to try to organize
it,” Bensinger recalled telling her. Taking on Starbucks was a massive project
that could quickly consume the resources of the tiny Upstate New York union
office where the 71-year-old organizer was working.

By late July, Brisack felt she had proved herself a reliable worker. A labor
shortage was putting pressure on baristas across Buffalo. “It’s now or never,”
she recalled thinking. She invited a friend from her store over to crochet. A bag
of yarn sat on the table. Brisack mixed some Old-Fashioneds.

Before they started, she told her friend, Cassie Fleischer, 25, that she had a
question that she had been wanting to ask her: one that could put their jobs at
risk and, for the moment, had to remain secret. Brisack tapped her finger
nervously against her glass. She could feel her heart beating in her chest.

“How do you feel about organizing a union at Starbucks?” she asked. She had
picked Fleischer for this first conversation because she knew she could trust
her and because she had noticed that her friend had shared messages on
Facebook about the impossibility of surviving on the minimum wage.

“Is that even possible?” Fleischer replied. “Starbucks is so huge.”

Brisack began speaking of the need for better pay, more generous benefits,
more consistent scheduling and a fairer promotion system. Fleischer, who had
been with Starbucks for almost five years, felt a bit ambushed and confused.

“So, do you want to learn how to crochet?” she finally interrupted.

Fleischer had barely made it home that evening when her phone pinged with a
500-word text message.

“Thank you so much for the crochet lesson and your patience with me!” Brisack
wrote. “I think unionizing will mean that we will have our own voice and real
power. … Right now, Starbucks has all the power and ultimately is supposed to
hold themselves accountable. If we had a union, we would be able to hold them
accountable and they would have to recognize us as equals.”

In the days that followed, Brisack began contacting other baristas at her store
and the 19 other Buffalo Starbucks. Secrecy was paramount. In 2019, Starbucks
had fired two Philadelphia baristas who were trying to unionize their stores,
killing the effort before it had even started and drawing a rebuke from a
National Labor Relations Board judge who ruled the company had violated the
workers’ rights.

Brisack focused her initial search on baristas who had championed liberal
causes on a group chat that Starbucks’s Buffalo employees used to promote
events or find fill-ins when they couldn’t work their normal shifts.

“Just wanted to see if you’re available to meet up soon to talk about activism in
Buffalo,” she wrote to a barista who earlier in the year had organized a
demonstration against sexual assault at a local college. One of the five
protesters there was Brisack.

A few days later, Brisack and another early union supporter raced out to a
nightclub to track down two baristas who moonlighted as drag queen
performers. She finally caught up with them around 3 a.m., pitched them on
the union and then dashed home to grab some food before starting her 5 a.m.
shift.

Often one pro-union barista led Brisack to others. Most of the people with
whom she met were in their mid-20s; many were the first in their families to
attend college and were saddled with five- and six-figure student loan debts.
Some had parents who had struggled with addiction or had served time in
prison.

Brisack introduced as many as she could to Bensinger. She wanted to show the
baristas that she had a real union backing her, and she wanted to convince
Bensinger that they could win.

Among the last people Brisack contacted was Eisen, the 11-year Starbucks
veteran from her Elmwood store. Brisack didn’t know Eisen well; they typically
worked different days. And Eisen’s long history with the company suggested
that she might not support the big changes that a union could bring.

But the pandemic had changed Eisen’s view of Starbucks, which had thrived by
selling normalcy. Even if the world was upside down, Eisen’s regulars could
still count on their caramel macchiato.

Eisen’s life, though, felt anything but normal. She also worked as a stage
manager for a local theater and depended on Starbucks for health insurance.
When the pandemic struck, her theater shut down and Starbucks became her
full-time job. She was making a little less than $16 an hour, $1 an hour more
than the minimum wage for New York state fast-food workers and barely
enough to pay her bills. The stress of it all had taken a toll on her mental
health.

Brisack took her to meet Bensinger. At 38, Eisen was older than most of the
other baristas, even-keeled and smart. Younger workers often turned to her for
career and life advice. Bensinger quickly pegged her as just the sort of person
the union needed to take a high-profile leadership role once the campaign
launched.

“How public are you willing to be?” he asked Eisen.

“As public as you need me to be,” she replied.

In late August, 49 baristas from across Buffalo sent a letter to Starbucks’s chief
executive in Seattle informing him that they were seeking to form a union. To
petition the NLRB for a vote, a store needed at least 30 percent of the workers
to sign union cards. The union decided to start by requesting votes at three
Buffalo-area Starbucks where a large majority of baristas had signed cards,
knowing that a strong anti-union campaign from Starbucks would persuade
some of the early signers to change sides.

Among the most pro-union stores was Elmwood.

***

After her initial awkward conversation with Brisack, Fleischer had tried to
forget about the union drive. She waited four days before she responded to
Brisack’s long text, writing back that making demands of the company felt
disloyal and “wrong.” Three weeks later when the campaign went public, she
declined to sign a union card.

To Fleischer, it seemed as if everyone had a hidden agenda. She had trained
Brisack to be a barista and recalled her during those early days as earnest,
eager to learn and prone to apologizing far too much. Fleischer hadn’t been
able to find her new friend on Facebook, so she had googled her and discovered
that Brisack had won a prestigious scholarship in Britain. Fleischer had never
heard of the Rhodes scholarship, but her mother was familiar with it. “Oh, my
God, your friend is smart as s—,” Fleischer’s mother had said.

Fleischer had initially assumed that Brisack was working as a barista because
she needed a break. Now she wondered whether Brisack had been part of some
“secret plot” to unionize the coffee giant.

Starbucks also seemed to be less than truthful. It flooded the Buffalo market —
and Fleischer’s Elmwood store — with “support managers” from around the
country who worked alongside the baristas. The company said the
multimillion-dollar campaign was designed to fix a market in crisis: stores that
were understaffed, dirty and struggling with insect infestations. But it seemed
to Fleischer that the “support managers” were also there to intimidate and spy
on union supporters.

Every few weeks, the company summoned Fleischer and the other Buffalo
baristas to mandatory meetings designed to undermine support for the union.
The presentations warned that Workers United — the larger union with which
the baristas were hoping to affiliate — was losing members and raising its dues,
which the company said could cost baristas as much as $600 a year. “I need
that $600,” Fleischer said she thought. “That’s a month’s rent.”

Sometimes she surprised herself with her long-suppressed grievances and her
assertiveness. In one meeting she told Rossann Williams, who oversees all of
Starbucks’s North American stores, that the company’s approach to taking time
off for mental health, which required baristas to find someone to cover missed
shifts, was “unacceptable.”

“I can’t believe I said that,” she told Brisack after the meeting.

“But it is unacceptable,” Brisack replied. “And that’s why you need to be on our
store’s bargaining committee when we win.”

In November, just days before the ballots were mailed to the baristas, Fleischer
filed into a hotel ballroom in downtown Buffalo for an hour-long address from
Howard Schultz, the company’s founder. Schultz agreed to go to Buffalo after
learning that Kevin Johnson, the company’s chief executive, hadn’t visited the
city. Schultz’s trip was a sign of how badly some top executives and board
members inside Starbucks wanted to stop the union drive. They worried that a
successful organizing campaign could depress Starbucks’s stock price, that the
union would make it harder to fire malingering employees or hurt relations
between workers and their managers.

Schultz seemed to view the union campaign as a personal affront. He had
stepped down as chief executive in 2018, but Starbucks was still very much the
company that he had built over 30 years.

Clad in a gray cardigan and khakis, Schultz gazed out at hundreds of 20-
somethings arrayed around him in the hotel ballroom. “I don’t want to give a
speech. I don’t have any notes,” he told them. “I just want to speak from the
heart about what I believe this company is about and what we’ve tried to do
over these many years in building a different kind of company.”

Soon Schultz was speaking about his father who returned home from World
War II and worked a series of “really tough, blue-collar jobs” in Brooklyn
before he suffered an injury at work that left him “bitter and angry” and his
family dependent on charity to survive. “I experienced at the age of seven the
imprinting shame, the vulnerability, the embarrassment of a family that was
really destitute,” Schultz said.

His goal at Starbucks, he continued, had been to “build the kind of company
my father never got a chance to work for.”

!

Advertisement

Advertisement

Advertisement

Advertisement

Sections Nelson Lichtenstein
Democracy Dies in Darkness

MORE FROM THE POST

A woman in danger contacted the
wrong police force — over 3,000
miles away. Luckily, they still
helped her.
Today at 10:02 a.m. EST

The TikTok buildup: Videos reveal
Russian forces closing in on
Ukraine
Feb. 11, 2022

IRS backlog hits nearly 24 million
returns, further imperiling the
2022 tax filing season
Today at 11:57 a.m. EST

Russian drones shot down over
Ukraine were full of Western
parts. Can the U.S. cut them off?
Feb. 11, 2022

Police try to clear ‘Freedom
Convoy’ protesters on Ontario
border bridge
Today at 4:34 p.m. EST

Company

About The Post

Newsroom Policies & Standards

Diversity and Inclusion

Careers

Media & Community Relations

WP Creative Group

Accessibility Statement

Get The Post

Manage Your Subscription

Gift Subscriptions

Mobile & Apps

Newsletters & Alerts

Washington Post Live

Reprints & Permissions

Post Store

Books & E-Books

Newspaper in Education

Print Archives (Subscribers Only)

e-Replica

Today’s Paper

Contact Us

Contact the Newsroom

Contact Customer Care

Contact the Opinions team

Advertise

Licensing & Syndication

Request a Correction

Send a News Tip

Report a Vulnerability

Terms of Use

Digital Products Terms of Sale

Print Products Terms of Sale

Terms of Service

Privacy Policy

Cookie Settings

Submissions & Discussion Policy

RSS Terms of Service

Ad Choices

CA Notice of Collection

Do Not Sell My Personal Information

washingtonpost.com © 1996-2022 The Washington Post

my father never got a chance to work for.”

As he was speaking, Fleischer was remembering her own struggles. She
thought about her single mother, who had worked a $7.25-an-hour job at
Wegmans and depended on federal aid to feed Fleischer and her brother. She
thought about the Christmas when she was 8 and overheard her mother saying
that they were on the verge of losing their house. She thought about how hard
she worked to earn a bachelor’s degree in social work and how, despite all that
hard work, she still carried $25,000 in student loan debt and qualified for
Medicaid.

She had been poor her entire life, and it had never been a source of “shame” or
embarrassment for her.

A few yards away, Schultz was talking about the “expensive” benefits he had
provided to even his part-time baristas: a company health plan, a stock option
program, free online college through Arizona State University, online mental
health counseling. “Who forced us to do it? Who pushed us to do it? No one,”
he repeated again and again and again.

Fleischer felt as if she was being “scolded by a parent” for her ingratitude. She
started googling Schultz and found an article that said that he was worth more
than $4 billion and no longer felt grateful at all. Now she was annoyed.

“If you have $4 billion, you should absolutely be providing these benefits to
us,” she recalled thinking.

As soon as Schultz had finished speaking, a woman in a black leather jacket
jumped up from her seat and strode toward him. “I am an organizing member
of Starbucks Workers United, and I am a barista,” she shouted as she held aloft
a copy of the union’s “fair elections principles,” which asked the coffee giant to
give union backers equal time to make their case, and which the company had
declined to endorse.

A Starbucks executive in a $500 down vest stepped in front of the young
woman, blocking her path to the company founder. “Howard Schultz, please, if
you care!” she yelled.

But Schultz had already slipped out the ballroom’s back door.

Four days later, Fleischer asked Eisen to meet to discuss the union. Her biggest
worry was the extra $600 a year in union dues. Eisen assured her that any new
contract would have to boost pay to cover the extra dues expense or it would be
rejected by the union.

Fleischer said she hoped that she might someday be able to sit on her store’s
bargaining committee, where she could press Starbucks executives to improve
barista training and change the sick leave policy that she had complained was
“unacceptable.” Later that afternoon, she texted Eisen that she was going to
vote for the union.

“I AM really passionate about this job and company, and I want my voice to be
heard,” she wrote. “I don’t know how else to make that happen. But if/WHEN
we unionize, I want to be part of the change that comes from it.”

***

Brisack, Eisen and Fleischer locked arms, their eyes fixed on a live video of a
NLRB lawyer who was counting the votes to determine whether their Starbucks
on Elmwood Avenue would become the company’s first unionized U.S. store.

More than four months had passed since Brisack and Fleischer’s first
conversation about the possibility of organizing a union. The lawyer slit open
the first envelope. To win, the union needed at least 14 of the 27 employees on
the store’s rolls to vote yes. Surrounding the three Elmwood baristas were
several dozen Starbucks employees from across Buffalo.

The first seven votes were all “yeses.”

“Landslide!” one barista called out.

“Where’s Rossann?” yelled another, a reference to the head of Starbucks’s
North America operations who had spent long stretches of the campaign in
their Buffalo stores and had repeatedly urged the baristas to oppose the union.

Five consecutive no votes followed. “What’s happening?” Brisack whispered to
Eisen who shut her eyes and squeezed Brisack’s left hand tight. Soon they were
up to 13 “yes” votes. They needed just one more to go their way, and they would
officially be a union. The NLRB lawyer opened the next ballot.

“Yes,” he read.

Brisack, Fleischer and Eisen clutched each other in a group hug, and Eisen
started to cry. “Elmwood! Elmwood! Elmwood!” the baristas around them
chanted.

The NLRB lawyer counted the votes at two more Buffalo Starbucks. One voted
narrowly against joining the union, and a third store’s results remained
inconclusive because of objections to some ballots that several weeks later were
decided in the union’s favor.

“We’re incredibly excited to announce that we have won the first unionized
Starbucks in U.S. history,” Eisen told a dozen reporters who had gathered at
the union’s office in a converted factory where Buffalo laborers once
manufactured World War II-era warplanes.

The reporters asked essentially the same question: What exactly did the
baristas want from Starbucks? More affordable health insurance? More
predictable hours? Better pay? “A new employee who starts today makes 63
cents less an hour than I do after 11 years,” Eisen said. “So, is that an issue?
Sure.”

The reality, though, was that Eisen, Brisack and Fleischer wanted something
bigger. In the first hours following the union’s victory, Eisen didn’t feel joy or
relief. Rather, she felt “resentment and anger” at how hard Starbucks had
fought to prevent their store and others from unionizing. The company had
postponed the balloting for months with unsuccessful legal challenges and
targeted pro-union baristas for the smallest slip-ups, such as minor dress-code
infractions or accidental swearing. In the case of the store where votes were
still in dispute, the union charged that Starbucks had attempted to dilute
support by more than doubling the staff.

Eisen told the reporters that she wanted the company to stop fighting, sit down
with them and “negotiate the best contract that the service industry has ever
seen.”

Brisack stepped forward. “We’ve said from Day One that all we had to do was
win one store,” she added. And now that they had won it, the Elmwood baristas
expected Starbucks to recognize their new power.

***

Three weeks later, the Elmwood baristas went on strike. The day before they
walked out, Brisack, Eisen and Fleischer took part in an emergency meeting
with three Starbucks executives and a company lawyer to discuss the omicron
outbreak that had sidelined 10 Elmwood staffers.

The sides talked in circles for nearly three hours. The baristas asked Starbucks
to close their store for five days to stem the outbreak and give people time to
return from isolation. When that request was rejected, they pushed for more
robust protective equipment, such as KN95 masks. The Starbucks executives
responded that they were “very confident” in their safety protocols and that
there were enough healthy baristas at Elmwood to “meet the needs of the
business.”

The next morning, around 5:45, a worker, who had gone to the emergency
room just days earlier for a non-covid illness, told Eisen that he was too weak
to finish his shift. He had come in, he said, only because he didn’t want to let
down his co-workers when they were already missing so many people. Eisen
drove him home and returned to the store.

“I’m about to walk out of this place,” one of the baristas complained to her.

“Let’s do it,” Eisen replied. “This is ridiculous.”

She quickly got assurances from the union that it would cover their lost pay
and that Starbucks couldn’t fire them for striking. Then she quietly consulted
with the other baristas — starting with Fleischer.

“Are you sure this is the move?” Fleischer asked nervously. “Is now the time?

“If we’re not going to walk out over our health and well-being, then there’s not
anything worth walking out for,” Eisen said. Brisack woke to a series of texts
about the walkout from Fleischer and raced down to the store to join them.

Soon they were all standing on the sidewalk and Eisen was texting the rest of
the workers to let them know what had happened. The store, staffed by a
manager and a shift supervisor, remained open for about 45 more minutes
until the overwhelmed shift supervisor uttered an agreed-upon safe word —
“Oklahoma” — and the manager locked the doors. The store stayed closed for
two days before Starbucks reopened it with a mix of Elmwood workers who
chose not to strike and other Starbucks personnel.

Brisack, Fleischer and Eisen spent the five days after the walkout on the
sidewalk picketing alongside their co-workers.

Inside the store, a few of their overworked and frustrated colleagues struggled
to serve the store’s customers. Fleischer tried not to make eye contact with
them through the windows. To Fleischer, it was “kind of baffling” that the
company hadn’t given them anything. Even their relatively small request that
Starbucks pay their out-of-pocket costs on coronavirus tests was denied. “I was
expecting them to do or say something,” she said.

She didn’t regret backing the union, which had given her a sense of mission
and purpose. But she was starting to doubt that they would even be able to
negotiate a pay raise big enough to offset their union dues. And she worried
that it would be awkward when she and her fellow strikers eventually returned
to work.

On Day 4 of their frigid, five-day protest, Fleischer worked up the courage to
ask Brisack a question that had been weighing on her for months.

“Did you plan on all this happening when you started at Starbucks, or was it
just a coincidence?” she asked.

Brisack replied that she hadn’t known whether it would be possible to unionize
the coffee giant when she took the job at the Elmwood store. “I’d try to organize
any place I worked, but this wasn’t a grand scheme,” she said. Without the
union and, even more important, the support of other Buffalo baristas, there
would have been no union drive.

Another barista standing nearby weighed in: “Are you like a union vigilante?
Are you just going to leave and go to some other coffee shop now?”

Brisack believed that the labor movement was the only vehicle in the country
for building power, outside of politics and big business. She had long ago given
up on politics. Even though union membership had been in a death spiral for
decades, she still believed that unions could serve as a liberating force that
could address the country’s most dire problems: poverty, racism, inequality.

Her four months fighting Starbucks had given her a visceral sense of how hard
the battle was going to be. “How are we ever going to overthrow capitalism
when it’s this hard to unionize a single store in Buffalo?” she had said, half-
jokingly, after Elmwood’s victory.

To succeed, she knew that the union couldn’t afford to negotiate a “good
enough” contract with Starbucks. “It has to be a great one,” she said. And she
realized that a single unionized store was never going to compel the company
to negotiate in good faith.

Every day, new Starbucks stores were petitioning the NLRB for union
elections. The grass-roots movement was spreading via Instagram and Twitter
and had grown by mid-February to 78 stores from all over the country:
Rochester, N.Y.; Kansas City, Mo.; Santa Cruz, Calif.; Eugene, Ore.;
Tallahassee; Everett, Wash.

Starbucks was still fighting the unionization push, but now it was waging a
much tougher and potentially more expensive multi-front war. Brisack also
knew that the company, which espoused liberal values and even sold a
Starbucks-themed Black Lives Matter T-shirt, was vulnerable to allegations of
union busting. In February, Starbucks fired seven employees in Memphis who
were seeking to unionize their store. The company said the workers violated
security rules, but the union claimed the firings were retaliation for labor
activity. “This might be a turning point,” Brisack said of the Memphis firings.
“They can’t do this and be the company they say they are.”

The bigger the baristas’ movement, the greater the chances that Starbucks’s
resistance would provoke a backlash that might damage its bottom line. Sixty
stores out of 8,947 probably wasn’t enough. The union might need 600 or even
6,000. It would need help from activists, politicians and possibly celebrities.

When she thought about her own future, Brisack’s thoughts turned to her
childhood hero Eugene Debs, who set her on her journey to Buffalo. Debs
famously had said: “When I rise, it will be with the ranks [of the working class],
and not from the ranks.”

Brisack wanted to do the same. Her plan was to stay in Buffalo in the
apartment she had decorated with furniture from Goodwill, continue as a
barista and build a movement that she believed could change Starbucks, and
shift the balance of power in America back to people like Eisen, Fleischer and
her.

1069 Comments Gift Article

Advertisement

Advertisement

Advertisement

Advertisement