Managers of change: How firms shape whether modernization leads to polarization

Author – Leon Küstermann.

Abstract :

Job polarization related to technological change has contributed to political polarization and the success of far-right parties. However, vulnerable routine workers experience changing employment structures differently depending on how their employers manage (technological) change. Understanding the firm as an actor with agency opens the possibility that despite status loss at a national level, inclusive firm strategies can prevent workers and their communities from feeling left behind and radicalizing politically. Therefore, I ask the following question: Do inclusive firm strategies moderate political radicalization among modernization losers in routine occupations?

My theoretical argument on what constitutes inclusive firm strategies starts with the notion that restructuring events are critical moments that bring macro-trends like technological change into the experienced realities of workers and their communities. When restructuring organizations to prepare them for changing economic environments, firms have the agency to (not) do this inclusive manner, e.g., by avoiding layoffs, investing in the skills of the incumbent workers, and prioritizing long-term employment relationships over flexibilization strategies. I argue that such inclusive strategies can be expected to reduce the perception of relative deprivation, denied economic opportunities and status loss, and, therefore, mitigate political radicalization among modernization losers in routine occupations.

Using Germany as my empirical case, I analyze the effect of managing restructuring at the community and worker level. First, I focus on the aggregated effect of managing restructuring on routine workers in affected local communities. I have extended a Eurofound database that tracks major restructuring events in Germany by adding qualitative evidence on how inclusive these events were managed based on newspaper articles. This allows me to estimate whether the effect of restructuring on local far-right support and other relevant characteristics like turnout and social trust depends on the inclusiveness of firm strategies. To that end, I match my restructuring database with data from the German Socio Economic Panel (SOEP) using local authority codes and rely on difference-in-difference estimators.

Second, I present evidence on the micro-mechanisms behind managing restructuring events. I use micro-level data from the SOEP in combination with a novel link to German firm-level register data. This allows me to analyze various micro-elements of restructuring, such as internal job changes, changing within-firm rank order, and exposure to flexibilization strategies, at the individual level. Here, I mainly rely on fixed effects models which make use of the longitudinal nature of my data. In addition to political outcomes, I also analyze well-being indicators.