The dark side of the logistics boom

Online shopping is simple and convenient for customers. But the logistics workforce may pay the price.

Online shopping was already extremely popular before the outbreak of Covid-19. Consequently, the European logistics sector and workforce have been growing enormously in the past decade.

When customers order online, a complex logistics process is instigated, involving different workers often working in different countries. Warehouse workers pick and pack the product, transport workers bring the shipment to a logistics hub or directly to a distribution centre and there a courier takes over delivery to the customer.

Various problems are evident, such as low wages, precarious working conditions and health-and-safety issues—as well as ‘regime shopping’. What is simple and convenient for customers often involves hardship for workers.

Intensified competition

The recent expansion of logistics has intensified competition among firms which operate with low profit margins despite high demand. In this customer-oriented and price-sensitive market, company growth strategies have relied on cutting costs wherever possible while achieving the necessary responsiveness.

Companies have introduced ‘lean’ management practices and used automation and new technologies to cut costs, raise productivity and maximise flexibility. In such volatile markets, firms require adaptable labour and so non-standard work—agency, sub-contracting, ‘self-employment’—is widespread. This has pressed down on logistics workers’ wages and conditions.

In addition, more and more companies—particularly those operating in highly regulated countries—have relocated their business to other regions in the EU where staff are available at lower cost and regulation tends to be less stringent, allowing for high flexibility. Bypassing national regulation and industrial-relations institutions in this way means relatively good jobs in ‘high-road’ countries are lost while relatively bad jobs in ‘low-road’ countries are created, with low wages, unstable and potentially unhealthy work arrangements, temporary employment relationships, underemployment and an absence of employer-provided benefits.

Regime shopping

The impact of regime shopping is not felt only by workers—it also affects states and national policies. By blaming strong employment-protection legislation and industrial-relations institutions for the loss of jobs, policy-makers in high-road countries are caught up in a competition to deregulate the labour market and create a more employer-friendly climate, to safeguard employment despite worsening working conditions. It is not difficult to imagine the detrimental effects of such a ‘race to the bottom’ on workforces.

This is visible, for instance, if one looks at Belgium and its neighbours Germany and the Netherlands. In Belgium, logistics workers’ wages, conditions and benefits are generally more favourable, due to different power relations: Belgian trade unions can rely on a strong tradition of social dialogue, high union membership (49.1 per cent in 2019) and relatively good (sectoral) agreements in logistics.

In the Netherlands and Germany, union density is much lower (respectively 15.4 and 16.3 per cent in 2019) and in Germany many small logistics companies opt out or derogate from sectoral collective agreements. This gives employers in both countries more leeway to cut costs through reducing wages, downgrading working conditions and increasing flexibility.

Belgian analysts and policy-makers have pointed repeatedly to the ‘competitive advantage’ of the neighbouring countries—demanding a weakening of employment protection and collective bargaining, as well as greater flexibility (such as more night and Sunday work) while weakening trade unions’ involvement. By generating similar conditions as in Germany and the Netherlands, (logistics) companies could be attracted and jobs created. The nature of the jobs being created, however, is hardly ever questioned.

Improving the situation

Three sets of actors could improve the situation of the logistics workforce. First, customers are powerful in keeping the work alive. It may not be realistic to believe they would change their shopping behaviour to support logistics workers but campaigns could raise awareness about the real costs of ordering online. If successful, this could encourage employers to improve working conditions and indeed use this as part of their branding.

Secondly, the workers themselves have power to enforce better working conditions but they hardly use it. They could easily disrupt logistics processes through social actions, yet the precondition for such actions is organising. Unions should seek to organise logistics workers, make them aware of their rights and actively involve them in fighting for decent working conditions. This requires some effort—and probably cross-country co-ordination—as logistics workers are often hard to reach, particularly because many do not work in the same place every day.

Thirdly, regulatory bodies at different levels, such as the European Union and its member states, should consider reinforcing regulation at the bottom of the labour market. This could include higher minimum wages and closure of regulatory loopholes. At sectoral level, collective bargaining is the key mechanism for improvement, yet relatively low unionisation makes it difficult for unions to push through higher standards. At company and workplace level, enforcement of existing regulation—such as on occupational safety and health, minimum wages and working time—should be observed by employee representatives, who could also engage in local bargaining to improve conditions, depending on the country’s institutional system.

A combination of activities by all these actors at different levels will likely be needed. This could better align the shopping experience of customers, as easy and convenient, with the work experience of the logistics workforce—as decent and fair.