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Dotcoms face employee action

pp_default1 It’s not just investors who lose out when a dotcom closes for business according to FTdynamo in the fourth of a series of columns written for HR Zone from the new management education portal.

It’s not just institutional investors and day traders who have suffered at the hands of the dotcom collapse. Spare a thought for the workers. According to most estimates, around 30,000 US employees in the dotcom and net-related sectors have lost their jobs this year. While many, especially “techies”, have walked briskly into replacement jobs, for “creative” types such as designers or editors the choice has often been a cut in pay or no job at all.

Perhaps no surprise, then, that labour unrest is rearing its head in this once-bastion of free-market liberalism. Employees at bookseller Amazon and Etown, a San Francisco-based online retailer, have declared their intention to hold votes on forming unions, much to the dismay of their bosses. Earlier this year, the unthinkable happened when employees at telecoms outfit Verizon actually went on strike for three weeks.

The reasons aren’t hard to find. Lay-offs are probably the biggest. Etown recently announced plans to lay off around a fifth of its 130 employees, for example.

But more than that there is a growing feeling that the net sector has somehow “exploited” its keen young employees. The attraction of dotcom jobs was largely based on the generous stock options that most offered to employees. But while these were trumpeted as making “everyone an owner”, often they acted as little more than promissory notes designed in large part to make up for low basic wages, long hours, and heavy workloads. Well, the stock price collapse has made those options about as attractive as Monopoly money. Trouble is, the low basic wages and long hours haven’t gone away. In fact, conditions have often worsened as dotcoms struggle to inject some profitability into their business plans and venture capital funding dries up.

Whether unionisation will ever take off is a moot point. Long term, labour unions in the US, as in much of the rest of the developed world, are in decline. Around 10 percent of US employees belong to a union; the figure was more than three times that just after the war. However, some employment analysts have suggested that the technicians who power the net wave could easily form themselves into specialised, and potentially very beefy, union-style organisations.

All of which is just further ammunition for those who have long-argued that the dotcoms could not, as they often suggested, turn normal business practices on their heads. That’s an argument that has been made about their approach to strategy, finance, marketing, advertising, and a host of other areas. Now it seems to be true of employee relations as well.

Could this be backlash time, as argued by sceptics such as Thomas Frank, whose book One Market Under God attempts to pull the rug from under the pretensions of the new economy to be anything else except the old economy in cool new guise? It would be irony indeed if one of the main legacies of dotcoms, which were after all predicated on new ways of working, was a resurgence of organised labor. In many respects the new economy may turn out to look a lot like the old economy after all.

FTdynamo features writing and research from leading business schools and management consultancies with expert insight and analysis from FTdynamo. A free trial of its services is available at

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