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Abstract

This dissertation contributes to our understanding of the role of illegality in the organisation of modern regulated economies and their labour markets. Through the study of rule-breaking in the context of labour-intensive subcontracting practices, I show how illegality can become a structural feature of competition models based on cost containment, even inside institutional systems built on the premise of rule-abidance. Fraudulent subcontracting practices that entail high levels of exploitation are just the most extreme expression of cost containment practices that are widespread and tolerated. Besides being the outcome of employers’ strategies based on the creation of hidden triangular employment relationships through misclassification and on the fostering of migrant workers’ vulnerability, the expansion of illegal practices derives from state inaction and its active promotion of restructuring practices based on cost-containment. The state does not necessarily encourage extreme cases of rule-breaking, but it also fails at adequately regulating them because this would be an obstacle to predominant competitive strategies and business models. This conflict of interests generates contradictions in the design of labour market policies that prevent effective rule enforcement. Eventually, the outcome of employers’ strategy and states’ forbearance is the modification of the operation of labour markets through the hidden expansion of a market for intermediation services and the creation of new employment statuses that crystallise the outcomes of segmentation strategies. What emerges from this study is that the struggle around the definition of institutional systems of industrial relations is not just a power-based debate over regulation but also a silent discussion over the amount of rule-breaking that can be tolerated. In this sense, rule-breaking is a fundamental part of institution-building processes in regulated labour markets, one which needs to be further explored to fully understand the dynamics of contemporary capitalism.