Dealing with Worklife in the New Economy
Story posted October 28, 2002
Former Secretary of Labor Robert Reich spoke at Common Hour on Friday about the the lives of workers in the new American economy.
The Common Hour speech was Reich's second at Bowdoin. Judging from the number of people in the audience who had come to hear him the night before, he'd impressed his first audience and left them wanting more.
Reich spoke without notes for forty minutes, leaving twenty minutes for questions from the audience. Using a mixture of facts, statistics and personal anecdotes, he covered a brief overview of the business cycle before addressing changes in the economy that are fundamentally altering the experiences of American workers, and how policy might affect those changes.
He reassured the anxious students in the audience that, while they missed the economic boom of a few years ago, expansion and recession were all part of the business cycle and the country is now emerging from a recession.
"There will be a recovery," he said, "and if you're a sophomore or a junior right now, you may hit it just right." What he asked students to consider was something other than the business cycle. "There are structural changes going on behind the business cycle."
According to Reich, the three major structural changes occurring in the US economy according to Reich are all related to a shift from "high volume, standardized, stable mass production to high value, customized service production."
He began with a bit of overview:
In the past, Reich said, the reliance on standardized mass production meant that economies of scale came into play and goods were cheaper to produce if produced in large quantities. This resulted in oligopolies in many industries and sometimes resulted in a lack of innovation as well. It also made it relatively easy for labor unions to gain power. In the 1950s, he said, about 35% of the workforce was unionized, but that was enough to establish prevailing wages in the major industries. Today, fewer than 10% of workers are unionized, so labor unions have lost a lot of their power to set wages. (Today it's fairly simple for a non-union company to undercut the prices of a unionized company.)
Globalization and technology have made customization possible, and this results in a move away from standardization and lessens the effects of economies of scale. "Competition is much more intense," Reich said. "[And] the key to competitive success today is innovation."
In the past, it was up to designers to design, manufacturers to produce and the sales force to push the standard model and make sales. "That sequence - design, make, sell - has been altered," Reich said. Now, designers work directly with customers to give them what they want. This kind of customization can't be found for every product or service just yet, but it is becoming the norm, rather than the exception.
Now this shift from mass production to service production is resulting in inequality, greater insecurity, and a "make hay while the sun shines" mentality.
Inequality is manifested in the types of work and salaries available to workers.
"Every rung on the income ladder is further apart than it was 10, 15, 20 years ago," Reich said.
Some have claimed this level of inequity hasn't been seen since the 1880s, and even if you dispute that, Reich said, it's certainly fair to say it's more unequal that anything seen in the last 50 to 70 years.
Years ago there were jobs such as telephone operators, service station attendants, elevator operators, manufacturers, that have now been eliminated because of globalization and improvements in technology. Yet, unemployment is still relatively low because the workers have moved to other types of jobs.
These new types of jobs are primarily "professional service jobs" such as those in design, sales, marketing, legal services, or "local service jobs" such as those in retail, restaurants, hospitals, and transportation. People working in the professional service jobs tend to be better educated and well paid, but those without as much education often end up in the local service jobs. These jobs aren't, to a large extent, threatened by globalization or technology, and they are abundant, but they are also among the lowest paying jobs.
Greater insecurity is felt by those in low and high paying jobs. In the new economy, it's relatively easy to find a better deal. Lawyers and doctors struggle to keep their clients just as convenience stores and delicatessens do.
"All commercial relationships are more tenuous than ever before," Reich said. "[Businesses] are hustling, to keep clients." In addition, nearly all employees in the United States can be fired at will, for any number of reasons.
The making hay while the sun shines mentality, Reich described with an anecdote:
"I left the best job I ever had - being secretary of labor, because I was seeing nothing of my -our- two sons." Reich new he had to leave his job in the cabinet when he called home one night to say he wouldn't make it home in time to see his sons before they went to bed. When he spoke to his son Sam, Sam insisted on being awakened when Reich returned home because he wanted to know that Reich was there with the family.
"If Sam had crafted a little dagger, he could not have been more effective," Reich said. So Reich left the cabinet and returned home to Cambridge where he could see more of his sons during their teenage years. A part of this was attending his son's cross-country meets. Just before he was to attend the first cross-country meet since he'd left Washington, opportunity came knocking.
Reich was offered a very large ("eye-popping," he said) sum of money to work as a consultant on a particular project, but, he would have to begin immediately and miss the cross-country meet. Now Reich was dealing with a choice of the new insecure, indeterminate economy.
"Because of that indeterminacy, one feels some pressure to take advantage of opportunities when they arise," Reich said. After all, a similar chance might not come along in the future.
Reich turned down the lucrative offer and went to the cross-country meet.
"Those of you who run cross-country, know what I am about to describe," he said to a laughing audience. "I was alone in a field for a long time...now it was the most expensive field standing I had ever done." This kind of choice, Reich said, leaves many to work longer and harder for fear of missing out on opportunities that won't come along again in an insecure environment. (He added that he did not regret his decision.)
Last year the average American family worked seven weeks more than in 1990, Reich said. While we once dreamed of the leisure time created by technology, we now have even less leisure time than we once did.
Certainly, the new economy has spawned good results: higher productivity, higher income overall, more efficient distribution of resources overall, Reich said. But the downside is this inequality, insecurity and the need to work long and hard when you have the chance.
Many look to Europe as an example of a society with a better quality of life. Reich suggested that it might be impossible to have the sort of productivity and overall prosperity that the United States has and yet have the lifestyle we observe in places such as Scandinavia, "Unless," he said, "public policy intervenes to provide some compensating mechanisms." Reich believes that a higher minimum wage, a larger earned income tax credit, better educational opportunities and wage insurance could help us get there.
We might need to reduce our productivity to find greater tranquility, he said.
"Can we afford it," he asked. "Probably we can. Theses are choices ahead for all of you. They are not only economic choices, they are political choices."
In the end, Reich said, it is impossible to separate the political and economic from issues of fairness and equality.
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