[This is Chapter
Eight of Murphey’s book The Emerging Crisis of Economic Displacement.]
Chapter Eight
THE EFFECTS THUSFAR: CHURNING, INSECURITY
Even now in the beginning
stages of work's obsolescence and marginalization, millions of people have felt
the effects. I call one of these
"churning" -- the unsettling uproar in lives and business activity
caused by the on-going challenge to the very existence of industries,
professions, firms and jobs. This has an
obvious relationship to personal insecurity.
Other effects are the twin polarizations of income and wealth. We have already looked ahead to the future
regarding these consequences. But
because "the past is prologue" in situations where there are
continuing forces leading in the same direction, it will be worthwhile to
devote this chapter to the present and immediate past, to see what is happening
now or has already happened.
In the course of it, we will see
that there is an effort by many commentators to deny what is occurring. Most of these writers are my personal or
philosophical friends -- excellent people who support the free market. They are moved to defend the market from
anything they perceive as an attack on it, in just the same way other classical
liberals have felt it necessary to defend the market against attacks from its
critics for almost two centuries. They
cite a variety of counter-evidence, despite the acknowledged trends set out in
the preceding chapter. Of course, there
will always be contra-indications in any massive historical tendency and
reasons to question this statistic or that, but the denials largely amount to
detours -- if the trends acknowledged by market economists are to be taken
seriously, which I think they should be.
The denials put the defense on a false footing, which can't long prove
the best way for classical liberals to defend the market or a free society in
general.
Churning and Insecurity
Here are excerpts from the literature that
illustrate the churning. I will
italicize some points to highlight the themes:
.
The Hudson Institute is the publisher of Workforce 2000. It said there that "because of
technology, the economy of the future will be a race to stay ahead or a race
to catch up. Technology will
introduce change and turbulence into every industry and every job."[1]
.
Bryan and Farrell in Market Unbound: Unleashing Global Capitalism
speak of unrelenting competitive pressure.[2]
.
Business writer Daniel J. Bases recently wrote of an outplacement
consulting firm's saying that "American corporations cut nearly 440,000
jobs in the first 11 months of 1996," and added this observation: "So
while the stock market booms and the economy creates millions of jobs, the
pace of layoffs is greater than in 1995."[3]
.
In Britain, The Economist speculates that "there may be
prolonged lags between job losses and the creation of new jobs. And the new jobs may anyway be inappropriate
for the displaced workers."[4]
.
Despite all that we hear about the number of jobs created by the 1990s'
economic boom, Business Week's Aaron Bernstein could write in June 1996
that "inflation-adjusted wages are rising at a tepid 0.6% a year, about
half the pace of the 1980s recovery."
He added that "the labor market is much softer today. More workers hold temporary jobs. Layoffs are more frequent, causing more
long-term joblessness and widespread anxiety that leaves many employees
unwilling to demand higher pay."[5]
.
Thomas A. Stewart writes in Fortune that "in the year that
ended in June 1995, according to the American Management Association survey,
50% of large and midsize companies eliminated jobs; the percentage has risen
each year since 1991. Most of those
companies also created jobs--hiring with one hand, firing with the other. Net-net their labor force shrank just 1.1%,
and other companies more than picked up the slack: Among the 1,003 surveyed
companies, total employment rose 4.5%.
In the vortex of the maelstrom, whirling faster than anyone:
you."[6]
.
Computers and the world competitive market's relentless pressure toward
lower costs are the prime movers behind "downsizing" and
"corporate restructuring."
Productive and service functions that not long ago required 10,000
people now require far fewer, even as output, sales and profit go up. Severe
competition won't allow a firm to keep people once they aren't needed. Authors in the Harvard Business Review
say "these competitive realities are creating intense pressure to
rationalize production, cut internal costs, and search for the least
expensive production base."[7]
Many other facets can be seen. "Trimming head counts is just part of a
broader strategy to improve productivity.
Most of the Nimble Giants had to reexamine everything from their
management styles to their manufacturing techniques."[8]
In their 1988 book The Great
U-Turn, Bennett Harrison and Barry Bluestone talked about these other
facets: "Companies [have] abandoned core businesses, invested offshore,
shifted capital into overtly speculative ventures, subcontracted work to
low-wage contractors here and abroad, demanded wage concessions from their
employees, and substituted part-time and other forms of contingent labor for
full-time workers--all in the name of ‘restructuring.'" They added that "this so-called
restructuring has taken the form of freezes and cuts in wages, the introduction
of two-tiered wage systems, the substitution of floating bonuses for fixed
wages, the proliferation of part-time work and ‘home’ work, and the shifting of
work previously performed by regular (often unionized) employees to
independent, typically nonunion subcontractors.
Even this list does not exhaust the number of devices...."[9]
Business Week told in 1994 how
at Nynex "four teams compiled more than 300 specific changes, from
consolidating work centers to simplifying procedures for approving customer
service."[10] In their 1982 book, Bluestone and Harrison
described the same process as going on in the economy since the early 1970s.[11] This gives some idea of what a long-term
secular process we are experiencing.
It is interesting to notice the "buzzwords"
used in the business community: Business Week recites these:
"Mobility. Empowerment. Teams.
Cross-training. Virtual offices. Telecommuting. Reengineering. Restructuring. Delayering.
Outsourcing. Contingency."[12]
Higher profits are realized from the
turbulence and cutting by businesses that survive. In early 1995, Business Week reported
that "thanks to a robust economy and a strong dose of corporate
cost-cutting, 1994 turned out to be the best year for company earnings
in more than two decades. Profits of the
900 companies in Business Week's Corporate Scoreboard leaped by a
stunning 40% last year."[13] A year later, Business Week said that
a survey of 362 of the United States' largest firms showed that between 1990
and 1995 worker layoffs increased 39 percent, corporate profits 75 percent,
worker pay 16 percent and CEO pay 92 percent.[14]
Stock prices (and the value of
stockholders' equity) have soared.
Murray Weidenbaum says that "from the time that
Stress and personal insecurity are a part of
daily life. Richard Freeman in the Harvard
Business Review tells of the fear that middle-aged American men have of
downsizing because such men "are typically unemployed for many months if
they are laid off and take a 20% or so wage cut when they finally find a new
job."[16] In the same issue, Marc Levinson speaks of
"a highly elevated fear of falling,"[17]
echoing Barbara Ehrenreich's 1989 book Fear of Falling about the
insecurity of the professional middle class.
Robert Reich says that "every time a large company announces a
major layoff, a chill is sent through the living rooms and kitchens of millions
of American homes. People feel less
secure."[18]
E. J. Montini of the Arizona
Republic told of this at the personal level. In a column on January 21, 1997, he reported
that "downsizing has happened all over America... Last week, it happened
here at the Arizona Republic... On the day it happens, downsizing slows
people and makes them quiet...It begins with a phone call. Men and women working here had been told to
be at their desks between 9 a.m. and 3 p.m.
And to wait. And to watch. And to wonder... By the end of the day, 60
reporters and photographers and editors and others were told they no longer
worked for the newspaper...You may come upon a reporter who...has been laid
off. He's standing in the parking
garage, waiting for the security guard to escort him to his car. Already, the reporter has had his
identification badge taken away from him... Before he goes, the security guard
must reach into his car and scrape the parking sticker from the
windshield."[19]
A corporate manager expressed the
same emotions in a letter to Otto Scott: "Our new owners have a quite
different culture and managerial style.
They come into your factory, give you a check for your remaining
vacation balance, a month's severance pay and in lieu of two weeks' notice give
you two weeks' pay and say, ‘You have 30 minutes to leave the premises.'"
[The letter writer's emphasis][20]
Insecurity appears in many
ways. In 1996, the number of personal
bankruptcies in the United States exceeded 1 million for the first time.[21] Companies cutting jobs see a "widespread
erosion of morale,"[22]
and the employees who remain even suffer something called "lay-off
survivor sickness."[23] Greider speaks of a sociological dead-end
that is bound to grow, carrying discontent with it: "The true incendiaries
of this age may be found among the gathering masses of younger people --
Europeans call them ‘marginalized youth' -- who have never had a real job and
perhaps never will."[24] People who have developed once-valuable
skills find them "suddenly obsolescent,"[25]
and are cut adrift from years of experience and training. Federal Reserve chairman Alan Greenspan tells
about a survey of workers at large firms that showed "that 25 percent
feared being laid off" in 1991 -- a figure that increased to 46 percent by
1996.[26]
The consolidation of companies into larger units,
long underway, continues.
A news report in early 1997 was
headlined "'96 was record year for mergers" and said that
"companies combined with a stunning vigor." The ten largest for the year: Bell
Atlantic-Nynex, $21.34 billion; British Telecommunications-MCI, $21.27 billion;
The consolidation is not just of
large companies, but includes the acquisition of countless small firms. In mid-1995, Business Week spoke of
"the consolidation of dozens of... mom-and-pop industries." It said "these mostly service-sector
industries range from funeral homes, golf resorts, and health clubs to landfill
sites, medical practices, and antenna towers." Costs are cut by managing from a single
location. Just the same, "investors
have found that consolidation simply doesn't work in some industries,"
citing dry cleaning, service stations and restaurants.[31] Small businesses in many areas are under
suffocating pressure competitively when the market comes to be structured
around, and responsive to, the units of vast size.[32]
Specifics about the downsizing are equally
striking. Again, I will give just a
sample of recent reports.
.
Business Week has called downsizing "a central fact of
corporate life in the 1990s."[33] In an article about "nimble
giants," which is the name it gives to the largest firms such as General
Electric, Intel and Rockwell International, Business Week said in 1994
that in the recent past "these huge companies virtually reinvented
themselves" when "faced with lean times and intense
competition." It gave major
examples, such as that Hewlett-Packard "knew the future belonged to
lower-cost computers with thin profit margins. To cut overhead, HP slashed employment
by 6%, or 5,400 workers." It says
"like HP, Merrill Lynch & Co. hacked away at its bureaucracy. The firm has trimmed its workforce by 11% to
41,290, from a 1987 peak. Meanwhile, the
revenue per employee has jumped more than 70% since 1990...Last year, its
profits rose by 46%... as sales climbed 24%."[34]
.
A news item in March 1997 said "H. J. Heinz Co. is closing or
selling at least 25 plants and eliminating about 2,500 jobs under a
reorganization plan...." The plants
that were to close included ten in North America.[35] A month later, the Coleman Company laid off
700 of its approximately 7,000 employees worldwide "as part of its
strategy to reduce costs and improve its competitiveness."[36]
.
Between 1990 and early 1994, Nynex cut 19,200 of its 95,400
workers. This included 13,000 managers.[37] Between late 1992 and early 1995, Pratt &
Whitney underwent a "massive restructuring, cutting employees by 40
percent and idling 600,000 square feet of factory space." It planned a 7 percent cost reduction each
year for the indefinite future.[38]
.
The process continues, but is at least subject to some fluctuation. There were fewer layoffs in 1995 than in any
of the preceding four years, although the 1995 layoffs had begun to hit
white-collar workers and were more noticeable.[39] The 1994 total of 92,300 for the United
States' 50 largest employers had been lower than the 146,800 for 1943.[40]
.
A news report in July 1997 told how Caterpillar lost $404 million in
1991 but brought profit up to more than $1 billion in both 1995 and 1996 after
it "slimmed down and reorganized."[41]
.
In a June 1996 article in Fortune entitled "How to Fire
People and Still Sleep at Night," Kenneth Labich wrote that "the
great corporate restructuring fever has held pitch for over a decade now--some
400,000 hapless folks got the boot during 1995 alone."[42]
.
Owen Edwards wrote an article for Forbes ASAP in late 1995 about
the software industry. He said
"when it comes to employment patterns the software industry won't be any different
from the automotive industry or the bathmat industry... What's the most costly
part of manufacturing? People. Dump people and the money really rolls in
[emphasis added]."[43]
"Deindustrialization": Is it happening to the
Bluestone and Harrison were authors in 1982 of
The Deindustrialization of America.
They meant by this a "widespread, systematic disinvestment in the
nation's basic productive capacity."
Their thesis was that capital in the United States has been moving away
from production and toward "speculation, mergers and acquisitions, and
foreign investment."[44] Writing in 1994, Wallace C. Peterson says
"‘deindustrialization' may be the wrong word... What has been happening
has been a slow and insidious erosion of America's capacity to make things and
compete in world markets. There is solid
evidence in support of this view, in spite of the presumed stability of
manufacturing's share of total output."
He points to the fact that a large fraction of U.S. exports has been of
military, not consumer, items. The U.S.
share of high-tech production "has been eroding since the mid-1960s."[45] Clearly,
the United States has in some cases ceased entirely, and in others nearly
ceased, producing a good many things, as I am reminded when I see "Made in
China" inside the electric razor I mentioned earlier. It is certainly a deindustrialization from
the point of view of those who think the United States should itself
manufacture most of what Americans consume in their home market. But this is hardly the perspective of those
who are most into the globalization.
Thomas J. DiLorenzo says "the deindustrialization theory is a
hoax. Manufacturing output as a percentage
of GNP is about 24 percent today, compared to 25 percent in 1950."[46] William Niskanen pointed out at the end of
the Reagan administration that "in terms of what we produce, America is
not deindustrializing," since the manufacturing percentage of total output
actually increased during those eight years even though the percentage of
people employed in manufacturing dropped.[47] Compare this with William Greider's critical
view, which looks to the decrease in manufacturing's percentage of
The world is changing so rapidly,
however, -- with the shift first to countries with low-pay workers, but then
eventually to whichever has the lowest-cost technology -- that the key
ultimately will be held by whoever has the technology. In such a place, neither
"deindustrialization" nor issues of "productivity" will be
a problem.
We saw earlier that the United
States has shifted its research emphasis from "basic" to
"applied" technology. As the
applied research comes to fruition, this positions the United States to move
into the forefront of the low-cost production of goods. Countries and multinationals that do the
"basic" research may then have the advantage at a later stage. Since the future depends upon such things, we
see how difficult it is to evaluate whether the U.S. is
"deindustrializing." I am
inclined to think it is not a long-term issue for the United States, provided
it maintains a balance between basic and applied research (and, in line with
the main theme of this book, the essentials of a stable society).
Other self-protective measures by firms and industries
In the cost-cutting struggle to survive, firms and
industries have adopted a smorgasbord of additional strategies:
.
"Just in time" inventory management. A number of costs can be eliminated if no one
needs to maintain a substantial inventory, with products simply manufactured as
needed in the shortest possible time.
(Many consumers experience this as inconvenience, since it often doesn't
work as smoothly as management seminars say it should. Many times, goods are "back-ordered"
and really don't arrive "on time" -- at least from the consumer's
perspective. This runs counter to the
literature's optimism that firms are scrambling to satisfy the consumer and to
fit everything to individual consumers' needs.
The explanation probably lies in the difference between an imperfect
real world and the more streamlined world of conceptual models. It almost certainly lies, too, in the
market's not yet being fully adapted competitively to serving consumers in this
rapid-fire manner. The market may come
to approximate current management theory in the future.)
. "Just in time" workers and
suppliers. A later section of this chapter
will discuss the underemployment that results when firms treat human services
as transitory and contingent. This is
part of the tendency toward "virtual organizations." The concept is well illustrated by a company
one of my clients hoped to form (a plan that ended when a patent search
revealed that a Japanese company already had a patent on a device he thought he
had just invented). He planned to
subcontract out the manufacture of the device and also the marketing, so that
there was nothing for himself to do and he could continue with his
inventing. He would have no
employees. The subcontracts could be
given to the lowest-cost providers, and he could have as his profit the
difference between the sales price and what he had to pay them.
Such a firm is called a
"shamrock organization," so named because leaves spread out from a
small central core. Otto Scott quotes
Charles Handy: "Essentially it is a form of organization based around a
core of essential executives and workers supported by outside contractors and
part-time help." Handy explains
that "this is not a new way of organizing things -- builders large and
small have operated this way for generations, as have... farmers with contract
harvesting and holiday labor." He
predicts that "all organizations will soon be shamrock organizations...
because it will be cheaper." The
key is "to buy their services when you need them," rather than to
have staff on the payroll all the time. The
connections are intermittent, which is to say, "just in time." When Handy mentions part-time workers in this
connection, the reference shows how even labor, skilled as well as unskilled,
comes to be used "on demand," with no permanent tie.[49] Handy's observations are confirmed by Business
Week when it says that "while outsourcing started in manufacturing in
the early 1980s, it has expanded through virtually every industry as companies
rush to shed staffs...."[50]
. "Delocalization." This refers to the mobility of capital, which
instead of becoming rooted in a certain locality (with a workforce there) is
free to seek out the lowest-cost supplier or manufacturing location anywhere in
the world. Schwab and Smadja in the Harvard
Business Review say "the delocalization option is one that no
corporation can resist in view of the intense competition all companies are
facing."[51]
. Severe cost-cutting regardless of impact on
customers. I commented above about how
management literature speaks glowingly of individuated service to customers,
while our experience shows that consumers are increasingly frustrated by the
depersonalization of the attention given them.
The latter has led in recent years to a drastic fall in the quality of
customer service in many things as the cost-cutting pressure drives everything
in its path. Columnist Donald Williams
in the Wichita Eagle recently told how a woman at the Pagosa Springs,
Colorado, chamber of commerce had repeatedly asked AT&T to stop giving out
the chamber's fax number as its phone number.
Williams commented, "It must be economical in the short term to
hire illiterate directory-assistance people and put them in what I imagine as
plastic bubbles beneath a few generic cities.
I ask you, does this justify driving customers wild?"[52]
I recently needed to go to an
airline's office to pick up and pay for a ticket that had been reserved. It turned out there is only one office in a
city of 300,000 -- at the airport at the far corner of the city many miles from
where I live. When I went to the
airport, perhaps 75 people were lined up to check in for a flight. There was no separate clerk for any other
purpose. After I stood in line for what
seemed an interminable time and reached the front, I was told the clerks
couldn't sell a ticket until everyone had checked in who was boarding a flight
and that, therefore, I had to go to the end of the line that had formed behind
me. Since flights are leaving all day,
there is rarely a "window of opportunity" to pick up a ticket.
Needless to say, I was livid. Now, in a calmer mood, let's think about the
lessons: First, that job-cutting had led
to an almost non-existent level of customer service. Second, that organizations are often ready to
treat the public impersonally, with a resulting dehumanization; and, next, that
the employees adapt to this unblinkingly as they carry it out. Further, that the public itself is
surprisingly acquiescent. Then we notice
two important ideological implications: Market theory commonly argues--on the
basis of what the economist considers a fully rational expectation -- that
"in a free enterprise system suppliers will compete to serve the consumer,
who is, after all, king." The example
shows how this doesn't describe reality as we know it; there has long been a
gap between theory built on rational expectations and the reality of what
people do. (This may be because they
don't act rationally, or perhaps it's because their purposes aren't the ones
the theorist supposes them to be.) A
second implication is that, again contrary to free-market thinking, government
isn't the only institution that has a propensity toward depersonalization. (This is not to say that government doesn't
do it; it certainly does. Not long ago,
the federal government constructed a new building for the Internal Revenue
Service in Wichita. The public comes to
the
Perhaps businesses will at some time
discover that it isn't really most profitable to depersonalize their treatment
of customers. It is hard to imagine that
it is more profitable not to serve customers than to sell to them, but many of
today's businesses obviously think so. I
once called the main phone number of the large Penney's store in Wichita in the
middle of a weekday and found that it went unanswered after 25 rings. We all know of stores that use only as many cashiers
as are needed to keep the check-out lines 8 to 10 people deep, so that there is
always a line, no matter how many cash registers are unmanned. Often there is no clerk in a department to
help a customer with the purchase of even an expensive item. Recently, my wife and I looked for a new
car. The Pontiac dealer said the company
provided no brochures about the Bonneville model we were interested in -- which
suggests the company doesn't care much about selling its cars. The examples from everyday experience are
endless, mixed of course with delightful examples of excellent service.
.
Taking advantage of government incentives. Even as the loyalty of firms to individual
locations and to employees has greatly diminished, many firms -- again seeking to
survive, to increase the return on investment, and to cut costs--play city
against city, region against region and country against country for every
possible incentive and tax break.
Barlett and Steele say this began as long ago as the 1960s, with the objective
"to locate a new plant or relocate an existing one in whatever area would
offer the greatest tax incentives...and where employee wages and fringe
benefits could be held down the most."
They say that "now the practice has gone global."[53] Sometimes firms obtain added subsidies and
tax breaks from governments in the locations they are already in, playing even
their home city against others after threatening to move elsewhere.
This has several effects. Taken as a system, it reallocates resources
from public agencies (and taxpayers) to private firms, leading to a sort of
"industrial policy" in which all must participate. Since those public agencies have important
functions to perform, many of which aren't being carried out nearly as well as
they might, this tends to impoverish the communities themselves, even though
each is thankful when its inducements attract or hold a firm with its
employment of local residents. Frederick
Strobel says "such activity encourages the frequent movement of industry
without any regard for the social and economic disruption of the communities
being deserted" (or, we might add, for the costs to the communities that
are the "winners").[54]
. Accounting ploys. A similar process comes into play with tax
avoidance by multinationals. Barlett and
Steele tell us that "corporations constantly shift their costs to
countries with high tax rates, in order to maximize their deductions, while
they shift their profits to low-tax havens to keep tax payments down."[55]
. Trade-offs for market access. Sometimes the bargaining power is greater on
the side of a government that controls a large market that business firms want
access to. Tonelson and Fuhrmans
reported in May 1996 how "Boeing has recently spent $100 million to build
an aircraft parts plant in Xian, China, and shifted construction of 737 tail
sections to this factory from Wichita."
They say "the Chinese government made this co-production
arrangement a condition of the 737 sale... Beijing is forcing the company to
teach it how to set up a rival industry -- and eventually seize market share in
China and around the world."[56] Greider reports that "AT&T agreed to
manufacture its advanced switching equipment [in China] in order to wire up
Chinese cities for modern telephone service.
China signed similar deals with both Intel and IBM as the two companies
sought entry...." He says that
General Motors sold an Opel radiator-cap manufacturing subsidiary to a company
in India as the price of entry into the Indian market in 1994.[57]
. Tapping into "over-funded"
defined-benefit pension plans. With a rising
stock market, the stock funds underlying many pension plans have come to have a
higher value than the benefits the company has contracted to pay. Business Week says that in the 1980s
some raiders took advantage of this by buying a company and then taking the
excess pension-fund money to recoup what they paid for the business. They would terminate "an overfunded
plan, replacing benefits with annuity contracts, and pocketing what was left." Congress eventually clamped down with
prohibitive taxes. Since then,
nevertheless, "there are significant ways to use a surplus to the
company's advantage," as by not needing to put additional money into the
plan, using the fund to pay medical costs for retirees, or giving
"sweeteners" to induce early retirement.[58]
Mutual loyalties are weakened, if not
totally broken, between employer and employee.
In its discussion of the Nynex downsizing, Business Week quotes a
middle-manager who says that "corporate values that not long ago focused
on caring for employees have been rewritten so that now employees come last
after shareholders and customers."[59] This lack of caring cuts both ways. Robert Kuttner points out that "firms
hesitate to train their workers because there is no assurance that they won't
move across the street and work for a competitor. The low level of reciprocity and loyalty
between firm and employee in the U.S. industrial culture is compounded at the
management level, where executives often rise in their own careers by moving to
rival firms."[60] (It is worth observing that with many
organizations such moves may be the only way to obtain a competitive salary;
universities, for example, often build up faculty "salary inversion"
because they pay new people so much better than those who have been there for
several years. This puts a premium on
mobility.)
Amazingly, Alvin Toffler saw this as
long ago as 1970. In Future Shock
he wrote "the old loyalty felt by the organization man appears to be going
up in smoke. In its place we are
watching the rise of professional loyalty.
In all of the techno-societies there is a relentless increase in the
number of professional, technical and other specialists."[61] Toffler's point about loyalty to a profession
rather than a job is echoed by Anthony Carnevale when he says: "Perhaps
there is employment security for workers at the very core of institutional
networks, yet the volatility of the new economy suggests that even these
workers, as well as those at the periphery of institutions, are best advised to
become more loyal to their skills and less loyal to individual employers."[62] Even loyalty-to-skills will become
increasingly tenuous as skills become more and more subject to rapid
obsolescence.
What we are witnessing is a final
stage in the movement that Sir Henry Maine noted more than a century ago
"from status to contract." It
may be the last stage; as things become intolerably insecure or unacceptable, as
I believe they will, some move back to "status" (an assured or at
least semi-assured place that people can count on occupying) may be
irresistible. "Contract" and
"mobility" have been two of the central values of a market economy,
but cultural conservatives have always known them to come at considerable
social cost. Those costs are going up.
The nature of work is changing. Non-permanence, continued retraining,
increased personal responsibility, self-direction, and even a lack of assigned
physical location are all mentioned in the literature. Lars Erik Andreasen writes that "the
cycles of a working life are different now; no longer can someone assume that
when they (sic) enter a craft or profession as a young person they will
ply that trade for life. People will
have to retrain not just once but several times during a working life. Workers are also more often expected to take
responsibility for more of their work. A
decentralization of control in work is taking place...."[63]
Talking about IBM's sales office in
Cranford, New Jersey, in 1994, Business Week reported that "the 600
representatives based here have no offices; a day each week, or less, they come
in to pick up mail and see associates, and are computer-assigned a spot with
little accoutrement save one chair, a telephone, and a jack for a laptop."[64]
Underemployment: substitutes for full employment
We know from experience that it is possible for
millions of people to be unemployed.
Just the same, free-market theory projects that that cannot be a chronic
condition where supply-and-demand are free to set wages at a level that will
"clear the market" of all who want to work. More so than most other societies, the United
States has that type of market. The result
of the displacement so far, therefore, has not been high unemployment. The effects show up in several surrogate
forms that are best lumped under the heading "underemployment." (In market theory, the response to such a
description is that it contains a value-judgment that is out-of-place in a
market setting. The free play of the
market makes an "optimum allocation of resources." The fact that that is not exactly what any
given person desires is irrelevant. This
is a concept that holds sway powerfully in the United States today, but which
is actually fallacious precisely from a classical liberal point of view. That is why I will need to examine it in
detail later in the "more conceptual" parts of this book.)
We have already seen the concept of
the "shamrock organization," where only the core is permanent but
there are many contingent relationships that branch out from it. It is time now to underscore the effect on
workers. Samuel R. Sacco tells us in the
journal Managing Office Technology that "in the era of
reegineering, more companies are focusing on their core competencies and arranging
their workforces to suit that focus."
The companies call in workers as needed "without the requirement
that these just-in-time workers become permanently attached to the
company."[65] Speaking of the converging broadcasting and
telecommunications industries, an ILO symposium summary says "many
firms...rely on a diminishing core of permanent, or at least long-term,
employees and on a growing portion of contingent workers employed part-time,
temporarily or on a project-by-project basis."[66] Carnevale says "flexible institutions
need flexible workforces. Most employers
have reacted by building a workforce in layers: a core workforce with permanent
status and a peripheral workforce of part-timers, temporaries, consultants, and
suppliers who are accorded varying degrees of commitment." He said in his 1991 book that "about one
in ten American workers is now in the peripheral workforce. For example, the number of temporary help
workers has multiplied threefold since 1978, increasing from a little more than
300,000 to a million."[67] Ian Angell of the London School of Economics
was quoted recently as saying that "the future for us all is free-lance
employment on a piece-by-piece basis."[68]
This was presented in favorable
terms by J. E. Chesher in the July 1994 issue of The Freeman. He says "the worker... does not have to
punch a time card, account for his every move, or go through some bureaucratic
ritual to take an afternoon off."
On the other side, the employer "enjoys the benefit of a nearly
endless labor pool, does not have to provide an assembly plant, or pay workers'
compensation insurance and fringe benefits." In sum: "This is a mutually beneficial
arrangement"--a conclusion that follows in every case in free-market
theory about any transaction that is "voluntary."[69] We see it, however, from the worker's
perspective in a letter-to-the-editor that a recent college graduate, Nate
Davis, wrote to the Wichita newspaper: "I graduated from Kansas State
University with a bachelor's degree in fisheries biology in December 1996. My job search brought about many employment
opportunities, all seasonal positions, all without benefits and all with low
pay. My situation is not unique. A vast majority of students in fisheries and
wildlife don't have a quality, full-time job available upon graduation. Some spend a few years living paycheck to
paycheck trying to get in, but most give up and find another field."[70] He puts the blame on universities that flood
the job market with graduates for areas that aren't needed, but in the context
of this book we see that the problem has much deeper roots. Anthony Harrigan writes that
"underemployment has risen on a colossal scale. Millions of Americans have jobs that don't
provide sufficient income to support a family -- even with husband and wife
working."[71]
The underemployed are subdivided in
the literature into part-time, temporary, mismatched and discouraged:
The discussion of part-time work brings us to the type
of statistical morass that prompted me to include Chapter 5's review of the
plight of economic statistics and to indicate that we will need to rely most
heavily upon the acknowledgments by pro-market economists of the trends that
are occurring. An editorial in the Wichita
Eagle says that "according to USA Today, 18 percent of the
nation's workers are part-time" and that "use of part-time workers
has gone up 400 percent since 1982."
But the editorial then tells of the diametrically opposite perception of
the Wall Street Journal, which "argues that... overall, part-time
workers are not a growing part of the working population. The Journal...notes that most people
who work fewer than 40 hours a week do so because that is how much time they
can and want to work."[72] This denial of the problem is in line with
the conclusions of Svorny and Kaljian writing in the Milken Institute's journal
Jobs & Capital: "About 16 percent of the labor force worked
part-time 20 years ago, and part-time workers compose about 16 percent of the
labor force today." And they
support the view that much of the part-time nature of the work is welcomed by
the employees.[73] But we switch back to the other side of the
statistical argument when we read Business Week's report about Japan: "One
of Tokyo's better two-year colleges...a few years ago boasted a 98% employment
rate for its graduates. That rate has
dropped to 60%... With no social stigma attached to living off parents, many
young people go home again and just work part-time."[74] So who's right? In light of the forces we know are at work,
we will do better to go with those who perceive a problem.
Temporary work is taking an ever-larger
place, with such workers forming what is called "the contingent
workforce." In mid-1995, Business
Week said "employment in the temporary-help industry has soared nearly
50% since 1990, to 2.25 million last year.
And the professional end is growing rapidly." It told of one temporary-help supplier that
"has doubled the number of accountants it places since 1992, to 85,000
last year." As to the type of jobs
the accountants get, the report says they "earn $35,000 to $40,000 a year,
10% to 20% less than full-timers and often get no health care or other
benefits. And most don't work
year-round."[75] Economist Steven Weber of the University of
California at Berkeley speaks of "the fastest growing category of worker
in the US--the temporary worker."
He explains that "the growth of temporary employment mirrors the
development of spot markets and just-in-time management of other factors of
production." In the fall of 1996 he
wrote that "the number of temps in the US has grown nearly 19% in the last
three years -- and is projected to increase another 60% over the next
decade."[76] There is now even a National Association of
Part-Time and Temporary Employees, which the journal Managing Office
Technology says "reports that this industry grew by 361 percent
between 1982 and 1994, and, by 1995, five percent of the total labor market was
comprised of temporary workers." We
are told, too, that "while the bulk of temporary jobs currently is in the
service and trade sectors, professional and manufacturing sectors are catching
up."[77] The spectrum includes manual labor; American
Enterprise told in late 1995 about how "the Dallas branch of
Industrial Labor Service Corporation is the largest employer of temporary
manual laborers in the city -- 650 jobs offered on a typical day," and
that "some 15 firms in Dallas supply temporary manual workers."[78]
As with virtually all of these developments, some commentators offer explanations that seem to deny the underlying secular trends. Thus, The Economist's "Survey of the World Economy" in September 1996 observed about both part-time and temporary work that: "True, the share of part-time jobs has increased in most industrial countries, but...the main driving force has been women's often-expressed preference for working part-time, not some sinister breakdown in the labour market. The OECD's latest Employment Outlook also produced figures to show, contrary to conventional wisdom, that in most countries there has been no significant increase in temporary jobs."[79] The problem is how to reconcile these points with a news report such as the one from San Francisco about a Pacific Bell supervisor, Linda Corbett, who was "severed involuntarily" and then called back six months later as a "contract worker."[80] A Wall Street Journal article quotes the executive vice-president of a national temporary-help firm who says "the business that's really growing is downsized workers who are hired back through us."