America's long-booming economy is spawning jobs at a furious pace, driving
unemployment down to levels not seen since the flush times of the 1960s.
Thanks to technology, trade, and sound fiscal and monetary policies, we
seem to have found the holy grail of economics: full employment without
inflation.
Yet for surprisingly many Americans, today's swelling prosperity also
means dwindling job security. That's because the new economy is destroying
jobs at only a slightly less feverish pace than it is creating them. Indeed,
many U.S. companies are firing some people even as they hire others to
adapt to fast-changing markets and reorient their operations around work
teams, information technology, and the Internet.
In 1999, U.S. firms announced 675,000 layoffs - up from only 111,285
in 1989, reports Challenger, Gray & Christmas, a Chicago consulting
firm. What is true of jobs is also true of enterprises. According to the
Progressive Policy Institute's New Economy Index, between 1994 and 1995,
695,000 businesses were born and 587,000 died, yielding a net growth of
108,000 new ventures. By comparison, in 1975 there were only 337,000 business
births and deaths combined. While the Index finds a strong correlation
between all this "creative destruction" and faster economic
growth, it also notes, "The faster pace of job churning has undermined
the predictability and stability of old economic arrangements and has
increased the insecurity faced by workers."
Every investor knows
that if you want bigger returns you have to be prepared to take bigger
risks. But most Americans are not accustomed to playing casino capitalism
with their jobs. As Business Week economist Michael Mandel has observed,
our labor markets are beginning to resemble our financial markets - volatile,
risky, exhilarating, and frightening. For many Americans, especially tech-savvy
younger workers, the shake-up of the old occupational order opens exciting
vistas. For many others, especially older, less educated workers in shrinking
blue-collar industries, it ushers in an "era of permanent anxiety."
Economic change has always created losers as well as winners. What's different
today is that information technology (IT), "high performance"
work organizations, and globalization are rewriting the rules of economic
competition. In the process, they are dissolving the social bargains that
historically have buffered average working families against the cruelties
and instability of industrial capitalism. After World War II, public policies
and informal understandings between big business, big labor, and big government
combined to promote mass upward mobility, smooth out business cycles,
and cushion families during economic downturns. But the old business-labor-
government paternalism can no longer deliver economic security in exchange
for workers' loyalty. No matter how enlightened a corporation, how militant
a union, or how caring a government, they can no longer guarantee anyone
a particular job for life in today's churning global marketplace.
This newfound sense of economic vulnerability in large part explains
the backlash against globalization that torpedoed last year's World Trade
Organization meeting in Seattle and now imperils efforts to open China's
markets to U.S. goods and services. While most Americans favor expanded
trade and realize that global integration cannot be stopped, many also
believe that their government is not doing enough to equip ordinary families
with new tools for economic success and security.
They are right. The power of global markets has grown stronger while
the ability of big institutions, including government, to cushion working
families from economic blows has grown weaker. The resulting imbalance
in the way the New Economy distributes its risks and rewards demands a
fresh and imaginative public response.
Patching holes in an industrial-era safety net won't do. In fact, it's
time to junk the "safety net" metaphor entirely and replace
it with the image of the trampoline. What the New Economy demands is a
system of supports that not only catch people when they fall but propels
them into new jobs and careers. Instead of a new top-down distribution
scheme in which the winners in global competition compensate the losers,
we need to create public-private systems to move more Americans into the
New Economy's winner's circle.
We should start by recognizing that the requisites of economic security
have changed dramatically over the last two decades. If security once
meant stable jobs and unchanging careers, it now means lifelong learning
to ensure that workers can continually acquire skills that command good
wages. Instead of depending on big institutions, today's workers need
to be more self-reliant, more flexible and more mobile. And although middle
class status has been measured mainly in decent pay and benefits, working
families increasingly aspire as well to ownership of wealth-producing
assets.
How can we move more Americans into the global economy's winner's circle?
Here are three key steps: 1) Create a comprehensive public- private system
of lifelong learning. As computer networks permeate every sector of the
economy, as "high performance" workplaces based on teams and
information-sharing replace the old corporate hierarchies, and as the
nature of work itself shifts from routine functions to more general problem-solving,
the demand for highly educated and skilled workers is rising. And since
career paths today are far less stable than before - most job growth occurs
not in the familiar Fortune 500 corporations but in fast-growing "gazelle"
firms less than five years old - education and training can no longer
be seen as something that happens "once and for all." If we
cannot restore the promise of lifetime employment, we can offer everyone
access to lifelong learning. As Italian Premier Massimo D'Alema, a former
communist, put it during a DLC Third Way forum last year, in the New Economy,
"skills are the highest form of social protection." Company
strategies are shifting from the old paternalism - "we'll take care
of you" - to a new ethic of worker self-reliance: "we'll help
you to take care of yourself." Consider IBM, once the prototype of
white-collar aspiration, with close-cropped "organization men"
dutifully climbing the corporate career ladder until retiring with a generous
company pension. Forced by fierce competition to downsize and restructure
itself for greater speed and agility, "Big Blue" now offers
workers a different deal. Its "career fitness" plan helps employees
acquire new skills and aim for better jobs within IBM or even at other
companies. In this way, the company gets a more capable and flexible workforce;
its employees get skills they need to enhance their future employability.
As this example suggests, America really has two job training systems.
One, operated by employers, provides relevant job skills but does not
help everyone. The other, run by government, is comprehensive but inspires
little confidence among employers or workers. Government can use various
policy levers to organize a lifelong learning system that combines the
best features of the two systems. For example, it can offer workers low-interest
loans for education and training. It can change tax policy to assure that
all workers have equal access to taxpayer-subsidized training. Instead
of offering firms unlimited tax deductions for training top executives,
we should adopt a non-discrimination rule that requires any firm providing
tax-free training to its managers and professionals to make comparable
opportunities available to all its employees. And it can foster industry-led
"regional training alliances" that get employers to invest collaboratively
in upgrading the skills of the local workforce.
2) Build a "rapid reemployment" system for U.S. workers. We
also need to transform our lackluster job training and employment programs
into a market-driven "rapid re-employment" system. In 1998,
President Clinton signed the Workforce Investment Act (WIA), which despite
a modest price tag (about $9 billion) contains the seeds of a radical
redesign of labor market policies based on such Third Way principles as
choice, information, and accountability. Using information technology
to break down bureaucratic barriers, it creates a nationwide system of
one-stop centers where workers and businesses can access all training
and employment services at one location. WIA expands workers' control
through individual training accounts that allow them to choose the training
services that best suit their needs. Finally, it requires report cards
on organizations that supply training so that workers can make informed
choices based on performance rather than promises.
Passing WIA, however, was only the first step. To realize its potential
for creating a market-driven system of labor exchange, we need to take
additional steps. First, expand its funding to accommodate the increase
in dislocated and disadvantaged workers seeking training. Second, use
the extra money to encourage the states to take full advantage of WIA's
flexibility to break down bureaucratic barriers rather than reproducing
the old public system. Third, link unemployment insurance to the rapid
reemployment and training system and make it easier for part-time and
low-paid workers to qualify for support when they are laid off through
no fault of their own. Fourth, develop public- private alliances that
help companies craft training regimes for "incumbent" workers.
A key challenge in designing the system is to avoid duplicating or competing
with the private sector. For example, the number of people looking for
jobs on-line has exploded, as more companies post their openings on sites
like CareerBuilder.com, Monster.com, and Jobs.com. The emerging one-stop
system should focus on those least likely to take advantage of private,
on-line labor exchanges, such as dislocated and low-skilled workers, including
welfare mothers.
3) Promote worker empowerment and ownership. The essence of a progressive
strategy for expanding the winner's circle is to enable working Americans
to share in the rewards as well as risks of global competition.
Government, for example, can use tax policy to encourage businesses
to adopt performance-based compensation and equity-sharing to give all
workers - not just executives - incentives to do their jobs better as
well as a chance to share in their company's success when they do. When
wage-earners change jobs, they should have the same control as top executives
over the principal sources of family security such as health insurance
and retirement income. For example, we can shift control of medical insurance
from employers to workers by offering the latter the option of using tax
credits to buy their own coverage. Similarly, we should replace the government's
insanely complicated welter of tax-exempt retirement savings programs
with a single, universal pension that workers can take from job to job.
If the New Economy demands greater economic self-reliance, it also promises
to liberate working Americans from reliance on big institutions for their
livelihood and security. It presents a chance to move from work that numbs
the mind and strains the back to work that stimulates thought and affords
continuous learning. It promises to help many Americans regain the independence
and dignity of pre-industrial workers, with new opportunities to become
owners as well as wage-earners.
To realize this promise, we should replace policies that transfer wealth
with public strategies that help every American family build financial
assets. For example, PPI has long championed Individual Development Accounts,
which match and subsidize the savings of very-low-income Americans. We
should embrace President Clinton's proposal for retirement savings accounts
to encourage low-income families to save. Finally, we should create personal
savings accounts funded by a small portion of the Social Security payroll
tax, to promote private saving for retirement and enable all Americans,
not just a privileged investor class, to reap higher market returns.
Nearly half of U.S. households report holding some stocks or bonds.
The richest half of the population owns most of these capital assets;
what's needed now are progressive policies that extend the same opportunities
to everyone else.
In the 20th century, progressives heaped calumny on market capitalism
as a soulless system for exploiting workers and searched vainly for an
alternative. In the 21st century, progressives should instead embrace
a new vision of democratic capitalism, based on the adage attributed to
former Democratic Sen. Russell Long of Louisiana: "The only problem
with capitalism is that there are not enough capitalists."
