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| project description | NEW EMPLOYMENT POLICIES FOR THE EMERGING POST-INDUSTRIAL LABOR MARKET In conjunction with the William T. Grant Foundation, IEE convened a group of academics and representatives from business, labor, government and foundations to discuss the need for new labor market policies in the emerging economy. The workshop, held in 1997 in New York City, focused on identifying programs and proposals that go beyond education and training and address demand-side issues of job quality and career opportunity. The workshop started with an overview of the problems surrounding work in the new economy. Participants then discussed in detail the various labor market solutions that have been proposed or are currently being implemented. The initiatives that were considered form a diverse group, and include union-run programs, industry trade group and multi-employer alliances, worker-owned businesses and organizations, job-matching agencies, and public-sector interventions and regulations. The discussion focused on the problems and barriers encountered in implementing the initiatives, as well as the legal and legislative reforms that are required, if such initiatives are ultimately to succeed. IEE has produced a report that examines the issues raised at the workshop and also highlights several of the program discussed (see publications below). American workers have witnessed striking changes in their jobs and wages during the last three decades. Wage inequality has grown, job stability has declined for vulnerable workers, and the chances for upward mobility have deteriorated among low-skill workers. These trends continue to the present, despite a strong economy and a tight labor market. Forces deeper than the business cycle are at work, in particular the globalization of markets, the development of new technology, and changes in wage-setting institutions. These are not short-term effects that will disappear once the transition to a postindustrial economy has been completed. Thus the very character of the American workplace is changing – in how work is organized, in how workers are matched with jobs, and in how wages and the terms of employment are set and who has voice in that determination. In the past, employment was modeled on the life-long job. Ideally, workers were guaranteed yearly raises and informal job security. In return, employers got a committed workforce and a customized training system that automatically prepared workers for jobs higher up the career ladder. But starting in the mid-1970s, the terms of this trade-off began to deteriorate for American employers. In order to reduce costs and gain flexibility, some firms have adopted high-performance work systems that can benefit workers as well as raise productivity. Other firms, however, now forego the motivation and firm-specific knowledge of long-term employees. They instead minimize the number of full-time employees, reduce training of entry-level workers, and rely on the external market for skilled, educated workers. In the process, the traditional paths to upward mobility are broken down. The new employment relationship – while successful in terms of restoring America’s productivity and competitiveness – has not been beneficial to a growing number of workers. The policy question then becomes: What kinds of public, private, and community-based policies are required to reverse the growth in inequality? Or more concretely, what kinds of institutions, laws, and regulations are needed to improve worker welfare, while at the same time maintaining the flexibility that employers are demanding? To date, policy makers have largely focused on education and training as remedies. This is the traditional approach of workforce development, but by itself, it does not suffice to address the myriad problems currently in evidence in the labor market. The supply-side approach must be balanced with demand-side policies that ensure workers access to quality jobs, economic security, and employment stability. As a society, we have not yet created the institutions, laws, and regulations to buffer the effects of flexible employment. What would such a demand-side labor market policy look like? In our minds, there are four specific goals that a comprehensive national policy should try to achieve:
These four goals are straightforward, but designing labor market policies to meet them is not. What are the best strategies for pursuing these goals, and which are feasible for widespread implementation? Are there policies that can increase the quality of employment for workers and at the same time benefit firms and raise productivity? In order to answer these questions, we have examined a range of new programs and proposals from around the country, analyzing their strengths, weaknesses, and feasibility. Two strategies emerge as the most effective in meeting the above goals, although they are also the hardest to implement. First, joint initiatives between employers and unions have the greatest potential to yield a "win-win" situation, boosting both firm productivity and worker welfare. But such initiatives depend heavily on unions (or other forms of worker representation), since in their absence employer participation and collaboration can be difficult to come by. Even when collaboration is arguably in the long-term interests of employers, short-term considerations often militate against their participation. Second, legislative and legal reform is an equally important strategy. Any attempt to improve the condition of workers in today’s employment system needs to be supported by new laws and regulations in one or more of the following areas: raising the wage floor, creating portable benefits, and reforming unemployment insurance and labor laws. For example, next to wages, portable benefits are the most important issue for workers today, yet the current structure of healthcare and pension benefits is an obstacle to portability. Similarly, only a third of the unemployed currently receive unemployment insurance benefits, and in particular, temporary employees, part-time workers, and contractors are often not eligible for benefits. A third model that holds promise is that of worker-based organizations. These organizations pool resources among workers who do not have strong ties to an employer and thus lack access to training, unemployment benefits, and group rates on health insurance. While this strategy gets around the problem of employer participation, bringing it to scale would be difficult. There are few legal structures to nurture the formation of such organizations, which also face the challenge of being competitive in the open market. Finally, intermediary labor market institutions simply focus on making the free market more efficient. The goal is to provide better information about job openings and labor supply, and then to coordinate the process by which the two are matched, thereby reducing the costs of hiring and job searches. This approach is relatively easy to implement but limited in its power, because it does not directly address problems of job instability, low-wage jobs, and lack of mobility opportunity. In short, broad institutional and legislative changes are necessary if we are to see significant improvements in wages and employment stability. While such changes are not likely at present, recent events are encouraging and suggest that we may be entering an era of greater sympathy for national policy initiatives. In the meantime, it is important to pursue the kinds of policy developments that we have discussed in this report. It is particularly important to continue work on joint union-employer initiatives, since these ultimately hold the most promise. The more examples that can be found of employers and unions working together to improve both firm performance and job quality, the easier it will be in the future to convince other actors that these efforts deserve more than moral support.
Full report: Bernhardt, Annette D. and Thomas R. Bailey. June 1998. Making Careers Out of Jobs: Policies to Address the New Employment Relationship. (40pp.) (Document No. Bk-6) $3.00. Non-technical summary of the report: Bernhardt, Annette D. and Thomas R. Bailey. December 1997. Making Careers out of Jobs: Policies to Address the New Employment Relationship. (4pp.) (Document No. BI-17).
Institute on Education and the
Economy
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