June 2006 – US employment trends force rethink
If you asked any mother or father
about their hopes and aspirations in life, one
priority for most would be to see their children
growing up in an environment that could provide
every opportunity to reach a higher standard of
living than their parents.
It made me sit up, therefore,
when Tom Kochan, a professor at the MIT Sloan
School of Management, confessed a real worry last
week that without a remodelling of the labour
market and the institutions that serve it “we
will be the first generation in a long time that
will leave our kids in a worse position than our
parents left us.”
Prof Kochan was discussing themes
in his latest book, Restoring The American Dream,
A Working Families’ Agenda for America.
Although, as the title suggests, the book is focused
on the US, he believes that labour market reforms
are going to be needed across many more western
Most employment mechanisms, he
argues, were created in a different era when families
were supported by a single breadwinner. This was
a time - before the advent of the so-called “knowledge
economy” - when the majority of people worked
in manual jobs, often in factories.
In this world of labour-intensive
manufacturing, economists would use terms such
as the “lump of labour”. Today there
is no lump and the word “labour” itself
seems antiquated in markets characterised by service
jobs, organisational skills and know-how.
The transition from labour-intensive
to knowledge-intensive work, often involving job
losses, restructurings and, in the US, cuts in
both wage rates and benefits, he argues, have
undermined “deeply held values of justice,
fairness, family and work.”
He writes: “Somehow, American
business, labour and government have lost sight
of their responsibilities to workers and their
Many working people, he notes,
are no longer in control of their destinies. Some
face real uncertainty over the prospect of a pension
at the end of their careers. The decline of trade
union power and influence means that the independence
of workers has been compromised. What some in
trade unions refer to as employee “voice”
is much weaker than it was.
As I have reported in previous
columns, in recent years employee satisfaction
has not improved in line with economic improvements.
Nowhere is this more apparent than in the US.
A survey carried out by the Conference Board in
2003 showed falling satisfaction since the mid
1990s among workers in the US with their pay,
health insurance and retirement savings.
While full-time employment prevails
it seems that in relative terms it is returning
less than it was in pay, working conditions and
other benefits. This has led to increasing pressure
on American two-parent families that on average
increased the hours they devoted to paid work
by about 15 per cent between 1985 and 2000. Today
the parents in these families are working more
than 3,800 hours a year, the equivalent of two
40-hour a week jobs.
At the same time many US workers
have seen significant declines in their retirement
plans. The overall value of pensions, writes Prof
Kochan, has fallen by $7bn since 1990 while health
insurance costs have spiralled leaving 45m Americans
without coverage. While benefits have decline,
pay has stagnated. “The median US wage earner
in America today is in about the same position
as he or she was a generation ago,” he says.
Then there are the 34m US citizens
classed as “working poor”, earning
too little to raise themselves out of poverty.
Prof Kochan goes on to list various other groups
of employees who have not faired well since corporate
re-engineering policies scythed through workforces
during the 1990s. These include the information
technology workers who lost jobs in the dotcom
downturn and subsequent moves to take many technology
Declining trade union power,
he says, means that collective bargaining can
no longer move workers and families in to the
middle classes as they did in the past. An estimated
40m workers would join a union were they given
a chance but widespread management opposition
has curbed the kind of union organising that would
have happened two or three decades ago.
A report published by The Commission
on the Future of Worker Management Relations –
a policy study group set up during the first Clinton
administration – found that some 10,000
people a year were being dismissed from their
jobs for trying to organise themselves.
In this respect American labour
laws offer far less protection of workers’
rights to join a trade union than those in the
European Union. No wonder an MIT student, responding
to one of Prof Kochan’s papers wrote: “I
can’t help but conclude that every generation
is ‘living to work’ a little more
and “working to live’ a little less.”
Prof Kochan believes that politicians
and economists can no longer treat employment
and the demands of daily life as separate concerns.
“We have to start by taking seriously the
need to reduce the stresses on working families.
This requires seeing work and family for what
they are today, namely tightly coupled issues,”
Seen from a historical perspective
his arguments make sense. Just as full time working
at workplaces outside the home, supported by a
single male breadwinner came to characterise work
in the industrial era, so more flexible patterns
are beginning to intercede to today.
It is easy to forget that factory
working has a history of less than 250 years.
Before that time many jobs were home based. In
1820 there were about 250,000 handloom weavers
in England, making cloth in their cottages. By
1856 their numbers had dwindled to 23,000. In
the meantime mass employment began to dominate
textile manufacturing. In the US manufacturing
began to proliferate in the late 19th century
creating the same trends.
Today far larger numbers of women
have entered the workplace creating new social
issues. Some women are delaying starting their
families. Childbirth has declined all over the
Faced with a continuing squeeze
on pay and gradually increasing pressure on working
hours, we should not wonder that family sizes
are falling. Employers need to learn again the
lessons discovered by Henry Ford in 1913 when
he stepped up the wages of his employees from
an industry average of $11 a week to $5 a day.
The move was heavily criticised but the ripple
it created across industry created the spending
power and thus the market for thousands of mass
Today the reverse is happening
in manufacturing. As Prof Kochan points out, many
of the service jobs replacing the dwindling number
of blue collar jobs do not pay as well as the
manufacturing jobs that have been displaced.
To deal with these issues he
says that governments will need to instigate more
policies that promote the integration of work
and family life. The education system will need
to adjust in order to deliver lifelong learning.
Employers will need to become more accountable
to employees who need to recover their collective
voice. Pensions and benefits will need to be portable
and transparent. Why can’t every employee
see – and top up if they choose to do so
- their individual pension pots? In the US, as
in the UK, politicians have been slow to respond
to these changing needs.
The danger is that those at the top of
companies and at the head of other institutions will fail
to heed the reality of declining well being among large
sectors of society. If good jobs are becoming scarce the
market must find new ways to recognise, reward and promote
good work. People still need to earn their living. That
remains an economic and human imperative.
Restoring The American Dream, A Working Families’
Agenda for America, by Thomas A Kochan, is published by
The MIT Press.