No Help Wanted

As Each New business statistic gives us hope that the long recession is over, one anxious question keeps intruding: When will the job market come to life? The flat answer is, it won't.

The notion that better sales and profits will naturally lead to ample employment is outdated. Nor can public-works projects make enough difference. In today's world, a number of conditions combine to prevent that from happening. There may be months ahead when the U.S. employment numbers appear to edge upward--usually as the result of statistical quirks. But those will be erratic detours along the downward slide.

The recession merely focused a spotlight on a calamity that waited 20 years in the wings before coming onstage. This show is going to have a long run. Not even the Depression quite compares with what we face. A new name will have to be invented for the global evaporation of full-time jobs that has gathered force since 1973, when a decline in worldwide industrial employment foretold the future. The ominous shadow of that 1973 figure has lengthened steadily. Now the combination of forces has brought it into full view.

One day unemployment figures will trigger a realization that the industrialized world has for two decades been putting itself out of business. An ancient fear has come true: People are being replaced by machines. They're being replaced at the worst possible time, when other trends are already pushing upper- and middle-incomers down a slope.

For years, as workers grew more expensive and civil rights actions made them harder to get rid of, they became less desirable to employers. Machines seemed like better buys in the blue-collar job market. By now, the custom of laying off workers has spread even to highly compensated white-collar jobs. Companies look for every possible reduction of their work forces.

The fear of losing one's job has become a dominant emotion not just for blue-collar workers but also for affluent employees who never imagined themselves remotely vulnerable. Upward mobility has already yielded to downward mobility.

One common nightmare is of a long layoff followed by a return to work at a job that pays less.

Why did the candidates who squared off this past November talk of budgets, schools, aid programs, taxes, health care, AIDS and the environment, with only a parenthetic mention of jobs? Rearrange the familiar numbers game, the candidates seemed to say, and our job market will automatically rebound. Play with the taxes, adjust the spending and we'll be back on the growth track.

Not so. Such airy optimism assumes a nation of earners, taxpayers and buyers. Instead, we are making ourselves into an economy of nonworkers who are soon to be nonconsumers. Most Americans are still employed at this moment, but job security is a dying ember as employers rush to dispose of people. Companies yearn to become lean and mean. A century ago, labor leader Samuel Gompers said that the greatest sin against labor is a company that fails to make a profit. But isn't it equally true today that the greatest sin against business is a company that fails to create more jobs? How else can business find customers? Why else should it deserve them?

Who says this? Have the leaders and the journalists not heard it? And why have the people not been told?

The signs have been obvious for at least eight years. The threat was recognizable long before that. But leaders and journalists hear so many conflicting statistics from the economists that their vision becomes blurred. Besides, what political candidate would consider it a judicious message to tell the voters: "Every major trend of our time will destroy jobs"? With growing populations everywhere, the world needs hundreds of millions more jobs. With far more women in the labor force, the number of people looking for work has increased. And with countries trading much more actively, the scourge of unemployment is rarely contained by borders. There is nowhere to run. Although the problem is global, it is more menacing in the U.S. than in countries of Europe that have stronger unemployment benefits and health care, says Wouter van Ginneken, the chief editor of the United Nation's World Labor Report. The U.S. jobless are caught off guard.

Meanwhile, instead of adding jobs, companies are striving to cut the numbers. First automation and now corporate restructuring are eliminating full-time work. Commercial success and national success have depended on industrial modernization--too often a euphemism for firing people and substituting machines. The trend accelerated when U.S. labor costs rose too high. The rationale was that we might not create jobs for people, but we would create work for the machines that make our products. Somehow, that will, as it has in the past, lead to more employment.

Economist Wassily Leontief, who won a Nobel Prize in 1973, created a model that suggested our era may not be like those of the past, that modern machines may be so overproductive as to displace humans. Everyone congratulated him and then did nothing about his findings. Trouble is, the machines won't buy our goods. Without purchasing power, people can't buy the machine-made goods. And so the system is grinding down.

I remember a conversation eight years ago at the Geneva headquarters of the International Labor Organization. An agency of the United Nations, the ILO has 162 member countries and is the world center of information on employment practices and prospects. Because I was heading a study of the world economic outlook funded by several U.S. government departments, Francis Blanchard, then the ILO's director general, asked me to meet with six of his principal deputies. As I explained my reasons for having written a New York Times series called "Tinderbox for Trade: The Looming Worldwide Job Shortage," one of the deputies told me:

"All of us are deeply concerned, of course. Not everyone in this organization is as pessimistic as you are about the future of employment. Some think the future will be much worse than anything yet imagined. Others believe that technology will somehow create great masses of jobs and put us into a favorable position by the mid-Nineties. And then there are the neutralists--probably the majority--who simply say we'll just have to wait and see."

What happens, I asked on that day eight years ago, if we find out that the pessimists were right? Even the great countries that would normally lead the way would be too weak to mount a meaningful program. Nor would there be time to head off a political and social catastrophe.

It now seems that the pessimists were right. The great countries are, indeed, seriously weakened. Many former lenders to the world have become heavy borrowers. And the sources of funds are drying up.

Today, under its new director general, Michel Hansenne, the ILO reports a particularly ominous fact:

One of the most disturbing aspects of employment in the industrialized countries is that unemployment has been persistently high even during periods of sustained economic growth. This is a serious reversal. In the era after World War Two, western European governments felt threatened if unemployment rose above two percent. Nowadays it seems impossible for many countries to bring unemployment below six percent.

What really happened during all the years of sustained economic growth? What was growing? Automation. The ILO and other employment analysts estimate that more than 40 million new jobs per year must be created worldwide to avoid what is seen as unemployment's inevitable companion--social chaos. But the world is going the other way, failing to hold the line in total permanent jobs.

Here again, it is not the figure of the moment that counts most. It is the likelihood that the next major move will be in the wrong direction. For even the slightly brighter spots are doomed to darken. Enthusiasm over Russian and eastern European moves toward capitalism will fade as the economies turn their sluggish state-owned businesses into private ones. Armenia, once a prosperous member of the Soviet Union, now suffers 70 percent unemployment. Asian economies have had more job growth than the rest of the world in recent years. But their prosperity was enhanced by export sales. Where will they sell their products in coming years as their customers consume less? And here at home, the specter that should have been heeded in the Eighties is now growing. As our sales to the rest of the world languish, unemployment will go even higher. We never pay enough attention to the fact that higher unemployment figures abroad represent lost customers. If their jobs are inadequate, how will they pay for our products?

Even before the recession of the past two years, unemployment and poverty were galloping worldwide. As noted in the The Wall Street Journal, "about 30 percent of the world's work force is jobless or underemployed, an International Labor Organization report shows. Some 100 million people are unemployed." Some 700 million others earn no more than $2.50 a day. This applies not only to traditional problem economies, such as those in Africa or Latin America, but also to leading industrial powers. The nations of the elite 24-member Organization for Economic Cooperation and Development have 30 million unemployed persons and harbor a scary trend toward more precarious employment. In the UK, for example, more than 30 percent of jobs do not involve full-time employment (and the figure is rapidly approaching 40 percent). Half or more of all new employment in France, Germany, the Netherlands, Luxembourg and Spain is based on temporary contracts.

In the United States, laying off workers has become almost a knee-jerk reaction of management. First the business pages and now the front pages (continued on page 90)No Help Wanted(continued from page 80) feature daily stories on what firings are planned by major employers.

By the end of January, IBM, Boeing and Sears had announced the layoff of 100,000 workers. In Washington, D.C. a new postmaster general took office and immediately announced a 40 percent reduction in the district's labor force. The Deutsche Bundespost, Germany's post office, plans to shed 34,000 jobs by the end of the decade. Automatic sorting machines will take over most of the work.

Plans such as these are often made to sound as if they were evidence of managerial skill: "United Technologies Corporation revealed a restructuring plan leading to a $1.1 billion cost reduction by 1994," reads one report. "The company expects to eliminate 13,900 jobs, or seven percent of the worldwide work force, including a 12 percent reduction in executive jobs." Apart from its decline in orders, UTC has simply decided that its bottom line could be improved by streamlining operations. It will have no reason to bring many of these people back. And that's 13,900 human beings, many of whom won't be good customers to anybody in the next few years.

The future impact of a case such as UTC is invariably ignored by analysts because the statistics will not show up until the layoffs occur. In 1991 General Motors announced plans to trim 74,000 people from its work force over several years. But the majority of those displaced people have yet to show up in government numbers.

Perhaps the most dismaying truth is that unemployment is much greater than statistics show. Official figures omit discouraged former workers no longer recorded as part of the labor force, part-time workers who would like to work full time, those for whom unemployment insurance has run out, domestic or transient workers, school dropouts, persons in training programs because they can't find jobs and persons pressured into early retirement. Accurate unemployment figures could be 50 percent to 300 percent higher than reported.

But will this streamlining of work forces and improving of bottom lines bring stronger companies and stronger economies? Initially, perhaps. But will that last when employed consumers are being turned into welfare recipients? Even welfare is running out.

It's been argued that firings do not necessarily lessen the total amount of buying power in the world. Companies spend money, too, it is contended. What is not paid out in salaries is paid in dividends and in investment in more machinery. However, with a shrinking consumer base, there will be less need for new machines resulting in fewer total sales and smaller dividends. John Bregger, the Bureau of Labor Statistics' key man on current employment analysis, cites Okun's Law (named for economist and presidential advisor Arthur Okun), which states that even a constant number of jobs creates more unemployment, since the population keeps growing. The gross domestic product has to increase two and a half percent a year to keep unemployment from worsening.

A stagnant or shrinking economy means more firings. More people will have less buying power. If we stood consumers against a wall and machine-gunned them, we could not more surely kill off the true source of new jobs.

Who is responsible for permitting the simple arithmetic of labor costs to become an epidemic? There is more than enough blame to go around. If today we can criticize business management for its firing frenzy, we can blame organized labor for the years it passed up the chance to make itself a partner in a reasonable balance. That spurred the determined search for automation.

Liberal politicians, too, joined with labor in pressing for a higher minimum wage. As they succeeded in winning these concessions for employees, they laid the groundwork for some of the workers' worst future woes. The minimum wage climbed to where few companies wanted to employ a completely unskilled teenager. The all-important chance to get practical experience and to build a career was denied to many future workers. In 1989 black youths in New York City had unemployment rates of up to 45.6 percent.

As terrible inflation swept most major economies, labor again shot itself in the foot by being more aggressive about wage increases. The increasing cost of labor accelerated a search for ways to produce without people. Labor's greatest competition--automated machinery--had seemed too costly up to that time. In the face of fat raises and fringe benefits, the previously prohibitive investment requirements did not seem so daunting and automation suddenly became competitive with the workers.

The pattern was set wherein most of the responses to our economic problems are irrational or undesirable:

• The number of unskilled jobs in which youths are apt to find first employment is declining. A big part of the adult generation in coming decades will have little chance to learn work discipline. Even the communist economies in eastern Europe--economies that claimed to have full employment--were forced to admit that they were encountering similar problems in putting young workers into jobs. Those countries have been left with a lot of youths whose work attitudes seem deplorable to their supervisors. The problem, in short, goes beyond borders and is not curable by ideologies.

• Women workers are more likely to be unemployed than men. This shows up wherever unemployment is highest. It seems to indicate how far the balance will tilt as joblessness worsens.

• In new high-technology companies that are outperforming the rest of our economy, the top jobs and salaries overwhelmingly go to male workers.

• Big multinational companies, long regarded as a great force for the creation of jobs, turn out not to be. This should be no surprise. Such companies tend to concentrate on ways to use a lot of machinery and relatively few workers.

•

Hopeless? Of course not. But how soon a solution begins to form depends on when governments and the special interests behind them put aside their short-term agendas and act as if we all needed to reach a common good. When survival is at stake, the impossible becomes the imperative. Nations are accustomed to adopting that kind of attitude in wartime.

There should be a labor--management pact, whether overt or tacit, to declare that there can be no winners or losers in this crisis. Only partners.

Companies will need to demonstrate their leadership by recognizing that creating jobs is one of their major roles. New strategies for upgrading efficiency by blending automation with human labor should be part of management's duty. Such efficiency should be defined as making finer goods, not just more of them. The ability to attract, train and hold productive people with reasonable compensation is a more responsible skill than quick-fix job cuts (continued on page 162)No Help Wanted(continued from page 90) and reliance on temporary help.

Workers will have to accept the inevitability of lowering their expectations in return for stability. Sheer necessity would force it in the end, anyway. This will often mean reduced wages, but they will, it is hoped, be accompanied by more reliable health and pension packages. (Europe is already responding to its stresses in a way that suggests our future. Scottish, Portuguese and Austrian workers have attempted to lure factories from France by offering costs as much as 25 percent lower. In one case, workers even renounced the right to strike.) The frightening period of joblessness we face will gradually condition workers to do whatever they must to get in step with market forces.

•

Unfortunately, the will on both sides to choose compromise over confrontation may take years to develop.

Perhaps to facilitate that process, President Clinton could convene another economic summit where he would assemble chief executives and labor leaders to entertain the following questions:

• How much of the joblessness is attributable to machines? Would more human input improve the quality of production?

• Can a smaller work force realistically handle a larger work load?

• What part of the reduction in permanent jobs derives from the use of temporary or contract workers? What are the drawbacks to using such workers?

• How much unemployment is entirely the result of the recession? How much rehiring can we expect after a pickup?

• Do most companies think their size will be shrinking for years to come?

The Senate Committee on Labor and Human Resources could hold hearings at the same time and get expert testimony on these points. Heads of consumer groups might also be asked to testify on whether a world of more machine-made products and less personal service reduces the quality of life. For example, there are complaints about stores that have shelves filled with products and no employees to help customers locate them.

From all the insider comments, we could deduce the answer to the critical question: Are many employees really superfluous in today's America? If a better job can be done with far fewer people, we might have to accommodate extreme joblessness. Even so, government would have to fight unemployment with creative economic devices, just as it has supported farm prices for much of this century in order to keep farmers going. We would have to invent new laws to provide steadier incomes for more people, despite employers' wishes to be rid of them. Here are some possibilities:

• Speed the inevitable wage decline that accompanies any big rise in new hiring. Allow companies to be exempt from the minimum-wage requirements for some young or unskilled workers. Chances are, we will soon see devices emerging that legalize the exemption of the minimum-wage law. The officially fixed level will not be rolled back soon. There will first be government programs with special names to glamourize the fact that some young workers are indeed being paid less for their time than the minimum wage. Private companies may then be allowed to adopt similar formulas for workers who get special training. Activists in the White House, Labor Department and Congress can engineer this once it is finally recognized that a low steady wage beats no wage at all.

• Make companies contribute to a modest benefit plan even for their temporary or contract workers. After earning some specified amount per year, such workers would begin to accumulate portable pensions, a reasonable level of health benefits and some unemployment pay during layoff periods. By providing minimal quasi-employee benefits to temporary workers, companies could retain some of their payroll savings without devastating the economy.

Governments should offer cash incentives to companies to encourage and directly supervise on-the-job training. It has been repeatedly shown that training the lowest level of unskilled and unemployed workers accomplishes little. Even when these workers master new skills, the economy seldom has new jobs to offer them. Giving additional skills to the employed has a far better chance of expanding both production and job opportunities. Many employers conduct meaningful training programs, especially for younger workers. But companies should consider upgrading job skills for all workers, as employers can often deliver vocational instruction better and more cheaply than can schools.

• A new arrangement of capital gains taxes should greatly increase the tax advantage of holding stocks for substantial lengths of time--say, for more than five years. This could be a way to make shareholders understand the need for management to put long-range planning ahead of quarterly and annual results. And that, in turn, would permit managers to install employment and training programs meant for the future.

• As another, and distinctly offbeat, example, the U.S. government might set the pace for other nations by reversing an antilabor policy it carried for some 20 years. The Investment Tax Credit policy, which was introduced in the mid-Sixties and continued into the Eighties, encouraged companies through tax incentives to modernize equipment. In effect, the companies were paid a lot of money to buy machinery that would reduce the need for people. Nobody ever put it in those terms, of course. It was all hailed as a creative way to increase efficiency and boost productivity. But the ability to produce more with fewer workers must lead to layoffs.

Why not turn that principle around and give a human employment credit? In its simplest form, it could mandate a ten percent reduction in the normal corporate tax to any company that added five percent to its work force. Buy all the gadgetry you want, but your tax credit would come from hiring people doing productive work.

Not every company would stop high-tech additions and cuts in employment. Many would weigh the merits of the tax saving and pass up the chance. There would still be plenty of modernization. The scales in its favor would merely tip back a little. The fight against this on Capitol Hill would be rough. Many economists and other analysts would object. Moving toward an emphasis on human jobs would strike them as a backward step, lowering our national productivity. But greater productivity is a blessing only when there is a demand for more goods and services. Not so when the markets are already awash in world products. For example, when there is a surplus of farm goods, we do not try to help farmers by urging that they produce more. If foreigners kept using more robots, would they not take away markets from the plodding production and higher costs of poor American workers? Briefly, perhaps, but more of our workers would be on payrolls, more of theirs on welfare. As a thriving market of prosperous consumers, the U.S. could lean on its foreign partners to adopt a pro-people law similar to our own. They have a fear of unemployment, too. By aligning their laws with ours, we could all gain.

•

Realistically, we probably will not implement enough of these kinds of actions until we live through some truly agonizing times. Automated machinery is much like the nuclear bomb: Once let loose into the world, it is hard to put back into its box.

During the time that will pass while all the players learn the need to compromise, you may face the greatest challenge of your life. If you are old enough, you have been conditioned to rely on a traditional job and system that could guarantee your basic living, during your career and after it. But that's not so now.

Job security is less real now than it has been in your lifetime. Employers used to encourage worker loyalty. There are now many companies that warn employees not to take long-term employment for granted. Your planning has to be based on self-reliance, not on a paternalistic employer.

The old employer-employee relationship is dead. "It is becoming standard management practice in U.S. corporations to cut permanent staff to the absolute minimum number of persons required to continue profitable operations," Dan Lacey, the late editor of the newsletter Workplace Trends, told a congressional committee. "Nobody wants employees."

As much as 30 percent of the U.S. work force is now considered part-time or contingent, according to a National Planning Association expert. Instead of hiring their own people, companies turn to temporaries, consultants and contractors. These take over entire departments--mail room, public-information office, quality control, maintenance operations, real estate. In other words, companies try to save money by renting workers instead of owning them. The companies owe workers nothing beyond the few months of their contracts.

•

Stay alert to signs that your company is joining the march to replace employees with outside consultants. Survey competitive firms that might offer more stability. If need be, line up to become one of the consultants yourself.

Maintaining your standard of living after you stop work may be a precarious job. Billions of dollars' worth of unfunded pension plans have the federal Pension Benefit Guaranty Corporation deeply worried. General Motors alone has $11 billion in pension liabilities that is not funded or insured. The figure is growing rapidly--more than 30 percent in the past year--while the regulator's ability to bail out pensions wanes.

If your company is building an annuity to provide you a monthly check upon retirement, remember that the annuity may be based on the performance of a shaky insurance company that holds the money. Check the insurer's annual report to assess whether or not you can rely on your retirement pay.

The certainty of Social Security is also lessening. Fewer young workers may pay new cash into the system, so the availability of rising sums needed to support retirees are questionable, especially after baby boomers start to retire in 2010.

With these formerly assured forms of income in doubt, your mastery of personal investment strategies becomes more important. No one should presume to pinpoint for you which assets you should buy and hold. There have been no precedents to help forecast the years ahead. The only thing we can be quite sure of is that we are approaching a drastic reshaping of our society.

"Accurate unemployment figures could be 50 percent to 300 percent higher than reported."