JOBS
Kuttner, Bob
This article is one in a group of six that will appear in a volume entitled ALTERNATIVES: PROPOSALS FROM THE DEMOCRATIC LEFT, edited by Irving Howe. Copyright © 1984 by the Foundation for the...
...By enticing millions of workers over 60 to take life a little easier (but to continue productive work), this would open up millions of jobs for younger workers...
...otherwise, we are simply reallocating an inadequate supply of real income...
...All of this, to be sure, will require the expenditure of tax dollars, and in the short run will increase public deficits...
...war production plants produced 128,000 airplanes...
...Parents would be able to be less frantically job-obsessed during the years when their children need them most...
...Two obvious categories are people over 60 and parents of young children...
...We also need to devise a means to redistribute some of the increased purchasing power that results from productivity gains—and turn it into both good jobs and the production of socially desired goods and services...
...As Wassily Leontief has pointed out, the failure to redistribute the gains of automation could condemn the society to a paradoxical condition of rising productivity and rising destitution...
...A second illustration is the domestic content legislation sponsored by the United Auto Workers...
...Further, the mismatch between the swollen labor force and the number of jobs created a classic supplyand-demand problem: managers could now attract workers for lower wages...
...Comparative advantage, in practice, worked very much for the industrial nations, because terms of trade were very favorable and because the industrial nations got to export the high-value-added products...
...In macroeconomic terms, a transfer is a transfer is a transfer...
...Women, no less, learned 38 blue-collar production jobs...
...Remember...
...Besides the obvious problem of not enough jobs, there is an equally distressing if more subtle problem of not enough good jobs...
...During World War II, the U.S...
...What might an American version of this approach look like...
...Active Labor Market Policies RETRAINING, BY ITSELF, IS 110 remedy for 10 percent unemployment...
...Unions have a more difficult time bargaining for wage increases at a time of high unemployment...
...Unless radically new policies are developed, unemployment is likely to remain close to 9 percent for the next decade...
...People with no prior experience in factories came off the farms to take good jobs in war plants...
...today it accounts for only one in eight, and that share is steadily dropping...
...As real wages dropped, for both men and women, more and more women poured into the labor force, putting more downward pressure on wages...
...If textile production is labor-intensive, and Haitian labor is paid at one-tenth the rate of American labor, the ball game is over unless we are prepared to dig a moat around the American domestic market...
...Until the last two decades, underdeveloped countries served mainly as sources of raw materials for the products of advanced industrial countries, and as markets for a portion of those products...
...Technology and capital have become mobile...
...But unions have had little success in organizing secretaries, bank clerks, or even computer assemblers...
...While it is unlikely that we will experience enough productivity growth to rely solely on work-sharing to solve the unemployment problem, it is nevertheless an indispensable piece of an overall program...
...But it will be 30 years before these effects subside...
...There is a well-proven and quintessentially American device for accomplishing this redistribution and translation of purchasing power into jobs...
...At this writing, the Dow Jones is roaring along at close to 1,300 while unemployment persists at 9 percent...
...For the first time since the industrial revolution, we seem to be entering a period when technology could truly wipe out more jobs than it creates...
...First, they replace American jobs...
...and instead of turning out computer-generated blueprints, CIM transforms his design directly into parts, and ultimately products...
...As the unhappy experience of the first two years of the Mitterrand government showed, Keynesian reflation in one country is just as difficult as "socialism in one country...
...But by passively submitting to a comparative advantage based on ever cheaper labor—all in the name of some idealized notion of free trade— we beggar ourselves...
...Under this system, workers are encouraged to take advantage of retraining opportunities, not just to upgrade the quality of the work force as a whole, to ease inflationary shortages of skilled workers, and to match manpower supply to manpower demand, but to take up slack during periods of high unemployment...
...True enough...
...What this literature fails to make clear, however, is how low is down...
...The nearly 50year-old structure of labor law is in desperate need of overhaul...
...Suppose the government offered to replace every subway car older than ten years...
...Government procurement, in contrast, creates the market...
...Under this approach, workers would have a very small deduction taken from their paychecks, which would be matched by the employer and by the government on a one-third/ one-third/one-third basis...
...For example, the new field of "ComputerAssisted Design/Computer-Assisted Manufacturing" or CAD/CAM will transform the function of draftspeople...
...Japan currently has a trade surplus in industrial products of over $100 billion...
...Production work happens to pay well mainly because of the efforts of strong unions...
...There is now a cottage industry of business-school experts, advising that America's chief problem is that we've priced ourselves out of world markets...
...Thus the purported gains of free trade may be illusory...
...There is a thin layer of skilled technicians in between, but it is surprisingly small...
...But comparative advantage today is increasingly based on whose work force will work for the lowest wages, or who is cleverest at appropriating the newest technology and at penetrating the other country's markets...
...Here's one variation: Redistributing Productivity Gains SOME 11 MILLION AMERICANS are out of work, but millions more are working longer hours than they really want to...
...But there was a substantial degree of planning and coordination by the government...
...During the past ten years the postwar consensus, in which big corporations grudgingly tolerated labor organization, has been unilaterally abrogated by management...
...with unemployment at 10 percent and the electronics industry offering a relatively good set of working conditions and fringe benefits, the microelectronics industry has no trouble recruiting workers, despite the relatively low wage structure...
...To be sure, it is in everyone's interest to help the Third World develop...
...A proposal: Every parent, male and female, living with a minor child, shall be entitled to five years of full-time pay for half-time work...
...If shirts manufactured in Taiwan are cheaper than shirts produced in North Carolina, American consumers gain...
...they also subsidize the rebuilding and improvement of capital equipment...
...For many business conservatives and "Atari Democrats" alike, the remedy is productivity...
...Things haven't quite worked out that way...
...It was the Wagner Act...
...This would accomplish two things...
...Finally, we have a version of the 1930s-style Keynesian problem of unemployment breeding 32 more unemployment and putting downward pressure on wages, especially at the low end...
...Conversely, when 11 million people are out of work and industry is producing at below 70 percent of capacity, the genius of the market for allocating capital isn't worth very much...
...It has now dropped to about 38 percent...
...The procurement can be targeted in areas of high unemployment, or to particular industries, or to create new forms of ownership...
...And we accomplished that, even though half of what we produced was made in order to be blown up...
...During the first six months of 1942, the War Department entered more orders than the entire value of the Gross National Product of 1940...
...Of course, there is nothing inherent about production work that requires high wages, just as there is nothing inherently low-wage about a service economy...
...Unfortunately, "industrial policy" has been defined largely as the subsidy or provision of capital, not the subsidy of production...
...Neither the drop in family income nor the conventional structure of career ladders permits it...
...it would benefit the American economy by keeping several hundred thousand highwage production jobs at home...
...Several junior colleges have introduced CAD/ CAM technician's curricula to retrain a generation of draftspeople...
...The federal deficit we have today is not sufficient to stimulate the economy out of recession, because it is a deficit born of tight money, lost tax revenues, and stagnant national output—not a deficit associated with a program of economic stimulation...
...Laid-off auto and steel workers have been encouraged to enroll in retraining programs, only to find that either no jobs exist at the other end, or that the jobs that are available pay a fraction of their former wage...
...Moreover, only about 24 percent of the cost of building a car is labor costs in any case...
...It depends entirely on whether the idled factors of production are reemployed, and at what activities...
...In the case of a one-parent family, this would provide a far superior alternative to welfare...
...One could go a big step further and create an agency that would enter into contracts whose purpose was not just the development of technology, but the creation of useful goods and services and the redevelopment of regional economies suffering high unemployment...
...The single most important piece of public-policy underpinning to the postwar, high-wage social contract was not job retraining through CETA or even minimumwage legislation...
...If yesterday's steelworker is today's cashier at McDonald's, then the entire economy is producing less value-added per worker, and workers as a group have less disposable income...
...Make up your own wish list of socially useful products that provide jobs...
...Note that "protectionism"—far from leading to "subsidized stagnation"—encouraged the textile industry to modernize and stay competitive...
...and Europe eventually negotiated a "Multifiber Arrangement"— a frank exception to the GATT free trade regime—which recognized that every industrial country wanted to retain a domestic textile industry...
...Textile exports have continued to grow and new countries, such as China, have become vigorous competitors...
...America's problem, we are told, is a lack of competitiveness: our workers are overpaid and our technology is obsolete...
...At present, American labor-market policy consists mainly of paying unemployment compensation to the unemployed, on the assumption that their joblessness is temporary...
...Studies by U.S...
...Thus the productivity paradox: the more the American industry becomes productive in order to compete in world markets, the more Americans are thrown out of work...
...And whatever advantage does result from cheaper Japanese labor is almost canceled out by shipping costs...
...But as long as the comparative advantage of the newly industrializing countries is based on repression of free trade unions, authoritarian governments working with authoritarian employers, and rock-bottom industrial wages, we have every right to limit imports...
...Department of Labor economists suggest that wage inequality has been widening since at least the late 1950s...
...In the civilian equivalent of a war, government contract translates into useful products, so there is less of a problem of too much demand chasing too little supply...
...When output expands at 13 percent a year, the economy can afford a lot of suboptimal use of capital...
...Korean shipbuilding workers are only half as productive as Swedish workers, but they work at one-eighth the wages...
...When 11 million or 12 million people are out of work, they are a drag on aggregate demand as well as consumers of transfer payment dollars...
...If American industry can actually design and produce guided missiles on railroad tracks for the sole reason that the U.S...
...Armed with this umbrella, the American textile industry began to improve its technological advantage...
...Simple arithmetic dictated that 3 million more people had no jobs at all...
...In addition to the pressures of demographic shifts and foreign competition, unemployment persists because of revolutionary changes in technology...
...it pays its workers about $200 a month...
...If public policy is floundering on the issue of high unemployment, it has barely even noticed the more difficult issue of job distribution and content...
...Under the multifiber agreement, imports of textiles from cheap-labor countries were permitted to grow, but at an annual rate of growth limited to 5 percent...
...All of this income transfer represents a resource that would be used for retraining and for wage subsidies, rather than just for subsistence...
...With CAD/CAM, a draftsman turns out blueprints by computer...
...Don't Mourn, Organize...
...34 A Coordinated Worldwide Economic Stimulus Program THIS PROGRAM must be coupled with a managed trade regime...
...The world's most modern steel mill is currently in Nigeria...
...Copyright © 1984 by the Foundation for the Study of Independent Social Ideas, Inc., and to be published this spring by Pantheon Books, Inc., with whose kind permission it appears here...
...It is, unfortunately, the Pentagon...
...One promising variation is the use of retraining vouchers and wage-subsidy vouchers...
...There is one caveat to this approach...
...The young people happened to be alumni of the baby-boom generation...
...Despite the entry of millions of women into the labor force, wage cuts have outpaced the additional income brought into the family by working women...
...The closest thing to a "civilian Pentagon" proposal in the political mainstream is Senator Kennedy's call for a domestic technology agency, which would let contracts to private industry...
...With 9 percent of the labor force out of work, real wages decline, especially at the low end of the work force, which can be more easily replaced with the unemployed...
...If productivity gains are good for the competitiveness of American industry and good for American consumers, but bad for American workers (who are the same people as consumers between 9 AM and 5 PM), then the 64-billiondollar question is how to socialize productivity gains, so they truly benefit everyone...
...Most European countries rely on similar policies...
...Suppose the government offered to finance the development of a commercially viable system of decentralized photoelectric domestic power generation...
...During the war, GNP expanded at an unheardof rate of 13 percent per year...
...During the war we trained 300,000 skilled machinists, a training feat that has never been equalled...
...Average household income has actually fallen by 11 percent since 1973...
...The world since the late 1960s is radically different...
...If we are serious about an industrial policy and a commitment to full employment, an entirely different approach to retraining is required...
...There is room for only one or two Japans...
...Translated to American proportions, this would equal over 4 million jobs...
...Polarization of Wages THE EROSION of the middle of the labor market, while closely related to the problem of high structural unemployment, is a distinct cause for concern...
...Neither process produces useful goods for the domestic civilian economy...
...This approach has succeeded in stabilizing the unemployment rate at 8-9 percent, but it has not reduced it much...
...During World War II, a good deal of the research and development was public (or under contract to universities...
...Suppose we adopt a supplemental earlyretirement incentive program...
...Under this approach, any worker idled because of technological advances would be given a voucher that was worth, say, half of five years' pay to that worker's next employer...
...it was the war...
...But what happens when textile production is heavily automated...
...After 1973, this effect was compounded by the slowdown in real economic growth...
...In theory, all the purchasing power generated by growth "has to go somewhere...
...Economic planners in every country are urging policymakers to emulate Japan: reduce unemployment by targeting capital investment on export winners...
...It would be good social policy in its own right...
...In a sense, • paying workers to build the implements of war is tantamount to paying them to dig up old bottles...
...The Pressure of Foreign Trade THE HIGH unemployment/low-wage syndrome has been compounded by the effects of international trade...
...Replacing labor with capital may not increase profits...
...This new career opportunity is likely to be short-lived...
...Since the late 1960s, each recovery of the economy from recession has produced a higher unemployment rate than the previous one...
...In the year 1943, U.S...
...And very, very few fathers have taken advantage of working spouses in order to spend more time at home...
...At peak periods of joblessness, as much as 5 percent of the entire Swedish labor force is in some training or make-work program under the sponsorship of a labor-market board...
...Despite the vogue for retraining programs, it makes no policy sense to concentrate on the skills of workers when the real problem is the shortage of good jobs...
...Whether production is accomplished in the public sector or through contracts with privately owned industry is optional...
...If America could grow at a rate of 13 percent a year on war production (much of which was blown up), just imagine how fast we could grow if that output went for useful goods and services...
...The original Social Security Act of 1935 was motivated partly by a desire to make life more comfortable for the elderly...
...it merely assures that American purchasing power will provide at least some American jobs...
...But even a concerted recovery program does not solve the problem of imports from lowwage areas...
...By 1980, the American industry could boast the world's highest rate of textile productivity...
...government is willing to write a check to pay for them, it is safe to assume that American industry can produce almost anything...
...rather, they exported capital...
...The present labor movement surely has its warts, but a look at the sweep of progressive legislation over the past 40 years suggests that the labor movement is, if not the only game in town, the indispensable ally for the other players—the civil rights, environmental, consumerist, feminist, and other progressive movements...
...For 30 years, it has been fashionable in conservative circles to aver that "It wasn't the New Deal that cured the Great Depression...
...But at the 80th percentile—the top fifth—earnings increased by 206.7 percent...
...Increasingly, high-tech machines tend themselves...
...is often condemned as an irrational form of beggar-thy-neighbor...
...The high-tech field is also a classic dual labor market in another sense...
...The challenge, therefore, is to find civilian counterparts to World War II...
...There has been little practical experimentation with redistribution of work and leisure, especially on this side of the Atlantic...
...Several independent empirical studies by an ideologically diverse assortment of economists have calculated that the rapidly growing service occupations have polarized pay structures, which are growing steadily more unequal, while only the declining manufacturing sector offers a distribution of wages that is both relatively egalitarian and stable...
...It is axiomatic that government procurement wastes some money...
...Because of the complex relationship between trade unions and the Democratic party, CETA-type programs have been designed not to compete with union labor, or even with nonunion full-time career workers...
...The multifiber arrangement, and its success in stimulating technological advances, suggests another counterintuitive conclusion about the relationship of technology to trade: ultimately, automation is the solution to a temporary comparative advantage based on cheap labor...
...Demand for millions of blue-collar workers with new skills to tend the machines of the high-tech economy simply does not exist...
...To a lesser degree, it is also NASA...
...We also have a parallel system of paying meanstested (welfare) subsistence benefits to the jobless who do not have a history of gainful employment or an ability to take full-time work...
...This sounds like utter heresy, but there are already numerous practical examples...
...Suddenly we can again compete with Haitian textiles on the basis of price and quality, because our capital is more efficient...
...But idle resources waste more money...
...The United States is now facing a shortage of experienced "A" machinists, in large part because about two-thirds of the senior machinists all reached retirement age about the same time-40 years after World War II...
...The civil aircraft and the automobile and the chemical fertilizer industry that roared into full production to meet the postwar demands of returning veterans and their families were not produced by plants and machines that had to be built from scratch...
...It is now open season on labor unions...
...Construction and production work accounted for one job in four in 1950...
...Suppose the government offered to buy a microcomputer for every classroom in America, subject only to the proviso that all of the production be carried out domestically...
...The minimum wage, a force for egalitarian pay structures, was once 54 percent of the average wage...
...World War II was also a formidable humancapital policy...
...Public-works jobs of the usual variety are not likely to replace the disappearing middle of the American labor market, or to solve the long-term problem of technological unemployment...
...The French have applied the boldest version of this program, and it has been only a mixed success...
...but it was also stimulated by the need to get older people out of the labor force to open up jobs for younger ones...
...Eventually, the accumulated capital would be sufficient to permit the worker to drop to a three-day week at age sixty, at full pay...
...This huge bulge in the labor force, of course, is a one-time phenomenon...
...They consume, but do not produce...
...We are still living off many of the technological advances seeded by World War II defense contracting—synthetic rubber, the tranSistor, early computer science, America's early lead in civil aviation, and, of course (for better or worse), atomic energy...
...Deficits that reflect high unemployment and shrunken tax bases create a self-perpetuating recession that will never cure either itself or the deficit it perpetuates...
...As recently as 1960, this trade accounted for only about 5 percent of the Gross National Product...
...America's current job problem is, unfortunately, not the result of a cyclical downturn in the economy that will be remedied by the upswing of the business cycle...
...In theory, feminism and the family with two working parents was supposed not just to give women a ticket of entry to the male rat race...
...Government should once again be the ally of labor-organizing that it was during the New Deal, and labor unions themselves should be encouraged to take on the new issues of work quality, work organization, the influence of technology on work, as well as that most "un-American" labor issue of all: how capital is to be invested, and for what...
...It would be a way of sharing available work, in a manner that also serves the critical social goal of shoring up family life...
...nor can female labor-force participation rates jump to near-male rates more than once...
...but there is more than one form of development...
...But the literal definition of higher productivity is more output for less labor input...
...workers...
...During the 1970s, an unprecedented number of women and young people entered the labor force...
...The American Electronics Association predicts that the demand for skilled technicians will grow by only about 15,000 a year...
...The benefit would be capped at, say, 100 percent of the first $12,000 of income, and 70 percent of the next $12,000, so that millionaires could not drop to half-time work at government subsidy...
...Tank lines became car lines...
...Studies have shown that Japanese cars built in America are built with every bit as much labor productivity as those produced in Japan...
...The most difficult problem of all is the interaction of trade and technology, as they affect the labor market...
...It is simply not realistic to expect that the welfare states of Europe and North America, whose social contracts are based on decent wages, will permit low-wage workers to impoverish their own populations through unlimited imports...
...But as the Third World continues to develop, it is politically unrealistic to expect that it will develop primarily by dominating Western markets and displacing Western workers...
...If employing people to build bombs and guns and planes to blow up half of Europe could energize a rapid economic recovery, production of anything can energize a recovery...
...The problem again is the familiar productivity paradox: automation produces more output at less labor input and thus makes "everyone" better off—but in the meantime it throws people out of work...
...q 41...
...Obviously, a full-employment commitment is the beginning and end of any progressive economic program...
...The research shows that the 20 fastest growing jobs pay annual wages that average fully $5,000 less than the 20 occupations in steepest decline...
...Suppose the government guaranteed a public 39 schoolteacher-pupil ratio of 1:15...
...For a variety of reasons, public-works jobs have been shortterm and relatively low-paid...
...Somewhere, the money must exist to finance these new income transfers...
...A good illustration is the trade in textiles...
...Protection," which is increasingly difficult to define (industrial policy is a form of protectionism, isn't it...
...Let me now turn to some of the real solutions to the structural jobs problem...
...War production produces a Keynesian "big bang" in several complementary respects...
...Highly skilled and trained workers, and professionals and executives, simply had more bargaining power and more prospects of full-time work than their lower-skilled workmates at the bottom of the pay scale...
...the loss falls mainly on the worker who loses his job...
...So building Japanese-designed and -capitalized cars in the U.S...
...As a consequence, there was a historical moment when nations on both sides of the Atlantic could enjoy high real growth, rising real wages, and a costly welfare state...
...As the economy becomes more and more productive, and fewer and fewer workers are needed to produce society's material goods, 37 other wrinkles could be added, like periodic paid sabbaticals for everyone in the work force...
...They depress worker purchasing power and consequently depress aggregate demand...
...The contributors to the book are Michael Harrington, Barbara Ehrenreich and Frances Fox Piven, Robert Lekachman, Gordon Adams, and Irving Howe...
...Unlike Pentagon contracts, the purpose of these projects would be to stimulate the development of technologies and products with civilian applications...
...More subtly, technology seems to be wiping out high-paid production jobs, and eroding the middle of the labor force, with severe consequences for America's future as a middle-class society...
...But it would do so without further enriching the rich...
...With close to a million high-wage auto and steel workers on layoff, those few jobs will not begin to fill the gap...
...Unlike Social Security, which is becoming a fiscal drag because it is a pay-as-you-go system, let's prepay our new early-retirement program, on the model of an Individual Retirement Account...
...The polarization of wages is also compounded by shifts in the distribution of occupations...
...Just around the technological corner is something called CIM, which stands for Computer-Integrated Manufacturing...
...Fewer than 1 percent of computer assemblers are currently unionized...
...The women were motivated partly by feminism and then, as real wages and living standards fell after 1973, many more by the need to maintain household purchasing power...
...indeed, this is not even a recognized policy issue in the United States...
...Keynes himself, in a celebrated passage, observed that if the government buried old banknotes in bottles and paid jobless workers to dig them up, it would be preferable to keeping them idle...
...By 1944, the peak year of war production, the Keynesian prod of war production had so stimulated the economy as a whole that civilian output alone exceeded the economy's entire output of 1940...
...the baby boom will not be repeated for a very long time...
...American superior technology was not a significant threat to Europe's labor market, because the dollar was extremely overvalued in relation to European currencies...
...That is far too limiting, and also too accepting of "supplyside" assumptions...
...But every country cannot solve its unemployment problem by exporting it...
...By the same token, the usual liberal proposal of massive public works or public employment also fails to solve the problem...
...Before the Japanese Ministry of International Trade and Industry let American semiconductor manufacturers sell their products in Japan, MITI extracted a series of coproduction agreements, which served to accelerate the development of Japan's domestic semiconductor industry...
...As recently as 1960, only 30 30 percent of married women with children worked...
...it accomplishes the same Keynesian jolt to aggregate purchasing power...
...With CIM, the engineer who designs a part sits at the computer terminal himself...
...Even this formidable accomplishment, however, was insufficient for the burgeoning labor force, which grew by over 24 million...
...The supply-side nostrums—subsidizing the cost of capital and lowering the taxes to be paid on anticipated profits—may stimulate some new productive investment (if entrepreneur is reasonably sure of a market for the product...
...The postwar society contract defied the Marxian picture of reserve armies of unemployed workers and falling real wages, mainly because each political economy existed in splendid isolation...
...After a series of de facto moves, the U.S...
...Whether the gain outweighs the loss is settled empirically, not axiomatically as the free-trade purists would have it...
...This has been the strategy of nations such as Brazil with respect to the auto industry for two decades...
...it was supposed to allow men the luxury of some female values—nurturing, care-giving, etc...
...Most studies suggest that the Japanese comparative advantage in automobiles is mainly the result of better management, more efficient use of technology, and superior design35 not cheaper labor...
...High technology," broadly defined, is expected to generate only about 6 percent of the new jobs that the economy will create over the next decade...
...Not only does a World War II-style jump in public procurement put people back to work, train them at high skills, and boost purchasing power generally...
...This new reality puts a whole new cast on the Ricardian concept of comparative advantage...
...Henle and Ryscavage found that at the 20th percentile of earnings (the bottom fifth), male workers increased their earnings by 130.6 percent, in current dollars...
...But it can go—and is going—to provide jobs overseas, while the jobs that it provides at home are not the kind that a broad middle-class society needs...
...A factory economy, particularly when factories are unionized, produces millions of relatively highwage production jobs...
...Government contracting has created technological marvels...
...Beginning in the early 1960s, textile imports from low-wage countries were threatening to wipe out the U.S...
...Our economies today are simply too interdependent to pursue their macroeconomic policies in isolation...
...The causes include demographic shifts, the pressures of foreign trade, technology, the decline of the public sector, and the effects of a worldwide labor surplus on domestic jobs and wages...
...ordnance production became chemical fertilizer production...
...Conventional economics does not factor into the same equation the efficiency gain of trade and the output loss of idle physical and human capital...
...Second, they put pressure on employed American workers to moderate their wage demands...
...European exports were not yet a threat to America's high-wage labor market, because American technology still dominated most basic industries...
...By subsidizing wages directly (rather than through tax gimmickry), this approach would send the dislocated worker to the head of the job line...
...It tells the contractor exactly what to produce, but leaves it to the contractor's ingenuity to figure out how to produce it...
...NASA is much like the Pentagon as an instrument of production, in that the output it stimulates is almost entirely removed from the civilian consumer economy...
...And the Japanese made sure that the 15 percent represented aeronautical technology that Japan wished to acquire...
...But anybody who thinks that, economically, World War II was anything other than a massive dose of Keynesian demand stimulus is kidding himself and the public...
...Government procurement is also an excellent planning tool...
...As the parent of two school-age children, my other nominee for oppressed worker is the twoincome family...
...Neither make-work nor share-work, by themselves, get the society to full employment with maximized output...
...There is new credence in the idea that "excessive" wages are themselves responsible for high unemployment, although the Great Depression and Keynes's work on aggregate demand should have laid that idea to rest...
...It is worth remembering that textile production, even in the U.S., is one of the lowest-wage manufacturing industries, despite a unionization rate of about 20 percent...
...A book-length study, Services: The New Economy (1981), by four colleagues of the well-known manpower economist Eli Ginzberg, concluded that the service economy in general exhibits polarized wages, while the declining production and construction sectors offered relatively higher wages and a wage structure that was far less skewed to the extremes...
...In other words, the state has to devise a way to create the effective demand for commodities and services that have "use-values," but for which the private market does not generate effective purchasing power...
...government mobilized more purchasing power than the country had ever seen...
...This approach is far superior to import quotas (the Reagan ad hoc remedy), because it gives the American consumer unlimited access to superior foreign-designed technologies and products...
...More recently, Japan informed Boeing that before Japan Air Lines would order the new generation of planes, Boeing would have to sign an agreement that 15 percent of the valueadded would be produced in Japan...
...In a Youngstown or a Flint, a prospective new employer would find thousands of skilled workers all holding job vouch40 ers that would add up to a subsidy of half of the employer's labor costs for five years...
...Surely, we can't expect American workers to lower their wage levels all the way to standards of a dollar an hour and less, which prevail in much of the Third World...
...it may simply permit the firm to hold its own against its competitors, for in a highly competitive industry profits are held down and efficiency gains passed along to consumers...
...Call it an ERA, for Early Retirement Account...
...Fully twothirds of the growth in the labor force during the 1970s was accounted for by women workers...
...Anybody who thinks this inevitably leads to lemon products has never flown in an F-15...
...To the extent that it reallocates purchasing power and reduces involuntary unemployment, it stimulates aggregate demand, which in turn stimulates the growth necessary to provide the real resources to finance the program...
...They built plants in Europe, which provided jobs for European workers and transferred technology to European industry...
...If Honduras has a climate suitable for growing bananas, and Canada has plentiful reserves of aluminum 31 ore and cheap hydroelectric power, it would be patently absurd for Canada to attempt to grow bananas or for Hondurans to dig for bauxite...
...The frequency, duration, and timing of these could be adjusted periodically, to provide a fine-tuning device to maintain full employment...
...As the American work force is radically transformed in response to changes in the mobility of capital and the technology of industry, a strong labor movement is crucial to defend decent wages, to broker these transformations so that they are not paid for only by workers, and to provide a long-term constituency for progressive policies generally...
...A service economy needs engineers and executives at one exI treme—and millions of secretaries, fast-food workers, sales clerks, waiters, computer operators, and janitors at the other...
...The newly exporting Third World countries, by combining high technology with low labor costs, contribute in several respects to unemployment and falling real wages in the United States...
...It also happens that the one sector of the manufacturing economy that is growing, microelectronics, shares many of the characteristics of the service economy...
...The retraining approach is also sadly inadequate...
...Defense production, however, has a patriotic aura about it, which imparts to it all sorts of virtues that enable conservatives to overlook the intimate involvement of the government...
...Some technical innovations of value to the civilian economy have resulted from NASA projects, but they were all incidental...
...Moreover, procurement contracts do not just allow industry to make profits and hire workers by meeting current orders...
...The United States, and Western Europe to a surprising degree, were able to build domestic economies based on high wages, because each was substantially insulated from pressures from low-wage areas of the globe...
...Nor has the multifiber arrangement beggared the Third World...
...There is substantial evidence of long-term structural changes in the American economy, which suggest that we can sustain a "recovery" of sorts with unemployment rates scarcely touched...
...By definition, increasing productivity means fewer jobs, unless the economy is growing very rapidly...
...In the case of two-parent households, there would be a total of ten years when at least one parent was in the home at least half-time...
...As these newly industrializing nations become more productive, their principal customers increasingly will be their own domestic markets...
...Once nations reach approximately the same general wage levels, free trade need not undermine Western living standards and Western social contracts...
...As the Great Depression made clear, falling real wages create a classic Keynesian problem as well...
...The payroll deductions necessary to build up to that sum over a 30-year period, especially given the miracle of compound interest, would be quite trivial—less than $200 a year...
...The domestic content bill is the exact counterpart of the development strategy long used by Japan itself...
...But a government contract—a guarantee to purchase what is produced—is what really works miracles...
...Today, we are congratulating ourselves that the 1983 "recovery" temporarily attained a growth rate of 5 percent, and economists debate whether such a rate can be sustained...
...If one country reflates by itself, its imports rise, a balance-of-payments crisis occurs, and the attempt at reflation selfdestructs...
...Consider the World War II experience...
...Its engineers and computer programmers typically have at least one college degree, and the prevailing wage is in excess of $30,000 a year...
...Unfortunately, most have been in the military sector, which is almost totally isolated from the discipline of consumer markets...
...And of course it retained jobs for more than a million U.S...
...Without full employment, workers who do have jobs lose their bargaining power to demand fair wages, and the state incurs the cost of supporting all those who have lost jobs...
...To some extent, of course, this system packs a Keynesian punch...
...Almost anything that can be produced in the United States can be produced on a hightechnology island of the Third World, at wages that are absurdly low by American standards...
...much of the production was private...
...The World War II example immediately throws into relief the fallacy of the conservative claim that government allocation of capital must necessarily retard output because it deploys capital "less optimally" than the market...
...But it is also possible creatively to deploy government contracts to energize new, dynamic civilian sectors, and not just by buying new generations of products...
...The "gain" to the firm may be invisible, depending on the competitiveness in the particular industry...
...Since the late 1960s, however, Third World countries have increasingly acquired branch plants of Western multinational firms, and have begun developing their own export industries...
...Even among mothers with children under six years old, today nearly half hold jobs...
...Because of its own rapid pace of automation, microelectronics 33 production is not expected to be a mass source of new jobs, good or bad...
...If the average worker earns $12,500 a year, twofifths of that times five years is a comparatively small sum—only $25,000...
...income will be more equitably shared, but we will lack the money to maintain full-time living standards for parttime work...
...But if the American textile worker displaced by the foreignmade shirt remains unemployed, or is employed at a lower-value-added occupation, then the economy as a whole may lose...
...Quite the contrary...
...But coupled with a commitment to full employment as a fundamental policy goal, active labor-market policies are very useful...
...They were built in converted war-production plants...
...Japanese wage rates are lower than American ones, but it takes fewer worker hours to build a Japanese car...
...For most of its advocates, industrial policy turns out to mean, in practice, some form of development bank or equity capital agency...
...Moreover, according to research by the economist Barry Bluestone, it is precisely the high-wage sector of the manufacturing economy that is shedding jobs most rapidly...
...Third World competition has given American industry a whole new rationale for resisting unionism and decent pay scales...
...As long as only Japan was pursuing this strategy, it had no trouble exporting its unemployment...
...Growth is of course desirable, but if more and more output requires fewer and fewer human workers, and if a growing share of workers producing for American markets are located abroad, then growth by itself won't solve the problem...
...It puts the unemployed back to work, and at relatively high-paid jobs...
...They promote technology transfer and, more important, assure that products sold in a particular country generate some jobs in that country...
...If the middle of the labor market is eroding, it becomes increasingly difficult to maintain the United States as a middle-class society...
...When a machine replaces a production worker, both the firm and consumers generally benefit...
...The Japanese, shrewdly, create markets for new generations of capital goods, by offering to buy out old capital goods...
...Other ongoing research by Labor Department economists is comparing prevailing wages in the most rapidly growing occupations with those of occupations in the most rapid decline...
...textile industry...
...Ens...
...By making our production processes more efficient, we will restore American industry to a position of competitiveness, which in turn will restore economic growth and produce the jobs that the economy needs...
...ALTERNATIVES is an effort to provide realistic short-range and intermediate analyses of and solutions to the socioeconomic problems facing this country...
...It would also give a needed competitive advantage to cities and towns hard hit by plant relocations...
...there is a neartotal absence of career ladders to bridge the gap between the industry's low-skill and highskill labor forces...
...Subsidizing capital accomplishes little when there is no assurance of a market for the product...
...would not exact a hidden tax on American consumers...
...The "new" job of CAD/CAM technician goes the way of buggywhip maker...
...Moreover, the one sector of the service economy that does pay well—the government—is in decline as a direct employer for a whole other set of historical reasons...
...American and European auto-makers wishing to sell to the big Brazilian consumer market must build auto plants in Brazil...
...This system would also help the national savings rate, a favorite cause of capital-conscious conservatives...
...Indeed, there is a case for compensating tariffs to be levied on goods from countries that prohibit collective bargaining...
...The Swedes have devised a system of local labor-market boards, which report to a national labor-market board (the AMS...
...The most comprehensive of these studies, by Bureau of Labor Statistics economists Peter Henle and Paul Ryscavage, (published in the Monthly Labor Review, May 1980) contrasted the distribution of wages in 1958 with that in 1977...
...Although the economy grew at a somewhat slower rate during the 1970s than during the 1960s, it generated an astonishing 21 million additional jobs-50 percent more new jobs than during the 1960s...
...It also sets in motion a technological dynamism...
...Given these long-term changes in the struci-l ture of the economy and the shape of the job market, conventional policy responses are quite inadequate...
...In Europe, trade unionists have long argued that the solution to technological unemployment is a shorter work week, earlier retirement, longer vacation pay, and other devices to share available work...
...An alternative to a trade free-for-all, in which different nations play by different rules and everyone employs forms of disguised protectionism, is to admit the political nature of the issue and to make the question of where production is located a matter for political bargaining...
...As originally propounded, the theory of comparative advantage was based on what economists call "factor endowments"—a country's natural advantages in arable land, raw materials, climate, or plentiful labor force...
...As the economy shifts from a production base to services, information, and high technology, more jobs are being created at the extremes of the labor force and fewer in the middle...
...First, consider the demographics...
...By 1980, it was 57 percent...
...The bill requires that a substantial proportion of the value-added of cars sold in the United States be built with American labor...
...The average woman with a full-time job outside the home still spends 30 hours a week on housework, according to the Labor Department...
...Moreover, the high-tech field is the quintessential "dual labor market...
...A civilian equivalent of World War II has the added advantage of being far less inflationary than a war...
...Partly because of the strong dollar, and partly as a deliberate policy in the spirit of the Marshall Plan, American manufacturers did not export substantial amounts of industrial product to Europe...
...But the surest way— and in the long run the only way—to bring deficits back to moderate proportions is to get the economy back to full employment...
...Before turning to remedies, it is important to look at the structural changes in the economy, for the job shortage and the "good job" shortage are closely related, and both have multiple causes...
...In a war, much of the added production goes up in smoke...
...The mainstream program to solve unemployment is "economic growth...
...Since 1979, the economy has lost 3 million manufacturing jobs, most of which are not expected to resume even with the end of the recession...
...More workers were accommodated than ever before, but the price for this was a drop in real wages...
...Computer assemblers earn about $6.00 an hour, far below the prevailing factory wage of over $9.00...
...Procurement as Industrial Policy EVEN MORE FUNDAMENTAL than work-sharing is the need to maximize total output as fewer and fewer workers are needed for production of physical goods...
...Coproduction agreements of this nature, far from restricting world trade, simply change the ground rules...
...Every time openings are announced for jobs that pay more than $8 or $9 an hour, people begin camping on the sidewalks...
...Second, of course, this particular form of family allowance would serve to free millions of person-years of jobs for people who are now unemployed...
...During the 1960s and 1970s, with substantial union cooperation, the domestic manufacturers invested massively in advanced spinning and weaving technology...
...Under the French program, an extra week of vacation is added, the work week is gradually being reduced from 40 to 35 hours, and firms are encouraged to enter into "solidarity contracts" with their workers 36 and with the state, in which workers agree to take voluntary early retirement and the state bears a substantial share of the cost of supplementary pensions, so that their purchasing power falls only slightly...
Vol. 31 • January 1984 • No. 1
