Barry Bluestone and Bennett Harrison's The Great U-Turn: Corporate Restructuring and the Polarizing of America
Levinson, Mark
THE GREAT U-TURN: CORPORATE RESTRUCTURING AND THE POLARIZING OF AMERICA, by Barry Bluestone and Bennett Harrison. New York: Basic Books, 1988. 242 pp. $19.95. Ronald Reagan's victory in...
...Workers with low earnings should not be identified with jobs that pay low wages...
...New figures from Bluestone and Harrison demonstrate that the situation is even worse...
...However, the causes of this decline are not adequately discussed in The Great U-Turn...
...According to Bluestone and Harrison, behind the plant closings and the resulting unemployment was the "hypermobility" of capital, which had "been diverted from productive investment in our own basic national industries into unproductive speculation, merger and acquisitions, and foreign investment...
...The average amount by which the incomes of the poor fell below the poverty line was at an all-time high in 1987...
...Between 1979 and 1987 all of the progress made during the 1960s in reducing poverty has been reversed...
...My own country learns nothing except by dreadful experience...
...Sprinkel knows very intelligent people...
...They have done something much more important: they have presented information that makes celebrations of the great American job machine appear as willful attempts to ignore stubborn facts...
...The poor are getting poorer...
...The main reason Kosters and Ross arrive at different results is that they use a different measure for inflation...
...If the future of the world economy is in services and high technology, the United States should develop these areas and not worry about deindustrialization...
...economy is in the seventy-second month of a rather SPRING • 1989 • 277 unusual recovery...
...In response, corporate leaders: abandoned core businesses, invested offshore, shifted capital into overtly speculative ventures, subcontracted work to low wage contractors here and abroad, demanded wage concessions from their employees, and substituted part time and other forms of contingent labor for full time workers—all in the name of "restructuring...
...This is probably correct, but it doesn't go far enough in explaining the relative importance of each factor...
...Factories closed, millions of workers lost their jobs, and thriving industrial communities became ghost towns...
...According to Kosters and Ross, they reexamined the data and reached "radically different" conclusions: The principal conclusion of this analysis . . . is that for workers as a whole, there has been no proliferation of low-wage (or even low-earning) jobs, or any movement of workers in the middle toward lower-earnings status...
...According to the Economic Policy Institute, since 1979 industries with expanding employment paid annual wages and benefits nearly $9,000 less per employee than those paid in industries with shrinking employment...
...Adding part-time jobs to the above table, controlling for hours worked, and updating the figures to 1987 show that 57 percent of net new jobs since 1979 pay wages that on a year-round, full-time basis are below the poverty level for a family of four...
...Critics argued that the loss of jobs described by Bluestone and Harrison was simply part of the process of economic development, with employment shifting from agriculture to goods-producing industries and finally to services...
...Why should we decide that the whole national history of migration, adjustment, and advancement must now come to an end...
...Earnings of a year-round-full-time worker is a measure that is significantly closer to a wage rate concept than earnings of all workers, because part-year and part-time workers are excluded from this earnings measure...
...In fact, a careful Percentage of Net Growth of Jobs Year-Round, Full-Time Workers 1963-73 1973-79 1979-86 (1986 Dollars) Low Stratum less than $11,104 —9.8 19.2 36 Middle Stratum $11,10444,412 87.6 74.6 50.1 High Stratum above $44,412 22.2 6.2 13.9 reader of the Kosters and Ross article will find similar figures...
...However, families were able to maintain their standard of living only by working more hours and by having more members work...
...Income inequality is at its highest level in over forty years...
...The upper 20 percent, and especially the top 5 percent, of the population has enjoyed substantial income growth since 1979...
...Government supported these corporate strategies through deregulation, the engineered recessions of 1980 and 1981-82, cutbacks in social programs, and direct attacks on organized labor...
...Kosters and Ross argue that the best way to understand trends in the quality of jobs is to focus on year-round, full-time workers...
...The distribution of earnings doesn't indicate anything about the level of earnings...
...From the late 1940s to the early 1970s the average American worker's standard of living rose steadily...
...In the few pages Bluestone and Harrison devote to this, they cite evidence contradicting the theory that it was the baby boom that bid down wages and swelled the ranks of low-paid workers...
...The increase in capital income is due largely to the sharp rise in interest rates during the 1980s...
...Such a discomforting picture of the "Reagan recovery" was bound to provoke a reaction...
...After such a thorough documentation of declining job quality we are left without an adequate understanding of what caused it...
...As I write the U.S...
...By 1986 the average family in the United States was saddled with personal debts of more than $11,500, excluding their mortgages...
...SPRING • 1989 • 279...
...Kosters and Ross then argue that the distribution of earnings (based on current-year medians) hasn't changed much since 1967...
...Carter's austerity program (in 1979, when millions of people were without work, Carter proposed a $25 billion cut in government spending) looked pale beside Republican promises to restore economic growth, stop inflation without recession, and make everyone better off...
...But Kosters and Ross ignore these numbers in their conclusion...
...Janet Norwood, commissioner of the Bureau of Labor Statistics, argued that their results did not represent a long-run trend...
...In 1979, 6.5 million working people fell below the poverty line...
...A tight-money policy resulting in high interest rates plunged the economy into recession...
...Business was reacting to falling profits, which, after peaking in the mid-1960s, declined for the next fifteen years...
...In The Great U-Turn Bluestone and Harrison follow Kosters and Ross's advice and restrict their analysis of new jobs to year-round, full-time workers...
...THE GREAT U-TURN: CORPORATE RESTRUCTURING AND THE POLARIZING OF AMERICA, by Barry Bluestone and Bennett Harrison...
...Bluestone and Harrison calculate that the average family was spending one-fifth of its monthly income simply to pay off debt...
...Whatever the cause, average hourly wages, adjusted for inflation, have fallen almost 7 percent since 1979 and 11 percent since 1973...
...Kosters and Ross also fault Bluestone and Harrison for failing, in their JEC study, to take account of the fact that part-year and part-time workers—whose numbers have been growing—tend to drag down average earnings...
...As James Fallows put it: There are good reasons to believe that today's economic change is very much like past changes that the United States has undergone—and therefore to conclude that it will create many more opportunities than it destroys...
...defined as one-half the 1973 real median annual wage...
...For these critics the problem with the U.S...
...New York: Basic Books, 1988...
...The results still show a dramatic decline in the quality of jobs...
...Profits have rebounded but the costs to American society have been large...
...In the Public Interest (Winter 1988), they claim that the Bluestone and Harrison study is "seriously flawed" and "presents a grossly distorted view of what is happening to work and jobs...
...As Democrats regrouped, some sought an alternative to Republican supply-side economics in industrial policy —an economic program that entailed an expanded role for government in the economy, democratic planning, public investment, and managed trade...
...Robert Samuelson, economics correspondent for Newsweek and the Washington Post, claimed it was a "statistical illusion...
...Those families that did not have an additional adult in the labor force experienced income losses from 4 percent to 6.5 percent since 1979...
...Labor income—wages, salaries, and fringe benefits— as a share of total personal income fell dramatically between 1979 and 1987, while income from capital—interest, dividends, and rents—increased...
...economy was not that private disinvestment in industry was occurring too fast, as Bluestone and Harrison argued, but that it was too slow...
...The index used by Kosters and Ross shows much less inflation and therefore a lesser fall in wages...
...According to Bluestone and Harrison these u-turns were the result of actions taken first by leaders of American business and then reinforced by government policy...
...The most important book demonstrating the need for an industrial policy was Barry Bluestone and Bennett Harrison's The Deindustrialization of America...
...See chart...
...Ronald Reagan's victory in 1980 was in part the result of Jimmy Carter's failure to respond to high unemployment and inflation...
...This is true but beside the point...
...Larry Mishel of the Economic Policy Institute has pointed out that productivity growth was greater from 1979 to 1986 than it was from 1973 to 1979, yet there was a greater deterioration of job quality after 1979...
...In 1987, after five years of economic recovery, the number of working poor was 8.4 million...
...Bluestone and Harrison have not, as too often happens today, retreated into the academicism of theoretical economists (including many Marxists) who spin models divorced from any economy (the Marxist models, we are assured, are very "radical...
...Kosters and Ross argue that the Consumer Price Index used by Bluestone and Harrison overstated inflation in the 1970s and early 1980s because of its treatment of housing costs...
...This shortcoming weighs little against the achievement of The Great U-Turn...
...More people are working than ever before yet society is becoming more polarized...
...and in a rigorous critique Beryl Sprinkel, chairman of Reagan's Council of Economic Advisors, stated that he didn't "know of anyone who thinks the argument is correct" (and we can be sure that Mr...
...In 1987 the average family's income (adjusted for inflation) was about the same as in 1973...
...The most serious critics have been Marvin Kosters and Murray Ross of the American Enterprise Institute...
...Warren Brooks, a conservative newspaper columnist, called Bluestone and Harrison's analysis a "big lie...
...The Great UTurn is a book-length answer to this - question...
...By the early 1980s Republican ideas were a disaster...
...However, The Great U-Turn, by detailing how dreadful the experience has become and in helping us understand why, will assist those committed to exploring alternatives...
...The most controversial claim in The Great U-Turn is that since 1979 there has been a proliferation of low-wage jobs...
...Bluestone and Harrison argue that, for explaining declining earnings, changes within industries are even more important than shifts between industries...
...The controversy started in December 1986 when the Joint Economic Committee (JEC) of Congress issued a report by Bluestone and Harrison that claimed three-fifths of net new jobs between 1979 and 1984 paid low wages, compared with one-fifth during the 1963-79 period (low wages were...
...Another widely held notion—that the decline in job quality is simply due to declining productivity—is also not an adequate explanation...
...Keynes's lament about Britain in 1940 seems equally true of the United States today...
...According to Bluestone and Harrison the more likely causes are a combination of deindustrialization, sluggish productivity growth, and the globalization of production...
...To examine whether there has been a shift to low- or high-paying jobs, one must do what Bluestone and Harrison have done—which is to look at changes in average earnings as well as changes in the distribution of earnings...
...Although it is difficult to say which index is the more accurate measure of inflation, it should be noted that the index used by Bluestone and Harrison is used by the Bureau of Labor Statistics and the Census Bureau to show historical trends and that Kosters himself has used it in several studies to measure wage growth...
...After 1973 wages fell, inequality started to rise, average family income stopped growing, and after 1979 the number of people living below the poverty level increased...
...Bluestone and Harrison's evidence on declining job quality has not been refuted...
...Families in the lower 40 percent of the income distribution lost ground...
...For example, every worker's earnings could decline by 50 percent 278 • DISSENT Books and yet there would be no change in the distribution of earnings...
...Since 1979 people who worked made up the fastest growing group among the poor...
Vol. 36 • April 1989 • No. 2
