Review article
Roy Green
While many books written on the US economy and labour market of the 1990s have been superseded by events, Working in America: A Blueprint for the New Labor Market is unlikely to be one of them. The authors - Paul Osterman, Thomas A Kochan, Richard M Locke and Michael J Piore - whose published research in this area has already been influential, have amassed a large volume of evidence from a three year funded study, the Task Force on Restructuring America's Labor Market Institutions. The study commissioned a number of working papers and held workshops involving over 250 people, mainly academics but also key figures in the US government, corporations and trade unions.
The argument which emerges from the study is as follows. Despite impressive growth in the US economy over the 1990s, 'deeply troubling' structural patterns have become entrenched, in particular an extensive low-wage labour market, widening earnings inequality, lack of employee voice in the workplace and problems for firms in gaining the flexibility they need to operate in an increasingly competitive market. Nor will these patterns be properly understood or addressed by a perspective which "equates economic welfare with social welfare" and which sees "the competitive-market model as a template for the organisation of all productive activity" (p 3).
The authors instead adopt an "institutional perspective" which conceptualises the economy "as embedded in the social structure and as depending on that structure for its capacity to operate effectively. It sees a need for the active co-operation of workers in the work process and it recognises the importance of institutions and the role they play in creating a framework in which a market operates, in mediating the relationship between the economy and society, and in reconciling economic efficiency with other social goals" (pp 3-4).
The next stage of the argument revisits propositions first canvassed in Piore and Sabel's Second Industrial Divide and Kochan's pioneering application of 'strategic choice' theory in The Transformation of American Industrial Relations, but pursues them both at a higher level of analytical detail and in a more popularly accessible format. These suggest that the set of assumptions giving rise to the collective bargaining model of the New Deal and the wave of social regulation of the 1960s "have been called into question by the subsequent evolution of the economy and society. The result is a basic mismatch between the institutional structure and the reality of today's world of work" (p 5). The assumptions include the traditional characterisation of the US economy as a relatively self-contained entity capable of sustaining standardised wages and working conditions, the sharp distinction between the economy and the household represented by a dominant male 'breadwinner', the stability and permanence of such employment in large organisations, the clearly defined structure of the corporation both in terms of its internal hierarchies and its relationships with the external environment and, finally, the implicit social contract between workers, employers and society linking rewards to loyalty, effort and rising national prosperity.
Changes in the world of work have undermined these assumptions and thereby, according to the authors, "eroded the foundations of the labor market's institutions". America has now reached a point where it lacks "strong institutions for linking together a series of short-term work opportunities into a continuous stream of employment and income, now that this function is no longer performed by large enterprises to which workers are permanently attached". It also lacks "institutional guidance for workers negotiating their careers through a sequence of skills developed by moving across the borders of different firms". And, finally, '[c]overage by unemployment insurance (originally conceived as an income replacement for workers on temporary layoffs) has declined while the risk of permanent job loss has increased" (pp 8-10). Consequently, it is argued that these changes require "updating" of America's policies and institutions, but the resulting Task Force proposals are more far-reaching than such a modest ambition would imply.
In their proposals for policy and institutional "re-engineering", the authors recognise economic efficiency as one of the central goals of any new framework for the labour market and workplace. Yet they also insist that "because work is typically a social activity, efficiency depends on the social structures in which it is embedded" (p 11). In this context, the authors elaborate a set of "core values" to underpin the proposed framework and to guide the re-engineering process: work as a source of dignity, a living wage, diversity and equality of opportunity, solidarity or social cohesion and voice and participation. These values are not dissimilar from those contributing more or less coherently to the emerging architecture of the European Union's 'social model' and they resonate too with some of the new policy thinking in Australia and New Zealand. Indeed, according to a recent paper by Robert Gordon (2003) - and contrary to the neo-liberal conventional wisdom - EU productivity has risen more rapidly than the US over the 1990s taken as a whole, and average productivity levels are consistently higher than the US in the much maligned 'old Europe' of France, Germany, Belgium and Ireland, when the low productivity effects of Britain, Spain, Greece and Portugal are discounted.
It is a major theme of Working in America that these values and principles may be implemented in a variety of ways which build upon changes in structures and policies already under way in the labour market, though the election of a conservative administration federally has inevitably slowed down and in some areas reversed the process. The changes are based on opportunities for "local experimentation" through "labor-management partnerships" and high performance work systems in large firms and extended networks in the case of small to medium firms, with an important role for trade unions and community coalitions as an evolving focus of social organisation. The argument is assisted by a series of condensed examples and case studies, which are derived from research for the Task Force. The role of government in this approach also shifts from one based on "command and control enforcement regimes" to an enabling role that "facilitates change and innovation" (p 21). Significantly, for these authors, this is no vacuous 'third way' concept since there is still a critical part in these arrangements to be played by labour law reform, which gets careful and extensive treatment in the book, and by the development of "institutional capacity" on the model of the Occupational Safety and Health Administration (p 165).
In sum, Working in America is an inventive and - as the authors readily concede - optimistic programme for labour market reform, even more so now than when the Task Force began its deliberations in the Clinton era. However, three final comments may be made. The first is that, in retrospect, we are also in a position to reflect more clearly on the scale and implications of the Clinton administration's missed opportunities for reform, particularly its failure to capitalise on the ideas and proposals of the Dunlop Worker-Management Commission in the early 1990s. The second observation is that these ideas, paradoxically, have meanwhile found richer expression in the European 'social model' which is striving to encompass them in policy and practice, most recently as part of its Lisbon Summit objective to build "the most dynamic and competitive knowledge-based economy in the world by 2010". A significant example is the newly agreed commitment to Europe-wide legal rights to information and consultation through employee representative bodies in all establishments with more than 50 employees.
The third and final observation concerns Australia. State governments must now become the standard-bearers of this potentially effective and electorally popular approach to social and economic reform, in partnership with unions, business and community organisations, at least until a more sympathetic regime comes to office at federal level. The important message of Working in America is that the absence of such a regime at the present time should not be permitted to become an excuse for policy inertia.
Roy Green is Professor and Dean in the Faculty of Commerce at the National University of Ireland in Galway, and a former member of the Evatt Foundation's Executive Committee. Paul Osterman, Thomas A Kochan, Richard M Locke and Michael J Piore, Working in America: A Blueprint fpr the New Labor Market is published by MIT, Cambridge, Mass.