Evolving job markets and
their socioeconomic implications

(The following speech was given by Eugene Fram, the J. Warren McClure research professor of marketing at Rochester Institute of Technology. Fram delivered the speech at an RIT College of Business alumni breakfast meeting on Wednesday, March 20.)

My presentation today is an updated version of the third biennium J. Warren McClure lecture given in December. These lectures are presented every two years, and this is the third in the series. To begin, let me summarize very briefly the path traveled on the last two lectures.
Four years ago, the subject centered on stress and its impact on shopping behavior. The conclusion: a large section of the consumer population had changed buying attitudes and processes because of growing job stresses. Lehman Brothers Global Economics reports a continuation of the trend, but with work pressures plaguing employees at a diminished rate.
Two years ago, the focus was on the massive restructuring occurring in marketing channels and its impact on the job market. For example, Wal-Mart’s objective to provide low retail prices has forced its suppliers to cut costs. These vendors have remained competitive by eliminating jobs. Many sellers also have turned to computers to substitute for human effort. As a result of these changes, traditional entry-level jobs in marketing and finance have disappeared.
In the discussion following the second lecture, it was suggested that I consider reviewing the socioeconomic impact of these job restructurings and downsizings. My goal is to focus on three scenarios of an evolving job market and the assessment of their socioeconomic consequences.

Job Markets Today
Despite the increased election year rhetoric on job downsizings, relatively few people are discussing or researching this area from a future perspective. According to press reports even Bob Dole has been surprised at the political interest. Perhaps, like other critical issues in a democratic society (e.g., medical costs), the country needs a crisis to spark interest.
Four recent headlines, however, can be used to illustrate the current scenario.
“The U.S. Is Still Cranking Out Lousy Jobs”
“Overworked Americans Give Ann (Landers) An Earful”
“Study Predicts Rising Global Joblessness”
“Productivity & Profits Are Up A Lot. Paychecks Aren’t”
Business Week recently concluded that U.S. firms continue to drive down costs, as if the nation were in a recession. Therefore, organizations continue to restructure jobs, which leads to lower wages and increased subcontract work. For example, during the week of March 3rd, 1996, 15,962 workers lost their jobs. Projected on a yearly basis, this would amount to over 830,000 persons being downsized. This number of persons is more than twice the size of the population of Rochester.
It is clear that job markets, careers and career paths are changing. The three scenarios (or models) emerging from my investigation can bring insight into what may happen to the job market, as we move into the next century. Each has significant socioeconomic implications for our country and for our global economy.

I. The Industrial Revolution Model
This school of thought bases its predictions on a repetition of history. Proponents conclude that we will be able to “muddle through” from a manufacturing society to an enlightened electronic age. The adjustments will be similar to the ones made during the Industrial Revolution.
Their conclusions incorporate the thinking of economists like Joseph Schumpeter. Schumpeter viewed “creative economic destruction” as a natural phenomenon by which the old replaces the new. Therefore, buggy whip makers were replaced by accelerator manufacturers, and slide rule firms were replaced by those making electronic calculators.
The key to this evolutionary process is that American manufacturers need to become low cost, high quality producers. This, in turn, will generate a positive employment picture similar to the one that existed from 1945 to about 1985.
Looking back at the turn of the century, one historian recounts that electric generators weren’t contributing very much to greater production. Office workers, for example, were just beginning to use electric typewriters and adding machines. It took 20 years after the introduction of electric generators to develop skilled personnel who could productively utilize these new technologies. And we may be on an analogous learning curve as we begin really to work with computers.
Analysts who look to a repeat of history call for a return of rugged individualism, a hallmark of the Industrial Revolution. They conclude that individuals in our society need to be responsible for themselves. In commercial firms, human resource people follow this philosophy, advising employees to develop “self-managed careers.”
Dr. Morris R. Shechtman, author of “Working Without a Net,” is a proponent of this view. Shechtman feels that individuals and corporations often psychologically deny reality. For example, IBM and General Motors encountered problems because they denied the reality of the marketplace. In a similar fashion, individuals can pretend their industries and local job markets are alive and well. In his book, Shechtman prescribes individualized actions workers can take to improve their choices.
The outcomes of the Industrial Revolution do parallel what is happening today. It is easy to view similar dislocations as we transition from a manufacturing-based factory society to a knowledge-based electronic society.
However, a century ago, the key was largely adapting human physical strength to power technology in factories and offices. The key in today’s electronic age is knowledge. We must ask: Will the coming century’s need for knowledge workers be in the same proportion as the need for factory workers was in the 1890’s? Some predict the proportion will decrease. Economic productivity measures aren’t making this assessment.
To obtain a perspective for yourself, just review the “networking” visits we receive from the victims of corporate downsizing programs. Although most of these persons are dedicated, honest, competent people, they are in the wrong place at the wrong time. Recently, I talked with a senior American Airlines pilot who is about to retire. He commented how lucky he is that he chose to work for American rather than the defunct Pan Am or Braniff Airlines.

Consequences of the Industrial Revolution Model
Paul Krugman, an internationally renowned economics professor, reports that the employment displacements caused by the Industrial Revolution took as long as 50 years to rectify. He feels that the social consequences of modern technological advances may take a similar time period. As a result, the nation may encounter economic disparity and harm people over a long period of time. He concludes, “The ultimate effects of growing economic disparity on our social and political health may be hard to predict, but they are unlikely to be pleasant.”
If the Industrial Revolution model takes priority, it would seem that Americans and others living in the first world countries might react in the following three ways. First, there might be a revitalization of the union movement, even though the foundation for such a change does not seem evident today. Many of the employees being displaced are well educated white collar workers, people well practiced in collective team efforts. Although this group has always identified itself with management, a charismatic creative leader might develop some new format of collective bargaining that is appealing.
Recently, both journalist Molly Ivins and The Kiplinger Washington Letter have warned that workers are being more willing to listen to labor organizers. Ivins concludes that John Sweeney’s leadership of the AFL-CIO may have more impact on American lives than the leadership of the next president. According to press reports, unions are beginning to apply pressures through customers, suppliers and government regulators.
A second consequence of the Industrial Revolution model is finding socially acceptable venues for coping with these problems. It is possible that the federal government might have to develop the modern equivalent of the Depression era Work Projects Administration (WPA). This agency would provide jobs for those unable to cope with change or those whose job skills are not in sufficient demand.
Finally as a third consequence, we might encounter social unrest. This outcome was evident in the Industrial Revolution period. As one of my liberal arts colleagues concludes, the Industrial Revolution rearranged the world and spawned communism. With a highly educated core of workers being displaced, the potential for social unrest exists. Historian Arthur Schlesinger, Jr. points out that the United States is practically the only place in the world that has not experienced tribal conflict in the past decade. Will the “tribal warfare” experienced around the world also invade the United States in the form of conflict between the employed and the unemployed? MIT economist Lester Thurow recently commented, “The Middle Class is scared, and it should be.”

II. Robert Reich Model
The second model of an evolving job market was proposed by Secretary of Labor Robert Reich in his 1991 book, The Work of Nations – Preparing Ourselves for 21st Century World Capitalism. This book correctly predicted the emergence of three broad categories of workers. These groups now comprise about 75% of American employees – routine production workers, in-person service personnel and symbolic analysts. The remaining quarter of the workforce is a varied contingent of farmers, miners and government employees.
Routine production workers, the first group, are the “foot soldiers of American capitalism in high volume enterprises.” Accounting for 25% of employees, they range from blue collar positions, to routine mid-level management jobs, to many information processing positions. The proportion of these types of jobs is declining because they can be easily exported. For instance, seven of the 12 major U.S. insurance companies process their medical claims in Ireland to achieve lower cost claims processing.
In-service personnel, the second group, provide basic person-to-person services (e.g, waiters, medical technicians, nursing home attendants). They account for a growing 30% of employment. For example, Beverly Enterprises, a nursing home chain with over 100,000 employees has the same number of personnel as Chrysler. Unlike routine production workers, in-person service activities cannot be exported.
Symbolic analysts, the third group, are creative and analytical persons involved with higher level problem-solving, problem-identification and brokering. This group, accounting for 20% of employment, includes research scientists, creative designers, advanced software specialists like the developers of Mosaic, civil engineers, biotechnical researchers, public relations experts, investment bankers, etc. The most visible of these people include Steve Jobs, Bill Gates, Steven Speilberg, Warren Buffett and (unfortunately) Michael Milken. They work with various symbols including data, words, oral representations and visual representations. These symbols are traded worldwide.
Reich’s model assumes that financial affluence and power will flow to symbolic analysts, and a recent New York Times article provides evidence that this is occurring. In another report, author Kevin Philips describes our social situation as “the widening chasm between a stagnating Middle America…and the top tenth of the population.” Labor Department data, comparing 1993 with 1983, show that the top quarter of jobs only increased by 1%.
Assuming the Reich model is realized, the job market in the coming century will be divided into a top 20% of symbolic analysts, controlling a considerable part of the productive wealth. The other two groups will be on the outside looking in. Reich predicts that by the year 2020 “the top fifth of American workers will account for 60% of all income earned by Americans.” The bottom fifth will receive only 2%. According to the recent December 11th issue of Fortune, we are well on the road to this era. Currently, the bottom fifth income group has 3.6% of national income, down from 4.1% in 1979. The top fifth is at 49%, up from 44% in 1979.

Consequences of the Reich Model
If this second model prevails, the United States could develop into a moderate version of a South American society. At the head would be the symbolic analysts living in walled communities, largely isolated from the rest of the population and protected by private guards. Currently, the United States has three times as many security guards as police officers.
To avoid this dire possibility, Reich suggests a reduction in public and private consumption. At the same time, however, it would be necessary to make investments in educating more symbolic analysts, and in improving the nation’s infrastructure to support economic growth.
Whether this happens will depend largely on the attitudes of the symbolic analysts. Reich’s book concludes hopefully, “There is … the possibility that symbolic analysts will decide that they have a responsibility to improve the well-being of their compatriots, regardless of personal gain. A new patriotism would thus be born, founded less upon economic self-interest than upon loyalty to the nation.”
In my opinion, this model’s analysis is forceful, but the solutions overly optimistic. Reich acknowledges that in times of crises, events will often become random, irrespective of the theoretical planning and analysis that preceded them.
It is obvious that it is necessary to produce more graduates with symbolic analytic skills. Teaching and testing processes must be reviewed to emphasize this focus, moving away from traditional memorization and description. The challenge is to help students change their perennial question from, “Is this material on the test?” to “How can I better understand the relationships of ideas?” or “Are these ideas relevant to a rapidly changing world?” In our move to improve technology, perhaps the understanding of ideas and human relationships has been relegated to the academic minor leagues.

III. The “End of Work” Model
The increasing impact of technological innovation on jobs is the basic issue for the third model and an underlying issue for the other two. We are all cognizant of very rapid technical change. For example, the Internet is moving like a Concorde jet, and the cost effectiveness of computer chips and media is doubling every 18 months.
Paul Romer, a University of Chicago educated conservative economist, is studying the process of search and discovery in an information age. He concludes that business cycles will move much more quickly. Firestone took 50 years to dominate the tire market and then decline. Microsoft, even with Windows 95, might duplicate the same process in another 10 years.
Jeremy Rifkin, an economist on the liberal side of the spectrum, agrees with Romer. He goes a step further and predicts resulting job structure upheavals. Rifkin presents his views in a well documented book, The End of Work.
He foresees the development of a two level society. On one level is a prospering elite. On the other level is a broad band of “have nots,” including the urban and rural poor, and middle-income persons struggling to survive in a reengineered and downsized milieu.
In this environment, global corporations are able to produce more with smaller workforces. Persons on the bottom of the scale are viewed as, “waiting for pink slips, being forced to work part-time at reduced pay, or being pushed onto the welfare rolls.” Rochester residents recently had a chance to view this group when 5000 persons, pictured in the local papers, applied for 200 basic contract assembly jobs at Eastman Kodak.
Moving toward the next century, Rifkin’s model predicts the workforce will have increased leisure time because improved technology will lessen the need for human labor. In addition, management will be hiring more part-time personnel to maintain globally competitive costs. If leisure time is not focused, “The more likely course would be widespread social upheaval, violence on an unprecedented scale and open warfare.” A more academically centered sociological analysis by Stanley Aronowitz and William DiFazio in their book, The Jobless Future, comes to the same conclusion.
To avoid this scenario, one recommendation would be to empower the third sector to employ more persons for community projects, such as child care and elder care programs. The third sector, of course, is the vast array of non-governmental, nonprofit voluntary organizations which promote community social improvement. These groups are equipped with the basic infrastructure to launch and maintain these projects.
To pay for programs, the model suggests an additional Value Added Tax. While the additional tax will not be popular, the alternatives could be quelling social unrest and dealing with increased crime.

Consequences of “The End of Work” Scenario
The prospect of more leisure time for large parts of the workforce seems difficult to comprehend in our competitive world where people are struggling to maintain their jobs. The long-standing forecast of more leisure time has not occurred. One critic calls Rifkin a “techno-pessimist.” However, just 10 years ago, the prediction that IBM would have serious economic problems or that the Cold War would be over, wouldn’t have been tenable predictions. Consequently, taking Rifkin’s analysis at reasonable face value leads to a conclusion that we may be at “The End of Work.”
Obviously, his model calls for a great deal of social planning, whether it be at the national or local levels. It also requires funneling huge amounts of tax dollars from government coffers to the loosely organized third sector. The questions: Can this be done in an effective and efficient manner? How will we properly balance the expenditures in terms of the real needs, e.g., place more than is needed in elder care, because of a strong lobby, at the expense of child care?
If these speculations about the growth of leisure time are even partially correct, they raise incalculable social and economic issues.
The Common Threads Among the Models
There appear to be five common themes among the three models.
1. The pace of technology improvements is rapid and will continue to cause major job dislocations. In addition, corporate downsizing will continue in order to meet pressures caused by international price competition.
2. Because of the rapid pace of change, job dislocations will likely arise more quickly than we anticipate.
3. There may be social unrest, whether it be based on Schumpeter’s creative destruction or on workers having excessive leisure time. Some predict a populist revolt at the ballot box.
4. At this point, business and industry, even with special tax benefits, cannot be major parts of the solution. They are constrained by vast technological changes and by competing globally with lower cost producers.
5. Very few analysts are focusing on job problems at a comprehensive level. Does this mean that, as is characteristic of a democracy, we will have to wait for a crisis before these issues demand our attention?

With an evolving job market, the potential for achieving satisfying work will be a challenge for millions of people. How employees, employers and society react to these challenges will determine whether the 21st century workplace will be a contentious or friendly environment.

Epilogue
One can no longer think about work through the narrow lens of our own organization’s immediate needs or interests. The business, academic and political communities must develop partnerships or collaborative models that focus on changing jobs and careers. More importantly, we must move our thinking away from the reactive mode characterizing many institutions.
Although senior business leaders are pressured by world competition, they need to assess what can be done for the victims of corporate downsizing. Academics will need to move beyond their own specialized fields. We need to examine careers and jobs to find solutions that challenge the thinking of business and political leaders. Political leaders should review the social supports required to alleviate the human problems emanating from job changes.
Pragmatically, society must act decisively to assist the unemployed 50-year-old who will not have another full-time job. Should we allow him/her to be buffeted by the growing uncertainties of the employment market or to slip to the lower level of the job market via part-time work? Or should society provide a productive social outlet for his/her excessive leisure time?
Finding answers to these complex questions leads to three new requirements.
* First, the university educational system must prepare students for self-managing careers. The concept of a social contract is not viable today and will not be viable in the coming century.
* Second, business leaders, as concerned citizens, must work with educators and political leaders to soften the changes that are turning career paths into jungle trails. Too many are looking to retraining as a simplistic solution to the problem.
* Third and finally, our leaders must begin to debate and plan for the public policy issues that center around the huge structural changes affecting the organization of work.