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AStatus Report on Social and
Economic Well.Being in the State of.California
\
CHRIS BENNER
BOB BROWNSTEIN
and .
!
AMY B. DEAN
. AJoint Publicaiion of
. WORKING PARTNERSHlp·S·USA
and
ECONOMIC POLICY INSTITUTE
.. !'~.
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�WALKING
THE
LIfELONG
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Advisory Board
Working Partnerships
California Living Standards Advisory Board
(Organizations listed for Identification Purposes Only)
The Hon. Dede Alpert
Lenny Goldberg
Jean Ross
Senator
Executive Director
Executive Director
California State Senate
California Tax Reform Association
California Budget Project
The Hon. Elaine Alquist
James Head
AnnaLee Saxenian
Executive Director
Associate Professor of City and
Regional Planning
'
Assemblywoman
California State Assembly
National Economic Development
& Law Center '
Robert Arnold
Co-Founder, Center for Continuing
Study of the Galifornia Economy
Jim King
Kirsten Spalding
President
Director, Center for Labor Research
and Education
, Bob Brownstein
Policy Director
Working Partnerships USA
Ruth Brousseau
Senior Program Officer
Applied Development Economics
University of California, Berkeley
Stephen Levy
Dean Tipps
Director
Center for Continuing Study of the
California Economy
The California Wellness Foundation
The Hon. George Miller'
The Hon. John Burton
U.S. House of Representatives
President Pro Tem
California State Senate
The Hon. Gil Cedillo
Assemblyman
California State Assembly
Miguel Contreras
Congressman
University of California. Berkeley
,
Manuel Pastor
Executive Secretary-Treasurer
Service Employee's International
Union California State Council
The Hon. John Vasconcellos, '
Senator
California State Senate
Professor, Latino and Latin
The Hon. Antonio Villaraigosa
American Studies University
of California, Santa Cruz
'
California State Assembly
'Willie Pelote. Sr.
Political & Legislative Director
Speaker
Richard Walker
.Professor of Geography
Executive Secretary-Treasurer
AFSCME
Los Angeles County Federation
of Labor
Alvertha Penny
Goetz Wolff
Program Officer
Department of Urban Planning
AmyB. Dean
William & Flora Hewlett Foundation
University of California.
Los Angeles
Executive Officer
University of California, Berkeley
South Bay AFL-CIO Labor Council
John Perez
Executive Director .
Kent Wong
The Hon. Denise Ducheny
UFCW Region 8 Council
Director, Center for Labor Research
and Education
Assemblywoman
California State Assembly ,
Tom Rankin
The Hon. Bob Filner
California Labor Federation
Congressman
U.S. HO\Jse of Representatives
W0 RI< I N G PAR T'N ER5 HIP 5 USA
President
University of California.
Los Angeles
�WALKING
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LIFELONG
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Table of Contents
Foreword ..................................................................................'............................,........... :...................... i
Executive Summary ..... ;................. ;.................. ~ ................................................................... ;.............. 1
1. Introduction-Working Families and the New Economy ..,............................. ~ ......................... 9
2. The Emerging Information Economy-A Transformation for California .............................. 15
2.1 Rise in Information Technology Industries ....................................................................... 16
2.2 Changing Boundaries of the Economy: GlobalizatIon and Localization ...... :................. 20
2.3 Changing Industrial Structure: Subcontracting. Outsourcing and Networking ............ 22
3. Work in the New Economy ..................... ~ ........................................... :........................................ 25
. '
.
3.1 Employment Instability and Volatility ......... :...................................................................... 26
3.2 Divergent Trends in Job Characteristics ................ :.......................................................... 33
3.3 Stagnating Wages and Growing Income Inequality: .......................................................... 38
4. The Social Contract and Its Demise ........................................................................................... 53
5. Conclusion: Building a New Social Contract ....................................... ;.................................... 63
5.1 Increase Workers' Earnings and Financial Assets ............................................................ 65
5.2 Reduce Insecurity and Minimize the Harm of Dislocation .............................................. 68
5.3 Provide Lifelong Education for Work and Development of Careers ....;......... :................ 70
5.4 Promote the High Road to Economic Development and Block the Low Road ............. 74
5.5 Developing Win-Win-Win Solutions ............................................ :....................................... 80
6. About Working Partnerships and the Economic Policy Institute .......................................... 83
WORKING
PARTNERSHIPS USA
�Walking the lifelong Tightrope:
Negotiating Work in the New Economy
AStatus Report on Growing Economic Inequality in the State of Califprnia
. Copyright © 1999. Working Partnerships USA
Also available from Working Partnerships USA:
GROWING TOGETHER OR DRIFTING APART:
Working Families and Business in the New Economy
A Status Report on Social and Economic Well Being in Silicon Valley
SHOCK ABSORBERS IN THE FLEXIBLE ECONOMY:
The Rise of Contingent Employment in Silicon Vaney
To obtain additional copies of this report on any Working Partnerships USA report,
please send $9.00 for ~ach report to:
WORKING PARTNERSHIPS USA
2102 Almaden Road, Suite 107
San Jose, CA 95125
Phone: (408) 269-7872
FAX: (408) 266-2653 .
E-m'ail: wpusa@atwork.org
URL: www.atwork.org
To find out about the extensive list of publications from Economic Policy Institute,
please see their website at:
URL: www.epinet.org
Or contact them at the following address:
ECONOMIC POLICY INSTITUTE
1660 L Street NW
Suite 1200
Washington, DC 20036
Phone: (202) 775-8810
FAX: (202) 775-0819
General inquiries: epi@epinet.org
Publications: publications@epinet.org
or call 1-800·EPI-4844
�WALKING
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Authors
Chris Benner leads Working Partnerships' research projects. His
wor~
includes documenting the rise of contingent employment,
developing appropriate indicators of economic and social well
being in Silicon Valley, analyzing the availability and effectiveness
of labor market intermediaries, anc!- formulating local and regional
economic development policy. His previous publications at
Working Partnerships include Shock Absorbers in the Flexiqle .
Economy: The Rise ofContingent Employment in Silicon Valley and
Growing Together or Drifting Apart?: Working Families and Business
in the New Economy. His writing has appeared in the International
Labor Review. The Berkeley Planning Journal,' Dollars & Sense,
Third Force, The Labor Center Reporter and Perspectives on Work.
His recent work with Manuel Castells.and Jordi Borja, published
in the book Local and Global (1998, Earthscan Press) expt'ores
how globalization affects the dynamics of local government and
local economic development. Mr. Benner is also a doctoral candi
date in City and Regional Planning at the University of California, .
Berkeley.
.
Bob Brownstein is Policy Director a~ Working Partnerships USA.
.His responsibilities include management of major research
projects expanding our understanding of the dynamiCS and flaws
..;.ofthe New Economy and the design of public policy initiatives at
both the state and local level. Prior to joining Working Partner- .
ships, he spent twenty years asa senior policy analyst in local
government serving as Chief of Staff to County Supervisor
Susanne Wilson and Public Policy and Budget Director for San
Jose Mayor Susan Hammer. His Significant policy achievements
include helping to: preserve the financial stability of the County
hospital; modify San Jose's affordable housing programs for the
benefit of low income families,establish an expand~d network of
youth services throughout San Jose, and create a GreenHne and
fiscal triggers to prevent urban sprawl. Mr. Brownstein holds a BA
from Princeton University's Woodrow Wilson School of Public
Affairs, a Master of Arts in Political Science from Stanford Univer
sity, and a Masters of Science Degree in Environmental Studies
.. from San Jose State University.
WORKING
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Amy B. Dean leads the labor movement in Silicon Valley and
is a leader in the revitalization of the American labor movement.
As the Executive Officer of the South Bay AFL-CIO Labor Council,
the eleventh largest labor council in the nation, with over 100,000
members, ,she has a reputation for building bridges across con
stituencies in her efforts to create a social contract for a new
economy. She serves as Chair of the National AFL-CIO Central
Labor Council Advisory Committee, a strategic effort to effec
tively retool'and re-engineer the labor movement at the region?-l
,leveL In 1995, Amy Dean founded Working Partners1?ips USA, a
non-profit organization that has been an influential voice in the
debates over national,state and regional economic development
policies through its research, training, and public policy efforts.
Her writing has appeared in Labor Research Review, Crossroads
magazine and recently contributed a chapter to Not Your Father's
Union Movement (1999, Verso Press) on unions in the new
economy. She is a member of the MIT Sloan School of Manage
ment TaskForce on Restructuring America's Labor Market Institu
tions, the Speaker of the Assembly's Commission on State and
Local Government Finqnce, State of California Economic Strategy
Panel, and is a Senior Fellow and 'On the Board of Directors of the
American Leadership Forum in Silicon Valley. Her work has made
her amuch-requested national speaker on topiCS such as strate
gies for shared prosperity in the new economy, the challenges
facing America's civil society, and the future of education and
technology.
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:Acknowledgements
his report was made possible by the financial support of
Ford Foundation, the Burr Oak Fund of the Tides Founda
tion and the Solidago Foundation. We additionally. offer
our thanksto,the McKay Foundation, French-American Charitable
Trust, the New World Foundation, and the'Unitarian Universalist
Veatch Program at Shelter Rock.
We would like to thank:
Larry Mishel, Jared Bernstein, and David Webster from the
Economic Policy Institute, without whom this report would
not have been possible. They were involved in all aspects of
the project, providing access to essential data sources, helping
to analyze the data results, and preparing the report itself. This
is the second joint publication of Working Partnerships and the
Economic Policy Institute.
The Advisory Board, for their assistance, guidance and sugges
tions. The Board played an active role in reviewing drafts of the
report and providing valuable insights about how to improve it.
Jim Grossfeld, for extensive editorial assistance and advice.
Susan Mulloy for research and writing assistance. Jennifer Chun
for her research assistance. The entire staffof Working Partnerships
and the South Bay AFL-CIO Labor Councilfor their valuable
assistance and input to the project. Laura Dresser and Branden
Born from the Center on Wisconsin Strategy for assistance with
data collection and.the creation of maps to review statistical·.
results. The staffand faculty ofthe Institute ofIndustrial Reiations
at the University ofCalifornia at Berkeley for providing a benefi
cial and productive working environment for both Chris Benner
and Susan Mulloy during the research and writing of this project.
Marianne Wyllie and Su Gatch for their assistance with the
layout. Poncho Guevara for graphic design assistance. John
Leopold for his production management assistance. Community
Printe~ for their assistance in printing.
.
WORKING
PARTNERSHIPS USA
�W A L I< I N G
THE
LI F E LON G
TI GHTR0 P E
Dear Friend,
California is experiencing a profound economic transformation involving the rise of industries
employing ever more advanced forms of information technology. This change is generating positive
outcomes, including job creation and rapid business development. However, the employment struc
tures and arrangements associated with the "New Economy" are also producing dislocations and
difficulties for many working families in our state.
Walking the Lifelong Tightrope analyzes the increasing forms of insecurity experienced by workers
as they seek to maintain earnings and find opportunity. Widespread wage stagnation, increasing
inequality. and the spread of a variety of forms of contingent employment are all taking place in
tandem with economic growth. The challenge this report presents to us, as policy makers, is to
find ways to sustain our expanding economy while also attending to its unacceptable human costs.
,
,
While everyone may not agree with the specific recommendations in this study, the call for a recon
structed Social Contract in California is worth hearing. In the long run. our economic institutions
can only thrive if the prosperity they generate is broadly shared. Walking the Lifelong Tightrope
is a serious effort to help California achieve this goal.
Sincerely,
John Burton
President pro Tempore
California State Senate
Antonio Villaraigosa
Speaker of the Assembly
California State As~einbly
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Foreword
"The whole saga of frontier growth and w.estw,ard expansion,
the story book version ofthe American Dream, was given its
penultimate staging in a semitropical setting at the western edge
of the continent. "
-Carey McWilliams
arey McWilliams' words described the California of the .
1920s, but to every generation since that era the Golden
State has remained the living embodiment of the American
Dream. Long before anyone would ever use the term "reinvention,"
it was California that offered every American a fresh start and a
new opportunity for success.
Long before anyone
would ever use the term
"reinvention," California
offered every American
a fresh start.
California's emergence as an American Zion was never simply a
(unction of its climate or distance from the aging power centers
of the East. More than anything else, it was a reflection of'our
state's robust economy and the promise it held of a middle-class
life to almost anyone willing to work for it. During the World War
II era, one of every eight new jobs created in America was in
metropolitan Los Angeles alone. Many of these new jobs were in
aircraft, steel, aluminum, ship building and other defense indus
tries. Given the furious pace of the state's postwar economic
expansion, it was little surprise that by 1963 California had be.'
come the most populous state in the union. However, it was never
preordained automatically that this economic expansion would
lead to the emergence of the middle class that justified
California's claim on the American Dream. Indeed, the state's
middle class was as much the product of a monumental historical
crusade as of growth alone.
In mid-1941, for example. more than 100,000 men and women
were employed in Southern California's aircraft factories. Semi
skilled aircraft workers then earned' only ftfty~cents-an-hour, a
wage roughly comparable to what Southern textile workers'
earned. The robust wages and benefits that lifted aircraft workers
into the middle-class were the result of aggressive organizing by
two competing labor unions-the United Auto Workers (UAW)
and the International Association of Machinists (lAM). By chal
lenging the powerful Aeronautical Chamber of Commerce and
successfully introducing collective bargaining to the aircraft
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industry, the lAM and UAW, prevented these employers from
following the "low-wage" path that textile manufacturers in the
South pursued.
The engine for much of
California's economic
growth is what many
people call the "new
economy.
II
Of course, years earlier California's labor movement had previ
ously displayed its ability to transform what were once low-wage
industrial jobs into well-paying careers. The 1934 San Francisco
general strike in San Francisco not only won unprecedented
economic security for the longshore workers who led it, but also
helped thousands of workers in the Bay Area win their own
battles for union representation. In these and others instances
workers proved that collective bargaining was essential to assur
. ing that California's new jobs were not only plentiful, but often
lucrative. Workers and their unions played a critical role not only
in raising the living standards of union members and, indirectly,
other workers but also in enhancing the quality of life and pros
perity for all Californians.
That's why this reporns so important.
Wealthy, But Not Successful
California enters the twenty-first century as an economic colos
sus. It has become the nation's leading exporter, with more than
$50 billion in merchandise for sale abroad passing through the
ports and airports of San Francisco, San Jose and Los Angeles
Long Beach. The engine for much of California's economic growth
is what many people call the "new economy" a complex of
service and information technology industries which, in some
cases, barely existed a generation ago.
Despite the state's loss in recent years of some 500,000 well-paid
jobs in defense and other industries, we're told this new economy
·has enabled California to compete - and win - in the new global
economy. California's old economy manufactured automobiles,
aircraft and steel. Its new economy - growing out of the defense
and entertainment industries of the past - is producing the
world's most sophisticc:ted electronic equipment, creating its
entertainment, operating its finest health care facilities and
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"
serving as a global center for research and developm~n~ in
dozens of new fields. There's no question'that California is setting'
the pace for economic growth, but all that glitters is not:gold. Our
state is wealthy, but more comprehensive measures show we do
not yet enjoy a fully successful economy.
The Hourglass Economy ,
We see the hourglass
economy in the growth
Historian Fred Siegal argues that California has "~m hourglass
economy" marked at one end by growth in well-paying, highly
skilled professions and, at the other, by the rapid expansion of
low-w.~g~j()~s,requiring. onlyunskilledJabor.We-can se'e-eviden~~\
.,:oHhe hourglass econ~~y"i,I1,~hoe.RrQ~h of both part-time or { ,.'
l. contingent work and low-w'age and low-skill employment. ThiS is
tIie'Ccilifornia of waite-is; waitresses, cashiers,-sales-derks, lo~
skilled health care technicians, and similar workers. Many others
are employed in Southern California'~ growing garment industry.
Often the men and women holding these jobs are recent immi
grants struggling to make their own American Dreams come true.
, However, the low wages and inadequate benefits they earn offer
not the promise of advancement, but only the guarantee of pov
erty. Still, these workers are not the only Californians at risk.
of contingent work and
low-wage employment.
,fAfthe ptlrer'en<iohne n6tifglass~llieexplosivegt6wtn6f(
h'palif01:nia!s information:technology (I'f:Hndustries has created}i
'ne.w.class oLworkers whQ, tocl~W faQ.e,~an..old,dilemma._Thoughf·'
California's ITworirers-are'among theworld's' most productive;)
.,even:highly skilled professionals are often regarded as little'mbre
Lthartp_disposable commodity by-the·state!s IT firms.
Many of these companies have set themselves up as "virtual"
corporations businesses that use flexible networks of partners
and subcontractors to produce goods and services rather than
develop their own internal capacity to do their work. These
companies regard a permanent, experienced workforce less as a
strategic asset than as an unnecessary expense. This pa,ttern is
particularly threatening to middle-aged and older workers. The
working lives of many of California's IT professionals are similar,
to those of professional athletes whose earning capacity peaks
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. early in their careers, but who become almost unemployable as
they grow older.
.
Economic insecurity has
become the defining
characteristics of the new
economy for Californians
at both ends of the
hourglass.
Economic insecurity has become the defining characteristics of
the new economy for Californians at both ends of the hourglass.
Over many years of bargaining, union~ persuaded employers in
the aircraft and automobile industries to offer generous wages.
health care, pension benefits, and income security during layoffs
or massive restructuring. Union contracts provided workers
security and employers an experienced. stable workforce. But
corporations in the relatively union-free new economy have taken
the opposite approach. Wit.n:tl1eir-growrrigoep'efidence-=-Q!l' .c<?n-=--,
.
.
tract.andcoE!i!lg~l!t-la?ot;-th~§.~ J:)J.lsinesses see-1ittLe.r~~~Q.n -to ~
pr6Inot'e=.workforce'stal5ilitjfo]legin With, Jef'alone=proyide )
costlyp~.nefi~sl.!~taiD~ it Without any form of collective bar
gaining. Californians working in even the most profitable busi
nesses of the new economy have all too often been left to fend
for themselves, shoul<;lering more of the risk of a high~y volatile
environment.
For example, as this report describes in detail, the largest single
category of new jobs created in California in recent years has not
been software engineers but employees of temporary help agen
cies. Compared with a few decades ago or even with other parts
of the country, workers in California today are more likely to work
a shorter time for any:single employer, change jobs more fre
quently, endure longer periods of unemployment. and suffer
greater difficulties in finding good jobs as they get older. In all
businesses, but especially in the many smaller, entrepreneurial
firms, they are less likely to have secure or comprehensive health
care, pensions or other benefits. Even when they perform essen
tial tasks for larger firms, growing numbers ofwor:kers are em
ployed in some contingent, contractual relatioriship that typically
increases their insecurity and denies them a share in the success
of the larger, core business. All these trends affect not only the
less educated workers but even those with advanced degrees.
In addition, the new economy requires continuous learning, but
our institutions do not provide it. ,Many workers at the bottom of
,
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•
,
�W A L KIN G
T HE
L I F E LON G
T IG H T R 0 P E
the hourglass economy are stuck in low-skill jobs that give
them little opportunity to forge meaningful careers that offer
. new challenges and opportunities. Even workers in the top of
the hourglass are often expected to develop new skills repeatedly
during their careers but are provided few formal opportunities
for further education at work or among fellow workers or mem
. bers of their profession, where it would be most helpful. .
The social contract we
envision is less a
reconfiguration of the old
Forging The New Social Contract
than a redefinition of the
Citing recent declines in unemployment, productivity gains,
and increases. in workers' wages, some analysts have argued that
market forces will ultimately ease all the social costs of tre new
economy. This report argues that in most cases that will not.be
true without new public policies and an organized voice for
workers. As Asia's financial crisis demonstrates, California has
plentiful opportunities in the global economy, but we also are
exposed to serious new risks. In this light, we cannot only con
cern ourselves_wUh. R-0licies-thatpromote economk .grpwJQ.-"--.
'(We must renegotiate the social<;:.~n.!r~~.t~to_<!s_sl}.!e_th.at as.I?_~w :
~ ind!lstriesmove allead, our families aren't left behind. /
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1_~--
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~_ ~_.
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+
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__
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responsibility of each
major actor.
. - ..
The social contract we envision is less a reconfiguration of the old
arrangements between business and labor and government than a
redefinition of the responsibility each major actor in the economy
has to promote a shared prosperity. For business, particularly
firms in the IT and service industries, that means acting as good
corporate citizens of the community even as they work to suc
ceeding in a competitive, fast-changing ~arketplace. Employers
have a responsibility to help assure that every Californian not
only earns fair wages but also receives the training and education
necessary to contribute to our state's economic growth. When all
employers share the responsibility of training, they will all benefit
and no one employer will bear an undue burden.
In a similar vein, policy makers - in our local communities, in
Sacramento and in Washington - need to understand that the:
collapse of the old social contract requires the. public seCtor to
playa creative role in helping to shape a new one. This doesn't
•
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require policy makers to resurrect particular programs of the
New Deal and the Great Society, but it does demand they recog
nize the essential wisdom of those earlier initiatives-that pro
moting shared prosperity is a legitimate function of government.
Organized labor will have
to redefine the relationship
not only between unions
and employers but also
between workers and the
labor movement.
Organized labor also faces new challenges. As America's unions
eliminated some of the most brutal employer practices of the past "
and encouraged even non'-union firms to adopt more humane
practices and pay higher wages, many Americans came to believe
that unions were no longer as needed or useful as they once were.
However, not all of th~ traditional problems that led workers to
turn to unions have vanished, and new challenges to workers
have arisen in manyJ'j'ldustries and occupations. Organized labor
still has a vital role in shaping California's future, but in order to
do so, it will have to redefine in many cases the relationship not
. only between unions and employers but also between workers
and the labor movement.
_"'---~--~-
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___
~
_ ' < r _ _ .-_
/Today only tW9 percenLofcoIl}P!J!~!,!yqrk.ce,r~.eng?g€? jIl collectiv:e· ,
U?~¥g<1tning ..UIiions in the past either have not tried hard to
organize workers in this industry or they have encountered both
stiff employer resistance and the belief by many workers that
traditional forms of unionism do not address their needs. The
industrial unionism of an earlier generation was appropriate for
representing the workers of California's old economy; but a
different kind of unionism will needed for many workers in the
new economy.
Like unions that successfully brought collective bargaining to .
California's entertainment industry, the next generation of unions
will need to organize and represent workers who are hired for .
specific projects and frequently change employers. Like unions
representing workers in the construction or maritime industries~
the next generation of uhions will also be called on to offer the
training that provides' their members with added value to poten
tial employers. Similarly, the labor movement of the next genera
tion will need to be as tightly woven into the fabric of community
as many industrial and public sector unions are today.
WORKING
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•
�W A l I< I N G
T H'E
l I FEl 0 NG
T I G H T R 0 P E.
We have already seen the first signs that this next generation of
unionism is taking shape in California;:In1996::we.sawjnn~Los: -....,
Al}gt:!~s' !yher~~!c:>~?l t!~ion- activists joined with community groups· \
t
. o. win passage of a "living wage" ordinance guaranteeing higher ~\
payJor-wor~erS atnQ-n-uni"ohcity contracl:ors.·AJ1i6~ after a ---
d~cade-fo~g effort that-i~~oived . bUilding (;i"1:ommunity coalition
to win new legislation and organizing a dispersed, contingent
workforce, 73,000 home health care workers in Los Angeles re
cently voted to unionize. More recently, living wage policies have'
been adopted in San Jose and Oakland. In San Diego, Los Angeles
and San Francisco, organized labor has won passage of ordinances
designed to retain the same workers in city jobs that are under
contract to outside firms, even if the contractors may change.
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_.
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We have already seen the
first signs that this next
generation elf unionism is
taking shape in California.
-~--
lrfSan Jose th~}~!:!or~o..,~m~ntha~_r~c:eDtlylODJ1~d..
J
•
-;-c--tbgeth'ef@work: an organization for contingent workers primarily
'... in clerical fields:-together@work represents one face of the new
unionism, by forming a network that covers many firms, provides
portable benefits, offers training and helps to establish a regional
definition of skill standards. In addition, this growing organization
acts as an advocate for contingent workers at the same time that
it is providing services. San Jose's labor community has also
established its own temporary employment agency. The agency is
demonstrating that it can pay temporary workers at higher rates
than other staffing firms while operating according to a 'code of
conduct that respects workers' rights and needs.
This kind of reinvented unionism alone will not forge the new
social contract, but it can provide models for unions and employ
ers. In the long run, however..without vigorous and comprehen
sive collective pargaining, there is little assurance that evenjobs
in the sparkling industries of California's new economy will help
the next generation of Californians to take their rightful place in a
growing middle-class.
This new social contract must do at least three things. It must
guarantee that prosperity is shared equitably by all. It must
reduce insecurity for workers and provide a more stable commu
nity and workforce. It must assist \Yorkers in forging a lifelong
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career, with education as needed along the way, that provides
the opportunity for growing rewards and meaningful work. This
cannot be done ifworkers are treated as disposable components
or if businesses declare war on organizations that workers form
to gain a voice in their work. Building a new social contract
requires far-sigh~ed leadership from leaders in business, govern
ment and the labor movement to develop the institutions of a
democratic society f<;>r anew economy.
'\
I
!
Building a new :social
:
contract requir:es
far-sighted leadership
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from leaders ih business,
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Amy Dean
Founding Director
Working Partnerships USA
May 1999
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government a?d the
labor movement.
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Executive Summary
ver the past decade. California's economy has changed
in striking ways that have profound implications for the
state's working families. This report's central conclusion
is that California's recent dramatic economic growth has carried
with it a hidden and escalating cost-increasing economic
insecurity fOf most workers at a time when there are fewer tools
available to help them adapt. Workers at all income levels are
increasingly vulnerable to rapid changes in our volatile. informa
tion-based economy; and inequality has not only increa~ed
markedly but also is likely to grow further if forceful policies are
not adopted to reverse the trend. Given the heightened instabil
ity and rapid change inherent in our rapidly growing technology
sectors, even many working families who are doing well'at the
mome?t face uncertainty about their economic futures.
O
The causes of these problems are deeply rooted in the nature
of our new economy and particularly in the failings of our social '
and public institutions to adapt to these economic changes.
Solving them will require fundamentally rethinking the nature
of our social contract. Government, business and labor must
develop new institutions and policies that protect the working
poor and raise their wages, provide effective bridges from low
paid to high-paid occupations and industries, and provide life
long learning opportunities that help people find reward~ng work,
even in the face of ,economic volatility.
Economic Transformation
In the early 1990s. California underwent its most severe economic
downturn in a generation. Damaging effects of a national recession
were compounded by reductions in military expenditures. which
hurt the large defense sector of the state economy. There, was a
net loss of morethan a ha~f million jobs between 199,0 and 1993.
Since 1993. however, economic growth has been unusually dy
namic, both in the scale and the pattern of the 'recovery .other
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recoveries reflected the cyclical rebound of the state's traditional
employers., but the current expansion has been led by industries
~hich, in some ,instances, barely existed 15 years ago. High-tech
manufacturing, software development and Internet companies
combined with motion pictures. multimedia and a handful of
other information-related industries-have not only led this
California recovery but also are transforming the structure of the
state's economy. Older industries are also adopting new technolo
gies to enhance their own competitiveness. California's economy
today is Significantly different from what it was 20 years ago.
Many analysts argue that this new economy has laid the ground
work for hroad growth and prosperity in this state for years to
come. Their optimism could be easily understood. California's
economy has flourished in recent years thanks to its new high
tech industries and its proximity to overseas markets that were
rapidly expanding during most of the decade. Merchandise
exports more 'than tripled from 1987 through 1997 and grew 53%
between 1993 and 1997 alone. Jobs have been created in Califor
nia over the pastfew years faster than in the rest of the nation. '
especially in many high-paying technology industries, such as
software and Internet companies.
The 'Don't Look Down' Economy
While this continuing economic expansion has generated enor
mous wealth for many firms, it has not significantly increased
the income 'of working families overall. At the same time, the new
structure of the state's economy is creating disturbing new trends
that threaten these families' well-being, induding:
• Growing Insecurity and Volatility: Increasingly firms need to
innovate constantly. responding rapidly to technological and
economic ch?nge and taking advantage of new opportunities.
This 'competition by innovation' creates high-levels of insecu
,rity in employment for large sectors of the workforce, induding
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employees within high-tech industries facing unstable and
rapidly changing market conditions. There has been rapid
g~owth in the number of workers employed in temporary,
contract, or other forms of contingent employment. Many
other workers regularly lose their jobs and have difficulty
finding new ones.
• Divergent Trends in the Employment Structure: A grow
ing gulf is appearing both between certain sectors of the
economy and within each sector. First, there is the expand
ing disparity betw~en high skilled, globally integrated,
high-productivity industries and industries that mainly
serve local markets and primarily pay low wages. Janitors,
home-health care workers, and waitresses are essential
parts of our new economy, but they benefit very little from
high-technology growth. Second, there is also increasing
disparity within economic sectors. Even in the global,
high-tech sector, full-time workers at core companiesJn
the new networks of production may have high incomes
and relatively secure jobs while workers at sub-contractor
firms earn low wages and·experience much instability in
their employment.
• Growing Income Inequality: As a result of the factors
outlined above, as w~llaschanging demand for education
and changing demographic characteristics of the workforce,
there is growing inequality in income in California. This
. expanding income gap is occurring NOT primarily because
wages are growing much faster for those at the top of the
occupational structure, but instead because wages have
declined for workers at the bottom and middle of the labor
market. Since this inequality has widened during the
strong rebound of the state's economy, clearly economic
growth ,alone cannot be relied on to raise the incomes of
those at the bottom of the income distribution or reduce
inequality.
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Because of this fundamental transformation of the state's
economy and the dramatic growth in information technology
industries, most Californians now must walk a lifelong tightrope
, -one that is poorly anchored in stressful and unstable employ- \
ment. At the same time, people face serious potential risks if they
slip on this tightrope or the rope fails. Economic vibrancy and
volatility seem to be two sides of the same coin. While
California's emerging economy carries the promise of continued
growth and added prosperity, most families will not share in, this
potential if the great divisions and imbalances of the new
economy 'are not addressed.
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The Social Contract, Old and New
Today's level and forms of inseCUrity and inequality are quite
new. In the three decades after World War II, the United States
experienced a period of remarkable economic stability; accompa
nied by' rising wages and improved standards of living for the vast
majority of Americans. These "wonder years" of the American
economy, however, did not rise simply from market dynamics.
Instead, they were made possible by a series of national poliCies
that created a broad social contract. These policies-'-ranging
from the unemployment insurance and social security systems to
the minimum wage and our system of labor relations-created an
institutional and economic system that was beneficial to nearly
everyone. Business flourished because of a growing consumer '
middle class. Productivity gains were passed on to workers in
the form of higher vyages. 'Government programs helped limit
'the severity-of economic downturns and redistributed the fruits
of prosperity to the, less fortunate.
These policies, however, were developed for an industrial
economy when employment was relatively stable and firms
retained long-term ties with their employees. Since the early
1970s, such policies have been eroded and are no longer serving
the function of stabilizing the economy by broadening access to
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its benefits. In today's economy, with greater volatility and more
tenuous ties now typical of the relations between, empl?yers and
employees, the policies of the post-war years are largely inad
equate to provide support for most workers.
A new social contract is needed to guarantee that prosperity both
continues to grow and is equitably shared in the new economy.
Public policies must be designed to support the economic flex
ibility that firms need to be competitive while also minimizing
insecurity and ensuring that the risks and rewards of the new
economy are divi~ed more broadly.
Because the economic changes which have occurred are funda
mental-creating entirely new industries and dramatically
restructuring both competition and production systems in older
industries-the new social contract must be comprehensively
redesigned. Piecemeal reforms of existing programs arid institu
tions will likely. be ineffective. As the old system breaks up, we
also have an opportunity to build institutions that are more
inclusive than in the past, creating a new social contract that
truly realizes the ideals of a democratic system with opportunity
for all to fulfill their potential.
Developing such comprehensive reforms will not be easy. During
the era of industrial mass production in this country, it took a
major depression to provide the stimulus to create policies and
institutions appropriate to the new structures of employment.
Californians today should learn from mistakes of the past and
implement a comprehensive new social contract at all levels
local, state, national and global-before the costs of inaction
escalate.
The purpose of this report is to present a framework for a new
social contract. Finding the most effective policies and institu
tions will require refinement through research, discussion, and
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experimentation in the community. the state and the nation.
Any new social contract, however, will have to address four
social needs:
• Increase Workers' Earnings and Financial Assets: Most work
ers-not just those earning very low wages-need higher
incomes. They especially need policies that increase their
earnings over their entire work lives and that help them accu
mulate a variety of financial assets. In addition to providing a
more secure livelihood. expanding workers' financial assets can
help them deal with layoffs or displacement.
• Reduce Insecurity and Minimize the Harm of Dislocation:
Dislocated workers need more support during periods of
economic pressure and more assistance in finding new jobs
which provide adequate incomes.
• Provide Lifelong Education for Work and the Development
of Careers: To find and keep good jobs in the new economy,
workers need access to education throughout their work lives
and organizational help in developing careers and networks
of support.
• Promote the High Road to Economic Development and Block
the Low Road: Economic development programs and public
subsidies should reward only employers who pursue high-road
strategies to counter competition and grow. In addition, public
policy should cut off assistance to firms that try to compete by
avoiding regulations, cutting wages and benefits, increasing
insecurity. or excessively eliminatirtgjobs .
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In order to ens~re the effectiveness of these approaches, Pubii~-='7
a9tfiof-iiies~needbetter-sYstemS"tojdenfi.f:i~aQocUment-insecu::-----j
~tty. Additional data will both help officials locate the particular - -- ~
industries, occupations or regions where earnings fluctuations
are more frequent and understand the impacts of instability on
families, thereby facilitating development of targeted assistance
and retraining programs.
Ultimately, ,with such a comprehensive approach, appropriate
public policies can support economic flexibility and minimize the
problems of insecurity, while also ensuring broadly shared pros
perity. In this win-win-win scenario, a new social contract could
make the new economy work for everyone.
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1. Introduction
\
"When we talk about the new economy, we're talking about a
world in which people work with their brains instead oftheir
hands. A world in which communications technology creates
global competition-notjust for running shoes and laptop
computers, but also for bank loans and other services that
can't be packed into a crate and shipped. A world in which
innovation is more important than mass production. A world
in which investment buys new concepts or the means to
create them, rather than new machines. A world in which
rapid change is a constant. A world at least as cfifferent from
what came before as the industrial age was from its
agricultural predecessor. A world so different its emergence
can only be described as a revolution. "
-Wired Magazine, Encyclopedia ofthe New Economy!
Simultaneous record
layoffs amid record growth
in employment are just the
most obvious sign of de~p,
divergent· forces changing
our country.
"[ never chose temp work voluntarily, but [had to, since [got
laid offand couldn't find permanent work. The time I've
spent as a temp ruined my financial situation, my self.
esteem, and destroyed any sense ofmy career direction.
The credit card debt that [ racked up would have easily
beena decent savings account if[didn't have to do that bout
oftemping. There is psychological damage in having to
constantly 'learn' the same old thing over & over. The need
to constandy learn can be very stressful, and actuaJ1y eats
away at my creative energy, since [ have to become short
term, rather than long-term oriented. "
-'Melissa', Executive Assistant in Silicon Valley2
Working Families and the New Economy
The U.S. economy set records in 1998 in two important ways.
First, December 1998 was the ninety-third consecutive month
of growth, marking the longest peacetime period of economic
expansion in this country's history. With unemployment at the
lowest levels in a generation, inflation in check, and even some
signs of rising wages after years of stagnation or decline. the U.S.
economy was often described as 'the envy of the world'. Never
theless, 1998 was also a record year for corporate layoffs and
downsizing. According to a regular survey from the out-place
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.!!lent f!fm,J:ha~Lengeri_Gray &. Christmas, -~ompaiii~s announced
~<.Ltota(of aln:tp~l 100,000 layoffs in 1998"..",56%.higherJhan in 19~7~\
, :-'and the highestsince''the survey-beg1iifi~J989: R~ior to :the last
\"-recession~ The'sifuult~:fneous- record iayoffs amid record growth ,
Why is it that in the richest
in' employment are just the most obvious sign of deep, divergent
forces changing our country.
country in the world, so
many people face such
uncertainty in the status of
their current employment?
During the 1990's, American society-including businesswas transformed by dramatic advancements in ~omputers, the
Internet, telecommunications, and a wide range of related informa
tion and communication technologies. These technologies are
creating opportunities for many, but most Americans feel increas
ingly uncertain about the future for themselves and their children. 3
Despite some recent gains, wages remain in real terms well
below what they were two decades ago for most Americans and
have not even returned to their level before the recession of the
early 1990s, Equally Significant, many working families experience
growing stress and insecurity as they try to cope with rapidly
changing economic conditions, unreliable paychecks and ben
efits, unpredictable employment opportunities, and growing'
pressures on the job.
Why is there this discrepancy between economic dynamism
and personal insecurity? Why is it that, in the midst of the longest
peacetime economic expansion in this country's history, more
people are being laid-ofIthan ever before? Why is it that in the
richest country in the world, so many people face such uncer
tainty in the status of their current employment, and worry so
much about their economic future?
These questions are not often asked by the enthusiastic analysts
of the new economy. Some see nothing but positive develop
ments from these altered structures. arguing that workers will
enjoy tremendous benefits from becoming 'free agents'. develop
ing multiple new careers and moving from opportunity to oppor
tunity. For them. the growth and dynamism of the new economy
will ultimately translate into improved well being for all. Other
analysts recognize the growing insecurity and inequality but
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argue that ~olutions lie in improving our educational system and
'providing new training opportunities for people. For them, the
new economy does raise challenging new issues for public policy.
but those are best addressed through giving higher priority to
education and making government more flexible. ,
:rhis report recognizes that the new economy offers a tremen
dous promise of economic dynamism and prosperity. But it also
contends that the new economy is fundamentally more volatile
and insecure. Furthermore, it argues that the resulting problems
for workers and their families cannot be addressed simply by
improved education and training systems. though these are
obviously important. Instead, this new insecurity calls for a
more comprehensive and fundamental 'restructuring of our
employment system and the creation of a new social compact
to ensure widely shared prosperity.
Vibrancy and volatility seem
to be two sides of the same
coin in our emerging
economic'structure.
The "Don't Look Down" Economy
Fueled by rapidly changing technology. constantly shifting
products and markets, and intense global competition; the new
economy is fundamentally uncertain, volatile and rapidly chang
ing. For some people, this creates new opportunities and exciting
work. However, many people-including many with well-paid
jobs-primarily experience new levels of anxiety and fear.
Vibrancy and volatility seem to be two sides of the same coin,
in our emerging economic structure.
So many people feel insecure not only because of rapid changes
in the economy but also because our social and political institu
tions have failed to adapt'to these changes. Employment policies
and institutions that once improved average living conditions as
prosperity grew no longer function effectively for large parts of
the workforce.
)
Just a generation ago, many workers held full-time. long-term jobs
in firms that offered relatively well developed opportunities for'
advancement and often assumed a mutual loyalty between the
employer and much of its workforce. 4 Based on this employment
model, a range of programs and policies were developed during
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the New Deal era and after World War II that helped link rising
wages with rising productivity and provided support for people
during temporary cyclical down-turns in the economy. Taken'
together, these innovations constituted an integrated social
contract.
new economy, stable
In-the new ecorlomy-:stable emplbyIfienOsfaJiiClI:fClisappeariQg.
:In its place, many firms h~\I~_dr.amaticallyexpanded the use of>
"outsourcing, subconti:'acting~-temporariand part time em=ploy~>
hldependent contractors and other forms of contingent)
. employment. The s!z~_oHl:!i~:peripheral'-workforc,e, is increasing ;' .
i~rapidiy, effectively closing of(many advancement opp'oriunities}
'; for thosewh9.~r~'ngt~mployedbyth~ ~9.rEl:co!porations.Jn--
addition:even workers in core employment positions 'face new
problems. Firms have flattened corporate hierarchies and
changed management practices, subjecting growing sectors of
i . the workforce to the pressures of rapidly changing technology
, and product markets. These trends make successful internal
career paths less clear, require greater flexibility and create
higher levels of insecurity. 5
employment is rapidly
disappearing.
, To create more security for workers in the midst of this fluidity,
we can not simply look back and try to recreate the stable
economy of the past. Policies created during the Depression and
post-World War II era will have to be seriously revised, and new
policies and institutions must be developed to solve problems
posed by the new economy.
The purpose of this report is to stimulate debate on the need for
new institutions to address these problems and to present some
ideas of what they might look like. It does so by examining the
recent economic transformatioll'in California from the perspec
tive ofthe state's working men and women. The home ofSilicon
Valley and leading information technology industries; California
hosts many of the most innovative sectors of the new economy.
By reviewing recent trends, this report can realistically assess
both the potential and the downside of California's changing
economic forces and structures and identify solutions to counter
the increasing insecurity that so many Californians experience in .
their working lives.
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Organization of Report
This report is organized into four substantive sections. It begins
with an introduction of the basic argument. Section two high
lights the rise of information tethnology industries and the
associated transformation in'California's economy.
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Section three examines clbselyihow California's economic trans
formation affects the state's working men and women. Despite
widespread uncritical claims tijat promoting competitiveness
and technology-led growth benefits everyone, this report demon
strates that the new economy has increased both inequality and
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insecurity for most workers.
This report demonstrates
that the new economy has
increased both inequality and _
insecurity for most workers.
In section four, an analy~is is p}esented which evaluates, how the '
social contract that evolved fr6m the New Deal through the 1960s
meets the needs of workers in this new economy. The state's
policies on unemployment insurance, industrial relations,
workforce development and tr~ining, and sociai benefits (health
care and retirement in particular) all prove to be poorly'suited
to an economic environment in which rapid change is the norm. '
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The final section outlines broa~ policy solutions that can begin
to address the problems of ins~curity in the new economy. Th~se
recommendations are not presented as a fully developed set of
proposals. Instead, they are dJsigned to stimulate debate about
solutions to the issueshighlig1;tted in this report.
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2. The Emerging Information Economy-A Transformation for California
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The rapid, widespread comme~cialization of information technol
ogy is transforming the structure of the United States economy.
Like earlier technological watersheds, these information tech
nologies are bringing changes far more profound than those
wrought by normal patterns of iinnovation or recurrent business
cycles. The fundamental task of information technology is to
store, manipulate and communicate information. Since all social
activity, including business, relies on communication, information
technology affects nearly every aspect of our lives. Its wide
spread use-from retail sales to transportation, from agriculture
to social services-is changing I how businesses compete and how
markets operate.
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These information
technologies are bringing
changes far more profound
than those wrought by
normal patterns of
innovation.
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This transformation began in the early 1970s as computers
became commercially importaiIt, then expanded again over the
last 20 years with the spread of personal computers. Computers
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are likely to undergo even mory dramatic development in the
next 20 years, as they become smaller and more powerful. They
will become an even more ubiquitous part of everyday life, being
built into cars and houses, clo~hing and even being installed
under the skin: The expansion bf the Internet in the 1990s is .
further accelerating technological and economic change in new
and largely unpredictable way~. The rapid development of wire
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into the Internet, greatly enhancing their power.
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Some of the most profound changes are likely to occur in bio
technology. Biotechnology ess~ntially invoives the decoding
and manipulation of informatiqn stored at a cellular lev~l in DNA
strands. Genetic manipulation has already had a tremendous
impact on agricultural production, yielding dramatic improve
ments in productivity and gen~tic methods of pest control.
Assisted by rapidly expanding,computing power, scientists are
expected to map the entire DNA structure of humans early in the
next century. Cutting-~dge companies are even embedding mo
lecular components of genes directly in a silicon chip, making it
possible to analyze genetic m~terial almost as fast as a micropro
cessor shifts bits. This is alrea9-Y having tremendous commercial
applications in the pharmaceutical and medical industries,.with
more rapid changes on the horizon. 6,
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The complex economy emerging from these transformations is
significantly different from the industrial economy of the earlier
decades of this century. Three fundamental trends, described in
more detail below, are particularly important:
Networked production
• First, information technology industries themselves are in
creasing as a portion of total economic output and becoming
an increasingly central component of our nation's economic
growth.
and heavy reliance on
information technology
characterize the emerging
• Second, the boundaries of our economy are changing. with
increasing economic activity at both a global and a local level.
model of business in the
• Finally, the structure of corporations and the organization of
economic activity is changing, with a decline in the dominance
of vertically integrated, hierarchical corporations. Instead,
economic activity is increasingly organized in complex and
constantly shifting networks of both small and large firms,
with much greater levels of outsourcing and shifting patterns
of hierarchy within ind~stry clusters.
new economy.
These trends, of course, exist to varying degrees in different
sectors of the economy. However, in the same way that assembly
line mass-production industries defined an underlying structure
of employment in the industrial economy, networked production
and heavy reliance on information technology characterize the
emerging model of business in the new economy.
2.1 Rise in information technology industries
This economic transformation is most clearly evident in the
increasing importance of information technology industries
themselves. Nationally. information technology industries are
currently growing at more than double the rate of the economy as
a whole. According to the Department of Commerce, information
technology industries alone are responsible for more than a
quarter of America's real economic growth in the past four years.
and information technology now represents over 45% of all
business equipmentinvestment. The growth of the Internet is
particularly dramatic. The number of U.S. users of the Internet
is now greater than the number who have cable television, while
Internet "traffic" is doubling every 100 daysJ
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Though California is not alone in :driving this growth in informa
tion technology industries, California's gross state product
accounts for 12% of the nation's total. and the state plays a
leading role in nearly all of the key sectors of the new, informa
tion economy. 8
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• Specifically, California firms employ 27% of the United States
workforce in the computer iniJustry and over half of those in
computer peripheral equipme~t. California accounts for 25% of
both employment and revenu~ in the nation's semiconductor'
industry. For all of high-tech manufacturing 9 , California had
20.7% of national employment :in 1998, its highest level ever.
of the United States
workforce in the
computer industry..
• California is by far the nation'~ leader in computer software,
accounting for 20% of U.S. employment in the software ~ndus
try in 1996 'a~d 25% of the natipnal software payroll (about $7.7.
billion that year). By 1998 the state had more than 16,000 multi
employee businesses in softw~re and data processing as well
as 240,000 employees and many more sole proprietorships in
these fields ..
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• Despite recent defense cutbac'ks, California dominates the
country's aerospace industrY, with '23% of total aerospace
production, including 35% of t~e country's search and naviga
tion equipment production, and 28% of missiles, spacecraft and
parts. The iridustry accounted for an estimated $29 billion
worth of revenue in 1995. Thi~ industry is not only a heavy
consumer of electronics and tither component parts, but in
turn contributes dramatically:tofurther technological develop
ment. Many aerospace compa:nies are increasingly pursuing
commercial satellite developJilent, with over 280 California
firms manufacturing satellites: or their components.
• California is the world's leading.center for biotechnology,
generating over $7 billion in r~venue a year. There are an
estimated 376 biotechnology ~ompanies in California, compos- .
ing one-third of the nation's total. In the related fields of bio
logical products and commerCial physical research, the state
accounts for 27% and 17% respectively ofthe nation's total
employment.
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High-technology industries
flourish throughout
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. - The 'convergence' of computer, data, voice, movie, and tele
. phone technologies is giving a tremendous boost to the state's
entertainment techiJOlogy and multimedia industries.
Entertainment technology involves enhancement of television,
. motion pictures and video by computers and telephony. Multi
media refers to the interactive combination of digital video,
sound and text delivered via the Internet, CD-ROM discs or
television. There are no accurate estimates of total production
and employment in these nascent, rapidly changing industries.
However, asthe home·to over half ofthe nation's workforce in
motion picture production, California is well suited to playa
leading role in all ofthese expanding sectors.
!- Innovation and entrepreneurship are key components of the
new economy. In 1997 California businesses received 37% of
all venture capital invested in the United States ($4.5 billion),
more than the combined total of the next eight most highly
, ranked states.
High-technology industries flourish throughout California, not
pnly in Silicon Valley. For example 10:
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posted the largest employment growth rates in the San FranCisco Bay region. The Bay region is extremely strong in multi
media, software and Internet-related services, and companies
such as Pixar and Industrial Light & Magic are increasingly
prominent in the entertainment technology industry. It is also
one of the centers of bio-technology research and development
inthe country, providing sites for at least 61 major biotechnol
ogy firms and one of the top medical research universities in
; the world at the University of California, San Francisco~ In
addition, it is a key source of venture capital for' future high
tech growth.
~ The Sacramento area is rapidly e~erging as a major high-tech
manufacturing center, with the opening of new production
I centers for companies such as Packard Bell, Apple, Intel,
Hewlett Packard and NEC. Oracle (software) has also recently
begun operations in the area. The region's low prices for land
and housing, iilong with its proximity to the Bay Area, make it
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an attractive site for high-tech ~xpansion. Engineering and
management services, which are integral to' high technology,
constitute a major growth sectbr as well.
• The economy of the Los Angele's Basin has recovered strongly
in the past four years, although, Los Angeles County itself still
lags behind. The decline in defense and aerospace employment.
has been offset by dramatic growth in employment in other
sectors. This "convergence" of film, television, video, Internet
and computer technologies has~placed the region's entertain
ment industry in a strategic position in the multi-media world.
In addition, the region has a str<?ng lead in the growing com
mercial satellite production and launching industry. Its diversi
fied manufacturing base'is increasingly technologically
,
sophisticated in its production systems as well,
The decline in defense and
aerospace employment has
been offset by dramatic
growth in employment in
. other sectors.
• San Diego seems likely to be theI fastest growing region in the
,
state in coming years, with much of that gain coming in new
industries, such as telecommun~cations and biotechnology.
The region's biotech sector has grown significantly, assist,ed
by research at UC San Diego, and it ranks behind only New
England and the San Francisco Bay Area in the number of
biotechnology firms. Advanced telecommunications, particu
larly wireless communication, is: a growing sector, paced by
industry leader Qualcomm.
;
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In all information technology industries, the pace of technological
change is unusually rapid. In line ~ith Moore's law (the pr_e~i~-=-,
.tion made in~~5-,-QyJnt~ls.Q:f9~l!<:l~r Gordon Moore)/fhe pow9r
jofifltegrate'd c.!!cuit~ h~s be_en d~'::1bli~geveiY18 'tnontfiS forthe'~)
,! last"__25 ___ years.;Ih the next few years,' the leading e-dge technology- ./
l
" fOr total bandwidth in telecommunications is predicted to grow at
an even faster rate, nearly tripling every 12 months. II
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Once this technology is incorpor'at~d into our telecommunica
tions infrastructure-particularly i~to individual homes-it Will
'allow faster transmission across va,st distances of more complex
information (particularly visual images and sound). Ultimately,
this will make it as easy to look at ~nd converse with someone on
the other side of the globe as it is hI person. As the technology of
virtual reality develops, even sophi'sticated movement and touch
sensations will be transmitted thro4gh the Internet.
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Nike contracts all of its
million-plus shoes per year
to manufacturers in Asia.
T H Eo
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: These rapid technological changes, however, will haVe dramatic
: implications for market condition and economic competition in a
I whole range of industries,Jrom music. publishing and entertainI ment to education, medical care and social services. They will
i influence the design and production of consumer goods as well
,as transportation and construction. New products, new produc
:tion processes, and new ,ways of providing various services will
!emerge in all of these industries. Businesses will face intense
!competition in unstable and rapidly changing markets. Product
!life cycles will continue to shrink, and firms will need to innovate
iconstantly to maintain market share. The result will be high levels
!ofvolatility. In this context, in the words of Intel co-founder and
JChairman Andrew Grove 12, "only the paranoid survive."
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;2.2 Changing Boundaries of the Economy: Globalization
and localization
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iIn recent years. international trade. investment and investment
'flows have increased significantly. More than $1.3 trillion changes
hands every day in global financial markets, leading to tremen
dously volatile flows of capital that are largely beyond the control
bfany single government or financial institution. Our imports and
exports combined now total the equivalent of 29% of the U.S.
Gross Domestic Product, up from 17% only ten years ago. 13
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In addition. information technology allows firms in all industries
to decentralize their operations on a global basis, moving many
. operations to low-cost areas around the world, while still manag
ing complex production processes and sub-contracting supplier
relations from management centers in the U.S. A prime example
of this pattern is the Nike' Corporation. Often thought of as a
footwear manufacturing company, Nike is actually a highly suc
.. 'cessf~l design, distribution and marketing firm. It manufactures
, ~one of its own footwear, contracting all of its million-plus shoes
per year to manufacturers in Asia. 14
,
.
This increased competition and volatility in international mar
, ~ets, combined with domestic deregulation, greatly increases
workers' vulnerabilities to market shifts and economic change.
The frenetic pace and harsh d~mands of global financial markets
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puts increased pressure on firms to cut costs and improve finan-_
cial performance or face sharp diops in the value of their stock
shares. Also, since some innovati~ms are quickly matched by
competitors, those businesses lose some of the increased profits
(or rents, as economists say) thatinormally come to market
leaders and are forced into price competition over unspecialized
commodities. Increased price competition means firms face
pressure to cut costs and to inno~ate continually in order to stay
ahead of the rapid pace of change; 15 Many businesses choose to
cut costs by directly reducing the wages and benefits of workers
or indirectly by moving operationsI overseas, subcontracting, or
relying on contingent workers.
I
The share of the workforce in
industries that serve only a
local area has increased.
n
Though it may seem contradictory;, in addition to, experiencing
i \
increasing globalization, the economy is also typified by increas- I
ing localization. Localization refers ito the increasing importance
of economic activity at a metropolitan, rather than a national
I
scale. This phenomenon results pa~tly from shifts in the sectoral
composition of the economy. As manufacturing jobs have declined I
and serviee jobs have increased as a percentage of total employ
ment, the share of the workforce in: industries that serve only a
local area (for example, retail sales, \social services and health
services, education, and public service) has increased. 16 ,
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These industries are somewhat affeCted by global trends, but
they are primarily shaped by local rharkets. Also, as globally
integrated industries locate activities on a truly worldwide basis,
they often pay special attention to tre characteristics of local
areas (for example, physical and social infrastructure, character
istics of the local workforce, and th~ potential for new markets
for products). Thus, the character of local government, public
private partnerships, educational institutions, and the regional
workforce plays an increasingly imP9rtant role in shaping eco
nomic development. '
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Finally, firms have moved persistently away from vertical integra
tion and towards more complex sub-contracting and networked
production relations in regional agglomerations of related firms
and industries. In this type of industry structure, the nature of
the relationships between local firms and their suppliers,
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: between firms and local governments, and between workers
: in the region plays an important role in shaping the direction
i of economic activity. While industry and commerce are still
: highly vulnerable to changes in the global economy, localization
may provide new opportunities for policies to strengthen local
!industries and improve working conditions.
I
These flexible arrangemeT?ts
makes workers more
1
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:2.3 Changing Industrial Structure: Subcontracting,
vulnerable, as companies
Outsourcing and Networking
are able to shift supplier
:Information technology allows firms to flatten organizational
hierarchies, to remove middle managers, and to shift more
'responsibilities to lower levels in the organization (though often
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without compensating workers for increased responsibility). At
the same time, higher level managers gain the, capacity to more
. directly monitor. the activities of many employees. In addition,
firms have increasingly outsourced much of their operations ..
~mproved'communication and information technologies allow
~ore fluid boundaries between firms. Producers, suppliers,
financiers, developers, marketing and advertising firms, and
sonsumers form increasingly complex and changing networks. 17
and sub-contracting
relationships quickly.
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These flexible arrangements make~ workers more vulnerable, as
I·
sompanies are able to shift supplier and sub-contracting relation
ships quickly and easily, depending on market changes or manaI
g'erial tactics, with little responsibility to the workers effected.
This network ~f production, however, is not a seamless, unstruc
tl,lred flow of economic activity. Firms in related markets clump
together in regional industry clusters. Small, inter-networked
cbmpa~ies benefit significantly from being near each other. They
are able to draw on a skilled, experienced pool of workers. They
I
d~velop mutually supportive business ties. Often they link up
with local educational institutions or public-private partnerships.
T6gether, these close ties lead to improved collective learning,
inhovation, and dynamic development in the industry cluster.
Yet, while the cluster as a whole may thrive, individual firms often
cdme and go, in rapidly changing configurations of relationships. 18
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A wide range of researchers and: analysts in California have
recognized the importance of these changes. Recent examples
inClude:
,
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• Collaborating to Compete in the New Economyl9-This promiI
'
nent report was released by tl~e California Economic Strategy
Panel, a high-l~vel group of experts appointed through
California's Trade and Comm~rce,Agency. It analyzes the'State's
economic changes and proposes new strategic directions for
economic development policy. The report highlights the rapid
growth of information-based it:ldustries in the state and the
ways these technologies are altering the, economic structure in
many traditional industries asiwell (for example, agriculture
and apparel). It advocates looking at the structure of new
industries-based on regional!clusters of related companies,
rather than large firms-and developing flexible public~private
partnerships to promote economic competitiveness.
Economic growth, however,
does not automatically
trans/ate into improved well
being of workers or society.
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• California: Continued Economic Recovery and Restructuring 20
This report is the latest of PG&E's regular analyses of state
economic performance. It concludes that the base of
California's economy is shifting from defense and traditional
manufacturing industries to information and knowledge based
industries: "from goods to services, from swords to
ploughshares, from PCs to the Internet"
• California Economnc Growth 1999 Edition 21_This latest
report from the Center for the Continuing Study of the Califor
nia Economy is the most detair~d analysis of economic change
statewide. It also emphasizes the importance of new industries,
observing that "new products *nd technologies in advanced
telecommunications, multimedia and the use of the Internet
I
symbolize the state's leadership position in future growth
industries. California already has the economiC base that
other regions and nations are ~triving to create." '
,
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These reports provide insightful analyses of California's economic
transformation and provide useful statistics documenting recent
economic ,trends. Economic growth, however, does not automatiI
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cally translate into improved well! being of workers or society. as a
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whole. What these reports do not address is the central question
of whether workers have been able to share in the economic
promise of the new economy. In fact, aside from general figures
on unemployment, job growth, and average wages, most reports
on the economy focus on measures of growth and changes ih
I industry structure and dynamics. As such, they present an incom
.~ plete picture of the economy that neglects fundamental human
I issues.
Neither the risks nor.
the rewards of the
new economy are
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i With increased global competition, continued corporate restruc
evenly shared.
'i turing, and the accelerating pace of technological change, uncer
.: tainty and v9latility have become the hallmarks of the new
: economy. Nearly all actors in this international framework
: companies as well as workers-face this same volatility and risk.
:Unfortunately for California's working families, neither the risks
,nor the rewards of the new economy are evenly shared.
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3. Work in the New Economy'
,
'
To fully understand California's e~onomic restructuring. we need
to take a more in-depth look at h6w the spread of information
technologies affects wages, working conditions, and the work
lives of California's workers. Thisireport argues that while the
new economy creates economic opportunity for many, it also
increases insecurity, polarizes employment between work in
the global and local sectors, and tidens income inequality.
This competition through
innovation creates high.levels
I
of insecurity in employment
tq
for large sectors of the
• Growing Insecurity and Volatil,ity: To survive in today's
economic climate, firms need innovate constantly, respond
ing rapidly to technological and; economic changes and taking
advantage of new opportunities~ This competition through
innovation ,creates high-levels of insecurity in employment for
large sectors of the workforce, i~cluding employees within
high-tech industries. An increasing number qf workers are '
employed in temporary, contrad~, or other contingent arrange
ments. Many other workers are regularly displaced and forced
to find new jobs. These problems affect the entire labor mar
ket, including many highly paid workers who despite their
education and experience still fa~e both unpredictable job
prospects and rapidly changing skill requirements. ' ' .
workforce.
• Divergent Trends in Job Characteristics: There is a growing
gap in the quality ofjobs between different sectors of our
economy, especially between hig~ly skilled, globally integ~ated,
, high-productivity industries and the primarily low-paid indus- ;-1 :7.
tries that serve the local econom~. Janitors, home-health care I j
workers and waitresses are essen,tial contributors to our new I !
economy, but they see few benefits from growth in high-tech- I
nology sectors. In addition to these disparities between sec- i
tors, however, there is also increa!sing disparity within sectors!
between the low end and high enq. of industry clusters. The I
rise of networked production relations allows companies at the
core of these networks to thrive, While excluding many sub- \J
contracted workers from the ben~fits of that growth. '
j
• Growing Income Inequality: There lis great debate over how
much weight to give to each of th~ several causes of growing
income inequality. Clearly,'a Significant influence on California's
rising inequality comes from the changes described above
insecurity and polarization ofjobs; increasing demand for more
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The once reliable tie
between workers and their
employers is becoming
more tenuous and frayed.
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highly educated workers, and rising immigration of workers
with low levels of education. Most economists now acknowl
edge that globalization-including trade and capital mobility
accounts for at least 20% of growing inequality, and many
_
analysts weight it much more heavily. This expanding income
gap is occurring not primarily because of wage growth at the
top of the occupational structure, but instead, because wages
are declining for workers at the bottom and middle of the labor
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:These trends are analyzed in more details below.
:3.1 Employment anstability and Volatility
':One of the most difficult challenges facing workers in the new
~economy is escalating levels of insecurity in keeping or finding
',employment. The well-defin~d, stable jobs that were the core of
employment 30 years ago are increasingly disappearing. Work
itself is becoming more unpredictable, as job requirements and
~orking conditions continue to change rapidly. Also, more work
hs are employed through a variety of contingent work arrange
tnents, while even those workers in standard employment rela
_
Vons have to change jobs and careers more frequently than in the
past. The once reliable tie between workers and their employers
(s becoming more tenuous and frayed.
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Avivid indication of the growth in instability is the 9.~am_a!lc: r!se
,~fthe temp()~~YJ1~elRJn~h.l,strY;'BetWee-n--1993 ancf1998, person- l
Im;l supplyfirms added 182,900jobs to the California economy->-.
,
..
,making temporary help jobs the largest.~iI!gle category of new
)
-'I'
s-----------'-- - - '--
jobs-in,the .past four- years. Employment growth in the temporary
-.- , - - - ---.-----"
--' - j
help industry has been as great as employment growth in the
sbftware and electronic equipment manufacturing industries
comqined,-TeI!if.>Orary warIers are}Jlaced in'il"vaiieiy-of c6mpa
, _'.L
- .. .
,
,
,
, ! nies and industries, but in neafly all cases their einploymenris--.
, 'highly iQsecure:Wages in the'temp-orary'heip 'iiidils'fryaverage'
'1·· - the equivalent of $19,000 a year, with little access to health
insurance or other benefits, far less than comparable permanent
jd:bS pay.
~~.
~--
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Chart 1: Net New'Jobs 1993-1998 .
Temporary Help Industry Compared to High-Tech industries
!
200,000 ,-----------7---~---------.
180,000
Even supposedly permanent
160,000
140,000
. jobs are lasting shorter
120,000
periods of time.
100,000
60,000
60,000
40,000
i
20,000
>
o
Temporary
Help Industry
Computer and Data
Processing Services
,
Engineering and
EIeclronic Equipment
Management Services
Manufacturing
Data: CoIiIorma D<MIIopme!rt [)epanmem. Labor
Industlial Machinery
Manufacturing
Mil"",! Infom1aIicn OMsion, I.sbot FoIr:8 BtId InOOsIry Empb;menI
Temporary help jobs, however, areionly one sign of increasing
insecurity of employmenC Even supposedly per.~~I!eI1.!jC!P"s~~.r:e .
lasting shorter periods oftime.--Accbrditiffo~i recenLUniversity ___ )
ofCalifornia-Sari Francisco stir\leY'-'~lrno-st halfofCalifotfiia's;
: worken~;-fiave-beenWith their current employer'for tWo years or
'~. less. Thiunedici':l]9Q.Jenure.for..: all_Workersjs_only_threey~a.r§t
"The-UeSF-stiiay found that. onIY-~Y~:9te~E~~i~~.-adu~t§:in
California Qag been with - - ... - cutr~~m:~_mploY'er-lOyears or .....
their - ; ' - ,
!.-....:.
--' •.
-- - - -m_orEfin, 1998._Byrontrast,35.4% of all workers nationally had .I
-.
-,
. beenemployed more than 10 years on their <;:urrent j9,b..;While
.~ someoHhis ]60 shififngls 'voluntary, as people move to' find
better opportunities, much of it is dtiven by undependable
I
employment arrangements. Job displacement remains high even
though unemployment rates are low: within the past three years,
one out of six adults in the Californi~ labor force reported having
lost a job or left their job because th1ey expected to lose it.
--~-....---'
--------~--~'-
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.Chart 2: Tenure at Current Job
California Workers, 1998
Median
Not reported 1'10----,
=3 years
Less than 1 year
Tenure <1 year
·74% 18-34 years old,
• 56% Have some difficulty living on
current income
• 42% Employed by small business
·20% Household income'below
125% of federal poverty level
,10 years
6-10 years
1-2 years
3-5 years
Sou",,: UniversitY 01 CaI~ornia, San Francisco and The Fi~d Institute.
n =947 emp~d CA adults, ~dud'~g 219 who haw been emp~d for les, !han 1year with !heir amenl elT\Pk7ler,
Chart 3: Job Lay~ffs
California Workers, 1998
Q: In the past three years, didyou lose a
job or leave a job specifically because
you expected to be laid off?
Lost lob
·63% Have some difficulty living on
current income
·39% Latino
• 31 % Not currently working
• 26% Household income below
125% of federal poverty level
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Source: University 01 CalHomia, San Francisco andThe Fi~d InsliMe
n = 1,304 CA adulls employed lor pay wilhin Ihe lasI!hree yeers, ~duclng 288 who 10,1 ejob
~ Ihe pasllhree years 0( Iell e job because Ihey expecIed 10 be laid oH
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Although there is no specific informat!Q!l ~b9i!t G~!it()rnia: avail
able, rfational~data1:r~arlyshowihigh lev~ls ofjob los~es in
ftechnology~bas'edindustries. In a stt.ldY oflay~ottsov~r the last
(six years, Challenger: Gray and Ghristmas; ajob pl~ce,ITIerit fir lIl , .I
(found that t1)e.GoITlPuter industry is a leader riot.only inj-;>b '
. ;growthbut also injob loss):rliestudy fo~nd ttIal~rom"1.993to
'''1
r' 1998.sompani~~ in, more tharl30 industriesJ!!!1ou9ced"j.~Fom- It
- ..:::::':;;';':'
_.
•
__
~
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•
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-
_ ,._,.
l
.~
-,
•
__
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>
bine9:f9~~J;"0r3;.~:~i~lit1~~~?tIs. Seve~ iq2~~~tl~~~ac;:couR~edfor
. more than_h_Cllf9fthls;amount. The computer'mdustry ranked
" -third in down,$izing~.;.while telecornmuniCationsfimked .fourth,
.: out-paqed only by aer()?pa~€) qnd,n~tailing.
_
.
------ -------_.
-
~
---'-'~ ~.
""
',"
.
,£ _
' ~
•
f#
,,..
The increasing pace of
..,
t'
--<"
technological change not only
throws more people out of
work but also contributes to
the increasing duration of
unemployment.
Top U.S. Industries with Announced Lay-offs, 1993-1998
Industry
Aerospace/defense
Retail
Computers
Telecommunications
Financial
Industrial goods
Transportation
Number of Lay~offs
373.000
280.000
273.000
, 251.000
241.000
177.000
, 135.000
Source: Challenger. Gray & Christmas
Technology Increases Duration of Unemployment
The increasing pace of technological change not only throws
more people out of work but also contributes to the increasing
duration of unemployment. This is true for a number of reasons.
As skill demands change more rapidly. large numbers of people
need to learn new skills, go back to school. or switch careers '
entirely. When a firm changes technology. it may permanently lay
off workers with certain skills and hire new workers with different
ones. This is true for workers at all levels. In recent years. middle
managers have faced some of the largest numbers of layoffs. 22
Some workers. particularly those who have the hardest time
acquiring new skills, may be unable to take advantage of new
job opportunities. and thus face long-term unemployment. More
critically. even when a .firm makes incremental changes in technol
ogy. it may not want to retrain some types of workers. For
•
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People who are
unemployed remain
unemployed for longer
periods of time than
in the past.
THE
L I FE LONG
T I G H. T R 0 P E
example. many firms believe it is not cost-effective to retrain older
(or less-skilled workers, either because the retraining costs are
! higher or beca~se firms believe workers may not be sufficiently
\ productive or on the job long enough to recoup the cost of train
\i~g. This employer strategy increases the share of the unem
ployed labor force made 'up of workers with relatively higher
retraining costs. It also threatens these unemployed workers
with a long job search or even permanent unemployment.
As a result of these changes, people who are unemployed remain
unemployed for longer periods of time than in the past. F9!:J
c~xaVlpJ~, jI1th~~t9Jo.s.-tlte:av~f_age:~duratio~10fjlfl~J(fRIQYment'for)
'. ITl~Il-\lV_~~1-~;-l=~_~~k:~~~while-in the-1990s·it was-17 weeks~-anextra-)
::~mQI}tl:!=pfjoblessnes~,- The-iI1<;:Ii~s~lti:,i!IleI!lp!oyrrient-isparticu- .
lailY-dramatic for'olderworkers: unemproyeamen -aged. ~SJ:o 64 /
~re_lJ_nel1)ploy.ed.an-av:erage_ofJ 9_w.e.eksjn the 1970s, 23.8--.
weeks--in the-1980§:'-arid 't5~3\veeks-in the-~1990s.Evenmore -'
distur-bing, th~;~~h~s be-;~-~nC;ticeableiflcreas~ in the propor
tion of displaced workers who are unemployed an exceptionally
long time. In~1:9_98-focexamRte;:14%-0f.the ..unemployed-were· out"
ofwork~7~YV~J~Ksof-moni,.compared_to onlY,9% in 197~faha less'
-than 5%in-1969.21.~- "
. . - -, .'
"' .----
--
~~-"-,"
...
United States, Mean Duration of Unemployment, Period Averages
1970-79
1980-89
1990-98
Men
All men
16-19 years
20-24 years
25-34 years
35-44 years
45-54 years
55-64 years
13.1
8.3
11.6
14.0
16.8
18.0
19.1
17.1
9.3
14.5
18.2
21.1
22.7
23.8
17.3
9.7
13.4
17.1
20.1
24.0
25.3
Women
All women
16-19 years
20-24 years
25-34 years
35-44 years
45-54 years
55-64 years
10.5
7.5
9.5
10.7
12.1
13.9
16.5
12.4
7.8
10.8
12.9
14.7
16.1
17.8
14.4
9.0
11.3
14.4
17.0
18.5
20.7
Source: Baumol and Wolff (1998)
Figures for 1994-1998 updated by author.
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Growth in Small Firms Leads to Poorer Work Conditions
The growing proportion of employment in small firms has al~o
contributed to increased employment turnover and insecurity.
New business formation and the growth in small and medium
sized businesses have been key factors in the economic vibrancy
of the information technology industry and in California's eco
nomic recovery. From 1993 to 1997, large businesses lost 277,443
more jobs than they created, while firms with fewer than 100
employees created more than 1.3 million net new jobs in
California. Firms with fewer than 20 workers accounted for
65% of this growth. 24
Employment in small
firms is inherently
more insecure than
in large firms.
Employment in small firms. however, is inherently more insecure
than in large firms. The small business sector is significantly
more vulnerable to failure, with many firms collapsing at the
same time that others succeed. There.are usually limited oppor
tunities for career advancement within the business. While some
small firms pay well, overall working conditions in the majority of
small firms are w~rse than in large firms. In particular. small-firms
typically___offer-ress'1rany~heaith care.beneflts. pensioils~ndJ
"
o~l':ben~fits .than-Iarge-firms::-~rec·eIlr:natiOnafstudY.2sdf
employmerit:fn~ail business -(less than 50 employees). for
instancedound: .:--.
~-
. - -" ~
"
/
;./E;mploye~s
oflarge firms (1,000 or more employees) are better
"h compensa~ed than small business employees, earning on
".?verage 39~ more.
r .. \ .
i· Workers at large firms receive better benefits than their. coun
.
, ;terparts at small firms: 68.7% of employees at large firms are
covered by pension plans, compared to only"13.2% at small
firms. Also. 78.4% of employees at large firms have health .
insurance. but only 30% of workers at small firms receive
health insurance.
\~
\
;. Job security at l~rge firms is also better, with job tenure ave rag
\~ing 8.5 years at large firms. but only 4.4 years at firms with .
fewer than 25 employees
WORKING
PARTNERSHIPS USA
�:CiQ
WALKING
Older high-tech workers
THE
LIFELONG
TIGHTROPE
A recent survey of California resi<;lents also found that workers
in smaller firms have less access to training and education
programs. While 61% of employees in firms with more than 500
employees report hav'ing attended ajobs skills class in the last
5 years, only 53% of employees of firms with fewer than 50
employees reported having attended jobs skills training. 26
face more difficult
employment prospects
and a decline in their
earnings.
Older Workers Face More Displacement
Older workers are particularly likely to suffer from insecure
employment. In the context of rapid change, older workers
often need more retraining and face more difficulties in finding
new employment. High-tech industries tend to be dominated
by younger workers, either those recently out of college or in
their earlyyears as a prOfessional. Companies would rather
hire younger workers wi~h the latest university training than
invest in retraining of their current, older workers, even if they
are highly skilled workers with university educations. As a
result. olaer-:fiign-tech'workers-face:more=difficiilfefuployment
prospects and a decline in their earnings precisely when
traditionally people have had the highest earning potential.
This trend was confirmed in research by University of California
Professor Clair Brown and her colleagues. 27 They compared
earnings growth baseq on experience ("the experience pre
mium") for engineers and managers in high-tech industries and
in the economy as a whole. As the chart below shows. earnings
growth has stagnated for high-tech professionals and managers
while growing substantially for engineers and managers in the
economy as a whole. ~·the-entireeconomYFa: professionilhvith
?O ~ears of-experieQce' irt'"t985:earned-'48%-more than a profes
si~)(lalwith no experience, and by 1995 that. differen'tial ha~
-incr:eased~to- -73%.-In-hign·:"iedi]iidusffies?a:.manager:or pn;>fes
sionalwith20 years'of experience earned 55% more thana'
newly hired einployeeJn.198,5.,b_ut,ol!ly. 5_9% .t:6<>..r~}n 1,995. :
, ,Wages-actuallystart·to-decline·f6n:~ngirieers and managers)
(with-more. than.24 years experience: .---.--- .
Why haven't thewages for older high-tech managers and
profeSSionals kept up with the rest of the economy? At least
WORKIN'G
PARTNERSHIPS USA
.'
�WA l K( N G
THE
l ( F E l 0, N G
TI GHTR0 P E
part of the reason is the growing number of graduate students in
engineering. combined with companies' desire to hire personnel
with the latest education. Companies have little incentive to train
older engineers when they can hire staff from the large flow of
newly-trained engineers, who are willing to work for lower ;sala
ries. Companies can save money on training as well, since the
recent graduates already have cutting-edge knowledge. Thus, at
a time in their careers when they may have expected the greatest
earning potential, high-tech engineers face increasing insecurity
in employment, accompanied by wage stagnation:.
The newjobs being created
disproportionately include
many that require few skills_
Chart 4: Manager and Professional Experience Premiums
90%
~
I
80%
~
~ 70%
.9
,~ 60%
'1ii
..
1!
~
20%
10%
0%
.........:::.::.:
;~
r:::
o
1':
?l
~
..
..*,' ; .........
.
a
E 40%
tr.l
c
.....
.....-.' ..............
...
.. , y
.. ....
"V
c: 50%
01
'
.* ....... --. . . .
....
... ' .
"ai
'; 30%
..
-- ----
... ......
",
~",:-
• • • • • AlllndustrfeS - 1995
I
- - . Atllnduslrtas -1985
---
.J~.-.-
High·tach Industnes - 1995 '
- • • • • • •• High-tech Industries - 1985
1/
:3
5
7
9
11
13
15
17
19
21
23. 25
27
29
Years of Experience
Dala: 1986 and 1986 Cu"ent Population Survey March Supplements
Courlesy 01 Clair Brown. et al. University of California, B_lay
3.2 Divergent Trends in Job Characteristics
In the past five years, the growth in high-tech sectors has also
stimulated growth in other sectors of California's economy. Yet
many of the jobs created during this period are significantly
different from the jobs that were lost during the recession of the'
early 1990s. While California lost large numbers of well-paid jobs
in core manufacturing and defense-related industries; the new
jobs being created disproportionately include many that require
•
WORKING PARTNERSHIPS USA
�W A l KIN G
Employment has grown .
dramatically in services,
including many low-paid
jobs in temporary
employment.
THE,
l I F E1 0 N G
TI GHTR0 P E
few skills and are poorly paid, even though there are also new
jobs in the middle and upper levels of the labor market. This is
part of a national trend in the decline in manufacturing employ
ment and the simultaneous growth ofjobs in both the high and
low ends of the service industries. As the following table shows.
California's employment in manufacturing declined by over
300,000 between 1989 and 1993, an amount that was one and a
halftimes the totaljob loss in the economy overall. Though there
has been some expansion in manufacturing employment in recent
years, employment remains significantly below the peak in 1989.
, On the other hand, employment has grown dramatically in ser
vices; including many low~paidjobs in temporary employment,
business services, and retail trade.
.
TABLE 1: CALIFORNIA ANNUAL AVERAGE LABOR FORCE AND INDUSTRY EMPLOYMENT
EMPLOYMENT
JOSCROWTH
TOTAlfAAM
TOTAl NONfAAM
1998
1989·1983
ANNUAL PERC€NT
JOBGROWrH
1989·1993 1993·1998
INDUSTRY SHARE Of
JOS GROWTH (LOSS)
1989·1998
1989
1993
311.400
362.300
19'1.000
·9,100
·0.6%
1.9%
~O%
12.2l11.500 lt04S.3OO
!lS84.100
·193,200
1,5l8,600
.0.4%
2.4%
98.0%
1993-1988
36.100 .
2.104.300
2.285.100
2.181.200
·418.600
301.500
.4.1%
2..5%
·as%
37.300
34.900
Z5.4OO
·2,400
-9.500
.1.6%
-6.2%
·0.9%
560.000
«5.100
601.600
.114.300
11~800
·5.5%
6.2%
3.0%
2.101.000
1.80S.100
1,960.300
·301.000
155.200
·3,8%
1.7%
·10.1%
1.405.000
1,110,000.
1.230,000
·295.000
120,000
,12.1%
695,200
129.400
·5.000
34.200
·5.1%
,0,2%
2.1%
101.100
1.0%
il%
9,53~200
9,759,100
10,996,000
225,500
1,131,200
0,6%
2.4%
106.5%
TRANSPORTATION >PUBliC UTIUTIES
59t200
610.600
694,000
12,400
83,400
0,5%
2.6%
1.0%
WHOlESALE TRADE
158.200
686,700
600,600
.71.500
\ 114,100
·2.4%
3,1%
3,1%
<193,000
t 125,200
2.321,200
·68.100
196,000
.{I.8%
1.8%
9,3%
0.1%
14,5'1(,
GOODS PRODUCING
MINING
CONSTRlCTION
MANUfACTlRlNG
DURABlE GOODS
NONOUAABlE GOODS
SEIMeE PRODUCING
RETAIL TAAOE
fiNANCE. INSURANCE> REAL ESTATE
SERVICES
789,000
194,200
199,000
5,201)
3,600
0,2%
0.1%
3,19~200
3,462,400
4,119,500
266,200
151.100
2.0%
4,0%
68~600
155,500
1,134,600
69.000
379.300
. 2.4%
8,5%
32.6%
• 121,400
825,400
901,000
98.000
15.600
3.2%
1.8%
12.6%
ENGINEERING> MGMT. SERV.
365.400'
383,400
439,600
18,000
56,'00
1.2%
2.8%
\,4%
PRIVATE EDUCATIONAL SERVICES
165,000
166,400
205,100
1,400
lII,100
0.2%
4,3%
2.9%
3,8%
BUSINESS SERVICES
HEALTH SERVICES
/
AMUSEMENT. RECREATION SERV,
144,000
163,400
197,700
19.400
34,300
3.2%
3,9%
MOTION PlCIURES
111,100
130,700
185,900
19,000
55,200
4.0%
7.3%
\,4%
ALL OTHER SERVICES
996,100
1,037,GOO
1.155,200
41.500
117.GOO
1.0%
2.2%
.11.6%
1,99t700
t08O,6OO
tl63,6OO
81,900
83.000
1.0%
0,8%
12.610.000 lt407,600
13,983,100
·202,400
1,575.500
.{I.4%
2,4%
GOVERNMENT
TOTA~
ALL INDUSTRIES
,
DATA: CAlIfORNIA EMPLOYMENT DEVELOPMENT DEPARTMENT. lABOR MARKET INfORMATION DIVISION, LABOR fORCE AND INDUSllI'f EMI'lOYMENT
WORKING
PARTNERSHIPS USA
•
1/,0%
100,0%
�WALKING
THE
LIFELONG
TIGHTROPE
The following table shows the 15 major industries with the top
employment growth between 1993 and 1998 in California. Together
these 15 industries accounted for nearly 84% of all employment
growth during that time. As might be expected, the list includes
major high-tech industries, such as electronic eqUipment manufac
turing, engineering and management services, and industrial
machinery manufacturing (a category that is dominated by the
computer industry).
Within business services,
the greatest growth
has occurred in the
temporary help sector.
TABLE 2 : TOP 15 INDUSTRIES WITH GREATEST JOB GROWTH, 1993 -1998
SIC
CODE
EMPLOYMENT SECTOR
TOTAL EMPLOYMENT
1993
1998
73
BUSINESS SERVICES
755,500 1,134.800
TEMPORARY HELP INDUSTRY
238,600
421.500
COMPUTER AND DATA PROCESSING SERVICES 125,200
239,400
ALL OTHER BUSINESS SERVICES
391.700
473.900
17 CONSTRUCTION-SPECIAL TRADES
280,500
393,400
LOCAL EDUCATION
738,600
844.400
784,900
871,800
58 EATING & DRINKING PLACES
50 WHOLESALE TRADE-DURABLE GOODS'
395,100
476,400
825,400
901,000
80 HEALTH SERVICES
87 ENGINEERING & MANAGEMENT SERVICES
439,800
' 383,400
185,900
78 MOTION PICTURES
130.100
36 ELECTRONIC EQUIPMENT MANUFACTURING
214,000
268,700
83 SOCIAL SERVIcEs
208,800
258,900.
93,400
134,600
45 AIR TRANSPORTATION
82 PRIVATE EDUCATIONAL SERVICES
205.100
166.400
35 INDUSTRIAL MACHINERY MANUFACTURING
194,400
232,900
79 AMUSEMENT & RECREATION SERV,
163,400
197.700
07" FARM SERVICES
140,100
173.900
TOTAL TOP 15 EMPLOYMENT SECTORS
5,474,600 6,119,300
TOTAL, ALL SECTORS
12.407,600 13.983,100
CHANGE 1993·96
AVERAGE 1997
NUMBER %
ANNUAL PAYROLL'
379,300 50%
182.900 77%
114,200 91%
82,200 21%
112,900 40"A,
105,800 14%
86,900 1.1%
81,300 21%
75.800 9%
56,400 15%
55,200 42%
54,700 26%
50,100 24%
41.200 44%
38,700 23%
38,500 20%
34.300 21%
33.800 24%
1,244,700 23%
1.575,500 13%
. $33,353
$19.407
$66,634
,$25,695
$33,584
$32,742 (1)
$11.545
' $42,975
$34.074
$50,077
$48.984
$52,333
$17,327
' $36.414
$22,901'
$61.447
$28,487
$25,048
$33,117
$32,799
'BASED ON THIRD QUARTER 1997 PAYROll AND EMPLOYMENT
.. INCLUDES FORESTRY AND FISHING EMPLOYMENT
(1) AVERAGE PAYROLL FOR ALL PUBLIC SECTOR EMPLOYMENT
DATA: CALIFORNIA EMPLOYMENT DEVELOPMENT DEPARTMENT, LABOR MARKET INFORMATION DIVISION, LABOR FORCE AND
INDUSTRY EMPLOYMENT
'
The single largest category. however. is business services. Wit~in (
business services, the greatest growth has occurred in the tem)~\i
porary help sector, which accounted for 35% of business service, '
expansion. These firms provide trained "temp" workers to busi- \, I
nesses at relatively low wages with few benefits.
\
I
,
/,,:
Alqngside the growth in high-tech employment and business /, i
services. however. there has been tremendous growth'in low- l\11 I'
:1
wage service occupations. Taken together. several predominately
low-wage service industries-including 'other business serv~ces'
.
I
•
j
WORKING
PARTNERSHIPS USA
�Nearly 40% of projected
newjobs will require,
at most, a high school
diploma.
(predominantly janitorial and security services) ,'eating and
drinking places, social services, private education services,
amusement and recreation services, and farm services
accounted for 326,000 net new jobs between 1993'and 1998,
or 21% of new jobs.
all
Occupational Projections Show Significant Low-Wage
Job Growth
The divergent trends in job creation reflect dramatically different
needs for education of the workforce. In an analysis of data from
the Bureau of Labor Statistics and the California Economic Devel
opment Department (EDD). the:Galifornia:Buaget=Project:estimates-,
" !!~~!!e~!1y-:'40%:of:projected-:neWJo)js;)jetWeerr1993 and:::f09.5. ~nb
t
bein oc~upatjQl1s~-that~wiltrequire;::at·most ..a liigh:scneo!=aiploma'
~1!..h relatively:-brief9_n-tbe~ob~.trairting.Anotner3r%:oFpF0jif<:j:e.d_2
.·lJew,joos:wilfrequire:a:"college-degree;::reflecting,the 'simultaneous '
grpJ.:!l'! aLb_othJ.be tOP:~!l~-bQttom:df.tnEnaoor force. 28
-------.-~--~
.---"
Chart 5: Percent of Projected Job Growth By Education
,
And Training Requirements
Bachelors Degree
9rHigher
~
f
(J
g'
"E
~
'D
Associate Degree
Postsecondary
Vocational Training
Work Experience in a
Related Occupation
;
c Long Term On·The-Job
,g "
,Training
.
u
.a
w
Moderate On·The-Job
Training «1 Year)
39%
Short On-The-Job
Training
o
5
10
15
20
25.
30
Percent of Job Growth 1993 to 2005
Source: California Budget Project analysis of data from Califofnla
Employmeol Developmeol Department and U.S. Department of Labor
WORKING, PARTNERSHIPS USA
co
35
40
45
�W A L KIN G
THE
L I F E LO N G
T I GHTR0 P E
The EDD's projections, which span the period from 1996 to 2006,
suggest that there will be 3.1 million ne~ jobs created in Califor
nia. However, three of the top four categories-accounting for
nearly 8% of all job growth-are in service sector jobs requiring
limited skills and paying low wages. NJullTQ~qUt_ofjJ:i~tqp~~ =-~
~occu~afi9ns with,
greatestjob'growth have~-m~tiian-wage
tili
----.
--~i6w.Ji9.a.nli-oui.~-
~..
/)
California Occupations with the Largest Projected Numerical
Growth, 1996-2006
Annual
Occupation
Cashiers
General Managers. Top Executives
Salespersons, Retail
Guards and Watch Guards
Receptionists, Information Clerks
Teachers Aides, Paraprofessional
General Office Clerks
Systems Analysts-Elec. Data Proc.
Truck Drivers. Light
Registered Nurses
Waiters and Waitresses
Food Preparation Workers
Hand Packers and Packagers
Combined Food Prep and Service
Maint. Repairers, Gen. Utility
Teachers-Secondary School
Computer Engineers
Adjustment Clerks
Sales Reps. Non-Scientific. Exc Retail
Engineer. Math and Nat. Sci Mgrs.
Total
Average
1996
2006
390,210
445,640
502.210
190,860
204.610
153,580
394,670
85,430
159,590
221,920
228,640
168,560
133,280
169,060
156,430
140,460
64,180
80.760
163.670
79,780
occupations with the greatest
job growth have a median
wage be/ow $10 an hour.
Absolute Percent Median
Change Change Wage
302,190
361,510
421,550
124,490
146,800
100,750
348.060
42.360
119.310
182,450
189.260
130.290
98,570
134,740
122,520
106,800
30,930
49,250
134,600
50.840
A full 10 out of the top 20
88,020 29.1% $ 6.87
84,130 23.3% $33.52
80,660 19,1% $ 7.56
66,370 53.3% $ 7.54
57,810 . 39.4% $ 9.58
52,830 52.4% $9.48
46,610 13.4% $10.07
43,070 101.7% $25.69
40,280 33.8% $ 9,78
39,470 21.6% $22.80
39,380 20.8% $5.61
38,270 29.4% $ 6.50
34,710 35.2% $ 6.81
34,320 25.5% $ 5.71
33,910 27.7% $11.29
N/A
33,660 31.5%
33.250 107.5% $29,05
31.510 64.0% $11,67
29.070 21.6% $17,69
28.940 56.9% $39.72
24.6%
Data: California Employment Development Department. Occ,upational Projections
1996-2006 Data: California Employment Development Department, Occupational
Projections
Divergent trends in the quality of future jobs are also demon
strated through estimates of job growth by average hourly wage
within differing occupations. The California Employment Develop
ment Department expects a disproportionate growth in occupa
tions that,paid less than $10 an hour in 1996. Thesejobs account
for an estimated 36% of projected newjobs by the year 2001: Jobs
WORKING PARTNERSHIPS USA
�WALKING
THE
LIFELONG
TIGHTROPE
in occupations that pay on average between $10 and ,$15 an hour
are shrinking as a portion of the workforce. while occupations that
pay above that amount are also seeing disproportionate growth.
Wages have stagnated
Chart 6: Distribution of Employment and Projected Job Growth,
1993-2001, By Average Hourly Wage in Occupation
for the majority of the
100
population, and inequality
is growing.
90
~
0
80
.~.
70
ell
60
32
e
>
Avg, Hourly Wage
(In 1996 Dollars)
$20 and up
D
0
'0
50
ell
m
S
c
~
If
$15-$19.99
$10-$14,99
40
30
•
$5-$9.99
20
10
0
Employment in 1993
Projected Job Growth. 1993-2001
Dala: California Employment Development Deparlmenl, Ot::ct.IpaJional
Projections 1993-2005 and Or:aipa1lona1 Emp/oymanI Statislics
3.3 Stagnating Wages and Growing Income Inequality
In the midst of growing insecurity and structural inequality. wages
have stagnated for the majority of the population. and inequality
is growing. These wage trends intensify working families' vulner
ability to economic dislocation.
Median Wages Decline.
The typical (median) wage paid to California workers in 1998 was
$11.96 an hour. Despite five solid years of economic growth. this
figure is still 1% lower than it was in 1993. Male workers saw an
even greater decline. The typical wage paid to men in California
declined from $13.53 in 1993 to $12.91 in 1998.29 The median wage
for female workers remained significantly below that of male
workers and remained unchanged, despite rapid economic growth .
WORKING 'PARTNERSHIPS USA
•
�W All< I NOT H ELI FE l 0 NOT [0 H T R 0 P E
Change in Median Hourly Wage, California Workers, 1993·1998
1993
All Workers
Male Workers
Female Workers
1998
Percent Change
$12.14
$13.53
$11.08
Workforce
$11.96
$12.91
$11.09
·1%
·5%
0%
Most workers have
experienced declining wages
Data: Current Population Survey·ORG File
over the past five years.
Wages Decline Across the labor market
Most workers, at nearly all levels of the labor market, have expe
rienced declining wages over the past five years, in some cases ..
quite dramatically. despite the long economic growth cycle of the
1990s. Despite some growth in 1998 for those at the bottom of the
income d~stribution (attributable to declining unemployment and
increases in the statutory minimum wage from $4.25 in 1993 to_ -:>
........
$5.75 i!!]'_~~_I).!.~\Vag~~-!~maiI}~~~~Jp~::!tt~jI:J!r~,1~e~~~l~n-leveIs.
cl'V1:Oreover: tfie-wage~p~id .a-male w6tker-aftnefoffieth perceirtlle
declined:over::5%:between:1993:ari{LI998:~Overall, irilhe:pasr:fiv"i?
cyeaFs:OnlY-~ages-ln:ihe~uppedialrof·the-I~\bormaFkeehave:.:g[Q~.!."but~\JJ~!l-th~~~_r::,y~~!!ghtly~focmale~~ork~rs. At the.
eightieth percentile, for example, wages for women grew by 6.4%
but only 1% for men ..
A
Hourly Wages by percentile
California, 1993·1998
Percent
1993
All Workers
80th
60th
40th
20th
Men
80th
60th
40th
20th
Women
BOth
60th
40th
20th
1998
$ 20.71
$ 14.40
$ 10.34
$ 21.38
$ 14.63
$ 9.98
$ 6.89
3.2%
1.6%
-3.5%
0.0%
$ 11.08
$ 7.29
$ 23.22
$ 15.76
$ 10.51
$ 7.13
1.0%
-3.2%
-5.1%
. -2.1%
$ 17.79
$ 13.06
$ 9.52
$ 6.68
$ 1B.94
$ 13.13
$ 9.35
$ 6.59
6.4%
0.5%
-1.8%
-1.3%
$
6.89
$ 22.99
$ 16.29
.,
Data:. Current Population Survey-ORG File
WORKINO
PARTNERSHIPS
USA
�'WALKING
THE
LIFELONG
TIGHTROPE
The wage declines in the past five years are not a new trend. The
long-term trends are even more disturbing, especially for those at
the lower end of the labor market. Wages at the thirtieth percenII
tile, f?[ instance, were 9% lower in 1998 than in 1989 and nearly
!18o/p lowerthan in 1979 when adjusted for inflation. In the space of
I 2Q years, workers at the bottom end of the labor market have lost
i Jdatly one fifth of their hourly earnings, a historically unprec
: edented decline during a period of economic growth.
I I ~- ''-.I
Workers at the bottom end
of the labor market have
,
lost nearly one fifth of
I
'"
\
\
I
their hourly earnings.
Chart 7: Cumulative Percentage Change In Hourly Wage
By Percentile 1979-1998
All Workers
10.-------------------------------------------~
5
~
o~------~~~~~~~~~~-~-~-~-=-----~~~=-~
' .. ..... ....
·15
----90thDecile
..... .......
.....
'" '...... ' " " , / .,,-
.....,
.....
..........
- - . iOth Decile
-20
......
.. • •• • .... 50th Decile
-
-
-
... "
30th Decile
-
-
................ .. ~ .. ,. ......... ~ ...... ~ ..
....
10th Decile
1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998
Data: CUrl.nt Population Survey, Out·Golng Rotation Group File
Despite the wage decline across most of the labor market, the
trends for men and women have been different. Women continue
(\ to earn' significantly less than their male counterparts. The me
\ dian wage for women in 1998 was $11.09, compared to $12.91 for
\ "\ men. However, wages for women at the upper end of the labor
\", market have increased sharply-up a full 28% since 1979 for
\ \ women at the ninetieth percentile-:-while the wages for men at
\ \the ninetieth percentile have remained stagnant. As Chart 8
,
\ I I .
\ .1
....J
WORKING
PARTNERSHIPS USA
.
�WALKING
J
THE
LIFELONG
TIGHTROPE
illustrates, since 1979 only men in the top 10% of earners have
I'
I, received wage increases. The real wages for at least 80% of work-
I\\ing men are now less than what their counterparts earned 20
\years ago. Women workers have fared somewhat better, with
'\their median wage in ,1998 remaining roughly the same as it was
lip 1979. However, by contrast with sizeable gains for women at
tpe top of the salary scale, the wages of the lowest-paid women
~orkers have declined by 15% over this period.
II
~J
The real wages for at least
80% of working men are
now less than what their
counterparts earned
Chart 8: Cumulative Percentage Change In Male Hourly Wages
By Percentile 1979-1998
.
20 years ago.
10-r~--------------------------------------------.
5
QI
-5
CI
c
III
G -10
...
c·
8
i -15
,,---.,"
-20
.'
·30
-35
-I-'::;=:::;::::::;::=;:::~-'---'-----r--r---.---.---r---'---'---'r--.---"'--.--
1979 1980 19811982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 19971998
Data: Current Population Survey. Out·Going Rotation Group File
WORKING
PARTNERSHIPS
USA
�WALKING
THE
LIFELONG
TIGHTROPE
Chart 9: Cumulative Percentage Change in Female Hourly Wages
By Percentile 1979-1998
,
30.-------~--------~--------------------------_,
25
20
Because of these declining
- - - - 90th Decile
- - 70th Decile
•••••••••• 50th Decile
- - 30th Decite
15
wages, many Californians
-
-
-
- 10th Decite
8, 10
.
face increasing difficulties
c
~ 5
i
..
providing for their
households.
~
O~~-~'~~~~~~__~,,~----~~~--··-··-··-··~··~··-···--··~···~.~~.
..
. ..
1l.·5
·10
":'........
\,......-.,
'- ...
-15
'" ..... ....
....
.
'--
-20
.......
~ ......
-
-~-
·25~~-.--.-.--r-,--r-.-.-~~r-~.-~~--.-.--.~
1~1~1~I~l~l~l~l~l~l~l~lml~lml~l~l~l~lml~
Data: Current Population Survey, Out·Golng Rotation Group ~ile
Because of these declining wages, many Californians face increas
ing difficulties providing for their households. A recent poll by
UCSF and the Field Institute found that over half of California
residents say that it is at least somewhat difficult to live on their
household's income and .16% say that it is difficult, very difficult,
or extremely difficult to do so. More troubling. about=l4%:oHhe~
state's r~sideJ!ts .rep.Qrt.that:it~is'eitYier:Ve~iY·or=somewnaflikelr~
<;,;;,
,-•• - . - ..... _ - - - - ... - _•. _ .
thatin::.the=nexHwo'monffisthey" aria-their7familie~n¥ill'experi- '
c-.
.ence~t~l..::.haf:dships;,::such:as::inadeqiiate· rrousing;::food, or
medical 'care. And 6% say it is very likely that they and their
,:!;faihilywilnlave to reduce their standard of living to the bare
,1 necessities of life in the next two months. 30
~--~.--
'J
Why Declining Wages?
How is it possible to have continually declining wages and grow
ing inequality in the midst of our state's recent economic growth?
There is no easy answer, since many forces are at work. Two
factors that have received the most attention in California .
W 0 R K[N.'d PAR T N ER S HIP SUS A
�WALKING
THE
LIFELONG
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recently are changing skill demands, and immigration, both of .
which are examined below. It is important to note, however, that
these two factors combined still account for less than half of the
growth in inequality in the last 20 years. Employment insecurity
and the rise in contingerit employment also playa significant role,
since workers who are insecure in their current employment are
less likely to demand higher wages. Other contributing factors
include increasing global trade, declining unionization rat~s,
rising employment levels in low-paid service sectors. and declin
ing value of the minimum wage. All of these latter factors consti
tute longer-term structural changes in the economy, and in many
ways, they are integrally linked with the character of recent
.
economic growth.
Workers who are insecure
in their current employment
are less likely to demand
higher wages.
Education and Wages
ClearlY changing returns to education has been a significant
n (factor in increasing inequality. Returns to education measure the
i f differential in earnings between more- and ~ess-educated workers,
!! and there is clear evidence that lower-educated workers are
II receiving significantly lower wages now than in the past. In the
ii last five years of economic expansion, for example. the average
I \li hourly wage for California workers with a college degree rose by
I \i: 2.5%, while the average wage for California workers with less than
\ I i a high school education declined by 3.3%. This trend is particu
\ I larly evident over the long-term. The average wage of workers
I
J ; without a high school education deClined by a full 34% bet~een
lJ 1979 and 1997, before recovering slightly in 1998.
.
a
I
i.
I
\
(
;It is
important to note, however, that the growth in inequality
related to education is occurring primarily because of declining
J
wages for those with lower education levels, not primarily be
cause of raising wages for those with higher education levels.
In fact, wage levels for workers with higher education levels have
seen surprisingly little increase. The average wage for men with
,a college degree in 1998. for example. was actually slightly less
when adjusted for inflation than the equivalent wage in 1979.
Only 30% of California's workers currently have a college degree·
or higher. Wages for the majority of the California workforce who
only have some college education or less have remained stagnant
or declined over the last 20 years.
WORKING
PAR T N E RS HI PSU SA
�WALKING
THE
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Average Hourly Wage by Education Level, California, 1993-1998
1993
1998
PE!rcent Change
All
Advanced Degree
College
Some College
High School
Less Than High School
$
$
$
$
$
27.36
20.26
14.09
12.22
8.55
$
$
$
$
$
27.55
20.76
14.09
11.91
8.25
0.7%
2.5%
0.0%
-2.6%
-3.3%
Advanced Degree
College
Some College
High School
Less Than High School
$
$
$
$
$
29.65
22.76
15.75
13.33
9.17
$
$
$
$
$
29.42
22.97
15.37
12.91
8.93
0.8%
0.9%
-2.4% .
-3.2%
-3.0%
$
$
$
$
$
23.31
17.44
12.45
11.02
7.34
$
$
$
$
$
24.35
18.50
12.77
10.71
7.06
4.5%
6.1%
2.6%
-2.8%
-3,9%
Men
Women
Advanced Degree
College
Some College
High School
less Than High School
Data Source: Current Population Survey
Chart 10: Cumulative Percentage Change in Average Hourly Wage for Men
By Educational Level 1979·1998
.
20
10
----~
0
<II
al
.
C
.c -10
(.)
",
'C
<II
2
t. -20
-30
.. ,. . . . . . . . . . . . . " II . . . . . . . . _. ~ • •
- - - - Adva..,ed Degree
- - College Degree
.......... Some College
-40
- - High School Diploma
-
-50
. - - Less Than High School
197919801981 1982 1983 19841985 1986 1987 1988 1989 1990 1991 19921993 1994 1995 1996 1997 1998
Oal.,Currenl Populetion Survey••Oul.GOlng
W 0 R1<1 N G PAR T N E R S HIP S USA
ROIa~on
Group Fila
•
�WALKING
THE
liFELONG
TIGHTROPE
Chart 11: Cumulative Percentage Change in Average Hourly Wage for Women
30-r__________~B~y~E=d~uc=a=tl~on=a=I=~=v~e=11=9=79=-=19=9~8____________~
20
Declining unionization
contributes to this
10
GI
Dl
C
.!
u
E
..
' '
. . . . . .I . . . . . . . . . . . . .
~ ........ "
growing inequality.
. . . . . . . .
O~~~~~------~~------------------------~
8
'i
-10
-20
- - College Degree
,
....... - •• Some College
- - High School Diploma
-
-
•• - Lass Than High School
.
'---,-"'"
...
-30 +:::;::::::;::::::;::::::;:~::::::;~.---.----r-..,...--r---r--,.---,-----.----r--,.---r~
Data: Curranl Populalion Survey, Out·Going Rotation Group File
j
What explains this decline in wages for less educated workers?
Again, there are many factors. Technological change has reduced
the demand for workers whose jobs can be replaced by technology
and automation. Increasing international trade has resulted ~n a
decline in pay for less-skilled workers in sectors vulnerable to
imports. In the past. unionization rates were higher for people with
lower schooling levels, so declining unionization contributes to this
growing inequality as well (this is explored in more detail below).
"
The decline in wages for workers with less than a college educa
tion particularly harms the state's African-American and Latino
population. as well as some groups of Asian descent .who have
below-average years of education. For example, only 5% ofthe
state's adult population of Latino origin had a college degree in
1990, while over 50% had never completed high school. Only 15
of the adult African-American population had a college degree.
compared to 24%. These educational differences are manifested
in the disparate wages among ethnic groups. In 1998. the average
. hourly wage in California was $14.31 for African-Americans and
$10.68 for Latinos, but it was $11.56 for white workers .
•
WORKING PARTNERSHIPS USA
�WALKING
THE
LIFELONG
TIGHTROPE
Chart 12: Educational Attainment by Race, 1990
Cambodian. Hmong, U;otian
Vietnamese
Asian Indian
Korean
Filipino
Chinese
Japanese
All Asian & Pacific Islander
Cuban
Olherlalino
Puerto Rican
Mexican
!ii!!I!~::::::"~~~!!i!i!l]!!i!i!l]i!I'.l±;;i!I'.l±;;i!I'.l±;;!!i!i!l]i!I'.l±;;i!I'.l±;;i!I'.l±;;i!I'.l±;;i!I'.l±;;i!I'.l±;;i!I'.l±;;;;;;;;;;;;;~1E1i!i!I'.l±;;!!!2l
Aillallno ~~~j§j§i!I'.l±;;i!I'.l±;;E:S!E:S!i!I'.l±;;i!I'.l±;;i!I'.l±;;i!I'.l±;;~::I![~j§j§j§E:S!:3
BlaCk
~1I111111.j§E:S!a
While
Souroe: U.S. Census PUMS, 1990
WORKING
PARTNERSHIPS USA
•
�W A L KIN C
THE
L I F E L.O NeT I C H T R 0 P E
Chart 13: Cumulative Percentage Change in Average Wage for Men
By Race 1979-1998
20-r------------------------------~--------~------__.
All Others:
15
-----White
••••••••••••• Black
10
Hispanic
·15
·20
-25-+-'r-'--r-'--r-.--.-'r-'--r-.--r-.--r-,--T--r~~
197919801981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994.1995 1996 1997 1998
Data: Current Population Survey, Out·Going Rotalion Group File
Chart 14: Cumulative Percentage Change in Average Wage for Women
By Race 1979-1998
25
.
::
20
.
~
: '.
15
:
10
,-----
~
~-
'.
",-f-- --~
:
".
---'
........ '"
,
... ......
...
'
~
CI>
en 5
c
I'll
J:
(.)
c
0
CI>
i
-5
·10
·15
·20
AIiOtliers
-----Whlte
............. Black
--Hispanic
·25
Data: Current Population Survey, Out-Going Rotation Group Fila
WOR K[ N CPA RT N ERS HIP S USA
�WALKING
Immigr~tion
While immigration is often
cited as a cause of growing
inequality in California, the
evidence is somewhat
ambiguous.
a.nd
THE
L.IFELONG
TIGHTROPE
Wag~s
While immigration is often cited as acause of growing inequality
in California, the evidence'is somewhat ambiguous. In the most
comprehensive recent study 31 of the factors contributing to
growing inequality, the Public Policy Institute of California (PPIC)
found that immigration was a significant source of growing in
equality, depending on which measures of inequality they used
and what years were compared. For instance, in looking at the
rise ~n inequality as measured by the ratio of wages at the sev
enty-fIfth and twenty-fifth percentiles, immigration appeared·
responsible for between 22% and 29% of the growth in inequality,
depending on the assumptions used. However, if inequality is
measured by the ratio of wages at the ninetieth and tenth percen
tiles (a measure of the more extreme inequality between the very
top and bottom of the income distribution), immigration actually
decreased inequality in one PPIC scenario by as much as 16%.32
While this finding doesn't contradict their conclusion that immi
grationis an important factor, it does suggest some caution in
assessing how significant a factor it is.
More importantly, however, the PPIC study didn't significantly
address the extent to which declining wages are associated with
the challenges confronting new immigrants or with the poor
treatment and discrimination .that new immigrants often face.
California has <always been a state of immigrants, and since the
time of the Gold Rush there have been only a few years when the
number of people who were newly arriving did not exceed the
number of those born within the state. For much of California's
. history, most immigrants came from other states of the union and
were of European origin. Since the 1970s, and partieularly during
the ·1980s, internati()nal immigration-=-particularly from Asia. .
Mexico and Central America-has out-paced immigration from
other states. Today one.in five Californians was born in a foreign
nation. This influx has transfigured California's population and
cities. Minority groups are expected to make up a majority of the
state's population early in the next century, and at least six
counties (Alameda, Fresno, Imperial, Los Angeles, Monterey and
San Francisco) already have a majority of residents who are not of
European-American ethriicity.33
.
WORKING ~ARTNERSHI~S USA
•
�W A L I< I N' ,G
THE, L I F Er 0 N G'
T I GHTR0 P E
Continued immigration into California is an inevitable and positive
component of our rapidly globalizing economy. The ethnic and
cultural diversity associated with immigration provides one of the
strengths of the state's workforce and contributes in important .
ways to California's growing international trade and commerce.
However, the fact that new immigrants are disproportionately
concentrated in the lower half of the income distribution raises
important questions about the obstacles to opportunity encoun
tered by these new arrivals. It also presents problems for efforts
to create a more cohesive and egalitarian statewide community.
Education and immigration
combined were only
associated with 44% of the
growth in inequality.
Even though immigration seems to play some role in California's
increasing inequality, PPIC's own data shows that it is not a
complete explanation. In fact, education and immigration com
bined were only associated with 44% of the growth in inequality
in California between 1967 and 1997 as measured by the ratio of
earnings by workers in the seventy-fifth percentile to the earnings
ofthose in the twenty-fifth percentile (or 24% ofthe growth in
inequality if the incomes of those in the ninetieth percentile are
compared with those in the tenth percentile). This still leaves the
largest portion of inequality unexplained. The PPIC study did not
look at any institutional factors shaping inequality, such as the
erosion of the real value of the minimum wage, declining union
ization, or the changing structure of corporations and employ
ment relations associated with California's new economy. Our
study does not attempt to make any quantitative estimate of the
contribution to declining wages a,nd growing income inequality
derived from these variables, but it does suggest that they are
important factors that deserve further study.
What Difference Does a Union Make?
In some sectors unions have been able to slow, if not entirely
reverse, the decline of real wages for their members. The ability
of unions to raise wages depends largely on their level of represen
tation in the relevant labor market, which can be local, national or
global and can cover either an industry, a sector or a skill. As the
proportion of unionized workers in any labor market segment
declines, 'the wages of their members decline, though their wages
remain higher than those of their non-union counterparts.
WORKING
PARTNERSHIPS USA
�WALKING
Union membership has
a clear impact on
wage trends.
THE
LIFELONG
TIGHTROPE
Overall, a slightly larger s'hare of workers in California belong to
unions than in the United States as a whole. In 1997 34, 16.0% of
workers in California were union members, compared to 14.1% of
all U.S. workers. There is a large difference, however, between the
'public and private sectors. In California, nearly 50% of all govern
ment employees were union members in 1997, and the share has
risen significantly since the 1980s. During the same year, in the
nation as a whole, 37.2% of all government employees were union
members.,In California's private sector, however, only 10.0% of all
workers.were union members in 1996, compared to 9.7% ofpri
vate sector workers nationally.
Union membership has a clear impact on wage trends. Since 1985
the average wage 35 for union members has declined by only 3%,
compared to a decline of 6% for non-union workers. Most of this
decline occurred in the private sector, where union density is the
lowest. The average union wage in the private sector has declined
nearly 10% in real terms since 1985 In the public sector, however,
the average wage of union members has risen nearly 5% since
1985, while the wages of non-union public sector workers has
remained essentially flat.
Union workers continue to receive significantly higher wages than
their non-union counterparts. In 1997. the average hourly wage in
California for all unionized workers in the private sector was
$16.80, a full 20% higher than the average wage for non-unionized
workers of $13.93 an hour. In the public sector, the average wage
for union workers was $19.21, nearly 23% higher than the non
union average wage of $15.67 This union wage premium is true
throughout the state's regions .
WORKING
PARTNERSHIPS USA
•
�WALKING
THE
LIFELONG
TIGHTROPE
Chart 15: Union and Non-Union Average Hourly Wage, 1997
$20.00-r----------------------------,
$18.00
$16.00
$14.00
~ $12.00
~ $10.00
..
!!
$8.00
$6.00
$4.00
$2.00
$
California
Bay Area
Sacramento
Los Angeles
Fresno
. San Diego
Chart 16: Index of Change in Union and Non-Union Average Hourly Wage,
California and U.S., 1985-1997
106,---------------------~------------------------------~
104~------~_,~~------------------------------------~
102~_f~~---------J~r._----------------------
__----------~
96~--------------------------------------->,----------~
94
92
............ , u.s. Union
- - - - - u.s. Non-Union
- - - - - Calitomia Non-Union
- - - - - California Union
1-'--------------------1
OO+---_r--~--_,----~--~--_r--_r--_.----,_--._--,_--~
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
Source; Bureau of National Altairs analysis 01 data from tn.
Currant Population Survey, Out·Going Rotation Group Fil.
'.
WORKING PARTNERSHIPS
USA
�WALKING 'THE
LIFELONG
TIGHTROPE
Chart 17: Union Membership Rates, California and the U.S., 1985-1997
Public sector
55,--------------------------,
Private Sector '
20
-
,50+-------------------,'-----"',,-1
18
16
,
"- ,
45~~'~-~J~----------------~~
14
,
,
... , .......
~,'''"- "
'\.
4O+----------------i '--_~'_' 12
-----/'-
10
35 I~
..,
~ :<
,
-
6
,1985 198619871988 1989 1900 19911992 19931994 1995 199611197
Source: Bureau of Nalional Affairs, Analysis of cUmlnl d>l> fTOm Cumml Populalion Burvey, Ou,-Going R_ion Group File
WORKING
PARTNERSHIPS USA
•
�WALKING
THE
LIFELONG
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4. The Social Contract and Its Demise
Work hasn't always been characterized by insecurity. volatility
and declining wages. From the late 1940s to the early 1970s, this
country experienced a period of remarkable economic stability,
accompanied by broadly rising wages and improved standards of
living for the vast majority of Americans. These "wonder years" of
the America economy, however, did not rise simply from the
workings of the market. Instead. they were made possible by a set
of national policies that constituted a broad social contract.
The Great Depression spurred the nation's shift away 'from
laissez-faire social and economic policies. The prolonged period
of stagnant demand and corporate losses in the 1930s fed a
vicious cycle, with massive layoffs and wage cuts further decreas
ing demand and pushing the entire economy into a deep decline.
While popular movements for social justice provided much of the
impetus for New Deal reforms, there was also a recognition that
raising wages through collective bargaining or providing income
to the aged or needy helped to .boost consumer demand and
stimulate the economy. Some of the key New Deal labor and
social welfare reforms. which in their aggregate constituted a
social contract, included:
.
.
These "wonder years"
were made possible by
a set of national policies
that constituted a broad
social contract.
·fThe NationaLLabor.RelationsAct.of.1935·protecfedwor~frs)
'righ!Jo-organize ~ .::l:>~rgaiJ:bcollectively. TliiScoiitdbuted to
and
l
..~-.~-~ '-'
---- -- "
the_ris~LQUaboLunions.in,nearly all-of the mass-production
. manufacturing industries that were the core of the U.S.
economy. Many post-war union contracts tended to link annual
wage increases with the era's roughly 3% annual,growth in
productivity and included cost of living adjustments to protect
real earnings from erosion by inflation. Linking wages and
productivity increases for the unionized workforce, which
reached a peak of 35% of the working population in 1945, also
helped non-unionized workers, since their employers strove to
match union pay scares in an effort to forestall unionization
and to compete for skilled workers.
• ..Tbe,EairLabor Stanaaras-Aa~QfJJijfLestibU~b~_(tn.<!ti9.f!C!L- /
Cstafldards tQr:::..theJJJj[l~i!:i,~m wage, overtime pay, and restric
tions on-.chi1(!}~b.Qr._Over'the next thirty years, until 1968,
periodieIncreases kept the nC\ltional minimum wage rising
•
WORKING
PARTNERSHIPS
USA
�WALKINC
THE
LIFELON'C
TICHTROPE
roughly in line with productivity increases, ensuring that
workers in many low-wage; nonunion industries also shared
the benefits of productivity growth.
• The S~c:!ahSeCtirity-~C(9D9.35_~ot·~~I~created o~?~~rret;lt
... _s'odalsecurity:system bUfalso'esiatilisneo ci'fe'deral'une'mploy
"'~ment insurance-tax a:ht:tfriceritfVes'Tci~ensure-fhaiaiI-states
vv~u!cl_eyemG.~1!icri~t~- unemployment insurance system§.
When older or unemployed workers dropped out of the labor
force,· their consumption would no longer fall precipitously. 36
The result was 30 years of
unparalleled economic
growth and stability.
Prior to the 1930s, many business leaders and corporations
denounced such policies. and President Franklin D. Roosevelt
faced Significant opposition in getting them enacted. Once in
place, however, business leaders discovered that this system had
positive outcomes that they could not have achieved on their
own or through unregulated markets. First. these measures
stabilized demand in the economy and helped create a large
. middle class base of consumers who served as the most impor
tant engine of growth for 30 years after World War II. Second, the
systen;t contributed to industrial peace in the workplace. which
was especially important for employers who needed stability to
reap the productivity benefits from improvements in mass pro
.duction technology.
Many workers obviously benefited from these provisions as well.
Employees had a stronger voice in the workplace and a package
of wages and benefits that provided stable. growing income.
which was protected to varying degrees even in economic .down
turns. Certainly the system excluded and provided fewer benefits
for many groups of people, such as bla:cks, agricultural workers,
women, most service workers, many public employees. and
others who made up the ranks of the urban and rural poor. How
.ever, these policies did constitute a broad social compact that
helped guarantee that the nation's growing prosperity was more
broadly shared and that inequality was declining across the U.S.
The result was 30 years of unparalleled economic growth and
stability.
Since the, early 1970s. however, as the industrial economy has
given away to our cur~ent information-driven economy,: these New
WORKINC
PARTNERSHIPS
USA
••
�WALXING
THE
LIFELONG
TIGHTROPE
Deal policies have proven less effective at protecting workers and,
ensuring broad based prosperity.31 As our economy changes in
fundamental ways, it is clear that many of the social and political
institutions that exist to ensure prosperity and workers protec
tion have become ineffective and need to be reformed at a fairly
, fundamental level. The following sections examine the New Deal
policies in more detail, explaining why they are less broadly
beneficial today than in the past.
, If the minimum wage,
had maintained
its same relationship
Minimum Wage
to the average wage,
The minimum wage was first established as part of the Fair Labor
Standards Act of 1938. Its level was never linked to any measure
of economic progress, ensuring continuous political battles over
legislation aimed at increasing it. Since October 1950, when the
minimum wage was nearly doubled from $2.74 to $5.07 per hour'
(in 1998 dollars), the value of the minimum wage has been
steadily eroded, in comparison to the increases in both productiv
ity and average hourly compensation. Between 1950 and 1978,
productivity and hourly compensation rose in tandem, both
nearly doubling in real terms. Meanwhile, the minimum wage fell
behind significantly, rising only 26%. Since 1978 productivity has r'
continued to increase but average hourly wages ha~e st~gnated.,/
During the same period, the minimum wage has lost the erttire /
amount it gained from 1950 to 1978. If the minimum ~~g~ had /
simply maintained its value adjusted for'inflation since ,its ~eak
in 1968, it would currently be $6.90 an hour. 'If it hadht,~in'Fai~~dl
its same relationship to the average wage, it would ,currently/be
"
J
I c'
$10.30 an hour. If it had maintained its same relationship to pref
I
ductivity, it would currently stand at $12.30 an hour.Jnstead, the
federal minimum wage now is only $5.15. Thoughtthk CalifoQ#a
state minimum wage is now $5.75, this is still far short of what its
value has been in the past by any measure.
I
it would currently
be $10.30 an hour.
)
j
I
'
"'-,
ahis.fatlure'!9:sus.tain,theominimum wage is the reason an in
\~a~Ji!g,por.tion,ofpeople-with·fuIHimejobs 'are earning poverty:.__
C!~vetwages.-A~)recently as 1979, a full-time, year-round job at the
mhrlmum wage kept a family of three barely above the Federal
poverty line. The samejob in 1993 would have placed such a
family $2,442 below the poverty line .
•
WORKING PARTNERSHIPS USA
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Chart 18: Productivity and Compensation, 1950-1998
200~., - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - ,
240
- - - - Labor Productivity
-
220
Unemployment insurance"
was not designed 'as a
s
o
source of funds to help
-
-
-
Real Hourly Compensalion
Real Value Minimum Wage
200
_-,,----.,,- .
51
en
workers develop new
-
••• ,' " " " "
'g.
.....
/-
" 180
~
160
;. 140
:.~
skills or get retraining.
.,:
120
100
~.....
.......:
...
.....:
. . . ...
•
~
•• .roo
........ :
""
_0,
~'
.
'.
... ......
~
... '
.~
,"
...................0
"#"~,~,,,,~~,~,~,,~,~,,
Source: Total non-farm output and real hourly compensation, from
Bureau of lab,?r Statistics. Minimum wage adjusted for inflation
using CPI·U for all urban consumers
Unemployment Insurance 38
The unemployment insurance system was designed more than 60
years ago to provide partial, temporary replacement of wages to
workers during a temporary cyclical downturndn~addition~t~t"2;
~elping:iiidividual-wotkers;'it,·was=aisoaesignea.T(f:effs_ur:e~macroceconomiEstabiitty' bY'slisTaining:t'onsum~r-demand-duri!lg:~c_o_" _.•
,I]..omi~_ rece_s~jon§_a!!~.to.help ,Rreve~!.~U~p_ers~f 01 -e_rDpJoyer~s,,:
trained wor-kf~e,;,Theunemploymenniisurant-e-system-assumed
,. -'~---'tnaflay-offs are primarily temporary and that workers will return
to the same job (or at least the same type of job in the same .
industry once economic recovery takes place}, This assumption
has become increasingly untenable in the new economy, and the
decli~e in program effectiveness over the years clearly reflects .
this'J!~eiTIj:iloYm~r1t. insu,rariCe'was'net desig~ea-a-s,-a squrce'of: -,
danas to help workers develop new skills ,or, get relfaining, Indeed",
~ it disco~rages workerS from getting sig~ific~~li retraining since .' '
.> they must document that they are. available to work in-order to ;
:-';,~O~!iilU~F~C~jv~ng!>~r:!~f!.!S,
an
.
WORKING
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The question of eligibility is crucial. The unemployment insur
ance system is the single largest program to protect workers who
lose their jobs, and it is designed so that workers are eligible
regard~ss.9fJOeir-finpncial-need.39""WliH~tne-iiiitia:I;;()oVefage;
Ji.a.~s-:~ipjl4.~,9: (itt,l$~ea t.6~~xclupe,\firms.iiih'fewe.t"th~fteight~'
.. ,
-"f,'...
.
~,.-"..,,.;
'i,,'
:,
-.'
r;.;.':.'
.
",
t
'~::4,
'if)
',<,'i.
.•. /,\)'~'"
.~
•
,w~rk~~~}:,t?ere.aresti1LWfJ!?'f re;,strictiqn~~.en wh9.;i~:~!!~i?le for;
~rWWJl!?YJ;~WI1t;:~1r~t, it~}.CFllj'd~~ all self;~mpl()ye,P:\~W9!:~~r~~ ;:~i~>
~.".1:m:g,~~~e
}~~;,~ut;ff.o~ .7~~'~% .gMhe yv,?rkf~~cH):~~J~9';
m ~')
,
,
.: ~t~~f,~.?~b '..' ..,:.gl~Ie,~~y.ror~eJ;'~~~~~~:t.~emonstr.at:ptevlq~~ .atta~~\
,The time limit for benefits
;s simply too short for many
workers in tOday's economy.
"m:nt to.the ;!a~~~\{0rce; nt~~s~J:,e.d ~y~the, arI}.f?-urttQ(~~~~ng,~ m
~:sovered',i~mployment d\!ring.the bas€tpettQq.~e,~~n,t~..!~~~)
'threshold {eveliri California of $1,300 a quartef-elimina~es large
numbers of low-wage, part-time worke~.:..Ihesta£e-also-de,ter-:\
mines tl1~t~~~Q!lIQ.ctl_neIDRIgYl1l.ef!t,jJFiemploylneJ'it,lnsuraQcd
cJ~~de~fi!!E2'cl. tQ.QhJy~~.$i§.~ tl!Q.s~1!1yQ!tJ.lltarily_unempI0yed~;This
- e'xcludes those who quit work 'without good cause connected
to the work', commit misconduct connected with the'work. or
refuse suitable work't:1.'b~$~ ~~ividuals~.flre.disqualifi~dJrom-
~r:i~ce.,~~~&~9:en~fits;-WO:~~F~:rnust also'demonstrate.dmtinued."O\
readl6ess ,to.work,on· a'·week,to-week.basjsJILQIder totretain - . '/'
__
....)
- .... --- ...- - - - - - - - - ~ eligifJility.:They have to certify that they are able to work and
. '-ava:iiabie-for suitable employment.'
~--;'--r.~
As the economy has changed. with more temporary, part-~ime,
and unstable employment patterns, unemployment inSurance has
become less effective in assisting displaced workers. Nationwide
in the 1950s an average of 49% of unemployed workers received
.benefits, but in the 1990s only 35% receive benefits (although
39.1% of the unemployed in California receivedbenefits'in 1997).
_....--~~-":~r~r~-~·-
. ~ :. ~--".
~
-c.-.
.,. ~.--~~~--.;r_
/fhe:!percentageofjooless worke~.~ I:.eceiying help,has:de€ ! ined
: /partliQ-~tause':mariy worKeis,are unabletb find suJtabl~~work '
/-: ~~d~re th~-'-m~frritfIrtpeiidcfofberiefits..has be~n exhausted.·:The
time"limit
bem;;fits"':::"z's weeks in California-is simply too
short for many workers in today's economy who must switch
occupations when they are laid off. FtfrffierrnO're;-oecauSt;:they
-for
Il1ust.certify~tp,il.t t~~~t;e""-'tv,Wl~pl~~for.::?.!titaJ~le_-woFk;:the:unem:~
(plo¥iiiei:i(ins~raI}ce:§Y2.ten-t_~cts asa dlslncentjY~{Q.Fpeopl~:.to
"___
. ___ "'"
r--""--'---'~-~"~~----
~,-~_
__~
--~:-
re!~m.to,schQol fOLad.djtioQC\l.~ducation'~.Dsl:trainingi,which
Cdften-i~ exact1r..~.§1theY
neecf'c-,-
----Y-
,
c:=-_--=~-~1-
•
WURKI~G
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.
/,;The benefits provided through unemployment insurance areal~o
f(inadequate. In most states, unemployment insurance is designed
\ \ to replace about 50% of a workers' wage up to a maximum benefit
\ \~evel. Califor'nia's plan replaces only 39% of wages. (Only Louisiana,
\;Alaska, and the Virgin Islands replace a smaller share of wages.)
Such a low replacement level provides little assistance for people
trying to refine or expand their skills to meet the needs of our
rapidly changing economy. Consequently, the:pt:9gram.doesJittle
to reduce..chronic.and-repetitive-unemploymenh·, -- ...:
The national laws
governing labor relations
has not adjusted to
"--=:.. -
changing economic
realities.
. -...._~--~"':..-)
--~- --,-~--
Labor Relations
The national laws governing labor relations, codified in the
Wagner (1935) and Taft-Hartley (1947) acts, may have been well
suited. to the industrial society ofthe 1930s to the 1950s, but this
framework has not adjusted. to changing economic realities. The
central reason for this is that the system for union recognition,
and for bargaining, .assumes a long-term, continuous, on-site and
full-time commitment between employers and employees' in
short the mass-production, stable manufacturing industries of
the New Deal era.
I I This
system has made representation difficult in industries with
':high turnover or insecure market conditions. As the economy has
Ishifted towards more service industries and white-collar work
:and has become more volatile, it has become increasingly difficult
:for workers to organize, and the level of union representation has
I 'declined. Furthermore, at least until recently, theJabor movement
.
.I
has been growing isolated from the growing and dynamic parts of
the economy. It has been dominant in traditional manufacturing
i1pdustries, but not in the growing ranks of service and white
.~\ collar. employees.
I
II
~
I
\
\.
.
.
Several fundamental principles of oudabor relations system are
responsible for much of this decline: 40
1.. The Wagner Act created a sharp distinction between produc
tion workers and management. Workers were assumed to be .
solely concerned with wages and working conditions and not
. WORKING
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with the strategic direction of the firm or industry. Manage
ment. on the other hand. was assumed to have full compe-'
tence in running the enterprise. This division of power and
responsibility contributed to an adversarial unionism that'
hinders new forms of work organization and new forms of
employee participation: It tends to limit bargaining to simply
wages and working conditions. rather than the whole array of
work. employment. and economic issues that shape long-term
employment opportunities.
An estimated 43% of the
entire workforce is not
covered under the
Wagner Act.
2. The system assumed the organization of production would
remain the same as that prevalent in assembly-line. mass
production industries. ,making representation in fragmented
service industries and within complex subcontracting
arrangements extremely difficult. For example. only in the
construction industry. are firms allowed to enter into pre-hire
,agreements with unions. Multi-employer bargaining systems
are not encouraged.
3. The system has limitedcoxerage. excluding anyone with
supervisof-yrespcillsibiiitiesirOin~union representation. An
--,-.- ---
-............
estiinated 43% of the entire workf6rceiS'::not-covered~under':: ,J
the W~gner::!ct~- This includes domestic w~;k~~~~;gricultural
workers. supervisors and managers. self-employed workers.
independent contractors. professional employees and others.
~
4. The process for union certification creates numerous b~rriers
to organizing. The long periods of time leading up to union
certification elections allow employers to pressure workers to
reject unionization. Complex rules governing the definition of
collective bargaining units create legal channels for employ
ers to challenge union campaigns. Legal restrictions on pre
hire agreements. recognitional picketing. secondary boycotts
and other 'secondary activities' have taken away union weap
ons that w~re crucial to bargaining efforts in the 1930s. Guide
lines for collective bargaining units hinder the development of
multi-employer agreements needed for effective union repre
sentation in fragmented industries.
As a result. the portion of the workforce represerited by unions
nationally has declined dramatically. Following the passage of the
Wagner Act, union representation rose steadily. as the founders of
WORKING ,PARTNERSHIPS
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the Act anticipated, from 11.6% of the workforce in 1930 to 35.5%
in 1945. Since the 1950s, however, there has been a steady decline
in the percentage of the workforce represented by unions. The
absolute number of people in unions continued to rise into'the
1980s, reaching a peak of 22 million, but the absolute numbers
have declined since then as well. In 1998. 13.9% of the labor force
was unionized, representing 37.5% of public sector workers and
only 9.5% of private sector workers.
These p,.imary educational
institutions do little to help
people in the workforce to
ac!iust to rapid changes in
Employment Training Systems
the economy. .
The system of employment and social policies implemented
under the New Deal assumed a well-functioning education and
training system, which generally met the needs of business for an
'appropriately skilled workforce. However, this system is primarily
designed to give people basic education early in life and thus
provide them access to entry-level pOSitions. It is poorly suited to
providing people with life-long learning and continuing education.
The bulk of money spent on education---.,.about $40 billion a year
in,California-goes into our basic education system-elementary
and secondary schools, community colleges, and universities.
Education dearly has a central. basic purpose in developing
responsible citizens and members of SOCiety, but it also plays a
critical role in preparing people to be productive members of the
workforce. Except for various university eXtension programs and
some community college contract training initiatives, however, ,
these primary educational institutions do little to help people in
the workforce to adjust to rapid changes in the economy. '
~
WORKING
PARTNERSHIPS USA
Additionaltraining p~grams are funded through other state and
. federal employment and training initiatives, including the
Workforce InvestmentAct (formerly Job Training Partnership
Act), CalWorks, several programs in the Health and Welfare
Agency, the Employment Training Panel, and a variety of smaller
programs. The total spending for all of these programs is over $2
billion annually. Most ()f these programs, however, are 'second
chance' programs. They are made available to workers only when
they are displaced, have special barriers to employment, or are
disadvantaged in some way from the educational system. Pro-
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grams are structured in such a way that workers are trained
. either for entry-level positions or for their immediate return to
the labor market. There is little effort to maintain relationships
with students over long periods of time. Participants are steered
into employment that might last for six months but not necessar
ily longer. There is little effort to integrate students either into
designing the program or into helping other studentS still in
training. These systems-conceptualized as providing a 'second'
chance and training for entry-level posi~ions-are poorly inte
grated with each other or with firms'internal training programs.
Also, a fundamental flaw exists in the way most training institu
tions assume that learning takes place. These institutions assume
that learning is an individual process, that"it has a beginning and
an end, and that it is best separated from the rest of our activi
ties. As recent research on learning and work has demonstrated,
however; learning is 'an on-going social process that is rooted in
workers' everyday activities. People's success in learning de
pends on the nature of their social networks and day-to-day
practices on thejobAl A person's ability and adaptability at.
work depends on who she relates to on the job and how she
relates to them. Training programs that are most successful
integrate instruction with practical work experience. They en
courage individuals to explore ideas and learn together while
building relationships with others in their field.
It is important to create
networks for learning that
cut across firm boundaries
and link the workplace and
training institutions.
In the context of our rapidly changing economy. where people
move more frequently from firm to firm but often stay within an
industry or occupation, it is especially important to create net
works for learning that cut across firm boundaries and liQk the
workplace and training institutions. Some cross-firm learning
networks already exist through various professional associations,
union-led apprenticeship programs. and other occupational
groupings. Such occupation-based networks provide important
models that need to be expanded and improved. They could
greatly help workers learn how to adapt to changes. Most training
programs. however, don't deal with changing skill demands in the
workplace or with integrating individuals into networks of people
in similar occupations. Thus. there is no way of evaluating their
effectiveness in supporting life~long learning .
•
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5. Conclusion: Building a~ew Social Contract
The old spcial contract fostered 25 years of unparalleled eco
nomic growth and prosperity in this country following World War II.
Assured a s,table workplace and market, companies were able to
improve productivity and expand operations, and the families of
many workers in the core national industries benefited from
.secure employment and steadily rising standards of living.
The system was far from perfect. Many people were still left
out. Women and minorities found themselves relegated to lower
paying jobs or received lower wages for the work they performed.
Agricultural and public sector workers were excludedJrom key
legislative protection, and large numbers of urban and rural poor
saw few opportunities for advancement. Nevertheless, the system
of balances and mutual responsibility ensured broad prosperity,
stable livelihoods, declining inequality, and a significant sharing
of the wealth.
Piecemeal reforms of existing
programs and institutions are
not likely to work well.
The new economy is booming. b~t workers face serious prob
lems-growing insecurity and volatility in employment. the
disappearance of middle-income jobs as employment grows in
both low-p~id and high-paid occupations. declining career pros
pects. and stagnant or declining wages.
Clearly there is an urgent need to build a new social contract to
ensure growth and shared prosperity in the new economy. Appro
priate, comprehenSive public policies are required that can
support the economic flexibility that firms need to be competitive )
while also minimizing workers' insecurity and ensuring that.
ecor;tomic risks and rewards are shared more equitably:
Just as the fundamental changes in our economy are creating
. new industries and dram~ticany restructuring competition and
production in older industries. the creation of a new social con
tract requires rethinking fundamentals as well. Piecemeal reforms
of existing programs and institutions are not likely to work well.
As the old system breaks up. however, we do have an opportunity.
to build more inclusive institutions than in the past. creating a
new social contractthat truly lives up to the ideal of democracy
and opportunity for all.
WORKING PARTNERSHIPS USA
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We should implement a
comprehensive new social
contract at all levels before
the costs of inaction
escalate.
THE
LIFELONG
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Developing such comprehensive reforms will not be easy. During
I the era of industrial mass production in this country, it took a
major depression to provide the stimulus to create employment .
\ poliCies and institutions appropriate to the new structures of
employment. We should learn from mistakes of the past and
implement a comprehensive new social contract at all levels
local, state, national and global-before the costs of inaction
escalate.
There are four primary:social needs that a new social contract
must fulfill. While the details of how we design poliCies to meet
those needs will reqUire more research, discussion and experi- .
mentation at all levels of government, this section presents a
framework to help statewide policy makers debate the solutions.
• Increase Workers' Earnings and Financial Assets: Most work
ers--'-notjust those earning very low wages-need higher
"incomes. They especially need policies that increase their
earnings over their entire work lives and that help them accu
. mulate a variety of financial assets. In addition to providing a
more secure livelihood, expanding workers' financial assets
can help them deal with layoffs or displacement:
• Reduce Insecurity and Minimize the Harm of Dislocation:
Dislocated workers need more support during periods of
economic pressure and m,Qre aSSis.tanc~
which provide adequate incomes.
• Provide Lifelong Education for Work and the Development of
Careers: To find and keep good jobs in the new economy,
workers need access to education throughout their work lives
and organizational help in developing careers and networks of·
support.
• Promote the High Road to 'Economic Development and Block
the Low Road: Economic development programs and public
subsidies should reward only employers who pursue high-road
strategies to cOUIlter competition and togrow.-In atlOiti~
puoUc policy sfi6lildcut off assistanceto1irms that try to
compete by avoiding regulations, cutting wages and benefits,
increasing insecurity, or cutting jobs.
. WORKING
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Taken together, reforms in each of these areas would go a long
way towards creating a new social contract to match the develop-
ment of the new economy. Each or'these b'road policy goals is
developed in more details below.
'
The most pressing need is
5.1 Increase Workers' Earnings and Financial Assets
Under the old social contract, wages for nearly all workers rose
along with our economic growth and improvements in productiv
ity.,Whether through union wage contracts, competitive non
u'nion wage increases, or effective minimum wage and employ
ment policies, economic growth usually improved earnings and
living conditions for workers.
providing stable, satisfactory
income for the large bloc of
workers now earning
poverty wages.
In the new economy, however. rapid growth can be accompanied
by a simultaneous, significant decline in the quality of life and
standard of living for most workers. Wages have declined in
absolute terms at the bottom of the labor market and stagnated
at most levels. In additio'n, life-time earnings have become more
erratic and uncertain. This problem requires mechanisms to raise
wages and increase financial assets for workers at nearly all
income levels.
The most pressing need is providing stable, satisfactory income
for the large bloc of workers now earning' poverty wages. Low- '
wage jobs will continue to s,erve as a major source of employment
for large sectors of the workfome. While technology may increase
productivity in certain sectors of the economy, other occupations
may never be transformed. Thus, an important goal should be to
ensure a livable wage for workers in jobs which currently pay
poverty level wages. Specific programs that could be pursued
include the following:
• Raise the Minimum Wage: Most critically, the minimum wage
should be ~aised ang"indexed. at least to keep pace with infla
tion, preferably to inc~s productivity rises in the
economy as a whole (or in the particular industry). Recent
research has documented that'modest minimum wage
•
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increases have little effect on overall employment and may
actually increase employment. since small firms benefit from
lower recruitment, training and motivation costs.42
In an unstable economy, "
workers cannot rely on
consistent income from
wages and need additional
sources of financial
support.
• Create a California Earned Income Tax Credit: California
could also implement a California Earned Income Tax Credit
(EITC) to provide assistance to low-wage workers. The Federal
EITC has been one ofthe more effective targeted programs
providing cash assistance to the working poor. Creating a
similar program at the state level would provide additional
cash support to low-wage workers.
• Encourage Unionization and Collective, Bargaining: Ulti
mately, low-wage workers need collective bargaining to raise
wages and offer them ,a voice at work. Collective demands for
higher wages can provide an additional incentive for employ
ers to improve their productivity and quality of goods or
services. Many individual employers will resist unionization, ,
since they fear it will put them at a competitive disadvantage.
However, encouraging, representation throughout an industry
and encouraging bargaining between a union and a broad
group of employers assures a level playing field for all firms.
It helps to take wages out of competition, pushing companies
to compete more through superior service, product quality
and productivity, rather than simply cost-cutting.
In addition to raising the wage floor, however, there is also a need
to stabilize life-long earnings,and enlarge the financial assets of
individuals. In an unstable economy, workers cannot rely on
consistent income from wages and need additional sources of
financial support. Specific programs that could be pursued
include the following:
• Promote Multiple Compensation Systems: Promote multiple
compensation systems. such as those that exist within the
entertainment industry. In addition to their basic wages, many
, workers in the industry receive residuals-additional pay
ments to workers for the exhibition of a product in media other
than the one for which it was originally created or for its reuse
within the same medium after the initial exhibition. Payment
WORKING
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continues as long as the product continues to be sold. Residu- ,
als are a particularly important source of income for workers (
starting out in the industry at lower initial pay 'levels. This
system developed through union negotiations with a multi
employer association and could be expanded to other indus
tries as well. 43
• Expand Employee Stock Ownership: Expand Employee Stock
Ownership Programs (ESOPs) and stock options to encompass
a wider range of employees. When properly implemented, such
programs offer assets to large sectors of the workforce, while
improving motivation and effectiveness on the job. They can
also giVe workers the opportunity.to gain wealth from the
success of previous employers, even if they have changed
jobs.44 Although stock ownership programs are generally
limited to direct employees of a firm, given the extensive use of
sub-contracting networks and outsourcing in the new economy,
indirect workers should be made eligible for stock options.
-
. The California Lifelong
Learning Fund would provide
resources for continuing
education for all current and
future California residents,
.
• Improve pension systems: Better pension systems are particu
larly important since small employers continue to provide
much less access to employer-sponsored pension programs
than large employers. There is potential for taking advantage
of economies of scale in administrative costs by pooling small
employers in the same industry together, thereby increaSing
the portability of pensions. In addition, there is need to expand
the options for pre-tax contributions to pension plans.
• Create a California ~felong Learning Fund:. This fund
(CALLF) would provide resources for continuing education for
all current and future California residents. It would be created .
. and expanded through regular annual payments (including
. p~sible stock contributions) 15y all businesses Operating in the
~e of Caiifornia. The fund w'outd tnvest pnmarily in California
based companies in orderto help improve the California
economy and to benefit from California growth. All residents of
the state would have access to income from the fund to sup
port education of their choice. The distribution would be
designed to disproportionately help lower-income residents,
possibly through ~ staged matching contribution system. (For
example, low-income residents might get a $10 match for every
WORKING
PARTNERSHIPS USA
�WALKING
/
"
r~
;.,
"
,
~
"
~ .~.,.
.... ..
,;--..--
\,~~.;
,
i
THE , L I F E LON G
T I G H T R 0 P E,
..
'~.~
,
,4
., " .l
We need to develop more
preventive social service
programs that can provide
S
financial support for
people while they are
trying to return to gainful
employment. '
. ~~~
~~~'I
(~[.
~ -e
$1 that they spend on education (up to a maximum amount)
but the higher-income residents would only receive a $1 match
for each $1 they spend).
· The concept is similar to the Alaska Permanent Fund, which
was established through a Constitutional amendment ap
proved by Alaska voters in 1976. The amendment provided that
at least 25% of oil revenues paid to the State would be depos
ited into a public savin s account and'. ~
current r"
s and all future gene!9ti0ns of Ala~s. One
, 'of the rpost unusual aspects of Alaska's Permanent Fund is the
dividend program, which distributes a share ofthe Fund's
earnings to every Alaska resident each year ($1,540.88 in
1998).45
f(
The California Lifelopg Learning Fund would be somewhat
different. Rather than depending on revenues from industries
that deplete natural resources, it would be supported by the
· entire ecqnomy. Rather than providing a dividend to be used
by individuals for any purpose, the ihcome would be devoted
solely to activities which assist the California economy-provid
· ing education and training to our workforce.
5.2 Reduce Insecurity and Minimize the Harm of
Dislocation
'
Under the old social contract, job dislocation was limited prima
rily to temporary layoffs in major industries 'due to cyclical
bqsiness patterns. The Unemployment Insurance System pro- .
vided a basic temporary support for people until they could be
rehired into their old jobs in the next business upswing. Seniority
systems ensured that as workers grew older and had more finan
cial responsibility for families, their jobs and income were more
secure. Workers in peripheral industries and jobs~ whose wage
floor was at least protected by a decent minimum wage, typically
experienced the most insecurity.
In the new economy, workers at all levels face insecurity, job
dislocation and potentially long-range unemployment. Public
policy must ensure support for people in such difficult times .
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We need to develop more preventive 'social service programs that
'Can provide financial sup ort for eo Ie while the are tryin to
o gam ul employment and revent them from bei
_IS
ee mg welfare support. Building better income
support durmgJob transItIons is also essential, since the current
high level of dislocation is unlikely to decrease significantly in the
foreseeable future. Specific programs that should be considered
include:
The state should provide
funds to replace at least
half ofan unemployed
• Expand and improve the unemployment insurance system:
Strengthening the unen:tployment insurance system includes;
first and foremost, expanding coverage to include the part- \
time, temporary, and contractworkers who ,are currently
fargely excluaed. either because their income is below the
~use, if they refuse assignments to another
temporary jobs, they can lose their eligibility. Second, unem
ployment benefits should be available for a full year (O~Teast)
39 weeks) instead of the current limit of ~6 weeks. This would
acc0l!lmodate workers who need to develop new skills arid
change occupations or industries. Finally, the state should
provide funds to replace at least half of an unemployed
, worker's' wages. Currently, California has one of the lowest
income replacement rates, with unemployment insurance
providing on average 38% income replacement compared to a
national rate of 47%. Only Louisiana, Alaska and the Virgin
Islands provide a lower income, replacement rate.
worker's wages.
• Create Rent Vouchers: Create rent vouchers to support work
ers who are in training or adult education programs. Many
workers have difficulties getting retraining because they can't'
, cover basic living expenses while in school. not because tuition
and school fees are too high. Such housing vouchers have been
made available on a limited basis for people making
transi
tion from welfare to work. They could be expanded to be
available to qther workers who have been displaced but aren't '
on welfare.'
the
0
• Make Health and Other Benefits Portable: Health care and
other benefits should be made !TIore portable fromjob to job
by pooling workers' benefits programs based on occupations
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- ( or through expanding community-based health programs ..
Health care should not be based necessarily on one's place of
work, but on a broader, more stable organizational relation
~
..
("
. ship. Short of a single-payer national health system, promoting
portable union benefits programs or collective programs
The overall goal of
available through professional associations would allow for the
workforce development
greatest economies of scale in purchasing and administration.
Many small businesses would benefit from such expanded
programs should be
systems, since they would be able to redu~e administrative
helping to ensure workers'
costs of benefit programs.
r~
vY"
livelihoods and careers in
5.3: Provide Lifelong Education for Work and
Development of Careers
the long run.
During the era of the old social contract, education and training
systems were designed fundamentally to serve two distinct
groups. The first of these was young people who requir:ed a basic
education at school before they entered the full-time job market
or embarked on their careers. The second group included disad
vantaged workers who hoped for 'second chance' assistance
either because they did not adequately benefit from the basic
education systems, or because they needed additional support to
gain access to entry-level positions in the labor market. Relatively
little attention was paid to on-going training, since it was as
sumed that employers would provide the necessary firm-specific
skill development that workers would need to be successful in
their jobs. While this internal firm training may not have been
abundant, it was significant-stable employment relations meant
that firms had significant incentives to provide training, since
they could expect their {presumably more productive) employ
ees to staywith the firm for an extended period.
In the new economy, however, a significant contradiction has
become noticeable. While there is much greater need for workers
to continue to learn through out their work lives, firms are
providing less internal training. Employers continue to complain
about acute shortages of skilled workers, yet they often assume
that this training should take place externally. The source of the
problem can be explained- by the immediate self-interested ca1cu
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lations of employers and employees. Firms often under-invest in
training for many of their own employees. since rapid turnover
makes it hard for them to capture the benefits of a more skilled
workforce. Conversely. employees are unlikely to invest in appro- .
priate training for themselves when they lack the resources, or
lack appropriate information about job availability or have little
assurance that increased education will translate into improved
career opportunities. Many workers feel isolated. buffeted by
rapid changes in their industry and uncertain about changing skill
requirements. Thus, they either don't know about or don't pursue
the limited training that is available.
.
The best way to develop this
new workforce development
infrastructure is through
regional training
partnerships.
Confronting these problems requires significant reforms in the
institutions that make up our workforce development infrastruc
ture. The overall goal of workforce development programs should
not simply be ·helping people gain access to employment. but also
helping to ensure workers' livelihoods and careers in the long
run. Workforce development institutions need to db more than
simply seek to improve employee skill~ in the supply-side of the
labor marke{ They need to also work towards restructuring
employment relations, coordinating with employers to ensure
both that the training that is provided is effective and that this
improved training is rewarded through improved careers and
livelihoods.
The best way to develop this new workforce development infra
structure is through regional training partnerships. Such
training partnerships bring together employers, unions, local
training providers and the community college system to develop
customized sectoral and occupational speciJic training pro
grams. Examples of such regional training initiatives include the
San Francisco Hotels Partnership. the Garment Industry Develop
ment Corporation in New York, and the Temporary Worker
Employment Project in San Jose .
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constantly updated information on changing labor. market trends.
Training institutions must have the ability to anticipate future
shifts in the labor market and develop a long-term outlook on
career opportunities. This sophistication is nearly impossible to
develop in a shot-gun approach that targets a wide-range of
occupations or sectors.
partnerships should
develop certification
systems that are
recognized by both
employers and employees.
Employers need to be integrated into this sectoral approach in a
collective way, not simply on a one-to-one basis. Collective com
mitment to regional training programs is essential for two rea
sons. First, all fIrms will have the ability to both share the costs of
creating a pool of skilled workers as well as benefIt from the
ongoing availability of such an employee base. Secondly. the
training that is developed needs to be widely r~cognized within
particular industry sectors. Again, this is important both to
. ensure that the training is effective in meeting the needs of em
ployers in the area, and to ensure that workers' skills are recog
nized and rewarded through increased wages.
.
Regional training partnerships should also work toward develop
ing regional skills standards-certifIcation systems that are
recognized by both employers and employees in the region. In
the clerical fIeld, for instance, an industry cluster might design
several grades of clerical competencies. Workers would progress
through subsequent grades over time by demonstrating capabili
ties over progressively more complicated administrative knowl
edge and tasks. These programs should be fluid, allowing an open
entry and open exit in line with the complicated schedules of
workers in the new economy. The Temporary Employment
Project operated by Working Partnerships USA in San Jose is
already demonstrating such open educational models. Lastly,
employers would need to agree to the appropriate tests to deter
mine grading levels but would benefIt froin lower recruitment and
training costs, along with confIdence in the ability of newly hired
employees.
Workforce development institutions also need to be integrated
into a r'kh network ofJearning environments that link together
various types of workers: permanent and temporary; experienced
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and entry-level. and those with various complementary work
responsibilities across multiple firms. These connections are
essential for building life-long learning. and moving away from
the conception of training as a one-time activity that is separated
from people's on-going work lives.
Workforce development institutions should also strive towards
mediating the risk that workers face in today's labor market.
They are in an ideal position to help create inex ensive ac
health care an 0 er ene ts, throu
evelo in economies of
sca e in purchasing and the administration of benefit~. Regional
training partnershIps can bring together multiple small and
medium size employers in a region who face increasing benefits
costs on their own, but who could enter into cooperative pur
chasing agreements to improve access and decrease expenses.
Workers who develop experience within an industry cluster over
time, even if they move to multiple employers, w~uld be able to
retain their more portable benefits structure, and have a first line
of protection in the case of periods of temporary displacement.
Workforce development
institutions are in an ideal
pOSition to help creat~
inexpensive access to health
care and other benefits.
Finally, the best workforce development 'institutions will also be
deeply rooted in poor neighborhoods and disadvantaged
communities. Linking poor communities to the regional '
economy is essential not only for confronting inequality, but also
for ensuring long-term economic prosperity. Many disadvantaged
workers are stuck in dead-end, low paid jobs, and have little
knowledge of other employment opportunities. Workforce devel
opment institutions that are tooted in the community are better
situated for linking workers into employment opportunities in a
region's core industries and firms. 46
Obviously developing such regional training partnershipsre
quires the active participation of the appropriate stakeholders at
a local level-unions and other organizations representing the
workforce, employers, and local training institutions. Public. ,
policy can play an important role in helping to ensure that thiS)
interaCtion takes place. Most training is either paid for or subsi- ,
dized in some way through public funding sources. Such funding
should be made conditional on organizationS accomplishing more
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When companies receive
subsidies, there is no
measurement of their
performance to the public.'
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than simply demonstrating their effective
orkers
.in short-term JO s. nstead, funding streams can provide incen
tives for developing collaborative training programs that bring
together the appropriate stakeholders and help develop regional
skills standards. In addition, funding streams should also be used
to induce workforce development institutions to establish the
internal capacity to create these regional training partnerships.
Relevant capabilities include technical expertise in understanding
local labor market trends and a diversity of management and
business skills needed to build these partnerships.
5.4 Promote the High Road to Economic Development
and Block the Low Road
Under the old social compact, companies exercised a certain
level of responsibility not only to. their shareholders, but also to
their workers, the communities in which they were located. and
to the nation. Stable market conditions and a protected national
economy allowed many firms to move beyond a narrow profit
motive and recognize their long term interests in sharing respon
sibility for broader prosperity and social welfare. To be sure. in
many cases corporate leaders did not come to this position out of
altruism.or oftheir own initiative. Nonetheless, pushed by union
organizing, public pressure and government policies. many
corporations came to realize the benefits of the social compact
anc:t its related commitment to workers, community and country.
In the new economy. our largest companies are global in nature
and face intense international competition. In addition, the in
creased fluidity in global financial markets has increased the
pressure companies feel from their shareholders. Sadly. these
factors lead some companies to place short-term profits above
all other considerations. Corporate responsibility to other stake
holders. including workers. communities in which they operate.
and the public good too often receive low priority, if any consider
ation at all. This attitude is perhaps best epitomized in the words
of James Meadows. AT&T Vice-President for Human Resources,
who was quoted in the New York Times on February 13, 1996. as
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saying, "People need to look at themselves as self-employed, as
vendors who come to this company to sell their skills. In AT&T,
we have to promote the concept of the whole work force being
coritingent [Le., on short-term contract, no promises] though
most of our contingent workers are inside our walls."
Nevertheless, many companies still expect subsidies from local
and state governments or preferential tax treatment. Such assis
tance is appropriate when companies earn itthrough improved
economic performance, job creation and investment in the local
community. All too often, however, when companies receive
these subsidies, there is no measurement of their performance or
the return to the public on its investment and no accountability
to public authorities. In one of the most egregious recent in
stances, Willamette Industriesreceived a total of $132.2 million in
tax credits for an expansion of their lumber mill in Hawesvme,
Kentucky, which will result in the creation of 15 net new jobs-:
the equivalent of $8.8 million in taxpayer money for ·eachjob.47
In many cases, publicly subsidized companies also fight against
worker efforts to organize, even directly or indirectly using public
money to pay for anti-union consultants and strategies that skirt
the edges of legality or even blatantly break the law.
Public financial assistance
should be geared towards
promoting 'high-road'
economic development
strategies.
This refusal of major companies to be accountable to the public
and the failure of officials ·to demand such accountability is
, unacceptable. Economic development programs should reward
those companies that exhibit a commitment to their workers,
communities, and the public interest. Public financial assistance
should be geared towards promoting 'high-road' economic devel
opment strategies. Such strategies encourage competitiveness by
enhancing skills, improving productivity, increasing quality,
customizing products, and improving customer service. This is in
contrast to 'low-road' economic development strategies in which
.
companies compete simply through cutting costs, reducing
wages, driving workers harder, and despoiling the environment..
Policies to pursue include:
1. Set MinirilUm Performance Standards for Public Subsidies:
To promote high-road economic development strategies, all
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forms of public subsidies and assistance to companies.
should set minimum performance standards and establish
methods of measuring the impact of the public subsidy.48
The standards should include:
Public authorities should
never provide a subsidy of
more than $35,000 for each
job created.
1
a. Minimum job quality standards. Specific wage leveis
are often set as an appropriate percentage of a county,
city or industry's average wage. Iowa, for instance,
requires all recipients of grants or loans to pay non
supervisory employees at least twice the minimum
wage. Rhode Island requires recipients of a Capital
Equipment Tax Credit to pay a median wage that ex
ceeds the state's average for that business category
(using the broad, two-digit Standard Industrial Code of
the Department of Commerce) .. Since 1996 Santa Clara
County, California, has required recipients of property
tax abatements to pay a minimum of $10 an hour, with
full health care benefits or an appropriate alternative.
b. Subsidy Caps: Public authorities should never provide a
subsidy of more than $35,000 for each job created. That
is the maximum a~ount allowed by the Small Business
Administration and the U.S. Department of Housing and
Urban Development. Other states have set lower caps
or guidelines. The Pennsylvania Department of Commu
nity and Economic Development sets a cap of $25,000
per job in their Infrastructure Development Program,
while the Illinois Department of Commerce and Commu
nity Affairs has a $10,000 cap in their Community Devel
opment Assistance Program.
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c. Good Employer Standards. Recipients of public subsi
dies should be required to document that they are good
employers. A good employer should demonstrate posi
tive labor relations practices and show no overt hostility
to workers who want a union, maintain a healthy work
place, and actively create equal employment opportuni
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d. A Standard for Greater Fairness in Competition for
Jobs: By empracing subsidy standards, the state would
create a more level playing field for cities and counties,
giving local officials clearer signals about the intent of
economic development programs. It would prevent one
city from luringjobs away from another by offering the
"low road:' option, and it would strengthen the hand of
public officials as they bargain with corporations.
2. Promote unions and collective bargaining: Promoting
unionization and collective ba~gaining is another high-road
economic development strategy. Unions help ensure that .
employers are paying fair wages and investing in their
workforce. Unions can playa key role in ensuring effective
development of skills and improving the motivation of their
members. This is particularly true in industries with multi
employer bargaining, where unionization across the indus
try can help take wages out of competition and encourage
companies to compete on the basis of quality, service,
innovation and investment in more advanced technology.
Reform of labor law primarily has to occur at a'Federal
level, but state officials can playa role in advocating reform .
in the following areas:
Promoting unionization and
collective bargaining is
another high-road economic
development strategy.
a. Redefine 'Employee': Expand the definition.of 'em
ployee' under the NLRA to include those currently
excluded either by statue or by case law. Roughly 50
million workers (43% of the workforce are now ex lic
Itly exem te rom exercising their rights to collective
~is inclu es orne . wor ers
,
sors, managers. self-employed workers, and certain
c~ies or professional employees.
---
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.
b. Expedite Union Recognition: Grant union recognition
when a solid majority of members sign union cards, as in
the Canadian system, or reduce the length of union
election campaigns and either prohibit employer inter
ference or give equal access to workers by both manage- .
ment and union organizers. Employers often abuse their
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power during union election campaigns, intimidating
workers into voting against union representation. Re
quiring only a check of union membership cards or
shortening periods between the filing' and actual admin
istration of a union election, while regulating employer
intervention, would help reduce employer abuse of
workers' statutory right to organize and act collectively.
Unions must once again
have the ability to
organize 'top down'
c. Promote Multi-employer Bargaining Units: For effective
bargaining to exist in an industry dominated by numer
ous small employers, the law needs to facilitate collec
tive bargaining between unions and groups of employ
ers. Multi-employer bargaining is also necessary for
stable, effective collective bargaining relationships in
industries with high levels of turnover, project-based
employment, or contingent employment.
and to exert economic'
pressures on employers.
d. Broaden Joint Employer Responsibilities: Where there
are sub-contracting and leasing arrangements, broaden
the definition 'of joint employer status. Currently the'
dominant, core employer bears little responsibility for
the economic conditions of their sub-contractors' em
ployees, yet the larger, "host"- employer decides'whether
or not there will be jobs for those 'employed' by the
subcontractor. For instance, a building owner can legally
terminate a building service contract to block union
organization of a contractor, even though such action by
an 'employer' would ordinarily violate Section 7 of the
NLRA
e. Remove Barryers to Effective Union Organizing: Re
move the legal restriction on pre-hire agreements,
recognitional'picketing, secondary boycotts and other
'secondary activities'. Unions must once again have the
ability to organize 'top down' and to exert economic
pressures'on'employers that were once legal. Histori
cally, the millions of non-factory workers-teamsters,
longshoremen, waitresses, cooks, musicians and oth
ers-who successfully organized between the 1930s
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and the 1950s relied on pre-hire agreements.
recognitional picketing. secondary boycotts. limitations
on nonunion goods and similar strategies to secure
bargaining rights. Making these. approaches legal once
. again would enable unions to organize many workers
now effectively beyond organization, ranging from home
based legal transcribers and domestic cleaners to the
millions of newly mobile professional consultants and
managers.
I
Corporations that abuse and
obstruct workers' rights
should not be eligible for
contracts or subsidies from
f. Penalize Rogue Corporations: Corporations that abuse
and obstruct workers' rights under national and interna
tionallaw to organize. bargain and take collective action
should not be eligible for contracts or subsidies from
public authorities. Violations of labor rights should be
treated like violations of civil rights laws. We need to
strengthen the penalties and remedies available where
employers unlawfully interfere with the rights ofwork
ers to organize. Current law is extremely inadequate and
provides little deterrent value whatsoever.
public authorities.
In addition collective bargaining practices must be redesigned to
enhance employee participation and to bt:oaden communication
between employee and employer. Rigid. detailed work rules
became less important in an environment in which decision
making has been shifted downward and in which trust and good
relationships between parties is deemed of value.
Improving Systems for Identifying and Documenting
Insecurity
In addition to the poJicy goals outlined above, it is also important
to improve our methods for identifying and documenting new
forms of economic insecurity. Systems for analyzing data on
.
insecurity. particularly at a local level. are incomplete at best and
often do not even exist. Accurate statistics on job turnover.
income mobility. wealth accumulation and long-term earnings are
kept only at a national level. Policy makers need to have a more
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complete understanding of who is affected by economic volatility
and how they are affected. This is essential for targeting pro
grams at appropriate populations and working to prevent people
from falling victim to changing labor demands.
We also need to develop
Improved information systems should focus on long-term careers,
rather than current jobs. Gathering static information about the
number ofjobs or industry growth may provide some informa
tion on changes in the economy as a whole, but it provides no
information on the employment paths of individuals or their
prospects over time. Even data in this report on wage trends
over~time are incomplete, since they only present a cross-section
of the population from ,year to year and do not trace individuals
over time. Instead of cross-sectional data, we should have better
data systems for tracking individual career paths over longer
periods. At a minimum, data is needed on people's long-term
earnings, rather than simply current wages. Such data would help
identify patterns of rising or stagnant earnings. It would help
detect those points at which there are dramatic changes in
people's earnings. If we are able to identify particular industries,
occupations or regions where sharp drops in earnings are more
frequent, or identify particular age, ethnic, gender, or educational
groupings of people who face severe fluctuations in earnings,
public officials could develop better assistance and retraining
programs.
better indicators of
insecurity beyond
measures of earnings
and wealth. .
We also need to develop better indicators of insecurity beyond
measures of earnings and wealth. Lack of access to affordable
housing, barriers to continuing education, and lack of social
support networks influence how people can cope with a volatile
economy. To accomplish this task, the state could learn from
numerous recent efforts to develop new, more comprehensive
and subtle measurements of the quality of life in communities. 49
5.5 Developing Win-Win-Win Solutions
The new social contract envisioned here would do more than
enhance workers' livelihoods. Its aim goes beyond making govern··
ment programs more applicable to the new economy. It is
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designed to create win-win-win solutions among the private sector,
the public sector, and individual workers and their families.
Businesses would benefit in a number of important ways. They
would be more able to pursue the flexibility they seek without
extensive government regulation. They would have access to
better trained and motivated workers. They would be able to
operate in communities with a high quality of life for everyone.
The new social contract is
designed
to create win-win
win solutions among the
private sector, the public
Workers would clearly benefit as well. First, they would earn
more and consistently receive a greater share of the economy's
productivity gains. Second, they would find it easier to get new
jobs and would have greater overall security. Finally, they would
be more empowered to express the~r needs on the job and in the
economy
. sector, and workers
and their families.
The public sector would also gain, partly from greater social
stability. less dislocation and less coiillict. Public investment in
education and training would realize a better return. By playing,
a critical role in ensuring a fair and stable social contract. by
helping to level the playing field. and byproviding support to'
workers, the public sector would gain legitimacy and support
from citizens.
Ultimately, this system would create an environment in which '
business could remain flexible and innovate, while workers are
protected from extremes of insecurity and growing prosperity is
more broadly shared .
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6. About Working Partnerships and the Economic Policy Institute
Working Partnerships USA
Working Partnerships USA was formed in .1995 in response to
a growing concern about the increasing disconnection between
Silicon Valley's economy and the well being of large sectors of the
workforce. Founded as a collaboration between community-based
organizations, Working Partnerships has brought awider range
of voices to the table in discussions around regional economic
development and state and national workforce development
and employment policy. Through grassroots campaigns, popular
economics education. research, and advocacy, Working Partner
ships is developing systemic reforms to the economic problems
confronting working families and advancing viable strategies
for addressing concerns abQut the health of communities ..
Working Partnerships is developing a set of institutional
responses to the changing nature of the economy through
a three-part strategy of developing new economic indicators,
new partnerships across constituencies and new models of
workforce development. Informed by an innovative research
agenda, Working Partnerships is developing the next generation
of labor market intermediaries, creating a policy framework
which will assistlocal organizations to address major issues,
and encouraging coalition building among groups with a limited
history of effective collaboration.
Innovative Research Agenda
In 1998, Working Partnerships published Growing Together,
or Drifting Apart?: Working Families and Business in the New
Economy. which detailed the extent to which wages have stag
nated or declined in Silicon Valley. The report also enumerated a
broad selection of social indicators that revealed a community in
need of a much more equitable distribution of the unprecedented
wealth created in the new economy. That report is one of the first
critical analyses of the failings of the new information economy
and gives community leaders a base of knowledge to challenge
prevailing econorriic wisdom and allows them to be both "actors"
and "thinkers" capable of shifting the.economic debate .
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Working Partnerships has also published Shock Absorbers in the
Flexible Economy; the Rise ofContingent Employment in Silicon
Valley, sparking a national dialogue on employment relationships
and providing a catalyst for policy development to mitigate the
adverse consequences of terriporary employment. This study
gave decision-makers and the community new tools to under
stand some of the major flaws in our current labor market,
particularly the economic insecurity of 50,000 workers.
Creating The Policy Framework for Economic Justice
In its first year, Working Partnerships led a community campaign
in support of a decision by the Santa Clara County Board of
Supervisors to link business tax assistance to performance in
creating jobs. In 1998, Working Partnerships initiated educational
efforts to inform residents of San Jose about the positive effects
of a Living Wage policy. With a strong foundation laid by its
Growing Together report, Working Partnerships successfully
focused subsequent discussion on the challenge of basing city
economic policies on shared community values. As a result, with
overwhelming public support, the San Jose City Council passed
a Living Wage ordinance that set a living wage at $9.50 with
benefits, included strong worker retention laI)guage and
a "labor peace" provision.
Building Relationships Across Constituencies
\
Working Partnerships' goals reflect a strategic long-term vision
for helping local and regional organizations define how issues are
debated and build an agenda that offers proactive solutions to
socio-economic problems. To achieve these objectives, in 1997,
Working Partnerships initiated the Labor/Community Leadership
Institute. Based on a cooperative agreement with San Jose State
University, the Labor/Community Leadership Institute is an eight
week course that trains activists in the tools of economic analysis
and the leadership skills needed to put them to use. Leaders
from neighborhood groups, unions, clergy and elected officials
and/or their staffs are recruited to experience a curriculum which
empowers participants to implement a community-centered
economic development agenda.
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New Models of Workforce Development
Working Partnerships is actively engaged in a sectoral employ
ment initiative as a labor market intermediary through the devel
opment of the Temporary Worker's Employment Project. The
Project is designed to address the difficulties that temporary
workers face in finding employment and maintaining an adequate
standard of living. It is also attempting to create a skills standard
for contingent workers in the clerical field. The Project is com
posed of together@work, a membership based organization for
contingent employees that provides portable benefits and finan
cial services and solutions@work, an employee-governed staffing
company that trains and places clerical workers throughout
. Silicon Valley. Through these efforts, Working Partnerships plans
to design mechanisms to' build career ladders across multiple
work sites fqr these individuals.The Temporary Worker Employ
ment Project will be supported by a consumer education cam
paign to expand the debate over the conditions of employment
for contingent workers and develop widely accepted community
standards for the temporary help industry.
The Next Step: A
Compreh~nsive
Economic Blueprint
To address the issues raised in this report and the ones detailed
in past reports, Working Partnerships has been involved in a
multi-year process both to analyze the most critical economic
problems that are confronting the Silicon Valley community and
to construct a set of proposed institutional responses. Initially,
roundtable discussions were held with over 300 organizers,
planners, environmentalists, and social service providers to
identify issues in healthcare, economic development, neighbor
hood revitalization, and job training and development within
the region. Practical solutions appropriate for local and regional
action will be implemented into a Community Economic Blue
print. it is intended that the Blueprint will engage decision
makers on behalf of community organizations throughout Silicon'
Valley and guide the direction of public policy for years to come.
To find out more about these efforts visit our web site at:
http://www.atwork.org
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Economic Policy Insti.tute
The Economic Policy Institute was founded in 1986 to widen the
debate about policies to achieve healthy economic growth. pros
perity, and opportunity in the difficult new era America has en
tered. Today, America's economy is threatened by slow growth
and increasing inequality. Expanding global competition, changes
in the nature of work, and rapid technological advances are ,
altering economic reality. Yet many of our policies, attitudes, and·
. institutions are based on assumptions that no longer reflect real
world conditions. Central to the Economic Policy Institute's
search for solutions is the exploration of poliCies that encourage
every segment of the American economy (including business,
labor. government. universities, and voluntary organizations.) to
work cooperatively to raise productivity and living standards for
all Americans. Such an undertaking involves a challenge to con
ventional views of market behavior and a revival of a cooperative
relationship between the public and private sectors. With the
support of leaders froin labor, business., and the foundation world.
the institute has sponsored research and public discussion on a
wide variety of topics: trade and fiscal policies; trend~ in wages,
incomes, and prices; th,e causes of the productivity slowdown;
labor-market problems; rural and urban policies; inflation; state
level economic development strategies; comparative international
economic performance; and studies of the overall health of the
U.S. manufactUring sector and of specific key industries.
The institute works with a growing network of innovative econo
mists and other social science researchers in universities·and
research centers all over the country who are willing to go beyond
the conventional wisdom in deviSing strategies for public policy.
Founding scholars of the Institute include Jeff Faux. EPI president;
Lester Thurow, Sloan School of Management, MIT; Ray Marshall,
former U.S. secretary of labor, professor at the LBJ School of
Public Affairs, University of Texas; Barry Bluestone, University
of Massachusetts-Boston; Robert Reich, former U.S. secretary of
labor; and Robert Kuttner, author, editor of The American Prospect,
and columnist for Business Week and the Washington Post Writers
Group. For additional information about the Institute, contact
EPI at 1660 L Street, NW, Suite 1200, Washington, DC 20036,
(202) 775-8810, HTTP://www.EPINET.org
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.Endnotes
1 http://www.hotwired.comlspecial/ene
2 'Melissa' is a pseudonym for one of the people involved in Working Partnerships Temporary Workers
Employment Project who preferred that her real name not be used in print.
3 Teixeira, Ruy (1998) Public Opinion on the Economy
1996~1998
(Economic Policy Institute)
4 See Osterman, PaUl, ed. (1984) Internal Labor Markets (Cambridge: MIT Press) This standard employment
relation certainly never characterized all jobs, but until recently it accounted for the dominant form of
employment in mass production enterprises, communications, transportation. wholesale trade, and
service industries such as insurance and banking.
5 Cappelli. Peter et al (1997) Change atWork (New York: Oxford University Press
6 Campbell-Kelly. Martin and William Aspray (1997) Computer: The History of the Information Machine (The
Sloan Technology Series) (New York: Harper Collins); Shapiro. Carl and Hal Varian (1999) Information
Rules: A Strategic Guide to the Network Economy (Boston: Harvard Business School Press); Kurzweil, Ray
(1999) The Age of Spiritual Machines: When Computers Exceed Human Intelligence (New York: Viking)
7 Margherios. Lynn et al. (1998) The Emerging Digital Economy (U.S. Department of Commerce: Washington, D.C.)
8 The following data come from AEA (1996) Cyberstates: A State-by-state overview of the High Technology
Industry and California Department of Trade and Commerce.
9 Including computers, communication equipment, electronic components, and high-tech instruments. (SIC
Codes 357. 366-7. 382, 384-7). Data from Center for Continuing Study of the California Economy California
Economic Growth 1999 Edition (CCSCE: Palo Alto, CAl
10 The following is primarily from the excellent overview of the State's economy by the Continuing Study of
the California Economy:. California Economic Growth 1999 Edition (CCSeE: Palo Alto, CM
11 Kevin Kelly (1998) New Rules for a New Economy: 10 Radical Strategies for a Connected World (New York:
VikiI)g Press)
,
'
12 Grove, Andrew (1996) Only the Paranoid Survive: How to Exploit the Crisis Points that Challenge Every
Company and Career (New York: Currency Doubleday)
13 Data on foreign trade is from the U.S. Bureau of Economic Affairs: http://www.bea.doc.gov
14 For information on Nike, see: Karzeniewicz, Miguel (1994) "Commodity Chains and Marketing Strategies:
Nike and the Global Athletic Footwear Industry" in Gereffi. Gary and Miguel Korzeniewicz (1994)
Commodity Chains and Global Capitalism (Praeger Press: Westport, CT)
15 Atkinson, Rob (1998) Indicators f~r the New Economy; (Progressive Policy Institute: 'Washington, D.C.)
http://www.neweconomyindex.org; Christopherson. Susan (1997) "The Institutional Edge: How Capital
Market Rules Influence Work Organization and Competitive Advantage" Paper prepared for the U.S.
Department of Labor, Bureau of International Affairs '
16 Persky. 1. and W. Wiewel (1994) "The Growing Localness of the Global City" Economic Geography Vol. 70,
No.2,129-143.
17 A comprehensive review of these trends is provided in: Castells, Manuel (1996) The Information Age
Volume I: The Rise of the Network Society (Cambfidge: Blackwell)
•
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. . .'. . . .
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18 see, e.g. Harrison, Bennett (1994) Lean and Mean:' The Changing Landscape of Corporate Power in the Age
of Flexibility (New York: Basic Books); Storper, Michael (1998) The Regional World: Territorial Development
in a Global Economy (New York: Guilford Press)
19 http://commerce.ca.gov/ california!economy/neweconomy'
20 http://www.pge.com/customer_services/business/ecodev.ht.ml#report
21 http://www.ccsce.com
22 Osterman, Paul, ed. (1996) Broken Ladders: Managerial Careers in the New Economy (New York: Oxford
University Press)
23 Baumol and Wolff (1998) Side Effects of Progress: How Technological Change Increases the Duration of
Unemployment (Annandale-on-Hudson: Jerome Levy Economics Institute) Original data from U.S. Bureau
of Labor Statistics, Employment and Earnings (Washington DC: Government Printing Office) Note that
these are national figures .
.24 Koehler. Gus and Rosa Moller. ,"Business Capital Needs in California: Designing a Program" California
. Research Bureau, Sacramento. 1998
:'1.\
25 _Belman. Dale,Erica Groshen, David Stevens and JuJia Lane (1998LSmallConsolation:-_TheDubiousBenefits
"'ofSmallBusiness for-Job-Growth and Wages-(WashingtonDC~~Economic-Poficy Institute) .- -- .--'"
26 California Work-and Health Survey.
,
,
27 Brown. Clair, Ben Campbel1, and Greg Pinsonneault, 1998. "The Perceived Shortage of High-Tech Workers"
Unpublished manuscript.
'
28 The training requirements for occupations come from the BLS OccupationC\l1 Employment Statistics, while
projected job growth by occupation is generated by the CaIiforni<i Employment Development Department.
'29 In inflation adjusted 1998 dollars.
30 California Work and Health Survey.
31 Reed, Deborah (1999) California's Rising Income Inequality: Causes and Concerns (San Francisco: PPIC)
32 Changes in the pattern of wage levels for immigrants in the 1990s seem to have produced this surprising
result. Between 1990 and 1997. the share of immigrants in the very lowest decile for male wage earners
actually declined, from 50 to 46%. Meanwhile. the share of immigrants in .Iower-middleincome groups
increased-to over 60% in the second lowest wage decile, for instance. According to PPIC's analysis. this
could be due to several factors, including: an out-migration of lower~middle income native born workers; a
growth of new native workers earning the lowest wages; and changes in immigration patterns resulting in
an immigrant workforce with slightly higher education levels and longer time of residence in the state in
1997 than in 1989.
\
33 State of California, ,Department of Finance, County Population Projections with Race/Ethnic Detail.
Sacramento, California. December 1998..
34 The latest year for which California data was available at time of writing.
35 Note that these figures and in the following paragraphs are for average not median wages. Median wages
provide a better indication of wage trends than averages. but the figures associated with union and non
union wages are only available by averages.
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36 Herzenberg, Stephen, John Alic and Howard Wial (1998) New Rules for a New Economy: Employment and
Opportunity in Postindustrial America (Ithaca: Cornell University Press) .
37 There have been various efforts since the New Deal designed to protect workers rights in the workplace.
Legislation such as the Civil Rights Act, the Age Discrimination in Employment Act, or the Occupational
Safety and Health Act do provide important legal protections for workers. However, their enforcement
places a heavy burden on the government, and it has led to a strategy that largely focuses on individual
complaints, rather than underlying structural factors. In the absence of effective access to litigation, this
approach is largely ineffective for the majority of workers, while failing to address the underlying changes
in our economy.
38 U.S. Department of Labor (1998) A Dialogue: Unemployment Insurance and Employment Service Programs
(Washington DC: DOL)
39 It is also structured in such a way that State VI taxes are based on an individual employer's experience
with unemployment-in an effort to create a financial disincentive for employers to lay off workers. It is
designed to be self-funding, which is typically taken to mean that funds should be accumulated during
periods of~conomic growth so that they will be available to pay benefits during economic downturns.
4P? FriedI9{n,'S~~ldon et al. ed.s.(1994) Restoring th.ePr«;>mise of American Labor Law (ILRPress: Ithaca),
\ \ espeCially tH~\followingChap~ers: Cobble, ~o~othy Sue "Making Postindustrial Unionism Possible"; Wial,
\ \H~yta:fd "Nw\~!lrg!li~irig Structtip,~s for Ne':Y'Forms of BU\i,ness O!.g~ni~a~on"; and Carre, Francoise, Virginia
\~d_uRivage and'Cljris Tilly (1994) "R~presJ:mting the Part-Time.a!ia Contingent Workforce: Challenges for
Unions and Public Policy"
- ./
41 See for example: Lave, Jean and Etienne Wenger. (1991) Situated Learning: Legitimate Peripheral
Participation. (Cambridge: Cambridge University Press); Wenger, Etienne (1998) Communities of Practice:
Learning, Meaning and Identity (Cambridge: Cambridge University Press)
42 Card, David, and Alan B. Krueger. (1995) Myth and Measurement: The New Economics of the Minimum
Wage (Princeton University Press, Princeton, NJ); Card, David, and Alan B. Krueger.: (1995) "Time-series
. minimum-wage studies: A meta-analysis." American Economic Review v85, n2; Card, David, and Alan B.
Krueger. (1994) "Minimum wages and employment: A case study of the fast·food industry in New Jersey
and Pennsylvania." American Economic Review v84, n4; Bernstein, Jared, and John Schmitt. (1997) Making
Work Pay: The Impact of the 1996-97 Minimum Wage Increase (Economic Policy Institute, Washington,DC);
Spriggs, William, and Bruce Klein. (1994) Raising the Floor: The Effects of the Minimum Wage on Low-Wage
Workers (Economic Policy Institute, Washington. DC).
43 Paul, Alan and Archie KIeingartner (1994) "Flexible Production and the Transformation of Industrial
Relations in the Motion Picture and Television Industry" Industrial and Labor Relations Review Vol 47, No.
4 July; Christopher, Susan and Michael Storper (1989) "The Effects of Flexible Specialization on Industrial
Politics and the Labor Market: The Motion Picture Industry" Industrial and Labor Relations Review Vol 42,
No.3; Gray, Lois and Ronald Seeber (1996) Under the Stars: Essays on Labor Relations in Arts and
Entertainment (Ithaca: ILR Press/Cornell University Press)
44 See the National Center for Employee Ownership (http://www.nceo.org)·
45 The size of each year's dividend is calculated using a formula that takes into account the Fund's
performance over the previous five years. Each individual Alaska resident received $1,540.88 from the fund
in 1998. See http://www.apfc.org
'.
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46 Pastor, Manuel, Peter Dreier, Eugene Grigsby, and Marta Lopez-Garza. Forthcoming. 1999. Growing
Together: Linking Community and Regional Development. Minneapolis: University of Minnesota Press.
Harrison. Bennett and Marcus Weiss. 1998. Workforce Developinent Networks: Community-Based
'
Organizations and Regional Alliances. Thousand Oaks, CA: Sage.
47 ,Greg LeRoy (1999) Terrible'Ten Candy Store.Deals of 1998 (Good Jobs First: Washington DC) http://
www.ctj.orglhtmVterrlO.htm
'
48 LeRoy. Greg and Tyson Slocum ,(1999) Economic Development in Minnesota: High Subsidies, Low Wages,
Absent Standards (Good Jobs First: Washirigton DC)
,
49 See e.g. R6we~ Jonathan. and Mark Anielski (199'9) The Genuin~ Progress Indicator, 1998 Update (San
Francisco: Redefining Progress)
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Dublin Core
The Dublin Core metadata element set is common to all Omeka records, including items, files, and collections. For more information see, http://dublincore.org/documents/dces/.
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Ruby Shamir - Subject Series
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First Lady's Office
Ruby Shamir
Is Part Of
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<a href="http://clinton.presidentiallibraries.us/items/show/36351" target="_blank">Collection Finding Aid</a>
<a href="http://catalog.archives.gov/id/7763277" target="_blank">National Archives Catalog Description</a>
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2012-0565-S
Description
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Ruby Shamir held the position of Policy Advisor and Assistant to the Chief of Staff in the First Lady’s Office. Previously, she served as Assistant Director for Domestic Policy in the Domestic Policy Council. This series of Subject Files contains materials relating to domestic policy topics, especially on children’s issues such as health, education, child care and youth violence. The records include memorandum, faxes, letters, reports, schedules, and publications.
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Clinton Presidential Records: White House Staff and Office Files
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Clinton Presidential Library & Museum
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236 folders in 15 boxes
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1999-2001
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Nonstandard Worker/EPI [Economic Policy Institute] Studies [1]
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First Lady's Office
Ruby Shamir
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2012-0565-S
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Box 11
<a href="http://www.clintonlibrary.gov/assets/Documents/Finding-Aids/Systematic/2012-0565-S-Shamir.pdf" target="_blank">Collection Finding Aid</a>
<a href="http://catalog.archives.gov/id/7763277" target="_blank">National Archives Catalog Description</a>
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