Cutthroat brand of capitalism started in 1980s
(Reuters) — It's time to start thinking about revitalizing the long-term career if we don't want its partner, the middle class, to vanish into thin air.
In an age of galloping inequality, it's worth remembering that middle-class people, rather than the rich, lead the way to growth and prosperity. They do this through their consumer spending, which drives productive investment; their skills and knowledge, which make innovation possible, and their strong rootedness in communities, which promotes cohesion and stability.
To achieve this, people need stable sources of income and a hope for the future. They require a sense of trust that smooths the transactions in both business and life. They must have an understanding that when they invest their hard-won skills and knowledge, there is a long-term payoff. Unfortunately, the trend toward insecure, disposal jobs is undercutting these necessities.
Sometime around the 1980s, proponents of a Darwinian style of U.S. corporate management threw out the compact between employers and workers that had existed for decades. They cast aside America's postwar social consensus that employers should invest in workers, who reciprocated with their performance and dedication. Consider that in 1983, Eli Lilly had not laid off a worker in its 107-year history.
As a cutthroat brand of capitalism swept the nation, Eli Lilly's strategy quickly became a relic. Long-term career expectations, the norm since the 1940s, were replaced by "flexibility" and short-termism.
Blue-collar workers were hit first with mass layoffs, as plants closed and management practices no longer focused on retaining employees. Before long, college-educated white-collar workers found that their jobs, too, were increasingly unstable and insecure.
Contributing to the sea change were off-shoring, globalization, weaker unions, automation and deregulation. Driving it all was the new corporate emphasis on maximizing shareholder value above all else. Executives concentrated on short-term stock-price manipulation rather than building value for the future.
The loyal employee was replaced by a new type of worker whose only sense of permanence was a pervasive feeling of insecurity. American workers were advised to become "entrepreneurial" through self-branding, networking and various kinds of maneuvering now viewed as essential to survival in the labour force. Work life was do-it-yourself.
By the early 21st century, "You're fired!" was a catchphrase for U.S. work life, courtesy of real estate mogul Donald Trump.
Corporate America usually celebrates these changes. In an extensive sponsored-content piece in the New Republic, Credit Suisse claimed that millennials don't want a traditional career path. Instead, a bank executive insisted, young people prefer a "winding, unpredictable progression of jobs in a variety of separate fields."
Flexibility and mobility are preferred over stability. Young people desire their work life to bring "a steady stream of new challenges." The bank cited a study indicating that more than 90 per cent of millennials in "America's lower occupational ranks expect to leave their jobs within three years."
There's no discussion in the piece of whether or not this "leaving" is voluntary. But the bank assures that the "benefit of all this increased mobility can be detected in workers' higher sense of fulfillment and fresh perspective."
Many others aren't so sure. Economist William Lazonick discusses the demise of the long-term stable career and what it means for the future in a paper written for the Institute for New Economic Thinking's project on the Political Economy of Distribution. He argues that the lack of career opportunities creates widespread negative effects that are bad for both businesses and people.
On the business side, getting rid of long-term careers may squelch innovation and productivity. Using high tech as an example, Lazonick describes the importance of cumulative and collective learning within an organization, which hinges on having experienced employees who are secure in long-term careers.
He emphasizes that skills are not just based on education — they also come from what you learn on the job, a point that seems to have been lost in corporate America, where employers increasingly throw responsibility for skill development to public-sector education facilities. Workers are expected to toil in unpaid or low-paid internships to acquire "skills" that often have little relation to what they would actually do on the job.
As Silicon Valley was abandoning the long-term career, with companies like Microsoft luring employees with stable jobs away from monoliths like IBM with offers of stock options, Japan's economic development was taking off on a model based on having permanent salaried workers, both blue collar and white collar, who collaborated in organizational learning.
This allowed Japanese companies to out-compete U.S. firms across a wide range of industries in the 1980s and 1990s, Lazonick argues, such as consumer electronics. (Japan's subsequent economic trouble, which began with a bursting asset bubble in the 1990s, was unrelated to worker productivity and innovation.) The Japanese rejected the theory that job insecurity was the best way to stimulate excellent work.
Today, according to the Global Technology Index, created by economic and urban studies theorist Richard Floridaand colleagues to measure the technological and innovative capabilities of the world's leading nations, the United States ranks third, behind Japan and Finland.
On the people side, there are signs that the middle class is being decimated by the lack of long-term stable-career opportunities. More than one-third of U.S. jobs are now part-time, short-term or on call. Wages in the middle-income level are stagnant or declining.
Attitudes toward careers may have changed, but you've still got to support yourself and your family over the course of your life. The frenzy of job hopping, however, makes it hard to do that.
Retirement also becomes dicey because changing jobs means you can't take full advantage of defined benefit pensions based on tenure and average salary, and you end up with lower Social Security payments if you have periods of unemployment.
Health may even take a hit. Dealing with chronic job insecurity, which studies show can even affect coronary heart disease and cancer rates, may be even worse for you than unemployment. Emotional problems emerge as well. A recent survey by the American Psychological Association showed that 45 per cent of workers say job insecurity has a significant impact on their stress levels, while authors of a Michigan study found that insecure workers are significantly more likely to meet criteria for major or minor depression and to report a recent anxiety attack.
Young people are getting stalled and can take decades to make up for lost wages — if they ever do. Some end up with "wage scars" that dog them forever and leave them earning 10 per cent to 15 per cent less over the course of their lifetime than those who had stable early employment.
The researchers describe a "lost decade" of work life among young people who could not secure stable, full-time jobs in the wake of the Great Recession. And when you feel insecure economically, committing to getting married, having kids or buying a home become worrisome propositions. When they get off to such a bad start, a study released by the Proceedings of the National Academy of Science showed, young people wait longer to have children. Some get so delayed they never have kids — even if their job prospects improve down the line.
U.S. graduates of 2012 were more concerned with job security, one study found, than any other employment issue, including salary and benefits.
If you look around the world, you see that it doesn't have to be this way. In Denmark, where unions are strong, even serving burgers at McDonald's can be a secure career that offers a living wage and full benefits.
In the United States, however, jobs at nearly every level have become dine and dash.
As a recent article in Fast Company points out, the median number of years a U.S. worker has been on the current job is just 4.4 years, down sharply since the 1970s. Of course, it's not just the length of the job, but quality also matters, and that's on a downward trend, too.
Some claim the answer is more education and more skills. This theory, however, has been widely debunked, especially in the wake of the Great Recession, which pummeled the well-educated and the highly trained.
Reforming corporate governance by banning stock buybacks, limiting stratospheric chief executive pay and putting workers on corporate boards (the norm in Germany) could help companies focus on long-term prosperity instead of short-term profits.
Strong labour unions would also allow employees to improve their contracts through collective bargaining. Regulating businesses that prey on workers with such practices as unpredictable scheduling and avoiding the rules by improperly classifying them as part time could help restore stability and security.
A prosperous economy and a healthy middle class are not short-term propositions. They require long-term thinking and investment, and stable, high-quality careers that bring value to employers, workers — and society as a whole.
A dine-and-dash job market in which more people tumble down the economic ladder is a recipe for disaster - not just for the middle class, but the entire economy.
