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The Seven New Directions at Work

Fourth Annual Address on the State of the American Workforce

Center for National Policy

September 3, 1996

On this, our fourth occasion to celebrate Labor Day together and two months before a presidential election, I could do the obvious and report to you on our past successes: 10.2 million new jobs added to the American economy between January 1993 and this July; on average these jobs paying better than the average wage of the jobs that were here when we arrived; unemployment dropping over the same interval from well over 7 and a half percent to under 5 and a half percent as of July; wage-push inflation nowhere in sight; ten million working Americans to benefit from an increase in the minimum wage. I could do this, but I won't, because in this political season anyone who is not yet convinced of the truth of these statistics will not be any more convinced simply because the Secretary of Labor says so.

I propose therefore to look ahead, not back, and to examine where we are going. Predictions are hazardous only to the extent that people remember you made them, so please ponder these for a short while and then put them out of your minds forever.

Consider, though, that as Secretary of Labor I have two special advantages. The first is an opportunity to travel around this great nation for the past four years, meeting and talking with thousands of working people -- farm laborers and sweatshop laborers, with those who mop the floors and those who empty the bedpans, with chief executives of big companies and owners of small businesses and with the owners of nothing but the clothes on their backs. The second advantage I've had is a wealth of data provided by that national treasure called the Bureau of Labor Statistics.

And so perhaps I'm uniquely able to make some observations about the direction working people are heading in this country. You should be satisfied with most of these directions. Others require continued effort on all our parts.

The first is clearly positive. Neo-Luddites are wrong. Technology is not eliminating good jobs. Quite the opposite: Technology is generating ever more jobs requiring problem-solving abilities, paying better and better. I've met workers who manage sections of retail stores by tapping PCs to monitor sales and replenish inventories, or who repair vending machines using hand-held computers to diagnose problems and communicate with the home office. I've met factory workers who reprogram machine tools, or install and test complex communications networks.

Where once a welder joined bits of metal, now a technician controls a rank of robots. Where once a teller handled transactions one by one, now a systems analyst upgrades the software for automatic teller machines. There's a growing demand for truck drivers who can use computers and modems to make just-in-time deliveries, for office workers who can orchestrate sophisticated spreadsheet and graphics programs, for auto technicians who can repair the electronic systems that guide today's cars, for hospital technicians who can run tests, for sales technicians who can explain and demonstrate new equipment.

These technician jobs are the new gateways into America's middle class, and the second thing I've noticed is that many of these jobs do not require a 4-year college degree. They do require some basic technical skills, but these skills usually can be learned in less than two years, sometimes a few months.

Even our poorest and most disadvantaged teenagers can learn them. Go to the East Los Angeles Skill Center and you'll see former gang members learning mobile electronics, starting at up to $12 an hour. Visit Project Focus Hope in the heart of Detroit and watch young dropouts get high-school equivalency degrees while learning to operate computerized machine tools, earning up to $15 an hour. Inner-city unemployment remains a huge challenge for this nation, but I've met these young people and I know that there are good jobs awaiting them.

The third trend is more troubling. Large numbers of Americans still don't have the education and skills they need for this new economy. It's not for lack of trying on their parts. Record numbers of high-school graduates are continuing their educations. Community colleges -- those great unsung heroes of the American workforce -- are brimming with adult students. But as a nation we are still underinvesting in our human capital. The cost of post-secondary education to American families is rising 3 times faster than average family incomes. Public schools in many of our cities, depending on shrinking local tax bases, are starved for resources.

American businesses are spending some $55 billion a year upgrading the skills of their employees, 20 percent more than a dozen years ago, according to the American Society for Training and Development. But the number of workers has risen 24 percent since then, meaning that private-sector spending hasn't nearly kept pace. And considering that skills are far more important now than in the early 1980s, this shortfall is deeply troubling. Left unchecked, it will retard economic growth and further widen the inequality in earnings that haunts this nation.

The fourth trend is toward lower levels of non-inflationary unemployment. A few years ago most researchers assumed that 6 percent of our workforce had to be out of work and seeking jobs in order for America to avoid spiralizing price increases. These unemployed were the unwitting draftees in the war against inflation. I don't claim we've won that war hands down, but there's little doubt that unemployment can be much lower without igniting inflation.

July marked the 23rd month that the unemployment rate remained under 6 percent with no sign of wage-push inflation in sight. Several regions of the nation are now experiencing even tighter labor markets -- in the range of 4 percent -- yet still feeling little or no upward pressure of wages on prices. Wall Street may yet suffer inflation paranoia, but Main Street knows better. Competition is so intense that producers are making every effort to avoid price increases.

There's another reason why prices aren't rising despite a tight labor market, and it marks a fifth trend. Most employees are not seeking higher pay because they know how easily then can be replaced if they do. Permanent layoffs represent only the tip of an iceberg of insecurity; it's the omnipresent possibility of losing the job that's helping keep a lid on wages. With ever growing efficiency, companies are outsourcing, subcontracting, automating, or moving entire businesses to new locations -- thus gaining a significant bargaining leverage over employees who might otherwise get a raise.

Perhaps the most striking change in employee compensation is a precipitous drop in health and pension benefits. Employer-provided safety nets are rapidly unraveling. If there's a pension at the workplace, it's ever more likely to be a 401-K plan rather than a traditional defined-benefit, and employers are less likely to be contributing to it. If there's a health plan, employees are paying higher premiums, higher co-payments and deductibles, and having less choice of doctor. For the first time in recent memory company health costs are rising more slowly than inflation, and a large part of the reason is that companies are shifting the costs of health care to their employees.

All this may explain a sixth trend I've been observing. Four years ago I rarely heard anyone tell me they were considering joining a union. Now I hear it all the time. In a recent survey, almost a third of non-unionized employees say they would vote for a union. That's nearly three times the actual level of union membership today. This new interest in unions shouldn't surprise anyone. Many working people feel vulnerable. They want a union to protect them and give them some bargaining power. There's also a new strength and vitality in the union movement. This trend should not strike fear in the hearts of employers. As Xerox, Corning, United Airlines, and many other companies have discovered, unionized workers can be helpful partners in achieving new efficiencies and improving productivity.

A seventh and final trend may surprise you; it surprised me. Our Glass Ceiling Commission reported last year on the scarcity of women and minorities among corporate executives. I still hear complaints of employment discrimination. Nonetheless, the overall direction is encouraging. Women and minorities are gaining ground, and I think I know why. It's not just that we're enforcing the law. In this intensely competitive economy, ever more dependent on human capital, companies simply cannot afford to ignore a huge pool of talent. Those that discriminate are at a sharp disadvantage, and will be ever more so. The fastest-growing businesses I've visited vigorously recruit and promote women and minorities; many are run by women and minorities.

The outlook for American workers on this day after Labor Day 1996? Clearly positive in terms of a growing number of good jobs, a declining level of non-inflationary unemployment, and a gradual but steady movement toward more diversity. But the challenge remains: Despite solid profits and low unemployment, wages and benefits for many working men and women are still lagging.

Meeting this challenge requires four things, all of which this Administration is pursuing and will continue to pursue into the next century. The first is solid economic growth. To achieve this we will remain on the path of deficit reduction. Second, working families need better access to education and job skills. The Administration is committed to this objective, but the private sector has to do its part as well. Third, we will continue to expand pension and health-care protections for working Americans. Finally, we will assure that working people can exercise their right to unionize as a means of getting a fair share of the gains from their labors.

Although the long-term decline in real median wages has stopped and there are recent signs of improvement, we can do better. The economy is strong. Profits in the second quarter of this year comprised the largest share of national output in almost two decades. There is ample room for tens of millions of lower-income people to get a raise. The fruits of this rich economy must be within reach of all hard-working Americans. That's the nation's agenda on this day after Labor Day, and in the days and years to come.

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