CHAPTER THIRTY
Planning for Redundant Workers
THE PLIGHT OF CHRYSLER will create a new demand for redundancy planning—that is, anticipating structural and technological changes in the economy and preparing to retain and find new jobs for workers who will have to be laid off.
During the next few years this demand will be intensified by the almost predictable closing of a number of steel mills that will become technically obsolete beyond repair. Indeed, labor unions are already proposing that Congress impose redundancy planning on industry.
Business, predictably, is fighting these proposals and may succeed in delaying their enactment. But for once industry is wrong in opposing a union demand. Over the next few years American business will need redundancy planning much more than labor and will have to design it, develop it, and adopt it in its own self-interest. For American business needs to make some fast structural changes if it is to remain competitive, capable of growth, and profitable during a time of massive population shifts.
Neither government nor business is prepared for the peculiar demographic changes of the next few years. There will be sharp drops in the number of young people available for traditional manufacturing jobs and in the total number of people available for traditional work. These declines will result in part from the “baby bust” that began in 1960–61: In a few years the number of young people reaching working age will fall by almost 30 percent.
Equally important will be a qualitative shift resulting from the “educational explosion.” Of the people who will reach retirement age in the next few years, fewer than a quarter will have completed high school. The majority went to work after no more than six or, at most, eight years of formal schooling. But of the young people entering the labor force, half will have been educated beyond high school and will therefore be unwilling to take traditional manual jobs. Indeed, they will be effectively disqualified for such jobs.
To create and find productive jobs for knowledge workers will be the first employment priority for this country. These had better be productive private-sector jobs; otherwise the political pressure for expanding governmental jobs will be well-nigh irresistible.
These demographic changes will require rapid automation and mechanization of existing processes. Automation can make many American manufacturing industries competitive again, precisely because this country possesses such a large supply of the knowledge workers who are needed to make automated plants productive. RCA, for example, recently built a plant that does what “everybody” had known was “absolutely impossible”: It turns out color TV sets at lower cost than Japan or South Korea.
An even more important consequence of demography will be production sharing. Labor-intensive stages of production that cannot be automated or mechanized—sewing shirts, tanning hides, or assembling parts—will be carried out in the developing countries with their enormous and growing surplus of low-skilled young people qualified only for manufacturing work. American knowledge workers will handle the more technology-intensive and skill-intensive stages of production—design, engineering, quality control, and marketing.
Even Chrysler might become viable again if it followed this route. Indeed, Chrysler was a leader as long as it was based on production sharing, as it largely was before World War II. Then Chrysler confined itself, in the main, to design, engineering, and marketing. It bought parts and assembled them rather than manufacturing them. For many U.S. companies, production sharing will increasingly be the only way to stay in manufacturing, no matter how protectionist we might become. Production sharing has already become official policy in Japan. It is the fastest-growing mode of industrial organization in the world today. And it is growing quickly in America despite all resistance by government, by labor unions, and, incidentally, by manufacturers themselves.
Unless there is a severe and prolonged depression, the American economy in years to come will be marked more by a shortage than by a surplus of manual workers. Although the front pages may be dominated by horrible tales of unemployment, the numbers of people displaced by moves toward automation and production sharing will be small indeed compared to the total number of jobs. Chrysler, the country’s tenth-largest manufacturer, employs fewer than 100,000 hourly workers out of a total American labor force of 100 million, or one tenth of 1 percent.
And, contrary to public belief, most workers laid off as the result of a structural or technological change manage to find new jobs fairly quickly. Even in steel towns where the dominant mill has shut down for good, more than four fifths of the affected employees have usually found new jobs within eighteen months, at least when overall economic conditions have been reasonably good.
Yet these small groups of “redundant” workers tend to be concentrated in small “distressed” areas. They tend to be middle-aged; old industries do not attract or hold many young people. These small groups are thus highly visible. They have political power out of all proportion to their numbers. And they are afraid.
What is worse, their plight infects the entire labor force with fear. Economically, one can argue that redundancy is not a problem. Politically, it is a sizable problem. And psychologically and emotionally it is a dominant problem. If the fear of redundancy cannot be allayed, there will be massive resistance.
Whatever form it takes, this resistance will be futile, as the British experience amply proves. Subsidizing redundant workers and obsolete processes has not saved British automobile plants, shipyards, and steel mills. On the contrary, it has accelerated their decline. But it has also inhibited the development of employment-creating new industries and of competitive technologies.
There are three approaches in the world today to redundancy. The oldest is unemployment insurance—sixty-five years old in Great Britain, the country of its origin. Economically it has been a vast success. But psychologically it has been a failure. It does not do what it was primarily designed to do: give emotional security.
Then there is Japanese lifetime employment. Though enjoyed by less than a quarter of the Japanese labor force, it has, in the past, given emotional security to the whole of Japanese society. But economically it threatens to turn into a disaster, as it greatly impedes the shift from old to new technologies and from old to new industries. Indeed, Japan is now desperately engaged in finding a solution that will maintain the emotional security of lifetime employment and yet permit, even encourage, rapid shifts of labor.
The third, and newest, approach is best exemplified by Belgium, where laying off people with any seniority costs so much as to be prohibitive. But the Belgian practice actually creates the unemployment it is meant to combat. If they weren’t afraid of being unable to lay off unneeded employees in the future, Belgian businesses—according to some estimates—would increase their hirings by 20 percent. As it is, hardly anyone in Belgium, whether Belgian or foreigner, starts a new industry or opens a new office.
We will be saddled with the Belgian “solution” unless we develop redundancy planning that welcomes redundancies, indeed speeds them up. We need to anticipate layoffs: There is usually a two-year lead time between the identification of redundancy and the actual closing of a plant or a change in process. We need to find new employment opportunities for people likely to be laid off, retrain them, and then place them.
This sounds like a formidable problem. A national program would certainly be as massive a boondoggle as the assorted governmental retraining programs already are. But as a local program, redundancy planning is fairly easy and cheap. We know this because it has been done—twice.
The first time was in Japan, seventy-five years ago, when, after the Russo-Japanese War, the country faced massive structural change in its industrial structure. At that time, the Mitsui group—already the country’s leading “zaibatsu” (that is “financial group”—the Japanese term for what we now call a “conglomerate”) and largest private employer—committed itself not to lay off redundant employees but instead to place them in jobs with other and growing Mitsui companies.
The second time redundancy planning was done successfully was in Sweden between 1950 and 1970. The country then faced a tremendous change from a primarily preindustrial, raw-material-producing economy into a modern technological economy. Under the leadership of a trade union economist, Gösta Rehn, tripartite groups were set up in each region to encourage, anticipate, and speed up redundancy and then retrain and place the affected people. Sweden moved almost half its labor force into new positions in those twenty years without great difficulty and at a fraction of the cost of paying unemployment compensation.
As a rule only a minority of redundant workers need to be trained and placed. A large group, mostly younger people, may need some counseling and placement help; otherwise, they have the required mobility. Another, and even larger, group is ready for early retirement, which usually means that they will find part-time jobs to bring their incomes back to their old standard. Only the middle-aged with large family obligations, limited skills, and low mobility need the assurance that they will be trained and placed.
What is needed is emotional rather than economic security. And this, as the Japanese and Swedish experiences have shown, only management can provide. American management must take the lead in fostering the emotional security of redundancy planning. If it does not, the fears of some very small groups may prevent American businesses from making the structural and technological changes that our population shifts and our technological opportunities demand.
(1979)