The treadmill of the new economy

Interview by A J Vogl


Former Secretary of Labor Robert Reich looks at why so many people feel they're running just to stay in place.

 

Robert B. Reich makes it look easy-from university to government back to university again. In 1992, he left Harvard's Kennedy School of Government to serve as secretary of labor during the first Clinton administration-the third in which Reich has served. Four years later, he resigned that position; currently, he is a professor of social and economic policy at Brandeis University and its Heller Graduate School.


But while Reich returned to academe, he didn't retire to academe. He keeps busy writing books (eight at last count), is a regular commentator on National Public Radio's "Marketplace," and is national editor of The American Prospect magazine, which he co-founded. He has also been quoted as being interested in running for governor of Massachusetts.


Reich's latest book, The Future of Success (Knopf), is related to his magnum opus, 1991's The Work of Nations: Preparing Ourselves for 21st Century Capitalism. In both books, he looks at the world through the prism of work, though not from an ivory-tower perch. "I am writing," he says, "about making a living and making a life, and why it not only seems to be but actually is getting harder to do both."


Across the Board editor A.J. Vogl spoke with Reich prior to publication of his new book.


The impetus for your last book, Locked in the Cabinet, was obvious: your experiences as Bill Clinton's secretary of labor. The impetus for your new book is not so evident.


Looking back on it, I suppose the book had its beginnings even before I left the administration. I loved the job. It was the best job I ever had. I couldn't wait to get to work in the morning; I stayed late at night. I was then and am happily married, and my kids were young teenagers. But it hit me that what I was doing was nuts.


I was losing contact with my family and friends and all aspects of my life unrelated to my work as a cabinet secretary. I couldn't go on doing this, so I left the administration.


In the wake of my departure, I was deluged with calls and letters from people, most of them sympathetic but some of them quite critical.


Critical in what sense?


Some women on the fast track were concerned that I was setting a bad example, suggesting that the only way to achieve a balanced life was to get off the fast track, when they had been spending years fighting that assumption. Others, men and women who were forced to work long and intensively because that was the only way they could make ends meet, also felt that I was sending a bad signal: It was easy for me to find another job that would pay enough for my family to live reasonably well and would not claim as much of my life, but what about them? And then there were some who said to me that I shouldn't congratulate myself on my decision, that there was nothing virtuous in leaving an important job. In fact, the virtue would have been in staying at that job. I was taking the easy way out.


The number of responses and the range of responses made me think that there was something quite important going on here. Now, for years people have talked about the difficulty of balancing work and life, but I also knew that something new was happening to the American economy, that these problems of balance are becoming central to more people's lives. And I was curious about why.


After all, we're supposed to be in a period of unprecedented prosperity. If there was ever a time when you would expect more people to be able to achieve a desired balance between what they do for a living and the rest of their lives, it would be now. Yet, ironically and paradoxically, it seems to be exactly the opposite.


Now, for half of my adult life, I've been looking at work in the economy, trying to understand how work is changing, and for the other half I'd been in public service, worrying about jobs and the structure of the economy. But I hadn't put all this together with the everyday dramas that were going on as people tried to adapt to a new economy that was making far more intensive demands on them. And I don't mean just time demands. We tend to think of this just as a matter of longer workdays, but it's more than that-the demands are more intrusive, more obsessive.


For me, the success you describe in your book is more bitter than sweet. You say we will all have to work harder just to stay in place, that there are only two tracks-- fast and slow-that the disparities between the haves and have-nots will grow. These are not optimistic projections.


They're not even projections. They're what's happening right now.


My book is neither optimistic nor pessimistic. Rather, I try to explain to people why they are feeling as stressed as they are and try to enable them to see that it's not so much that they have failed at work, or failed at being adequate friends or parents or neighbors or members of their community, but that there's something about the structure of the economy that's shifted. This is something almost all of us are facing today.


What I'm trying to do is integrate an awful lot of what people are experiencing and explain it in terms of the shift in the economy and the changes at work.


Let's start with work. You say the American worker now works 350 more hours per year than the typical European. And the hours are increasing. I just got a news release that said 68 percent of executives polled recently are working more hours today than five years ago. More, more, always more. When does it all stop?


It only stops when, first of all, people read my book and they come to understand that not only is it happening but that it's happening on a widespread basis and that it's endemic and systemic. And people then know that they have personal and also social choices to make. This is not beyond anyone's control.


I'm not a technological determinist. If you were an economic or technological determinist, and you read my book and said to yourself, "This is inevitable," you'd be misreading what I have to say. It's not deterministic. We have the power to reverse some of these trends. But the first step is understanding why they're occurring.


It's also important not to create false demons, not to put blame in the wrong places. Some people want to blame global corporations or globalization or capital markets, and some people want to blame Third World countries and foreign workers who are willing to labor for less money. Some want to blame the immigrants. When people are stressed, even in the face of what looks to be a great deal of abundance, there's a tendency to want to fix blame and not understand the system itself and not want to take the kind of responsibility that people need to take, not only for themselves but for being part of this new system.


At the heart of this new system is a paradox. On the one hand, there are demands that people work longer hours, and many people respond to these demands. On the other hand, many of these same people say they want more balanced lives. Don't they see the paradox here?


I think they fail to see the paradox. But perhaps the core paradox is that people celebrate the genuine benefits of this buoyant economy, this extraordinarily dynamic economy we have, but fail to see that the same dynamism lies behind more work hours and less-secure income streams, behind fast-track or slow-track choices in the workplace.


But you also say that Americans are working hard not because they want to in some deeply psychological sense but, rather, because they're up against the market.


Exactly. And at the end of the day, we can't have it both ways. We do, I believe, have to make some accommodations if we want both a dynamic economy and a humane economy. I draw some parallels with the kinds of accommodations that had to be made a hundred years ago, when people struggled to adapt to an industrial economy. We don't want to go along with the neo-Luddites and the protectionists and those who want to sacrifice everything that's good about this economy. Yet at the same time, many of us-if we fully understand the nature of the dilemma we're in-might argue for easing the transition. Let's take steps to reverse the sorting mechanism, let's create incentives for businesses to treat employees in ways that are more congruent with how people need to live their lives and not expect businesses to do it simply because that's a nice thing to do in order to retain talented employees.


One of the greatest myths going is that you've got to create a familyfriendly company in order to recruit and retain talented employees. Well, you absolutely have to do so, but the myth is thinking that family-friendly policies are going to solve the problem of overwork. I know company after company with generous family-- leave policies that enable employees to take sabbaticals and to take time off for this or that, but you know what? It turns out that employees aren't taking advantage of any of these so-called family-friendly amenities. They're not doing so because of the nature of competition. They understand implicitly that if they're not on the fast track, they're going to be on the slow track. And it's not because of anything nefarious on the part of the company-it's the nature of competition these days.


I'm a bit skeptical of the easy solutions that are given out in terms of slowing down and simplifying one's life, because I don't think they take full account of where people find themselves in the new economy and the complexities entailed in trying to simplify.


We are moving toward an economy in which there's less of a cushion between individual working people and the market. Companies are decentralizing and becoming thin horizontal networks. In this kind of an atmosphere, more and more people find themselves as free agents or people whose incomes depend upon how much they hustle. And we can't simply expect these people to turn around on a dime and say, "I'm going to cut back 20 percent of my work," because they could end up on a far slower track than they had bargained for.


Interesting, too, your point that where wealth disparities are wide, such as in the United States, people put in more hours of paid work than in nations where disparities are narrower.


Yes, for two reasons. If you're at the bottom of the economic ladder and disparities are wide, chances are that you've got to work longer and harder simply to make ends meet. If you're at the top, or near the top, chances are you're going to work longer and harder because the opportunity cost of not doing so is huge.


So no exceptions: People hustle because they have to hustle.


They hustle because the structure of the economy now requires much greater hustling. They have to hustle just to stand still. In the old days, when most people worked in or around large organizations, you were promoted up through the organization. There were career routes, there were passageways, there was some predictability.


I should say that I'm not at all nostalgic for the past. The economy of the mid-20th century had a lot of problems associated with it as well. A lot of work was boring, there was a great deal of prejudice still in the workplace, women had few opportunities, and we had a great deal of conformity. So this is not in any shape or form a plea to go backward. And yet, because the organizations are dissolving in the new economy, people are more on their own, and the pressures undoubtedly are increasing substantially.


For some people-namely, the poor-- the pressures cut close to the bone, and another point you make in The Future of Success and that you made 10 years ago in The Work of Nations is the growing income disparity between the haves and the have-nots. Getting a handle on that problem still seems out of reach.


I make a number of suggestions-- for example, a progressive voucher system. I think education-and I'm not alone in this-is more important than ever, and yet we live in a society that condemns kids from poor families to lousy schools, often with lower perpupil expenditures than wealthier suburban schools. Why not provide poor kids with much larger per-pupil expenditures than kids from average-- income families have? And then give it to the family in terms of a voucher that can be used at any school that meets minimum standards?


Conservatives have taken up the voucher cause, but they have not suggested this kind of voucher, which is calculated to reverse the sorting mechanism and get at precisely the problems that make upward mobility so difficult for so many of our poorer children: lack of resources and also the concentration of poor kids in the same poor schools.


That seems like a modest proposal compared to another you make in The Future of Success-to give every child, at the age of 18, a nest egg of $60,000.


Yes, because the nature of capital accumulation is such that if you don't have any to begin with, you're at a severe disadvantage. The magic of compound interest means that investments today are worth far more in the future. If a child has that money and can invest it in education, advanced education, and financial assets, that child has a nest egg that will help him or her later in life.


A noble goal, but the obvious question is whether an 18-year-old has the capacity to handle that amount of money. Will he have the wisdom to invest it? Or will he buy a new Corvette?


No, the money would have to be used only for education or for financial investments, and even then there would have to be some guidelines with regard to the kind of financial investments.


Despite such efforts, will the distance between rich and poor continue to grow? As you point out in the book and as a number of others have noted, CEOs make something on the order of 400 times more in salary than the average worker. Is that number going to keep going up?


Hopefully, the supply of talented and capable people will begin to expand enough and the demand will moderate somewhat, so that those wild compensation levels will calm down.


Are you suggesting that we don't have a sufficient supply of talented and capable people, and that accounts for this kind of escalation?


No, I think the real problem is that the executive committees on boards of directors who are in charge of finding new CEOs are terribly risk-averse. They want to go after the one among a small pool of people who have already proven themselves. And because of that, anyone who is in that small pool is in extraordinary demand.


Even so, why should that risk-averseness diminish in the future?


I think it may decline somewhat if shareholders-and I know shareholders are becoming much more active-begin to put pressure on boards to look a little bit more broadly. The CEOs who make it into that small ring of risk-averse choices may not be the best choices. In fact, given the demands of the new economy, CEOs who have been successful doing it the old way may be exactly the wrong people. You want boards and executive committees of boards who are doing the hiring to begin to think out of the box.


If you look at recent CEO hires, you see them very quickly followed by fires-fires of those same CEOs. Shareholders are already raising eyebrows and getting involved. Institutional investors are beginning to worry about selection procedures.


Are they? I thought their main concern was the value of the shares they hold.


They're concerned with the recruitment process. They have to be: If you're stuck in a rut of looking in exactly the same old places for your CEOs, and you end up with a string of CEOs who are not up to the task of running companies in the new economy, who are not nearly as creative as they need to be, that's going to directly affect share prices negatively.


That's why I would expect-and I think there's already some evidence of this-that institutional investors and some large individual shareholders are starting to say, wait a minute, we need to get out of that old box, we need to expand and broaden our thinking about the kind of CEOs we need. We need more creative types, we need people who've come from different backgrounds. We need people who are not necessarily chief financial officers or who have been executives of large bureaucratic firms in the past. Let's be more imaginative. If we don't, we're going to be deeply in trouble.


The ease with which we hire and fire CEOs seems related to a larger issue you address in your book: the ease with which we enter and leave market relationships. I was struck by your observation that the easier it is for us as buyers to switch to something better, the harder it is for us as sellers to keep customers and clients-- consequently, the need for marketers to create what you call sticky systems.


The customer is always looking for something that is better, faster, cheaper, so it's up to the marketer to reduce price or otherwise add to the value of what's being offered, so the customer won't have a reason to switch. The ultimate sticky system is a system of interconnectivity that becomes so widely used that both sellers and buyers have little choice but to use it.


But as I point out, sticky systems are always temporary; and as technologies continue to develop, consumers are finding ways to unstick themselves. Consumers have more and more power in this system because technologies enable them to exit almost every commercial relationship with far greater dispatch. Even the sticky systems through which consumers provide more and more information about themselves-to the point where sellers can tailor items particular to consumers' needs-even these systems are destined to become unsticky, as consumers understand that it's in their interest to keep that information, to create "me.coms" and distribute that information exactly to whom they wish, creating some competition for that information.


But ultimately, the consumer must find somebody to fulfill her consuming desires. And especially now with the Internet, there are a lot of new commercial voices out there crying to be heard. In your book, you talk of brand portals and large companies controlling these portals, which convey an air of credibility to the consumer. You also talk about how old-fashioned oligopolies have disappeared. But aren't we talking about a different kind of oligopoly here?


Absolutely, and we're seeing a new kind of oligopoly arise in many industries. Rather than depending on economies of scale, the new oligopolies depend on economies of trustworthiness. And because the average person can keep only three to five brands in his head with regard to any given field, those three or five brands will be the dominant trustworthy brands if they play their cards right.


We live in a marvelous time-our options seemingly boundless, our prosperity extraordinary-but there remains the question: Is it worth the price? The price, of course, is the loss of balance in our lives.


Well, we don't want to do anything that will jeopardize the new economy, its dynamism and its buoyancy. But at the same time, we want to adapt it so that people can lead more humane lives. One adaptation would be to cushion people against sudden economic shocks. This is a very volatile economy, and it's not volatile just in the stock market. Capital moves very, very quickly, and as a result people and neighborhoods and sometimes whole small countries are subjected to a great deal of hardship that comes with extreme change.


We need to look for ways to smooth out this volatility. Instead of providing unemployment insurance to people, for example, we could try "earnings insurance" that pays half of the difference between an old higher-paying job and a new lowerpaying one, at least until someone has the opportunity to get the training and connections they need to get a better new job.


Unemployment insurance is an anachronistic by-product of the old economy, in which somebody lost their job in an economic downturn and then would get it back again when the economy improved. But most people who lose their jobs these days are not going to get the old ones back, and we've got to think about easing the process of adjustment. The same thing holds for communities. Sometimes a great deal of political pressure builds to protect an industry or to subsidize a set of companies because they are the mainstays of communities. That's a very inefficient way of conducting an economy. It would be far better to provide "community insurance," so that if a community loses, say, 15 or 20 percent of its economic base in a given year, it can dip into a fund that will enable it to attract other businesses or retrain its people or otherwise diversify its economies.


In trade law, we need to be aware that sudden inflows of certain products can cause a great deal of hardship to individual employees and to communities. We don't want to protect them forever against those imports-that would be shooting ourselves in the foot-but maybe we want to expand the escape clause under our trade laws so that it's not so much a matter of easing the adjustments for industries but is also a matter of easing the adjustments for people and communities. That will take some of the pressure off-and take some of the wind out of the protectionists' balloon. And there are many, many other things that we can do, but I consider them all means of easing the transition and smoothing out the adjustments that have to be made.


One of the traditional approaches to redressing imbalances, of course, is for people to band together. The old form of banding together was unions, but you portray the future of unions in a very pessimistic light.


Well, unions will continue to be a very important means for workers in certain industries to gain greater leverage. But, increasingly, we're going to see that leverage applied in local service sectors of the economy-retail, restaurant, hospital, and hotel-places where there isn't international competition, places where there's not even very much national competition.


But we also have to think beyond the old forms of unionization, toward ways in which people can join together to gain bargaining leverage, for better terms, for health care and pension protection. If I'm correct, more and more workers will be either on their own or working indirectly for many different companies. They need ways to come together and generate some purchasing power.


Toward the end of your book, you say something that could be understood a number of ways: "No one designed the system this way, nor intended this result. ... A decent society should not have to rely on saintliness."


Yeah, I said that in terms of the sorting mechanism, and that's absolutely right. The people with the greatest bargaining power-able to strike the best deals for schools, health care, child care, taxes, and so on-- are already the best off. And the people with the least bargaining power are the ones on whom the burdens of economic change will fall the heaviest. They're the ones who have to settle for the poorest schools, the poorest health care, the poorest of everything.


And as I said, nobody designed the system this way. The people who are well-off may try to help people who have less; they may disapprove of this sorting mechanism, which actually increases the pressure to earn as high an income as possible.


I think many people find themselves in a bind these days, whether it's with their families or their neighbors. They're faced with a business environment that is more intensely competitive. They would like to make a certain set of decisions and set certain kinds of priorities for themselves that reflect their own personal values. But the cost of doing so is likely to be very large for them as individuals. If we, together as a society, could set certain priorities and enable people to live their values more easily, we'd all be better off.


As individuals acting alone, we are very, very naked in this new economy. Personal responsibility is still very real, and people can take actions. But without a social balance backing them up, without a balanced society backing them up, these personal decisions become more and more difficult.

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