Statistics Mask New U.S. Reality
Our understanding of the changing U.S. economy lags behind reality.
There was disappointment last week when the Labor Department’s employment figures for March showed a gain of only 19,000 jobs on company or government payrolls--and that gain only because of additional staff working in primary campaigns. The country is in rough shape indeed if it’s relying on Clinton and Brown as a growth industry.
Yet the Census Bureau’s employment survey of households--released along with Labor’s statistics--showed a gain of 305,000 jobs in March, signaling that the economic recovery has truly begun.
What’s going on here? An indication that the government’s employment figures are obsolete, which is why policies based on such figures don’t work. Either more or fewer people are employed or they’re employed in ways that government surveys don’t cover.
The numbers are compiled differently: The Labor Department asks employers if they are hiring; the Census Bureau asks households if any family members are working. “The household survey is a better gauge of purchasing power because it catches part-time and self-employed workers,” says Irwin Kellner, chief economist at Chemical Bank.
The payroll survey, geared to larger companies, is out of date at a time when big companies employ only a third of the work force and 10 million companies employ fewer than 20 people.
What’s really going on is historic change. Part-timers, for example, are no longer kids who work after school. “A part-timer today is anybody who works on contract with no company-paid health benefits,” says Dan Lacey, editor of Workplace Trends, a Cleveland-based newsletter.
And the current wave of restructuring in service industries, which employ 88 million people, or 75% of the U.S. work force, is making the government figures even more irrelevant. Banks are merging and laying off thousands of employees; insurance, airline, media and legal firms are reducing staff and taking advantage of all the computing power they installed in the 1980s.
The recession is making service companies face up to the fact that they haven’t seen a payoff in productivity from hundreds of billions invested in data processing equipment, says economist Stephen Roach of the Morgan Stanley investment firm. So they’re doing what U.S. manufacturers did a decade ago, reducing staff, changing work procedures and contracting work out rather than starting or expanding a new corporate department.
The result is an enormous increase in self-employment among white-collar people--and a permanent shrinkage of the big company style of employment--with job security and full company-financed benefits. That style is fading in America, and a less structured system is emerging--one setting fewer work rules but expecting more individual initiative--with decentralized flexible work in factories, more work with home computers for white-collar folk.
Such work can be exciting and productive, but don’t expect people to embrace it too quickly. There’s a fault line in our brains between new realities and traditional ways of working.
Right now, for example, the United Auto Workers union has gone on strike in an attempt to impose a contract on Caterpillar Inc. that is based on work practices and bargaining patterns dating to 1958. Caterpillar, in response, is trying to force the union back to work, or break it by bringing in non-union staff.
It’s a classic, old-fashioned confrontation, but neither side can win because they seem not to recognize how the world has changed. Unions are weak to be sure--now representing fewer than 12% of U.S. workers. But their traditional check on management is being carried on by ever more active courts--the number of lawsuits for wrongful dismissal, job injury or discrimination have soared as unions have declined.
And more lawsuits are in prospect because the law too lags in understanding the changing economy. “How does the law cope with working from home?” Lacey asks. “If you slip in the kitchen, is that covered by workers’ comp?”
But not to worry, the law and our understanding will adjust over time. For there is no question that headlong change will continue--it is being pushed by an epochal advance in technology. “Since World War II, computers have become 1 trillion times more productive,” says Larry Smarr, director of the National Center for Supercomputing at Champaign, Ill.-- 1 trillion.
The practice of medicine provides an illustration. Since the early 1970s, the number of hospitals in America has declined steadily. But the number of doctors and nurses has increased, thanks to decentralization.
The doctors and nurses are working in the many diagnostic centers and outpatient clinics that have sprung up in the last decade as increased computing power at lower cost has made it possible for teams of doctors to set up their own businesses.
Also, many of those diagnostic clinics have opened as an unexpected consequence of regulation. “The government’s attempt to control hospital costs early in the ‘80s drove doctors to set up the separate units so they could charge more,” says a medical consultant who makes a good living from the multiplicity of clients.
The benefits of this for the public may be arguable. But the lesson for government is clear: Change is certain, and the government had better keep up.
