THE ECONOMY : A Presidential Fix for Cruelties in the Workplace

Last week, American Telephone & Telegraph Co. and Wall Street followed a familiar script in the drama of downsizing. The telecommunications giant said it was slashing 40,000 of its remaining 300,000 jobs. Wall Street boosted AT&T;’s stock--and the Dow Jones Industrial Average, as well.

It was another harbinger of a harsh new workplace, where casual cruelties defy conventional economics and the social contract.

For working Americans, the old certainties no longer apply. Loyalty to your employer is no longer reciprocated with lifetime job security--even if you work for such corporate icons as AT&T;, International Business Machines Corp. or Sears, Roebuck & Co. Hard work is no longer rewarded with regular raises--even when corporate profits swell, the stocks soar and executive salaries skyrocket.

All this should concern business executives--and the nation’s chief executive, as well. President Bill Clinton should address the issue of an economic recovery where workers’ jobs are in jeopardy and their wages remain stagnant. His State of the Union, now set for Jan. 23, offers the opportunity to place the problem before a national audience.

The president should point out that you can’t build prosperity on pink slips and pay freezes. Sluggish retail sales during the holiday season were only the latest sign of an economy dragged down by declining wages. New-home sales fell by 2.7% in October, despite declining mortgage rates. And auto sales dropped by 1 million from 1986 to 1994, despite a 10% growth in the adult population.

Clinton should declare it’s a matter of common decency, as well as maintaining consumer demand, to let workers share in the wealth they create. During the 1990s, workers’ productivity has increased three times as fast as their real wages. One Wall Street economist, Allen Sinai of Lehman Bros., ironically echoed Winston Church-

ill: “Never in our history have workers been asked to do so much for so little.”

Applying moral argument to the problem of vanishing jobs and shrinking paychecks would follow Clinton’s success at framing the budget debate in terms of “American values.” In his State of the Union, Clinton is expected to appeal to the values of individual responsibility and civic virtue. He can use these powerful ideas to urge companies to reward productive workers, not fire them or freeze their wages.

But can presidential oratory change corporate behavior? It sure can. Clinton should follow the the example of his hero, President John F. Kennedy.

Kennedy used a tactic his economic advisor, Walter W. Heller, called “jawboning” to urge business and labor to behave responsibly. In Kennedy’s time, that meant pay increases shouldn’t exceed productivity gains--and price hikes shouldn’t exceed increases in wages.

As Heller explained, “jawboning” used “the power of public opinion and presidential persuasion”--the bully pulpit--and Kennedy did it with words and deeds.

In his 1962 State of the Union, Kennedy declared, “Our first line of defense against inflation is the good sense and public spirit of business and labor--keeping their total increase in wages and profits in line with productivity. There is no statistical test to guide each company and each union. But I strongly urge them--for their country’s interest and their own--to apply the test of the public interest to these transactions.”

Soon, Kennedy’s call was questioned. U.S. Steel Corp. substantially increased its prices after the steelworkers’ union accepted pay raises limited to productivity gains. An angry Kennedy held news conferences, met with business leaders and awarded a defense contract to a steel company that had not raised prices. U.S. Steel got the message--and rescinded its increase. And the Kennedy years are remembered for rising incomes, stable prices and a growing economy.

Of course, when it came to convincing corporate America to behave responsibly, Kennedy had advantages Clinton would envy. In the early ‘60s, government was far more respected, and the president commanded attention, from the executive suites to the factory floor. Major corporations, such as U.S. Steel, dominated the national economy without fear of foreign competition. And a powerful labor movement made sure government and business paid attention to issues like jobs.

But Clinton can still bring formidable resources to the fight: a compelling message; the president’s power to set the agenda; the government’s clout as a contractor, and his own pivotal role in federal budget negotiations.

More than three decades after Kennedy’s jawboning, Clinton can use this tactic to keep pay raises in line with productivity. Once this principle held wages down. Now--with raises trailing productivity gains--it can lift wages up.

As Clinton is proving in the budget battle, even a weakened president can set the terms of debate. In his State of the Union, Clinton can echo Kennedy, explaining that “the first line of defense” against a stagnant economy and a fractured society is living standards that rise with productivity. Clinton could also borrow a tactic from Ronald Reagan’s State of the Union addresses: Saluting heroes in the House gallery who exemplify the points he’s making. His heroes could be business executives and workers who

personify the principle of partnership.

So Clinton should honor Aaron Feuerstein, who kept workers at his Massachusetts clothing company on the payroll over the holidays, even after his factory was destroyed by fire. Other possibilities would be workers and managers from the Levi Strauss Co. and General Motors Corp.’s Saturn plant, where labor and management are cooperating for quality.

By honoring these people, Clinton would implicitly be criticizing the corporate chiefs who treat workers like disposable parts. And public shaming by public figures can change corporate behavior. For example, after various national leaders attacked the violence and misogyny in rap music, the company they were pressuring got out of “gangsta rap”--though it has a loyal and lucrative audience.

Clinton can also use the federal government’s $200 billion a year in contracts to pressure private companies to raise wages. Among other initiatives, Clinton could issue an executive order requiring federal contractors to raise their lowest wages to the minimum he has proposed: a boost from $4.25 an hour to $5.15. He could also award preferences in contracts for companies with relatively narrow gaps between salaries of top management and wages of front-line workers.

Finally, Clinton can make a strength out of a weakness: his conflict with Congress over the budget. With the GOP majority proposing subsidies and tax breaks for corporate America, Clinton could offer a potentially popular idea: make benefits conditional on retraining workers and raising wages.

If he pushes for these proposals, Clinton will have allies. The new AFL-CIO president, John J. Sweeney, insists “America needs a raise.” Clinton’s labor secretary, Robert B. Reich, has analyzed the plight of an “anxious class” of insecure workers. House Democratic leaders Rep. Richard A. Gephardt (D-Mo.)and Rep. David E. Bonior (D-Mich.) are experimenting with ideas to offer incentives to companies where workers share in productivity gains. But only a president can command national attention for such policies.

Clinton got elected by appealing to people who “work hard and play by the rules.” Now, he should champion the idea that people who work hard for successful companies should keep their jobs and get a raise.