Workplace Revolution Revs Up

In a time of high anxiety in the workplace, an era when rank-and-file Americans struggle with a new and alien code of survival, listen to “Doc” Windle conduct his class at the world’s busiest truck-trailer factory.

“Your hands aren’t enough anymore,” declares the Purdue University professor who helps pump up the brainpower at Wabash National’s sprawling plant in the heart of Indiana, a once-struggling region that has enjoyed a renaissance in the 1990s. “Your brawn isn’t enough. What you need is the intelligence. We’re here to help you develop the knowledge.”

An hour down the road, in booming Indianapolis, giant drug maker Eli Lilly--born in an era of medicine shows and snake oil--unloads its last U.S. capsule-making factory. In the new era, the goal is to wring profits from information, innovation and knowledge. With that goal in mind, more than 100 workers are retrained as lab technicians.

Across town, Bob Oswald signs the checks that enable his crew of machinists to master new equipment that hums with startling speed and precision, equipment that rival shops have loaded up on to win the deadly serious contest for work.

The checks pay for school. “It’s a cost of business I’ve got to be willing to invest in,” Oswald says of classroom fees that are more than $600 a worker.

Not since the Great Depression has the U.S. economy--its mysteries, its frustrations and its promises--weighed so heavily on the minds of Americans. And with good reason: The economy that Americans have known for decades has evolved into something a lot more complex and a lot less evenhanded than it used to be. Suddenly, it seems, knowledge and skill are rewarded far more than ever; resilience and the ability to adapt are the essential tools of survival.

Indeed, a revolution is rumbling through the nation’s places of work, a jarring process that is remaking jobs, dictating who has the chance for a decent livelihood and shattering age-old rules of the corporate road.

It is a revolution of expectations, the soaring demand by employers that workers possess skills that fortify the bottom line in a fiercely competitive world. More than ever, a worker’s success is linked to a worker’s know-how. More than ever, the marketplace offers a bounty of rewards to those endowed with the right abilities.

And more than ever, safe havens for companies and workers who for decades had cruised along in an easier, more protected atmosphere are vanishing.

These realities have jolted the work force, preoccupied political leaders struggling to understand how Americans feel about their lives, and widened the social and economic chasm between haves and have-nots. They have touched off an avalanche of media commentary and remain smoldering issues for Democrats and Republicans at their national conventions this summer and on the presidential campaign trail.

“By historical standards, this is a major event,” says Kevin M. Murphy, a labor economist at the University of Chicago, “something that might happen one other time in a century.”

But this event, a convergence of forces, really, has become a widely misunderstood national experience, in the view of many experts on the workplace and the economy.

Upward mobility, corporate downsizing, new opportunity, unequal rewards, job creation--they all are elements of the turbulent process. Melancholy accounts of job loss, although painfully real, represent just a fragment of this complex reality, statistics make clear. For most Americans, the changing culture of the workplace has affected day-to-day life in other ways.

It is a bewildering mishmash of signals, to be sure, a study in shades of gray. Sweep aside the emotion, however, and the picture starts to take on clarity. Consider some of the more telling traits of America’s relentlessly stirring economy as it grinds toward a new century:

* The economy has created at least 40 million jobs in the 1990s, while wiping out about 30 million, estimates John Haltiwanger, a University of Maryland professor and co-author of “Job Creation and Destruction.” The official tally of more than 11 million new jobs overshadows Japan, Germany, France, Italy, the United Kingdom and Canada combined.

* Contrary to stereotype, two-thirds of the new jobs since 1994 have been in fields that tend to pay above the national average, according to an April analysis by the U.S. Labor Department and White House Council of Economic Advisers.

* The true losers in the contemporary workplace, and by growing amounts, are people whose education ends with a high school diploma or those who do not get even that far. That is because employers rely more than ever on workers with higher levels of knowledge, whether in factories or offices.

* Despite all the headlines about layoffs, U.S. corporations expanded their worker ranks by 4.5% on average in the year ending June 1995, according to a survey by the American Management Assn. The message: Even in a time of cutbacks, hiring goes on. “Only it’s [mostly] not at AT&T; and IBM,” notes Cornell University economist John H. Bishop. “It’s somewhere else.”

* “Somewhere else” often refers to knowledge-oriented enterprises that have mastered the alchemy of converting smart ideas into profits. And California remains a national nursery for firms that expand through creativity, innovation, design and other fruits of the intellect. Multimedia enterprises in the San Fernando Valley, makers of medical instruments in Irvine, international trade consultants in Long Beach, biotechnology firms in Ventura County, apparel designers in Los Angeles and environmental engineers in Pasadena are just some of the vivid examples.

*

But if the West Coast is a leading edge of the future economy, California’s fast-growing firms only dramatize an all-pervasive national and increasingly global phenomenon. The commercial value of knowledge and skill is impressing itself on workers and their employers in virtually all regions of the country, in technologies high and low, in factories and offices.

It has altered the way that Rust Belt industries operate, infiltrated the financial centers of New York and influenced the pay scales of temporary workers tracked by Manpower, a temporary employment firm based in Milwaukee.

More broadly, it has redefined cherished notions of job security and long-accepted paths to affluence. People who are savvy about new technologies command a growing premium that mirrors their growing importance to employers. They are most likely to bounce back quickly from a layoff or avoid one altogether.

“It’s not just in manufacturing. It’s not just in services. You see across-the-board changes in the value of workers, and you see those changes very dramatically,” maintains Murphy, the University of Chicago economist. “What we’re talking about is an incredibly pervasive phenomenon.”

Here in central Indiana, a place that calls itself “America’s crossroads,” the economy’s epic shifts are as clear as an abandoned steel mill that looms over a shimmering field of corn. Entire industries have ascended and fallen, like ancient cultures entombed in the landscape.

It was 102 years ago on the Pumpkinvine Pike in Kokomo that inventor Elwood Haynes showed off his horseless carriage, signaling the death of a whole industry of buggy builders and the rise of a vastly more powerful one. But by the 1930s, Haynes and other Indiana auto makers with names such as Marmon, Cole, Stutz, Auburn and Duesenberg stumbled, ceding a fabulously rich future to their rivals up north in Michigan. (Studebaker, which made wagons for the Union in the Civil War, lingered in South Bend until 1963.)

“They were basically wood craftsmen, but here they were dealing with the new technology of metal,” says Morton J. Marcus, director of Indiana University’s Business Research Center in Bloomington and Indianapolis. “They made very nice interiors, but they weren’t ready to compete with Henry Ford and mass production.”

More recent, in the 1970s and early 1980s, Indiana and much of the United States were battered by overseas competition, a painful episode that helped set the stage for today’s corporate changes. Oil shocks exposed old, energy-guzzling equipment as hopelessly inefficient.

Workers were tossed out of antique steel mills in Gary and other cities that had embodied U.S. industrial might. Once-bustling auto suppliers shut their doors. Unemployment skyrocketed to 22% in Kokomo and soared in other industrial centers as well. Incomes plunged along with morale. A growing number of young people felt no choice but to escape bleak hometowns and seek their fortunes in the Sunbelt.

The agony of America’s heartland prompted gloomy prophecies of a broader American decline. For Indiana residents, known as Hoosiers, the lesson of the early 1980s was searing--as well as prophetic: “They were more aware of the certainty that no economic order was fixed, that late-20th century Hoosiers had to be prepared for changes as challenging as those their pioneer forbears faced,” writes historian James H. Madison.

In fact, an extraordinary healing process was underway that was a harbinger of the sweeping changes that would grip much of the nation in the ensuing years.

Surviving factories loaded up on advanced technology, like the steel mini-mills that are sleek miniatures of their ancestors. Auto makers undertook an extraordinary effort to retool, pouring billions of dollars into plants that make electronic circuitry, transmissions and other parts.

Aggressive new enterprises barged onto the funereal landscape, companies such as Wabash National of Lafayette--with equipment salvaged “from the carcass” of dead Rust Belt manufacturers. The aim of the truck-trailer maker was as brash as it was novel: to create, from the ground up, a workplace that rewarded ingenuity and churned out innovations that its rivals thought were impossible.

“When you have the opportunity to create a culture, you think, ‘Now’s the time to get it right,’ ” says Donald J. Ehrlich, corporate chairman, “because to change it is very, very difficult.”

Today, Indiana is the nation’s leading steel producer. The unemployment rate hovers just above 4%, compared to the U.S. rate of about 5.3%. Indianapolis, Columbus, Lafayette and other cities have drawn a host of new employers. And the out-migration of young families finally reversed in the early 1990s.

Small-town basketball and fields of corn may be the state’s enduring images. But at a whole different level, bustling factories, growing job opportunities and busy workers have become defining features of Indiana and much of the Midwest.

They are pictures of rebirth, signs that pounding competition can unleash a powerfully effective response. The Midwest “might be the shining example for the rest of the nation” in today’s episode of restructuring, says Mark Zandi, an economist with Regional Financial Associates in West Chester, Pa.

In the aftermath of the Rust Belt’s traumas, some also discern a not-so-secret key to national prosperity in an increasingly competitive world.

The regional turnaround, maintains Marcus, highlights just how valuable brainpower--engineering, design, innovation, savvy use of technology--has become: “The real payoff comes from producing human knowledge and transferring it into things people can use.”

*

Sound abstract? These realities are clattering away inside a one-story building of white cinder blocks and green trim in a rundown neighborhood north of downtown Indianapolis. Here, at Apex Precision Technologies, 32 machinists are living testimony to the rising value of skill.

Walk over to the old milling machine, the one they call “the Cincinnati,” and there’s Wayne A. Newlin, 75, chewing tobacco and working steadily under the fluorescent lights, as he has done for four decades.

A few yards away, but in another world, Jason Robinson, 23, feeds cast iron into a computerized machining center. The two men share a place of work, but their career paths are as different as a slide rule and a calculator.

Back when Newlin started out, it was up to a machinist “to get it right” with the help of manual equipment. Newlin, who drove trolley cars before the city switched to buses, gradually learned the subtleties of the manual cutting tools inside the shop on the job.

“I like to see the finished product,” he explains, alluding to the intimate relationship that once existed between workers and the old mills and lathes.

But by the time Robinson showed up just a few years ago, technical ignorance--”I didn’t know what a drill was”--represented a towering barrier to moving up and escaping the loading dock, where he earned $6.50 an hour. At Apex these days, “getting it right” is the province of those who can program and run the new, computer-controlled machinery that needs only seconds to finish tasks that used to take minutes.

The effect on people’s lives is profound. Robinson, a former D student who recalls high school as a time of girls and spring breaks at Daytona Beach, studies trigonometry, geometry and other subjects at Ivy Tech, a vocational school. He does up to two hours of homework a night.

What happened? “I wisened up,” says Robinson, who has climbed onto a career ladder that pays up to $18 an hour plus overtime. “I found out you had to have a goal.”

By last fall, skilled machinists had become such hot commodities in Indianapolis that employers engaged in a free-for-all of luring each other’s workers away. Finally, they were forced to hold a peace conference in the mayor’s office.

Oswald pays more than $20,000 a year in training expenses for Robinson and his other machinists, part of the “cost of staying current” and improving the shop’s productivity. “I know there are people who say: ‘Why spend that money, because people are going to leave?’ I just look at it and say, if I train enough people, some of them are going to stay.”

*

The stakes are soaring: An array of pressures has slammed into corporate America, pushing up the importance of every hire, heightening the awareness of each employee’s worth. Insulation that once sheltered employers and their employees from brutal market forces has cracked and peeled like a cheap coat of paint. The landscape, in short, is far less forgiving than it used to be; protected enclaves have gone the way of eight-track tape players.

Defense firms that were addicted to rising federal expenditures have been forced to scale back and consolidate. Cost pressures from deregulation continue to rain down, not only on big-name companies in telecommunications, transportation, finance and other fields, but on a nationwide web of suppliers and services that they deal with. Overseas competition has prompted a range of U.S. firms to control their prices and improve quality.

On top of all that, Wall Street has taken a more aggressive and judgmental role in a world of burgeoning investment funds and potential takeover bids. Its analysts and professional investors are quick to tut-tut anything that might be interpreted as corporate waste; chief executives, whose personal fortunes are tied more than ever to financial performance, are exquisitely sensitive to these demands.

All these pressures, which have converged in the late 1980s and 1990s, help explain why companies have taken the knife to middle-management jobs that don’t boost the bottom line and why they have automated tasks once performed by workers and dumped operations that can be farmed out for a savings. These forces are remaking the culture of the workplace, business experts contend, prompting employers to appraise the value of jobs more critically than ever. “Workers cannot be employed if their product cannot be sold in the marketplace,” says a new report by the Committee for Economic Development, a policy group that reflects the views of corporate America. “Consequently, they increasingly are paid what their marketable skills are worth. In the new workplace, ‘showing up’ and working are no longer enough to produce once-expected rewards.”

Frank Levy, an economist at the Massachusetts Institute of Technology, offers this advice to workers who wish to prosper in today’s climate: “You’ve got to do things that are valued, that other people can’t do.”

Few companies are untouched by these forces, from vast, publicly traded corporations to obscure, private enterprises. Apex, for example, is a private concern, but it is buffeted by the investment world’s demands because it supplies parts for forklifts and jet engines to big corporations that must answer to investors.

“Our customers have very strong pressures to maintain or drive down costs--and they’re rather merciless in their approach to us to accomplish that,” Oswald explains.

Severe pressure on costs influences more than wages: It has prompted employers to rethink the very nature of job tasks, heaping added responsibilities on lower-level workers as they pare back the middle layers of once-fat hierarchies.

*

Not surprisingly, those who thrive in the climate of higher expectations will be those who possess higher levels of skill.

In part, this is a tale of evolution: Developing countries with low labor costs still may gauge their economic strength in tons of coal or cement; for the United States and other advanced nations, rising affluence increasingly means--to use a buzzword in business circles--working smarter. Older products must be made with state-of-the-art efficiency. Newer products feature innovations in design, engineering and technology.

Firms that ignore such imperatives face a grim future in the hotly contested U.S. and international marketplace. Federal Reserve Board Chairman Alan Greenspan calls this trend the “conceptualization” of economic growth, the substitution of “ideas for physical matter” in creating products of value.

Human skills, Greenspan said this year, “are subject to obsolescence at a rate perhaps unprecedented in American history,” a shift accelerated by the satellite, computer, semiconductor, microprocessor and other advanced information technologies.

This abstract-sounding concept has a solid connection to the workplace. While estimates vary, more than four of 10 new jobs in North America in recent years have been created in such knowledge-based industries as software, computers, telecommunications, health care and pharmaceuticals, says Nuala Beck, a Toronto-based management consultant and economist.

“Let’s face it: Intellectual capital is the key source of strategic advantage in this new economy.”

At the same time, it is an economy that will continue to grind alongside an older version that asks less of its participants and offers less in return, posing unresolved issues for society. Not all jobs, after all, can be remade by technology, shipped overseas, upgraded, combined or otherwise eliminated.

By all accounts, Americans will continue to hire people to mop floors, cut grass, bus restaurant tables, attend the frail and perform a multitude of other low-paying tasks. High-skill, high-wage jobs in management and the professions will increase rapidly in the next several years, as will jobs for hamburger-flipping and other low-wage services, according to a 1995 forecast by the U.S. Bureau of Labor Statistics.

This dual reality is graphically clear at Bindley Western Industries, a national distributor of drugs and health care products. “We still have to have people that take boxes off the shelf in the warehouse,” says William E. Bindley, chairman of the Indianapolis concern. But, he adds, workers who find out how the drugs inside those boxes are used in the marketplace provide intelligence the firm can profit by.

“The manufacturer [of a cancer drug] might want to know, are their prescriptions coming from oncologists, preferred providers, family-practice doctors, dermatologists?” Bindley explains. “The type of people we’re in desperate need of are people who have the propensity to grasp programming, systems development, software implementation.”

The predicament for many workers is that such opportunities are frustratingly out of reach. Just as high-paid factory jobs for the unskilled have been disappearing, low-paying office jobs that once allowed people to gain a toehold in the work force have grown scarce as well.

Martha “Marty” Miles recalled that as recently as the 1980s, people who entered her Indianapolis training program often got their first chance as file clerks, typists and mail-room assistants. But as offices have become more computerized, and seek more from their workers, such opportunities are hard to find. Employers now prize “language skills, thinking skills, customer skills.”

In Indianapolis, which counts 12,000 adults on its welfare rolls at a time when 20,000 jobs are unfilled, such expectations only make life harder for the unskilled, many of whom contend with broken families, transportation problems and other barriers. The declining grip of unions, the shrinking value of the minimum wage and cheap overseas labor all are blamed for the weaker position of workers at the bottom.

“The first step you have to take up that ladder,” Miles says, “is a really big step.”

Her comment is reinforced by a dominating trait of the contemporary workplace: Rewards are doled out less evenly than they used to be. High school dropouts get less than high school graduates, college dropouts get less than college graduates, holders of advanced degrees take home more than everybody else. And the gaps have been widening.

Simply put, the rich in skill get richer in pay; those wanting in skill get very little. Male college graduates, for example, enjoyed average earnings of $61,000 by the end of 1994, according to the Labor Department--an increase of $9,885 since 1982--while high school dropouts were getting $22,878--a decline of more than $2,800 in the same period. Many others without college degrees stagnated or slipped, though not as precipitously as dropouts.

What is most striking to some experts is the growing wage disparity between people in the same industry, sometimes within the same occupation. At various rungs on the ladder, it appears, the winners command ever more lucrative rewards.

Pressures in the contrary direction, such as from organized labor, have declined in the great majority of occupations.

“What’s really happening, by and large, is that wages are pulling apart,” says Erica L. Groshen, an economist at the Federal Reserve Bank of New York who has studied wages and the labor market.

Quietly, many companies are changing the way they set pay hikes, increasingly looking at workers’ skills and knowledge rather than basing increases narrowly on the jobs they hold. Between 1987 and 1993, the percentage of Fortune 1000 large corporations that expressly looked at knowledge and skill in compensating at least some of their workers rose to 60% from 40%.

“The individual with the right set of skills is gaining increasing power and income in our society,” says Edward E. Lawler III, director of USC’s Center for Effective Organizations, which surveyed the corporations. “The future is very bright for them.”

*

There is no crisp catalog of sought-after skills; they vary among employers. But the changing values at Eli Lilly provide some perspective.

As recently as the early 1990s, Eli Lilly recruited blue-collar workers from the auto industry, attracted by their experience on assembly lines. Today’s credentials, by contrast, feature critical thinking, problem solving, working with other departments, openness to changing technology and new ways of doing things.

The firm has retrained more than 100 people, mostly from phased-out production lines, as laboratory technicians since late 1993.

“To work at Eli Lilly--I’d submit at almost any company in this day and age--you have to buy into a learning environment,” says John H. Vice, manager of the company’s career center. He adds: “People who learn a job and get comfortable in it and want to do it repetitively get left behind.”

Clearly, basic skills in mathematics and reading also are part of the formula for survival in the workplace. One study found that female high school graduates who were good at mathematics have reaped a substantial--and growing--pay advantage over young women who lacked these abilities.

The pay gulf between women of varied math skills was 93 cents an hour in 1978. By 1986, the gap between a similar group of young women had ballooned to $1.71 an hour, or about $3,420 a year.

“A big piece of it [inequality] is technological change that has favored workers with more skills,” says Richard Murnane, an economist at the Harvard Graduate School of Education, who worked on the analysis.

Such explanations, of course, are cold comfort to those who have been orphaned by the knowledge-based workplace. The emergence of a more cost-sensitive economy is providing an extraordinary test of capitalism itself, a textbook study in whether the short-term disruptions prompted by competitive need can lead to a greater social good.

Optimists predict that the changing culture of U.S. business will pay off in the form of improved economic growth and higher living standards for all, as national productivity makes a long-awaited rally after years of meager progress. America’s job gain of 11.4 million payroll jobs in the 1990s spotlights a degree of economic vitality entirely lacking in Western Europe, where workers enjoy a stronger safety net but confront much higher, chronic unemployment.

Critics complain that corporations have become far too nonchalant about getting rid of workers, and that the volatile times dictate a stronger social safety net for those injured in the transition. Already, a growing body of thought finds that rank-and-file workers are benefiting little from recent gains in corporate profits and stock prices.

Even some who are wary of government meddling in the private sector acknowledge the sheer difficulty of finding short-term remedies for those displaced by long-term economic adjustments.

“I’m not positive what the answer is,” says Indianapolis Mayor Stephen Goldsmith. “Over the long range, a higher percentage of adults need to graduate from high school and go on to college.”

*

On the 1.5-million-square-foot factory floor of Wabash National, the problems are more focused, the answers more easily tested, the rewards more palpable. The goal, says Ehrlich, the chief executive, is to come up with innovations and carry them out meticulously. It is the only formula, he believes, for thriving in a ferociously competitive industry.

“We see ourselves as a technology company in a non-technology field,” he says.

Employees are encouraged to take courses in the on-site classroom on areas of business economics, statistics, teamwork and modern strategies for handling inventory. Graduates get pay hikes of 25 cents an hour for finishing two of the basic courses. A more rigorous regimen awaits those who wish to climb the managerial ranks.

In its short history, Wabash has outmaneuvered rivals by creating a “RoadRailer” truck trailer that runs on highways as well as railroads, and pioneered a design that ekes out extra interior space while abiding by mandatory size limits. Worker teams have found ways to reduce welding labor, cut down on leaks and find other savings.

A new plan for routing the 1,500 tons of material delivered to the plant each day is expected to free up 30 workers for other jobs. “Ideally, we’d like to have everybody building trailers,” Ehrlich says.

Wabash now sells more trailers than any of its rivals and is clamoring to market new products, such as railroad cars, overseas. It has created 3,400 jobs since 1985 and enjoyed whopping sales gains averaging 40% a year.

Certainly, gloom-and-doom tales of job loss and dwindling opportunity have little place here. But if this churning factory in the heart of Indiana sounds like the happy parable for a new, knowledge-based world, it is a parable that comes with a cautionary footnote: Wabash officials pointedly refuse to rule out layoffs.

“We’re not a social institution,” says Jim L. “Doc” Windle, the Purdue University professor who runs the classroom.

Then he utters a simple thought that captures the changing relationship between employers and employees in the 1990s. It is an age-old message, but a haunting one for workers who wish to prosper in today’s live-or-die economy: “There has to be a payoff here.”

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New World of Work

The U.S. economy is always a work in progress, reinventing itself in response to innovation, technology, population makeup, popular taste, government policy and conditions throughout the world. Through it all, Americans have had faith that their system offers most people the chance for a better life.

But a recent convergence of forces has fueled a sense that the old rules are changing and that time-honored expectations may no longer be valid. A quick look at some of the differences between the old economy and the new:

OLD

Old: Muscle power in great demand. Wealth was created by producing basic commodities such as steel, autos, coal and farm products.

Old: Less competitive. Many firms and industries were able to continue inefficient activities and pay loyal employees more than they might command in the labor market.

Old: Rewards were doled out to employees more evenhandedly. The pay gap between workers at the top and bottom of the ladder was narrower, and workers with limited education could earn a decent living.

Old: Predictable. Jobs were more secure, employers more paternalistic. A reliable worker might labor a lifetime with the same employer, often performing familiar tasks in a clear-cut organizational framework.

Old: Bureaucratic. Firms maintained fatter bureaucracies, with more employees in administrative roles not directly linked to the bottom line.

NEW

New: Brain-power-driven. Wealth is increasingly created by producing ideas. Educated workers are valued more than ever. The premium for muscle is disappearing.

New: Highly competitive. Deregulation and global trade have wiped out havens for firms and workers. Workers’ value is appraised more carefully than in the past. Jobs unrelated to the bottom line are in jeopardy.

New: Rising inequality. People whose skills are in demand enjoy a growing advantage over everyone else. The gap between high-paid workers and their lower-paid counterparts has been growing.

New: Turbulent. Jobs are less secure for white-collar workers and employers are less protective. Workers may expect to change jobs and employers periodically. Up-to-date skills create the greatest job security.

New: Flexible. Middle-management jobs are being slashed. More responsibilities are pushed to lower levels. There is greater emphasis on teamwork and flexible job descriptions.

--JONATHAN PETERSON