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Sociology 360 - The Disposable American

Sociology 360 - The Disposable American - CHAPTER SIX...

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Unformatted text preview: CHAPTER SIX Dismantling Job Security, I977 to 1997 There was one more stab at mandating full employment before the nation slid into the age of layoffs. The circumstances seemed to require drastic action. The worst recession since the Great Depression engulfed the country in the mid—rgyos. The unemployment rate reached 9 percent in May r975, nearly double what it had been only twelve months earlier. Stock prices plunged, wiping out a decade’s gains, and the economy cone tracted for two straight years despite a 36 percent increase in government spending to prevent just that from happening. Out of this turmoil came a bill that would guarantee a return to full employment by making the fed“ eral government the employer of last resort—resurrecting a solution than Congress had rejected in 1946. . ' Barely thirty years ago, Congress was debating a proposrtion that seems strikingly radical and utopian today: whether government should provide a job at decent pay for every American who is able to work and wants to do so. The original bill even included the right to sue if thl' promised job was not forthcoming. The arguments dragged on for thn-r years. By then, the recession had ended, prosperity had returned, and a rising inflation rate overshadowed full employment as a mammal issue. The moment was lost, and the law that President Jimmy Carter finally signed—the Full Employment and Balanced Growth Act of 1974:. better known as the Humphrey-Hawkins Act-"turned out to be llfi toothless as its forebear, the Employment Act of 1946. It was “stripped ul its original provisions calling for government [to create] ‘last resort’yule for the unemployed,” the Congressional Quarterly reported at the time The bill’s principal author, Representative Augustus F. Hawkins, .m African American Democrat representing the Watts area of Los Angrlrs. DISMANTLING JOB secumrr,1977 T0199?“ 125 a ghetto bereft of jobs, had argued that full employment would pay for itself. It “will increase the nation’s output and quality of life,” he insisted,- in effect summarizing an axiom in economics known as Okun’s law, which holds that for every percentage—point drop in the unemploy- ment rate, the overall economy grows by 3 percent. (Senator Hubert H. Humphrey, Democrat of Minnesota, sponsored the bill in the Senate.) . Hawlrins’s argument failed to sway his congressional colleagues and a huge potential support for job security—{or a respectable job at decent pay if the private sector did not Furnish enough~was pushed aside. True, the Humphrey-Hawkins Act, in its final form, spoke grandly of full employment. It directed'the administration and the Federal Reserve to reduce the unemployment rate to 4 percent by r983 and keep it there. But it did not say how this should be done. The act also spoke grandly " about inflation, directing the administration and the Fed to reduce the inflation rate to zero by 1988 from the current level of 9 percent in 1978. This the Fed under Paul Volcker and Alan Greenspan diligently tried to do through the manipulation of interest rates, and soon full employment became a casualty of their strategy to control inflation. If too many people . had work, Volcker and Greenspan argued, they would demand raises and that would force employers to raise prices. Inflation would accelerate. So . each time the unemployment rate fell below 5.5 to 6 percent, or threat- ened to do so, the Fed raised interest rates, which inhibited economic ._ growth-and hiring. Not surprisingly, the unemployment rate climbed over the next twenty years to its highest levels since the Depression, enlarging the pool of people seeking work. There were more candidates to choose from, and that reduced the pressure on employers to avoid layoffs and aid on to their workers. . Tight labor markets are a barrier to layoffs and that barrier came ,down. So did other barriers, one after another from the late 1970s to the l‘late rggos, until we finally incorporated layoffs into our expectations and, {in doing so, gave up on the sort of collective solution that Augustus rHawkins had proposed. Each layoff became the victim’s problem, not society’s, or the victim’s fault, and once people shifted to this view, their employers were free to incorporate layoffs into their tactics and opera— ons. They could ignore what Richard Layard, a British economist, escribes as the self-esteem and identity that a stable workplace-wa com— 126 THE DISPOSABLE AMERICAN munal settingwconfers on its employees. Mergers, outsourcing, constant corporate reorganizations in obsessive pursuit of short—term profits, the frequent migration of factories and offices to lower-wage cities and coun— tries, wage stagnation, plant closings, the shrinking or abandonment of entire industries—all these require an acquiescence to layoffs. In hind- sight, after Augustus Hawkins lost his battle, the resistance to layoffs gradually disintegrated and acquiescence arrived. Hawkins believed that job security was beyond any individual’s con— trol, and society therefore should maintain it, doing so mainly through government. Furthermore, when layoffs did have to occur, society should- take some of the stigma and suffering out of them by recognizing an obli- gation to keep people employed. He had incentive for this belief, given the plight of his ghetto constituents. He was convinced that the private sector, on its own, could not generate enough work to achieve full employ— ment at decent pay. As the first African American elected to Congress from California, having taken his seat in 1963 at age fifty-six, he felt that the mid—19705 recession, with its painfiilly high unemployment, offered the right backdrop for action. Government must step in more directly, he said, outlining key provisions of his proposed legislation. It should do so through the creation of a Standby Job Corps, for example, “in which qualified job seekers could be temporarily placed if no suitable (private sector) jobs are available.” Or men and women seeking work could join “local reservoirs of public and private employment projects.” That meant community job creation and public projects, funded by the federal gov- ernment, in hundreds of towns and cities. Through such programs, Con- gress would finally do what it had failed to do in 1946. “We must not replay the drama of events which led to the watering down and lessening” of the 1946 act, Hawkins warned. Senator Humphrey endorsed several of the early drafts and spon— sored the bill in the Senate. But Humphrey was more in the mainstream than Hawkins. He had been Lyndon Johnson’s vice president and he ran for president himself in 1968. He listened more to the criticisms. For one thing, the Hawkins approach went against the prevailing wisdom, born in the 19605 and 19703, that the unemployed lacked the necessary skills or education to land ajob and had themselves to blame for their lack of ini- tiative and accomplishment. Hawkins insisted on taking people as they DISMANTLING JOB SECURITY, 1977 T01997 127 were, giving them jobs first at decent pay and training them on the job if that was necessary. Government would “respond directly to the needs of millions ofAmericanswho have heretofore been excluded from consider- ation and attention,” he said. Employers of low—wage workers protested. They would be squeezed intolerably by rising wages, they insisted, if the government came in as a competitor offering good jobs to all comers. Partly in response, the open— ended guarantee was scaled back; there would be federally funded jobs for everyone, but only until the unemployment rate fell to 4 percent, a national average that included a 6 to 8 percent unemployment rate for African Americans and other vulnerable minority groups. In addition, the goiternment would be careful not to compete with the private sector for workers. The inflation argument also registered with Humphrey, although the Senate heard plenty of testimony that the rising Consumer Price Index in those years was mainly a result of higher prices for fuel oil, housing, and food, and not pressure from wage increases. After 1973 wages no longer rose fast enough for most workers to keep up with inflation. Still, despite this willingness to give ground, Humphrey thought of making Hawkins’s full-employment proposals, or some of them, central to his platform in a run for the presidency in 1976. He saw that as good politics. The unem- ployment rate was still high that election year, although the numbers were beginning to fall as the nation recovered from the recession. . Humphrey did not run; cancer ruled that out. And Jimmy Carter, the Democratic candidate, turned out to be lukewarm to Humphrey— Hawkins, hardly mentioning the bill in his campaign. Carter saw infla— tion as the overriding concern, and Public opinion polls seemed to confirm that view. Once he was elected, the watered—down version that Hawkins feared became inevitable, and there was insuflicient public pres— sure to change that outcome. “You needed much higher unemployment, massive unemployment, to bring out a strong coalition for full employ— ment,” Stanley Moses, an economist at Hunter College in New York, told me years later. Moses had helped to draft early versions of Humphrey— Hawkins, and he wrote speeches for Humphrey in the seventies. A strong coalition had brought the nation civil rights legislation in the sixties and similar public pressure ended the Vietnam War in the early 128 THE DISPOSABLE AMERiCAN seventies. By the late seventies, however, Americans were moving, or being pushed, in a different direction when it came to jobs. Humphrey- Hawkins turned out to be a last, futile salute to fiill employment through collective action. Thereafter, the headwinds were too strong to muster significant support. The oil price shocks, the loss of faith in government after Vietnam, the unsettling phenomenon in the seventies of a rising inflation rate even in a recession, the stiff competition from Japanese and Western European multinationals, a growing budget deficit that inhib- ited public spending, increasingly ineffective unions, the rise of income inequality separating the rich from the poor much more than in the past—all these soured Americans and eroded communal action, either on the streets or through govermnent. Wage stagnation for the bottom 70 percent of the workforce only added to what Carter described in his famous malaise speech in 1979 as a “crisis of the American spirit.” The Depression had taught the value of a collective response during an earlier crisis of the American spirit, and the prosperity after‘Worl'd War 11 reinforced that lesson. The good times had bred in Americans a sense of inclusiveness and equality, and a respect for using government to lift everyone's lot. It was an outlook that prompted Congress to regularly raise the minimum wage, legislate working conditions, impose environ- mental standards, increase Social Security pensions, enact Medicare and Medicaid, subsidize universities, expand public health services—a collec- tive effort to generate opportunity and a reasonable standard of living for as many people as possible. Individualism was kept in check, but as prosperity deteriorated so did respect for collective behavior and for its corollary, Keynesian theory, the reigning view in economics and in public policy from the mid-thirties until the mid—seventies. John Maynard Keynes had civilized neoclassical economic theory, with its emphasis on individualism and its trust in self- regulating markets, by demonstrating that prosperity and fiill employ- ment could often be achieved only when government and the private sector complemented each other. Keynes’s influence now declined. Too much had gone wrong for America to keep faith in the communal responses that Keynes had advocated and that had worked so well. Neoclassical economics came back to life in the new atmosphere, and a crude individualism reasserted itself; that is, the largely mythical, nos— DISMANTLINGJOB SECURITV,1977T01997 129 talgic, and debilitating view that in America, people pulled themselves up by their own endeavors, acting heroically and alone, as Jay Gatsby had in F. Scott Fitzgerald's r925 novel The Great Gatsby or as Howard Roark did in Ayn Rand’s 1943 novel The Fountainhead Both books enjoyed renewed popularity in the eighties and nineties. Taxes and regulations only got in the way, as did unions and job security. Neoclassical economics celebrated this individualism. So did Wall Street and Silicon Valley, which recruited well~educated, self~absorbed men and women who saw themselves as very much in control of their lives and who took as a given that a nation once free of government constraints, or at least constraints on what they wanted to do, would prosper from the unfettered endeavors of millions of energetic, self-sufficient, masterly individuals like themselves. In his. best-selling book The Culture qf‘Narc-z'ssrsm, published in 1979, the historian Christopher Lasch argued that Americans were increasingly fixated on their own grandiosity and their personal goals, forgetting in the process the collective achievements so prominent in the past. “To live for the moment is the prevailing passion—to live for yourself, not for your predecessors or posterity,” Lasch wrete. Or for your neighbors, he might have added. He caught the trend early. Infectious individualism helped immeasurably to put Ronald Reagan into office in 198r. But Jimmy Carter, his Democratic predecessor, pushed it along, too. Carter initiated the deregulation, inherent in individualism, that accelerated in the Republican Reagan years. It was a neoclassical economist, Alfred Kahn of Cornell University, who, as chairman of the Civil Aeronautics Board, became Carter’s chief salesman for airline de- regulation, explaining to the public in his articulate, often humorous fashion how unrestricted competition would bring down passenger fares, multiply services, and make airlines more responsive to passengers. He was right in a way. On the day that Carter signed the Airline Deregula— tion Act of 1978, a line of people representing airline ventures formed at CAB headquarters. Once the bill became law, two thousand dormant air— line routes were doled out on a first—come, first-served basis. What Kahn did not anticipate was the extent of the layoffs to come. In the unregulated, freewheeling competition that he helped bring to life, tens of thousands of airline employees lost their jobs, year after year, as giant carriers like Eastern, Pan American, and Braniff merged with other 130 THE DISPOSABLE AMERICAN airlines or went out of business; new carriers like People Express came and went, or, like Southwest and JetBlue, came and stayed. Their success as discount airlines forced the survivors, particularly American Airlines, United, Northwest, and Delta, to try to remake themselves as lower—cost carriers. But that only perpetuated the layoffs and the pressure on employees to agree to wage concessions, and nearly thirty years after air- line deregulation the upheavals and layofis have not begun to subside. Regulation had created a set of airlines with steady earnings, predictable operations, and supervised growth, all of which was conducive to job security if not to more flights and rapidly falling fares, although fares had fallen during regulation, too. Deregulation in airlines and soon after in trucking, banking, telephones, railroads, and utilities exposed to layoffs the nearly 13 percent of the national workforce employed in these once safe industries. ' Thirteen years later, long gone from government, Kahn had acquired more respect for the destructiveness that came with deregulation. He told me that, caught up in the late 1970s in the promise of unregulated compe- tition, he could not then “appreciate the way in which the forces [of deregulation] began to take on a momentum of their own." He had not anticipated the predatory pricing that occurred, in which big airlines with considerable resources underpriced the small upstarts, like People Express, until most of the People Expresses went under, eliminating the competition and manyjobs. Nor had he understood the determination of the big airlines to re-create the marleet control that regulation had made possiblemthrough the hub airport system, through airline mergers, and through “yield management.” In yield management, computers con- stantly revised fares in advance of each flight, lowering them as necessary to fill more seats. While discount fares got the publicity, yield manage— ment in fact maximized the sale of as many seats as possible at stubbornly high prices. Only in the fall of 1978, on the eve of deregulation, Kahn said, did he begin to sense the potential for airlines to use acquisitions and predatory pricing to eliminate overcapacity and competition, as well as thousands of jobs. Traveling in Europe with his wife, celebrating their thirty-fifth wed- ding anniversary, he 'sat down in Venice and drafted a memo outlining his last—minute concerns. But soon after he returned to Washington, Presi- DISMANTLING jOB SECURlTY,1977 TO1997 131 dent Carter pulled him off the Civil Aeronautics Board, which would be dismantled over the next few years, and put him in charge of fighting inflation as chairman of the Council on Wage and Price Stability, an innocuous job. If he had remained at the CAB, he insisted to me when we met in I991, he would have initiated antitrust actions to curb mergers and predatory pricing. “I never was able to follow up,” Kahn said, a little wistfully. Still, he had no regrets about the role he had played. Regulation had become asso-j ciated in his mind with too many ills that the nation had suffered. “I felt that government regulation was so ridiculous that the moet important thing was to wipe away its encrustations,” Kahn said, “and in the process, I may have been overly enthusiastic about the benefits of free markets.” As regulation gave way, so did another source of resistance to layoffs. Tightly knit communities had formed around the factories and mills that dominated employment in dozens of towns and cities. When plants were shut, some of these communities tried to take them over and preserve the jobs on which the communities depended. By the mid-nineties, however, most ofthis resistance had failed and so had the will to keep trying as the people in the communities lost their incomes, their cohesiveness, and their optimism. The steel industry produced the first mass layoffs .to rivet national attention and the first notable attempt at community ownership to pre- serve jobs. Campbell, Ohio, figured prominently in this endeavor. It is an incorporated city next to Youngstown, whose men were employed at the Campbell Works, a steel mill owned by the Youngstown Sheet 8cTube Company. On September 17, I977, Youngstown Sheet 8cTube announced that the Campbell Works would close and all five thousand workers would lose their jobs, a big layoff by seventies' standards. '- The workers in Campbell and in other nearby towns and cities were in most cases the third generation employed in steelmalting. Their grand— fathers had emigrated from Ireland, Italy, and Poland. They had taken jobs melting, pouring, and shaping steel in the blast filIl'laCCS and mills that were located along a twenty-five—rnile stretch of the Mahoning River just west of the Pennsylvania border——an area known during World War II as America’s Ruhr Valley, home in its heyday to forty thousand Steelworkers. They lived in close-knit communities. People were linked to 132 THE DISPOSABLE AMERICAN one another through unions, churches, bowling leagues, theatrical groups, marriages, and lifelong friendships born in public and parochial Schools and extended through years of working together in the same mills and blast furnaces. They were homeowners and gardeners. High school bas- ketball and football games were big social events, and graduation daywas a ...
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