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The New York Times, September 2, 2004
ON this Labor Day, it is worth remembering how widely it was once
argued that America's new economy would produce more democratic workplaces
that depended on the advancing skills of workers. Old assembly-line
mass production was dead, hierarchical management was a dinosaur,
and the nation's productivity would be raised rapidly through the
creation of interesting new jobs at higher pay and benefits.
But the new economy, it appears, can cut two ways. New technologies
can be used to create good jobs, but they can also be used to create
stultifying and poorly paid ones. In fact, the latter possibility,
more than outsourcing or globalization, may account for why the nation's
productivity has been rising recently while real wages are stagnating
and job creation is well behind the pace of past recoveries.
To the historian Nelson Lichtenstein, who teaches at the University
of California, Santa Barbara, one way to think about how the economy
has changed is that Wal-Mart Stores, a services company, is the classic
"business template" of the contemporary economy.
It is the nation's largest company, representing 2.3 percent of the
gross domestic product and employing 1.5 million workers. Its prowess
and buying power are breathtaking: it is the largest trucker in the
nation, the third-largest pharmacy, one of the nation's largest grocers,
and its overall sales are greater than those of Target, Sears, Kmart,
J. C. Penney, Safeway and Kroger combined. Microsoft and Intel sales
are a tenth as large.
Two researchers calculate that the average Wal-Mart
wage for all of California is 20 to 30 percent below the average
wage paid by retailers with 1,000 or more workers.
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Moreover, it is a remarkably innovative exploiter of the latest technologies,
enabling it to run its huge retail network highly productively, and
providing its 20 million or so daily customers both low prices and
a wide variety of products. The economists Barry Bosworth and Jack
E. Triplett of the Brookings Institution find in a new book, "Productivity
in the U.S. Services Sector" (Brookings Institution Press), that
retailing in general has contributed substantially to the nation's
productivity boom since the mid-1990's. And Wal-Mart is the industry
leader.
By contrast, Mr. Lichtenstein says, in the 1950's, General Motors
was clearly the nation's business template. G.M. was the largest company
in America, its revenues making up 3 percent of G.D.P. And G.M. was
highly productive, meaning high output per hour of work, just as Wal-Mart
is now.
But here is the critical difference. The manufacturing company paid
high and rising wages, setting a pattern for the rest of the nation.
Unlike G.M., Wal-Mart is not producing high-paying jobs, even by the
standards of the retailing industry. Critics are compiling evidence
that Wal-Mart's success, while entrenched in the brilliant management
of new technologies, is dependent on low labor costs. And the low-wage
business model is setting a pattern for others.
As James Hoopes, a professor of business ethics at Babson College,
puts it, the new technologies enable Wal-Mart to manage its labor
from the top down in ways that Frederick Winslow Taylor, the classic
managerial efficiency expert of the first mass-production era, could
only dream about. Just as it closely manages its inventory and purchases,
Wal-Mart's central management deploys its employees and minimizes
their hours.
Mr. Hoopes says that because it does not work face to face with employees,
top management may not even fully understand what is going on. But
academic researchers interviewing Wal-Mart employees find frequent
complaints about stress and overwork and little respect for personal
needs. And a recent gender-discrimination class-action suit has attracted
wide attention.
High technology, critics say, also allows companies like Wal-Mart
to juggle worker schedules so adeptly that they can make efficient
use of part-time help. So part of Wal-Mart's success results from
hiring a high proportion of temporary and part-time workers from the
ample supply of students, retirees and working spouses.
A new study by Arindrajit Dube and Ken Jacobs of the University of
California, Berkeley, has produced clear evidence of Wal-Mart's comparatively
low wages. The researchers calculate that in the San Francisco Bay
Area, the company's average wage, about $11 an hour, is roughly 30
percent below what unionized workers get in local grocery chains.
They also find that the average Wal-Mart wage for all of California
is 20 to 30 percent below the average wage paid by retailers with
1,000 or more workers. Indeed, annual turnover is high at Wal-Mart,
averaging some 46 percent nationwide. Costco averages only 24 percent,
though Wal-Mart counters that its turnover is lower than the average
for all American retailers. Wal-Mart also argues that the Berkeley
study was done by researchers who are advised and sometimes financed
by organized labor. But this columnist could find no bias with their
methodology. Further, Wal-Mart's health care benefits have also come
under fire.
But the issue goes well beyond Wal-Mart. A recent book by Simon Head,
"The New Ruthless Economy" (Oxford, 2003), finds a tightening
supervision of labor in other industries that are technology-intensive.
Ubiquitous call centers are Mr. Head's favorite examples, but he argues
that the health care industry is going down a similar path. He even
finds that the widely praised innovations of the Japanese automakers
in the 1970's and 1980's had more to do with ever tighter control
of labor tasks, reminiscent of Frederick Taylor, than with any highly
promoted cooperation among workers.
Whether Mr. Head is ultimately right, the new economy is clearly not
the one-way street it was once heralded to be. "There has been
a sort of wishful thinking that technology will create democratic
workplaces," Mr. Hoopes of Babson said. "To some degree,
where skills are short and demand is high, that is happening. But
for unskilled and semi-skilled workers, people can be more closely
supervised, lose freedom and be stuck in low-paying jobs."
Just as at the turn of the last century, most Wal-Mart critics say
a crucial way to improve conditions is to change laws to make labor
unions easier to organize. Mr. Lichtenstein says a substantial raise
in the minimum wage – back to its 1980 level, before inflation
eroded it – would have still more impact. This sounds like 19th-century
Progressivism all over again. Perhaps it is sometimes true that the
more things change, the more they remain the same.
_____________________________
Jeff Madrick is the editor of Challenge Magazine, and he teaches
at Cooper Union and New School University. His most recent book is
"Why Economies Grow'' (Basic Books/Century Foundation). E-mail:
challenge@mesharpe.com.
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