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English draft version of the article “Dringend gebraucht: Neue Initiativen für eine globale Ar-beits- und Beschäftigungspolitik”, published in: WSI-Mitteilungen 10/2002, vol. 55, p.p. 555-565

Urgently needed: new initiatives towards Global Work and Em-ployment Policy1

Thomas A. Kochan, Co-Director of the MIT Institute for Work and Employment Research and MIT Workplace Center

The consequence of a lack of unified labour and employment policy is the postpone-ment of the renewal of political regulation and labour market institutions which aim at making adaptations to the changed aspects of work and labour force. The fact that re-forms have been neglected contributes to the unacceptable variance between income and chances for the future which have become characteristic of American and interna-tional labour markets. For the fi rst time in many years American employees are prepared to support a new way which is both productive and also contributes to a fairer distribution of economic profi t, while at the same time giving the work force the necessary means to support their fami-lies and guarantee their long-term security. This is represented by a comprehensive la-bour and employment policy strategy based on a three pillar system: labour market pol-icy for working families, policies and institutions for economy based on human capital and knowledge, and policies and institutions aimed at global economic development and security. None of these design concepts can, as yet, be found on any current politi-cal agenda, but nevertheless, such a „shadow catalogue“ of proposals for active labour and employment policy is indispensable for the future of the USA in terms of social pol-icy.

1 Prepared for presentation at the Third Regional Congress of the Americas, International Industrial Relations As-sociation, Toronto, Canada, June 25, 2002. Support for this work was provided by grants from the Alfred P. Sloan, Rockefeller, and Ford Foundations, and by the Cambridge-MIT Initiative. The views expressed here are solely those of the author.

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1. Introduction America has no tradition of a shadow government. It is time to change this, starting with work

and employment policy. Neither Americans, nor the rest of the world, today or in the future, can

be secure and prosperous unless we fill the void in leadership and policy making on issues that

affect workers and their families at home and abroad. This Administration has demonstrated a

total lack of interest and leadership in these issues.

It has also chosen to ignore a key lesson of history. In times of past international crisis, presi-

dents such as Franklin Roosevelt rallied business, labor, and other interest groups to work to-

gether to address the critical issues that, if left unattended, would eventually erode the national

unity and support from the world community needed to sustain the war effort (Taylor, 1948).

President Bush chose to go it alone in responding to the terrorist attacks of September 11,

2001. History suggests that this will eventually produce a political backlash. At some point

Americans will demand attention be given to domestic issues. And, of more ominous concern,

a similar and perhaps more violent backlash is likely from those in the developing world who

see the U.S. as pursuing only its narrow concerns for security against terrorists rather than act-

ing as a global leader in the quest for peace, shared economic and human development, and

improved employment and living standards.

The absence of a coherent labor and employment policy once again puts off what our genera-

tion of professionals will be held accountable for by those who follow us, namely, the task up

updating public policies and labor market institution to catch up with changes in the nature of

work and the workforce. The failure to do so contributes to the intolerable gaps in income and

opportunity that now characterize both domestic and international labor markets and societies.

We also put off the task of building a 21st century knowledge-based workforce, work systems,

and organizations that are essential to thriving in today’s economy. And, we risk building the

next generation of extremists determined to strike back the U.S. for pursuing terrorists in their

midst while ignoring the root causes of Anti-American sentiments.

The time is right to address these issues for another reason. For the first time in many years

American workers are ready to support a new approach, one that is both productive and fair in

the distribution of its economic returns and that provides them the tools needed to take care of

their families and provide for their long run security. Consider, for example the following survey

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results from Business Week, collected at the end of 1999, after nearly eight years of a booming

economy:

• 75 percent of Americans believed the benefits of the “new economy” were un-

evenly distributed;

• 69 percent said business was doing a poor job of raising living standards,

• 61 percent said globalization was good for U.S. companies and consumers, and

developing countries. But only 46 percent saw globalization as creating jobs in the U.S.

• Only 34 percent agreed the booming economy was increasing their incomes or

enhancing their job security.

• Only half (53 percent) saw the boom as making their lives better and three

fourths felt the benefits of the boom were not be shared equitably!

Then, came the bursting of the dot.com bubble, September 11th, and the corporate and finan-

cial scandals of, among others, Enron and Anderson, Tyco, Polaroid, and Merrill Lynch. An-

other Business Week/Harris Poll reported that 70% of the public believes there are many more

companies with practices similar to those that led to the fall of Enron. Still another recent poll

found more than three fourths of voters wanting the government to increase minimum wages,

provide health insurance for laid off workers, extend unemployment insurance benefits, and

increase support for women moving from welfare to work. Confidence in business has col-

lapsed similar to the effect of the collapse of confidence experienced at the Great Depression

replaced the booming (“roaring” 1920s).

These sample numbers and ample other data suggest that the American public is ready and

eager for policies that reflect their realities at work and that give them the tools and flexibility to

regain control over their jobs, careers, and economic destiny.

How to do this? My colleagues and I have outlined our specific blueprint for how to fill the void

in American employment policy in two recent publications (Osterman, Kochan, Locke, and

Piore, 2001; Bailyn, Kochan, and Drago, 2001). These were both written with the pre Septem-

ber 11th world in mind. I believe our ideas now take on an added degree of urgency and, there-

fore, offer a summary and updated perspective on what is needed.

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Contrary to the go it alone approach of the current Administration, we see the need for busi-

ness, labor, family, community, and government leaders to work together to update our policies

and practices to reflect the modern workforce and economy. Our approach is designed to up-

date policies in a way that builds on and complements what the market, leading employers, and

leading unions are already doing. Rather than view the national government as a big brother

ready to impose a one-size-shoe fits all type of regulation, it sees government as a partner, and

a catalyst for change focused on empowering employees and employers on the front lines to

solve their problems and fashion flexible, efficient, and equitable policies fitted to their particular

circumstances. Just as we have successfully used states as laboratories to test ideas for new

social welfare and labor market policies in the past, we call for experimentation at local and

state levels. We urge a policy agenda that speaks to the full labor force—from the lowest paid

entry level worker, to professional and managerial employees, and includes those in standard

and nonstandard or so called contingent work arrangements. And, we see the need to build a

new generation of labor market institutions starting with the next generation of unions, not nec-

essarily in the mirror image of the 20th century industrial unions, but as networking and coalition

building agents capable of helping workers navigate and prosper in the labor markets and or-

ganizations of the 21st century. Other various non-government organizations (NGOs) at home

and abroad also deserve our attention as they work to address the needs of families, youth,

and other groups in their communities and societies. Finally, we need to join a debate that is

long overdue but that challenges powerful and deeply engrained interests and ideologies in

America. We need to ask what change in the role of corporations are best suited to building a

knowledge based economy and protecting society from the excesses of corporate power that

are now being laid bare by recent scandals.

I will summarize our ideas by focusing on the three pillars of a coherent strategy: (1) Labor

Market Policies for Working Families, (2) Policies and Institutions for Human Capital and

Knowledge Based Economy, and (3) Policies and Institutions for Global Economic Develop-

ment and Security.

2. Labor Market Policies for Working Families Why start by focusing directly on the needs of working families? The answer is simple. A new

approach is needed to break the nearly quarter century deadlock in American labor policy that

results every time the issue is framed in a way that pits business against labor. As long as the

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policies governing work are viewed as the province of interest group politics between these two

groups, there is little hope for any breakthrough. A new approach is needed, one that brings

the voice of the American workforce as articulated by the survey data above more directly into

the policy making process. Given the nature of today’s workforce, this means shifting from a

focus on individual workers to one that addresses the needs of working families. Why? Again

the answer is simple. Today more than three fourths of the workforce is drawn from families

where either both parents are in the paid labor force or there is only one parent to do the work

of earning a living and attending to family and personal responsibilities. More household hours

are devoted to paid employment today than any time since our labor and employment laws

were enacted. Decisions about when, where, and how much to work are made as part of

these family units and these decisions in turn affect the quality of family and community life,

perhaps more today than ever before. Work and family, therefore, need to be seen as highly

interdependent and build public policies need to start from this perspective. A starting point

should be to provide working families with the resources and time needed to integrate their

work and family responsibilities by providing a flexible form of paid family leave and by finding a

flexible way to return to the long term trend of reducing hours as the workforce and economy

become more productive.

2.1 Paid Leave and Family Care The Family and Medical Leave Act (FMLA) is the first law to provide job protected leave for

family care, but it covers only about 55 percent of today’s workforce. And because it is unpaid,

it is of little or no value to families in the lower portion of the income distribution. These are the

same families that are more likely to lack employer provided paid leaves for vacation, sickness,

or family emergencies, and that lack the flexibility and personal control over their work sched-

ules to take time off to attend to family responsibilities (Heyman, 2001). American families

need access to a universal paid leave policy to meet different needs encountered at different

stages in their personal and family life cycles.

But, in fashioning a new paid leave policy we need to build on the base of practices already in

place in leading companies and collective bargaining agreements. One way to do this would be

to establish minimum standards for paid leave while allowing employers and employees con-

siderable flexibility in how to integrate this leave with existing policies and practices. For ex-

ample, individuals and employers could be encouraged to set up flexible time accounts analo-

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gous to 401k savings plans or individual retirement accounts. These accounts could be (1)

flexible, so that they could be used for any family care needs; (2) accruable to the individual so

that unused days saved in one year carry over into the future; (3) portable, so that the dollar

equivalents of unused leave move with an employer across job changes, and (4) contributory,

so that individuals could choose to allocate some portion of current vacation or sick leave to

this purpose in the current period or match employer contributions to their accounts with pre-tax

salary deductions. To launch this approach and test different models for implementing these

principles, Congress should authorize states to experiment with alternative approaches and

financing arrangements for meeting the minimum standard consistent with the criteria outlined

above.

2.2 Reduced Hours and Flexibility The historic trend of reducing hours of work in tandem with economic growth has been re-

versed in recent decades. Americans not only now work more hours than their counterparts

around the world. Many workers, and especially parents, also experience a gap between the

hours they prefer to work and their actual hours on the job. Working families and employers

need more options for working reduced hours while simultaneously meeting the 24 by 7 service

expectations of their customers.

Prior efforts to address this issue have bogged down over how to introduce such flexibility.

Employers want to encourage more choice over whether to use compensatory time off in lieu of

overtime payments. Worker and family representatives fear this will both lead to a step back-

ward by increasing hours beyond the current 40 hour standard and will put control of hours in

the hands of employers rather than workers. The obvious solution to this dilemma is to design

a policy that ensures employees have an independent and meaningful choice over whether to

allow flexibility in scheduling and use of overtime or compensatory time.

2.3 Work-Family Councils & Summit To bring the voices of workers, families, employers into the policy making process, we need a

new form of local direct democracy that engages these groups in the applying, testing, learning,

and adapting these policies to their local circumstances. We suggest creating a set of broad-

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based state or regional Work-Family Councils to carry out these functions. Members would

come together periodically for a national-level Working Families Summit.

3. Building a Human Capital and Knowledge Based Economy Today there is a growing recognition among politicians, academics, business executives, and

labor leaders alike that human capital and knowledge need to be the key building blocks for

21st century economies and organizations. Moreover, there is considerable evidence that in-

vestments in education, training, and the widespread adoption and diffusion of knowledge

based work systems have positive effects on productivity, the quality of good and services,

human capital development, and worker satisfaction (Ichniowski, Kochan, Levine, Olson, and

Strauss, 1996).

Yet across America we see efforts to adopt knowledge based work systems and to deepen in-

vestments in human capital competing with an alternative model of organizations and the

economy—one that reflects the 20th century view of the workforce and organizations. The 20th

century corporation rose to prominence in an era when finance capital was viewed as the scare

resource and most critical source of competitive advantage. Corporations were viewed primar-

ily or even solely as instruments for returning maximum shareholder value. Labor was viewed

as a cost to be controlled. The knowledge embedded in the workforce was seen as concen-

trated among an elite core of executives and technical experts, leading to a top-down view of

leadership and managerial control and a separation of those who developed new technologies

and strategies from those who were charged with implementing them. Carried to its extreme

form in the booming 1990s, this view produced a very narrow view of where value is created in

organizations. CEOs, financial experts, engineers and other technological specialists capable

of inventing new products and services were critical. These select few were viewed a key

knowledge workers while others were viewed as more expendable. Organizations should

therefore slim down to focus on the core competencies and contract for all other services re-

quired. All workers should be prepared to take responsibility for their own careers, training, and

long-term security.

We are now paying the price for allowing this view of corporations to go too far. Even some of

the staunchest Wall Street icons are recognizing that corporations have to be held accountable

in new ways (Leonhardt, 2002). But so far the real question of whether corporations should

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also be held accountable for returning value to a broader set of stakeholders over the long run

has yet to be joined. It is time to do so. Questioning these very basic assumptions about or-

ganizations helps surface the forces that hold back organizations from realizing the full value

and potential from the human capital and knowledge embedded in the workforce.

In a paper prepared for discussion at the MIT Sloan School’s 50th Anniversary Convocation,

several colleagues and I contrasted these 20th century organizational assumptions with ones

capable of realizing the vision of a human capital and knowledge based organization (Kochan,

Orlikowski, and Cutcher-Gershenfeld, 2002). This view starts by seeing all workers and the

knowledge they bring to their jobs as potential assets that need to be organized into knowledge

based work systems. Value from technology comes from both invention and use and therefore

human inputs and organizational practices that “give wisdom to the machines” need to be inte-

grated with the development and applications of technologies to achieve maximum value.

Leadership is viewed as a distributed process involving front line and middle level employees

working together in teams as well as the CEO and other high level executives. And since

workers are investing and putting at risk some of their own human capital, they have a stake in

the long run sustainability of the organization and therefore a legitimate right to participate in

the governance process and to a fair share of the rewards produced by their collective efforts.

We suffer under no illusions about how difficult it will be to gain support for this view of organi-

zations. There is no guarantee that the knowledge based organizational form and the work

systems and necessary complementarities will be adopted by a given organization much less

become the dominant model within an industry or economy. Moreover, the process of trans-

formation involves groups (managers, investors, employees, unions and professional associa-

tions, and government agencies that regulate employment relations, organizations, and finan-

cial markets with different interests, ideologies and beliefs, and power. The transformation

process itself is a contested terrain and involves negotiations among these different groups.

Thus, it will take a clear strategy and sustained effort to build the employment relationships,

institutions, and public policies to achieve a transformation to a knowledge-based economy.

The building blocks for doing so are briefly outlined below.

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3.1 Human Resource Development Clearly knowledge based work systems, organizations, and economies must be built on a base

of a well-educated workforce. The starting point is the basic education system. The quality of

the human resources in a society or labor force is only as good as the quality and distribution of

basic education of children and young adults, the on-going or life long learning opportunities

and take up of the current workforce, and the labor force participation and utilization of the

population.

Are the basic dimensions of education that are needed for a knowledge-based economy any

different than the traditional fundamentals of reading, writing, and mathematics? Clearly there

are strong returns to education in general, and to advanced technical education in particular.

The ability to work with modern information technologies and to develop and use science are at

least if not more important today than in the past. But, the nature of work is changing in ways

that behavioral skills such as the ability to communicate clearly in verbal and written media, the

ability work effectively in teams, the ability to work with external customers, solve problems,

and negotiate conflicts are equally important. Given the global and multi-cultural nature of to-

day’s labor force, the ability to work effectively in diverse teams and work settings is especially

important. Thus, educational curricula need to reflect this mix of technical, analytic, and be-

havioral skills required to support a modern economy.

The educational models found in most countries were developed at a time when industry was

moving to industrial production. Discipline, standardization, and reliability were among key

workforce requirements. Not surprisingly, educational models mirrored these principles by

adopting standardized curricula and emphasizing tight discipline, individual achievement, learn-

ing by lecture and memorization of facts, and lock step advancement through grades at speci-

fied, uniform time intervals. Building the skills demanded in 21st century knowledge-based or-

ganizations requires a fundamentally different approach, one that builds teamwork into early

educational experiences and encourage students to do projects that allow them to express their

creativity and to present their work to each other so that they develop the work styles and

communications’ skills valued by the modern economy.

The need to rethink the way education is delivered is not limited to the time before young peo-

ple enter the labor force. A clear model of adult education is needed to support life long learn-

ing. Adult learning models recognize that adults learn best when educational efforts are situ-

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ated in and able to be applied directly in their work environments. Moreover, adults learn best

from discussion rather than from abstract lectures since this allows them to relate the concepts

and information being presented to their daily experiences and to compare these to others in-

volved in the discussion. This type of learning is facilitated and can be reinforced and contin-

ued over time if the process builds learning communities or communities of practice in which

individuals can draw on members of their networks to share knowledge when confronted with

problems or common experiences. Within groups or teams, both explicit and tacit knowledge

and information can be shared or built up over time (Cutcher-Gershenfeld, et al, 1998). Tacit

knowledge is shared when group members can predict each other’s behavior and use it to con-

tribute to task performance without direct communication such as when members of a soccer

or basketball team execute a play successfully by anticipating what each other will do, without

verbal communications or even seeing the other team members’ movements. Strategies for

achieving life-long learning, therefore, need to attend to these adult learning design principles.

The availability of information technology offers another option for updating basic and university

education by linking through distance learning sources of information and teachers who other-

wise were far beyond the exposure limits to students. These innovations provide fertile experi-

ential opportunities to learn skills such as the ability to access information and work in globally

dispersed teams, a feature now common in industries and organizations that have operations

spread across the globe. Thus, we are in a period of significant experimentation with new ap-

proaches to educational reform and innovations that span from basic to continuing education

and that take place in shared or virtual space. Increasing the amount of education and its qual-

ity and overcoming disparities in exposure to state of the art educational opportunities are criti-

cal starting points for transforming the process of learning from one geared to meet the re-

quirements of the factory system to one better suited to the needs of a knowledge-creativity

based economy.

To achieve widespread life-long learning requires agreement on what skills are needed and

some standardization of job requirements and training curricula so that skills acquired are

transferable across firms and so that the costs of investments in training to any individual em-

ployee or firm are reduced. Moreover, there must be some means of spreading the costs of

training across industry so that the problems of poaching skilled workers trained by one em-

ployer do not lead to an overall under-investment in training (Kochan and Osterman, 1994).

Countries have tried a variety of approaches to achieve this objective, with mixed success.

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Finding a workable mix of incentives and institutional arrangements to support widespread

sharing of the costs of and access to continuous training and education of adults remains a ma-

jor challenge for countries that aspire to be knowledge based economies.

Human resource development does not take place in an institutional vacuum. Modern labor

relations and employment policies and institutions must support it. I turn next to a discussion of

the challenges facing countries as they update these components of their employment system

to support a knowledge based economy.

3.2 Next Generation Unions: A Network View Throughout the world unions are declining. In the U.S. unions now represent less than 10 per-

cent of the private sector labor force, about the same percentage as was the case for union

representation just prior to the Great Depression. So once again we appear to be at an historic

point where serious questions have to be asked about whether or not labor organizations as we

have known them in the 20th century will survive and be important players in 21st century labor

markets. History urges us to not be too linear in thinking about the rise and decline of unions or

of the roles they play in employment relationships, labor markets, or overall economies. Indeed,

rebuilding unions and labor management relations in the mirror image of the past would do little

to foster the diffusion of knowledge based work systems. Thus the question of how to encour-

age the forms of unions and labor-management relations that support the adoption and utiliza-

tion of knowledge work is a critical policy question.

My colleagues and I have proposed a view of unions as life-long networking agents that pro-

vide the full range of labor market and employment services to workers from the time they enter

the labor force (or even before) to retirement (and possibly beyond) (Osterman, Kochan, Locke,

and Piore, 2001). Unions (or professional associations) would provide education, training, and

labor market information and counseling to young people as they move from school to work at

the beginning of their careers, represent workers individually and/or collectively at their place(s)

of employment, and retain the individual’s membership during periods of unemployment or fur-

ther training as they move between jobs over the course of their career. In this way unions

would become significant suppliers of well educated and trained workers to employers and use

the combination of individual labor market power and more traditional control over the supply of

labor and the norms and expectations workers and professionals bring to their jobs to cham-

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pion the transformation to a knowledge based economy and to ensure workers share equitably

in its benefits. This is not some abstract idyllic vision of the role unions and professional asso-

ciations could play. It is only a somewhat modified view of what some individual craft, occupa-

tional, and professional unions and associations already do. What is different is the continuity

of membership, the call for representation even in the absence of a collective bargaining agree-

ment, and a strategic view that sees worker bargaining power (individually and collectively) as

stemming from their human capital and the knowledge they can deliver to an organization.

It is not necessary for all employees to be represented by unions or associations. Indeed a

healthy competition between union and non-union systems may be optimal to achieve a rea-

sonable balance of power and both to discipline non-union firms and to stimulate innovation

through the threat effects of unionization. Clearly, however, this type of positive innovative cy-

cle is difficult if not impossible to achieve with the low and declining levels of unionization and

representation that characterizes the American economy and most other countries around the

world today. A declining labor movement tends to become more conservative and less able to

promote or participate constructively in the types of innovations called for to achieve a knowl-

edge based employment relationship and economy. Thus, a major policy challenge, as well as

a major strategic challenge for labor movements, lies in building these types of next generation

unions. A closely related policy challenge is building labor-management relationships that

promote, complement, and support knowledge based work systems.

3.3 Labor Management Relations In our previous research we have also argued that the models of labor-management that are

best suited to supporting a knowledge based strategy and work system are ones that engage

workers directly in problem solving, continuous improvement, and cooperation with peers and

supervisors, negotiate employment terms that reinforce these workplace practices, and share

information and govern the organization in ways that reinforce and sustain trust and use of

knowledge throughout the organization over time (Kochan, Katz, and McKersie, 1986). These

broad principles can be achieved in a variety of ways, and with different bargaining structures

at the enterprise, regional or industry levels.

Most countries recognize, at least in words if not in actions, the value of building strong net-

works of respect or partnerships between labor and management at the company and industry

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level and among labor, business, and government at the national level. Sometimes these tri-

partite forums are given important responsibilities for wage setting as in the case of the Eco-

nomic and Social Council in Ireland which has successfully negotiated four rounds of incomes

policy that has supported the remarkable growth rates of that economy from the early 1980s to

the present. In Singapore tripartite interactions occur on formal and informal levels involving a

variety of wage and non-wage issues. At the firm level, in the U.S. labor management partner-

ships sometime take the form of highly visible examples such as the comprehensive model at

the Saturn Corporation (Rubinstein and Kochan, 2001) or that has been put in place more re-

cently between the Kaiser Permanente Health System and the coalition of unions that repre-

sent is workers. But these are only the visible ones. Significant numbers of smaller scale and

more informal partnerships can be found in many other settings.

The biggest common challenge facing partnerships at all these levels is sustainability. Most

partnerships arise out of some perceived and usually real crisis, last as long as the individuals

who championed them remain with their respective unions, firms, or governments, and then

either slowly erode or are abandoned because of shifting priorities or some conflict that occurs

that leads one or other party to walk away from the partnership effort. Yet, like the Phoenix,

they keep coming back and get reinvented. This suggests there is a strong case for a govern-

ment strategy for building labor-management partnerships that operate at different levels of the

economy.

Doing so requires recognition that partnerships are not synonymous with “cooperation.” Labor,

business, and government will continue to bring their own separate and sometimes conflicting

interests and priorities to their partnership initiatives. Partnerships do not eliminate these dif-

ferences; they provide a basis for working on them in a constructive fashion. Second, because

these are representative organizations, it is imperative that partnerships attend to constituency

needs and expectations, and be prepared to manage the internal debates and tensions they

generate. Not all workers or managers accept the value of labor and management working to-

gether. Neither do all political leaders or government officials. These constituency pressures

are often the downfall of partnerships where the participants are perceived to being too coop-

erative at the expense of advocating and negotiating aggressively for the particular priorities

and interests of the constituents. So recognition of the mixed-motive nature of partnership is

essential. Third, the partnerships will only be successful to the extent that those involved have

the necessary expertise, knowledge, and skills to add value in decision-making. That is, they

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need analytical support, data, and education in the particular problems that motivate their for-

mation. Finally, the temporary or limited nature of partnerships should be anticipated. Since

few if any last forever, they might be designed and viewed as only lasting as long as the prob-

lems they were created to address remain critical. But they can be disbanded in a way that

lays a positive foundation for creating new partnerships as needed in the future. Thus, the gov-

ernment’s central role in supporting labor-management partnerships is to create a climate and

infrastructure that supports them as needed and encourages their use where appropriate with-

out promoting them as the exclusive means for addressing employment or labor management

processes.

3.4 Promoting Adoption and Diffusion of Knowledge Based Work Systems Over the past thirty years the federal government has mounted at least three different efforts to

support the adoption and diffusion of knowledge based work systems. None have been sus-

tained long enough to have a significant effect.

The first dates back the formation of a National Center for Productivity and the Quality of Work

in the 1970s. That initiative was very top down oriented. A small group of government and

foundation leaders defined the American problem as having alienated and dissatisfied workers

because workers were not involved in designing their jobs or given a voice in improving the

quality of their work environment. A series of highly visible demonstration projects were initi-

ated in a small number of firms and industries but lack of grass roots business or labor support

led to the end of this effort (Goodman, 1984).

In the 1980s, a group within the Department of Labor encouraged diffusion of best practices

through state of the art business-labor conferences, supported with research on workplace in-

novations. This effort built a significant labor and management constituency, but largely among

those firms and union leaders who already were engaged in transforming their workplace prac-

tices and labor-management relationships. The effort never reached the larger number of tradi-

tional union-management settings or the vast majority of non-union workplaces in America.

The basic problem was that the various Secretaries of Labor in office over this period of time

saw these as low priority efforts as did the Presidents they worked for and the Congresses that

controlled their budgets. So the programs never grew to a scale necessary to have a national

impact.

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The third effort came with the election of Bill Clinton and the creation of an Office of the Ameri-

can Workplace under Labor Secretary Robert Reich. This office was to promote diffusions of

high performance workplace practices and again held a series of high profile conferences,

sought to build support among labor and business, and worked in tandem with a Commission

on the Future of Worker Management Relations created by the Clinton Administration to update

labor law to fit the modern workplace. But this office also never achieved strong labor and

business backing or the financial support from Congress or the Administration needed to get to

a scale required to have a national impact. The shift to a Republican controlled Congress in

1994 doomed this effort as well as any efforts to reform labor law.

Yet despite these failed attempts, the current Bush Administration and Labor Department have

launched a new yet similar effort under the banner of the Office of the 21st Century Workforce.

So far it does not appear to be any more successful than past efforts in building the broad

based constituency and support needed to achieve its objectives.

The U.S. experience is not alone. Australia, for example, launched a large scale and highly

visible “best practices” project in the 1990s similar to the American efforts. It supported this

effort with collection of national survey data and case studies charting the diffusion and effects

of workplace innovations. It met a fate similar to the American counterpart—strong interest

from a select set of firms and unions already engaged in this effort but little penetration beyond

this small circle of the already converted.

While these government led initiatives have not succeeded, a number of foundation supported

industry consortiums have been quite successful in learning about best practices that fit their

setting and building networks to diffuse these practices. From 1989 to the present the Alfred P.

Sloan Foundation has created twelve industry centers at leading universities to promote the

study of the forces that underlie the competitiveness of each industry. They modeled their ap-

proach on an automobile industry project that was already started at MIT. That project brought

together industry and labors leaders from the global auto industry and supported research that

compared the performance of auto plants around the world. The data that were collected and

the findings of this research showed very clearly that the combination of production system fea-

tures of just in time inventory, rapid product development, incremental investments in advanced

technologies, continuous improvement efforts and attention to quality, combined with invest-

15

ments in training, flexible work systems and employee participation produced significant im-

provements in productivity and quality—what was referred to as world class manufacturing

(Krafcik, 1988; MacDuffie and Krafcik, 1992; MacDuffie, 1995). Similar research was then car-

ried out in a number of the other industry centers that the Sloan Foundation created, ranging

from apparel, semiconductors, computers, communications, food processing, construction,

steel, financial services, and others (Ichniowski, Levine, Kochan, Olson, and Strauss, 1996) .

These efforts, supported by hard data that are convincing to those with practical knowledge

and experience in the industry, have had a greater stimulus to diffusion of innovation than any

of the government efforts discussed above.

Several lessons can be drawn from these experiences. First, government cannot push these

ideas from the top down. The ideas must have strong and broad grass roots labor and busi-

ness support and diffusion efforts must be decentralized enough to speak to specific industry

needs and workforce challenges. Second, these efforts need to be supported by clear data

and research that documents the performance benefits derived from workplace transformations

and innovations. The impacts of the industry studies makes this point clear. Third, there needs

to be on-going forums that bring industry representatives and their labor counterparts together

to discuss and learn from these efforts and to build networks through which best practice infor-

mation and peer-to-peer visits and learning flow. Fourth, to be successful efforts to diffuse

workplace innovations must be based on a clear and sustained vision and set of resources that

do not depend on the shift in personalities or leaders within government agencies. This is the

key role for government—to clarify and then sustain its vision and support for efforts to diffuse

knowledge based work systems sufficiently to generate macroeconomic benefits.

Finally, these efforts all have a missing partner that needs to be brought into the picture,

namely the investment community. While there is growing consensus that high performance

work practices have significant productivity and quality benefits and can add to profits if sus-

tained over time, there is very little understanding or acceptance of the value of these human

resource investments and workplace innovations among the key players in the capital markets.

This applies both to domestic and global financial institutions and leaders. Few “industry ana-

lysts” have a sense of the value of these innovations nor do they ask for data on what individual

firms are doing along these lines.

16

4. Support for Global Economic Development and Security Even before September 11th it was clear that future labor and employment policy needed to pay

greater attention the role America is playing in the world. Debates over the World Trade Or-

ganization (WTO), the expansion of trading rights with China and other developing nations, and

the Administration’s response to the crisis in the American steel industry all illustrate the links

between domestic and international policies. It is neither possible nor advisable to try blocking

the gradual growth and importance of international trade. But there is growing evidence that

globalization, in the absence of attention to its human impacts in the U.S. and abroad, will not

automatically produce the widely shared prosperity, increased democracy and labor rights, or

social cohesion its advocates promise. Instead, the longer this impasse remains, the more

globalization will increase inequality and further threaten social cohesion both at home and

abroad. The key to ensuring that globalization contributes to positive, broadly shared results

lies in creating policies and institutions that are capable of promoting these objectives in the

context of expanding global trade. Here we need significant new thinking and experimentation.

The military responses to the terrorist attack now increase the urgency and the scope of what

will be needed. The issues of international security and regional conflicts such as those that

continue to plague the Middle East cannot be divorced from the concerns for the long term

economic development of these regions and the rest of the developing world. Regardless of

the intent of current American policies, the effects of the war against terrorism and the lack of

progress in the Israeli-Palestinian conflict is to risk creating a new generation of Arab and Mus-

lim extremists who see America as self-interested aggressors. I am not suggesting that any-

thing less than a sustained effort to eradicate terrorism is required. But military actions in the

short run, if unaccompanied by an equivalent commitment to promoting economic develop-

ment, human rights, and improved access to education and decent work will at best produce a

short run reprieve from the current generation of terrorists while breeding the antagonism and

extremism that dooms our children to future hostile actions. Nothing short of the equivalent of a

modern day Marshall Plan for developing nations of Africa, the Middle East, Asia, and South

America is needed. For this reason the need to expand trade, worker rights, access to educa-

tion and employment opportunities must be seen as all part of an international labor and inter-

national security policy.

Designing and implementing this type of policy in a way that gains the support of the American

public and key interest groups will require a balanced agenda, one that avoids the perception

17

and the reality of a zero sum relationship between those who may lose and those who gain

jobs as capital and work move across borders.

To do so we need to link expansion of trade, global investment in the developing world in gen-

eral and those regions torn apart by war in particular, and worker rights and welfare in two new

ways. First, we must have an active policy that allows all American workers to gain access to

the new job opportunities created by expanded trade without losing the economic gains and

representation rights achieved in the jobs that are lost. This requires active labor market poli-

cies to promote training, life long learning, mobility and adjustment and labor policies that allow

labor unions to represent and serve high skilled workers in the new economy and to transform

low wage jobs into careers that create the next generation’s middle class. The labor and em-

ployment policy changes and institutional innovations proposed in other parts of this paper are

therefore critical components in America’s trade and global development and security strategy.

Second, we need to experiment with institutions that can support what former World Bank chief

economist Joseph Stiglitz described as “democratic development” (Stiglitz, 2000). He broke

with the “Washington Consensus” by proposing that promoting institutions that will enhance

democracy can produce a “high road” development strategy that gains the macro-economic

benefits from expanded trade and ensures that these benefits produce a gradual improvement

in working conditions and living standards in developing countries. But it will not happen

through macro-economic interventions and policies alone. They must be accompanied by sup-

port for democratic unions, education and child development investments, and the creation of

institutions that are sensitive to different cultures and levels of development that promote and

enforce the fundamental human rights endorsed by the ILO and its participating nations.

There is no single way to build these institutions. Considerable experimentation and learning is

needed here as well as in the domestic arena. The key is to get beyond the rhetorical debate

over whether or not to link trade and labor standards to concrete efforts to figure out how to do

so in ways that support economic development and improved standards of living. Experiments

are needed such as ones undertaken in Brazil and elsewhere that attack the root cause of child

labor by providing financial incentives to keep children in school and financial support to keep

families from falling deeper into poverty (Pastore, 2000) . While this is obviously not the unique

solution to the vexing and complicated problem of child labor, it is an illustration of the type of

experimentation that goes beyond writing language directly or as side letters into trade agree-

18

ments by creating options that are sensitive to the complexities involved in upgrading labor

standards and worker rights in different cultures and in countries at different stages of eco-

nomic and democratic development.

An important part of this strategy will require experimenting with new approaches to building

international institutions capable of addressing and monitoring labor standards in a flexible

fashion. Recent efforts to engage the stakeholders in the garment industry in developing a set

of shared principles for codes of conduct is one example. The various NGOs that are emerging

at home and abroad to monitor and publicize working conditions across the value chains of

firms are further examples of the types of institutional capacity that will be needed. We know

very little about the quality, neutrality, or effectiveness of the range of NGOs that are proposing

to get involved in these efforts, nor how big a role they should or could eventually play in pro-

moting gradual upgrading of employment standards and living conditions in developing coun-

tries (O’Rourke, 2002). But their recent emergence as new actors in the international arena is

a promising development. The U.S. and the global society would be well served by devoting

public resources to their experimental development and evaluation. Otherwise, they are more

likely to remain in the control or designed to serve the interests of firms, or at least be per-

ceived as such by many people, and therefore lack the credibility needed to achieve their ob-

jectives.

America has a precedent to draw on in working to build the international institutions needed to

support labor market and economic development. In years past, the U.S. government agencies

channeled significant funds to labor movements and development agencies as part of its Cold

War efforts to defeat the Communist threat. The contemporary equivalent is to support devel-

opment of emerging democratic institutions that are promoting labor and human rights as part

of a policy to promote expansion of world trade, global development, and international security.

This can be done by working with international agencies such as the IMF, World Bank, and the

ILO as well as more directly with the range of labor, religious, and other NGOs that are spring-

ing up at home and abroad to promote these objectives.

5. Conclusions None of the policies advocated here are on the political agenda in America today. They would

be roundly rejected by the current Administration since it would require accepting the legitimacy

19

of unions and the need to rebuild them in a fashion consistent with the needs of the workforce

and economy of the 21st century. It would require recognizing the need for a labor market pol-

icy built to support the integration of work and family responsibilities. It would require holding

corporations accountable for building sustainable organizations that are governed by and ac-

countable to employees as well as traditional shareholders. And it would require accepting re-

sponsibility for rebuilding economies and societies in regions of the world that are now torn

apart by conflicts of their own making or by American efforts to rid the world of this generation’s

terrorists. Yet all these issues remain festering under the surface and if unattended today will

eventual give shape to terrorist actions and international crises yet to come.

But to date there are no alternative voices calling for action on these issues, domestically, or

internationally. The labor movement remains muted, unable to gain a voice in current national

economic or political discourse. The business community remains silent, satisfied to enjoy the

status quo while confidence in the business community plummets in the wake of the downsiz-

ing and outsourcing of the 1990s, the bursting of the dot com bubble, and the recent corporate

scandals. This then is why it is time to create a new tradition—a shadow set of proposals for a

work and employment policy suited to the needs of today and tomorrow’s workforce, families,

and economies.

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