A bold program to prevent a one-term Clinton presidency

Robert Kuttner

May 17, 1993|By Robert Kuttner

PRESIDENT Clinton and his labor secretary, Robert Reich, propose to use worker training to produce more good jobs at better wages. In addition, Mr. Clinton and Mr. Reich have named a commission on labor law reform as well as a new assistant secretary of labor responsible for workplace collaboration and innovation. All this is intended to make workers and the workplace more productive.

This agenda is fine as far as it goes. We surely need better trained workers and more collaboration between the employee and the boss. The problem, however, is that this agenda by itself will not restore high growth, full employment, or rising wages, unless the right macroeconomic policies are in place, too.

The economy today is mired in a long-term condition of slow growth. Industrial productivity is actually rising again, as companies invest in smarter machinery and make do with fewer human workers.

Productivity is a good thing. Over time, rising productivity is what makes us a richer society. But if productivity increases during a period of slow growth, the human workers displaced by smarter machines don't find jobs elsewhere. Idle people then lack the incomes to buy products -- and the economic machine stalls despite the higher productivity.

That is surely our economic condition today: The productivity statistics are heartening, but the growth statistics are not. After a robust final quarter of 1992, the economy grew at a paltry 1.8 percent annual rate in the first quarter of 1993. The unemployment rate seems stuck around 7 percent.

Even worse, not enough good jobs are being generated. The fastest growing sector of the economy is temporary and part-time jobs. In a slack job market, the higher productivity does not translate into higher wages, since there are plenty of idle workers who will take available jobs at relatively low pay.

In such an economy, improving the education and training of workers could actually backfire. There are already millions of college-educated Americans in the work force doing jobs that do not require a college degree.

Simply giving workers increased skills does not cause high-skill jobs to materialize. It's necessary to address both sides of the equation -- the jobs that employers offer as well as the skills that workers supply.

Indeed, during the era of high growth and rapidly rising living standards between 1942 and 1973, most factory workers lacked even a high school diploma. Yet wages and productivity were steadily rising nonetheless because relatively fast growth and tight labor markets meant that wages rose roughly in tandem with rising productivity, generating further growth.

What to do?

A great many fiscal conservatives continue to think that the deficit is the main problem. But reducing the deficit at a faster rate would only depress demand and slow economic growth further, leading to increased unemployment. Instead, we need the following package of complementary strategies:

1. Investment-led growth. At least $100 billion of public investment is needed to return the economy to a high growth path. President Clinton's $16 billion public investment package went down to defeat, in part because it hardly seemed worth the fuss.

Historically, wars are the most reliable source of economic stimulus. In wartime, high rates of economic growth are generated as a by-product. But public works can have similar effect in peacetime.

2. Labor law reform. Unions are the most reliable constituency for high-wage, high-skill jobs and a macroeconomic policy of full employment. But the legal machinery guaranteeing workers the right to organize has become rusty. Today, employers fire pro-union workers and replace strikers, despite supposed protections of the Wagner Act.

Moreover, today's unions, after nearly two decades of being pummeled, are in a mood to support workplace collaboration. Public policy needs to help the labor movement reinvent itself.

3. Better workers linked to better jobs. Mr. Reich's challenge is to ensure that better trained workers rendezvous with better jobs. Employers use workers productively when workers are scarce. But that strategy requires a context of high growth and full employment -- which is why item 3 logically depends on items 1 and 2.

Of course, the strategy I've described presents a very difficult politics. Unlike during a depression or a war, there is not the feeling today of a national economic crisis, but rather the sense of a slow economic bleed.

At some point, the Clinton administration will recognize that slow growth and static living standards spell a one-term presidency. Unless President Clinton fights harder for a much bolder program, the midterm elections in 1994 will be a referendum on economic gridlock. The Republicans would then pick up seats in Congress, virtually guaranteeing political gridlock and stagnation for the remainder of his short presidency.

The economic tools are there to restore growth. What's required is more political imagination and leadership.

Robert Kuttner writes a syndicated column on economic matters.

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