A Changing Labor Force

PAUL W. BOLTZ

September 06, 1993|By PAUL W. BOLTZ

The essential point to grasp is that in dealing with capitalism we are dealing with an evolutionary process. --Joseph A. Schumpeter, ''Capitalism, Socialism, and Democracy.'' Payroll employment in the United States has climbed by well over 1 million so far this year, and yet scarcely a day passes without a news report of vast layoffs at some company or other. We are barraged with reports of defense-industry layoffs, cutbacks at giant computer firms, staff reductions at major retailers; even layoffs at foreign firms like Daimler Benz now merit national news time.

Positive news on the labor front is rare, except for an occasional piece about a recall of workers, and even that provides the reader or listener with the unhappy reminder that the workers had, of course, been idle.

As the American economist Joseph A. Schumpeter devoted much of his writings to explaining, the inescapable essence of capitalism is that it evolves. This means that individuals, firms, industries, sometimes entire countries must adapt continually to changes in market and technology.

In our era, some of the changes have been of such heroic size and intensity that it is easy to forget the way the world used to be. In 1960, there were only a handful of computer programmers and operators in the United States, mostly working in scientific settings in academia and industry. By 1991, almost 1.3 million people worked as programmers and computer operators, and another 900,000 people were described as ''mathematical and computer scientists'' in the Bureau of the Census report on employment.

Taking a longer view, the change in the composition of the American work force has been nothing short of staggering. In 1900, more than one-third of all American workers were engaged in agriculture. By 1991, farmers and farm managers had dropped to 2 percent of the work force. At the turn of the century there were hundreds of thousands of sawyers and blacksmiths, and no less than 1 out of every 20 American workers was a servant. No doubt many of their descendants are among the new ranks of computer scientists, since sawyers, blacksmiths and servants have largely disappeared from the American scene.

While a detached historical review of the dynamic of capitalism shows that progress toward higher standards of living has demanded radical changes in the labor force, the workers experiencing the changes typically revile and condemn the dislocations. It is pleasant to contemplate that decades ago millions of workers were released from back-breaking, dawn-to-dusk agriculture work to pursue longer educations leading to occupations that provide far higher standards of living.

But it is not pleasant to consider wrenching changes at Sears, IBM or GM that lead to the layoffs of tens of thousands of workers. It is not pleasant to see thousands of manufacturing jobs evaporate if the affected workers are lacking the skills, flexibility or will to prosper in a highly technological environment. Consequently, no news report will ever begin with the exciting news that thousands of workers were just forced to take the opportunity of a lifetime by being pushed out of a shrinking firm or industry to pursue better opportunities elsewhere.

But this does happen, and we should be thankful it happens nonstop in a dynamic, market economy. IBM's troubles are matched by stunning successes elsewhere in the computer industry. While Sears earned countless headlines by cutting 50,000 employees, has any headline ever noted that Wal-Mart hired well over a quarter of million new workers in the late '80s and early '90s?

It is sometimes said that where there are no options, there are no problems. In the case of the evolution of capitalism, there is no sensible alternative to the changes we see daily. Does anyone seriously desire that the labor force return to the days when 1 in 20 Americans worked as a servant? How about 1960 when there was almost no computer industry to speak of?

Stagnation is the only alternative to what Joseph Schumpeter called the ''creative destruction'' that occurs as capitalist economies relentlessly reinvent themselves. Creative destruction means that it would be possible to begin all news reports with an announcement of layoffs somewhere in the U.S. economy. It would equally legitimate to begin every news report with an announcement of hirings instead.

Paul W. Boltz is a vice president and financial economist for T. Rowe Price Associates.

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