October, 2001, Vol. 124, No. 10
A successful future
Small business employment
Book reviews from past issues
A successful future
The Future of Success. By Robert Reich. New York, Alfred A. Knopf, 2001, 289 pp. White-Collar Sweatshop: The Deterioration of Work and Its Rewards in Corporate America. By Jill Andresky Fraser. New York, W.W. Norton & Company, 2001, 278 pp.
Over the past decade, and despite a strong economy, there has been a steady increase in the number of books and articles chronicling an increasingly stressful American workplace. Books by both former Labor Secretary Robert Reich and financial journalist Jill Fraser fall into this category as they attempt to document the problem, analyze the issues, and offer solutions to alieviate these stresses. These authors’ premise is that while stock prices may have soared, workers’ economic security has eroded over the past decade. And unless definite actions are undertaken, these trends will continue into the future, continuing to cause difficulties for workers and society in general.
Although pursuing a similar theme, the two books take different approaches to their subject. Robert Reich looks at the subject from the macro level, calling this the age of the "terrific deal" where everything seems cheaper and consumers expect more. Reich says that society has changed and so have work rules. For workers, this means less predictable income, which causes workers to work harder during times when work may be less available. He also discusses a growing wage differential between jobs in high demand and those in low demand, causing workers to pay a greater financial price if they choose not to pursue a highly paid but more stressful job. Finally, workplace changes have increased workers’ need for self-reliance, adding to employee stress. In addition to working harder, they must continually devote some of their energy to promoting and caring for their own careers.
Reich feels that the results of these trends are strains that are evident in the breakdowns of bonds—between employers and employees, in families, and in communities that suffer as people work more and have less time for social activities. Yet, he contends that workers themselves are not blameless in this new society. People are making active choices that result in the trends outlined above. All workers are both consumers and producers in this economy, and he postulates that those same people who expect greater advantages as consumers are subject to greater stresses on their jobs as they attempt to meet consumer demands. Thus, we become both the beneficiaries and victims of our own economy.
Unlike Robert Reich’s book, Jill Fraser approaches her subject by documenting individual worker stories derived from interviews. Focused specifically on white-collar occupations, she devotes much of her book to telling those individual stories as proxies for a more general story about the economy. Almost to the point of repetition, individuals recount their experiences with a variety of corporate jobs, all of which share a common theme on the deterioration of employment conditions in many of the largest corporations over the past decade. These stories add up to a picture of a society where loyalty is a negative value and workloads grow as rewards are slowly eroded.
Just as their approaches to the subject vary, so do the two authors’ conclusions, although both are optimistic that these trends are reversable. Robert Reich considers many potential solutions by individuals, including a return to a more simplistic lifestyle and greater self-awareness. In the end, though, he puts most of his faith in changes in public policy. While not advocating any one policy as the sole solution, he sees value in new laws and regulations that will protect the current benefits of the new economy while moderating its costs.
On the other hand, Fraser believes that individuals have it within their own power to reshape the economy through individual and corporate actions outside of government. Among her options, she advocates that corporations take a more worker-friendly approach to their employees, not as a moral choice, but as a competitive advantage over firms that treat their employees in a harsher manner. She also advocates smaller executive compensation, limits on the use of contingent workers, and greater use of investor activism (because many workers are both employees and stockholders). Most importantly, she encourages individual employees to take greater control of their worklives by setting limits to their worktime and seeking out employers who provide support to their workers.
In both of these books, there is an explicit premise that the American workplace has fundamentally changed over the past 30 years. Robert Reich’s book is helpful in giving readers an overview of a society that workers may be experiencing individually, while Jill Fraser records the voices of those individual workers to spotlight larger issues. Looking to the future, both books implicitly, but confidently, assume that current workplace trends will continue, unless people actively work for change, either through government or through individual actions. Neither book anticipates that change may occur by outside forces or due to fundamental changes in the world’s economy. Recent events, which could not have been forseen at the time these books were published, raises questions about this premise and thus the solutions proposed by the authors. Whether the workplace of the future follows recent trends remains to be seen, but persons interested in understanding the stresses felt by many American workers during the 1990s should add these books to their reading list.
Bureau of Labor Statistics,
Grand Master Workman: Terence Powderly and the Knights of Labor.By Craig Phelan. Westport, CT, Greenwood Press, 2000, 294 pp. $65.
Here is a delight for labor history buffs with an interest in the 1870s and 1880s. Terence Powderly was recently added to the Labor Hall of Fame at the U.S. Department of Labor. This detailed biography will tell you why. Phelan argues that Powderly was "the first American working-class hero of national stature" and that the Knights of Labor was "the most significant and ambitious labor organization of the Gilded Age."
As leader of the Knights of Labor from 1879 to 1893, Powderly presided over an extraordinary mass movement. The "Order" took in union and nonunion, skilled and unskilled, black and white, male and female, immigrant and native-born. They joined local "assemblies" for a variety of reasons, but chiefly to protest and resist abuses and exploitation by an essentially unregulated capitalism manipulated by powerful industrial buccaneers and railroad "robber barons" like Jay Gould.
You will get insight into the monumental labor-management battles of the 1880s, a sense of then current divisions among workers on the basis of religious, ethnic, race, gender, skill, occupation, and union distinctions, and the problems of reconciling solidarity and democracy in a decentralized labor organization with "local autonomy" and community control."
Powderly transformed the Knights from a secret society into a mass movement. The Knights zoomed from 10,000 members in 1879 to 750,000 members in 1886, reflecting workers’ militancy in reaction to employer-imposed wage cuts and longer work hours. Goals ranged from economic strike actions and strike support to political lobbying, political electoral action, cooperatives, and temperance. Powderly’s firmly held principles of democracy, and community control for the Knights’ local and district "assemblies" and the national (General Assembly) reliance on voluntary contributions led to inevitable weakness of the national organization, Phelan argues. Local and district jurisdictional squabbles often failed to yield to Powderly’s charismatic persuasiveness. "The very basis of the Knights’ popularity—community control—engendered a lack of trust in any central authority, including one of the members’ own making," Phelan notes. "The demise of the Knights thus underscored the inherent tensions between the appeal of democracy and the necessity for discipline and unity of purpose in time of crisis."
Powderly (1849–1924) left school at age 13 to work for a coal-canal-railroad company. At age 17, he started a 3-year apprenticeship to become a machinist. With "boundless, almost manic energy," he rose through the ranks of the Machinists and Blacksmiths International Union. In 1878, he was elected to the first of three terms as mayor of Scranton, Pennsylvania. In 1879, he was elected Grand Master Workman, leader of the Knights of Labor, to succeed Uriah Stephens.
Powderly urged black-white, male-female integration in the Knights locals—but rather than have no local Knights organizations in the South he advocated separate locals for black members. In 1885, after speaking in Richmond, Virginia, to a racially mixed audience on workers’ common interests, he organized 24 tobacco workers into the city’s first black local and he organized cigarette workers into the city’s first all-female local. In 1886, some 10 percent of Knights members were women.
Powderly also led the Knights to an extraordinary 1885 victory over railroad magnate Jay Gould. Gould had put wage cuts into effect all over his railroad empire. A spontaneous mass uprising of striking railroad workers resulted. "One week after the strike became general, a stunned Gould rescinded the wage cuts," Phelan relates. Membership of the Knights shot up, but the subsequent wave of poorly organized, underfinanced, unsuccessful strikes led to membership losses and worker disenchantment with the Knights.
Powderly continued as leader of the Knights until 1894, but the organization dropped in membership and influence in the late 1880s almost as quickly as it had grown in the early 1880s. In part, this was the result of unrestrained localism and factionalism, but Phelan contends the overwhelming cause of the Knights collapse was U.S. employers’ "relentless counteroffensive that effectively killed it within three years" after 1886. "By 1888 well-organized, highly disciplined, and soundly financed employer associations, often with the assistance of the State, had crushed a decentralized, undisciplined, impoverished, and fractured movement still struggling to define its goals and strategies through democratic means."
Samuel Gompers and the American Federation of Labor "launched a thoroughly pragmatic alternative to the utopian and backward Knights," says Phelan. "Confidently discarding all the Order’s fuzzy reform notions, Gompers declared that the only long-term strategy for labor was the continuous wresting of incremental improvements in the matter of wages, hours, and working conditions." Gompers’ Cigar Makers International Union represented "the very craft particularism that the majority of Knights held in contempt," and the Knights General Assembly, contrary to Powderly’s wishes, drove the Cigar Makers out of the Knights, "a colossal blunder," according to Phelan.
Powderly and the Knights of Labor are usually consigned to the dustbin of history. This biography brings the man, the organization, and the 1880s to life. Phelan deserves our thanks.
Formerly with the AFL-CIO
High School Career Academies: A Pathway to Educational Reform in Urban School Districts?By Nan L. Maxwell and Victor Rubin. Kalamazoo, MI, W.E. Upjohn Institute for Employment Research, 2000, 235 pp. $19 paper.
The recent presidential election saw both major party candidates react to Americans’ deep discontentment with the educational system. Although individuals will differ as to what they see as its shortcomings, many would argue that our schools do not adequately prepare students for the world of work. One educational reform put forth as a potential method to improve the employment readiness of students is career academies. The career academy model has three defining features. First, although the academy is housed in a high school, students are for the most part taught separately, creating a school within a school. Second, the academic coursework is integrated with the workplace, such as internships. Lastly, employers are involved in the program.
Maxwell and Rubin examine the impact of career academies in a large urban school district. (For confidentiality reasons, the district is not identified.) The district has six high schools with nine different career academies in fields such as Computer Science and Technology, Transportation, Visual Arts, and Business and Finance. The impact of the career academy on various outcomes is estimated through a regression analysis that controls for student and school characteristics. A cohort of 10,000 students was followed from their enrollment as sophomores during the 1990–93 period to 1996.
The authors found that seven of the nine academies had a positive, statistically significant effect on students’ grade point average. Although the authors use grade point as one measure of accumulated human capital, it could be argued that it may not in fact reflect knowledge, especially when students are, for the most part, placed in separate classes. The academies did not directly affect the probability of graduating high school, although they did tend to raise high school grade point averages that in turn increased the probability of graduating high school. Controlling for other factors, the academies had a statistically significant positive impact on enrollment at 4-year colleges, but there was no significant effect on enrollment at 2-year colleges. Although the amount of elapsed time was not sufficient to examine this, it would be interesting to see what effect the academies had on college graduation rather than just enrollment, especially if the academy students’ higher grade point averages resulted only in admission to college but not subsequent graduation. The academies did not have a significant effect on hours worked or the hourly wage rate, but once again, the effect could show up in later years. Academy students self-reported higher levels of good study habits and other characteristics that would positively affect their capacity for life-long learning.
The authors also examined differences in career academies across the high schools. There were differences across the schools in terms of students’ socio-economic status, differences in the way the schools were run, as well as differences in the extent to which career academy students participated in the program (for example, number of academy courses, share of students in academy courses that were academy members, and internships). The academies seemed to increase the level of knowledge, as measured by grade point average, more in schools with lower average socio-economic status students.
Maxwell and Rubin have wrestled with some critical and difficult issues. Given the Nation’s current concern about how well our schools prepare students for the working world, there is a need for programs that will improve the job-readiness of students. Further, given the rising gap between the earnings of the more educated and the less educated, there is also a need for programs that will facilitate the attainment of a higher education. As an objective scientist, one might hope for a long period of time to evaluate whether career academies improve employment, earnings, and the chance of obtaining an advanced degree. Unfortunately, such a long-range experiment might leave many in the large control group with inadequate education and training when such skills are ever more important. In short, given the magnitude of the problem, the authors’ early conclusions are of great use and make a contribution to our knowledge about possible effective remedies for concerns about the educational system. The book does not serve as a curricular guide to career academies, but should serve policymakers well by providing some preliminary quantitative evidence about the effectiveness of career academies.
—Robert J. Gitter
Professor of Economics,
Ohio Wesleyan University
The Academic Marketplace. By Theodore Caplow and Reece J. McGee. Transaction Publishers, New Brunswick, NJ and London, 2001, 262 pp. $27.95, cloth; $20.95, paper.
This book originally appeared in 1958. Since then it has become a classic. Its reissue with a new introduction is to be welcomed and testifies to the book’s lasting value. The authors are sociology professors at the University of Virginia and Purdue University, respectively. The work is based upon a survey of faculty vacancies and replacements in 13 arts and science departments at 9 major or research universities. The interviews consisted of mainly open-ended questions. Unfortunately, the survey questionnaire has not been reproduced, and there is no bibliography. But the authors’ style is lucid, candid, and nearly free of sociological jargon.
Caplow and McGee treat universities as social institutions. They have provided a systematic analysis of how vacancies occur, how faculty are chosen and promoted, and who is involved in the selection process. It is not surprising that the largest percentage of vacancies is caused by resignations, followed by dismissals and retirements. In the decisionmaking process, especially at the senior level, the prestige of a candidate within his or her academic discipline is the decisive factor. One’s merit is "determined for the most part by disciplinary prestige." The prestige factor is quite rightly a leitmotif in this book. Faculties are hired "on an estimate of how much research they are likely to do." Prestige is, of course, quite subjective and elusive. There is no objective prestige index. Although publications are generally not read in full—a disturbing phenomenon—they are important in the prestige calculus. One’s productivity is thus a "composite of subjective opinion." Faculties are hired "on the basis of how good they will look to others."
American universities and colleges range in quality from some of the best in the world to some of the worst. The smaller and minor institutions place far less emphasis upon publications and far more upon teaching ability. The authors discuss this and its implications at considerable length. The fact remains, however, that the minority of large research institutions set the tone for the whole higher education system.
As might be expected, the selection process is lengthy, cumbersome, and increasingly bureaucratized and competitive. It usually involves senior departmental members, the chairperson, the dean, and sometimes others. There are frequent departmental conflicts and conflicts between the department and the dean. These matters are analyzed at length and provide penetrating explanations of how the selection process really operates. Caplow and McGee have also presented many long and highly revealing quotations by various decisionmakers. There are many excellent recommendations for the resolution of some of these conflicts. Since the book’s first appearance, the selection process has become more open and democratic, largely as a result of the Federal Government’s affirmative action and civil rights legislation, which the authors acknowledge in their new introduction.
Although the book does not deal specifically with the academic labor market as such, it is set in the 1950s when there was a seller’s market and fears of faculty shortages. Since the 1970s, there is a buyer’s market in many disciplines with more qualified applicants than available positions, and the consequently large numbers of unemployed and underemployed academics (educational qualifications exceeding employment requirements). Moreover, in an increasing number of disciplines the academic labor market is now global. Also, colleges and universities now have far higher proportions of temporary and part-time positions. It is regrettable that Caplow and McGee have not addressed these developments and their implications in their new introduction.
Despite the noted omissions, this pioneering and classic work remains a significant analysis of the operation of the academic marketplace. It is of special interest to potential and current faculty, higher education administrators, and government and foundation officials supporting higher education.
— John Dreijmanis
University of Essex
The American Academic Profession.Edited by Stephen R. Graubard. New Brunswick, NJ, and London: Transaction Publishers, 2001. 352 pp. $29.95, cloth; $24.95, paper.
This book is a reprint of the fall 1997 issue of Daedalus, plus an index. There has been neither an updating of the material nor a correction of the various errors. The authors are professors and senior university and college administrators. The style ranges from quite informal and almost conversational to formal. As frequently happens with edited books or commissioned articles for special journal issues, the quality is uneven, and many of the chapters are of peripheral concern.
Burton R. Clark, one of the contributors, has provided a bleak but realistic overview of the academic profession. There is so much institutional differentiation that core academic values and an ethos are difficult to locate in American academic life. In the community colleges and many of the 4-year colleges, there is now much remedial education. At these institutions, faculty authority is weak and teaching requirements heavy, with little time left for research. Throughout higher education, there is an increasing trend in part-time employment and non-tenure track positions. The results of these developments are diminished intrinsic rewards and motivation. The chapter has many unreferenced quotations. Clark’s conclusions deserve more indepth analyses.
The meaning of profession in general and academic profession in particular needs to be addressed in detail. Francis Oakley addresses these matters, but insufficiently. In a more substantial chapter, Patricia J. Gumport has related the status of the profession in public universities to the decisionmaking process, which has shifted from departments to university administrators and State governments. As a result, faculty is now treated "as workers who need to be monitored rather than as professionals who are trusted to work according to internalized standards." She raises the important question of whether or not the faculty will internalize "a conception of themselves as employees, competitors, revenue-generators, and redeployable resources?" If so, "what educational consequences will result?"
In any book or collection of articles on the academic profession, one of the main themes should be the academic labor market and the socialization process. The latter is not covered, and the academic labor market is quite inadequately dealt with by a visiting assistant professor who laments the fact that he was misled by a co-authored book that he read as a graduate student; it predicted significant faculty shortages in the humanities and social sciences. Instead, the surpluses evident since the early 1970s have continued. This should have been evident from the many books and articles on the academic labor market and that for educated people in general, especially Richard B. Freeman’s The Overeducated American (New York and London, Academic Press, 1976) and the articles by Russell W. Rumberger and this reviewer. Cheryl B. Leggon has sketchily noted that there are too many scientists chasing too few academic positions and research grants. A whole chapter should have been devoted to a detailed analysis of faculty supply and demand data and projections.
In a comparative chapter, Philip G. Altbach has found that the professoriate abroad faces some of the same problems as in the United States. The proportion in tenured and tenure-work positions is declining. Unhappiness with the academic administration is also widespread, as well as increasing bureaucratization and declining funding. Unlike in the other countries of the world, however, American academics are the least likely to go abroad for study or research, pay little attention to the knowledge produced in the rest of the world, and remain uninterested about "internationalizing the curriculum."
All in all, this book falls considerably short of its potential. However, it is of special interest to potential and present faculty and administrators.
University of Essex
Small business employment
The Job-Generation Controversy: The Economic Myth of Small Business. By David Hirschberg. Armonk, NY, M.E. Sharpe, Inc., 1999, 163 pp.
In The Job-Generation Controversy, David Hirschberg provides a methodology for addressing an important economic issue. The question is a simple one: How many jobs are created by small businesses? But while the question is simple, the underlying problem of how to count job gains and losses between small and large businesses over time is not readily apparent.
While it may seem a dry statistical matter, the accurate measure of small business job creation affects the everyday lives of millions of American workers and families. Prominent examples of these real world impacts are the coverage of small firms by minimum wage laws, mandated employer benefits for health insurance, and occupational health and safety laws. The national debate on these issues is vigorous. For example, the small business community such as the National Federation of Independent Businesses contends that increased business costs caused by higher minimum wages, adopting mandated employer health insurance, or lowering the size thresholds for companies subject to health and safety regulations would create more unemployment because small firms cannot afford them, and thus would lay off some workers or even go out of business.
A crucial part of the debate is how many workers would be affected by such job losses. There are two aspects to this. One is the extent to which such cost increases would lead some small business employers to decide they cannot afford them without having to lay off some workers. The other aspect is the universe of workers at all small firms, on which Hirschberg focuses.
The potential job impacts differ considerably if the estimates of jobs created by small businesses are calculated at 91 percent of the total of all new jobs, or if in fact small businesses lost employment as job losses exceeded job gains. Indeed, these are the magnitudes that are at controversy in Hirschberg’s book. In particular, he questions the validity of data on small business job generation prepared by the U.S. Small Business Administration (SBA). He concludes that by using a faulty methodology, the SBA vastly overstates the number of jobs created by small businesses. In these analyses, a business is defined as a private nonfarm firm (both for-profit and nonprofit enterprises) that includes all establishments under its ownership operating in various locations around the country.
Hirschberg’s contribution is in breaking through a conundrum that has long plagued analyses of the employment impact of small businesses. This is the vexing problem of how to count businesses that shift in size status from small to large and from large to small over time. He summarizes his methodology in the following example that uses a commonly accepted definition of the threshold for small business of 500 employees, with companies of less than 500 employees defined as a small business, and companies of 500 or more employees defined as a large business. Suppose a company starts with 400 employees in year 1, growing to 600 employees in year 2, and falls back to 400 employees in year 3. The net change in employment over the 3-year period is zero, as the gain of 200 workers in year 2 is offset by the loss of 200 workers in year 3.
Hirschberg breaks through the problem by rigorously accounting for firms that cross over the boundary from being a small firm to become a large firm and from being a large firm to become a small firm. For example, consider a threshold of 500 employees, which defines a small business as having less than 500 employees and a large business as having 500 or more employees. From year 1 to year 2, when a small business grows from 400 to 600 employees, is the entire job gain of 200 employees counted as a growth in jobs for a small or large business? Similarly, if a large business contracts from 600 to 400 employees, is the entire job loss attributed to a large business or a small business? Hirschberg’s insight is that it is neither.
Specifically, for the job gain from 400 to 600 employees, Hirschberg counts the increase of 100 workers from 400 to 500 employees as a gain for small business, and the increase of 100 workers from 500 to 600 employees as a gain for large business. And for the job loss from 600 to 400 employees, the decrease of 100 workers from 600 to 500 employees is a loss for large business, and the decrease of 100 workers from 500 to 400 employees is a loss for small business.
This issue is crucial in getting an unbiased reckoning of the growth of small and large businesses, but it had never been systematically addressed before, resulting in gross distortions of the contribution of small and large businesses to job growth. The procedure results in a completely neutral accounting of these boundary crossovers, which favors neither small business nor large business. By contrast, in the above example, the Small Business Administration counts the entire increase of 200 workers from 400 to 600 employees as a gain for small business, and the entire decrease of 200 workers from 600 to 400 employees as a loss for large business. Hirschberg’s contribution is vital because in the dynamic U.S. economy, competition among new and existing firms is intense, with an everchanging landscape of some small businesses prospering and becoming large, some large businesses losing out and becoming small, and some small and large firms going out of business.
By contrast, the SBA methodology attributes all of the gain of 200 workers in year 2 to small businesses because that was the firm’s initial size status in year 1, and all of the loss of 200 workers in year 3 to large businesses, because that was the initial size status in year 2. But the exact opposite and equally justifiable result would happen if the calculation were made using the size status in the terminal year 3, with large businesses having all of the job gain and small businesses having all of the job loss. In this case, all of the job gain of 200 workers in year 2 would be attributed to large businesses, and all of the job loss in year 3 would be attributed to small businesses. In fact, Milton Friedman, a staunch free-market economist, in questioning claims that the preponderance of job gains is created by small businesses, raised this very issue of not limiting size status to the initial period because equally valid estimates would be obtained by using the terminal period (Hirschberg cites the Friedman critique). This is analogous to the difference between the Laspeyres (initial period) and the Paasche (terminal period) weighting schemes used in index number construction.
Using an example of actual data, Hirschberg highlights the effects of the different methodologies for the 1989–91 period that was characterized by slow economic growth and a recession (the National Bureau of Economic Research dated the recession from August 1990 to March 1991). The SBA estimated that small businesses accounted for 91 percent of the new workers from 1989 to 1991. By contrast, in working through complex data sets, Hirschberg calculated that small businesses lost 192,000 workers while large businesses gained 802,000 workers for the period. The differences between the two estimates are stark. Both the SBA and Hirschberg use the same data base from the U.S. Bureau of the Census in their calculations, so the differences between them are solely due to their methodologies.
The distribution of establishments by employment size has not changed since 1946. In addition, the shares of total employment accounted for by small and large firms has also remained stable over the years. Thus, based on Census Bureau data, small businesses of less than 500 employees accounted for 54 percent of total employment in both 1977 and 1992. These shares hardly diverged in the intervening years, and also showed no upward or downward trend over the period. Hirschberg explains this constancy in the size distribution as the net result of the tremendous volatility in the dynamic American economy. As firms compete for larger market shares by expanding their investments, the successes and failures of these ventures are randomly distributed independent of firm size. The constancy also reflects the great volatility in new firms starting up in business (births) and existing firms going out of business (deaths).
Hirschberg also gives a perspicacious explanation of the real life dynamism of the economy that leads to this stability. The rationale for this is given in the development of a gaming theory model in Chapter 5 ("Explaining the Employment Distribution by Firm Size: The Economic Game"). It is based on the statistical probabilities in which firms move across business size categories over time. The insight provided in this explanatory model is a second signal achievement of the book.
We are indebted to David Hirschberg for providing some light in this murky area and for clarifying how important it is to fix it.
Formerly with the
Office of Management and Budget
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