A force to be reckoned with.

In CE's June issue, eight CEOs addressed the downsizing dilemma. As a follow-up, we asked two other prominent executives fur their prescription for dealing with the sweeping economic change that has turned business inside out.

Corporate leaders have taken some hard knocks in the past year - held to the fire over downsizing, accused of greed and heartlessness, labeled "corporate killers," and worse. We should not be - and certainly have not been - immune from criticism; some of it is undoubtedly justified. Sometimes, however, the reality has been obscured. Consider the following:

* Most new jobs do not pay below-aver-age wages.

* Major companies in general have increased employment.

* Workers' compensation has kept pace with productivity and capital income.

* International trade has benefited the vast majority of Americans, both as workers and as consumers.

* The nation's unemployment rate is close to a record low.

The hallmark of the new economy is not universal insecurity, as some in the media have charged, but intense competition that has brought unprecedented change to the workplace and the skills needed to enter and remain in it. Today, the business community has an opportunity to move this debate away from eye-grabbing headlines and toward an assessment of what's really happening to American jobs and the nature of work. Now that companies can no longer offer lifetime job security to their employees, they must consider forging a new relationship with the work force - one that entails preparing people to work in a global economy marked by rapid technological shifts, deregulation, and worldwide integration.

To accomplish this, business executives must focus their energies on three areas of human capital development. One area, increasing employer training and career development, is in our hands. The others - improving schools so students are prepared for work, and designing social policies that promote employment - need our support. There are no quick fixes, but delay will compound the costs. Corporate America must respond quickly and constructively.

THE NEW ECONOMY

The competitive forces unleashed by deregulation and the globalization of capital and technology are creating a more productive and wealthier world with vast new markets for American goods and services. At the same time, however, American companies and their workers can no longer shield inefficient elements in their production systems from domestic and foreign competitors. Those companies that have remained competitive have learned to do more with less - sometimes with fewer workers - in a never-ending battle to raise productivity.

New computer-based technologies have broken the link between standardization and efficiency and have reduced the need for top-down authority over the conception, execution, and control of work. These changes have raised education and skill requirements for workers. Unlike previous technologies, computers often complement, rather than substitute for, skill. For example, new programmable assembly-line machinery requires better basic preparation in reading and math. Networks integrated by pooled information require better reading, writing, and computational abilities that allow employees to communicate and use information effectively.

Another requirement for high performance is that each worker takes responsibility for the organization's final product or service, regardless of his or her specific job assignment. Consumer demand for customized products and services requires employees who are sufficiently versatile and creative to handle exceptions. To speed innovation and improve collaboration among design, production, and marketing units, employees must have the teamwork skills necessary for effective learning and adaptation.

In general, the new economy bodes well for workers who have education beyond high school and preparation for managerial, professional, or technical careers. Those with no more than a high school education and few skills, however, are finding their options diminished. In the old economy, these workers typically could start out on the lowest rang of a company's career ladder, and with hard work and a little luck, earn a decent living. Today, many of those first rungs are simply dead ends or altogether gone.

Job skills, particularly computer skills, are an increasingly important part of a modern education. In 1993, about two-thirds of college graduates used computers at home, school, or work, as did half of workers with some college education and one-quarter of high school graduates. In contrast, only 10 percent of high school dropouts used computers, leaving them at a significant disadvantage in an economy where almost half of all workers used computers on the job.

Business and society currently invest most heavily in the education and training of those who are already relatively well-educated and well-trained. As rewards flow to those with skills, such differentials in human capital investments may spawn even greater earnings differences. A society increasingly divided into the "haves" and "have-nots" also may become vulnerable to protectionist and regulatory "solutions" that actually would reduce American productivity growth and living standards.

CLANGING DIRECTIONS

What can business leaders do? First, we can start convincing ourselves that investing in human capital is a vital part of a comprehensive economic growth strategy, and then underscore that philosophy with a three-pronged course of action:

1. Implement employer training and career development: In the new economy, employees have the primary responsibility to continually upgrade their knowledge and skills, while business has a responsibility to provide and actively support such efforts.

Employers should use selection, appraisal, reward, and training systems based on career plans developed in consultation with employees. Consistent with their needs and economic situation, employers can provide counseling, flexible work arrangements, more intensive on-the-job training, and tuition assistance to employees who wish to pursue formal education.

Automatic Data Processing provides free cradle-to-grave work-family assistance, which, for example, offers employees the opportunity to talk to counselors in their communities about everything from how to get their children to do homework to finding the best elder care for an ailing parent. In addition, at least 10 percent of the company's 25,000 U.S. employees are estimated to work flexible hours, allowing them to fulfill family responsibilities or get additional education. ADP offers an education reimbursement program in which the company gives any employee who works more than 20 hours a week $2,000 a year toward studying for an undergraduate degree and $2,500 toward a graduate degree. Employees receive a $1,000 bonus one year after completing a degree program.

The company also may send managers to Harvard or Stanford University, for example, for a course or conference, and employees are eligible to sign up for out-side training seminars. Each department has its own training budget, which can cover having a computer school come in and teach a course to employees after hours. In addition, ADP executives teach a five-day executive management seminar twice a year at the company's Roseland, NJ, headquarters.

Increased attention to employer-based training is particularly urgent for smaller firms that are less able to afford training and more apprehensive that their trained workers may be "pirated" by other firms. This "training gap" is troubling at a time when more American production activity involves smaller companies orbiting as suppliers around larger firms.

Of course, different businesses face different production and market conditions that inevitably lead to different training requirements. Public measures to mandate, or even to reward, "appropriate" training activities by firms are almost certain to raise costs and create additional barriers to the employment of less-skilled workers. A better policy would be to keep both firms and employees well-informed about the benefits and costs of training. The market itself will provide abundant incentives for training that is genuinely productive.

For smaller firms, this can be facilitated by consortia of employers that draw upon the resources of community colleges and other educational institutions. In addition, larger corporations increasingly provide assistance to their smaller suppliers to raise productivity and ensure quality. For example, since 1993, GE has invited officials from its suppliers to its Power Systems Training Center for workshops. The program has helped to narrow the training gap and also increased manufacturing productivity and decreased defect rates for both the supplier companies and GE.

2. Encourage school reform: All the employer-based training in the world cannot make up for the lack of basic educational preparation that leaves so many of America's young people unfit for today's workplace. According to the U.S. General Accounting Office, "9 million of the nation's 33 million youth aged 16 to 24 will not have needed skills to meet employer requirements for entry-level positions." Schools must set standards for academic performance - and proficiency in areas such as computers and business-related subjects - and establish both teacher and student incentives to achieve them. Business should make sure those standards meet the demands of the modern workplace.

The long-term rewards of a good education grounded in core disciplinary knowledge should be made clearer to students. Employers can make the connection more explicit by relating entry-level hiring decisions more closely to academic performance, thereby motivating students who otherwise fail to see the "relevance" of academic learning. Employers also can help schools provide employment counseling for non-college-bound students, supplement general academic work with technical courses, and integrate applied learning with curricula.

This kind of performance-driven education is at odds with the culture of most schools, which reward teacher and student compliance with rules and regulations rather than innovation and excellence. The Committee for Economic Development and other business groups have advocated site-based management in which teachers, administrators, parents, and students have authority and accountability. CED also endorses publicly funded charter schools, designed and run under performance-based contracts, and the expansion of public school choice as a way to extend educational opportunity to low-income families.

Unfortunately, much talk about school reform remains just that - talk. Recent attempts to institute national educational standards have been diluted to the point of ineffectiveness. Day after day, schools are faced with the task of meeting vague goals, sometimes without necessary resources.

Business can and must play a role in school reform. The participation of business leaders from each state at the National Education Summit last March was a hopeful sign. At the local level, businesses seeking a better-prepared labor pool will have to reach out to the schools located near their plants and offices and demonstrate to teachers, administrators, and parents how resources can be used more effectively to prepare students for today's economy.

3. Support employment-oriented public policies: Dislocation in the labor market has grown substantially in recent years.

The positive effects of employers' efforts to ease the impact of downsizing, expand work options, and design "family-friendly" policies are limited to those who are working. Current public welfare, unemployment insurance (UI), and tax mechanisms require substantial reforms to help Americans who are out of work or in transition cope with rapid economic change.

For less-educated adults, limited access to work perpetuates a destructive downward cycle in capability and income. A job is the best training program and also the admission ticket to mainstream society. Public assistance should encourage or require work, and public welfare agencies should become job-oriented in the mode of private-sector employment agencies. Income assistance, health-care benefits, and other services should be structured to allow for diverse work arrangements such as home-based work, part-time work, temporary employment, and job sharing.

Furthermore, the welfare reform measures now being adopted in many states are likely to substantially increase the number of individuals seeking low-wage work, so job losses are likely to be disproportionately high for this group. We recommend that UI eligibility requirements be adjusted to extend benefits coverage to a larger proportion of those low-wage and nontraditional workers who are seriously seeking employment. We also urge states to harmonize tax, eligibility, and benefit structures to promote regional labor market efficiency and equity and to lower compliance costs.

Finally, we recommend that the UI system be better integrated with effective re-employment services and that states be given broad discretion to use incentives, such as re-employment bonuses or self-employment allowances, in their UI systems. We also urge employers to support the Earned Income Tax Credit, which is a work-based alternative to welfare for the working poor and families suffering temporary economic setbacks. The EITC provides incentives to work and could help reduce demands on the UI system.

These public-sector reforms need the support of the private sector. Although effective public programs to help people move from dependency to self-supporting work may raise costs at first, they can reduce the costs of income support, health care, crime, and substance abuse in the long run.

A CRITICAL CHOICE

Like the earlier wrenching shift from an agricultural to an industrial economy, recent changes enhance our economic prospects but also outpace institutional change. Many of the social and economic institutions that prepare us for work, sustain us during our working lives, and provide for our retirement are now outdated.

As a result, some Americans are being left behind, and others are feeling anxious, insecure, and burdened. The "old" economy may have been more predictable, more paternalistic, and, in some respects, more stable. It provided a more comfortable and secure living for many, albeit at a lower average living standard than prevails today. But we should not romanticize the past, and trying to hold back economic change is a futile and ruinous exercise.

So, we face a critical choice: We can embrace change, exploit its opportunities, and mitigate its costs - or we can resist, be overwhelmed by it, and become poorer. Business leaders have a responsibility to ensure that this nation makes the right choice - and to help workers take advantage of the new economy's opportunities.

Josh S. Weston is chairman of Roseland, NJ-based Automatic Data Processing, a $4 billion company that provides computerized transaction processing, data communications, and information services. Frank P. Doyle is a former executive vice president of GE, a diversified manufacturing, services, and technology company. Doyle is chairman of the Committee for Economic Development, and Weston chairs the organization's Research and Policy Committee.