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Employment Futures: Reorganization, Dislocation, and Public Policy.

Employment Futures: Reorganization, Dislocation, and Public Policy. By Paul Osterman. New York, Oxford University Press, 1988. 207 pp. $24.95.

This is, to be blunt, one of the best treatments of current labor market issues that I have read. Professor Paul Osterman is clear and balanced in his presentation of the issues, astute in his analysis of the condition of the modem American labor market, and has realistic ideas for policy.

An excellent example of his analysis is found in the second chapter:

. . .slack labor markets and reduced worker bargaining power have reduced average income and also worsened the distribution of annual income. These are major problems. . . It does not help matters, however, to also argue that the economy is moving toward more lowskilled work. In fact, the oppositeis occurring, and we must understand this if we are to devise effective solutions to real problems.

Thus, Osterman takes the longstanding good jobs-bad jobs debate away from nitpicking over numbers and provides us with some understanding of how wage stagnation can coexist with the fact that the fastest job growth over the current expansion has been in what are generally regarded as well-paid occupations. (It will be interesting to see if the current tighter labor markets will raise eamings and narrow income differentials, as Osterman's logic suggests.)

The analysis of labor market structures takes up the third and fourth chapters. Osterman first describes a stylized model of the labor market characterized on the supply side by "flexible" and "inflexible" labor-basically, women and teenagers versus adult men-and on the demand side by hierarchical intemal labor markets based on seniority and detailed position classification. In this model, experienced workers stay with their employer and the firm expands (and contracts) its labor force primarily at the entry level so that senior workers will face only limited outside competition for promotions and are somewhat insulated from the periodic layoffs that remain management's prerogative. Such a system works when "flexible" labor is readily available to fill low-level jobs, but one consequence is the demonstrated difficulty displaced experienced workers have finding a new job at wages comparable to their old employment.

In Osterman's view, this model may not be viable much longer as labor supply conditions tighten, the number of younger working-age persons declines, the growth in participation by women slows, and increasing structural change leads to higher risks of displacement across many sectors. One response open to firms is to move away from the 'Job control" or "industrial" intemal labor market model, and toward a "salaried," or "white-collar" model. In such a regime, job security is made much more explicit by the employer in exchange for more flexibility in the assignments that may be given workers.

By comparison, the industrial model stresses rigid job descriptions and assignments based strictly on classification and seniority. With at least senior workers thus given some degree of security, the industrial model then gives management substantial latitude over staffing levels.

There is obviously a great deal of tension between these two models of industrial relations. Osterman sees the tension being resolved in favor of the more internally flexible salaried model. His reasoning lies along two tracks. First, wage drift can make die industrial system very costly, and wages are of increasing salience to firms in an increasingly interdependent and fiercely competitive world. Second, and to my mind, much more important, "the system is poorly adapted to easing the introduction of technologies that challenge traditional job classifications, yet this is exactly the characteristic of many innovations."

At issue is how will firms respond to this transition. Osterman outlines two polar strategies-commitment versus concession. The first requires that employers commit themselves to providing a substantial measure of job security to their workers in exchange for a flexible intemal environment. That is, adopt and embrace the salaried intemal labor market model.

In stark contrast, the concession strategy tries on one hand to force workers currently under an industrial model to concede workrule flexibility without the retum commitment of security, or, on the other, to force white-collar workers to tolerate a reduced level of insulation from layoffs.

The role Osterman sees for public policy is to encourage the acceptance of greater use of the white-collar model, and to provide mechanisms for readjustment of workers in those cases where a firm fails or is forced to downsize or reorganize. The broad principles that he suggests for policy are not original: enhance intrafirm mobility and flexibility, improve the efficiency of interfirm mobility, and assist individuals with persistent labor market difficulties.

What makes Employment Futures singular is the attention paid to what is too often the forgotton client of employment policy-the private firm. As Osterman sets the stage for his more detailed recommendations, he makes these persuasive arguments:

Implicit in this approach is the view that if labor market policy is to succeed, it must swim with the current of events in the labor market. Each firm has its own employment policy, and that policy is based on a set of goals, incentives, and constraints. If the incentives offered by public policy are irrelevant to the firm's decision problem, . . .it will not succeed.

This view of employment policy may seem paradoxical in that it simultaneously calls for increased govemment involvement in the labor market, but an involvement that . . . should be more attuned to private interests and more under the control of firms than past efforts. . . . Our goal, therefore, is to ground employment policy in the needs of the labor market, and, specifically, to find a way to make it useful to firms as they seek to solve the problems that are most salient to them.

These, it seems to me, are reasonable and realistic foundations for employment policy, and are the basis of my recommendation that anyone with a professional interest in labor policy will find this book worth reading.

-Richard M. Devens, Jr. Office of Employment and Unemployment Statistics Bureau of Labor Statistics
COPYRIGHT 1989 U.S. Bureau of Labor Statistics
No portion of this article can be reproduced without the express written permission from the copyright holder.
Copyright 1989 Gale, Cengage Learning. All rights reserved.

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Author:Devens, Richard M., Jr.
Publication:Monthly Labor Review
Article Type:Book Review
Date:Jul 1, 1989
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