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    A Warning Bell
    from US Secretary of Labour Robert Reich

    from The Jobs Letter No.22 / 3 August 1995

    ROBERT REICH, the US Secretary of Labor in the Clinton Administration, presented a controversial picture of American working life in a speech late last year to the US Democratic Leadership Council.

    " We are on the way to becoming a two-tiered society composed of a few winners and a larger group left behind...."

    Our Media Watch reports that The White House quickly distanced itself from Reich's remarks, but his speech represents a rare appraisal of the present political, economic and employment climate from a Washington insider. It also represents a warning bell for other economies like NZ who are following the same trends.

    In this special feature, The Jobs Letter gives an essential summary of Reich's speech

    The old middle class has become an anxious class worried not only about sustaining their incomes but also about keeping their jobs and their health insurance. Our large corporations continue to improve productivity by investing in technology and cutting payrolls. Nearly one out of five who lost a full-time job since the start of 1991 is still without work. And among those who have landed new jobs, almost half 47 percent are now earning less than they did before. Tens of millions of middle-class Americans continue to experience what they began to face in the late 1970s: downward mobility. They know that recoveries are cyclical, but fear that the underlying trend is permanent.

    On a recent national poll, 55 percent of American adults said they no longer believe that you can build a better life for yourself and your family by working hard and playing by the rules. Of those without college degrees, fully 68 percent no longer believe it. Because they have been working hard, and they are still falling behind.

    This isn't the way its supposed to be in America. Unlike more fatalistic cultures, Americans have always had a deep faith that effort will be rewarded, that you reap what you sow. For generations, Americans have believed in the bargain that if you work hard and play by the rules, you'll get ahead. They guided their lives by it, passed it on to their children. It's woven deep into the fabric of our culture. It sounds like an economic equation, but its more than that: It's an implicit moral compact. The conviction that you earn your own fate forms the bedrock for the American ethic of individual worth and accountability.

    In the years after World War II, America built the biggest middle class in history on the foundation of that bargain. We turned our hard work into homes and cars, health care and pensions. The middle class grew, enlarged and enriched still further, as the barriers of race and class and gender slowly began to fall. Poverty reached an historic low. And the sense of possibility grew stronger.

    But then something happened. Around 15 years ago, this American dream began to fade. And as it faded, middle class families tried every means of holding on: Spouses went to work, both parents worked longer hours or took multiple jobs, they decided to have fewer kids and have them later, they drew down their savings. But middle class families have pushed these coping mechanisms about as far as they can go. And they still feel they are losing the dream.

    All the old bargains, it seems, have been breached like the breaching of the postwar bargain between companies and their employees. It used to be that as companies became more productive and more profitable, employees who worked hard and proved their loyalty could count on steady jobs with rising pay and better benefits. No more.

    If American business continues to pursue short-term profits at the price of insecurity and falling living standards for a large portion of our society, it will sooner or later reap the bitter harvest of popular rage. The American public is basically pro-business. But that support rests on an implicit bargain. And business betrays that bargain every time it fires an older worker in order to hire a younger one at a lower wage, provides gold-plated health insurance to top executives while denying its workers health coverage, labels employees independent contractors in order to avoid paying them full-time wages and benefits, or discards its workers rather than invest in them when profits are booming.

    In the emerging economy, every job can become more valuable; every person, more valued. The only enduring solution is to equip every American to succeed through hard work under the new rules. Now you need to make your own way in the economy, learn new skills throughout your career, be ready to apply them in new ways and in new settings.

    Study after study shows that skills can be learned. Every year of education or job training beyond high school whenever it occurs in one's life increases average future earnings by 6 to 12 percent. Most Americans are on a downward slide because they lack the learnable skills to prosper in an economy convulsing with change. A new middle class will rest on a refinement of the old American bargain: You take responsibility for working hard, you get a chance to work smart.

    We have made progress on this agenda [with several programmes] The Earned Income Tax Credit, to help hard-working families stay out of poverty. Low-interest loans to attend college. School-to-work apprenticeships to gain job skills. One-stop career centers to link unemployment insurance to job training. Voluntary skill standards, to know what to train for. They already have helped real people get new and better jobs.

    These initiatives, however important, are only a bare beginning. If this society is to reverse the long decline in living standards of American workers, a far bolder strategy is necessary. Incrementalism just won't do. Reform is no longer enough we need to reinvent lifelong learning. Instead of feeding the budgets of bureaucracies federal or state let's channel resources directly into the pockets of ordinary Americans so they can get the skills they need at the time, in the place, and in the way that makes sense for them. Let's make sure that Americans have up-to-date information on what skills are in demand and likely to stay in demand, and where they can get those skills.

    Robert Reich, US Secretary of Labour, Speech to Democratic Leadership Council November 1994 published on The Utne Lens online magazine 17 July 1995 (homepage -

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