Harvard Extension School Alumni Bulletin

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VOLUME 30, NUMBER 1 HARVARD EXTENSION SCHOOL FALL 1996
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from Robert Reich's Lowell Lecture

Robert Reich: Questions & Answers

Q: What do you think about the growing trend toward contracting out jobs, union jobs and stuff like that?

A: All of these phenomena, contracting out jobs, out-sourcing to low-wage nations, moving to two-tier levels of wage structure so that young people coming in have a lower wage structure than the people who are already there, reducing the workforce, automating the workforce . . . all of these are aspects of the same fundamental phenomenon, which is reducing payroll costs. Thursday, the President and I and other Cabinet members will be getting together with about 100 chief executive officers and talking about this very thing. The optimist in me wants to point to the companies that are viewing their employees as assets to be developed, rather than as costs to be cut. And the optimist in me wants to say those companies understand that over the long term, any competitor can cut payroll, out-source, or automate, but the only true source of long-term sustainable competitive advantage is a dedicated, skilled, and loyal workforce. And there are companies that believe that. That's the optimist in me.

Q: If you've got employees who are earning $40 an hour, and you can have the work done elsewhere for $20 a hour, would you claim that you can develop those employees into people who are capable of earning $40 a hour? I think that one of the problems in our society, unlike Germany for example, is that we have too many over-qualified people. We have too many college graduates. Do we need 50 percent of the population with a college degree? Look at Germany, it's more like ten percent, and they train the remainder to do very highly skilled work in manufacturing. In other words, I wonder if it isn't more useful to rearrange the economy to suit the abilities of the workers, rather than, as you suggest, to make the workers fit the needs of the economy.

A: I do believe--and we're coming down to fundamental questions and assumptions about the capacities of people--I believe that there are great untapped resources in the American workforce. I believe the people are capable of much, much higher levels of productivity and value-adding, however you want to define it, than they are now providing. I believe that because I not only have read a number of controlled experiments with regard to taking essentially the same socioeconomic groups, giving them additional education, additional job training, additional on-the-job training, and seeing the results. But I've also seen, with my own eye, dramatic, dramatic things. Let me quickly give you two examples.

In the middle of Detroit, there is something called Project Focused Hope. A thousand young people, over the last five years, who have not graduated from high school, have been given training to become numerical machine tool operators. They've been working with computers. These young people have been getting jobs; 83 percent of them have jobs paying a starting salary of $20 an hour. Astounding. The automobile industry of the next eight years has to hire 115,000 new workers, and these young people are already there.

Q: But if you send them to college, they would be unemployed.

A: I thought your question was about the capacity of people. If your question is about a four-year college degree, as opposed to an apprenticeship program and which is better, I'm not prepared to say. I think that for many people a four-year college degree is preferable in the sense that we are not only preparing people for an economic place in society through a four-year college program, we are preparing them to be full and productive people, citizens, participants in a democracy. A very narrow economic view of the purpose of training or the purpose of education might dictate less four-year liberal arts education and more apprenticeship, more training, more two-year, three-year programs, but I'm not prepared to make that sacrifice in our society. And particularly in a $6.6 trillion economy, why can't we do a better job giving people a full and fulfilling life?

Q: What do you think of the role of illiteracy in the changing job market? Is changing skills and technologies required or changing government?

A: Illiteracy is a huge problem on the job right now. People in public policy circles are not paying nearly enough attention to this. We do have a segment of the work force--I don't want to put a particular percentage on it, whether it's eight percent or 12 percent or 13 percent, it is in that range--that is functionally illiterate, that is incapable of reading communications or directions, or communicating and writing. They are severely handicapped in an information economy. We not only need people who are literate, we need people who are computer literate, who have enough understanding of technology to be able to continuously learn on the job.

The Extension Program here at Harvard is a good example of continuous life-long learning. It doesn't have to be vocational in a very narrow sense. But we all are going to have to be, and should be, engaged in continuous learning. Long gone are the days when at the age of 18, or 22, or 27, you can say, "Well, that's it for my learning for life." One more point: The community colleges of America are, in my view, the great unsung heroes of the transition that the American workforce is now going through. The average age of a community college student is 29. As I travel around the country at night, community colleges are filled with people struggling to pay the bills, to go to a community college, to feed the kids, to put the kids to bed, and to deal with their jobs during the day. These people ought to be given medals; community colleges are doing yeoman work, trying to get on with this great transition.

Q: One point to utilize work skills and learn more skills is to plan and schedule work, so on and so on. And it seems like the current gas tax debate and the increase in the minimum wage are hung up on this issue of team and employee participation in these issues. I wonder if you can tell us what the sticking point seems to be relative to the employees.

A: The sticking point here is a provision of the National Labor Relations Act, which does not prohibit employers from engaging in teamwork with employees over productivity, or over efficiency, or over quality, or over many, many topics, but does prohibit them from essentially appointing and deciding who is going to represent employees over wages, hours, and working conditions. These are the key issues that are subjective to collective bargaining, and when employers are allowed, as before 1935, to decide who is going to represent employees, they essentially undermine the ability of employees, in a democratic sense, to decide how they are going to represent themselves. Those sham unions, or company-controlled unions, were one of the key devices that employers used prior to the Wagner Act to keep out unions. There's a great deal of misinformation about what is allowed right now. And again, 97 percent of companies over 5,000 employees have teams, quality teams, efficiency, productivity, all sorts of teams--employee involvement. The only thing employers cannot do is appoint employee representatives to deal with the key issues of collective bargaining. It should not be a problem. It is not a problem.

Q: I'm wondering if your administration has considered any issues regarding immigration, extending or easing immigration for people with college educations, but there seem to be a number of problems, one of which is workers from other countries filling in the low-scale jobs in this country.

A: I'm considering it this moment, actually. You are referring to the H1B visa program, which now does permit employers in the United States to bring in, for six years, foreign nationals who have skills that are not easily available in the United States. It is actually not that long and involved. The Labor Department has to certify those requests within seven days, so it does not have time to verify those requirements. So, in fact, one sticking point in the immigration bill that's moving through Congress is that very point: Is the Labor Department doing, and is it capable of doing, the job it needs to do to verify employers' claims that they cannot get those skilled people other than through a six-year visa, which, by the way, is not a narrow technical matter. The H1B visa turns out, as you may know, to be the main gateway toward legal immigration in this country.

Q: Mr. Secretary, I'd like to get a fix on why, in the opening part of this speech, did you create so much laughter in this room? As I recall, a member of the House Appropriations Committee read your books and was obtuse or stupid enough to ask you if you were a Communist, whereupon another member of the House of Representatives was clearly mad enough to accuse another member of the House of Representatives of being nuts, whereupon a great deal of lack of civility broke out. Since these Republicans could not have gotten into that room unless they were representative of those who sent them there, did you say this to let us know that the American people are obtuse?

A: No.

Q: But then how do Republicans like that get into a room where people call each other nuts, where they ask if you're a Communist--were they all similarly deluded in their maturity? Where's the fault in the chain, if these are our Representatives?

A: My impression, having witnessed this breakdown in civility, is that it may have indeed represented a more general breakdown in civility. That a year ago, I detected, not throughout America by any stretch of the imagination, but in certain circles in this country, an unwillingness to debate and discuss civilly certain differences that we had--a kind of confrontational attitude. But I find--and perhaps I'm being overly optimistic, viewing present political situations with far rosier glasses, given that it is Friday--a little bit more civility now, a little bit more willingness to listen, and to that extent, my anecdote was meant to be perhaps suggestive, perhaps symbolic. Do you want to pursue this longer?

Q: That's a very interesting point, because there's a statue of Charles Sumner near this campus, and I believe that he was beaten for his opinions on Abolition, and the United States broke out into Civil War. So perhaps our Representatives are "representative." Shouldn't we have our vote in there?

A: Well, let's keep the social fabric in here, yes.

Q: Mr. Secretary, in the last segment of your book The Work of Nations, you discuss the collapse of international communism, the disappearance of the USSR, and the new position of the United States in the world. And then you say something about the possibility of a new mass movement. I'm sure about this, because I have a copy of your book right here.

A: There is always a danger in publishing books.

Q: You present the possibility of a new mass movement; you say that the answer to that question is far from clear.

A: The question relates to the consistency between what I was thinking five years ago and what I am now saying. I'm somewhat disappointed, actually, that I have not gone far beyond what I was saying in that book. But let me draw the connection. The point I was making there is that with the collapse of communism, given the nature of the American economy, which is quickly becoming a global economy, the American population is as diverse, if not more diverse, than we ever were. We are indeed a society perhaps in jeopardy. It is now possible for the most fortunate among us to genuinely secede from society through modems and faxes and new technologies, and through the global economy to have more in common with the elites of other nations than with compatriots here in this nation. And that secession is very dangerous. What is the glue that is going to keep us together?

The question fundamentally is one that I believe we are facing now in our political culture even more than we were five years ago. Are we simply an economy in which the commonality that binds us together is no more than the transactions we undertake with each other, or are we still a society in which membership demands certain responsibilities and duties to one another? I don't know the answer to that, I don't know the answer to what it is that is going to bind us together and convince us that we are a society with those kinds of duties and obligations. I do not mean to suggest, and I hope you did not take it to be my suggestion, that we have to find an external enemy. That would be a terrible and very sad consequence of where we are right now. Professor Galbraith.

Q: I have a couple of questions which may be considered as having come from a friendly member of the Committee. Neither has to do with the immediate preoccupations of the Secretary of Labor. In the development of the welfare state, we have placed a very large amount of welfare costs on the payroll--health costs, pension costs, worker disability, and so forth. With the effect that this is true in the United States, it makes it rather expensive to hire workers. Where should we shift more of this cost to the state? After all, the taxpayers don't have that choice, and I belong to that group, so a considerable number of people are considered by Congress to be rich. So what would be the cost of moving this to the budget, rather than remaining on the payroll? I have another question, but it would be an easy question, and a straightforward agreement for this one would be sufficient.

A: When I am out of my present post, I will be able to give straightforward answers to questions like that. I must now resort to ellipses. It is interesting that we are now in the process of moving from a social safety net that is essentially privatized through the corporation to a very different kind of social safety net. Health care coverage provided by employers is declining very dramatically. If one is merely a high school graduate, or has just two years of college, and is in the employ of a company, health care coverage is declining very, very rapidly. The same is true of pensions. Whereas 30 years ago it was common for companies to provide defined benefit pensions, you would know after a period of vesting that you had upon retirement a certain amount of money that you could count on. Now the rage is for 401(k) plans, under which the burden is on you. I, as an employer, may not even contribute any longer. We are seeing before our very eyes the shift away from the company-provided benefit to something else.

Now the question you are raising is, what is the "something else." Is it going to rest completely on the individual or does the state/society have some responsibility to pick up the pieces as the corporation leaves that individual behind? It's a question we dealt with in health care with the formation of the health-care plan. I remember distinctly a meeting in which there was a heated debate about whether to use the company as a platform for national health insurance or to go to a kind of single-party payer system, as in Canada. The decision was made, perhaps unwisely, to rely on the employment relationship. But the question is a very good one.

Q: My other question: Whenever I see a reference with satisfaction to job creation, I always think of the other side of that, which is that we are producing an enormous volume of consumer goods, which takes an enormous expenditure just to sell. I, therefore, go on with the question of whether we shouldn't think, in the longer run at least, of more leisure time and shorter working hours. I'm aware of the extent to which leisure is valued by members of my profession. We begin to value leisure more than people who do more disagreeable work than teaching at Harvard, we think in terms of a much shorter work week, much more leisure time.

A: I think the question has embedded in it a more fundamental question of shortening the work week and yet paying people the same as if they were working for a full week, or rather shortening the work week and paying them a pro-rated share of what they are now earning. Many employees, in my experience, would prefer the former, rather than the latter. But the former is basically an increase in pay. The question comes up as a practical matter, in terms of mandatory overtime. Should we--and I ask this as a matter of intellectual and also practical inquiry--give employees the choice as to whether they want to work over 40 hours a week? Right now, the law requires, in effect, or gives the employer an option to say to the employee, "You must work more than 40 hours a week. I will pay you time and a half, but you do not have the right or the option as an employee not to work over 40 hours a week if I want you to work over 40 hours." Or maybe we should provide an option where you can either have compensation time that you can put away and use as vacation time or time-and-a-half extra wages for the overtime.

Q: Mr. Secretary, you mentioned before about community college education and undergraduate college educations. But when you look at problems such as the inability to read, the inequality begins at a much earlier age. My question is much more along the lines of public education--what reforms should be put in, in your view, and how do they fit into the process so that the value of training and learning will be saved?

A: As you may know, Secretary of Education Riley and I have been working very closely together these past years in trying to develop school-to-work apprenticeship systems so that 11th and 12th graders can get on-the-job experience. A mentor at the work site works closely with teachers in the classroom, showing young people the relationship between what they are learning in school academically and what they could be doing at work.

The press has not reported it, because the press tends not to report news that does not involve controversy. But it has been an enormous success. Young people around the country, over 200,000 now, are involved in these school-to-work apprenticeships. Not long ago, I met a young woman in Boston who had been in danger of dropping out, 16 years old. She was working on building a homeless shelter in the afternoon and in the morning was taking academic subjects, and she came up to me with a huge smile on her face and said something that nobody has said to me before. She said, "Mr. Secretary, I love geometry."

And after I got over the shock, I asked her why. And she said that she was learning geometry in the morning and was applying the geometry on the work site in a very practical way in the afternoon. This is not vocational education. This is academic education in the morning, but applied academic education in the afternoon. I think this is very promising.

Your basic question has to do with the quality and perhaps the resources we put into K through 12 education. I believe that one of the biggest problems we have has to do with inequality of resources. Remember, the federal government only provides five percent of the budgets that go to K through 12 education. States provide about 35 to 45 percent, but the local property tax provides about 50 percent. And we are by a nation segregated by income more than we have ever been before. There are entire towns that have low tax bases versus high tax bases, and it is not surprising that we have such a difference in the resources going to schools on a per capita basis. You have townships next to each other in which the per pupil expenditure can vary to 50, 60, 80, 100 percent. State courts are getting involved in this, but it's a mess, and until we do something to equalize, or at least provide a bit more resources to our poorest schools, our poorest towns, we are going to face an increasing problem with regard to the abilities of young people coming out the other side of this education process.

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