It's perhaps not surprising, then, that when he's asked to name his proudest achievements as former President Clinton's top labor official for four years, Reich mentions first a law that was intended to help restore balance to workers' lives, the 1993 Family & Medical Leave Act. "It's certainly not the full answer but was a beginning," he says of FMLA, which mandates unpaid time off for many employees of large companies facing family emergencies, such as the birth of a new child.
Reich, whose writings have been widely published in newspapers and magazines, is the author of eight books. After leaving the Cabinet in 1997, he returned to academic life -- he had been a professor at Harvard University's Kennedy School of Government -- and today teaches economic and social policy at Brandeis University. Recently, he talked to BusinessWeek Online writer Pamela Mendels about what the New Economy means for its worker bees. Here are edited excerpts of their conversation:
Q: You write that the rewards of the New Economy are coming at a steep price. What is the cost?
A: The rewards come to us as consumers who have far greater choice of products and services than ever before, and can switch far more easily to a better deal when it comes along. That means that the economy overall is more efficient and more innovative, that consumers have more power than ever before. All that is very good and enables us as consumers to have a higher material standard of living.
But the same technologies that allow far wider choice and easier switching by consumers also are wreaking havoc with our personal lives, because as workers and producers, we have to hustle harder than ever to attract and keep every consumer, customer, and client. Companies must be far more flexible than ever before, which means that they can't afford the high fixed costs of steady payrolls. So fewer and fewer of us know with any certainty what we'll earn next year or next month. This causes us to want to make hay while the sun shines, to work harder when the work is available, because we don't know that we will be in demand in the future.
The New Economy is also a two-track economy, either fast-track or slow-track. In order to attract or keep customers and clients, and in order to stay abreast of new technologies, really in order to stay in the loop, we have to work very hard. We can't afford to take a lot of vacations or take time off. If we do work part-time, we are on the slow track, and the slow track means that we are vulnerable, highly vulnerable to being either laid off or marginalized.
The New Economy is [also] generating widening inequality, because if you are well educated, well connected, and innovative, your talents are in greater demand than ever before. On the other hand, if you are a routine worker, doing something workers elsewhere around the world could do just as well and cheaper, then you are losing ground. What this means, in turn, is that low-wage workers have to work harder in order to make ends meet, and high-wage workers face huge "opportunity costs" of not working hard. Every decision they make to go slower entails a much larger potential loss of income.
Q: You write about what is required of employees in the economy. Can you explain your terms "shrink" and "geek"?
A: The innovative workers who are commanding the highest compensation in the New Economy are creative workers, able to see new possibilities in technologies, new artistic possibilities, new content. I call these people geeks. The New Economy also requires a second type of personality, whom I call the shrink, as in a therapist. Shrinks are extremely good at intuiting what people might want or need. Their talents lie in discerning what it is that customers might want, even before customers know that they have a want or a need.
Q: You contrast the organization man of the 1950s with the self-promoter of
today. What are the differences between the two?
A: The organization man of the '50s was perfectly adapted to the large-scale
bureaucracy of that era, which created huge numbers of identical goods or services and was premised on economies of scale. These people had to fit in. They had to be accepted. They had to conform if they were going to take their place in the industrial order. Conformity and acceptance were the key.
The New Economy is not bureaucratic. It's more horizontal than vertical. It's
composed of linkages of contractors, subcontractors, and talented individuals who come together on projects and then recombine in a different formation for different purposes. You are no longer promoted up a hierarchy in a particular organization.
Today, the organizations themselves are becoming amorphous and undefined. The way you gain a promotion today is to promote yourself. We are becoming an economy of free agents. Even full-time employees are paid depending upon their performance, their billable hours or commissions or performance bonuses. Or if they're blue-collar employees, their income depends upon overtime. In this new world, the self-promoter wins, not the organization man. Today's rewards are going to people who make sure they stand out.
In the Old Economy the question was, "Do you fit in?" In the emerging economy, the question is, "Are you in demand? Have you marketed yourself adequately?"
Q: What do you see as some of the consequences?
A: Today there's a brittle difference between friendship and a commercial relationship. People get together and make connections for all sorts of reasons and often there are ulterior motives that have a commercial nature. You get a call from an acquaintance or a friend for lunch or for breakfast, and rarely is it simply to catch up with one another's private lives. Often it's in order to make a deal. There's a new sense of relationship in which personal and commercial are intertwined that seriously threatens the quality of friendships and even the quality of one's own sense of self.
Q: Your solution is overhauling social and employment regulations?
A: Not really. The solution begins with the individual. People have to take
stock of how they are living and make some conscious choices.
The second domain of change must be employers. Employers talk a good game about having so-called family-friendly policies at work -- job sharing, flextime, and so forth. But there is a yawning gap between rhetoric and reality.
If companies were to take a longer-term view of their competitive position, they'd understand that they are paying dearly for turnover, burnout, and loss of, often, very talented people, because they are not understanding what those people need to live whole lives.
But beyond the individual choices and the choices companies make, there are social choices as well, from the small to the large. Let me give you some examples. If you're a blue-collar worker and your employer wants you to work overtime, you don't have the right to say no. You may have children at home, day-care obligations. You may have a car pool waiting for you -- but the employer asks you to work overtime, and you are obligated to work overtime. If you say, "I cannot do it," the employer can fire you. That seems to me a small-scale change that's needed in order to understand and respect people's needs outside work.
There are a number of tax benefits that go to full-time employees, such as health-care and retirement benefits paid through the employer, which are not available to people who are contract employees or freelancers. Why should we provide these tax benefits only to one category of employee -- a shrinking category called full-time employees -- and not to the growing portion of our workforce who have a different employment relationship?
Q: Could you discuss one more idea you mention in the book: earnings insurance as opposed to unemployment insurance?
A: That's very important. An insecurity many people face is not so much a loss of a job, because with the low rate of unemployment expected to stay rather low, people can get new jobs fairly quickly. The real threat is loss of income or loss of the same level of income you had before. A loss of maybe 20% of your income, if you lose one job and move into another. Or if you are paid on a variable rate -- commissions, billable hours, and so on -- the big fear is that next year you may earn 30% less than this year, [although] costs of living, mortgage payments, utility bills, car payments, are fixed. So, we need to consider changing the nature of the insurance we provide.
Earnings insurance would, for example, pay the difference, or maybe half the difference, between what the old job paid and the new job pays, for a certain amount of time. Or between what you were earning last year and what you're earning this year, for a certain amount of time, if the new earnings are below the previous earnings.
It's like a hedge fund against the possibility that you may be facing reduced earnings, and because of that, not having enough cash flow to pay the bills that are not stopping.