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6 Investing in the Future of the Urban Labor Force NEW JOBS, MORE JOBS, DIFFERENT JOBS IN DIFFERENT PLACES A substantial investment in human resources will be required if the nation is to take advantage of the opportunities offered by the structural changes that are transforming the economy and the urban system and by the growth in demand for occupations that require information, commu- nications, and interpersonal skills. As the mechanization of work in both manufacturing and services continues and accelerates, all types of urban areas, including those with strong service sectors, will need resilient labor forces if they are to take new economic roles. While the importation of labor for the new jobs and the out-migration of workers who lose "old" jobs are always possibilities, the slower national rate of growth for tra- ditional manufacturing means that the redundant blue-collar workers will not have the same opportunities for migration that once were common- place. The recent recession has had a powerful reinforcing effect on structural change. It has accelerated the decline of the weaker industries and those most vulnerable to international competition. When the upswing of the business cycle occurs, there will be greater growth in the newer industries and occupations particularly those offering new products and services- relative to expansion in the older industries and occupations (Bureau of Industrial Economics, 19821. Many of the jobs that have disappeared 97

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98 Rethinking Urban Policy during the recession, particularly in manufacturing, mining, and distrib- utive services, will not reappear when it is over. The new jobs that are created will be predominantly in service occupations. And in manufac- turing, the number and proportion of service jobs will increase, although the absolute number as well as the proportion of traditional production jobs could decline. Many service enterprises, particularly those based on office work, will increase their level of mechanization (Ginzberg, 19821. There will be new jobs, perhaps more jobs, but they will be different, many of them demanding new skills and higher levels of education and training. Many workers will have to acquire new skills continuously to retain their jobs. Unskilled jobs are likely to pay less in relation to other work than similar jobs in the past. Many of the new jobs will not be located in the same places as the old jobs. They will be in different parts of the metropolitan area and distributed in a different pattern throughout the country. Table 7 shows growth rates for selected industries during the last decade and projections to 1990. Because the figures for 1990 are based on past trends, they probably overstate growth in traditional manufacturing and understate growth in electronic technology and services. Major changes in such basic industries as metals and automobiles suggest that there is likely to be more permanent displacement of workers in these industries than is projected, even in an economy that is on the whole resurgent.2 The Geography of Cyclical and Structural Unemployment The geography of the recession is an important factor in restructuring urban economies. Because of the regional concentration of particular in- dustries, the recession has had uneven consequences for local economies. In September 1982, when the nationwide unemployment rate reached 10.1 percent, it was over 20 percent for workers in the steel industry and other primary metals and over 15 percent in the automobile, textile, and lumber industries. No service industry had experienced unemployment rates of over 14 percent, and the rates in communications; finance, insurance, and real estate services; and government were all under 5 percent (New York Times, October 10, 1982:A11. In fact, while employment in all goods- producing industries declined by 5.8 percent between July 1981 and April ~ There is some evidence that technological advances could destroy more jobs than they create (Schwartz, in press). This view is disputed by Levitan and Johnson (1982). 2 From 1979 to 1982, employment in traditional manufacturing industries fell by 11 percent (650,000 jobs) (Congressional Budget Office, 1 982a:8).

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Investing in the Future of the Urban Labor Force TABLE 7 Percentage Distribution of Actual and Projected Annual Growth Rates for Employment in Selected Industries 1979- 1990 99 High Low Sectors and Industries 1969-1979 Trend Trend Traditional manufacturing Motor vehicles 0.9 0.5 - 0.7 Textiles - 1.2 0.6 0.2 Rubbera 0.3 0.6 0.5 Iron and steelb 0.7 0.8 0.6 Energy-related Crude petroleum and natural gas extraction 3.0 4.0 3.6 Coal mining 6.7 5.4 4.1 Construction, mining, and oil field machinery 3.4 4.8 2.4 Electronic technology Computers and peripheral equipment 4.6 5.2 4.2 Electronic components 2.9 2.2 2.2 Services Miscellaneous business services 6.4 3.8 2.9 Health servicesC 5.2 4.8 4.1 Professional services 5.1 3.1 2.2 Finance, insurance, and real estate 3.6 2.8 2.2 Total employment 1.9 2.1 1.4 NOTE: The projected low trend assumes a decline in the expansion rate of the labor force, continued high inflation, moderate gains in productivity, and modest increases in real output and employment. The high trend assumes a larger labor force, higher production and productivity, and lower unemployment rates. aIncludes tires, inner tubes, and miscellaneous rubber and plastics products industries. bIncludes blast furnaces, basic iron and steel, and steel foundries and forgings industries. CIncludes doctors' and dentists' services, hospitals, and other health-service industries. SOURCE: Congressional Budget Office (1982a). 1982, service employment actually rose slightly, by 0.3 percent (New York Times, May 18, 1982:D11. Tables 8 and 9 illustrate how these extreme variations in sectoral un- employment have affected particular urban areas. Most of the 20 SMSAs in which unemployment exceeded 12 percent contained high concentra- tions of the industries in the lagging sectors (Table 81. Of these 20 SMSAs, 8 are classified as manufacturing centers in the urban system. Only 3 are regional (diversified service) centers: Mobile, Birmingham, and Spokane. Of the four functional (specialized service) centers, Detroit and Peoria are centers of the automotive and heavy equipment industries.

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100 Rethinking Urban Policy TABLE 8 Metropolitan Areas With the Highest Unemployment Rates, July 1982 Unemployment SMSA Rate Classification Rockford 1 9.1 Manufacturing Flint 18.6 Manufacturing Youngstown 18.3 Manufacturing Peoria 15.9 Functional Gary 15.6 Manufacturing Lakeland 15.4 Mining-Industrial Northeast Pennsylvania 15.1 Manufacturing Johnstown 15.1 Mining-Industr~al Duluth 14.7 Mining-Industr~al Detroit 14.4 Functional Mobile 13.6 Subregional Jersey City 13.3 Functional Canton 13.1 Manufacturing Birmingham 13.0 Subregional Huntsville 12.8 Industrial-Military Tacoma 12.8 Educational-Manufacturing Spokane 12.4 Subregional Fresno 12.2 Government-Education Knoxville 12.1 Functional Chattanooga 1 2.1 Manufacturing York 12.0 Manufacturing U.S. average 9.8 SOURCE: Bureau of Labor Statistics ( 1 982:Table D- 1). The effect of cyclical factors on different types of cities is further illustrated by Table 9. Of the 22 SMSAs with rates of unemployment well below the national average (9.8 percent) only l, Lancaster, is a manu- facturing center. The 3 functional (specialized service) centers, Tulsa, Hartford, and Rochester, are centers for energy, insurance (a major service industry), and advanced instruments, respectively. Even with the end of the recession, many cities where declining in- dustries are concentrated will continue to face long-term structural un- employment. Even in areas in which a major restructuring of the economy is well advanced, as in New York City, the introduction of new service jobs does not mean that those who have been laid off from the disappearing manufacturing jobs will find work. Workers for many of the new jobs will be imported from other regions. Skilled and semiskilled workers in areas with concentrations of old-line industries will, in many cases, transfer to consumer service occupations, usually at lower pay and with fewer benefits ( OCR for page 97
Investing in the Future of the Urban Labor Force TABLE 9 Metropolitan Areas With the Lowest Unemployment Rates, July 1982 101 Unemployment SMSA Rate Classification Raleigh-Durham 4.4 Government-Education Oklahoma City 4.5 Subregional Harrisburg 5.5 Government-Education Lancaster 5.5 Manufacturing Washington 6.3 Government-Education Minneapolis 6.3 Regional Tulsa 6.3 Functional Denver 6.3 Regional Nassau 6.3 Residential Orlando 6.4 Resort-Retirement Hartford 6.4 Functional Ft. Lauderdale 6.5 Resort-Retirement Newport News 6.6 Industrial-Military Atlanta 6.6 Regional Philadelphia 6.8 Regional Madison 6.8 Government-Education Albany 6.9 Government-Education Pensacola 6.9 Industrial-Military Anaheim 7.0 Residential Rochester 7.0 Functional U.S. average 9.8 SOURCE: Bureau of Labor Statistics (1982:Table D-1). Some workers whose jobs have been terminated will seek to move to areas where they think their skills may be marketable. If those skills are limited to industries or occupations that are declining, relocation is likely to change only the site of their unemployment or underemployment. The American economy may have reached the end of an era in which there was always a good job somewhere for a skilled blue-collar craftsman. Clearly, however, new skills in a wide range of occupations are needed. For example, projections estimate that while demand for machine assem- blers will increase only 27 percent by 1990, demand for data processing machine mechanics will increase by over 157 percent (Carey, 19811. Redundant Labor Estimates of the size of the structural unemployment problem (Table 10) suggest that as of January 1983, depending on the definition used, the number of dislocated workers could vary from 100,000 1 percent of the unemployed to over 2 millionabout 20 percent of the unem-

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102 Rethinking Urban Policy played (Congressional Budget Office, 1982a). Probably a practical esti- mate for policy-making purposes is 800,000-1,000,000, accounting for most of the workers affected by mass layoffs and plant closings (Congres- sional Budget Of fire, 1 982a:4 11. -These estimates describe only the immediate problem. They do not account for continuing worker dislocation from further changes in the economy and within specific industries over the next decade or so. The problem of redundant labor differs from the problems of temporary unemployment that the nation has faced in the past. First, it is a continuing problem and will exist in periods of prosperity (although it will not be as severe) as well as in periods of economic recession. Second, structural change compounds the impact of cyclical unemployment on skilled work- ers and older workers. In 1982, for the first time in recent history, the rate of unemployment in the skilled trades exceeded the average unem- ployment rate (New York Times, August 8, 19821. Certainly this situation was exacerbated by a prolonged recession that hit construction industries especially hard. Many skilled workers are older. Table 10 shows that 845,000-1,050,000 workers currently affected by structural unemploy- ment are in their mid-forties or older. Some of these workers have skills that are unsuited to the kinds of new jobs that are being created in the growing sectors of the economy. Thus they may have a difficult time finding replacement jobs either in their existing communities or in places to which they might move if their old jobs are not restored as the recession ends. The problem is further complicated by the large concentrations of re- dundant manufacturing workers in middle-sized urban areas with spe- cialized economies. Thus, structural change in a single plant can affect a large percentage of the total local labor force. Even if it is assumed that relocation to another area would increase chances of reemployment, the age of such workers makes migration a difficult option to pursue. Com- munity and family ties, mortgages on existing homes at rates that cannot be duplicated in a new location, and supporting institutions and services in existing communities, unions, and industries tend to inhibit migration. The redundant labor problem in declining industries has both short- and long-term aspects. In a number of areas there is a short-term problem of finding jobs for those who are unemployed, whose unemployment benefits have been exhausted, and whose prospects for being called back to their old jobs or to work in the same firms are at best remote. They may need retraining, relocation, or both. For the long term, there is a need to devise methods of anticipating declining employment or occupational restruc- turing in some industries and to institute programs to retrain and relocate workers whose jobs will be eliminated. In the absence of such programs,

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Investing in the Future of the Urban Labor Force TABLE 10 Estimated Numbers of Dislocated Workers in January 1983 Under Alternative Criteria and Economic Assumptions Number of Workers (in thousands) 103 Criteria High Trenda Middle Trendb Single criteria 1,065 880 835 Declining industry 1,700 Declining industry and other 2,165 1,785 1,095 unemployed in declining areae 1,360 1,150 675 Declining occupationf 835 710 845 10 years or more of job tenure 1,050 890 535 More than 45 years of age 760 560 More than 26 weeks of unemployment Multiple criteria Declining industry and 10 years of job tenure 275 225 215 45 or more years of age 250 205 195 26 weeks of unemployment 145 110 100 Declining industry including other unemployed in declining arease and 10 years of job tenure 430 355 340 45 or more years of age 490 395 375 26 weeks of unemployment 330 255 245 Declining occupationf and 10 years of job tenure 235 195 185 45 or more years of age 335 280 265 26 weeks of unemployment 165 120 105 aHigh trend assumes continuation of March 1980-December 1982 growth rates in the number of unemployed workers in each category. Specifically, the number of workers unemployed from declining industries increased by 32 percent in this period a monthly average of 1.4 percent. bThe middle trend assumes that the number of dislocated workers will remain constant from December 1981 to January 1983. The number of dislocated workers in December 1981 is estimated by adjusting March 1980 Current Population Survey totals for changes in the level and composition of unemployment through December 1981. CThe low trend assumes that the number of dislocated workers in each category decreases proportionately with the projected change in the aggregate number of unemployed workers between the first quarter of 1982 and the first quarter of 1983, a reduction of nearly 5 percent. The declining industry category includes all job losers from industries with declining employment levels from 1978 to 1980 (see Bendick and Devine, 1981). elf a declining industry was located in an area defined as declining, all other job losers in the area were included. Declining areas are defined as those experiencing declines in population from 1970 to 1980 or with an unemployment rate of 8.5 percent or higher in March 1980. fThe declining occupation category includes all job losers from occupations with declining employment levels from 1977 to 1980. SOURCE: Congressional Budget Office (1982a).

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104 Rethinking Urban Policy structural unemployment is likely to reach beyond the blue-collar ranks into the middle technical and professional levels of many industries, par- ticularly manufacturing, mining, and some services (Ernst, 1982; Gunn, 1982). The New Worker A serious, broad policy issue arising from the restructuring of national and urban economies is the inadequate preparation of those who will enter the labor force in the future. More than in the past, the international competitiveness of the American economy will depend on the quality of its labor force, including its flexibility in shifting to new kinds of work and to new ways of working. The increasing knowledge required by many old and new occupations suggests the need to invest in the education of the present and future labor force. Higher- and middle-level occupations will require advanced scientific and mathematical education, computer competence, and strong verbal skills. Lower-level occupations will require literacy, usually more advanced verbal skills, basic mechanical skills, and some introduction to the use of computers. The information content of many service jobs is increasing as the proportion of unskilled private sector jobs shrinks (Mare and Winship, 19791. Certainly one aspect of this problem involves education in science and mathematics, especially at the secondary-school level. In particular, there is a need for computer literacy, a basic understanding of how to use computers, across the whole population (National Academy of Sciences- National Academy of Engineering, 19821. The problem is, however, far broader and more complex than the education of a new generation of scientists and engineers. It includes the education and training of young people, particularly disadvantaged urban minorities and the poor, for en- trance into and advancement in the economic mainstream.3 The shift in the economy toward service jobs should signal a need for a reorientation of the local educational system to equip more students for entry into that market. Even in such blue-collar industries as transportation and distribution, traditional manual jobs are being replaced by mechani- zation and computer-assisted systems. For a wide variety of nonprofes- sional and nontechnical office and manufacturing jobs ranging from secretarial positions to machinists, some training in computer-assisted work is necessary (Guiliano, 1982:148ff.; Gunn, 1982:114ff.~. 3 Less than 2 percent of the nation's scientists and engineers are black, indicating a serious problem of underdevelopment of a potential source of talent.

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investing in the Future of the Urban Labor Force 105 Because of the ways in which work is being reorganized, career ad- vancement may require a worker to change occupations and firms more frequently than in the past. Without better preparation, many workers will be confined to low-level service occupations that suffer not only from low wages but also from rapid turnover and little or no job security. An alternative for some has been participation in the underground economy. Both the occupational and geographic mobility of young workers are restricted by the lack of basic skills and work habits that are needed in a wide variety of jobs. The absence of these transferable skills makes work- ers less marketable and inhibits full or rapid adjustment of regional and national economies. It also often retards the introduction of new technology that can increase productivity and even improve the work environment. The effect tends to be magnified at the local level, particularly in highly specialized manufacturing economies, which tend to be the smaller urban areas. The problems of redundant older workers and the inadequate preparation of younger workers for the kinds of jobs and work environment that will increasingly characterize a more service-oriented and knowledge-based labor market make the quality of the labor force a matter for urgent national attention. Ways are needed to improve the ease with which workers and jobs can be matched, whether by facilitating migration to places where the jobs are or by attracting jobs to where the workers are. Ways are also needed to facilitate the transition of workers from one job or occupation to another, both within firms and between firms,4 to constantly improve the skills of those already working, and to improve and broaden education and training for new entrants into the labor market. LABOR MARKET POLICY OPTIONS The National Market Approach There are strong differences of opinion about the way labor markets work and how policy should address their imperfections. One view tends to rely on the "natural" operation of the economy to produce, over time, the adjustments that will be needed in the labor forces of metropolitan areas. This is essentially the strategy advocated by the President's Com- mission on an Agenda for the Eighties (1980) and the President's Urban Policy Report (U.S. Department of Housing and Urban Development, 19821. Both assume that the labor market works spatially through the 4 To some extent this will require the cooperation of unions and management in redefining jobs and job security arrangements within industries (Piore, 1981).

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106 Rethinking Urban Policy migration of industries and workers to locations that are the most eco- nomically advantageous to each. They also assume that these patterns of migration are the consequences of long-term trends that are, for all prac- tical purposes, irreversible, or at least not subject to substantial influence by public policy. The President's commission, for example, argues that "recognition should be made of the near immutability of the technological, economic, social, and demographic trends that herald the emergence of a post-industrial society" (p. 1001. In a similar vein, the 1982 President's commission asserts that "the variety of urban conditions is ultimately traceable to natural geographic features and to decisions and preferences of individuals and firms as they respond to innovations in technology, transportation, and communications, and to changing life-style prefer- ences" (pp. 2-30~. Both reports assume that no form of government intervention will result in as efficient an allocation of labor to jobs as the unfettered operation of the market (U.S. Department of Housing and Urban Development, 1982:2- 161. They also assume that allowing the market free rein will maximize national wealth, which ultimately will result in a higher degree of indi- vidual and urban welfare than any strategy that attempts to redistribute wealth among people or areas on principles of equity (President's Com- mission on an Agenda for the Eighties, 1980:Chapter 51. This approach relies on the idea that, in the long run, market operation will produce a state of equilibrium in terms of both economic sectors and geographical regions. Finally, they assume that in reaching equilibrium, the various market prices whether for products or factors such as land, capital, and labor- will reflect all social as well as private costs. The Local Market Approach Appealing as national market theory is, we feel it overlooks some important aspects of labor market operation and is therefore not a fully satisfactory basis for policy. First, the labor market is not a completely integrated national market but a series of related, but also segmented, urban labor markets (Berry, 19641. There is not one market but many, and they are not equally competitive; they are sometimes referred to as a dual labor market. Workers in one market may have highly imperfect information about other markets and only approximate knowledge of their own. Second, one of the most basic assumptions of simplistic approaches to free market strategy that the forces governing labor mobility are virtually immutable appears erroneous. There seem to be few immutable forces governing geographic patterns of labor mobility. The decline of a particular

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Investing in the Future of the Urban Labor Force 107 region and the growth of another are not inevitable, nor are these occur- rences necessarily reciprocals of each other. A short time ago the Frostbelt metropolitan areas were scenes of rapid urban growth, presumably at the expense of the less urbanized South. More recently, many perceived the reverse to be the case as the southern and western states experienced rapid job and population growth. Yet there has been a remarkable revitalization of the New England economy, and although the Midwest has experienced job declines, a continuation of such trends does not appear to be inevitable. A recent study by the staff of the Joint Economic Committee, for instance, found that the Midwest was the region expected to receive the largest percentage increase in new plants and permanent offices of high-tech- nology firms (U.S. Congress, Joint Economic Committee, 19821. Empirical studies of labor markets demonstrate that the most important single factor in labor migration for rapidly growing and rapidly declining areas is the growth or decline of jobs. The location of investment is the critical driving force of regional growth as well as regional differentiation (G. Clark, 19831. Employment opportunity, or at least the perception of opportunity, is a critical factor in urban growth. The flexibility of the local labor market may also be an important factor because the turnover in jobs may increase the number of chances a worker has of being hired or moving up the career ladder in a particular local market. Turnover also seems to explain continued in-migration of workers to declining areas (G. Clark, 1983:Chapter 31. National migration trends seem to be second in importance and to respond to the growth in job opportunities. Thus general background conditions influence the flows of workers between local labor markets. The important consideration seems to be how well the national economy is doing compared with the local economy (G. Clark, 1983:Chapter 31. In times of general unemployment and slow economic growth, labor mi- gration slows. The national trends operate to encourage migration when workers perceive not only that their local economy is stagnant or in decline but also that this condition is sharply at variance with other local economies (G. Clark, 1983:Chapter 31. They are willing to take the risk that moving entails when they see their local economy as weak in comparison with the nation's economy and other local economies. When they see things as bad all over, however, they are more likely to stay put. Third, any interpretation of the operation of local labor markets must be especially cautious in using net migration figures. Such data often obscure more than they explain. The gross flows of workers into and out of an urban area or region provide a far more accurate and useful picture of what is actually happening (G. Clark, 1982a, 1983:Chapter 3; National Research Council, 1982a). Even declining areas continue to have a steady

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124 Rethinking Urban Policy supplement that of the system. The education might include tutoring in basic subjects, such as mathematics, or various kinds of vocational train- ing.~6 Finally, consideration might be given to creating a few selected residential or specialized schools offering advanced high school programs as a means of developing the potential of exceptional young people when the regular public schools cannot provide an environment that supports their intellectual growth. North Carolina's School of Science and Math- . . emat~cs Is one example. Created by the state legislature, it draws students from the entire state, reflecting the racial, sex, and income distribution of the whole population. It has produced a high percentage of merit scholars while serving as a seedbed for educational techniques that can be used by the regular public schools (Dymally, 19821. Clearly, the public schools will not be able to serve everyone. Seriously disadvantaged young people will continue to need special programs such as the Job Corps. Despite its relatively high cost per enrollee, the success of that program appears to have built a bipartisan consensus in favor of maintaining it as an important direct federal responsibility for training disadvantaged people and placing them in jobs (Congressional Budget Office, 1982b). Military service also remains an important source of basic skill and job training for some young people. Additional attention; might be given to the quality of both regular and reserve training as an integral part of the nation's training strategy. A great deal of experimentation is now going on in education and training programs, much of it in response to the financial distress of school budgets and the simultaneous public demand for improved performance by schools. While much of this activity has been highly creative, and room for experimentation is always desirable in education, one of the tasks of state and local leadership is to begin to use this experience to help organize investments in education and training in ways that contribute to an overall strategy of urban economic adjustment and stabilization. State involvement can be particularly crucial, because no matter how well some communities educate their children, there still may not be enough jobs in a particular local market. If part of the process is conceived as job placement for the young worker, the placement program has to be inte- grated with state, regional, and national systems. New entrants are among the most mobile members of the labor force, and programs should rec- ognize that it is often easier for them to move than it is for older workers. i6 A paid tutoring program could have multiple benefitse.g., making use of temporarily redundant baby-boom college graduates and developing new skills among undereducated 25- year-olds.

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Investing in the Future of the Urban Labor Force The educational system should also be seen as a critical part of the economic development strategy of an urban area. Recent initiatives by Massachusetts and other states to establish stronger vocational education programs illustrate the importance that states are placing on training their labor forces as an integral part of efforts to attract and keep industries (Magarell, 1983~. Since industry tends to be reluctant to provide basic skill training but has increasingly recognized the need for it, the creation of an industry-supported fund, perhaps channeled through a community foundation, might be an effective device for developing industry financial support for the better preparation of young workers and for concentrating those resources where they are most likely to be effective. In addition to support for basic education, such a fund might assist in supporting, jointly with public funds, a system of postsecondary training vouchers. These vouchers could be issued to high school graduates for training or retraining at a time of their choice, provided that they are not eligible for other public subsidies of educational expenses, such as tax deductions or credits. The vouchers could be used immediately after graduation for specialized training or to offset college costs, or they could be banked with interest for training at a later stage of a person's career when a job change was necessary or desirable. One way of looking at this proposal is as an extension of public re- sponsibility for the education process by one year but not necessarily a consecutive year on the theory that the returns to society through greater productivity and earning power will more than repay the cost. Many self- employed professionals are able to deduct their continuing educational costs from their income taxes, thus shifting part of such costs to the public at large. Ordinary workers who are less able to bear the cost, however, have no such opportunity. For most American workers, a tax deduction or credit would have little dollar value, whereas a voucher would allow them to discount the out-of-pocket cost of retraining or a special course to an affordable level. With a long-term decline in the proportion (and in many states the absolute number) of students in regular kindergarten through 12th grade, a postsecondary voucher program would result in a less rapid decline in the proportion of the public budget devoted to education, but would not axiomatically increase education outlays. A supplemental source of funding for postsecondary training might be tax credits for corporations that provide training vouchers to their employees for use in cooperatively funded institutes operated by an industry, a regional association of firms, or a government-industry partnership. Like credits for research and de- velopment, employee training provides a substantial long-term benefit for a small, early cost. 125

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126 Rethinking Urban Policy While the proposal at this stage is conceptual, the basic idea is to provide, much as the G.I. Bill did, a flexible opportunity for education that fits individual need and produces a national social benefit. Postsec- ondary vouchers could be used, for example, for regular public vocational training, privately provided training, union programs, and, conceivably, for self-teaching programs such as computer courseware that have been accredited by the appropriate educational or training authorities. Such a program would be to the advantage of industry as well as workers, since it is increasingly obvious that all the jobs that will be created cannot be filled by new recruitment alone. Retraining the existing work force will be a continuing necessity for any industry that hopes to keep abreast of new technology and remain competitive (Mills, 1981:2671. Moreover, as an increasingly important objective of collective bargaining agreements, labor organizations are considering the rights of employees to retraining and to participate in judgments about the introduction of mechanized systems (Levitan and Johnson, 19824. Keeping the Skills and Knowledge of Workers Up to Date We can no longer assume that a high school graduate who does not go to college or some other postsecondary educational program will need no further basic or special training apart from that received on the job. Success in the labor markets of an advanced economy will increasingly entail continuous education as part of a worker's life. It is conceivable that in the l990s some urban school systems will enroll more adults than children. This suggests a restructuring of urban education, with more attention to adult and continuing educational programs, to adult vocational education, and to expanding the role of community colleges. It also suggests changes in the basic social contract involving labor, industry, government, and educational institutions. Redundancy planning should become a normal function of industries and communities.~7 Essentially, redundancy planning means anticipating changes in the economy, markets, and technology and the ways they will affect patterns of employment in the industries located in a community. Such a program would attempt to identify those industries and firms that can be expected to experience substantial changes in their labor re- quirements as a result of shifts in markets or technology, giving emphasis to urban areas in which there are heavy concentrations of such firms. By |7 Our discussion of redundancy planning is based on Drucker (1981:249-251); also see Oreskes (1982:5)

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Investing in the Future of the Urban Labor Force 127 anticipating and preparing for transitions, it may be possible to smooth the process for firms, workers, and their communities. Firms that operate in changing markets are often under great pressure from their unions and local communities to maintain practices that may even speed their demise. Workers are understandably anxious about the prospect of losing a job when they have skills but no known prospects of continued employment in their trade and no sense that they may have skills that are transferable to other jobs in the same firm, in another firm in the same community, or to another firm in another community. Redundancy planning also means having preventive unemployment pro- grams available for retraining the dislocated workers and a process set up to place them in new jobs. If established, such a process can ease the transition considerably. Workers can be offered training and new jobs before their present jobs are terminated. A preventive strategy essentially consists of foreseeing the decline of employment in an industry and preparing workers through retraining pro- grams for other types of jobs, preferably new jobs in the same labor market. Such a program has been used, with some reports of success, in West Gerrnany(NationalResearch Council, 1982b:19;Wolman, 1982:1131. Where industries are unionized, contract clauses providing for early warn- ings of permanent layoffs and for job training may become fairly standard, reflecting both a growing sense of corporate responsibility for the welfare of employees and union realization that their members' interests can be protected best if they are assured of gaining and maintaining marketable skills. In many cases this assurance may consist of training in the general verbal and quantitative skills needed to operate computerized equipment or to compete for the better jobs in service industries. While it is reasonable to assume that industries will increasingly accept responsibility for retraining workers who face layoffs, communities should also become involved in redundancy planning. Because many workers would probably prefer not to relocate and because substantial relocation of workers can have a serious ripple effect on the local economy and fiscal capacity, the community should also assume some part of the obligation for redundancy planning and for helping to train and place as many workers as possible in new jobs in the community or within commuting distance. From the perspective of industry, if no redundancy planning or retraining programs exist, decisions to change corporate investment patterns or to introduce new technology will be resisted more strenuously by both work- ers and their community leaders. Redundancy planning should be aimed primarily at workers who have several years of experience but who are well under retirement age. They are the most vulnerable because they have families to support, children

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128 Rethinking Urban Policy in school or college, mortgages, and usually strong ties to the community. Redundancy planning may be considered an adjunct to unemployment insurance; instead of providing only a temporary stipend to offset cyclical unemployment, it involves an active program of planning for change, retraining, and placement in the event of structural unemployment. Part of the cost of redundancy planning should be paid by the employer when that is possible. Part may be considered legitimate public investment in the human resources of an area and of the nation. The advantage of such an approach is that it tends to increase the security of workers, allowing technological progress to occur in their industry without unrea- sonable labor resistance. It gives workers more bargaining power in the labor market and more control over their own careers. It helps a community keep its labor force up to date and in a position to compete for other industries that need the kinds of skills for which the labor force is trained. While retraining will make it easier for some workers to move, it can also make it possible for others to stay and be productive or to move up the local employment ladder. The community can then more readily accept change rather than fear it or find itself reduced to spending its funds to buy out a declining industry. It should not be necessary for a community to hit bottom before it can begin to think about itself as a different kind of place. While redundancy planning, including education and training programs and the mobility option discussed above, is the most urgent of the tran- sitional problems raised by structural unemployment, attention must also be given to the continuous training of the workers in a community who take jobs that require a high degree of skill and training. This means engaging the resources of a community for adult education, community college, business-based education, and other education and training in a broader and more intensive effort than has been common. It also involves a higher degree of cooperation among private and public institutions. Computer training and education is clearly a high priority. If computer literacy is to be advanced in the school system, current teachers must themselves become masters of these powerful machines that have become as important to both practical and theoretical thinking as our standard languages and traditional mathematics. Among other groups, office workers are obvious targets for continuing education in computer technology. The scientists and engineers of a community, in particular, must continuously refresh their information and skills with new ideas and technology. In ~8 Rader (1982:18) argues that "computer literacy is essential if a person is to participate fully in an information society, and will be as important as reading literacy."

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Investing in the Future of the Urban Labor Force 129 fact, workers of almost all sorts will need to keep abreast of new tech- nology. One cautionary note is important in designing computer literacy pro- grams. Advances in technology are rapid and computers are increasingly usable by people with minimal training in programming. There is thus risk that some forms of computer training could rapidly become obsolete and virtually worthless. This suggests a tiered approach, with a program for almost everyone that emphasizes basic skills and applications a sort of driver training for a wide population of potential users. From the basics, other tiers can be added for education in computer applications, mechanics, and theory. Any effective program in continuous education of a large part of the work force represents a major departure from past practices. We have tended to assume that most of the work force is already adequately edu- cated, so that training efforts represent only a marginal part of the re- sponsibility for the quality of work. Even so, the nation has been spending $40 billion a year on training, and government has been contributing only a little over $9 billion ($4 billion from state and local governments, $5 billion from the federal government) of the total (New York Times, October 17, 19821. This is a low level of commitment in comparison with that of other economically advanced countries. If the United States had a retrain- ing program with an effort equivalent to that of Sweden, for example, it would involve a cost of at least $100 billion a year (Haveman, 19821. Some of the added effort may be paid for by those who receive the training. Even if it were entirely paid by employers and government, however, it could be the most important investment made in the future of an area and of the country (Drucker, 1981 :251~: There is a need, above all, to realize that the labor force of today and even more the labor force of tomorrowrepresents a tremendous resource of knowledge and experience which has to be continuously tapped and continuously upgraded. We need to shift from the traditional approach of the nineteenth century which saw labor as a "cost," to the approach which so far only the Japanese have taken, the approach of seeing labor as a "resource" and therefore, as a "profit center" rather than a "cost center." There is a need to organize the human resource around continuous learning and continuous training. The Role of Higher Education If the public school system is the foundation for human resources in- vestment strategies, the urban universities and community colleges are the capstone. They should be considered as centers for investment in the development of human capital (Rudnick, 19821.

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130 Rethinking Urban Policy The universities in an urban area are not of a piece. Some are traditional, private institutions; others are truly national or international universities whose mission is scarcely local at all. Perhaps the most important are state or city universities, many of which are part of a multicampus system. The universities of an urban area are internally complex, respond to a variety of external interests, and are often ambivalent about the relationship they should have toward their immediate environment. Notwithstanding the difficulties that they present for participation in an urban strategy, their contribution to such a strategy can be crucial, particularly in the long term. '9 Taking advantage of the potential of the universities, however, requires a sensitive understanding of their institutional limitations and of their many roles in education, research, and public service, regardless of the fortunes of their locations. Thus, many universities will consider themselves as institutions that coincidentally are located in urban settings, while others will characterize themselves as urban universities with a primary interest in addressing the higher education needs of the local population (Brown, 19821. Community colleges and postsecondary technical schools have generally been more aggressive in relating their programs to local labor markets. Universities and colleges are important parts of the local service econ- omy. They can also contribute to the fund of intelligence necessary to formulating local and regional economic development strategies. Our chief interest, however, is in the university's role in developing human re- sources. This involves three functions that are fundamental to the com- petitive position of an area: (1) the education of minorities, (2) the improvement of the primary and secondary educational system, and (3) the continuing education and retraining of professionals, managers, and tech- . . nlclans. The higher education of minority and disadvantaged students has be- come a primary function of publicly supported urban universities and community colleges. These schools enroll large proportions of minority students, many of them graduates of weak secondary schools; low-income students; part-time students; students of older average ages; and a generally high percentage of married and working students (Rudnick, 1982:31~. Despite these difficulties for students and for the institutions that such populations pose, there is a need to support and expand such opportunities and to assist students in completing their courses of study. Higher edu- ]9 For a discussion of the pitfalls of expecting too much from universities and other think tanks in solving urban problems, see Szanton (1981).

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Investing in the Future of the Urban Labor Force 131 cation is the surest way to break an intergenerational chain of poverty. It is also necessary for entry into most credentialed occupations. At the same time, the rising educational profile of an area increases its attraction for employers in industries that are expanding and need well-trained workers. A strong university in an attractive city provides a significant competitive advantage. Over time it may even operate as a magnet, draining talent from other places in a cumulative, reinforcing process. Inner-city uni- versities and colleges are important stabilizing forces insofar as they help offset the other competitive disadvantages of inner cities by reducing migration flows. In some cases they can do much more, especially when used as a focus for urban conservation and economic development. In this sense an urban university can do more then Almost ~nv other ~ ~ ^ ~ ~ ~ _ ~ } ~ HA 4_A institution to give an area a competitive edge over places that are not mining the potential of their minority populations for entry into jobs that require advanced training and education. This is a costly role, however. It involves costs that are not imposed on institutions that confine them- selves to traditional approaches to the education of traditional, full-time students with good academic backgrounds. State funding formulas gen- erally do not recognize the differences. States should revise these formulas to provide priority support for higher education of minorities and the disadvantaged. From a programmatic point of view, there is also a need, both in urban universities and in the traditionally black colleges, to provide and promote educational programs geared to the disadvanta~cl Tl~ :~1 _1_ _r 1 ~c~ _ 111~ villa UrULld1 rOle Of uroan unlvers1nes in a human resources strategy is fostering change in the urban school system. The universities have a vested interest in the quality of primary and secondary education; if its quality is high, they can dispense with remedial programs. They will also attract more students who can be expected to do well in college, having received a sound primary and secondary education in science. mathematics, computers, and language. As centers for teacher training and the development of educational theory, universities are beginning to recognize an obligation for direct involvement in local educational systems. For example, a project spon- sored by the Ford Foundation currently involves state university presidents and school superintendents in working relationships designed to increase support for primary and secondary educational imorovem~nt~ anal hazer preparation of students for higher education , _ ~ ~ r _ . . _ . . . v a. . ~ V _ ~ ~ _ A Ultimately, universities should be involved in restructuring the entire urban educational system, including approaches to training and retraining the adult work force. While some aspects of the educational system are not directly associated with higher education, creating new techniques to retrain redundant workers or to motivate and prepare new entrants to the

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132 Rethinking Urban Policy labor force requires a strong element of multidisciplinary research and experimentation. Programs created through the association of area schools, businesses, and unions can be major catalysts in the timely reform of both public and corporate training and education.20 Urban universities are also a valuable resource for the private sector in terms of training and retraining professionals and other workers. Uni- versities can develop strong relationships with the private sector through the use of industry professionals in their teaching programs; through re- search and development programs, including industry-sponsored research; and in the analysis of new technologies and related educational needs. Involvement of a university in the economy of its region can be of material assistance in keeping that economy competitive. The experiences of Silicon Valley, the Boston area, and North Caro- lina's Research Triangle illustrate how important university-related eco- nomic development strategies can be. To be sure, the universities involved- Stanford, Harvard and MIT, and Duke and the University of North Car- olina are unique and strong institutions. But many less prestigious uni- versities have strengths that could be harnessed for economic development. They may not be able to generate a Silicon Valley, but they can support other activities that materially improve an area's economy (Sheridan, 19821. To some extent, universities are in competition with advanced education programs offered within industry, programs that in part have been de- veloped because of default by institutions of higher education. Many of these programs could be recaptured by educational institutions, which alone are able to offer the credentials often required for professional advancement. To do so, however, urban universities would have to accept the obligation to provide continuing degree and nondegree education for professionals and to ensure that the quality of these programs matches or exceeds that which industry can provide alone. Universities may also have to be more flexible in allowing industry a sufficient say in the content and methods of instruction for special courses and programs. Particular attention might be given to the educational needs of managers and profes- sionals in smaller, growing firms that lack the capacity to provide in- house education on a par with that provided by large international cor- porations. Universities could provide such programs on a cooperative basis, with smaller firms providing development programs that offer the 20 An illustration of how a university might approach this task can be found in the proposal of Wayne State University to establish a comprehensive education and training program to retool Michigan's automotive work force for new jobs and career mobility (Rudnick, 1982:24).

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Investing in the Future of the Urban Labor Force 133 quality of the large corporate career development programs at relatively modest costs for each firm. In this way, university education could also be directly related to local economic growth. SUMMARY The economic fortunes of our urban areas rest on their human capital, which has replaced factors such as natural resources as the major source of comparative advantage among firms and urban areas. That human capital can become as obsolete or inappropriate for competition in an advanced economy as deteriorating infrastructure and antiquated industrial plants and technology. It must be continuously renewed. Most American cities have a large pool of underdeveloped human capital in their existing labor forces and in those people who could enter the economic mainstream in years to come if they are adequately trained and educated. Well-trained workers are, of course, mobile if they choose to be. But a well-trained labor force is also a major attractor of capital. Since, in most instances, capital is more mobile than labor, the development of a region's human resources is probably the most useful investment that it can make in its own future. In this chapter we have recommended that in devising a strategy for investment in its human resources, the nation and its urban areas should first invest in developing the basic knowledge and skills without which a worker cannot function in the economic mainstream. These include a working knowledge of science, mathematics, and computers and, above all, a level of literacy that is functional to the type of society and work environment that will exist. Particular attention should be given to edu- cating and training the disadvantaged youth of the inner city. They rep- resent a substantial resource that the nation cannot afford to waste, particularly as the number of new entrants to the labor force declines from rates of the last two decades. Without training they will operate as a brake on the rest of the economy, requiring expenditures on which no return can be expected. Second, we have recommended that substantial investments be made in maintaining knowledge and skills and in retraining dislocated workers. Redundancy planning should become a regular function of national, state, and urban governments working in combination with industries, univer- sities, and schools. We are particularly concerned with productive older workers who happen to work in industries that must change the nature of the work they offer or even their locations in order to remain competitive or to stay in business at all. Retraining such workers is essential if they are to maintain their incomes and to find new jobs. It is also essential to

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134 Rethinking Urban Policy their communities and to industry itself to reduce resistance to economic change and growth. Third, we have recommended that special attention be given to the role that universities might play in a strategy of investment in human resources. Urban universities are in a position that allows them to be catalysts in bringing together the public and private parties necessary to make in- vestment strategies work. Urban universities are also in a position to offer both moral and intellectual leadership in restructuring urban educational systems, in rethinking their own role in preparing minority youth for the new world of work, and in continuously refreshing the knowledge of the professional labor force. As in other topics discussed in this report, these elements are not in- dependent of each other. They are interrelated parts of a strategy of using existing resources to expand economic opportunities and to foster new enterprises and development.