U.S. firms responded to price competition by downsizing, flattening hierarchies, and restructuring organizations and processes. In one survey, for example, three-fourths of the corporate respondents cited increased competitive pressures as the key factor motivating restructuring of their operations (Wyatt Company, 1993). Increases in investments of foreign companies in the United States also grew significantly during this time period (growing from $83 billion in 1980 to $406 billion by 1990) and put additional pressure on production and work systems to compete with ones designed (and sometimes managed) by international competitors.

These changes in markets interacted with—and in industries such as trucking and telecommunications accelerated (e.g., Belzer, 1994; Batt and Keefe, 1999)—the decline in unionization. In industries especially hit by price competition (such as auto supply, steel, tires, apparel, electrical machinery, and trucking), union strategies to "take wages out of competition" by maintaining common wage standards (Kochan et al., 1986) were substantially curtailed. Jobs that in the past paid high premiums could be supplied more cheaply in other countries or in domestic enterprises that pay competitive market rates. As a result, unionized employment fell as these jobs moved to lower-cost environments and organizations. This is particularly true of semiskilled blue-collar work in both manufacturing and services. Thus, the combination of increases in international and domestic competition is one major cause of the restructuring experienced in American industry in recent years. It is also a contributing factor to the increase in inequality in the wage structure that is discussed later in this chapter. Those with the most scarce skills and capabilities realized increasing returns to these attributes, and those with fewer and more easily replaced skills were affected most by pressures to hold down wages and labor costs.

Along with increased price competition, markets have changed in ways that require increased capacity and speed in developing and introducing new and more varied products. Prod-