“You can give lifetime employability … . But you can’t guarantee lifetime employment.” – Jack Welch, former CEO, General Electric

A recent paper by Jerry Davis, a professor of management at the University of Michigan’s Ross School of Business, tied the bow for me better than anything I’ve read recently on the central challenge facing the economy of the 21st century – linking the growth of business sales to growth in the income of workers.

Published by the Brookings Institution last month, Davis’ paper sets a useful context for understanding, and thereby responding to, the key issues dividing our increasingly contentious economic and political culture: Wall Street versus Main Street; capital versus labor; the costs and benefits of globalization and technological advance.

“For most of the 20th century,” Davis argues, “growth-oriented corporations provided stable long-term employment, health and retirement benefits, and opportunities for upward mobility.” Economies of scale in manufacturing and distribution favored large enterprises. And the self-interest of large enterprises was stable, steady, predictable growth, which was best served by a stable, steady, predictable labor force.

Labor markets were, in effect, internal to the corporation. Careers advanced through one company. The single best demonstration of this fact, Davis notes, is the fact that “nearly all of the companies included in the Dow Jones Industrial Index in 1932 were still there 50 years later, but much bigger.”

While the stable U.S. corporate model survived the Depression, World War II and the Cold War, it didn’t survive the 1980s. The political revolution that opened Russia, China and India to the world economy – combined with the digital communications revolution that disconnected economies of scale from corporate size – decimated the corporate structure on which U.S. “normalcy” had been built.

“The stable employment relation,” Davis notes, came to be seen as a “costly albatross for many big firms that faced competition from nimbler foreign rivals.” In the course of 10 years, “one-third of the Fortune 500 was taken over or merged.”

Vertically and horizontally integrated companies were broken up, and older, high-cost plants were shut down, spawning a career for “Chainsaw Al” Dunlap and, for Bruce Springsteen, a career’s worth of ballads about the tragic demise of Rust Belt cities.

In Maine, this trend was perfectly exemplified by the breakup of the vertically integrated paper companies that had come to define our state’s 20th-century industrialization and whose struggling pieces have come to define the challenge of de-industrialization in a global economy.

For the past 25 years, the growth of corporate sales and stock valuation has become disconnected from employment. In 1982, the top four U.S. corporations by market capitalization (IBM, AT&T, Exxon, GE) together provided over 1.7 million jobs. In 2012, the top four (Apple, Exxon, Microsoft, Google) provided barely 300,000 jobs.

Even more importantly, the source of large corporate employment has switched from manufacturing to retail. Wal-Mart is, by a very wide margin, our nation’s largest employer, and other large employers are grocery chains, big box retailers and the shippers that serve them (UPS and FedEx).

In short, the U.S. corporate “welfare” state of the 1930s to the 1970s has been replaced by nimble, highly valued clusters of marketers, designers, engineers and digitally connected logistic experts operating global networks of independent producers, shippers, distributors, financiers and marketers.

What once was a lifetime job within a giant corporate enterprise whose primary goal was steady, predictable growth became an outsourced job with a small contractor who needed a specific set of skills to meet a specific order whose ultimate product and purpose were often unknown to the “business” providing the “job.”

And as the logic of disintegration has increasingly played out at ever-faster speeds in what has come to be known as the “gig economy,” that “job” with an “employer” has come to be replaced by a “task” announced by some human need aggregator such as Uber to all who are plugged into “the network,” to respond or not as fits their individual time availability and financial need.

The labor market has moved from one highly focused on the degree, the resume, the interview and the first job – one with an enormous initial entry cost – to one focused on a continuous supply of labor called when needed, paid as needed and “laid off” as not needed.

An optimistic interpretation of this trend makes it an all-comforting, all-needs-providing digital nest in which no one has a “job” but everyone works when the need/desire arises. In a less sanguine view, we all join Terry Malloy on the digital waterfront scrambling for black marbles strewn on the street before us by the Lee J. Cobbs of the 21st century.

Which interpretation proves to be correct will depend on how well we come to understand the reasons for and the solutions to the anger that so clearly drives our collective feelings today.

Charles Lawton is chief economist for Planning Decisions, Inc. He can be contacted at:

clawton@planningdecisions.com

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