America Works

Thoughts on an Exceptional U.S. Labor Market

Publication Year: 2007

The U.S. labor market is the most laissez faire of any developed nation, with a weak social safety net and little government regulation compared to Europe or Japan. Some economists point to this hands-off approach as the source of America’s low unemployment and high per-capita income. But the stagnant living standards and rising economic insecurity many Americans now face take some of the luster off the U.S. model. In America Works, noted economist Richard Freeman reveals how U.S. policies have created a labor market remarkable both for its dynamism and its disparities. America Works takes readers on a grand tour of America’s exceptional labor market, comparing the economic institutions and performance of the United States to the economies of Europe and other wealthy countries. The U.S. economy has an impressive track record when it comes to job creation and productivity growth, but it isn’t so good at reducing poverty or raising the wages of the average worker. Despite huge gains in productivity, most Americans are hardly better off than they were a generation ago. The median wage is actually lower now than in the early 1970s, and the poverty rate in 2005 was higher than in 1969. So why have the benefits of productivity growth been distributed so unevenly? One reason is that unions have been steadily declining in membership. In Europe, labor laws extend collective bargaining settlements to non-unionized firms. Because wage agreements in America only apply to firms where workers are unionized, American managers have discouraged unionization drives more aggressively. In addition, globalization and immigration have placed growing competitive pressure on American workers. And boards of directors appointed by CEOs have raised executive pay to astronomical levels. Freeman addresses these problems with a variety of proposals designed to maintain the vigor of the U.S. economy while spreading more of its benefits to working Americans. To maintain America’s global competitive edge, Freeman calls for increased R&D spending and financial incentives for students pursuing graduate studies in science and engineering. To improve corporate governance, he advocates licensing individuals who serve on corporate boards. Freeman also makes the case for fostering worker associations outside of the confines of traditional unions and for establishing a federal agency to promote profit-sharing and employee ownership. Assessing the performance of the U.S. job market in light of other developed countries’ recent history highlights the strengths and weaknesses of the free market model. Written with authoritative knowledge and incisive wit, America Works provides a compelling plan for how we can make markets work better for all Americans.

Published by: Russell Sage Foundation

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On April 19, 2007, the Russell Sage Foundation will celebrate its centennial, 100 years to the day since Margaret Olivia Sage dedicated the foundation, in her husband’s name, “to the improvement of social and living conditions in the United States of America.” From the outset, social...

INTRODUCTION

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pp. 1-6

In 1984 the American Economics Association sent a delegation of economists to the Soviet Union for scientific discussion with Soviet economists. It was the final meeting in a series of cultural exchanges at a time when the Cold War...

CHAPTER 1. The U.S. Market-Driven Labor System

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pp. 7-19

More than any other advanced country, the United States relies on the competitive labor market to determine the well-being of workers and the living standards of their families. The collective bargaining institutions, government regulations, and social safety nets that capitalist economies use to constrain market forces and ensure a minimal level of economic...

CHAPTER 2. When Markets Drive Outcomes

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pp. 20-40

At the turn of the twenty-first century, the U.S. labor market did better in two important ways than the labor market of most other advanced countries. The United States generated rising employment relative to the working-age population while European Union countries were mired in low employment and lengthy spells of high unemployment rates. The...

CHAPTER 3. Distribution Matters

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pp. 41-57

Americans are traditionally less concerned about income distribution than persons in other countries. As long as wages and incomes rise for everyone, why worry that Bill Gates makes more than all the other Bills in the country taken together? Economists generally stress the fact that inequality—differences...

CHAPTER 4. Why Americans Work and Work

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pp. 58-88

Americans work more hours than persons in any other advanced economy. In 2005 American adults averaged 1,804 hours worked over the year compared to 1,638 hours worked by Europeans and 1,775 hours worked by Japanese.¹

CHAPTER 5. Where Have All the Unions Gone . . . Long Time Passing?

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pp. 75-106

Trade unions are the primary worker institution in capitalist economies. They replace market wage setting with collective bargaining and management control over workplaces with “industrial jurisprudence”—rules and negotiated...

CHAPTER 6. Regulating the Unregulated Market

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pp. 93-108

CHAPTER 7. Management in the Driver’s Seat

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pp. 109-127

With unions in abeyance and weakly enforced government regulations, management determines what happens at most workplaces. The well-being of workers depends on how management organizes work, deals with problems at the workplace, and divides revenues among workers, shareholders, and managers....

CHAPTER 8. The Great Doubling: Is Your Job Going to Bombay or Beijing?

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pp. 128-140

Before the collapse of communism in the Soviet Union, China’s movement toward market capitalism, and India’s decision to undertake market reforms and enter the global trading system, the global economy encompassed roughly half of the world’s population— the advanced OECD countries, Latin America and the Caribbean, Africa, and some...

CHAPTER 9. Helping the Invisible Hand Do Better

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pp. 141-148

Nothing irritated John Dunlop, former secretary of Labor, dean of faculty at Harvard, and my mentor as labor economist at Harvard, as much as academics tacking obiter dicta policy suggestions on to the end of their specialized analyses without giving them the critical attention that they had given to...

NOTES

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pp. 149-165

REFERENCES

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pp. 167-180

INDEX

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pp. 181-191

E-ISBN-13: 9781610442176
Print-ISBN-13: 9780871542830
Print-ISBN-10: 0871542838

Page Count: 206
Publication Year: 2007

Series Title: Russell Sage Centennial Volume