Decline of the blue-collar worker: as our economy changes from producing goods to providing services the most numerous casualties are among the ranks of industrial workers

Before World War I, farmers composed the largest single group of workers in every country. This statement would have been true at any time since the dawn of history. It applied equally in Germany and German East Africa, Canada and Cambodia. Today, in all developed free-market countries farmers form, at best, five percent of the population; their proportion of the population has dropped nine-tenths within living memory.

The second largest group in the population and workforce of industrialized countries at the turn of the century was live-in servants. Today, the only live-in servants any of us see are usually in movies and on the stage.

By 1900, in developed nations, a new class had risen to importance--the blue-collar worker in manufacturing industry. But, to quote social scientist Peter Drucker: "No class in history has ever risen faster than the blue-collar worker. And no class in history has ever fallen faster."

The heyday for industrial workers was the 1950s. They formed the largest single employment group in every developed country, and most of them had attained middle-class income levels. They had extensive job security, long paid vacations, unemployment insurance, pensions, and health-care benefits. They had also achieved political power. In countries such as Britain, the United States, France, Italy, and Germany labour unions became very powerful. In some cases, these unions challenged the authority of elected governments. In the late 1940s and early 1950s, strikes at Toyota and Nissan came close to overturning the political system. In 1974, the government of Edward Heath in Britain was brought down largely by the National Union of Mineworkers. Today, industrial workers and their unions are in full retreat almost everywhere. By 2010, in every developed free-market economy, industrial workers will account for less than 12% of the workforce.

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The machine-minders of the 1950s are being replaced by the "technologist"--someone who works with both hands and theoretical knowledge. By the end of this century, these so-called knowledge workers will make up one third of the workforce. In that growth comes some very bad news for industrial workers; most of them will not be able to move into knowledge work in the same way that farmers and domestic workers moved into industry 60 and 70 years ago.

Knowledge workers need a set of skills most industrial workers don't have and find very difficult to acquire. Knowledge workers need a lot of formal education. They need to be able to absorb and apply theoretical and analytical knowledge. Above all, they need the habit of continuous learning.

Huge numbers of people in the 1950s and '60s did what made the most economic sense--they left school early to get one of the plentiful mass-production jobs. However, it's these well-paid jobs that have disappeared fastest in the last decade. The casualties of this job decline are now in their forties and fifties; they have little formal education and few prospects of picking up anything more challenging than a job delivering pizza. Many have plummeted from jobs that paid $20 a hour to working for minimum wage plus tips. Many others have not been able to find even menial work.

So, where have all these jobs gone? The popular theory is that most have been scooped up by low-wage countries. This was certainly true in the 1970s. Countries such as Taiwan and South Korea combined mass production techniques with the wage costs of pre-industrial economies. For a while, this strategy gave these countries a huge trading advantage and enabled them to get a foothold in world markets.

Shipbuilding, once an important sector of European and North American industry virtually disappeared from those regions in the 1960s and '70s. The multiplier effect--more accurately described perhaps as the divider effect--of that was a reduced demand for steel and all the other materials that go into building ships.

Some areas of the United States took a big hit in the mid-1980s. In the industrial Midwest factories were closing so fast the region quickly became known as the "Rust Belt." The closings moved north in the 1990s and were made worse by the severe recession. Canada's industrial heartland suffered as it had never suffered before. In Windsor, Ontario manufacturing plants were shutting down at the rate of one every nine days in 1990. Towns and cities across southern Ontario and Quebec were devastated as factories and plants were turned into rusting monuments to old technology.

The effect of this shift in where work is done has been devastating in industrialized countries such as Canada. At the moment, in the developed world there are 35 million unemployed people. According to writer Gwynn Dyer, half of these people are out of work because their jobs have been transferred to the developing world. Technology is thought to be behind the disappearance of the rest.

Since the start of the Industrial Revolution, business investments in new machinery have tended to eliminate jobs rather than create more work through expanded production. To offset massive unemployment two other trends have been operating. First, the average work week went down from 68 hours in 1860 to 42 hours in 1950. Since then, the average work week declined a little and then started to go back up again. Second, more than half the workforce has shifted from manufacturing and farming to office and service jobs.

However, since World War II, the average work week has been stuck at about 42 hours. At the same time, the onward march of technology continued. New manufacturing processes reduced the need for labour and the unemployment queues started to grow longer. Global competition speeded up the process. Seeking ways to lower production costs, companies installed more and more robots--so-called steel-collar workers. Robots didn't take vacations, didn't need health or dental benefits, didn't go on strike, and, when they retired, they could be melted down and made into new robots instead of demanding a pension.

Look at what automation has accomplished at the Caterpillar Tractor Company. Caterpillar was once the only name that mattered in the heavy earth-moving equipment business. Then, it began to take a terrible mauling from Japan's Komatsu and other rivals. Caterpillar got lean and mean and slashed its workforce by 31%. Sales went from $886,000 per employee to $2.3 million. Profits made a rapid recovery. The increased mechanization has paid off in other companies. Our industries, once battered by overseas competition, have regained some of the ground they had lost. But, the price of this success has been high.

In the fall of 1994, Time Magazine's Board of Economists assessed the cost as: "wave after wave of downsizing layoffs, wage increases limited or foregone, replacement of full-time workers by part-time or temporary hired hands. Even those who have hung on to regular jobs are often too exhausted by long hours of overtime and weekend work to enjoythe extra money they are earning."

For those that are left on the shop floor, the hours can be brutal. Companies are pushing their existing labour forces to work longer hours. While paying overtime is expensive, the cost of hiring a new employee is even more so. When companies have squeezed as much overtime out of their existing workforce as they can they still avoid hiring full-time help. As much as possible they bring people in from temporary-help agencies to see them over the busiest spells. Again, economics drives the strategy--temps are cheaper and can be let go without any bother. So, to some extent, the industrial workforce is made up of two groups--the underemployed and the overemployed.

Difficult though it is during the transition period, the coming of the New Economy is not seen as a calamity by everyone. The editors of The Economist are quite optimistic. In the summer of 1993 they wrote: "Workers have fretted about being displaced by machines ever since the invention of the printing press. But continuous technological advance has not meant ever-rising unemployment. On the contrary, the number of those employed has soared. There is little reason to believe that this will not be the pattern in the future too." And, even if The Economist's brightest minds have called it wrong, futurist Frank Ogden is quite upbeat. "Prepare for what will appear to be chaos," writes Mr. Ogden. "And, remember that the picture really is brighter than it looks through Industrial Age eyes. For chaos is a time of great creativity and opportunity...

Much of the turbulence of river rapids is caused by the speed of change as water flows from a more tranquil river section to a narrower channel--not unlike moving from one era into another. The ride can be threatening or exhilarating, depending on your view of change."

SUGGESTED ACTIVITIES:

1. Economist Milton Friedman said in a September 1994 speech: "In the past 200 years, there has been a greater increase in world output than in the preceding 2,000. In my opinion, the next century could see an equally large percentage increase in output." How can this be achieved without destroying our planet's environment?

2. Invite a speaker to your class from your local Chamber of Commerce to discuss how the focus of industry has changed in your community over the last 40 years. Prepare for this by researching your local employment place during the 1950s.

BAD NEWS--GOOD NEWS

There has been some criticism that large companies have been behaving like barracudas in a pond full of guppies. The massive downsizing of the last five years has proven how heartless large corporations really are, said the critics. Big business defends its actions by saying that the short-term pain will lead to long-term gain, and they point to Compaq Computer Corp. as the model. The company was losing sales and profits in 1991 when Eckhard Pfeiffer was brought in to rescue it. He changed the marketing strategy and cut, cut, cut. Mr. Pfeiffer got rid of 20% of the staff. He also cut the price of the company's products by an average of almost 30% a year. The result has been a dramatic increase in sales and profits and a re-hiring binge. Compaq went from more than 11,000 employees down to 9,000. Now, its workforce has rebounded to 14,000. So far, however, the probusiness sector is hard put to identify many other large companies with greatly increased workforces.

LACK OF VISION

Innovation drives economic growth. This is something that's so well known that it's amazing how often the captains of industry fail to recognize the potential of new ideas. When Alexander Graham Bell invented the telephone in 1876, many "experts" thought it had no commercial use. They believed there would always be a plentiful supply of small boys to run messages. More recently, lawyers at Bell Labs were unwilling to even apply for a patent for an invention called the laser. This failure to spot potential is not unusual; in fact, it seems to be typical. The steam engine was invented in the 18th century to pump water out of mines. It was many years before anybody realized it could be used as a source of power to run factories or haul trains. Marconi, who invented radio, thought it would only be used where communication by wire was impossible. In 1949, the boss of IBM said his company should stay out of computers. He thought the world demand could be satisfied by 15 machines--tops.

FACT FILE

According to the Canadian Manufacturers Association, it takes the average manufacturer in Canada today about seven hours and 50 minutes in an eight-hour production shift to cover operating costs; another five minutes goes for corporate income taxes.

TURNAROUND

In the 1970s, U.S. car manufacturers were being clobbered by imports. The Japanese, inparticular, were building better vehicles at lower cost than their American counterparts. The war for customers pushed Chrysler to the brink of bankruptcy, while Ford and General Motors started to hurt badly too. But, when the going gets tough, the tough get going. U.S. car companies did not roll over and play dead, they turned themselves from the world's highest-cost producers to those which the lowest costs. In 1994, U.S. carmakers' wage costs were just $42 for every $100 in product turned out. That's about a third below Toyota and Mercedes-Benz. As a result, they've won back customers. In 1991, imports accounted for 22% of U.S. auto sales; by 1994, this had dropped to 14%.

Copyright Canada and The World Mar 1995
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