Author Cites Limits of Going Cheap On Labor

By Staff Report

Aug. 3, 2006

The low-cost labor route may dead-end in tomorrow’s economy. So says scholar Edward Lawler, co-author of the just-released book “The New American Workplace.” The book aims to update a seminal 1973 study about work in America, and Lawler discussed the findings at the Society for Human Resource Management’s annual conference in June.

As he does in the book, Lawler argued to his SHRM audience that companies focused on cutting costs through measures such as low wages and skimpy benefits will struggle to adapt effectively in the fast-moving global economy. You can go “only so far” with a low-cost approach, he said.

Lawler wrote the new book with James O’Toole, the principal author of the original “Work in America” study more than 30 years ago. The new book was financed in part by SHRM.

The 1973 study, sponsored by the federal government, cited evidence that too many Americans were engaged in narrow, repetitive and routine jobs, especially in manufacturing, and that was leading to mental and physical health problems.

In “The New American Workplace,” Lawler and O’Toole say executives in the 1970s and 1980s redesigned some jobs to make them more challenging and satisfying, automated other tasks, and exported many of the remaining “bad” jobs. Now, they say, the U.S. has chosen to have the most capital- and knowledge-intensive industries in the global economy.

But the country faces a number of challenges. To survive competitively, the U.S. economy must be in a state of constant change, where inefficient products, companies and industries are continually replaced.

The country is not creating enough new good jobs, Lawler and O’Toole say. They also see evidence of decreasing economic mobility. And while workers face a wider array of choices than ever before, the authors say that most American workers bear increased risk in areas such as employment security, health care and retirement.

The topic of economic insecurity in America has been getting more attention in the past few years, as companies distance themselves from traditional pension plans and corporate giants such as General Motors announce major layoffs.

In the wake of the traditional bureaucratic, hierarchical management model, Lawler and O’Toole see three alternatives today. One is what they call “low-cost operators,” which concentrate on trimming costs in a bid to keep prices low. Work there, they write, is in many ways “similar to the routine, low-level tasks that were the norm in manufacturing in an earlier era.”

The companies Lawler and O’Toole call “global-competitor corporations” are large and geographically spread out, and they compete for financial capital, skills, knowledge and technology. The firms may pay employees well and offer opportunities to develop new skills, but the relationship between such companies and employees is “transactional, not one based on loyalty.”

Then there are “high-involvement companies,” which provide workers with challenging jobs, a voice in the management of their tasks and a commitment to low turnover and few layoffs. The authors say employees in these firms tend to share in company profits or from gains in productivity and enjoy generous benefits.

During his presentation, Lawler said that the latter two management styles make the most sense. But, he said, “Our hearts and minds are with the high-involvement approach.”

Ed Frauenheim

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