The End of Loyalty

PREFACE

As I waited for an Uber to pick me up at Google, my mind was racing.

It was late February 2015, and a light breeze blew through the Mountain View, California, night sky. I'd spent the past couple of hours at a meeting of a group called i4j, which stands for Innovation for Jobs. The buffet had been resoundingly mediocre—a surprise considering that we were at the Googleplex, the technology giant's corporate headquarters, famous for its great perks. The cognitive power in the room was sure dazzling, though.

There was Vint Cerf, a Google vice president and one of the fathers of the Internet; Byron Auguste, a former Obama administration economic-policy official who was now running an organization called Opportunity@Work, which was aiming to "rewire the US labor market"; Robin Chase, the cofounder of Zipcar; Marjory Blumenthal, executive director of the President's Council of Advisors on Science and Technology; and a couple dozen other entrepreneurs of both the business and social variety.

This being Silicon Valley, we'd been kicking around how to "disrupt unemployment," which officially stood at 5.5 percent in the United States at that moment, a substantial drop from the double-digit jobless rate that had wracked the nation four and a half years earlier, following the Great Recession. Yet for many folks across the country, the recovery was less than full-bodied. "Right now, as many as 30 million Americans are either out of work or severely underemployed," Jim Clifton, the president of Gallup, the research and consulting firm, noted just a few weeks before my visit to Mountain View. "Trust me, the vast majority of them aren't throwing parties to toast 'falling' unemployment.

"The great American dream," he added, "is to have a good job, and in recent years, America has failed to deliver that dream more than it has at any time in recent memory."

High-tech tends to be full of optimists, and i4j didn't disappoint in this regard. Many on hand could see a day coming soon when algorithms would connect job seekers of all stripes with just the right options for employment—a development that would be terrific for everyone, including business. "There are trillions of dollars to be made in raising the value of people, which are, perhaps, our world's most underutilized resource," asserted David Nordfors, the cochair of i4j.

I, too, am an optimist at heart, and I truly hoped that Nordfors was correct. But as someone who'd spent more than five years examining how the social contract between employer and employee in America had changed since the end of World War II, I was skeptical of any remedies that seemed too quick or easy.

As my Uber driver, Jorge, pulled onto Plymouth Street to take me to San Francisco, it was hard not to think about what kind of job he had. On one level, far too much has been made of Uber, TaskRabbit, and the rest of the online "gig economy," which accounts for less than 1 percent of the US workforce. But on another level, Uber is a perfectly appropriate symbol for positions that are now found all across America: ones that don't pay well, have terrible or nonexistent medical and retirement benefits, and command not the slightest bit of long-term loyalty from one's employer.

Labor economist Guy Standing has a term for those with such jobs: "the precariat,” a group of people who invariably live lives defined by economic insecurity and are all too aware that they're stuck in the mud, if not falling ever further behind. Their ranks extend well beyond those in gig jobs or other forms of "contingent work," and their disenchantment with how poorly they're faring is hardly new. Indeed, members of the working class have been feeling aggrieved since political pundits in the early seventies referred to them as the "Archie Bunker vote,” a nod to the star character of the hit sitcom All in the Family.

Since then, not much has improved for most workers; a lot has gotten tougher. Compensation for some 80 percent of the American labor force, in fact, has barely gone up since Archie ruled the airwaves—a 10 percent raise over forty years, after adjusting for inflation. During the prior twenty-five years, by contrast, pay and benefits for this huge demographic climbed by 90 percent.

Today, nearly half the nation's workforce earns less than fifteen dollars an hour. About a third of men in their prime don't make enough to keep a family of four out of poverty or are altogether unemployed—double what it was thirty years ago. More than 10 percent of jobless men ages twenty-five to fifty-four have stopped looking for work—a trend particularly prevalent among those without a college degree. In the mid-1950s, only 2 percent of this group of men was on the sidelines.

Meanwhile, few Americans have sufficient savings to retire on, in no small part because employers have cut their pension benefits. And businesses continue to push more health-care costs onto their employees.

Some unequivocally good news came when the US Census Bureau reported that median household income rose more than 5 percent in 2015. But this surge didn't come close to offsetting decades of stagnation. For those on the middle rungs of the economic ladder, their income was still more than 4 percent below where it was at the start of the financial crisis in 2007, and more than 5 percent below where it was at the end of the nineties. Even after the latest jump, earnings for male workers were less than they were in the 1970s. Median pay for women has essentially been flat since 2000.

Why is this happening? It's certainly not because American companies have been struggling overall and therefore haven't had the means to do better for those in their employ. Corporate profits have reached historic highs in recent years. A big part of the trouble is that this wealth has not been distributed like it was previously. Workers have been largely left out. Instead, the winners have been the fortunate few: investors (who've reaped dividend increases and stock buybacks) as well as top corporate executives and others at the very high end of the pay scale. Most Americans, even those who work their tails off, can't count on the job market to give them the lift it once did.

"Some say that our current income inequality is no longer like the Roaring Twenties or even the Gilded Age," labor lawyer Thomas Geoghegan has written. "We're reaching inequality that we haven't known since feudalism. Charlemagne, not J. P. Morgan, is the relevant comparison."

Within weeks of my evening at the Googleplex, a slate of candidates would officially announce that they were entering the 2016 race for the White House. The resentment voiced by Geoghegan—and so many others—would now find its expression through the campaigns of Bernie Sanders on the left and, especially, Donald Trump on the right. "The forgotten men and women of our country will be forgotten no longer," Trump vowed in his victory speech on election night. The working class (really, the white working class) had helped to catapult Trump to the presidency, taken in by his promises to restore the kind of blue-collar employment that had once guaranteed a good life. "I want him to bring America back," said Youngstown, Ohio, resident Kerri Smith, a caregiver for disabled children and a former Democrat who voted for Trump. "Bring back the jobs, bring our country back."

But while the electorate's anger was understandable, it was tough to see how shaking up Washington would have the intended effect. There is "the pretense in American elections that choosing the right president will magically fix the nation's wide economic problems," observed journalist Hedrick Smith, the author of, among other books, Who Stole the American Dream? But what "plagues the middle class is much less the product of presidential policies and much more the result of the private-sector trickle-down business model. In the economy, the power to divvy up the nation's pie lies in the hands of corporate CEOs."

This reality—that most Americans' fortunes depend directly on whether they have work and how their company treats them, not on the maneuverings of government—is what compelled me to explore the shifting relationship between employer and employee. It is a narrative that I've been watching play out for a long time from a variety of angles.

For fifteen years I was a reporter at the Wall Street Journal, where I tracked the coal, steel, and aerospace industries, getting to know frontline laborers along with those in the C-suite. I covered economic policy from the Treasury, Federal Reserve, and White House—and was also there when a minimum-wage worker in Louisiana came home after a ten-hour day to discover that her gas had been shut off because she couldn't afford to pay her bill. More recently, I've done management consulting for major corporations at the Drucker Institute and have sat side by side with union leaders on the board of a progressive publication called Capital & Main. From all of these different vantages, I have noticed the growing worship of Wall Street; the increasingly one-sided chess match between employers and their workers; the mounting hoopla around "corporate social responsibility" that, in most cases, has very little to do with companies looking out for their own people.

I bring to these issues a strong belief that by better understanding where we've been, we can be smarter about where we're going. To that end, since 2009 I have been delving into the histories of four companies: General Electric, General Motors, Kodak, and Coca-Cola. By tracing their ups and downs over a seventy-year span—through the Golden Age of the fifties and sixties, the tumultuous years of the seventies and eighties, and the past two and a half decades, when the corporate compact has been completely undone—I tell the bigger story of how America has transformed.

I have tried not to romanticize what was or wash out the complexities and contradictions. Most workers, for instance, did do quite well during the aforementioned Golden Age—but only if they were white and male. For women and people of color, corporate America was a hostile environment. (In many cases, it still is.) The hatred between organized labor and management was often savage. Many look back at that older era and fondly remember it as a time of rock-solid stability, marked by "lifetime employment." I even use that felicitous phrase in a few spots. But it's actually not so cut-and-dried. Even in the 1950s and '60s, it wasn't uncommon for someone to have ten or twelve different jobs over his career. The ability of workers to move around has always been a positive feature of the American economy.

That said, workers in more recent years have found themselves moving less because they've wanted to and more because they've had to. Job security in the private sector is much weaker than it once was, a big reason that many people's incomes have become tremendously volatile, swinging up and down a lot more than they did before. For workers, the American corporation used to act as a shock absorber. Now, it's a roller coaster.

As seen through the lens of GE, GM, Kodak, and Coke, a combination of forces has led us here: globalization and heightened competition from low-wage countries; the fading influence of unions; the introduction of labor-saving technology; a newfound willingness—and at times eagerness—to lay off enormous numbers of people even when there's no crisis at hand; the outsourcing of all manner of work; the decline of manufacturing; and the rise of knowledge jobs for those with the skills and education to grab them and, simultaneously, the rise of third-rate service jobs for those without.

Yet from my reading of these four iconic companies—and the larger universe of businesses that they reflect and represent—I'd single out one other factor as more important than all the others: a reconstituting of corporate culture that has explicitly elevated shareholders above employees. American workers won't be able to overcome these other challenges unless this perversion ceases.

What the future holds is a mystery, of course. Some maintain that we are destined for a prolonged period of slow economic growth, which would be bad for workers. Others see the spread of artificial intelligence setting off the next boom. Some warn that robots will take away so many jobs that masses of people will be left with nothing to do. Others suggest that all sorts of new avenues of employment are about to open up because of cloud computing, Big Data, and the Internet of Things.

Whatever comes, what's clear is that we as a country have to find a way to share our prosperity more broadly again. At stake is nothing less than the well-being of our democracy.

A good place to begin is simply to ensure that more people are working. A tight labor market causes employers to bid up compensation—something that finally started to be realized toward the end of 2016—and split profits more equitably. "With just a few exceptions, our economy has failed to generate the necessary quantity and quality of jobs," Jared Bernstein, who served as director of the White House Task Force on the Middle Class under President Obama, has written. He has calculated that when wages were expanding at a healthy clip for most everyone, from the late 1940s through the late 1970s, the country was at "full employment" more than 70 percent of the time. That's the point at which all eligible people who want a job can find one. Since 1980, we've been at full employment less than 30 percent of the time.

Given his perch, Bernstein has offered numerous policy prescriptions (some of them also supported, to varying degrees, by the Trump administration): putting people to work repairing roads, bridges, railways, airports, and the like through a government infrastructure program; more aggressively overseeing Wall Street so as to protect Main Street jobs from being wiped out in another speculative bubble; more seamlessly reintegrating into the workforce those with criminal records; giving special attention to residents of "job deserts"—depressed urban and rural areas with stubbornly high unemployment rates. All of these recommendations are vital.

But Washington's prod can't alone turn things around. Corporate executives must step up. It is their companies that must do the bulk of the hiring. It is their companies that must reinstitute a sturdier social contract with their workers.

If that sounds Pollyannaish, this is where history is a useful reminder. In the 1940s, those heading some of our biggest companies took it upon themselves to help create tens of millions of decent jobs. And they did so not only to make a buck but also to strengthen society.