Restoring the American Dream in a High-Risk Economy: A Review Essay

By CHARLES J. WHALEN

Books Reviewed in the Article:

The Great Risk Shift: The Assault on American Jobs, Families, Health Care, and Retirement and How You Can Fight Back. By Jacob S. Hacker. Oxford University Press. 2006 Pp.240. $26.00 (hardcover), ISBN 13:978-0-19-517950-7.

Restoring the American Dream: A Working Families' Agenda for America. By Thomas A. Kochan. MIT Press. 2005. Pp. 247. $27.95 (hardcover). ISBN 10: 0-262-11292-2.

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In the mid-1990s, I wrote a number of articles on rising worker insecurity in the United States . Some were published in academic journals, others—such as a contribution to a USA Today cover feature—were intended to reach a wider audience.(1) Then the Internet-driven boom kicked into high gear, obscuring the underlying reality that confronted more and more families each year in the New Economy. Articles on the need for a national strategy to revitalize the American Dream soon became unfashionable.

Now, however, the heady days that ushered in the new millennium seem a distant memory. Even in the absence of recession, economic insecurity may be more widespread and threatening than at any time since the Great Depression. An updated look at the problem and how to resolve it is clearly warranted—and, taken together, new books by Jacob S. Hacker and Thomas A. Kochan admirably meet that need.

Families at Risk

At the core of Hacker's The Great Risk Shift are chapters describing four dimensions of the “harsh new world of economic insecurity” (p. 6): “risky” jobs, families, retirement, and healthcare. Jobs are more risky due to the spread of trends such as downsizing, outsourcing, and contingent work. Families face greater risk because pursuit of increased economic security often puts households in a time bind (as spouses attempt to juggle work and family obligations) and an even-deeper financial bind; middle-class families “are not merely more in debt than they used to be—their debt is increasingly tied up in risky investments in education and housing” (p. 99). (2) Retirement and healthcare, meanwhile, are more risky because defined-benefit pensions (and perhaps even Social Security benefits) are being replaced by individual retirement accounts and because medical care is becoming less and less affordable.

These are not independent developments, stresses Hacker. Rather, they are all part of a national transformation that began in the 1970s: Economic risk has been increasingly “offloaded by government and corporations” and placed upon American workers and their families. This “Great Risk Shift” is what Hacker considers “the defining feature of the contemporary American economy” (pp. ix and 6).

The Great Risk Shift claims to use “new evidence that unlocks the puzzle of growing insecurity” (p. ix). Yet neither the data sources nor the emphasis on emergence of a high-risk society are new. For example, Michael Mandel, an economist at BusinessWeek , gave attention to both a decade ago.(3) In fact, Mandel emphasized that the New Economy has meant greater risks for companies as well as workers, a point glossed over by Hacker.

Nevertheless, Hacker does a superb job of weaving statistics and anecdotes into a vivid account of the ongoing assault on working America . For example, his chapter on the erosion of U.S. retirement security illustrates the problem with attention to Ellen Saracini—wife of an United Airlines pilot whose plane crashed into the World Trade Center—who recently saw her widow's pension cut by more than half and Tom Padgett, a former Enron worker who, at age 59, lost nearly $600,000 in pension assets when that company's stock plummeted.

Ownership versus Opportunity

What caused the Great Risk Shift? Hacker fingers three contributing causes: the competitive pressures of an increasingly global economy; the emergence of new corporate human resource management strategies, in part a response to the waning power of labor unions; and a “Personal Responsibility Crusade” engineered by opponents of government provision of social insurance. The political factor gets the most emphasis—not surprising given that Hacker is a political science professor at Yale—and helps explain why government has done very little to ease the growing burdens that face working families: a well-financed group of radical conservatives has been working for years to take government out of the safety-net business. Political operatives and analysts at think tanks such as the Cato Institute and Heritage Foundation write of the “ownership society,” but their bottom-line message to workers, says Hacker, is “You are on your own” (p. x).

The Great Risk Shift was not inevitable, Hacker stresses. Similarly, the future need not be so insecure. “We can reshape our economy and policies to achieve the ideals we believe in, rather than letting our economy and policies reshape our ideals,” he writes (p. 167).

His alternative to the “ownership society” is an “insurance and opportunity society.” The latter begins with “a simple but forgotten truth: economic security is the cornerstone of economic opportunity” (p. 178). It also generates a straightforward “acid test” for policy evaluation: does a proposed change “substantially increase the risk on Americans' already overburdened shoulders? If the answer is yes, then our response should be no” (p. 179).

Hacker's social vision is attractive, but he offers few details on how to get there. Most of his discussion of reform focuses on retirement, healthcare and family catastrophes. To encourage worker saving and bolster retirement security, he supports supplementing Social Security with “Universal 401(k)s,” which would be available to all workers and provide an annuity upon retirement. To increase healthcare security, he proposes expanding Medicare so the program would be available to all Americans. Major unexpected household expenses or drops in family income, meanwhile, would be protected by what Hacker calls “Universal Insurance.” While each suggestion has merit, the strength of The Great Risk Shift is its analysis of the current situation, not its prescriptions for change.

A Detailed and Pragmatic Roadmap

Fortunately, Thomas Kochan's Restoring the American Dream provides the detailed roadmap that Hacker's book lacks. Kochan, who teaches at MIT's Sloan School of Management, quickly establishes that economic insecurity is a fact of contemporary American life and argues, “We cannot build a sustainable, stable knowledge economy with a highly stressed, frustrated and insecure workforce” (pp. 6-7). He then sketches a wide-ranging reform agenda to restore economic opportunity and broadly shared prosperity. (4)

Kochan makes it clear that revitalizing the American Dream will require lots of work. Deeply engrained, albeit outmoded, ideas need to be reconsidered—for example, the image of the “ideal worker” must be recast to reflect contemporary labor force realities, and work and family issues must be reframed as “tightly coupled” (p. 9). Major social institutions and policies must be restructured to promote lifelong learning, effective employer use of workforce skills, portability of employee benefits, corporate governance that considers the interests of all stakeholders, and public policies that focus on creating and sustaining good jobs.(5) A national commitment to restoring working families' confidence in the U.S. economy must go beyond the use of trendy buzzwords and appealing rhetoric, such as the “family friendly” workplace and “human resources are our most important resource” (p. 13); words must be backed by deeds and (often) dollars.

Written from the pragmatic industrial-relations standpoint pioneered by John R. Commons, Restoring the American Dream gets past rhetoric and wishful thinking by grounding its agenda in real-world cases and promising experiments. For example, Kochan points to corporations that have successfully redesigned work to meet enterprise and employee needs, unions that have embarked on innovative partnerships with companies and community groups, and states that have found creative ways to address the concerns of struggling families. The book is also in the Commons tradition in that it stresses the need for workers' voices to be heard on the job, in corporate boardrooms, in legislative committee rooms where public policies are fashioned, and in civic-engagement forums across the nation.

Taking Action

In his final chapter, Kochan stresses that just as all Americans are adversely affected by the economic insecurity gripping working families, all Americans can participate in tackling this problem. “Individually and collectively, the potential members of a viable working families' coalition need to draw on the resources and sources of power we each bring to the table” (p. 206).

In light of Hacker's analysis of the Personal Responsibility Crusade as a driving force behind economic insecurity, scholars and practitioners who adhere to the Commons/Kochan approach to industrial relations have something unique to “bring to the table” and thus have a special role to play in the fight to restore the American Dream. As Hacker and Kochan both recognize, the notion of social insurance under attack by the “personal responsibility” movement was developed and implemented by Commons and his University of Wisconsin students (such as Edwin Witte). Members of the industrial relations field are, therefore, among those best suited to come to defense of this notion—at least they should be.

Restoring the American Dream is an opening volley in the industrial-relations tradition's Internet-era counteroffensive against the move to establish an “you're-on your-own” society.(6) However, an intense, ideological and political struggle is likely to come—and nobody who cares deeply about the future of the nation can remain on the sidelines. As that struggle heats up, these books by Hacker and Kochan should prove useful in rallying support to the side of working families.

Notes

1. See, for example, C. J. Whalen, “The Age of Anxiety: Erosion of the American Dream,” part of the “What is Killing the American Dream?” cover feature (along with essays by Senator Edward M. Kennedy, Senator Paul Coverdell, and Robert B. Reich) USA Today [Society for the Advancement of Education], September 1996, pp. 14-16.

2. Hacker recognizes the importance of families investing in education. “But not only is education a big investment, it is also a surprisingly risky investment. Returns to skills have gone up, but so too has the variability of those returns” (p. 98). Similarly, he recognizes that buying a house can be a good investment. “The problem is that there is no guarantee that the housing market will remain hot.... And if the air goes out of the housing bubble, families will be in serious trouble. What's at issue for families, in other words, isn't just the size of the monthly mortgage check; it's the increased economic risk they are assuming as housing comes to represent more and more of the typical family budget” (pp. 97-98).

3. M. Mandel, The High-Risk Society: Peril and Promise in the New Economy (New York: Crown Publishing, 1996). Unlike Hacker, Mandel (who holds a Ph.D. in economics from Harvard University ) outlined positive as well as negative dimensions of the high-risk society. In part, this is because Mandel viewed the economy from a macroeconomic perspective in addition to the vantage point of working families—and because Mandel was writing at the start of an economic boom.

4. A paperback edition of Restoring the American Dream will be released in October 2006.

5. The boom of the late-1990s demonstrated that an economy running near full employment yields important social benefits. See, for example, C. J. Whalen, “It's About Jobs, Stupid,” BusinessWeek , August 28, 2000, p. 38.

6. For a counterattack rooted in Commons's standpoint and mounted in the Reagan era, see R. Marshall, Unheard Voices: Labor and Economic Policy in a Competitive World (New York: Basic Books, 1987).

 

Charles J. Whalen edits Perspectives on Work , published by the Labor and Employment Relations Association. He has served on the Cornell University faculty and the BusinessWeek editorial staff. He can be reached via e-mail at perspectives@ad.uiuc.edu .