Robert Reich: The Economics of People

By Allan Alter  |  Posted 2006-12-05 Email Print this article Print

With globalization, disruptive technology and aging demographics bearing down on the U.S. economy, Robert Reich says we need a new way to think about people.

Equal parts economist, professor, polemicist and politician, Robert Reich is quite unlike any other business thinker on the current public scene. These days, the former Labor Secretary under President Clinton is a professor of public policy at the University of California–Berkeley, National Public Radio commentator and sought-after public speaker. But in his spare time, Reich worries that the U.S. has reached an economic crossroads and could take the wrong path, choosing protectionism over globalization and failing to take advantage of its most important resource: its people.

"We shouldn't be afraid of globalization. It creates tremendous opportunities to create value," Reich told members of the Society for Information Management at its annual conference in September. "That's where all of you come in. Because if we have the right human capital, and companies can continue to innovate, and the people in those companies are sufficiently linked together to take advantage of their talent, then technology, demographics and globalization are on our side. If that's not the case, we will have to pay the piper." CIO Insight Executive Editor Allan Alter explored these issues with Reich in multiple interviews. The following is an edited version of their conversations.

CIO Insight: You told CIOs we're at an economic crossroads because of three structural changes: globalization, technological change and demographic change. What's happening, and what's at stake?

Reich: Essentially, America's broad middle class is not sharing in the nation's prosperity to the extent that the middle class shared in it 15, 20, or 25 years ago. Not only that, but many more people are worried about the security of their jobs. There is more widespread economic insecurity than we've seen at any time since the Great Depression. There are three reasons why.

First, globalization is not really well understood. Most people assume it's about trade. It's not about trade; for the most part, it's about direct investment. Companies are becoming global supply chains. IT is being done wherever it is done most cheaply with the best skills. And that means IT is rapidly becoming globalized. In fact, all management is becoming globalized: Wherever something can be done cheaply and at the right level of skill, it will be done there. Note that I said "at the right level of skill," because it's not just a matter of cheap labor. The jobs of IT professionals who have skills that are in short supply, including the soft skills of having great knowledge of a particular industry or customer base, will not be jeopardized. But, undoubtedly, globalization is going to have a convulsive effect on the IT industry.

Technology is a second great force that will force many people to change their jobs and skill sets. In the future, anything that can be done routinely or can be reduced to software code will not be done by a person. And software is becoming ever more sophisticated. That means that we've got to think quite differently about who is going to do what in IT in the future. There will be many jobs, for example, installing, upgrading and consulting about new hardware and software. In healthcare and financial services there will be many IT jobs involving complex applications, and in the sort of consulting that identifies new needs and new IT solutions.

The third great force is demographics. The baby boomers are rapidly moving into their later years. The baby-bust generation, people born in the U.S. between 1965 and 1990, will be in relatively short supply. Companies will have to worry even more about recruitment and retention than they do now. Immigration will become an ever more contentious issue because we'll need many more people than we have available to do all sorts of jobs, at the high end and also at the low end. We haven't even begun to explore what it means to have a large portion of our population in their seventies and eighties. Already the elderly comprise the most politically potent group in America. What happens when all the baby boomers become elderly? Chances are the current political strength of the elderly will double, which means they will form a giant sump pump sucking benefits from the rest of the working population. How can the U.S. possibly afford that?

None of this economic uncertainty is due to malfeasance or nonfeasance of corporations of government. But that doesn't mean we should sit back and simply accept it. There are two great political parties in this country, and they are not the Republicans and Democrats. One is the "let 'er rip" party, which stands for the proposition that the economy should just be allowed to do whatever it's doing and let the chips fall where they may. The other is the "preserve and protect" party, which stands for the proposition that all jobs in all communities ought to be kept as they have been in the past. The problem is, neither of those positions is tenable.

That's why we need to embark on a whole different way of thinking about economic change and our people. And that means giving people the tools they need to adapt to a fundamentally different economy, beginning with early-childhood education and improved K-12 education access to post-secondary education. It means a job-training system that gives people the wherewithal to get the skills they need, when they need them, and provides unemployment insurance while they get those skills. We need a tax system that encourages and rewards people not just for taking financial risks, but also for being more flexible. We need social insurance that enables people to move from job to job and location to location without huge penalties and risks. Healthcare should no longer be linked to employment, so that people can change jobs without fear of losing their family's health insurance. And so on.

Read the full story on Robert Reich: The Economics of People.

Executive Editor

Allan Alter has been a specialist on information technology management, strategy and leadership for many years. Most recently, he was editor-in-chief and the director of new content development for the MIT Sloan Management Review. He has been a columnist and department editor at Computerworld, where he won three awards from the American Society of Business Press Editors. Previously he was a special projects editor, senior editor and senior writer for CIO magazine. Earlier, Alter was an associate editor for Mass High Tech. He has edited two books: The Squandered Computer: Evaluating the Business Alignment of Business Technologies and Redesigning the Firm.


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