North Dakota Work Organizations and Industries in the 21st Century

North Dakota Work Organizations and Industries in the 21st Century

Answer the Following Question based on provided sources: What do Karoly and her co-authors at Rand predict about 21st century work, organizations, and industries?


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Prepared for the U.S. Department of Labor
The 21st
Century at Work
Forces Shaping the Future Workforce
and Workplace in the United States
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In the next 10 to 15 years, work in the United States will be shaped by
demographic trends, technological advances, and economic globalization. Formulation of sound labor policy will require an understanding of how those trends will evolve and affect the size and composition of the labor force, the features of the workplace, and the
compensation structures provided by employers. It is our purpose
here to contribute to that understanding. In the following pages, we
summarize current trends in each of the three principal forces acting
on the world of work. In the final section, we draw out some implications that the combination of those forces will have for the future of
work. Our key findings are as follows:
• The U.S. workforce will continue to increase in size, but at a
considerably slower rate, while the composition will shift toward
a more balanced distribution by age, sex, and race/ethnicity.
Slower workforce growth may make it more difficult for firms to
recruit workers during periods of strong economic growth,
although greater participation in the workforce by the elderly,
women with children, persons with disabilities, and other groups
with relatively low labor force participation could cause the
workforce to grow faster. Immigration policy offers another lever
for changing the growth and composition of the workforce. Many
of the trading partners of the United States are undergoing
slower workforce growth and population aging on a more dramatic scale, thus offering a new comparative advantage to the
United States.
xiv The 21st Century at Work
• The pace of technological change—whether through advances in
information technology (IT), biotechnology, or such emerging
fields as nanotechnology—will almost certainly accelerate in the
next 10 to 15 years. Synergies across technologies and disciplines
will generate advances in research and development (R&D), production processes, and the nature of products and services.
Further technological advances are expected to continue to
increase demand for a highly skilled workforce, to support higher
productivity growth, and to change the organization of business
and the nature of employment relationships.
• The future reach of economic globalization will be even more
expansive than before, affecting industries and segments of the
workforce relatively insulated from trade-related competition in
the past. The new era of globalization—marked by growing trade
in intermediate and final goods and services, expanding capital
flows, more rapid transfer of knowledge and technologies, and
mobile populations—is partly the result of inexpensive, rapid
communications and information transmission enabled by the
IT revolution. Globalization will continue its record to date of
contributing economic benefits in the aggregate. Although market share and jobs will be lost in some economic sectors with
short-term and longer-term consequences for affected workers,
the job losses will be counterbalanced by employment gains in
other sectors.
• Rapid technological change and increased international competition place the spotlight on the skills and preparation of the
workforce, particularly the ability to adapt to changing technologies and shifting product demand. Shifts in the nature of
business organizations and the growing importance of knowledge-based work also favor strong nonroutine cognitive skills,
such as abstract reasoning, problem-solving, communication,
and collaboration. Within this context, education and training
become a continuous process throughout the life course involving training and retraining that continues well past initial entry
into the labor market. Technology mediated learning offers the
potential to support lifelong learning both on the job and
through traditional public and private education and training
Summary xv
• A number of forces are facilitating the move toward more decentralized forms of business organization, including the transition
away from vertically integrated firms toward more specialized
firms that outsource noncore functions and more decentralized
forms of organization within firms. Some sectors may be comprised of “e-lancers,” businesses of one or a few workers linked
by electronic networks in a global marketplace for products and
services. More generally, we can expect a shift away from more
permanent, lifetime jobs toward less permanent, even nonstandard employment relationships (e.g., self-employment) and work
arrangements (e.g., distance work). These arrangements may be
particularly attractive to future workers who seek to balance
work and family obligations or such workers as the disabled and
older persons who would benefit from alternative arrangements.
These changes call attention to the importance of fringe benefits
that are portable across jobs, or even independent of jobs (in the
case of freelancers, for example).
In the next 10 to 15 years, important demographic shifts will continue to influence the size and composition of the workforce. The
size and composition of the population, as well as labor force participation rates, determine the number and makeup of people who
want to work. Demographic parameters also influence the consumption patterns of the population and thus the mix of goods and
services produced and of the labor required to produce them. These
factors continue to evolve, in some ways that perpetuate recent
trends, and in other ways that suggest changes from the recent past.
Slower Labor Force Growth Ahead
The labor force has been growing more slowly over the past 20 years
than it had previously been. During the 1990s, the workforce grew at
an annual rate of just 1.1 percent, in contrast to the 1970s when it
grew at an annual rate of 2.6 percent. This is partly because, in the
years following the end of the baby boom in 1964, the fertility rate
(the number of live births per capita) fell by about a quarter, and
xvi The 21st Century at Work
these smaller cohorts reached working age during the 1980s. It is also
partly because of a trend toward earlier retirement by male workers.
That the labor force has been growing at all has been the result of
progressively higher labor force participation by women (see Figure
S.1) and a continuing large inflow of immigrants. Immigration tends
to increase the workforce disproportionately to their numbers,
because immigrants include many young adults of working age.
Most notably, workforce growth will slow even more dramatically
over the next several decades. Between 2000 and 2010, the annual
growth rate is projected to equal the rate in the 1990s of 1.1 percent.
In the decade that follows, the rate of growth is projected to slow to
just 0.4 percent, followed by an even lower 0.3 percent annual growth
rate between 2020 and 2030. The slowdown of the workforce growth
rate may make it more difficult for firms to recruit workers in the
future, especially in periods of more rapid economic growth.
1950 1960 1970 1980 1990 2000
Percentage in labor force
SOURCE: BLS (2003a), series LNU01300001 and LNU01300002.
NOTE: Population is those age 16 and above.
Figure S.1—Labor Force Participation Rate, by Sex, 1950–2002
Summary xvii
Shifting Workforce Composition
The composition of the workforce will also continue to shift, largely
reflecting demographic changes that have been under way for some
time. Because the U.S. population as a whole has been growing older
as the baby boom generation ages, the workforce has also been aging
or, looking at it another way, has come into greater balance across
age groups. Older people bring strengths to the workforce different
from those younger people bring. However, to the extent that they
are not part of the labor force and are supported by such largely payas-you-go programs as Social Security and Medicare, an older population imposes greater support costs per working person. These
greater costs, which impinge on the quality of life for the labor force,
are still less than those faced by most other developed countries. By
2050, there will be three working-age adults per elderly person in the
United States compared to two in the United Kingdom, France, and
Germany, and 1.4 in Japan, Spain, and Italy.
The inflow of immigrants has been largely responsible for a continuing increase in the racial and ethnic diversity of the workforce. Hispanics and Asians are the fastest-growing racial and ethnic groups in
the population and workforce. In the case of Hispanics, a high birth
rate is partly responsible for that, but immigration is the main driver.
In addition, the steadily increasing female labor force participation
rates, combined with decreasing male rates, have brought the labor
force close to gender balance. The rise in female rates holds for married women and single women alike. It holds as well for women with
and without minor children, and, for the latter, it holds whether they
are married or not and no matter how old their children are. As a
result of population aging and the increased labor force participation
of women, another dimension of change is that more workers have
responsibilities outside of work. This may involve caring for children,
elderly parents, or both.
The Growing Importance of Worker Skill
While these attributes provide one way of characterizing the future
workforce, an even more important dimension as we look to the
future is the skill that potential workers bring to the workplace. The
rapid pace of technological change is expected to continue to propel
xviii The 21st Century at Work
demand for highly skilled workers who can develop the new technologies and bring them to market and who can exploit the new
technologies in the production of goods and services. Moreover, the
transition to a knowledge-based economy continues to fuel demand
for well-educated workers. Maintaining a high-skilled workforce is
also a key component of U.S. comparative advantage in the world
economy. Shifts in organizational forms and the nature of employment relationships, brought about by new technologies and global
competition, also favor such high-level cognitive skills as abstract
reasoning, problem-solving, communication, and collaboration, attributes associated with so-called “knowledge work.”
On the whole, educational attainment (i.e., years of schooling completed) in the United States has been rising and will probably continue to do so. Achievement scores of U.S. students, however, have
been only about average when compared to those in other developed
nations, despite greater public and private expenditures on education in the United States. Likewise, adults in the U.S. rank near the
middle of other developed countries on tests of skill measures
important for workplace literacy. Notably, the United States also
tends to have a wider spread in the distribution of such skills, with
more very low-skilled and very high-skilled individuals based on
these assessments. Education reforms, such as those that address the
funding and institutional organization of schools, and the degree of
competition among schools promise to raise the productivity of education. In addition, technological developments, such as technologymediated instruction, have the potential to improve educational outcomes and support lifelong learning through on-the-job training or
training through other public and private institutions.
Options for Raising Workforce Growth in the Future
The slowdown in the growth of the workforce may have far-reaching
consequences for the U.S. economy. In general, further growth of
economic activity depends on a growing labor force or increases in
worker productivity. Thus, the growth rate of the future labor force
limits the growth rate of the economy for any given rate of productivity growth. Slower economic growth is a concern, given the rising
costs of such entitlement programs for the elderly as Medicare and
Social Security, which will be largely paid for by taxes on a workforce
Summary xix
that is growing more slowly. To the extent that it is desirable to raise
the rate of labor force growth, in the short to medium term the two
primary options are to increase the labor force participation rate for
the current population or to increase the overall size of the population through immigration.
Given the right environment, more older workers may be motivated
to retire later and continue to contribute to the nation’s prosperity.
Indeed, the rates of labor force participation for men age 55 and
older, previously on the decline, have begin to level off and even
increase at older ages. A variety of factors, including changes in
incentives associated with pension plans and reforms to Social
Security, mean that the reversal in the trend toward earlier retirement will likely continue. The rise in female labor force participation
rates holds for women with and without minor children, regardless
of marital status and the age of their children. Clearly, women with
responsibilities at home are willing to work outside the home. Data
from the United States and from other countries suggest that labor
force participation by women with children could rise further if work
could be more easily balanced with family responsibilities, such as
through less-expensive child care, greater availability of public
preschool programs, or more-flexible scheduling. While the overall
effect on female labor force participation may be modest, the effect
would likely be larger for women with lower earnings prospects. It
may also be possible to raise labor force participation by groups
underrepresented in the workforce. For example, fewer than one in
three working-age individuals with disabilities are currently in the
workforce, leaving around 12 million persons with disabilities out of
the workforce. Finally, immigration offers opportunities for workforce growth. In particular, immigration policy may be applied to
target highly skilled aliens, thus raising the overall skill levels of the
U.S. workforce.
Demographics Will Shift the Demand for Goods and Services
So far, we have emphasized the effect of demographic trends on the
characteristics of labor supply. However, those trends will also alter
the mix of goods and services demanded and thus the characteristics
of labor demanded by firms. Older households tend to spend their
money differently from younger ones: an aging population is likely to
xx The 21st Century at Work
employ more health care workers and increase the demand for other
health care–related products and services. Furthermore, such
household activities as child care, cooking, cleaning, and gardening
that used to be performed by household members may be
“outsourced” to the paid workforce as women (in particular) take
paid work in greater numbers.
By the end of the twentieth century, the U.S. economy was shifting
from one based on production to one based on information. New
technologies had spawned new products and industries and had
transformed the way firms in established industries were organized
and labor was employed. In the coming decades, technological
advances promise to further shape what is produced; how capital,
material, and labor inputs are combined to produce it; how work is
organized and where it is conducted; and even who is available to
Rapid Advance in Information Technologies
To anticipate the future consequences of technology for the workforce and workplace, consider the remarkable pace of change in the
incorporation of information technologies into the U.S. economy.
Computing power and storage capacity, data transmission speed,
and network connectivity have increased dramatically while costs
have fallen rapidly. For example, between 1970 and 1999, as the
capacity of a fingernail-size silicon chip grew from a few thousand
transistors to 44 million, the cost of 1 megahertz of processing power
fell 45,000-fold from $7,600 to 17 cents. At the same time, greater
user-friendliness of new software has led to rapid adoption of computer systems: levels of business investment in computer hardware
during the mid- to late 1990s were several times those of previous
years (see Figure S.2).
Summary xxi
1987 1992 1997 2001
Billions of 1996 dollars
Communications equipment
Computers and peripheral equipment
SOURCE: BEA NIPA Tables, Table 5.9 (
Figure S.2—Real Private Fixed Investment in Information Technology,
While the technological advances experienced in the last several
decades in IT have been remarkable, the pace of change will almost
certainly continue for the next decade or more. The practical implications of further technical advances will include greater processing
speed, higher storage capacity, and a wider array of applications. For
example, advances in microprocessors will support real-time speech
recognition and translation, and the fields of artificial intelligence
and robotics are likely to advance further. The use of more intelligent
robotics in manufacturing will support agile manufacturing—the
ability to quickly reconfigure machines for the production of prototypes and new production runs—with implications for manufacturing logistics and inventories.
xxii The 21st Century at Work
Other Evolutionary and Revolutionary Technologies Are on
the Horizon
Technological progress, however, is not limited to communications
and information technologies. A wide array of such technological
advances as biotechnology and nanotechnology are expected to have
equally profound consequences for the U.S. economy in the next
several decades. In the health care sector, for example, recent
progress against a variety of diseases will be married to moleculargenetic advances spawned by the Human Genome Project to yield
“personalized medicine” in which drugs might be individually tailored to increase their effectiveness and reduce side effects. In the
near future, progress in biotechnology is expected to generate medical advances that will further extend life expectancy and improve the
quality of life for those with a chronic illness or disability, often in
ways that will enhance their productive capacity in the workplace.
Nanotechnology—the manipulation of matter at the atomic scale—
could afford even more-drastic revolutions in products, services, and
quality of life over the next half-century. In addition to applications
in electronics and IT, nanotechnology is expected to lead to breakthroughs in pharmaceuticals and other aspects of biotechnology,
energy technology, and aerospace and materials technology, among
others. As a cross-cutting technology, nanotechnology will facilitate
technological change that extends and enhances existing technologies—further computing power for semiconductors, for example—as
well as more revolutionary applications—computers no bigger than a
bacterium and new materials displaying paradoxical properties of
strength and flexibility and performance in heat and cold. The earliest applications in the next 10 to 15 years are likely to be in the first
category, while those in the second category may be further in the
Many of the advances in biotechnology and nanotechnology raise
social, legal, and ethical implications, among other concerns, that
need to be addressed as the technologies evolve. If public acceptance
of the new technologies is slow to materialize, their adoption and
diffusion may not match the pace of discovery.
Summary xxiii
New Technologies Demand a Highly Skilled Workforce
Job skill requirements have been shifting across all sectors as a result
of new technologies. Machines with microprocessors can now be
programmed to do the sort of routine activities that less-skilled
workers used to do. At the same time, business computer systems
generate demand for highly skilled labor in the form of technical staff
who operate and repair the equipment, develop and install the software, and build and monitor the networks. In addition, computer
systems often generate more data that may be profitably analyzed,
thereby increasing the demand for the analytical, problem-solving,
and communication skills of workers, managers, and other professionals. Increasingly, the term “knowledge workers” is applied to
workers who go beyond just providing information to now being
responsible for generating and conveying knowledge needed for
While the recent technological advances may favor either skilled or
unskilled workers, depending on the application, the overwhelming
evidence is that on balance, recent technological advances favor
more-skilled workers and the same can be expected for future
advances. Not surprisingly, those demand differentials have been
driving up the salary premium paid to workers with higher education
levels (see Figure S.3). For example, between 1973 and 2001, the wage
premium for a college degree compared with a high school diploma
increased 30 percentage points, from 46 percent to 76 percent.
Researchers consistently find that technological progress that
increased the demand for more-skilled workers explains a sizable
portion of the rise in the wage differential by education level since
the 1980s, although other factors played a role as well.
The Organization of Firms and the Workplace Respond to
Technological Change
The new information technologies adopted in recent decades have
had implications for other aspects of the production process, from
the capital equipment used in the goods-producing sectors to the
ways firms across all sectors are organized and conduct their
business. Such changes have taken place in “old economy” goods-
xxiv The 21st Century at Work
Real median hourly wage (2001 dollars)
1973 1983 1993 2001
Advanced degree
College degree
Some college
High school graduate
Less than high school graduate
SOURCE: Mishel, Bernstein, and Boushey (2003), Table 2.17.
Figure S.3—Real Median Hourly Wage by Education Level, 1973–2001
producing sectors, such as the steel and machine tool industries, as
well as services-producing sectors, such as retailing, trucking, and
The vertically integrated corporation was the dominant organizational model for much of the twentieth century. This model provided
the means to control and coordinate the various stages of production, especially in an era when markets were underdeveloped and
supply networks were more uncertain. While this model has by no
means disappeared and revenues and production volumes may be as
large as before, some sectors of the economy are moving toward
more specialized, vertically disintegrated firms. With vertical disintegration, firms divide up the production pipeline and specialize
broadly in products and services that define core competencies while
outsourcing noncore activities. Such activities might include steps on
the production chain, such as industrial design or the manufacturing
of intermediate goods, or support activities, such as computing ser-
Summary xxv
vices or human resources. This trend is facilitated by the power of
information technologies and their associated networks to coordinate and control across organizations and within organizations in a
more decentralized manner.
Technology also shapes firms’ decisions about how to organize production within the firm and how to structure the compensation system to motivate workers at various levels of the organization. With
increased investment in IT, companies have been moving toward
more participatory, “high-performance” work systems. Such practices invest greater authority and problem-solving responsibilities in
front-line employees rather than managers. Jobs become more flexible and broadly defined, employees work in collaborative teams
requiring a high degree of information-sharing and communication,
and outcomes focus on timeliness, quality, and customer service. A
related development is the increased reliance on performance-based
pay to improve employee motivation. Production-based pay, profitsharing, and stock-option plans allow employees to share directly in
the profitability of their employers.
Technology also facilitates telecommuting and other forms of distance work. As of 2001, nearly 20 million workers, or 15 percent of the
workforce, usually did some work at home (at least one day a week)
as part of their primary job. Using a broader definition of off-site
work, about four out of five workers either work off-site themselves
or work with others who work at a distance.
Technology Supports the Process of Lifelong Learning
As technology operates to increase the demand for more skilled
labor, workers often need to undergo retraining in order to take
advantage of how new technologies are utilized in the workplace or
to operate within new organizational structures. At the same time,
technology has great potential to support the education and training
of the workforce prior to labor market entry and as a part of lifelong
learning. Technology-mediated learning—the use of computers and
other information technologies as an integral part of the learning
process—is gaining ground through such applications as computerbased instruction, Internet-based instruction, and other methods for
customized learning. Information technologies potentially allow
access to instructional materials any time, any place.
xxvi The 21st Century at Work
New technologies in the next 10 to 20 years offer tremendous potential to revolutionize the way education and training is delivered in
order to improve efficiency and effectiveness in learning. For example, one application that goes beyond traditional distance learning is
the use of electronic performance support systems, typically wearable computer devices that provide real-time access to information
needed on the job to perform increasingly complex, dynamic tasks.
Just as individualized medicine is envisioned as an outgrowth of
biotechnology, individualized learning programs that are optimized
for a given person’s knowledge base and learning style are expected
for the future. Such learning programs will become increasingly
sophisticated over time with advances in hardware and software,
including artificial intelligence, voice recognition and natural language comprehension. They will also benefit from improvements in
intelligent tutoring systems that allow self-paced, interactive, selfimproving learning.
Productivity Benefits from New Technologies
After a long period in which it seemed that the information revolution was having no impact on worker productivity, an acceleration of
the annual rate of productivity increase began in 1995 and has not
been slowed by the post-2000 economic downturn. The productivity
gains were not limited to a few industries but applied to a range,
including durable-goods manufacturing and such services as wholesale and retail trade and finance. Analyses by economists indicate
that the rise in economywide productivity can be attributed to
growing productivity within the IT sector itself, as well as increased
productivity in other sectors of the economy. Given that these new
technologies have yet to reach saturation in the economy, most analysts expect the boost to productivity from the IT revolution to continue for the near term.
With the growth of economic globalization in recent decades—
whether measured by flows of goods and services, direct investment
and other capital flows, the transfer of knowledge or technology, or
the movement of people—the economies of the world are tied
together even more so than in the past. In the decades ahead, the era
Summary xxvii
of economic globalization will affect the size of the markets we produce for, the mix of products we consume, and the nature of the
competition in the global marketplace. It also has implications for
the labor market that U.S. workers compete in and the sources of
domestic and international labor available to U.S. firms.
The Dimensions of Economic Globalization
Recent decades have been marked by dramatic increases in trade.
Total trade activity (exports plus imports) has increased from about
one-tenth of U.S. gross domestic product (GDP) in 1960 to about a
quarter at the turn of the century (see Figure S.4). Meanwhile, the
sectoral distribution of trade has changed. Trade in services has
grown from 18 to 30 percent of the total over the last 20 years.
Another important new aspect of trade patterns, called “vertical
Goods imports
Goods exports
1960 1970 1980 1990 2000
Percentage of GDP
Exports + imports
SOURCES: BEA U.S. International Transactions Accounts Data, Table 1 (http://, and BEA NIPA Tables, Table 1.1
Figure S.4—U.S. Exports and Imports as a Share of GDP, 1960–2002
xxviii The 21st Century at Work
trade,” is that finished products may be composed of inputs
produced and assembled in stages in different countries.
Multinational firms no longer limit production to a single country
but carve up the production process into stages implemented in
multiple countries through subsidiaries or contractors. This allows
more labor-intensive stages of the production process to be located
in lower-wage settings, as opposed to stages that are more capital-,
knowledge-, or technology-intensive, which are located in higherwage settings. This pattern of specialization extends on a global scale
the vertical disintegration of the firm discussed above in the context
of technological change.
Not only manufacturing jobs have been outsourced overseas but also
higher-skilled white-collar jobs in the services sector, such as IT and
business-processing services. Advances in communication technologies and falling prices associated with voice and data transmission facilitate the shift of IT-enabled services from the United States
to overseas locations in such countries as China, Costa Rica, Hungary, India, Ireland, and the Philippines. Since the work products in
many information-based and knowledge-based industries can be
readily transmitted over high-speed computer networks, the physical
location of the workforce is increasingly less relevant. Data to estimate the extent of international outsourcing in the services sector
are not readily available, but some estimates suggest that the movement is relatively modest to date but growing. In the future, companies may choose to blend onshore and offshore models to offer
greater flexibility as well as the capacity to work around the clock.
As trade flows have increased and production has become more
internationalized, the United States has altered the mix of trading
partners toward countries with lower wages. While Canada remains
the largest trading partner with the United States in terms of goods
exported and imported, Mexico assumed the second-place ranking
as of 1999, displacing Japan from that position. Trade with China has
also grown dramatically, from less than 1 percent of U.S. goods
imports in 1980 to 11 percent in 2002, exceeding goods imports from
Japan for the first time. Even so, more than half of U.S. goods trade
takes place with other industrialized countries where wages are more
Summary xxix
Globalization has extended to capital flows and labor skills. U.S.
acquisition of foreign assets increased sixfold between 1980 and
2000, and foreign acquisition of U.S. assets grew even more. Capital
flows increasingly take the form of direct investment in companies
overseas as a means to control production and expand into new
markets. Worldwide migration has doubled in the last quarter-century, resulting in greater circulation of workers, not only the lessskilled but also the highly skilled. At the same time, IT advances have
enabled highly skilled workers on different continents to collaborate
without physically relocating. The internationalization of labor is
also tied to the greater ease with which new knowledge and technologies are transferred across international boundaries.
Forces Propelling Globalization Will Continue
What is driving the current wave of economic globalization? First,
over the past 50 years, communication and information transmission
costs have declined precipitously, along with transportation costs.
For instance, a call from New York to London that would have cost $1
in 1950 cost just 6 cents as of 1990, and the call is essentially free
today using the Internet (although the quality might not be as good).
Through voice, video, and electronic communications, firms can
work with subsidiaries or suppliers in other countries and ensure the
quality and timeliness of product delivery necessary to meet their
own production processes. The revolution in information technologies also provides a mechanism for rapid transmission across electronic networks of inputs and outputs in the IT-enabled services sector, as well as the means for supervising work products and monitoring quality. Second, since the end of World War II, a series of trade
agreements have reduced barriers to trade, while the move to flexible
exchange rates in the early 1970s, combined with other financial reforms and new financial instruments, increased capital mobility.
On balance, we believe the trend toward a globally integrated economy is likely to continue, driven by further IT advances and reductions in trade and capital market barriers. However, there may be
efforts to link further trade and capital market liberalization with
particular countries or regions to concerns over labor standards, the
environment, human rights, the existence of democratic institutions,
or the protection of property rights. There are also signs that other
xxx The 21st Century at Work
countries, especially low-income nations, are more reluctant to seek
further liberalization without the major industrialized countries
relaxing some of their remaining barriers (e.g., subsidies for agricultural products, patent protections on pharmaceuticals). If so, this
may limit the pace of expansion of trade between the United States
and developing countries.
Economic Globalization Generates Aggregate Benefits to
the Economy
The consensus among economists is that globalization has had and
can be expected to continue to have, at the aggregate level, a favorable effect on income, prices, consumer choice, competition, and
innovation in the United States. In terms of long-run growth, at the
same time that trade’s share of the U.S. economy more than doubled
in the last four decades of the twentieth century, real GDP per
capita—a measure of U.S. standard of living—did so also.
From the perspective of U.S. consumers, trade typically expands the
range of choices available and results in the reduction of prices for
some goods when foreign suppliers can produce them at less cost.
For U.S. firms, a more open world economy expands the size of the
market they can sell to, elevating sales and possibly reducing costs
and raising productivity through economies of scale. At the same
time, the increased openness of U.S. markets, both through export
competition and import competition, pressures U.S. firms to remain
competitive in the global marketplace. Such forces spur innovation
and adoption of technologies and production processes that can
reduce cost. Trade also provides access to foreign technology and
ideas (e.g., business organization practices), which further allow
productivity gains for U.S. firms.
Globalization Also Has Distributional Consequences
While greater integration in world trade and capital markets can
enhance welfare at the national level and over the long term, there
can be short-term and longer-term consequences for particular segments of the U.S. economy and workforce as labor, capital, and other
inputs are reallocated to their most efficient uses. Some industries
Summary xxxi
facing greater import competition will lose jobs. At the same time,
trade generates new jobs for U.S. workers in domestic exporting
industries. As of 1999, for example, an estimated 11.6 million jobs in
the United States were supported directly or indirectly by goods and
services exports, representing about 9 percent of employment. With
continued growth in exports relative to GDP, that share is likely to
expand. In two industries—computers and electronic products and
primary metals—more than one-third of jobs were tied to exports as
of 1997. On balance, research suggests that the effect of trade on
overall employment levels is, at most, small, with job losses caused
by import competition counterbalanced by job gains that stem from
expanding exports.
Economywide, most workers displaced due to a plant move or closing, elimination of a position or other factors that lead to involuntary
job loss find new jobs although they may experience spells of unemployment and face permanent wage losses. For example, the typical,
or median, worker displaced in the late 1990s experienced a little
more than five weeks of unemployment before finding a new job.
Earlier in the 1990s, when the labor market was weaker, the typical
unemployment spell was about three weeks longer. Studies of the
longer-term consequences of job displacement suggest permanent
earnings losses in the range of 5 to 15 percent. More-educated workers tend to be reemployed more rapidly than their less-educated
counterparts and their relative earnings losses tend to be smaller,
presumably because their skills transfer more easily from one job to
the next. This suggests that, while painful, future job loss associated
with higher-skilled services-sector employment might not be as
costly in terms of unemployment and permanent wage loss as were
earlier waves of blue-collar trade-related job displacement.
Globalization has also been linked to the relative decline in earnings
among less-skilled workers over the last few decades. Research suggests that, while trade made a modest contribution to the trend,
other factors, such as technology and immigration, were more
important. It must also be kept in mind that many less-skilled workers are employed in nontradable services and thus will not be directly
affected by globalization. In the future, if trade in services that
involve more highly skilled jobs continues to grow, trade will affect a
xxxii The 21st Century at Work
larger share of the workforce, so the effect on the wage structure
could become larger over time.
The three forces we have examined do not move independently of
one another but can be expected to have important interactive
effects. Given these interactions, we seek to anticipate the implications of these interrelated and interacting forces for the future of
work. These issues are relevant from the perspective of current and
future workers who wish to anticipate future trends and how they
might respond in terms of investments in their human capital and
other decisions throughout their working lives. Other issues pertain
to choices that employers make about how to organize their workplaces, invest in their employees, and structure employee compensation. Policymakers at the federal, state, and local levels also make
decisions that shape the laws and regulations governing the workplace and other policies that may provide incentives or disincentives
for behavior on the part of workers or employers. Other interested
parties include public- and private-sector education and training institutions that help shape the quality of the future workforce.
The Organization of Production
Technological advances and globalization are changing the way production is structured, pushing firms toward vertical disintegration
and specialization, decentralized decisionmaking, and attaching a
premium to acquiring and sustaining knowledge as a means of
achieving competitive advantage. Such specialization allows firms,
which may remain as large as ever, to exploit their comparative
advantage in the provision of particular goods and services, while
outsourcing those functions peripheral to the core business. With
more decentralized decisionmaking, striking the right balance
between empowerment and control will be an important management element in the future workplace.
In some sectors, these trends could result in the disintegration of
firms to the individual level in the form of numerous IT-enabled,
networked, self-employed individuals or “e-lancers.” In this new
business model, individuals may compete in a global market for
Summary xxxiii
project opportunities and may work on multiple projects at any
given time. Project teams continually dissolve as old projects are
completed and form as new projects begin. Issues associated with a
more decentralized e-lance model of production include access to
the full range of tangible and intangible benefits that come with traditional employment relationships: economic security through
employment continuity and subsidized employee welfare benefits,
professional development through training and other opportunities,
social connections to workplace colleagues, and a sense of professional identity. In the future, some or all of these functions may be
provided by worker associations, organizations independent of particular employment relationships. Existing organizations (e.g., professional or community groups) may take on these functions or new
organizations may be established defined by occupational groups or
geographic areas to take on this role.
The evolution of organizational forms in the next 10 to 15 years is not
expected to rapidly converge on any one particular model. Instead,
organizations are expected to adapt in the future in response to the
nature of innovation, markets, networks, and information costs.
Thus, we can expect large corporations to continue to exist, albeit
with greater specialization of function than in the past, at the same
time that the prevalence of decentralized networks of small organizations grows. Within these new paradigms of specialized firms, decentralized decisionmaking, and knowledge-based organizations,
employers in the coming decades will require a workforce with welldeveloped analytical skills and communication and collaboration
The Nature of Employer-Employee Relationships and
Work Location
The conventional model of employment is that of full-time jobs of
indefinite duration at a facility owned or rented by the employer. The
forces driving the reorganization of production are expected to
decrease the fraction of workers in such traditional arrangements
and increase the fraction in such nonstandard arrangements as selfemployment, contract work, and temporary help. Already, about one
in every four U.S. workers is in some nontraditional employment
relationship. These alternative work arrangements may become
xxxiv The 21st Century at Work
more prevalent in the face of rapid technological change and competitive market pressures. A further increase could result from
increases in labor force participation among subgroups of the population, such as the disabled or older workers who have a preference
for more flexible work arrangements. To the extent that the ranks of
workers in nonstandard work arrangements grow in the future, one
issue will be access to traditional workplace benefits. It may be
worthwhile to implement policies promoting health and pension
coverage among workers in nonstandard arrangements, whether
through the tax code or access through business or professional
associations. The latter may be modeled on the worker associations
as discussed above.
As advances in IT continue to weaken the bonds between work and
workplace, a greater proportion of the labor force will be working at
home or in other locations removed from their employer’s headquarters (or client’s office). Part-time or full-time telecommuting can
allow employers to accommodate the needs of workers who care for
children at home or a sick family member. Older workers and the
disabled may also benefit from nontraditional workplace arrangements. This geographical separation, where it crosses state boundaries, will increasingly raise questions about which jurisdiction’s
work-related policies apply.
Changes in business organization, management structures, and
employment relationships have other implications for the relationship between employers and their employees in more-traditional
employment relationships. On the one hand, shifts in organizational
form and the use of nonstandard work arrangements weaken the
bonds between employers and their employees. On the other hand,
many employers increasingly recognize the human capital and
knowledge base of their employees as a critical asset. Within this
context, the use of high-performance workplace practices that give
greater decisionmaking authority to front-line employees is blurring
the traditional distinction between “labor” and “management.”
Changing employer-employee relationships will also alter the opportunities and challenges faced by labor unions.
Summary xxxv
Workplace Safety, Security, and Privacy
While workplace safety and security concerns focused in the past on
high-risk industries in the goods-producing sector, these issues now
resonate with virtually all employers and the entire workforce. In the
coming decades, the aging of the workforce may raise new safety
concerns in traditional or emerging industries. For example, workers
age 65 and older have been shown to experience higher rates of permanent disabilities and workplace fatalities compared with their
younger counterparts in the same industries and occupations.
Emerging technologies may present new health and safety concerns
(e.g., those associated with nanotechnology or biotechnology). At the
same time, technological advances may provide new solutions for
improving worker safety. Workplace security, in the face of terrorist
or other security threats to workers in the United States or overseas,
raises issues regarding the balance between public-sector investments in workplace security and private-sector security investments.
Privacy concerns will become more prominent as a result of various
technological advances that facilitate employee monitoring and
access to sensitive information.
The Nature of Work and Job Skill Requirements
Future technological developments will increase the demand for
highly skilled workers who can develop and market the new technologies, while other workers will be involved in production processes or in the production of goods and services based on these
technological advances. A growing emphasis on knowledge workers
and knowledge-based organizations can further define a source of
competitive advantage for U.S. workers and employers. The shift in
organizational forms and the nature of employment relationships
also favor strong cognitive and entrepreneurial skills. Workers who
increasingly interact in a global marketplace and participate in global
work teams will require the skills needed to collaborate and interact
in diverse cultural and linguistic settings. At the same time, demographic and other factors will drive demand for traditionally lowerskilled jobs in retail trade, health services, and other personal services. None of these jobs typically require postsecondary education,
although training often is an important component of job preparation. In addition, more of these jobs in the future are likely to incor-
xxxvi The 21st Century at Work
porate new technologies but typically with intuitive interfaces accessible to individuals who are not technologically sophisticated.
A variety of forces appear to be shifting the workforce away from
more permanent or lifetime jobs toward less permanent, even nonstandard employment relationships. Thus, the labor market will
require a workforce adaptable throughout the life course to changing
technology and product demand. As less-competitive sectors of the
economy lose jobs, workers who can retrain will be better able to
adjust and find productive reemployment. The prospects of continued or even accelerating job displacement as a result of technological change and trade also invite consideration of current and future
policies to help workers adjust to these shocks.
In this context, consideration must be given to how the U.S. education and training system can evolve to better meet the needs of the
twenty-first-century workforce. Workforce education and training in
the future will involve continuous learning throughout the working
life, involving training and retraining that continues well past initial
entry into the labor market. Challenges for the private and public
sectors include improving educational outcomes at the primary and
secondary levels of education, developing opportunities for careerlong learning through formal and informal training opportunities,
and meeting the growing need for scientists and engineers who can
advance new technologies in the laboratory, develop the applications, and bring them to market.
Technology-mediated learning, which offers the advantage of individualized learning programs that can be accessed “any time any
place,” may help meet training challenges and support life-long
learning. In addition, as e-learning materials become more common
in routine work processes (e.g., the use of wearable devices with procedural information to supplement prior training and reduce errors),
continuous training and lifelong learning can become a reality.
The Size and Composition of the Workforce
Current demographic forecasts estimate no change in the growth
rate of the labor force over the coming decade and even a likely
slowdown after that. Such projections depend critically on assumptions regarding underlying population growth rates (immigration
Summary xxxvii
being one important factor) and rates of labor force participation
among demographic subgroups. Labor force growth rates can exceed
current projections to the extent that labor force participation can
rise for groups not fully employed.
Thus, an important issue is whether tapping underutilized labor
force capacity can contribute substantially to a larger workforce.
Some older workers are lengthening their careers, and more might
do so if employers show more flexibility in job responsibilities, hours
worked, and pay (and if government permits such flexibility). There
is room for progress in this regard: 63 percent of workers age 59 or
over say that their employer would not let them move to a less
demanding job with less pay if they wanted to. Greater attention to
work-family balance issues may increase the labor force participation of women, particularly women with children. Technological
advances may aid the labor force participation of people with disabilities by alleviating the disabilities themselves or their impact on
ability to work. Other demographic groups that may be targets for
greater inclusion are low-income women with children, former military personnel, and immigrants.
From the perspective of employers, strategies to make work more
attractive than remaining out of the labor force are not cost-free. In
tight labor markets, employers may offer higher wages. They may
also offer more attractive work conditions (such as flexible scheduling or telecommuting) or more generous fringe benefits (such as
time off for family emergencies, on-site child care, or assistance with
elder care). In their negotiations about compensation, prospective
workers and firms may trade off among cash wages, working conditions, and benefits. The key challenge will be to identify the compensation mix that attracts the most new workers for any given total cost
increase. Government policies may constrain employers’ abilities to
increase participation among some groups. For example, government policies currently limit employers’ ability to adjust benefits for
older workers to account for changes in preferences for health insurance, pension benefits, and other employee benefits as workers age.
Compensation in the Form of Wages and Benefits
Future trends in technology, globalization, and demographics are
also likely to affect the level and distribution of wages, just as they
xxxviii The 21st Century at Work
have in the past several decades. Continued technological progress
has the potential to lead to further productivity gains that would
support growth in real wages (or total compensation to the extent
that compensation patterns shift from wages to benefits). At the
same time, mechanisms driving greater wage disparities in the recent
past, namely technological change and globalization among others,
can be expected to exert the same pressures in the near term. In the
absence of a strong increase in the supply of skilled workers in
response to the higher returns to education, wage dispersion—particularly as measured by the gap between more- and less-educated
workers—will likely remain at current levels or continue to widen.
Meanwhile, a variety of factors may weaken the tie between
employment and access to fringe benefits. Greater turnover within
traditional employment relationships and shifts to nonstandard
employment relationships also spotlight the importance of fringe
benefits that are portable across jobs or even independent of jobs (in
the case of freelancers, for example). Employers that do offer benefits
may move toward more personalized structures, tailored to meet the
circumstances of each employee. Younger and older workers, for
example, might be allowed to select those benefits that fit their circumstances with corresponding adjustments in cash wages to retain
current compensation levels. Information technologies and outsourcing may support this trend by reducing the costs associated
with managing a more complex system of employee benefits.
We have identified a number of ways in which the workforce and
workplace are likely to differ in the early decades of the twenty-first
century compared with the experience of the twentieth century. At
the same time, many of the institutional features of the U.S. labor
market—such as the laws and regulations that govern employment,
hours, wages, fringe benefits, occupational health and safety, and so
on—evolved in the context of an earlier era. In some cases, these
policies need to be reexamined in light of the evolution of the labor
market in the coming decades. Are there distortions or unintended
consequences associated with current policies that preclude desirable market adjustments? Are policies put in place to address market
failures in the past less relevant, given parameters that exist today
and their likely future evolution? Are there new market failures that
policy can address? Are there distributional consequences that could
make a case for government intervention? These questions merit a
Summary xxxix
more detailed examiniation in the context of the future of the workforce, workplace, and compensation in the twenty-first century.

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