A basic dilemma of our modern economic system is how to reconcile freedom with security. As more and more people work for large organizations -- either corporations or government bureaucracies -- the issue becomes increasingly personal. Must we either chain ourselves to the benevolence of a big organization or attempt to play out the fantasy of the last rugged individualists?
More than half the labor force works for employers of 100 people or more. Possibly two-fifths toil for firms of 500 or more. Theirs is the world of intricate personnel policies, growing fringe benefits and organized welfare on one level or another.
In an sense, this is the triumph of enlightened capitalism. Since the dawn of the industrial age, workers have striven to achieve economic security: insulation from the whims of the market of the autocratic impulses of the boss. To a large extent, we have achieved it. But the cost may be a loss of individual choice and creativity.
In the next quarter century, that will matter increasingly. As the nation's work force ages, more workers will find themselves in jobs they find boring and unsatisfying. Opportunities for promotion will diminish. The question is how to keep workers both happy and productive. It's sometimes assumed that older workers are more rigid, less open to new ides of simply less interested. Maybe. But they may need a change of scenery and a little new stimulation.
Today's security-conscious world impedes changes. The security lies less in public protection (unemployment insurance, various antidiscrimination laws) than in the private practices of employers. Big organizations require rules and create customs; the evolving rules and customs form a protective cocoon around many employes, especially those with long tenure.
Academic research now is beginning to shed light on how these nechanisms work. Economists Bradley R. Schiller and Donald C. Snyder of American University have shown that pensions tend to bind workers to particular firms. Workers hang around to collect accumulated benefits.
Seniority practices probably have the same effect. In a series of recent studies, James L. Medoff of Harvard University and Katharine G. Abraham of the Massachusetts Institute of Technology found that most companies (unionized or not) frequently grant older workers larger pay increases for the same work than younger workers.
Likewise, older workers enjoy better job protection. More than three-fourths of the firms in one survey reported that senior workers would be laid off before junior workers only if the younger workers performed "significantly better."
The upshot is that the accumulation of fringe benefits, status and seniority privileges may keep some workers wedded to their employers long after it is good for either of them. Workers are afraid to let go. They fear they'll drop in salary and responsibility. They don't want to forsake security, although they may increasingly dislike -- even hate -- their jobs. They like themselves less and contribute less.
To say this is not to condemn the current system. In most respects, it is sensible and humane. A company that abuses workers when they age -- or simply discards them like interchangeable parts -- is bound to acquire a reputation as a cruel and heartless place.
Consequently, the prevalence of seniority practices and fringe benefits is not simply corporate charity but rational management. Companies compete for good workers, seek to reduce turnover costs, attempt to assure loyalty and continuity. To be known as a human shredding machine is to send good young workers scurrying for careers elsewhere.
This sensitivity to seniority represents one of the lasting contributions of American unions to the improvement of the workplace. Unions made seniority protection a key bargaining demand. Significantly, one Medoff-Abraham study found that more than two-thirds of unionized firms would never fire an older worker before a younger one.
Shrewd corporate executives also long ago recognized the importance of creating a sense of security for their workers. Here is Robert E. Wood, the head of ysears, Roebuck & Co., speaking to company executives in 1950: "We have approximately 150,000 employes. On the treatment of these employes and our policy towards them rests much of the future success of the company. . . . The constant endeavor of the company should be to build up security and capital for its people."
Having said all this, though, it's impossible not to wonder whether the pendulum has swung too far.
To some extent, the modern organization no longer demands success or striving. The "merit" pay increase that is not based on merit at all is now commonplace. In one firm studied by Medoff and Abraham, about four-fifths of the toal salary increases involved "merit" raises (as opposed to promotions). Some of the increases were based on true merit -- as reflected in performance ratings -- but many were not.
Problems may multiply in years ahead. The current system grew and flourished in an era when the proportion of young workers was expanding constantly. There was always "fresh blood" and a growing number of supervisory positions. Now the infusion of younger workers is abating, as is the overall growth of the labor force. Moving up will be increasingly tough.
One of the great challenges of the next few decades for both government and business will be to keep work interesting and to accommodate changes in the labor force. That means rearranging work patterns and giving workers more freedom to move.
Consider fringe benefits. They enjoy favored tax treatment. It's less costly for a company to provide pension or health benefits directly than to increase a worker's salary and let the individual select the benefits. Consequently, fringe benefits are channeled through the job. Might not it make sense to change this special tax treatment, allowing individuals to become a little freer or their employers?
Business executives and government officials ignore these matters at their peril. The basic issue is nothing less than the place of the individual in the economic system.