New Rules for a New Economy: Employment and Opportunity in Post-Industrial America by Stephen A. Herzenberg, John A. Alic, and Howard Wial, Ithaca, New York: ILR Press/Cornell University Press, 1998, 216 pp., ISBN 0-8014-3524-2.

This thought-provoking book is about the new economy with particular reference to the service sector. It argues that because the new economy means that most Americans will find themselves working in the service sector, labour market reform is a necessity. The authors’ goal is “to understand the dynamics of today’s service industries and to use that understanding to map out a set of public policies that will benefit workers as well as businesses and consumers.” The book consists of eight chapters, which can be grouped into three sections. Chapters 1-4 assess the current situation in the service sector and provide the background for the main argument of the book. In the first part of the book, the authors review the elements of the American economy undergoing change, focusing on how better performance and economic security can be achieved. Three-quarters of American workers now work in the service sector and labour market institutions must be adjusted to reflect this fact. Herzenberg, Alic and Wial identify public policy institutions, unions, work systems, and business organizations as elements in the change process. Arguing that employment relationships in the service sector are important, they repeatedly emphasize the requirement for labour market changes that can provide workers with higher incomes, better job security, and more meaningful career paths. Low wages and rising inequality, declining job security, and low productivity growth are identified as the sources of anxiety in the modern economy. The need for a new labour market structure to replace the old one shaped by the old industrial economy, is underlined in several places in the book. In the authors’ view, new institutions and new public policies must be developed to respond to the needs of both employers and the workers and reduce anxieties created by forces in the new economy. The authors divide the labour market into four work systems based on production organization, task performance regulation, and career paths provided: (1) the tightly constrained work system, which is exemplified by cheque processing or fast-food restaurants where jobs are narrowly defined, like on an assembly line; (2) the unrationalized labour intensive work system, which ties pay to output and can be characterized by low cost, low volume, and low or uneven quality (e.g., home health aides, clerical home workers); (3) the semi-autonomous work system, where workers perform tasks that cannot be technically monitored, and peer pressure, organizational culture, promotion opportunities play an important role in motivation (e.g., low-level managers, some sales workers); and (4) the high-skill autonomous system, which is characterized by self-motivated workers who have professional commitment, as well as financial and career incentives (e.g., physicians, engineers). According to the authors, the “unrationalized labour intensive” and “high-skill autonomous” work systems are expanding. They emphasize the negative consequences of the expansion of the former system, which is characterized by jobs of low skill, low wages, and close supervision. Such systems are considered as the main factor that deepens the anxieties of the labour market. Despite this conclusion, the authors are not clear how we can prevent extensive use of such systems. Is changing the laws sufficient? Or do we need more radical changes? The authors introduce their proposed labour market changes in chapters 5–7. One of their more provocative points is the suggestion that education and training will have a limited impact on attempts to solve today’s “important” economic problems, such as inequality in income distribution and job insecurity. Increasing levels of education do not result in changes in income distribution—such changes simply increase entry requirements, thus exercising little impact on wage differentials. Based on case analyses, it is concluded that higher average …