New Social Contract: Restoring Dignity and Balance to the Economy
Publication Date: February 2007
Publisher(s): Economic Policy Institute
The implicit social contract that governed work for many years-- the norm that hard work, loyalty, and good performance will be rewarded with fair and increasing wages, dignity, and security--has broken down and been replaced by a norm in which employers give primacy to stock price and short-term gains often at the expense of America's workers. The decline in middle-class living standards, the elimination of institutions that support a growing middle class, and the dramatic increase in income equality experienced in recent years, is not the result of some invisible hand. It is the direct result of policy choices that have undermined the bargaining power of everyday Americans.
Instead of instituting policies in this global economy to ensure a broadly shared prosperity, we have made choices that benefit the few. At the same time, who works, how work is carried out, and the conditions of employment have changed dramatically in recent years, while the public policies, institutions, and practices governing work and employment relations, put in place in the 1930s to fit the industrial economy and workforce of that time, have not kept up.
As a result, the American Dream is slipping away from millions of Americans and their families. A majority of Americans now worry their children will not be able to improve on the standard of living they experienced growing up. If this is not the legacy we want to leave the next generation, then we need to start now to put in place forward-looking policies and labor market institutions to build a new social contract tailored to today's workforce, families, and economy. A new social contract must build an economy that is strong and durable, but it must also build strong and durable families. It must recognize that we live in a new global economy with increased insecurities and with modern families that in most cases include fathers and mothers in the workplace.