SHAKING THE BLUE-COLLAR BLUES Unskilled workers took a beating in the Eighties. Happily, more people are enrolling in post-secondary schools. And corporations are learning that training pays off.
By Jaclyn Fierman REPORTER ASSOCIATE Nora E. Field

(FORTUNE Magazine) – USED TO BE if you were free, white, and 21, you just about had a lock on the American dream. The job at the local plant or department store was waiting for you after high school. Before long you saved enough to get married and buy your own home. Things got better year after year, and the world you passed on to your children was better than the one your father handed you. The Eighties put an end to that. In an unprecedented setback, a whole segment of American society headed downhill: people who didn't go to college. Among the hardest hit were the nearly nine million white men 25 to 34 years old who had either dropped out of high school or quit the books right after graduation. Over the past decade and a half the living standards of this ten- year cohort eroded by 1% to 2% annually -- the same amount they used to gain, says Harvard labor economist Richard Freeman. The crowded elevator also carried down blacks of all educational levels, even college graduates. Women, by contrast, generally improved their lot over the Eighties (see chart). A high school diploma alone was enough to push them ahead of their counterparts ten years earlier. Though women still earn only 65% of what men earn, Harvard economist Claudia Goldin estimates that the male wage premium shrank by 18.5%. At the beginning of the Eighties the guys who had gone to work after the senior prom took home 26% less than their classmates who had gone to college. By 1989 the gap had more than doubled to 55%. The small number lucky enough to land good, low-skilled jobs and hold them saw their real wages creep upward over the decade. But when they stopped to compare themselves with their parents at the same age or, more pointedly, with their better-educated peers, their sense of well-being quickly dissolved. Impossible, you say. During one of the greatest economic expansions the world has ever seen, people actually fell from grace? Even worse. People are always moving up and down the ladder. But this time, says Greg Duncan, a program director at the University of Michigan's Survey Research Center, ''a higher percentage of people headed in the wrong direction than in decades * past.'' The preliminary results of Duncan's latest study show that 7.8% of adults between 25 and 50 who had middle or high incomes in the early 1980s had fallen to the lowest-income group by mid-decade. Over the comparable period a decade earlier, only 5.3% of the haves became have-nots. Happily, the Nineties can -- and should -- be different. Demographics and global competition, which weighed against so many workers in the past decade, are combining to create a new premium for people with training. ''You need front-line workers to be thinking workers, not just cogs in the machine who perform the same simple task 800 times a day,'' says Ira Magaziner, a management consultant in Providence. Magaziner is a proselytizer for better training and a principal author of America's Choice: High Skills or Low Wages! Farsighted companies such as Corning and Motorola are already investing in company-wide training to upgrade skills, with clear rewards for both employers and employees. Post-secondary enrollments are rising, especially at two-year colleges. But business, government, and academia still have more to do before a shipshape American work force can ensure rising productivity and living standards. HOW DID an entire generation of Americans get left behind? Ask Gale Prime, 34, a General Motors assembly line worker who by 1982 had worked his annual wages up to $30,000, enough to secure passage into America's middle class. His one-bedroom home in Saginaw, Michigan, was comfortable enough for his wife and young son, and his horizons extended as far as the combined horsepower in his driveway (a 16-foot motorboat, a dirt bike, a snowmobile, a Buick Electra, and a Ford Bronco) would carry him. Prime bid the good times farewell when he was 26. Laid off in 1982, he sold his possessions and enlisted in the Army. He drifted after his discharge in 1986 until GM rehired him a year later to work on an assembly line in Tarrytown, New York. Determined to provide for his family and keep history from repeating itself, Prime began an apprenticeship in toolmaking at GM. But he lost his job again last fall, three years shy of regaining some semblance of job security. ''I always thought I'd work at GM for the rest of my life and go fishing on the weekends,'' he says, arms slumped over the top of a lathe at Westchester Community College, where he is fulfilling the classroom component of his training, courtesy of GM. Demographics threw the Primes of the world in with the fish. During the 1970s a crush of college-educated baby-boomers hit the job market. Columbia University economist David Bloom estimates that among white men 25 to 34 with full-time jobs, there were nine college graduates for every ten who had completed no more than high school in 1979. The Ph.D. driving a cab was more than a metaphor -- he was a fact the country over, as the better-educated vied with the less skilled for entry-level jobs. Eventually the market began to send a message: Why bother with college? People got the message, but their timing was dreadful. By 1988 there were only seven baccalaureates for every ten who held no more than high school diplomas. At the same time, the unskilled jobs were drying up. According to the Work in America Institute, a labor force research organization in Scarsdale, New York, corporate America cut some 4.5 million jobs over the decade as it automated and outsourced.

Companies facing new competition and more demanding customers suddenly wanted workers with better skills. Telephone operators had to know how to search databases; bank tellers, how to solve personal finance problems; and janitors, how to best maintain a shop floor. ''You can't go to a textile factory today with a degree in football and know how to run the new machines,'' says economist Anthony Carnevale of the American Society for Training and Development. Fathers who once proudly bequeathed jobs to their sons are empty-handed today. GM, Michigan's main employer since World War I, says its typical blue- collar employee is 44 and has 21 years of seniority. New hiring, except in engineering, design, or computer services, is rare. Says Columbia anthropologist Katherine Newman, author of Falling From Grace: The Experience of Downward Mobility in the American Middle Class: ''People can pass on a desire to grab a share of the American dream, but they can't pass on their job or their status to their children.'' Ask the Trevino family about generational givebacks. Alphonse, 48, son of a Texas migrant worker, waltzed through GM's gate in Flint, Michigan, 22 years ago. ''People found two assembly-line jobs and then picked the better one,'' he says. Things were different when Trevino's son began pounding the pavement over a decade later. Since high school Alphonse Jr., 28, has moved from one low-paying job to the next and has just about lost hope of finding an assembly job. Says his father: ''In Buick City there's nobody left with less than 13 or % 14 years' seniority. We're the last of the Mohicans. We're on our way back to being migrants.'' WHEN FOLKS like Trevino migrated in the Eighties, they often moved not to the farm but to the service sector, with its generally lower pay. Even many who stayed in manufacturing lost ground when they were squeezed out of lucrative union jobs, such as those in autos and steel. Columbia's Bloom says that in 1980, 47% of high school graduates over 25 and 40% of dropouts held union jobs. By 1988 only 31% of graduates and 25% of dropouts were paying dues. As membership dwindled, union settlements no longer pulled up wages at non-union shops. ''The ethos that drove employers to treat workers more or less equally has weakened,'' says Brookings Institution labor economist Gary Burtless. With competitive pressures growing, companies drove wages down. Losing the union thread markedly changed Matthew Bowman's life. Raised in a Houston ghetto, Bowman made $18 an hour as a longshoreman in 1983. That also turned out to be his worst year. He was laid off and has yet to recover. He now makes $10 an hour as a jail guard for the Houston Police Department. Like many of those evicted from middle-class status in the Eighties, Bowman is pinning his hopes on his four children. Two years ago he moved to a modest home in Spring, Texas, a suburb of Houston known for fine schools. ''At least I can send my kids in the right direction,'' he says. If the Seventies sent out a negative signal about the benefits of education, the Eighties hit people over the head with a different cue: Get a degree or else. Interest in four-year colleges is picking up steam. The U.S. Department of Education counts some 200,000 more college students than there were last year, pushing enrollment to over 8.5 million students. The Hudson Institute research organization in Indianapolis estimates that more than half the 18 million jobs expected to materialize by the end of the century will require advanced skills -- not a baccalaureate necessarily, but at least some technical training after high school. Nowhere is the momentum as great as at the nation's 1,200 community colleges, havens for people in their mid- to late 20s who are eager to acquire marketable skills. And with tuition averaging only $842 a year -- half the price of a four-year state school and one-tenth the cost of a private institution -- the education is a steal. The American Association of Community and Junior Colleges estimates that six million people will enroll in two-year colleges this year, up from 4.7 million in 1985. While baccalaureates are best, post-secondary training of any sort secures jobs and fattens paychecks. A long-term research project by the Rand Corp. of Santa Monica, California, found that recipients of on-the-job training earn 16.9% more on average than the untrained. People who seek outside vocational training earn 11.9% more when they return to work, and community college yields an 8.2% premium. The study also found that people armed with vocational training are less vulnerable to layoffs for a good 12 years. The returns from post-secondary training would no doubt be greater if course offerings more closely mirrored job market opportunities. Detroit, for example, has a huge presence on campus -- witness the amount of heavy-metal offerings in the typical junior college course catalogue. Two-year schools are strongest in the areas of manufacturing technologies and health care. But they fall short in preparing people for many critical occupations, including food processing, warehousing, and front-line service in banks. Getting kids to go to college in the first place is an even greater challenge than revamping the curricula. Though the number is edging up, just 60% of the high school class of 1989 signed up for post-secondary training of any kind. And if history is any guide, only half the college-bound will earn a baccalaureate. Educators will be stumped by black youngsters, in particular, who ask, ''What for?'' During the Eighties blacks with college degrees earned half again as much as those who graduated from high school. But though the premium held up, they were losing ground. They earned nearly 11% less in real terms than their counterparts a decade earlier. Hiring cutbacks by the federal government, which had traditionally absorbed a large number of college- educated blacks, hit this group especially hard, says Harvard's Freeman. Another reason blacks lost ground, he suggests, was the weakening of affirmative-action programs during the Reagan years: ''Business had the feeling that it wasn't worth spending a lot of resources on the issue because Washington didn't care.'' Whatever their race or gender, all youngsters heading directly for the workplace after high school could use help making the transition. Boons for unskilled youth are the budding partnerships between businesses and high schools that enable students to apprentice while continuing their education. ; ''Watching and imitating is how children make their way into adulthood,'' says Assistant U.S. Secretary of Education Christopher Cross. ''Apprenticing youngsters to masters is founded on this fact of life.'' EMPLOYERS who capture the minds of future workers at an early age stand to gain a lot. Take New York City hospitals, which are in dire need of support staff. The Greater New York Hospital Association is working with the board of education to train secondary school students to become orderlies, aides, technicians, and practical nurses. In September, 100 middle-school children will begin basic courses that by 12th grade will equip them to don a white coat right after graduation. In Cambridge, Massachusetts, Polaroid Corp. recently joined forces with the Cambridge Rindge and Latin School, which has one of the oldest vocational programs in the country, to better equip youngsters for entry-level jobs. Polaroid pays eight seniors $7.79 an hour to learn on the job. The 20-hour workweeks include instruction in carpentry, air-conditioning repair, and the photographic process. Says participant Brian O'Connor, 17, of the opportunity: ''This may help me get a job at Polaroid so I can earn money to go to college.'' So far the program is mainly generating good will. In the long run, it might provide a new source of trained workers. Polaroid is a snapshot of experimental projects the federal government ought to be encouraging around the country. Currently the Labor Department spends about $3 million a year in seed money for such apprenticeships. Senator Sam Nunn has proposed legislation that would up the ante to $50 million a year. State and local governments play a bigger role. According to a report by the Congressional Office of Technology Assessment, 44 states spend about $375 million on training tailored to the needs of local businesses. Local governments spend at least that much. Companies pick up most of the training tab and should, but Washington could nudge them with a small tax break -- similar, say, to the incentive they used to get for investing in new equipment. The nation can fairly expect the same returns from education that individuals and businesses receive. Corporations that take training seriously can show eye-popping benefits. Consider grade-A trainer Motorola. The electronics company spends about $60 million a year on 104,000 employees worldwide. During the Eighties much of the money went to remedial education so that the company's largely illiterate production work force could master seventh-grade reading and math. Today workers who used to perform one or two repetitive tasks are learning to handle a dozen different jobs, work faster, and make fewer mistakes. The payoff? Motorola says it has saved no less than $1.5 billion over the past three years, largely because of improvements the training has made in its work force. In some operations, Motorola gets $33 out of every dollar it spends on training, says William Wiggenhorn, corporate vice president for training and president of Motorola University. Yes, university. Motorola U. exchanges faculty, jointly develops courses, and shares lab equipment with local community colleges across the country. Eleven years ago Motorola concluded that it would not survive over the long run without a better-educated work force. Back then the company anticipated a one-shot training investment of $35 million over five years. Now it expects to invest $120 million annually -- $60 million in training and another $60 million in lost work time -- for the indefinite future. CORNING is a convert. ''We're in a mad race for competitive position,'' explains David Luther, senior vice president of quality. The company expects every employee, from forklift operator to division manager, to spend 5% of his working hours learning new skills. ''This goes way beyond the old watch-Joe method of teaching,'' says Luther. ''Joe might have been doing the job all wrong.'' To get things right, the company has formally assigned 400 people to train others in their departments. On the glass company's cutting edge is Corning's cellular ceramics plant in Erwin, New York. The 70 employees, most of whom never went to college, work in teams to produce filters that purify molten metal. Everyone on the four production teams knows how to operate and repair the machines, load the kilns, pack and ship the filters, order parts, and control for quality -- tasks that used to be divvied up one per person. The more you learn, the more you earn at Corning's ceramics plant. The varied production tasks every team member performs are broken down into four levels of difficulty. Progressing through each level brings a raise -- up to $2.25 an hour for those who reach the top. Fail to complete the second level after two years and you're fired. Talking with the ceramic associates, as Corning calls them, makes it plain that morale has improved along with wages. So has quality. Plant manager Corbin Plymale says the reorganization has saved ''tens of thousands of dollars,'' twice as much as the investment in training. In five years Corning has cut the cost of each filter by 60%. Even more noteworthy: Corning had to toss out 9,500 of every million filters in 1986; last year there were only five rejects per million. Business can also sponsor off-site training, particularly at junior colleges and vocational schools. Each of the Big Three automakers has a retraining fund for laid-off workers that many have drawn on to pay college tuition. GM started its pool, known as the nickel fund, in 1982: 5 cents per employee per hour. Recently the fund has swelled to as much as $120 million a year and includes money both for people out of work and for those still on the job. Verna Samuel, 38, a divorced mother with four daughters, used to work at a Fisher auto-body plant in Flint. In 1987 former GM chairman Roger Smith shut down the plant, a decision later vilified in the film Roger & Me. She used GM retraining money to take a course in entrepreneurship. Today Samuel is a self- employed seamstress, with a pick-up and delivery service for working women. Her earnings come to about $7 an hour, just under half her GM pay. But she makes up most of the rest in a pension she continues to receive from the company. Fortified with skills he bought with GM retraining money, Gale Prime, the idled assembly line worker in Tarrytown, New York, plans to approach his former boss again. Just a few months from completing his courses at Westchester Community College, he says, ''I hope this training will make the difference when I apply for another apprenticeship back in Michigan.'' Men like Prime will have their best shot at competitive companies that want to smarten up -- not dumb down -- their production processes. Also receptive are those that have discounted low wages as a currency to buy global market share. Today U.S. corporations spend at least $30 billion a year to train junior and senior employees in subjects from basic arithmetic to biofeedback techniques. Nowhere near enough, given the dramatic productivity improvements companies can win by embedding learning in the workplace. Only about 12% of the nation's work force receives any formal training at all on the job. Fully three-quarters of the people who will be employed in the year 2000 are already at work -- eager to remain and more willing than ever to do what it takes to stay there. They are especially amenable when the American dream hangs in the balance. That's good news for corporate America. Especially since the message from places like Corning is the same one that came back from the superbly capable non-college-educated troops in the Gulf: People can be trained.

CHART: NOT AVAILABLE CREDIT: SOURCE: BUREAU OF THE CENSUS CAPTION: HOW THE PAY GAP GREW IN THE EIGHTIES College was worth the price for most Americans during the Eighties. Men who quit after high school found an inhospitable job market and saw their wages sink compared with those of their college-educated peers. Except for high school dropouts, women gained ground over the decade.