(FORTUNE Magazine) – THE SOCIETY 40 ^ WHAT WE CAN DO NOW America's top CEOs maintain that integrating the urban underclass into the national economy isn't just right -- it's essential to everyone's prosperity. Here's what needs to be done, and how business can help. by Richard I. Kirkland Jr.

43 HOW TO MAKE WELFARE WORK Sociologist Christopher Jencks says repairing the damage will take both an improved safety net and more self-reliance among the poor.

INVESTING/COVER STORY 52 HOW CHARLES SCHWAB WINS INVESTORS Individuals are coming back to stocks. With low prices, lots of service, and heavy promotion, Schwab has become their favorite discounter. Also: a guide to brokers. by Terence P. Pare

POLITICS & POLICY 67 DO AMERICANS PAY ENOUGH TAXES? Not judging by the usual international comparison. But U.S. taxpayers certainly don't feel like giving government more. by Joseph Spiers

MANAGING 71 IS THIS LAYOFF NECESSARY? No, and it may even reveal stupid management. That's the view at recession-hit companies that have found scads of ways to avoid taking the fateful step. by Edmund Faltermayer

THE ECONOMY 89 WHAT GAINS FOR RECESSION'S PAIN? By sobering businesses and consumers, it has set the stage for lasting growth. Debt is ebbing, inflation will stay cool, and companies are digging harder for efficiencies. by Louis S. Richman

CORPORATE PERFORMANCE 102 AIRBUS TAKES OFF The flight was plenty bumpy, but Europe's planemaker has reached the status of a serious threat to U.S. giants Boeing and McDonnell Douglas by offering cutting-edge technology. by Kenneth Labich

CORPORATE PERFORMANCE 111 STAYING AHEAD OF 800 COMPETITORS Electrifying little-known AMP. by Andrew Erdman

112 REVOLUTION FROM WITHIN An insider rescues his utility. by Stephanie Losee

115 COMPANIES TO WATCH

MONEY & MARKETS 117 THE BATTLE OF THE BEAN COUNTERS The big debate over accounting practices: Advocates of change want to avoid a new S&L mess; critics, a new credit crunch. by Ford S. Worthy

TECHNOLOGY 131 TECHNOLOGY TO WATCH

EXECUTIVE LIFE 135 THE CEO'S SECRET OF MANAGING TIME It doesn't look efficient, but smart executives stay on top by being interrupted. by Alan Deutschman

DEPARTMENTS 4 EDITOR'S DESK 8 INDEX 12 NEWS/TRENDS Women candidates in record numbers, whether Germany has lost its business edge, using your PC to find a job, interactive TV, and more.

17 FORTUNE FORECAST Wages begin to inch up. by Joseph Spiers

23 PERSONAL INVESTING The Solomon of stocks finds a better way to pick them -- by discarding beta.by Terence P. Pare

Also: Betting on China's boom, new vroom in toy stocks, and Portfolio Talk with Larry Keblusek of Northern Investment Counselors in Chicago.

34 LETTERS TO FORTUNE

148 FORTUNE PEOPLE Rukeyser vs. Rukeyser, Nick Buoniconti's true goal, and more. by Laurie Kretchmar

163 KEEPING UP by Daniel Seligman

THE SERVICE 500 168 NOTHING TO WRITE HOME ABOUT What kind of year was it for the FORTUNE Service 500? Not so hot. Among the stars: retailers and -- are you ready for this? -- life insurers. by Mark Fefer and Sally Solo

174 THE SERVICE 500 LISTINGS The largest service companies in the U.S.

201 THE 500 RANKED BY PERFORMANCE The top 50 companies rated by 12 measures.

214 ^ THE 500 RANKED WITHIN STATES Headquarters plus CEO and phone number.

238 ALPHABETICAL INDEX

ABOVE: Charles Schwab on the customer floor at his San Francisco offices, photographed by Doug Menuez -- Reportage.

COVER: George Lange's camera found the king of discounting near the Golden Gate Bridge.