Economic gains and blame

Heller Dean Lisa Lynch talks about economic crises and the social contract

Economist Lisa Lynch, PhD, became dean of the Heller School for Social Policy and Management in July 2008. Catalyst interviewed her about her research and the turmoil in the economy.

Catalyst: Much of your recent research has focused on how investments in workplace design and organization impact workers’ pay and the ability of companies to innovate. What are some of the most important aspects of organizational innovation that you see making a difference for workers and firms?

Lynch: There has been a great deal of discussion in the popular press and in academic journals on what explains rising productivity growth in the United States over the past 10 to 15 years—the so-called New Economy phenomenon. While many have focused on just the role of investments in information technology, my work with UCLA economist Sandra Black has looked at how investments in IT, along with investments in organizational innovation such as workplace education and training, employee involvement in decision making, and incentive-based pay, have jointly contributed to the marked increase we have seen in productivity in the United States since 1995.

We found that organizational innovation has a significant impact on productivity, both directly and through synergies with other forms of investment, like information and communications technology. More specifically, we discovered that organizational innovation accounted for as much as 30 percent of output growth in manufacturing in the 1990s. We also determined that organizational innovation has a mixed impact on employees. There is more wage inequality within firms that invest in both technological and organizational innovation.

Catalyst: Are there specific results from your research that surprised you or others?

Lynch: Our work was the first to examine how such investments impacted the economy as a whole. We found that organizational innovation in unionized workplaces, especially in the manufacturing sector, resulted in much greater productivity gains than the returns to organizational innovation in nonunionized firms. This generated enormous interest by trade unions and employers, not just in the United States but in Europe, Australia, and New Zealand. Another key finding was the link between education and organizational innovation. Firms that have a more educated work force are more likely to invest in organizational innovation. This last result underscores the importance of investing in education to ensure our ability to innovate in the long run.

Catalyst: Are there any implications of this work for the current economic crisis?

Lynch: There is a deeper structural problem that faces policymakers here in the United States and that is the overall skill level of the work force. From survey work we know that only half of the U.S. adult population aged 16 to 65 years has the minimum reading and quantitative literacy skills as identified by the National Institute for Literacy to succeed in the labor market. This problem will need to be addressed both through improvements and innovation in our education system for those entering the work force and job-training programs for those already in the work force.

Catalyst: Given the economic crisis, what are some of the broad questions Obama be considering to make sure economic history doesn’t repeat itself?

Lynch: I think this crisis highlights a greater need to revisit our social contract. What are the advantages and disadvantages of unfettered markets versus markets that have more rigorous regulatory oversight? How do the gains and blame in our economy get shared? Finally, can we continue to design policies to regulate our capital and labor markets at the nation-state level when these markets are increasingly organized across borders?

Catalyst: You’ve often said that what interests you is the interaction between theory, practice, and teaching. How will you apply this approach as the new dean of the Heller School?

Lynch: As we approach Heller’s 50th anniversary, we have a special opportunity to look back and see how far we have come. But there is nothing like a big anniversary to get us to look forward and identify what it will take to be on the cutting edge of social policy and management in the decades ahead.

So over the next year I will engage the Heller community, leading social policy researchers, and key social policy-makers in a frank discussion about how we see social policy evolving over the next decade. In particular, we will examine how our research and educational programs need to be preserved, enhanced, and augmented to prepare the next generation of leaders in social policy and management and to deliver on our mission statement’s promise of “knowledge advancing social justice.”