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Technology and Labor
in Five Industries
Bakery products/Concrete/Air transportation
Telephone communication/Insurance
U.S. Department of Labor
Bureau of Labor Statistics
1979
Bulletin 2033







Technology and Labor
in Five Industries
Bakery products/Concrete/Air transportation
Telephone communication/Insurance
U.S. Department of Labor
Ray Marshall, Secretary
Bureau of Labor Statistics
Janet L. Norwood, Commissioner
September 1979
Bulletin 2033




For sale by the Superintendent of Documents, U.S. Government Printing Office
Washington, D.C. 20402
Stock Number 029-001-02394-4

Library of Congress Cataloging in Publication Data

U n ite d S t a t e s . B ureau o f L ab o r S t a t i s t i c s .
T ech n o lo g y and la b o r i n f i v e i n d u s t r i e s .
( B u l l e t i n - B ureau o f L ab o r S t a t i s t i c s ; 2033)
" F i f t h o f a s e r i e s w hich u p d a te s and expands BLS
B u l l e t i n 1^7^-, T e c h n o lo g ic a l tr e n d s in m a jo r A m erican
i n d u s t r i e s , p u b lis h e d i n 1966 ."
B ib lio g r a p h y : p .
1 . T e c h n o lo g ic a l in n o v a tio n s - - U n ite d S t a t e s .
2 . U n ite d S t a t e s —I n d u s t r i e s . 3* I n d u s t r i a l p r o ­
d u c t i v i t y —U n ite d S t a t e s .
I . U n ite d S t a t e s . B ureau
o f L abor S t a t i s t i c s . T e c h n o lo g ic a l t r e n d s i n m ajo r
A m erican i n d u s t r i e s . I I .
T itle . I I I .
S e r i e s ; U n ite d
S t a t e s . B ureau o f L abor S t a t i s t i c s . B u l l e t i n ; 2033.
h c h o .t U 5
u
1979
338 *. 06
79-16868




11

Preface

This bulletin appraises some of the major technological
changes emerging among selected American industries
and discusses the impact of these changes on productivity
and occupations over the next 5 to 10 years. It contains
separate reports on the following five industries: Bakery
products (SIC 205), concrete (SIC’s 3271,2,3), air
transportation (SIC 45), telephone communication (SIC
481), and insurance (SIC 63).
This publication is the fifth of a series which updates
and expands BLS Bulletin 1474, Technological Trends in
Major American Industries, published in 1966, as a part
of the Bureau’s continuing research program on produc­
tivity and technological developments. Preceding
bulletins in this series are included in the list of BLS
publications on technological change at the end of this
bulletin.
The bulletin was prepared in the Office of Productivity
and Technology under the direction of John J. Macut,




Chief, Division of Technological Studies. Individual
industry reports were written by staff members of the
Division under the supervision of Rose N. Zeisel and
Richard W. Riche. The authors were: Bakery products,
Gary E. Falwell; concrete, William C. Perkins; air
transportation, Gustav A. Sallas; telephone com­
munication, Michael D. Dymmel; insurance, Gustav A.
Sallas.
The Bureau wishes to thank the following companies
and organizations for providing the photographs used in
this study: Nabisco, Inc.; Heltzel Co.; Air Transport
Association; American Telephone and Telegraph Co.;
International Business Machines, Inc.
Material in this publication other than photographs is
in the public domain and may be reproduced without the
permission of the Federal Government. Please credit the
Bureau of Labor Statistics and cite Technology and
Labor in Five Industries, Bulletin 2033.

Contents

Page
Chapters:
1. Bakery products ....................................................................................................................................................... 1
2. C oncrete........................................................................................................................................................................10
3. Air transportation.......................................................................................................................................................20
4. Telephone communication........................................................................................................................................28
5. Insurance ..................................................................................................................................................................... 41
Tables:
1.
2.
3.
4.

Major
Major
Major
Major

Charts:
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.

Output per employee hour and related data, bakery products, 1960-77 ..................................................... 4
Employment in the bakery products industry, 1960-78, and projection for 1978-90 ............................. 6
Projected changes in employment in the bakery products industry, by occupational group, 1976-85 . 7
Concrete industry output and construction activity, 1960-78 ........................................................................ 14
Output per employee hour in the concrete industry, 1960-77 ....................................................................... 15
Employee hours in the concrete industry, 1960-77 .......................................................................................... 15
Employment in the concrete industry, 1960-77 ................................................................................................ 17
Output per employee and related data, air transportation, 1960-77.............................................................. 25
Projected changes in employment in air transportation, selected occupations, 1976-85 ...........................27
Output per employee hour and related data in telephone communication, 1960-77 .................................34
Employment in telephone communication, 1960-78, and projection for 1978-90 ....................................36
Projected changes in employment in telephone communication, by occupationalgroup, 1976-85 . . . . 38
Employment in the insurance industry, 1960-78 ................................................................................................47

technology
technology
technology
technology

changes
changes
changes
changes

in
in
in
in

the concrete industry .......................................................................................... 11
air transportation ................................................................................................ 23
telephone communication ................................................................................. 29
the insurance industry ........................................................................................43

General references ....................................................................................................................................................................49




IV

Chapter 1. Bakery Products

Summary

(SIC 2051), and establishments engaged in manufac­
turing biscuits, cookies, crackers, and similar “dry”
bakery products (SIC 2052) (called the cookie and
cracker sector in this chapter). The bread sector is by far
the larger, with almost 5 times the number of employees
and 3 times the value of shipments of the cookie and
cracker sector in 1977.
The cookie and cracker sector of the industry is
dominated by a few firms that operate a relatively small
number of large-capacity plants. The four largest com­
panies accounted for almost 60 percent of the sector’s
shipments in 1972, as they did in 1958. Almost 70 percent
of shipments came from plants with 500 or more
employees. In this sector of the industry, advanced
technologies have been widely adopted.
Unlike the cookie and cracker sector, however, the
perishable nature of bread and cake products has limited
the geographic market of bakery plants. Inventory
buildup is not possible and the very frequent deliveries are
costly. Transportation costs have both effectively
prohibited their expansion and insulated them from the
competition of more economical producing units.
Consequently, large-capacity plants have been restricted
to areas of high population density.
To some extent, the structure of the bread baking sector
is changing to allow increased capacity utilization and
economies of scale. The number of breadbaking plants is
declining, and the larger plants are becoming relatively
more important. By 1977, for example, the number of
breadbaking plants had declined to half the number in
1958. Plants with more than 100 employees accounted for
more than 18 percent of all bread plants in 1972 com­
pared with less than 12 percent in 1958, and their propor­
tion of shipments increased from 69 percent to 80 percent
in this period.

The technology of the baking industry has not changed
substantially in the last two decades, and significant
advances are not anticipated. In general, the changes have
been largely confined to improvements to existing
machinery rather than changes in design concepts or
functions. In breadbaking, important innovations were
introduced in the 1950’s, but acceptance and diffusion
have been limited. In the long run, however, the trend to­
ward larger plants and the possibility of higher labor costs
will tend to make advanced mechanized systems
economically feasible for more breadbaking plants. In the
cookie and cracker segment of the industry, advanced
technologies are already widely established.
Productivity growth in baking was moderate from 1960
to 1977; the average annual rate of 2.5 percent was
roughly comparable to the average growth rate of all
manufacturing for the period. However, in the last 10
years of the period, 1967-77, the rate was only 1.5 percent,
while the growth rate of all manufacturing was 2.3
percent. Because of the industry’s prospects for relatively
small increases in output, productivity growth is expected
to be very moderate in the 1980’s.
Despite the fact that dollar outlays for plant and
equipment more than tripled from 1960 to 1977 peak
levels, real dollar outlays peaked in 1966 and then turned
down. This was associated with the underutilization of
existing capacity and expectations of slow industry
growth.
Industry employment has shown an almost steady
decline for the last 20 years. From its highest level in 1956,
employment decreased almost 25 percent, to 228,400
workers in 1978. Decreases were most concentrated in the
years from 1967 to 1978, when the rate of decline averaged
2.1 percent annually. The long-term outlook is for a
decline of less than 1 percent annually from 1978 to 1990,
or roughly half the 1960-78 rate.

Technology
There have been no major technological innovations in
the last several decades in either sector.
Since the largest proportion of cookie and cracker
shipments comes from high-capacity plants, the
economies resulting from the installation of mechanized

Industry Structure
The bakery products industry (SIC 205) is composed of
two major groups: Establishments engaged in manufac­
turing bread, cakes, and other perishable bakery products



1

or automated equipment in this sector have long been
recognized. Bulk handling of material, high-capacity
mixing, mechanized processing, and automated packag­
ing are now commonplace in the industry. The amount of
labor required to operate production lines has been
minimized. Future equipment developments will attempt
to offer more efficient operations by reducing break­
downs or reducing “cripples” (imperfect products), but
the manufacturing process will probably be altered very
little. The impact of new technology on labor in this sector
is expected to be relatively low in the 1980’s.
In baking bread, radical technologies were introduced
in the 1950’s. For larger plants, a more automated
processing system was developed which included liquid
fermentation and continuous mixing, discussed in detail
below. However, continuous mixing has not been
accepted, and liquid fermentation is used almost
exclusively with conventional processing rather than with
a continuous system. For smaller batches, technology
modifications such as high-speed dough mixing
significantly reduced fermentation time and facilitated
conventional processing, but these affect specialty
products primarily.

continuous mix processing, there has been no significant
change in the technology of the breadbaking industry.
New equipment has been introduced, but the changes
have been in capacity, reliability, or efficiency rather than
in concept or function. Even in the larger breadbaking
plants where advanced mechanization is most feasible, no
significant new techniques are available to the manufac­
turer.
In general, conventional breadbaking equipment has
been improved to reduce manual processing and
handling. Pneumatic conveyors transfer bulk materials to
storage and mixing operations. Automatic batching and
weighing equipment delivers ingredients to mixers
quickly and with a high degree of accuracy. Bulk dough is
divided, rounded into balls, molded into loaves, and
panned by specialized machinery. Products pass through
the final fermentation, baking, and cooling stages, and
between processing stations, on conveyor systems.
Slicing, wrapping, packaging, palletizing, and tray
stacking can be accomplished by machine.
The major impact on unit labor is likely to come from
improvements to conventional machinery and from
structural changes, such as larger establishments which
permit better capacity utilization, rather than from
development or diffusion of innovative, higher capacity
machinery. It is also possible that, in the long run,
increasing labor costs may make the adoption of more
automated machinery feasible even in medium- and
small-sized plants.

Since the introduction of liquid fermentation and

Continuous mixing
Continuous mix processing substantially reduces the
labor required for dough mixing and makeup in bread
manufacture. Instead of the two-step mixing of the
conventional sponge and dough method, continuous mix
processing subjects a steady flow of liquid ferment to
high-speed mixing. The developed dough is extruded and
panned without further processing by conventional
degassing, dividing, rounding, and molding equipment.
Because several separate processing stages are
eliminated, makeup time and labor requirements are
greatly decreased. The semiskilled workers who transfer
dough between the mixer and the fermentation room are
no longer needed, and the number of bakers who oversee
the mixing and makeup operations is reduced. Also,
because continuous mixing operates in a closed system,
cleanup is easier. Consequently, one or two operators
produce the same hourly dough volume as six or seven
workers in conventional processing.
Despite significant savings of labor costs, continuous
mixing has not gained acceptance since its introduction in
the 1950’s. Because high levels of output are necessary to
achieve a significant reduction in average unit cost,
continuous mixing is economically practical only for
larger plants. Also, to some extent, there appears to be a
problem with consumer acceptance of the texture of

Baker controlling flow of ingredients from overhead conveyor
system to mixer.




2

bread produced by continuous mixing. Moreover,
operating problems have also limited its diffusion.

At present, high-speed mixing accounts for less than 5
percent of bread production in the United States, or less
than half of the output for which it is suitable. The
expense of replacing conventional mixers with ones
capable of the necessary energy output may not be
economically justified and has been the primary factor
limiting diffusion.

Liquid fermentation
Liquid fermentation gained acceptance in American
bakeries in the early 1950’s and is currently widely used.
An important step in the automation of the breadbaking
process, it was developed to replace the sponge stage of
the conventional sponge and dough method in order to
reduce total processing time and labor requirements.
The liquid ferment can be advanced through several
processing stages by pumps instead of by manual transfer
of the mixed sponge, a procedure that is required in
conventional processing. Bulk fermentation time is
shortened, less plant space is required, and processing and
maintenance time is reduced.
In contrast to the conventional sponges which require
immediate processing, the fermenting liquid can be
cooled and stored for a short time, which makes a more
flexible production schedule possible. Besides its impact
on conventional mixing, the introduction of a pumpable
ferment that could be processed in a closed system made
possible the concurrent development of a continuous
mixing process.
The impact of liquid fermentation on labor re­
quirements is significant. Skilled workers responsible for
sponge remixing in conventional processing—often
among the highest paid in the plant—are no longer
needed. Also, the work done by unskilled mixers’ helpers
in transferring dough between the mixer and the
fermentation room is eliminated.
Because liquid fermentation can be utilized in both
conventional and continuous mixing, its diffusion has
been great. It has been estimated that liquid ferments are
currently used in 40 percent of bread and 75 percent of
bun and roll production. Because widespread use has
already been achieved, it is expected that further diffusion
will be minimal.

Output and Productivity Outlook
Output
From 1960 to 1977, output of all bakery products rose
at the relatively slow rate of 0.7 percent annually.
However, this reflected a much stronger rate during the
first part of the period than during the last. From 1960 to
1967, the growth rate was 1.5 percent; this followed the
pattern of the 1950-60 decade. During 1960-67, output
increased in every year except 1961, when a small decline
occurred in conjunction with the 1960-61 recession. In
contrast, the rate from 1967 to 1977 slowed to only 0.4
percent annually, which reflected a sharp decline during
the 1969-71 recession. (See chart 1.)
In general, the slower rate of output growth in the last
10 years is associated with a decline in per capita
consumption and slower population growth. Per capita
consumption patterns may relate to changes in diet or in
income levels. A BLS study of consumer spending habits
in 1972-74 shows that for the United States as a whole,
expenditures for bakery products increased with family
income.1 Outlays for bread alone, however, stabilized at
family incomes of $15,000 and above. Since slower
population growth is projected for the 1980’s and no
significant increases in per capita consumption are
expected, it is likely that bakery product output growth
will slow down.
Productivity
Output per employee hour in the baking industry
increased at an average annual rate of 2.5 percent during
1960-77. This growth was comparable to the 2.6 percent
rate for all manufacturing for the period and surpassed
the industry’s performance in the decade of the 1950’s
when the rate was only 1.8 percent.
Significant gains were made from 1960 to 1967 when a
3.8 percent annual increase was recorded. The productivi­
ty gains in that period reflected significant reductions of
employee hours (2.2 percent annually). In the last decade
however, the rate of productivity growth fell off
substantially to 1.5 percent per year. The modest growth
rate since 1967 reflects small productivity declines in 1973
through 1975. Employee hours declined somewhat in the
1967-77 decade, and output growth was negligible. In the
1980’s, productivity growth is expected to be very
moderate because of the industry’s prospects for
relatively small increases in output.

High-speed mixing
High-speed mixing eliminates the extended fermenta­
tion time required in conventional breadmaking. It is
suited primarily to the manufacture of nonwhite breads
which constitute about 10 percent of current bread out­
put. With high-speed mixing, separate sponge and dough
mixing and fermentation are replaced by the rapid mixing
of all ingredients of the batch in a single step. In 5 minutes
of high-speed mixing, the concentrated input of
mechanical energy is sufficient to accomplish the same
dough development that results from 4 to 5 hours of
fermentation and conventional mixing.
As in the case of liquid fermentation, significant labor
savings can be achieved because several stages of
conventional processing are eliminated. Skilled mixers
responsible for sponge remixing in conventional process­
ing are no longer needed. Also, the work done by
unskilled mixers’ helpers used to transfer dough between
mixer and fermentation room is reduced.




'Consumer Expenditure Survey: Diary Survey, July 1972-June 1974,
Bulletin 1959 (Bureau of Labor Statistics, 1977).

3

Chart 1. Output per employee hour and related data,
bakery products, 1960-77
Index, 1967 = 100

Source: Bureau of Labor Statistics.




4

Investment

The outlook is for a decline in employment by 1990.
According to BLS projections,2 the rate of decline from
1978 to 1990 will be roughly half the 1960-78 rate
(chart 2).
Production workers accounted for about 58 percent of
all employees in 1978, and their share of the total has not
changed significantly since 1960. In all manufacturing,
production workers accounted for about 75 percent of all
employees. Extensive use of driver-salesworkers—a
practice not common to other industries—contributed to
the high proportion of nonproduction personnel.
In 1978, women accounted for almost 27 percent of
industry employees (having increased gradually from
about 24 percent in 1960) compared with 30 percent in all
manufacturing. But the two sectors of the industry
differed significantly. In cookie and cracker es­
tablishments, the proportion of women was relatively
high, 47 percent of all employees, and had not changed
substantially since 1960. In bread and cake plants,
however, women constituted only 22 percent of the total
but had increased significantly from their 1960 propor­
tion of 18 percent. Historically, jobs held by women in
both segments of the baking industry have been in the
assembly or packaging operations. In cookie and cracker
manufacture, these operations require proportionately
more plant labor than they do in bread and cake baking.
Because improved breadbaking techniques since 1960
have reduced the unit labor requirements in the stages of
production in which jobs are typically held by men, the
share of jobs held by women has increased.

Capital expenditures
Real outlays for new plant and equipment hit a peak in
1966 and have been declining almost steadily since then.
This may be associated with the underutilization of
existing facilities and the projected slow growth of
demand for the industry’s products.
In current dollars, capital expenditures in the baking
industry rose to $363 million in 1977, a threefold increase
from 1960. In the 1960’s, expenditures for plant and
equipment fluctuated cyclically, rising moderately
overall; but from 1969 to 1977, they rose very sharply and
without interruption to peak levels. More than 80 percent
of the industry’s outlays were those of the bread and cake
sector. Outlays by the cookie and cracker sector followed
the general pattern of the bread and cake sector, but the
cyclical swings were more pronounced.
These data reflect costs unadjusted for price changes.
Because equipment prices rose very significantly during
this period, comparisons of current dollar outlays over
time are not necessarily indicative of change in the stock
of capital equipment. Adjusting current-dollar expen­
ditures by the BLS index of bakery machinery prices
shows that real capital outlays probably declined in the
1970’s compared with the 1960’s. The peak in real
expenditures occurred in 1966; since then, the overall
trend has been down. Measured in 1967 dollars, real
annual outlays for 1961-69 (1960 price data unavailable)
averaged $153 million and in 1977, only $142 million.
Between 1960 and 1977, capital expenditures per
production worker, expressed in current dollars,
quadrupled as these outlays rose for both sectors of the
industry. However, after adjustment for bakery
machinery price increases, annual real expenditures per
production worker in 1977 ($1,083) were 15 percent
greater than in the 1960’s ($939). In bread and cake
establishments, real outlays per production worker
averaged about 15 percent higher in 1977 than in the
1960’s, while they rose 25 percent for cookie and cracker
establishments.

Occupational trends
There has been a shift toward a higher proportion of
white-collar workers in recent years, a trend experienced
by many manufacturing industries. Lower unit labor
requirements for production workers are associated with
larger, more efficient conventional machinery.
As indicated in the technology section, advanced
production techniques reduce unit requirements for
certain production workers below the number necessary
for conventional processing and in some cases may
eliminate several steps in the process. In liquid fermenta­
tion and high-speed dough development processes, as
contrasted with conventional fermentation, unit re­
quirements for mixers’ helpers are reduced, but the work
of sponge remixing, one of the jobs performed by mixers,
is no longer necessary.
Another interesting aspect of occupational change is
the increase in emphasis on marketing skills. This will
contribute to the growth in administrative personnel, as
shown in chart 3, particularly in the breadbaking sector.
Because differences in cookie and cracker products are
more easily recognized, nonprice competition and

Employment and Occupational Trends
Employment
Approximately 228,400 workers were employed in the
baking industry in 1978—almost 25 percent below the
number employed in the peak year of 1956. With the
exception of only 4 years, employment declined steadily
as the industry moved toward greater concentration and
the utilization of mechanized, laborsaving production
techniques. From 1960 to 1967, employment fell at an
average annual rate of 1.0 percent; for the years 1967-78,
the rate of decline more than doubled. Overall, from 1960
to 1978, employment fell 1.6 percent annually or a total of
24.1 percent.
302-595 0

-

79-2




2The projected data are BLS estimates of what the economy might
look like in 1990, given certain assumptions, for example, a fullemployment economy (4.5-percent unemployment). For details, see
Monthly Labor Review , April 1979, pp. 3-14.

5

Chart 2. Employment in the bakery products industry, 1960-78,
and projection for 1978-90
Employees (thousands)

method for projection.
Source: Bureau of Labor Statistics.




6

highest paid. They make the necessary machine repairs
and adjustments on plant equipment and delivery trucks.
Mixers and oven operators are among the highest paid
production workers. In broad terms, mixers combine the
ingredients needed to make dough and oven operators
monitor the ovens, adjusting temperature and timing.
Mixers’ duties include monitoring the flow of predeter­
mined quantities of ingredients into the blending
machines. In breadbaking, divider operators run
machines that divide, round, and shape dough into loafsize balls. Moulder operators, somewhat down the skill
and pay scale, monitor machines that degas the proofed
dough and form it into loaves. After baked goods cool,
slicing and wrapping machine operators feed loaves of
bread into the conveyers which lead to slicing and
wrapping machines, or where equipment is more
automated, the operators monitor the process for
problems. For every occupation, the duties vary with the
automaticity of the equipment.
One occupation in the breadbaking sector not common
to other industries is the driver-salesworker or route
driver. Because of the perishable nature of bread and cake
products, store deliveries and stock rotation have to be
made frequently. Historically, when retail outlets for
bread were small grocery stores, the duties of the route
worker included selling and promoting new items,
making collections, servicing display space, and removing

advertising have always been more important than in
bread products, where the emphasis traditionally has
been on gaining production advantages to permit price
competition.
Job content for production workers has changed very
little in recent years. Technical changes in past decades
have already eliminated most of the manual processing of
materials in bakery plants. Even where continuous
mixing has been introduced, the duties and respon­
sibilities of the mixers, for example, have not changed
significantly. In general, no additional skills are required
by the more advanced technology for production
workers.
Currently, in most plants, production variables are
decided in advance by supervisory personnel. The bulk of
production employees in breadbaking plants are semi­
skilled operatives assigned to feed materials into
machines mechanically or automatically, conduct quality
checks, make minor adjustments to the machinery, and
monitor the machines’ operation, in some cases for
emergencies only. In most bakeries, unskilled beginners
are known as helpers (e.g. mixer helper or oven tender
helper) and may be part of an apprenticeship program. In
small bakeries, all-round bakers assisted by helpers may
handle all the work.
Maintenance workers and mechanics are the most
skilled workers in the bakery plant, and generally the

Chart 3. Projected changes in employment in the bakery products industry,
by occupational group, 1976-85

Occupational group

Percent of
industry
employment in
1976

Professional and
technical workers

-10

6.2

Clerical workers

-20

7.4

Sales workers

-30

2.2

Managers, officials,
and proprietors

Percent change
-40

9.2

Craft workers

29.1

Operatives

38.1

Service workers
Laborers

■

3.1
4.8

Source: Bureau of Labor Statistics.




7

10

Tobacco Workers International Union, the International
Brotherhood of Teamsters, Chauffeurs, Warehousemen
and Helpers of America, the International Association of
Machinists and Aerospace Workers, and the Inter­
national Union of Operating Engineers.
Shielding the worker from the impact of technological
change is not a central issue of the collective bargaining
agreements in the baking industry. Specific reference in
union contracts to new technology or changing pro­
duction methods is infrequent. Provisions requiring
advance notification of production changes or transfer
rights for workers displaced by new machinery are
present in only a few agreements. Provisions which allow
renegotiations of pay rates for workers expected to
absorb increased workloads because of a change in
production methods are found in some union con­
tracts—usually those covering larger plants. Of nine
major contracts covering 1,000 or more workers studied
by BLS, two had provisions related to increased work­
loads.3 One contract provided that union officials would
be informed of changes in methods of manufacturing or
increases in production being considered by the company.
If the union claims that any change will result in more
than a fair day’s work for the employees involved,
representatives of the union and management would be
designated to confer in an effort to reach an agreement on
the issue. Every contract examined contained grievance
and arbitration procedures to facilitate the enforcement
of contract rights.
Although unrelated to the impact of technology, one of
the major issues of collective bargaining in this industry
involves the hours of the workweek or temporary layoffs.
As protection from marketing priorities that require
sharp fluctuations in daily production, most union
contracts contain provisions that govern production
schedules. For example, guarantees of a full day’s pay for
employees reporting to work are common. The following
provision is typical:

stale products. However, since retail grocery sales have
become concentrated in large supermarkets, the job of the
route driver has changed in many areas. Product
marketing and sales contracts are now usually arranged
by administrative personnel. Also, the servicing of shelf
space and stock rotation have increasingly become the
responsibilities of store employees. Generally, the route
driver is paid a base wage plus a commission for products
sold. According to BLS data, route drivers made up 8
percent of the industry work force in 1976; employment
projections indicate a decline in both number and
proportion by 1985.
As a result of the changes in the industry, the
proportion of white-collar workers has been increasing.
White-collar occupations—professional and technical
workers; managers, officials, and proprietors; sales
workers; and clerical workers—constituted 25 percent of
bakery products employment in 1976 or a rise from 22
percent in 1970. Conversely, blue-collar occupations—
craft workers, operatives, laborers, and service workers—
declined over this period. As is evident from chart 3, this
trend will continue into the 1980’s, according to the BLS
projections. The workers chiefly responsible for
production—craft workers and operatives—are expected
to decrease in number from 1976 to 1985 but will con­
tinue to account for two-thirds of the total work force.
Although laborers and service workers now constitute
only 8 percent of employees in the industry, they will
probably decline sharply in number and proportion by
1985.
Adjustment of workers to technological change
Programs to protect employees from the adverse effects
of changes in machinery and methods of production may
be incorporated into contracts or they may be informal
arrangements between labor and management. In
general, such programs are more prevalent and more
detailed in industries and companies which negotiate
formal labor-management agreements. Such contract
provisions to assist workers in their adjustment to
technological and associated changes may cover new
wage rates, new job assignments, retraining, transfer
rights, layoff procedures, and advance notice of changes
planned by management, including machine changes or
plant closings. They may also include various types of
income maintenance programs such as supplementary
unemployment benefits or severance pay.
There is a high degree of unionization in the baking
industry; approximately 80 percent of the employees are
covered by collective bargaining agreements. Contracts
usually run 3 years, and negotiations generally are
conducted on an establishment basis. The major unions in
the baking industry are the Bakery, Confectionery and




Employees required to report for work and who report for
work at a regular starting time and place shall be given not less
than eight (8) hours pay except where work is discontinued by
mutual agreement.
Although provisions for advance notification of tem­
porary layoffs are common, the time required for
notification can vary from as long as 7 days to only a few
hours. Of the nine contracts examined by BLS, two
required 7 days’ notice and two only notification in the
previous shift.4
Unpublished data. For general subject matter, see Characteristics of
Major Collective Bargaining Agreements, July 1, 1976, Bulletin 2013
(Bureau of Labor Statistics, 1979).
4Ibid.

8

SELECTED REEERENCES

Federal Trade Commission. Economic Report on the Baking Industry,
1968.

Pyler, Ernst John. Baking Science and Technology, 2d ed. Chicago,
Siebel Publishing Co., 1973.

Matz, Samuel A. Cookie and Cracker Technology. Westport, Conn.,
Avi Publishing Co., 1968.

U.S. Congress, Select Senate Committee on Nutrition and Human
Needs. Economic Organization o f the Milling and Baking Industry,
1975.

O’Connell, Desmond H. Aim fo r a Job in the Baking Industry. New
York, Arco Publishing Co., 1971.

Whiteley, Peter R. Biscuit Manufacture: Fundamentals o f In-Line
Production. London, Elsevier Publishing Co., 1971.

Opportunities for New Machines in the Baking Industry. New York,
Frost & Sullivan, 1976.




9

Chapter 2. Concrete

Technological developments in the concrete industry
will only slowly reduce labor requirements and change
job content through the 1980’s. Diffusion of new
machinery and equipment will be very slow, largely
because local market areas and seasonal demand limit
the need for volume output. Although some structur­
al changes are occurring, automated, high-volume
technologies will continue to be uneconomic for all but
the largest manufacturers.
For purposes of analysis, the industry is divided into
two parts: Concrete products (SIC 3271 and 3272) and
ready-mixed concrete (SIC 3273).1 In the concrete prod­
ucts sector, some technologies such as transfer systems
and automatic cubers may reduce labor requirements,
particularly for material handlers. In the ready-mixed
sector, the changes may be primarily in job content, such
as the shift in the batch operator’s duties from controlling
to monitoring.
Between 1960 and 1977, productivity in concrete prod­
ucts and ready-mixed concrete rose at an average annual
rate of 3.1 percent and 1.6 percent, respectively. The more
rapid productivity rate in the concrete products sector
was associated with greater volume resulting from new
markets, and the demise of smaller, more inefficient block
plants. Productivity growth slowed in the last decade in
both sectors compared with the first half of the 1960’s,
when construction was particularly strong.
Capital expenditures in current dollars increased more
than fourfold from 1960 to 1977, at an average annual
rate of 7.9 percent. Real expenditures—after adjustment
for changes in the price of concrete-producing machinery
and general purpose machinery—rose very sharply from
1960 to 1967 (price increases were minimal), but from
1967 to 1977 real outlays did not rise significantly as
prices moved up rapidly.
Employment in the concrete industry increased from

137,300 in 1960 to 159,000 in 1976 or at a rate of 1.3
percent annually. The peak year was 1973, at 180,000; a
sharp drop in 1974 and 1975 reflected the very sizable
decline in new construction activity. Block and brick
employment declined over those 16 years, but the decline
in this sector was offset by gains in employment in
precasting, prestressing, and ready-mixed concrete. In
1977 and 1978, employment rose sharply to a near-record
level, as construction activity recovered from the mid­
decade slump.

Technology in the 1980’s
Technological developments will only slowly reduce
labor requirements and change job content in the
concrete industry because diffusion will be slow. Several
factors account for the slow diffusion, including seasonal
demand for concrete and small, local markets which tend
to limit volume output. Consequently, the average plant
is small, and complex, high-capacity equipment is
generally uneconomic.
The average plant had 16 employees in 1977. Threequarters of the more than 10,000 establishments in
the industry employed fewer than 20 workers. They
accounted for about 30 percent of both employment and
output in 1972 (latest data). The other, larger plants
accounted for the bulk of employment and output, but,
even in these plants, employment averaged only 48
workers.
Some progress has been made toward bringing about
conditions which would promote the use of newer
technologies, for example, the extension of construction
activity and concrete manufacture to longer periods of the
year and the greater standardization of building equip­
ment.2 While changes in the construction industry are
basic to technological progress in the concrete industry,
other problems exist such as the difficulty of trans­
porting concrete long distances. Consequently, although
the trend to larger plants may accelerate in the long run,
automated, high-volume technologies will continue to be
uneconomic for all but the largest manufacturers. The
average plant will continue to use less complex ma-

’The concrete industry includes establishments producing concrete
products and ready-mixed concrete and excludes concrete which is
produced on-site by the contractor. The industry includes SIC 3271,
concrete block and brick; SIC 3272, concrete products other than block
and brick (major products are precast and prestressed concrete and
concrete pipe); and SIC 3273, ready-mixed concrete. In ready-mixed
production, cement and aggregates are either mixed in the plant and
delivered to the job site (centrally mixed) or funnelled into the truck and
mixed on the way to the site (transit-mixed).




2“Prestressed Concrete: A 20-Year Success Story Without an End,”

Engineering News-Record, Sept. 28, 1972, p. 33.

10

Table 1. Major technology changes in the concrete industry
T e c h n o lo g y

L a b o r im p lic a t io n s

D e s c r ip t io n

D iffu s io n

E l im i n a t e s n e e d f o r f o r k l i f t o p e r a t o r s i n ­

I n u s e in a b o u t 2 5 p e r c e n t o f p l a n t s in i n ­

s id e p l a n t a n d a w o r k e r t o o p e r a t e t h e

d u str y ; u s e in c r e a s in g .

p la n t; c u b e r s ta c k s b lo c k s w it h o u t

m en t

o r p la t­

f o r m s m o v e b l o c k s o r p i p e s i n s id e

I m p r o v e d m a t e r ia l h a n d li n g e q u i p ­

cuber.

T r a n sfe r

ca rs,

c o n v ey o rs,

m a n u a l a s s is t a n c e .
R e d u c e s u n it r e q u ir e m e n ts f o r b lo c k a n d

D iffu s io n

m a­

p r e str e sse d c o n c r e te w o r k e r s; s p e c ia lty

m a n d b u t lim ite d t o la r g e r p la n ts.

c h in e s, im p r o v e d e x tr u d e r s a n d m o ­

p r e c a s t i n g m a c h in e e l i m i n a t e s n e e d f o r

b ile

Im p r o v e d c a stin g m e th o d s

p r e str e ssed

h a n d c a s te r s .

is

U s e o f h ig h e r c a p a c i t y
c h in e s,

s p e c ia l t y

c a s tin g

beds

b lo c k m a ­

p r e c a stin g
fo r

dependent

on

s tr e n g th

o f de­

co n c r ete .
H ot

c o n c r ete ,

hot

o il,

and

a u to ­

H ot

co n c r ete

p ro cess

th e

pre­

N o n e e d f o r f ir e m a n t o a t t e n d h o t w a t e r

H o t o il b e c o m in g w id e s p r e a d ; h o t c o n c r e te

h e a t in g o f c o n c r e te s o t h a t f o r m s c a n

b o i le r

in

be

c l a v e m e t h o d s o f c u r in g

m eth o d s

s tr ip p e d

m ore

q u i c k ly ; h o t o i l

m e t h o d r e p la c e s c o n v e n t i o n a l s t e a m
c u r in g ;

a u t o c la v in g

tem p era tu re,
A u to m a t ic b a tc h e r s

u ses

save

hot
u n it

o il

is

la b o r

u sed ;
by

o th e r

r e d u c in g

c u r in g t im e .

l im it e d

u se

in

U n it e d

S ta te s ;

a u to ­

c l a v i n g u s e d f o r a b o u t 2 5 p e r c e n t o f a ll
b lo c k s . S lo w d iffu s io n e x p e c te d .

h ig h -

h ig h -p r e ssu r e

w h en

s te a m .

E l e c t r o n i c a ll y s e l e c t , w e i g h , a n d p r o ­

O p e r a t o r ’s d u t i e s c h a n g e f r o m c o n t r o l t o

U s e d b y a b o u t 1 0 p e r c e n t o f p l a n t s in i n ­

p o r t io n a g g r e g a te s a n d c e m e n t fo r

m o n it o r in g .

d u stry .

d i f f e r e n t m ix d e s i g n s . Q u a l i t y o f c o n ­

D iffu s io n

to

s m a lle r p la n ts

un­

l ik e l y .

c r e t e is i m p r o v e d .
L a r g e r m ix i n g - t r u c k c a p a c it y

L a r g e r c a p a c it y a l l o w s t r u c k t o c a r r y

J o b s c a n b e c o m p le t e d m o r e q u ic k ly w ith

M a n y tr u c k s a t m a x im u m

m o r e c o n c r e t e t o j o b s it e .

f e w e r d r iv e r h o u r s .

la w ,

but

o ld e r ,

s m a lle r

p e r m itte d b y

tru ck s

w ill

be

r e p la c e d .

chinery such as semiautomatic methods of batching and
cubing.
This study analyzes the most recent technological
changes in the industry. Their diffusion and their impact
on labor are presented in the following pages and are sum­
marized in table 1.

supervised by the plant’s machine operator.
While only a few employees are affected by the use of
transfer systems and automatic cubers, the relative labor
reduction can be very substantial. In one case, for
example, the use of a block transfer system and an
automatic cuber reduced the labor force inside the plant
by half. About 25 percent of all block plants utilized
transfer systems and automatic cubers in 1974.4 Since the
remaining 75 percent are relatively smaller plants,
diffusion is likely to be limited. The impact of these
systems on industry productivity will increase, however, if
smaller plants continue to leave the industry, as one
industry expert expects.5

Material handling equipment
Technological change will improve material handling,
a major part of concrete products manufacture. The most
highly mechanized plants in the industry are using
transfer systems to move newly cast concrete through a
number of different operations inside the plant. Transfer
systems range from simple conveyor belts to more so­
phisticated rack transfer cars or mobile platforms. They
are used most often for the production of blocks, but they
are also used in pipe manufacture and in the production
of smaller precast concrete products.
These material handling techniques reduce re­
quirements for forklift operators who move concrete
products from one operation to another inside the plant.
The plant’s machine operator can control the transfer
system in addition to his other duties since only minimal
control is necessary.
In conjunction with transfer systems, automatic cubers
are also used by the largest block plants in place of
manual or semiautomatic methods. The automatic cuber
has a pair of arms which arranges blocks in the proper
pattern and then stacks them. This is an improvement
over the semiautomatic cubing process which requires a
worker to arrange the blocks before the machine stacks
them. The automatic cuber requires only periodic super­
vision, in place of one full-time semiskilled employee for a
semiautomatic cuber and four unskilled employees for
the manual process.3 The automatic cuber is periodically

Improved casting methods
Casting methods are being improved for blocks,
specially designed precast shapes, concrete panels, and
for more standard prestressed products such as hollowcored slab. The industry is adopting some of these new
methods when it is economically feasible to do so.
Larger capacity block casting machines will increase
productivity in concrete products manufacturing. The
new machines can produce 1,200-1,600 standard 8-inch
units per hour6 compared with about 1,000 units per hour
with average machinery in the 1960’s. Unit labor
requirements decrease with the use of a high-capacity
block machine since it does not require a larger crew than
does a smaller machine. But, as would be expected, the
use of high-capacity block machines is limited to large
producers of block.
“Gordon F. Jensen, Industrial Energy Study o f the Concrete,
Gypsum and Plaster Products Industry (Palo Alto, Stanford Research
Institute, 1974), p. 2.
5J. Bell, From the Carriage Age to the Space Age, (Arlington, Va.,
National Concrete Masonry Association, 1970), p. 166.

Concrete Industries Yearbook 1975/76 (Chicago, Pit and Quarry

3Special Concretes, Mortars and Products, (Skokie, 111., Portland

Publisher), p. 106.

Cement Association, 1975), p. 26.




11

On the other hand, machines which produce specially
designed precast shapes are expected to be used more
widely.7 The use of these machines in place of the manual
process eliminates the need for casters. One producer of
concrete curb units, for example, changed from a manual
process to the use of a new molding machine and doubled
production using only half the labor formerly required.8
The casting of prestressed concrete is also being
improved. (Prestressed concrete is concrete in which steel
strands, tensioned by hydraulic jacks, are embedded to
increase tensile strength.) The casting of hollow-cored
slab, one of the most common prestressed concrete
products, has been accelerated by the replacement of
electric motors with hydraulic drives in some extruding
machines. According to one manufacturer of extruding
equipment, hollow-cored slab can be extruded at speeds
of about 12 feet per minute compared with about 8 feet
per minute in the 1960’s.
Hollow-cored slab can also be made on mobile beds
which move under stationary equipment, just the reverse
of the extrusion process. This system, which has been
used in Europe for a number of years, has recently been
introduced to American industry and is reportedly very
productive. One manufacturer of mobile beds, for
example, claims that production can be increased more
than 50 percent above the more conventional extrusion
process.9
When a mobile casting bed system is used, there is no
need for an extruding machine operator, but the system
must be controlled by a skilled worker from a control
panel. Some plants which use mobile casting beds do not
need an overhead crane and operator which are required
for other methods of manufacturing hollow-cored slab.
The diffusion of mobile casting beds in the United
States has been very slow. Only four plants had adopted
the system by 1975 largely because of the high cost of the
equipment and the fact that many producers do not have
a large enough market area to need such a system.1 This
0
is an example, not uncommon in this industry, of a very
productive technology which cannot be used eco­
nomically.

restrict the use of fast but energy-intensive curing systems.
Hot oil is one of the more important methods of curing
in many prestressing operations. With this type of system,
hot oil is pumped under the length of the casting bed, pro­
viding heat by conduction. Hot oil systems are replacing
hot water and steam systems because hot oil is easier to
control than steam and is capable of retaining the heat
longer than a hot water system. Moreover, there is no
need for a tending fireman.1
1
For blocks and other small precast products, high
pressure steam (autoclave curing) is the most technologi­
cally advanced system. When this system is used, blocks
are either placed directly in the autoclave for highpressure, high-temperature curing (one-stage curing) or
are permitted to harden for a short time and then are
placed in the autoclave (two-stage curing). One-stage
autoclave curing can be completed in 12 hours and twostage curing can be completed in 8 hours.1 This
2
compares with curing times of between 24 and 48 hours
for more conventional low-pressure steam systems.1
3
“Hot concrete” is a new process which speeds the curing
of precast products. This method, used much more widely
in Europe, consists of preheating the concrete in the
mixer. This permits the concrete to harden much more
quickly after it is cast than concrete produced conven­
tionally. In some applications, curing is completed in one
half of the normal time, saving labor per unit of output.
In spite of the advantages of these systems, autoclave
curing is used for only about 25 percent of all blocks and
the use of “hot concrete” is even more limited. Because of
the extensive slack period each year, the process of curing
blocks with older, less productive methods and allowing
them to “yard cure” (the blocks finish curing in the
storage yard during the slack months) is widespread.
Automatic batchers
A major technological advance in the concrete industry
is the completely automatic batcher. It can be used by any
concrete manufacturer but is used most often for the
manufacture of ready-mixed concrete, where different
mixes are usually demanded on a daily basis. Its major
advantages are improved quality control and greater
flexibility. Nevertheless, less than 10 percent of the plants
in the ready-mixed concrete sector have completely
automatic batchers, and about 50 percent still batch
manually. Because of the limited market area that a
manufacturer supplies, the use of an automatic batcher
may not be economically justifiable. The radius of ship­
ment averages about 50 miles, and volume output tends
to be limited.
When the automatic batcher is used, labor re­
quirements do not change, but the function of the
operator is simplified. Automatic batchers electronically
select, weigh, and proportion required amounts of

Curing technologies
Changes in curing methods (heating the concrete after
it is cast so it will harden and become stable in volume)
will also affect productivity in concrete products manu­
facture. However, some of the more productive methods
are not being widely adopted because the seasonal
demand for concrete permits the use of slower curing
methods in slack periods. High energy costs will also
7Ibid., p. 108.
8“Rhode Island Precaster Automates Curb Production with New
Molding Machine,” Modern Concrete, Feb. 1973, p. 32.
9Ralph Ironman, “Movable-Mold System Offers Big Advantages,”

11Concrete Industries Yearbook, p. 191.

Concrete Products, Oct. 1975, p. 37.

l2Ibid.

10William J. Blaha, “Stresscon ‘Rolls’ in Central Florida,” Concrete

1
3Special Concretes, Mortars and Products, p. 285.

Products, Aug. 1976, p. 15.



12

aggregates and cement for a particular mix of concrete.
The operator simply activates the batcher and supervises
its operation. The process is terminated without manual
assistance. In addition, manual data-logging to record
raw materials, batching time, and truck identification is
greatly reduced.

allowed ready-mixed concrete manufacturers to carry
more concrete in each truck and complete a job with fewer
driver hours. According to the National Ready-Mixed
Concrete Association (NRMCA), the average volume of
a mixer in the early 1960’s was 7 cubic yards. By the early
1970’s, this had increased to 8.5 cubic yards.1
4

The automatic batcher is a significant improvement
over the manual system in which the operator must weigh
each ingredient separately and cut the operation off when
the proper amounts have been added. It is also an
improvement over the semiautomatic batching system,
which is self-terminating but which must be activated by
the operator for the weighing of each ingredient.

Larger truck-mixer capacity will be less significant in
bringing about future productivity gains, however. The
average size may continue to move up slightly as smaller,
older trucks are retired, but most trucks have reached
maximum weight restrictions permitted by State law.
Since truck-mixing concrete accounts for about threefourths of total ready-mixed production, the smaller
potential for productivity growth in this area is signifi­
cant.

The most recent improvements to batchers include the
incorporation of a computer and, in some cases, a tele­
type printer into the system. Computers can store
thousands of mix designs, and teletype printers keep
accurate records of inventory. These types of systems,
however, are only used by the largest plants.

Production and Productivity Outlook
Output
Output of concrete products and ready-mixed concrete

Larger mixing-truck capacity
The increased capacity of ready-mixed concrete
trucks—in which mixing takes place on the way to the
site—has been the major source of productivity gains in
this component of the industry. Larger capacity has

14Robert S. Robinowitz and Martha Farnsworth Riche, “Productivi­
ty in the Ready-Mixed Concrete Industry,” Monthly Labor Review,
May 1973, p. 13.

Automatic batching in which aggregates and cement are automatically selected and weighed to meet required specification.

3 2- 595 0
 7 9 - 3


13

Chart 4. Concrete industry output and construction activity, 1960-78
Index, 1967 = 100

1Private and public construction.
Source: Bureau of Labor Statistics and Department of Commerce.

increased at an average annual rate of 3.5 percent and 2.8
percent, respectively, from 1960 to 1977 compared with
3.5 percent for all manufacturing.1 In the products
5
sector, output grew rapidly through most of that period
with the exception of some decline in 1967 and a very
sharp drop in 1974-75. While demand for ready-mixed
was as strong as for concrete products until the mid1960’s, it has not risen as rapidly through most of the
1970’s. On the other hand, ready-mixed output declined
more moderately in 1974-75 (chart 4).

1960’s. However, from 1969 to 1973, the rise in concrete
products output far outdistanced the increase in
construction activity. During that time, precast and
prestressed concrete replaced alternative building
materials such as structural steel and timber. The
increase in use of precast and prestressed concrete in the
late 1960’s was dramatic.
Prestressed and precast concrete offer certain advan­
tages over other building materials. Buildings made with
prestressed concrete do not require a structural steel
frame, and buildings made with precast concrete do not
require extensive onsite fabrication. As a result, assem­
bly time is rapid and great quantities of onsite labor are
not needed.

Although more recent output data are not available,
concrete production trends can be estimated from the
pattern of construction activity, as shown in chart 4. As is
evident from the chart, concrete output in general reflects
construction activity. Judging from the construction
recovery in recent years, concrete output appears to have
increased to the levels of the early 1970’s. The outlook is
for continued high output through the mid-1980’s.

Productivity

The association of construction activity with output of
concrete products was particularly close through the late

Productivity in the concrete products and ready-mixed
concrete sectors increased at average annual rates of 3.1
percent and 1.6 percent, respectively, from 1960 to 1977
compared with 2.6 percent for all manufacturing.1 The
6
higher productivity growth rate of products compared

15BLS output data which exclude onsite production by contractors
are based on Census value of shipments and BLS industry price data.

l6For information on productivity measurement, see BLS Handbook
o f Methods, Bulletin 1910 (Bureau of Labor Statistics, 1976), ch. 31.




14

Chart 5. Output per employee hour in the concrete industry, 1960-77

I9 6 0

1965

1970

1975

Source: Bureau of Labor Statistics.

Chart 6. Employee hours in the concrete industry, 1960-77

I9 6 0

1965

1970

Source: Bureau of Labor Statistics.




15

1975

with ready-mixed was associated with a more rapid
output growth and a comparatively slower hours growth
in the former sector than in the latter, particularly in the
1960-66 period (charts 4-6).

products and ready-mixed concrete) increased sharply
from 1960, when 137,300 persons were employed, to 1973,
when employment peaked at 180,000. The only
significant exception in employment growth in that
period occurred in 1967, when construction activity
dropped. From 1974 through 1976, employment fell
again following a very sharp decline in new construction
activity; by 1976, employment was down to 159,000
persons (Census data). Overall, from 1960 to 1976,
employment in the concrete industry rose 1.3 percent
annually. The rate in the 1960-66 period was 3.1 percent
compared with 0.9 percent in the 1966-76 decade.1 In
7
1977 and 1978, however, employment rose sharply to
near-record levels as construction recovered from the
mid-decade slump.
Employment is about equally divided between the
concrete products sector and the ready-mixed sector, and
their shares have changed only slightly over those
years. In the products sector, (block and brick, and other
products), employment totaled 77,200 in 1976, up from
72,500 in 1960 (chart 7), but distinct patterns of growth
occurred within this sector. In block and brick
manufacture, employment declined in 10 of the 16
years—averaging a drop of more than one-half of 1
percent annually—while in products other than block and
brick (primarily precast and prestressed), employment
rose every year except in periods of recession; the increase
averaged 1.7 percent in those 16 years.
Similarly, employment in the ready-mixed concrete
sector grew at a 1.7-percent rate, from 64,800 in 1960 to
81,800 in 1976. In part this resulted from a change in
construction industry work practices in the late 1960’s
and early 1970’s.1 Contractors required concrete to be
8
delivered early enough in the day so that employees could
finish placing concrete during normal working hours.
Also, Saturday work declined. As a result, there was a
decrease in average weekly hours and, as demand
continued to rise, an increase in employment.

For the products sector, average annual productivity
gains in 1967-77 were less than one-third as large as in the
1960-67 period; for the ready-mixed sector, the gains
were only one-fifth as large. The decline in productivity
growth in the last decade is associated with the economic
recessions of 1970 and 1974-75, when output was par­
ticularly hard hit.
As discussed earlier, greater penetration of the
construction market was an important aspect of rising
concrete output and productivity from 1966 to 1973. In
addition, the smaller, more inefficient block plants were
unable to compete effectively and shut down. From 1967
to 1977 (census years), the number of concrete block
establishments declined by 21 percent. In general, these
plants were likely to have lower productivity levels.
During the same time, establishments which employed
over 20 workers and which usually used the latest, most
efficient equipment increased from just under 22 percent
to about 27 percent of the total.
Capital expenditures
In general, capital outlays in the concrete industry are
limited because firms are small. This applies particularly
to outlays for research and development. As is common in
many such industries, the manufacturers rely heavily on
equipment manufacturers for information on tech­
nological developments.
Nevertheless, dollar outlays for new plant and
equipment increased more than fourfold from 1960 to
1977, at an average annual rate of 7.9 percent, from
$127.4 million in 1960 to $554.9 million in 1977. They rose
rapidly almost every year between 1960 and 1966, and
then, with the exception of four recession-year declines,
continued to climb sharply. These current-dollar figures,
however, reflect costs unadjusted for changes in the price
of machinery. Very sharp price increases since the late
1960’s suggest that real expenditures have not increased
significantly since then.
From 1967 to 1977, dollar outlays for plant and equip­
ment by the industry, concrete products and readymixed, more than doubled, but prices of machinery rose
almost as much, so that real outlays rose only slightly in
those years. In contrast with that period, dollar outlays in
the first half of the 1960’s were not eroded by rising prices.
From 1960 to 1967, current-dollar expenditures almost
doubled while prices of machinery rose less than 10
percent.

Occupational trends
Although technological change is not having a
significant impact on industrywide labor requirements,
some jobs are being eliminated, some reduced, and some
only changed in content. As mentioned in the technology
section, molding machines for specially shaped precast
concrete products eliminate the need for casters. Hot oil
curing systems eliminate the need for trained firemen.
Automatic cubers and transfer systems reduce re­
quirements for unskilled material handlers and industrial
truckdrivers inside block and pipe plants.
Job duties are changing in mechanized block plants.
Where the job of material handlers has been eliminated,
responsibility for the mechanized operations is being
assumed by the operator of more basic machinery. In

Employment and Occupational Trends
Employment trends
In line with the expansion of new construction,
concrete industry employment (block, brick, and other




l7Census data for SIC s 3271,2, and 3; BLS data are not available for
the concrete industry.
18Robinowitz and Riche, p. 13.

16

Chart 7. Employment in the concrete industry, 1960-77
Employees (thousands)

200

1960

1965

1970

^Least squares trend method.
Source: Bureau of the Census.




17

1975

small plants, there may be only one operator, excluding
the supervisor and outside yard workers. That operator
will be responsible for overseeing all major operations
performed inside the plant. These include batching,
mixing, blockmaking, curing, cubing, and other han­
dling operations.
Duties and skill requirements of the batching operator
are also changing, particularly in ready-mixed plants
using automatic batching equipment. As described in the
technology section, the operator simply activates the
machine and supervises its operation. The process is
terminated without manual assistance. In addition,
manual data-logging is greatly reduced. In the manual
system, the operator must weigh each ingredient
separately, terminate the process, and keep records.
On the other hand, skill requirements for maintenance
workers are increasing in ready-mixed and concrete prod­
ucts plants where new technology is used. Maintenance
workers become responsible for maintenance of control
panels and instruments as well as machinery. However,
since diffusion of new technology is expected to be slow,
such changing skill requirements on an industrywide
basis will be gradual.
In the ready-mixed sector of the industry, technological
change is not expected to affect labor requirements
significantly. Truckdrivers should be less affected by the
increased payloads of ready-mixed trucks than they were
in the 1960’s because, as explained earlier, most trucks
have reached maximum weight restrictions permitted by
law. Changes in the other major occupation, batching,
will also be minimal. Although the batch operator’s
duties change from control to monitoring with the use of
the automatic batching system, the use of the automatic
system is not expected to increase significantly above its
current 10-percent level.
By and large, plant production workers are semiskilled
and maintenance workers are skilled. However, the cen­
tral batch plant operator is the most skilled worker in the
plant and concrete pipe makers and blockmaking ma­
chine operators are also skilled workers.
In many concrete plants, the unskilled and semiskilled
workers perform several jobs rather than being assigned
just one. This is necessitated by seasonal production
patterns, the nature of the work, and the characteristics of
the small plant. In one plant visited by BLS, the president
of the company explained that he arranges for workers to
alternate jobs. One worker, for example, may be able
to operate a semiautomatic cuber and a forklift. This
practice becomes particularly important in the absence of
a worker, in slow periods, or when new machinery
reduces labor requirements for a specific job in the plant.
The BLS occupational employment survey of the
concrete, gypsum, and plaster products industry (con­
crete accounts for 90 percent of employment) showed the
following occupational distribution for the major groups
in the industry in 1977: Managers and officials, 9 percent;
professional and technical workers, 2 percent; produc­



tion workers, 76 percent. The other groups (sales, clerical,
and service workers) accounted for relatively small shares
of the total.1
9
The largest occupations in 1977 were truckdrivers, with
26 percent of the employment total; industrial truck
operators, 37 percent; and automotive mechanics, 3
percent.
Adjustment of workers to technological change
Assistance to workers in their adjustment to tech­
nological change varies depending on the industry
and the union. Programs to protect the worker from the
adverse affects of changes in machinery and methods may
be incorporated into union contracts or they may be
informal arrangements between labor and management.
Adjustments to new technologies may relate to the
workers’ involvement through advance notice or
knowledge of workload changes, with possibilities of
retraining or transfer based on seniority rights. Where
severance is a possibility, seniority may be particularly
important. Aid in adjustment to layoff may include
various types of income maintenance such as supplemen­
tary unemployment benefits or severance pay. In general,
these provisions are more prevalent and more detailed in
formal labor-management contracts.
The extent of unionization differs in the two major
sectors of the concrete industry. While a majority of
workers are unionized in the ready-mixed sector,
substantially less than 50 percent of the workers engaged
in the production of concrete products are unionized. The
two major unions (agreements cover 1,000 employees or
more) are the International Brotherhood of Teamsters,
Chauffeurs, Warehousemen and Helpers of America,
which covers the ready-mixed sector, and the Laborers’
International Union of North America, which represents
employees in the concrete products sector. To a lesser
degree, about 12 other unions represent workers in the
concrete products sector. Unionization is not more
widespread in part because the industry is made up of
small firms which are difficult to organize. In addition,
prestressed concrete manufacturing is a relatively new
part of the industry in which labor organization is still
developing.
The contract provisions which help the worker adjust
to change are not specifically tied to technology. These
provisions include seniority and advance notice. In
general, seniority provisions are standard in nature, but
the length of time required for advance notice in most
cases is minimal. In several Teamsters’ contracts, sev­
erance pay is provided.
Provisions related specifically to technology are not
common in these contracts. For example, workload
'’Unpublished preliminary data from the BLS Occupational
Employment Statistics survey of the manufacturing sector conducted in
May 1977. For earlier data, collected in 1971, see Occupational

Employment: Concrete, Gypsum, and Plaster Products Industry, April
1971, Report 430-39 (Bureau of Labor Statistics, September 1974).

18

either in unionized or nonunionized plants, and the
formal provisions discussed above are not assumed to be
the only agreements.

adjustments, transfer rights, retraining, and similar
measures are relatively few. Nevertheless, unwritten
agreements between management and labor may exist,

SELECTED REFERENCES
Concrete Industries Yearbook. Chicago, Pit and Quarry Publisher,

“Prestressed Concrete: A 20-Year Success Story Without an End,”
Engineering News-Record, September 28, 1972, pp. 28-58.

annual.
Jensen, Gordon F. Industrial Energy Study o f the Concrete, Gypsum
and Plaster Products Industry. Palo Alto, Stanford Research
Institute, August 1974.




Robinowitz, Robert S., and Martha Farnsworth Riche. “Productivity
in the Ready-Mixed Concrete Industry,” Monthly Labor Review,
May 1973, pp. 12-15.

19

Chapter 3.

Air Transportation

Summary

showed a rapid growth of 6.5 percent annually between
1960 and 1977 compared with 2.6 percent in all
transportation and 1.4 percent in the private nonfarm
sector. If air traffic, spurred by deregulation, continues
to climb, it is likely that productivity growth will be strong
in the 1980’s.
Employment in air transportation, which includes
terminal services, rose to a high of 396,000 in 1978, having
increased at an average annual rate of 4.7 percent from
1960. Except for three recession years, employment
climbed upward as passenger and cargo traffic outpaced
productivity growth. In the 10-year period 1967-77,
however, the annual rate was only 1.9 percent. The out­
look is for a more rapid rise, according to BLS
projections, with a growth rate of 2.2 percent annually
from 1977 to 1990.

Air transportation,1 one of the Nation’s fastest growing
industries in the last several decades, has also been among
the most advanced in the adoption of technological
innovations. Because of the rapid growth which accom­
panied these changes, technological progress took place
without reduction in total employment. Over the next
decade, technological development will be evolutionary,
rather than revolutionary, and aimed primarily at lower­
ing maintenance and fuel costs, meeting environmental
requirements, and improving reliability.
At the same time, the Cargo and Airline Deregulation
Acts of 1977 and 1978 have ushered in an era of intense
competition requiring the highest productivity per­
formance. Consequent emphasis on laborsaving
technologies and processes is expected. Reappraisal by
airlines of their competitive strengths could alter industry
structure and traffic patterns and substantially affect
productivity and labor. Although opinions differ on long­
term implications for productivity and employment, it is
generally believed that expanding airline traffic will offset
reductions in unit labor requirements. The new legislation
will end the Civil Aeronautics Board’s power over routes
and fares by 1983 and abolish the agency by 1985, ending
40 years of Federal regulation.
This study will deal primarily with the private sector air
transportation industry; data on output and productivity
cover certificated air carriers only. The following are not
included in this study: General aviation; government
sectors involved in air transport regulation or research
such as the National Aeronautics and Space Administra­
tion (NASA) and the Federal Aviation Administration
(FAA); and industries manufacturing air transports,
engines, or other equipment.
Productivity for certificated carriers (as measured by
revenue passenger-miles, freight ton-miles, express tonmiles and U.S. and foreign mail ton-miles per employee),

Technology in the 1980’s
Current developments in air transport technology are
directed toward improving reliability and fuel efficiency
and reducing pollution levels. In particular, special effort
will be concentrated in the next decade in developing a
more sophisticated air control system. Containerization,
the principal technological innovation in air freight
handling, is widespread among major carriers, but
smaller carriers do not find the system economically
feasible.
Productivity gains will be achieved through the use of
larger than average planes with low-maintenance turbo­
fan engines; expansion of more efficient passenger
processing; and digital electronic systems to assist in
traffic control. The application or extension of many of
these technologies could reduce unit labor requirements
for maintenance personnel, controllers, and reservation
and ticket agents. However, anticipated traffic growth in
the 1980’s is expected to more than offset the effects of
laborsaving technologies. The effect of deregulation on
technology application or utilization is not yet clear,
however, particularly in the long run, and will not be
addressed directly in this section.
Technological research, development, and implemen­
tation in the air transportation industry are products of
private and public organizations. In particular, NASA
and the FAA play basic roles in these processes.
The FAA, with authority to regulate in the interest of

'Standard Industrial Classification (SIC) 45, the Transportation by
Air Industry, includes establishments engaged in furnishing domestic
and foreign transportation by certificated and noncertificated air
carriers and also those operating airports and flying fields and
furnishing terminal services. The technology, employment, and
occupations sections of this chapter cover SIC 45, while output and
productivity measures are for certificated air carriers only (SIC 451).




20

aviation safety, employs two mechanisms, regulatory and
operational, to achieve this goal. In regulatory
provisions, the FAA establishes standards for the design,
performance, and maintenance of aircraft, aircraft en­
gines, equipment, and instruments, and for certification
of aircraft and air personnel. Their operational func­
tions relevant to the impact of technology include pro­
curement, installation, operation and maintenance of air
navigation, communication, and surveillance facilities;
installation, operation, and maintenance of the air traffic
control system; and a research, engineering, and
development program to assure a safe and efficient
system.
This study analyzes the major technological changes in
the industry. Their diffusion and impact on labor are
presented in the following pages and in table 2.

The biggest thrust is currently in the medium-sized
plane carrying 180-220 passengers. This new generation
of wide-bodied, medium-range jets with improved turbo­
fan engines will be placed in service in the early 1980’s.
Incorporating technology developed over the last decade
such as advanced wing designs, specialized composite
material structures, and high-bypass-ratio engines, these
planes are reported to be more reliable, more energy
efficient, quieter, and less polluting.
This medium-sized plane is expected to increase
productivity for the middle-range flights, and it is likely
that unit requirements for flight and maintenance
personnel will be reduced. Productivity increases may
also be associated with the competitive climate of
deregulation—more efficient route structure and load
management.
At the same time, redesign of engines is being
undertaken. In anticipation of high capacity re­
quirements in the 1980’s and FAA’s time schedule on
reducing noise levels, the industry is working with
manufacturers to retrofit older planes with new quieter,
fuel-efficient engines.
The supersonic transport (SST), which in 1965 was
expected to revolutionize air transportation in the
1970’s, has not had the expected impact. Nor is it likely
to play an important role in the near future. The first

Airframes and engines
Deregulation and the anticipated traffic pattern
changes have spurred interest in small and medium-sized
planes. Small planes seating 50 are expected to fill the gap
between smaller commuter lines and the larger jets.
Carrying sophisticated navigational equipment, such
planes could be used efficiently for short trips between
small cities or between small cities and major airports.
This could increase industry employment.

Mechanics doing maintenance on engine of wide-body jet. These engines produce more thrust with lower fuel consumption per
pound of thrust by using new powerplant technology.

302-595 0

79




21

generation of S S P s—only 10 are in operation—has
problems of payload capacity, range, and, above all, noise
and pollution. At 1,400 miles per hour, these planes can
travel 3,500 miles without refueling. But they carry only
about 125 passengers and consume about three times as
much fuel per passenger mile as the fastest subsonic
transports, which can carry several times as many
passengers for up to 6,000 miles.
Fuel efficiency will be of growing concern as fuel costs
rise. Already, considerable savings have been realized.
Between 1973 and 1978, the number of passengers flown
per gallon increased nearly 40 percent. According to the
Air Transport Association, this was due to more efficient
aircraft and reduction in jet cruising speed.

the surveillance system, and act as a backup within
surveillance areas.
Also, the data link system would be useful in
transferring information on weather automatically by
digital, visual, or aural means (inadequate weather
information is one of the major causes of air accidents),
and for more routine communications to the pilot of
aircraft with digital equipment. These digital systems are
considered by the FAA to be critical to the evolution of a
more efficient automated traffic control system. To
accomplish this objective, it is expected that the current
computer system will require enhancement or replace­
ment in the late 1980’s.
In view of expected traffic growth by 1990 and the
subsequent heavy demand on controllers, such automatic
systems are believed to be essential for safety. If
implemented, the reduction in unit requirements for
controllers would be more than offset by increased traffic.

Advances in navigation
Sophisticated navigational aids to increase productivi­
ty and safety are being developed, implemented, and
evaluated. Since the most critical phase of flight is
probably the approach and landing operation (about 40
percent of accidents occur at that time), high priority is
being given to this area.
The Microwave Landing System (MLS) was selected in
1978 as the international standard for eventual replace­
ment of the Instrument Landing System (ILS). Utilizing
advanced electronics, the MLS requires a coordinated
program of airborne equipment and ground station
installation. Although the MLS will make possible more
reliable landing guidance, is more efficient, and is easier
to install and maintain, the transition to MLS will be
gradual. ILS will remain the dominant landing system for
several years as new ILS’s with solid-state systems replace
older tube-type ILS’s in locations which do not justify the
use of the MLS. The FAA expects that conversion to
MLS will be “well on its way by the mid-1980’s.”2

Developments in traffic flow
The traffic control system is now manual, i.e.,
controllers monitor and guide pilots by voice from
control centers and terminals. If traffic continues to grow
as expected, however, twice as many controllers will be
required in the 1990’s, and the subsequent complications
in air traffic control could greatly decrease safety. To
increase productivity and safety, it is believed that
automated systems will have to be used.
Improvements in traffic flow are being developed
which will probably be implemented in the 1980’s.
Examples of such improvements to the system are
ETABS (Enroute Tabular Display System) and TIPS
(Terminal Information Processing System). These are
designed to increase controller productivity and overall
flight productivity by reducing or automating some of the
controller’s functions and increasing airspace and airport
capacity utilization. TIPS, for example, will accept,
process, distribute, and display flight and other data in
terminal control facilities and towers.
In addition, several important advances are still in the
design stage and would follow the implementation of
DABS. These include continuous control systems such as
AERA (Automated Enroute Air Traffic Control), and
cockpit display systems which will give the pilot more
control. Such systems, which are expected to be
implemented in the 1990’s, would also increase controller
productivity and overall flight productivity.
These automation aids are, however, still controversial.
Questions remain in regard to the function of the
controller in this system, the impersonal aspect of visual
compared to voice information, and the tie-in of these
aids to future air traffic control systems in view of
anticipated traffic growth and limited airspace.

Improved surveillance and separation assurance
As part of the overall air traffic control system, the
FAA is developing and testing DABS, the Discrete
Address Beacon System for improved surveillance, and
the DABS data link for improved air-ground com­
munications. Since the voice system currently in use is not
adequate in many situations, the DABS data link system
is being considered to assure improved surveillance and to
be part of a collision avoidance system (CAS) called
Automatic Traffic Advisory and Resolution Service
(ATARS). The ATARS under development will provide
information via the DABS data link on traffic within its
coverage, and will, if needed, automatically transmit
conflict resolution instructions, as a check on the basic air
traffic control system. The Beacon (CAS) would provide
information on collision avoidance, principally outside

Statem ent o f Langhorne Bond, Administrator of the Federal
Aviation Administration, before the House Committee on Science and
Technology, Subcommittee on Transportation, Aviation and Weather,
Sept. 12, 1978, p.4.




Automating airport terminal services
The speed and efficiency of passenger processing will
become particularly important in the 1980’s, in view of the
22

Table 2.

Major technology changes in air transportation
T e c h n o lo g y

D e s c r ip t io n

D e v e l o p m e n t s in f u e l - e f f i c i e n t a ir fr a m e s a n d e n g in e s

N ew

g e n e r a tio n

f u e l- e ff ic ie n t,

m e d iu m - r a n g e j e t s

w ith

D iffu s io n

L a b o r im p lic a t io n s
m e d iu m - s i z e ,

im p r o v e d

tu r b o fa n

R e d u c e u n i t r e q u i r e m e n t s f o r m a in -

W i ll b e in u s e in t h e e a r ly 1 9 8 0 ’s;

ten a n ce.

e x p e c te d t o b e w id e ly a d o p te d .

e n g in e s.
A d v a n c e s in n a v i g a t i o n a i d s

M i c r o w a v e L a n d in g S y s t e m
advanced

e le c t r o n ic s ;

( M L S ) u t il iz i n g

m akes

p o s s ib le

m ore

In creases

a ir p o r t

c a p a c it y - u tiliz a ­

t io n ; i m p r o v e s f li g h t p r o d u c t iv i t y .

G rad u al

im p le m e n t a t io n

th ro u g h

t h e 1 9 8 0 ’s.

r e li a b l e l a n d in g g u i d a n c e .
D e v e lo p m e n ts

in

s u r v e il la n c e

and

s e p a r a tio n a s s u r a n c e s y s te m s

D e v e lo p m e n t
d ress
and

by

B eacon
d a ta

t io n s ,

FAA

o f D is c r e te

(D A B S )

P r o v id e s b a s is fo r a u t o m a t in g c o n -

C u r r e n t ly

in

tr o lle r

te s t in g

FAA;

fu n c tio n s ;

p o s s ib le

in c r e a s e

in p i l o t c o n t r o l w i t h s u b s e q u e n t r e ­

a ir t r a f f ic c o n t r o l c o m m u n i c a ­

by

d e v e lo p m e n t
e x p e c te d

and
to

be

d u c t io n in in v o lv e m e n t o f c o n t r o l­

sy ste m

p r o v id in g

a n d c o llis io n a v o id a n c e .

lis io n

Ad-

s u r v e il la n c e
im p r o v e d

l in k

s u r v e il la n c e ,

th e

S y stem

A v o id a n c e

S y stem

B e a c o n C o l­

(B C A S )

p r o v id e

in fo r m a tio n

on

o u t s id e

s u r v e il la n c e

a rea s,

c o llis io n
and

i m p l e m e n t e d i n t h e 1 9 8 0 ’s.

ler.

w o u ld

a v o id a n c e
a

backup

w i t h in .
D e v e l o p m e n t s in t r a f f ic f l o w

A u to m a t e d a id s t o p ilo t a n d c o n t r o lle r t o in ­

In c r e a se c o n t r o lle r e ffic ie n c y .

A u to m a te d

a ir p o r t

t e r m in a l

v ic e s

ser-

S e v e r a l s y s t e m s d e s ig n e d t o r e d u c e t i c k e t in g

R ed u ce

t im e ,

e r v a t i o n a n d t ic k e t a g e n t s .

e .g . ,

c o n fir m

s c a n n in g

r e s e r v a t io n s

m a c h in e s

at

and

t ic k e t s ;

issu e

S h o u ld

be

im p le m e n te d

in

th e

1 9 8 0 ’s.

c r e a s e e f f i c i e n c y o f t r a f f ic f lo w .

t e r m in a l

u n it

r e q u ir e m e n ts

fo r res-

D iffu s io n

l im it e d ;

e x p e c te d

to

in -

c r e a s e in t h e 1 9 8 0 ’s.

can

b e o p e r a t e d b y c r e d it c a r d .

Although still in limited use, these and other newer
systems will become more widespread in the 1980’s.

expected travel growth and the limited capacity of
airports. Of more immediate importance is the necessity
to adopt cost-cutting procedures in the new competitive
climate. With this in mind, innovative automated
passenger processing procedures are being instituted
which could greatly reduce unit labor requirements for
terminal services, even as traffic increases. Currently,
persons working in airports and terminal services
constitute about 10 percent of all air transportation
employment.
Computerized systems for reservation information are
in general use, even for multicity itineraries involving
several airlines. However, a large proportion of tickets are
still issued by hand. Now, the major airlines have an
automated reservation and ticketing system which greatly
reduces time involved in manually issuing tickets. When
the passenger arrives for the flight, the ticket agent verifies
the reservation on the cathode ray tube and generates the
ticket on the printer. Also, two major airlines have a more
automated system which does not require a ticketing
agent. The passenger can insert certain major credit cards
into a scanner at the terminal which will issue the ticket
automatically. At least one airline is utilizing an
established “ticketron” system to expedite reservations
and billing.
For baggage handling, a system is in use by at least one
airline in which an encoded sticker is placed on each piece
of baggage at the checking point. A laser beam scanner
then reads the stickers, separates the bags, and directs
them to the proper flights. More automated systems may
be instituted in the next few years. For example, the
passenger could deposit baggage at an unmanned check­
in position where an electronic device would encode the
identification number on each bag and on the boarding
pass.




Production and Productivity Outlook
Output
Industry measures for air transportation, as published
by BLS, are available for certificated carriers only.3 The
output index (based on data from the CAB) covers most
of the certificated air transportation industry’s
operations, which are measured by revenue passengermiles, freight ton-miles, express ton-miles, and U.S. and
foreign mail ton-miles. Only excess baggage, subsidy, and
miscellaneous sources of revenue are excluded from the
computation of the index.
Continuing the pattern of the 1950’s, air transportation
of passengers and cargo in certificated airlines rose very
sharply in the early 1960’s; from 1960 to 1966, the annual
growth rate averaged 15.4 percent (chart 8). After 1966,
however, demand started edging off and hit a low point in
the 1974-75 recession when air transportation declined
for the first time in the post-World War II period. As the
economy recovered in 1976, air transportation rose more
than 10 percent from the year before. Because of the sharp
dips in the recession years, however, air transportation
3The certificated domestic airlines account for over 90 percent of the
air passengers and cargo transported annually within the United States,
and over 80 percent of the employment. The certificated route air
carriers hold a Certificate of Public Convenience and Necessity issued
by the Civil Aeronautics Board (CAB) to conduct scheduled services
over specified routes. Certificated carriers also are permitted to conduct
certain nonscheduled (i.e., charter) operations. Not covered in this study
are the noncertificated carriers (SIC 452), which are mostly in limited
charter and air taxi service, or fixed facilities and services related to air
transportation (SIC 458), i.e., airports and flying fields and airport
terminal services.

23

does not justify jumbo jets but has outgrown smaller
planes. In the long run, deregulation may stimulate
changes in demand or in the industry structure with yet
unknown productivity implications.5

growth in the decade ending in 1976 averaged only 6.4
percent annually. Overall, in the 16-year period 1960-76,
the growth rate for air transportation was 11.5 percent.
Many factors will affect traffic growth in the next
decade. While route and rate deregulation is stimulating
demand in the short run, opinions differ as to whether
competitive pressures to keep rates low will continue and
whether the consumer response will remain as strong.
Moreover, confidence in air safety is probably an
important determinant of miles flown for optional travel.
In addition, saturation in supporting air and ground
facilities can limit the industry’s growth in some major
metropolitan areas. The cost to carriers from aircraft
delays due to airport congestion is already very high.
But the major factors affecting demand—growing
population, rising income, and ever-increasing interest in
travel—will continue to be strong in the next decade.
Moreover, the limiting factors mentioned above are being
addressed by the industry by developing and imple­
menting technologies which increase productivity and
reliability. Consequently, the outlook for air transporta­
tion in the 1980’s is very good. According to the
Department of Transportation, passenger travel will
continue to increase at a faster rate than the general
economy in the 1980’s. Assuming the economy remains
stable, the outlook for cargo traffic should also be
favorable.

Employment and Occupational Trends
Employment in air transportation rose to a high of
396,000 in 1978, at an average annual rate of 4.7 percent
from 1960. Except for three years associated with
recession, 1970, 1971, and 1975, employment climbed as
passenger and cargo traffic outpaced productivity
growth. Reflecting the declines of those three years, the
average rate of employment growth in the last decade was
considerably below that of the first half of the 1960’s;
employment grew at 5.9 percent annually in the 1960-67
period and averaged 1.9 percent in the decade 1967-77.
The 1967 high growth rate of 20 percent—the largest 1year jump—followed the 43-day strike a year earlier of
employees of the International Association of
Machinists.
Of the total working in air transportation, about 90
percent are employed by air carriers. The remaining 10
percent are employed in airport and terminal services.
Women account for a relatively large proportion of
employees in the air transportation industry, and their
share has been increasing. In 1960 women held slightly
over 20 percent of the jobs; by 1978, their share had risen
to 31 percent as women workers increased more rapidly
than men. A large majority of the women are flight
attendants, and nearly all flight attendants are women.
Most of the other women in this industry are communica­
tion, ticket, and reservation clerks. Few women are pilots,
copilots, flight engineers, dispatchers, or in jobs related to
maintenance, baggage handling, or cargo operations.
Because the industry cannot stockpile its product,
employment is particularly sensitive to fluctuations in
demand. Moreover, labor constitutes about 40 percent of
total costs. A pronounced business recession may, as it
did in 1970-71, cause up to 10 percent of the work force to
be furloughed in some airlines, although such furloughs
are mostly of short duration.
The effect of deregulation on employment in the 1980’s
is not clear. Deregulation may continue to stimulate extra
traffic, which could require more labor. Employment
could increase as regional carriers using smaller planes
move in to replace or supplement long haul, major carrier
service. But, in the view of one union official, the
likelihood is that, in the long run, people will get used to
lower fares or that rates will rise and people will no longer
respond with extra travel. Other unknowns include

Productivity
Productivity for this industry, as measured by output
per employee, rose very rapidly from 1960 to 1977,
roughly continuing the growth pattern of the 1950’s.4 At
the average rate of 6.5 percent annually in the 17-year
period, productivity growth compared very favorably
with all transportation industries (2.6 percent). The
sharpest rise occurred in the 1960-66 period (following
the introduction of the turbojet) when the average annual
increase was over 10 percent. Even in the last decade,
however, when productivity growth slowed to the lower
rate of 4.4 percent, it was nevertheless more than double
the rate for all manufacturing or for all transportation.
The sharp productivity growth rate in the early sixties
was associated with technological changes such as the jet,
which greatly increased output with only minimal
employment growth. Then, starting in the late 1960’s
through most of the 1970’s, the economy slowdown
significantly reduced air transportation, and productivity
growth declined markedly.
The outlook is good for strong productivity growth in
the 1980’s. The impetus may come from deregulation,
which will probably result in route rationalization and
more efficient scheduling. Also the new medium-size
planes may improve load ratios in cities where the traffic

5It should be noted that several of the technological developments
discussed earlier which could reduce requirements for controllers would
not be reflected directly in airline productivity data. The labor
productivity data cited do not include hours of controllers since
controllers are Federal and not airline employees. Nevertheless, their
greater efficiency could increase airspace and airport capacity
utilization and thereby overall flight productivity.

4The index of output per employee for the air transportation industry
(SIC 4511) was developed in accordance with concepts and procedures
described in chapter 31, “Output Per Employee-Hour Measures:
Industries and the Federal Government,” BLS Handbook o f Methods,
Bulletin 1910, 1976.




24

Chart 8. Output per employee and related data,
air transportation,1 1960-77
Index, 1967 = 100

1Covers SIC 451 1, which includes domestic and international/territorial operations, both scheduled and nonscheduled.
^Measured by revenue/passenger-miles, freight ton-miles, express ton-miles, and U.S. and foreign mail ton-miles.
Source: Bureau of Labor Statistics.




25

mergers and cost cutting automated systems which could
reduce employment whether or not traffic increases.
According to the most recent BLS projections,6 the
outlook for employment in air transportation is expected
to be about 464,000 in 1985 and 511,000 in 1990. This
would mean an annual increase of 2.4 percent from 1977
to 1985, and 2.2 percent from 1977 to 1990, as output
moves up more rapidly than productivity. At these rates,
employment will be increasing more rapidly than in the
last decade.
Occupations
Ground personnel have been greatly affected by
changing technology and productivity. The sizable
productivity growth discussed earlier has permitted air
traffic to rise very substantially since the mid-1960’s, with
only small increases, or even decreases, in many
occupations. For example, according to data from the
CAB for scheduled airlines, communications personnel
have been steadily declining since 1968, as computers are
increasingly being utilized to handle growing volume.
Similarly, mechanics working for scheduled airlines
totaled 45,000 in 1977, or about 15 percent below the peak
in 1969, in spite of tremendous growth in passenger and
cargo volume.
These changes are reflected in the proportion of flight
personnel to ground personnel in scheduled airlines. In
1967, flight personnel (pilots, copilots, flight engineers,
and flight attendants) constituted about 20 percent of
scheduled airline employment; in 1977, they were more
than 25 percent. Pilots, copilots, and flight engineers did
not increase significantly in that decade and declined
slightly as a proportion of total employment, but flight
attendants (stewardesses, stewards, and pursers) rose 78
percent. FAA regulations require 1 flight attendant for
every 50 seats available.
Flight personnel increased substantially in the 1970’s,
and this trend is expected to continue, as indicated in
chart 9. For the entire industry group SIC 45, pilots
numbered almost 45,000 and flight attendants more than
41,000 in 1976. By 1985, their numbers are expected to
increase 18 and 81 percent, respectively, over 1976. As a
proportion of all employees, flight personnel (including
flight engineers) are expected to increase from 24 percent
in 1976 to 29 percent in 1985.
Aircraft mechanics in this full industry group increased
only 8 percent from 1970 to 1976, but BLS projections
show a substantial increase by 1985 of almost 40 percent.
While technological developments are expected to reduce
unit labor requirements for maintenance on newer planes
and engines, older equipment, increased traffic, and
greater emphasis on safety will result in greater demand
for mechanics. As for airport services, the number of
reservation, ticket, and passenger agents declined from
6The projected data for SIC 45 are BLS estimates of what the
economy might look like in 1985 and 1990, given certain assumptions,
for example, a full-employment economy (4.5-percent unemployment).
For further details, see Monthly Labor Review, April 1979, pp. 3 14.




1970 to 1976. But, as shown in chart 9, an increase of 27
percent in these occupations is expected by 1985.
Although newer mechanized and automated servicing
procedures will be instituted, the increase in traffic could
greatly increase passenger and baggage service employ­
ment.
Another occupation which is greatly affected by
technological developments, air traffic controller, is in the
Federal sector and not included in the air transportation
industry data. In 1976, there were about 32,000
controllers, 25 percent more than in 1970. The BLS
projects an increase of 30 percent by 1985 to 42,000
assuming the anticipated traffic growth develops.
Undoubtedly, occupational needs and skills in the next
decades will be affected by changes in the industry
brought about by the competitive climate of deregulation.
Adjustment of workers to technological change
Air carriers typically negotiate agreements nationwide
on an individual company basis with a number of unions.7
Although these unions are generally organized along craft
lines, several, like the International Association of
Machinists and Aerospace Workers (IAM) and the
Transport Workers Union (TWU), represent various
crafts. Some of the unions in the air transportation
industry are:
Airline Dispatchers Association
Airline Employees Association
Air Line Pilots Association, International
Allied Pilots Association
Brotherhood of Railway and Airline Clerks
Flight Engineers’ International Association
International Association of Machinists and Aerospace
Workers
International Brotherhood of Teamsters, Chauffeurs, Ware­
housemen and Helpers of America
Transport Workers Union of America
Occupations covered by these unions include clerks
(office, store, fleet, and passenger service), dispatchers,
flight attendants (pursers, stewards, and stewardesses),
flight engineers, kitchen and commissary workers,
meteorologists, pilots, and radio and teletype operators.
In general, seniority provisions in the labormanagement contracts govern reduction in force, layoff,
and recall, which may or may not be related to
technological change. In addition, technological
severance pay provisions are included in many contracts
to eligible employees permanently separated from
employment because of technological change. Such
provisions cover about one-fourth of the pilots, flight
engineers, and flight attendants, and two-thirds of the
customer service agents, office clerical employees, and
maintenance and related workers.8
In addition, the Deregulation Act provides financial
protection for employees, under certain conditions, who
are laid off as a result of the act. If at least 1 X percent of
A
1Industry Wage Survey: Scheduled Airlines, August-November 1975,
Bulletin 1951 (Bureau of Labor Statistics, 1977), pp. 1-5.
8Industry Wage Survey, p. 21, table 16.

26

Chart 9. Projected changes in employment in air transportation,
selected occupations, 1976-85

Source: Bureau of Labor Statistics.

the company’s full-time employees are laid off within a
12-month period due to deregulation, employees in the
company with 4 years’ seniority are guaranteed 60 percent
of their wages for 6 years by the Federal Government or
until the laid-off employee finds comparable work.9
One of the major labor issues related to technology is
the question of two- or three-member flight crews.
According to a report by an FAA-sponsored task force,
safety is not diminished by a two-member crew instead of

three-member flight crew in the planes at issue. It pointed
out that manufacturers have controlled the workload in
two-men aircraft by automating and simplifying systems
to lessen required pilot actions. On the other side of the
controversy, the Air Line Pilots Association states that
the task force ignored conditions outside the cockpit,
namely the amount of traffic and the increasing load of
the air traffic control system.
9Airline Deregulation Act of 1978, Section 43.

SELECTED
U.S. Department of Transportation, Federal Aviation Administration.

Air Transport Association of America. Air Transport, 1978. Washing­
ton, D.C., 1978.

Consultative Planning Conference, New Engineering and Develop­
ment Initiatives — Policy and Technology Choices, Progress Report,
Sept. 6, 1978. Summary.

Aviation Week and Space Technology. Weekly issues, 1975-78.
Haggerty, James J. “Air Transports: The New Generation,” Aerospace,
Fall 1978, pp. 2-7.

______ , _______ Systems Research and Development
Progress Report, Aug. 8-9, 1978, 350 pages.

Loving, Rush, Jr. “How the Airlines Will Cope with Deregulation,”
Fortune, Nov. 20, 1978, pp. 38-41.

______ , _______ Statements before the House Committee on Science
and Technology, Subcommittee on Transportation, Aviation and
Weather. Concerning the FA A R, E & D Program, Sept. 21, 1978.

Schneider, Lewis M. The Future o f the U.S. Air Freight Industry.
Boston, Harvard Business School, Division of Research, 1973.

______ , _______ Statement of Quentin S. Taylor, Deputy Ad­
ministrator of the Federal Aviation Administration, before the House
Committee on Science and Technology, Subcommittee on Transpor­
tation, Aviation and Weather, Concerning the FA A R, E & D
Program, Feb. 20, 1979.

U.S. Department of Labor, Bureau of Labor Statistics. Industry Wage
Survey: Scheduled Airlines, August-November 1975, Bulletin 1951,
1977.




Service.

27

Chapter 4. Telephone
Communication

Summary

Industry Structure

Technological change is affecting every segment of the
telephone communication industry (SIC 481), con­
siderably altering the job content and skill levels of in­
dustry occupations. Efficient electronic switching sys­
tems, higher capacity transmission systems, and in­
creasing automation will contribute to rising output levels
while decreasing the labor content of the communica­
tions process. In addition, alternate methods (domestic
satellites) and forms (computer data traffic) of communi­
cation are in active use.
Due primarily to technological change, productivity
growth averaged 5.5 percent annually from 1960 to 1977,
well above the average for the total private economy. The
growth rate was 5.8 percent for both 1960-67 and
1967-77. Current growth trends of output and employee
hours indicate continued high productivity in coming
years associated with expanding use of the newest
technological developments.
Expenditures for telephone plant and equipment more
than quadrupled to $14.4 billion between 1960 and 1977.
After accounting for the very substantial construction
cost increases over this period, real expenditures roughly
doubled. Although sensitive to general economic con­
ditions, expenditures will likely be maintained to provide
sufficient system growth to meet continually increasing
demands.
Employment totalled 992,400 in 1978, having increased
by an average of 2.5 percent annually from 1960. This rate
reflected periods of strong growth combined with sharp
employment declines in the early 1960’s, when tech­
nological changes were at a peak, and in the 1974-75
recession when total employment dropped almost 50,000
by 1976. The BLS projection for employment in 1990 is
for a moderate growth rate of 1.0 percent annually
between 1978 and 1990, indicating that continued output
growth will offset productivity growth despite the effects
of technological change. Changes in occupational
distribution and skill levels were perhaps greatest in the
late 1950’s and early 1960’s, but they will continue to be
significant as newer technologies and operating
procedures are more widely implemented.

To fully understand telephone communication
technology and its labor impact, an explanation of
the industry structure would be useful. The telephone
industry is comprised of almost 1,600 operating telephone
companies servicing over 162 million telephones. These
companies, called common carriers, must serve everyone
within the geographic area in which they operate.
The Bell System dominates the industry with roughly
82 percent of total telephones and 84 percent of total
operating revenues. The Bell System is headed by the
American Telephone and Telegraph Company (AT&T),
which is a holding company with total or majority
ownership of 21 operating telephone companies and
minority ownership of 2 additional companies. Through
these companies, Bell serves about half of the geographic
area of the United States, an area which includes the more
densely populated urban centers. In addition to the
telephone operating companies, the Bell System includes
the Western Electric Company—the manufacturing
subsidiary; Bell Telephone Laboratories—the research
and development subsidiary; and AT&T Long Lines,
which provides long-distance service between individual
operating companies.
The remaining common carriers, known as in­
dependents, primarily serve rural and suburban areas and
small towns. The independents are also dominated by
holding companies, the largest being the General
Telephone and Electronics Corporation (GT&E), which
controls over 50 percent of independent telephones. Like
AT&T, GT&E also controls manufacturing subsidiaries
and research laboratories. While independent companies
provide long-distance service within their own territories,
AT&T Long Lines provides long-distance links between
territories.
In addition to the common carriers, several specialized
communications carriers are now providing private-line
data and voice transmission services in some highdemand areas as a result of recent Federal Com­
munications Commission (FCC) rulings. Equipment
manufacture and supply have also been opened to
competition. The effect of these changes on the telecom­




28

munications industry has thus far been small (about 2
percent of revenues), but the long-run effects remain
uncertain.
A major area of competition is in high-volume, long­
distance service. The rates charged for service by the
common carriers are based on averages of the costs of
local and long-distance calling, with less costly, long­
distance service, in effect, subsidizing more costly local
service. Since the specialized carriers operate under
different rate structures than those required of the
common carriers, they are able to provide specific services
to the less costly, high-volume, long-distance users at
rates that more accurately reflect the lower costs of these
services. As a result, the common carriers are losing
revenues from this market segment. In response to this
challenge to their traditional regulated monopoly
standing, the common carriers have proposed changing
rate structures to permit them to compete more effectively
in this lower cost area. However, according to the
common carriers, this would mean that to meet FCC
Table 3.

regulated rates of return, prices in other areas of service
might increase. In the area of equipment manufacture and
supply, the long-standing practice has been to use only
carrier-supplied equipment. In contrast, the law now
permits the use of any communications equipment which
is registered with the FCC as compatible with the existing
network. Responding to this area of competition, the
common carriers are trying a new method of telephone
distribution—directly to customers for self-installation.

Technology in the 1980’s
Telephone communication is in essence a combination
of two processes, call switching and signal transmission.
In call switching, the major development in technology is
the electronic switching system (ESS), in fairly wide use
now but continually evolving. In signal transmission,
optical instead of electrical transmission is most impor­
tant, with significant commercial use expected by the
early 1980’s. Basic to almost all segments of the industry is
the pervasive use of computers to automate equipment

Major technology changes in telephone communication

T e c h n o lo g y

D e s c r ip t io n

D iffu s io n

L a b o r im p lic a tio n s

s w itc h in g

sy ste m s

(E S S )

H ig h -s p e e d , c o m p u te r -b a s e d s w itc h ­

R e d u c e s u n it la b o r r e q u ir e m e n ts fo r c e n ­

L o c a l E S S in tr o d u c e d

in g e q u ip m e n t m o n it o r s its o w n p e r ­

t r a l o f f i c e e q u i p m e n t i n s t a l le r s a n d r e ­

n e a r ly 2 5 p e r c e n t o f p h o n e s b y 1 9 7 8 ; n e a r ly

fo r m a n c e

E le c tr o n ic

p a ir e r s .

c o m p le t e

d ia lin g

and

p r o v id e s

c a p a b ilitie s .

c a p a c it ie s
p r e v io u s

g r e a tly

advanced

C a ll-h a n d lin g
in c r e a s e d

over

e q u ip m e n t — th r e e f o ld

fo r

M o d u la r

d e s ig n ,

c o n v e r sio n

1 965; se r v ic e d

p r o jec te d

by 2000.

n a n c e f e a t u r e s r e d u c e m e c h a n i c a l s k i ll s

L o n g - d i s t a n c e E S S i n t r o d u c e d in 1 9 7 6 ; 5 0

n e e d e d f o r r o u t in e m a in t e n a n c e ; k n o w l ­

p e r c en t c o v e r a g e p r o jec te d fo r 1985.

edge

of

c o m p u te r -b a se d

lo c a l E S S , f o u r fo ld fo r lo n g -d is t a n c e

p r o g r a m m in g

ESS.
T r a n s m is s i o n i n n o v a t i o n s

s e lf -m a in te ­

in

and

n ecessa ry

fo r

o p e r a tio n a n d c o n tr o l.

M il l im e t e r
ta n c e

U n it l a b o r r e q u i r e m e n t s f o r i n s t a l l a t i o n

U n d e r g o i n g f ie l d

m e d iu m

con­

a n d r e p a ir p e r s o n n e l w i l l b e r e d u c e d , a f ­

w i l l d e p e n d o n g r o w t h in c a ll v o l u m e o n

un d ergrou n d

tu b e

fe c t in g

h ig h

w a v e g u id e :

tr a n sm iss io n

s is t in g

of

an

L o n g -d is ­

t h r o u g h w h ic h s i g n a l- c a r r y i n g r a d i o
w aves

are

t r a n sm itte d .

C a ll-h a n ­

d l i n g c a p a c it y is m o r e t h a n d o u b l e
th a t

of

c o n c e p ts

s y ste m s

m o st

advanced

lo n g -r u n

e m p lo y m e n t

g r o w th .

S i m i la r i t y t o m ic r o w a v e r e la y t r a n s m i s ­
s io n

sh o u ld

not

r e q u ir e

m a jo r

tests.

F u tu r e d iffu s io n

d e n s ity c o m m u n ic a tio n

r o u tes a n d

o p t ic a l s y s te m d e v e lo p m e n t .

s k ill

ch an ges.

e x is t in g

c a b le s .
F i b e r o p t i c c a b l e s : G la s s f ib e r c a b l e s

L o n g -r u n

in ­

I n t r i a l s t a g e s ; a p p l i c a t i o n t o c o m m e r c ia l

c o m b i n e d w i t h s e m i c o n d u c t o r lig h t

s t a l l a t i o n a n d r e p a ir w o r k e r s w i l l b e a f ­

c o m m u n i c a t i o n s s y s t e m s e x p e c t e d in 1 9 8 0 .

s o u r c e s f o r v e r y h ig h c a p a c ity tr a n s ­

fe c te d

m is s i o n . C a b le s a r e c o m p a c t , r e s is t

m e n ts . S k ill r e q u ir e m e n ts m a y b e le s s ­

e le c t r i c a l i n t e r f e r e n c e , a n d i n t e r f a c e
w e l l w i t h d i g it a l s w i t c h i n g a n d t r a n s ­

e n e d d u e t o h i g h l y p r e e n g in e e r e d e q u i p ­
m en t.

by

e m p lo y m e n t
reduced

g ro w th

of

u n it la b o r r e q u ir e ­

m i s s i o n t e c h n i q u e s . U s e is f e a s i b l e o n
lo n g -d is t a n c e

and

lo c a l

in te r e x ­

c h a n g e ro u tes.

S a t e l l i t e s s e r v e a s r e la y p o i n t s b e ­

M o d e s t g r o w t h in R & D a n d i m p l e m e n ­

tw e e n d is ta n t e a r th s ta tio n s , tr a n s­

t a tio n e m p lo y m e n t s h o u ld

m it tin g v o ic e , d a t a , a n d t e le v is io n

g r e a te r u tiliz a tio n . U s e a s s u p p le m e n t a l

T h ir d

s ig n a ls . S a t e l l i t e s y s t e m s a d d v e r s a ­

c a p a c it y s h o u l d n o t a f f e c t e m p l o y m e n t

phone

t il it y a n d s e c u r i t y t o e x i s t i n g g r o u n d

S a te llite c o m m u n ic a tio n s

o n g r o u n d - b a s e d f a c i l it ie s .

p r iv a te -lin e

r e s u lt f r o m

n e tw o r k .

F ir s t d o m e s t i c s a t e l li t e s y s t e m i n s t a l le d in
1 9 7 4 , s e c o n d in 1 9 7 5 , a n d t h ir d in 1 9 7 6 .
sy ste m

t ie s

n e tw o r k ;

in to

n a t io n w id e t e le ­

o th e rs

s e r v ic e

o n ly .

are

le a s e d ,

I n te r n a tio n a l

s a t e l l i t e s l i n k e d 1 0 0 c o u n t r i e s in 1 9 7 7 .

T r a n s m i s s i o n o f e le c t r i c a l p u l s e s i n ­
ste a d

m a in te n a n c e c r a ft w o r k e r s in t h e lo n g

w a v e r e la y n o w

i n c r e a s e s c a p a c i t y w i t h m in i m a l i n ­

ru n .

o f a p r i m a r i ly d i g i t a l t r a n s m i s s i o n n e t w o r k

v e s tm e n t a n d fa c ilit a te s tr a n s m is s io n

p e r s o n n e l m a y o c c u r d u r in g c h a n g e o v e r .

of

D ig ita l tr a n sm iss io n

R ed u ces

S k i ll

o f c o n t i n u o u s s ig n a ls g r e a t l y

d a ta .

C o m p a tib le

w ith

f u tu r e




S h o r t-r u n

la b o r

r e q u ir e m e n ts

g r o w th

r e q u ir e m e n ts

not

fo r

o f in s ta lla t io n
e x p e c te d

D i g i t a l l i n k s b e t w e e n 1 0 0 c i t i e s o n m ic r o in o p e r a tio n . E v o lu t io n

p l a n n e d f o r l a t e in t h is c e n t u r y .

to

change.

t e c h n o lo g ie s .
C o m p u te r a p p lic a t io n s

u n it

N e w u se s o f sto r e d p r o g r a m c o n tr o l

U n it l a b o r r e q u i r e m e n t s r e d u c e d i n a ll

O p e r a t o r f u n c t i o n s c o n v e r t e d in s o m e h ig h

f a c ilit a te

c a ses; h o w e v e r , a c tu a l e ffe c ts o n e m p lo y ­

d e m a n d a r e a s. M a in te n a n c e s y s te m s , s o m e

s w itc h in g

and

b i ll in g
an­

m e n t d e p e n d o n g r o w t h in s e r v i c e d e ­

n o w i n l im it e d u s e , a r e e x p e c t e d t o b e in

s w e r in g in t e r c e p t c a l l s , m a in t e n a n c e

m a n d . E q u ip m e n t o p e r a t i o n a n d r e p a ir

o p e r a tio n

a n d te s t in g f u n c tio n s , a n d m a n a g e ­

a r e s im p l if ie d , in m o s t c a s e s r e s u lt in g in

1980.

m e n t in fo r m a tio n p r o c e ss in g .

le ss e m p lo y e e s p e c ia liz a t io n b u t g r e a te r

e x p a n d e d c o n s i d e r a b l y s in c e 1 9 7 0 .

o p e r a to r - a s s is t e d

t o ll

c a lls ,

v a r ie t y in j o b d u t i e s .

29

th r o u g h o u t

th e

n e tw o r k

M a n a g e m e n t in fo r m a tio n

by

s y s te m s

conversion expected to be about 50 percent complete by
1985.2
Call-handling capacities are greatly increased com­
pared to previous equipment—threefold for local and
fourfold for long-distance ESS. In addition, automatic
maintenance monitors locate and diagnose circuitry
problems, notify operating personnel of necessary
repairs, and route connections around faulty com­
ponents until such repairs are made. Most ESS circuitry
consists of plug-in modules that can be rapidly changed.
In areas where ESS has been widely installed, central
control centers may link each switching office and
perform remote monitoring and maintenance functions.
Moreover, ESS provides automatic dialing functions,
which may be individualized simply by changing the
software controlling the operation of each switching
machine.
The workers mainly affected by this technology are the
central office installation and maintenance craft workers.
The installation of electromechanical switching equip­
ment involved complex wiring assignments to integrate a
standardized machine into varied central office opera­
tions. The tasks are greatly simplified with ESS because
its software is preprogrammed to meet the specific
requirements of each installation. Thus, unit labor
requirements for installation are decreased as more of this
function is incorporated into the manufacturing process.
Similarly, maintenance requirements with ESS are
being reduced—up to two-thirds in the case of long­
distance switching systems.3 Electromechanical switching
equipment requires extensive mechanical abilities and a
basic knowledge of electrical circuitry. With no moving
parts, however, ESS eliminates the need for mechanical
skills but requires a working knowledge of electronic
computer-based systems and programming concepts and
greater responsibilities in job duties. Thus, the technical
skills of personnel are increasing as are the educational
requirements for this type of work. However, no changes
in occupational classifications are anticipated.
ESS will also affect network administration clerical
personnel, whose jobs involve the translation and analysis
of network operating data. As this type of information
becomes more sophisticated and complex with ESS, the
skills of this occupational group will increase.
Since ESS and its support systems sharply increase
capacity and reduce unit labor requirements, their im­
pact on employment growth could be adverse. However,
sharply increasing call volume may offset the reduced unit
labor requirements of electronic switching technologies,
resulting in slight increases in central office craft worker
employment.

through stored program control. In general, major
advances in technology substantially increase the system’s
capacity while requiring little, if any, additional labor.
These aspects of technological change in the telephone
communications industry, their labor impact, and their
diffusion are discussed in the following sections and are
summarized in table 3.
Electronic switching systems
Electronic switching systems (ESS) adapt the
technology of stored program control to the central office
function of switching telephone calls. ESS utilizes solidstate designs with the inherent advantages of high-speed
operation, high reliability, ease of maintenance, and
physical compactness. This technology, first introduced
to local call switching in 1965, was used for roughly 25
percent of U.S. telephones in 1978. Coverage is expected
to be almost complete by the year 20001 as new central
offices are established and as older crossbar and step-bystep switching equipment is phased out. ESS was also
adapted to long-distance call switching in 1976, with
‘Stanley Johnston, Herbert Kettler, Alan Tedesco, “Planning Local
Switching Replacement with ESS: When and How?” Bell Laboratories
Record, March 1977, p. 59.

inform ation provided by American Telephone and Telegraph Co.
officials, October 1977.
3“Illinois Bell Using Long-Distance Switch,” Electronics News,
January 19, 1976, p. 8.

Employee monitors the master control console of a long-distance
electronic switching system.




30

Transmission innovations
Increases in long-distance call volume, averaging 9
percent annually during the last decade,4 have prompted
the development of two innovative transmission sys­
tems—the millimeter waveguide and fiber optic cables.
Using totally different technologies, both can achieve
call-handling capacities far greater than existing coaxial
cables and microwave relays.
The millimeter waveguide is essentially an un­
derground tube through which signal-carrying radio
waves are transmitted. It was developed as an adjunct to
the video telephone, which required much more capacity
than normal voice communication for its video signals.
Although interest in video communication has waned, the
waveguide remains a viable, long-distance transmission
medium that can provide additional capacity, as call
volume increases. In view of its extremely high capacity,
waveguide would be installed only on high density com­
munication routes, such as between major cities, and its
diffusion would depend on call volume growth in such
areas.
Optical transmission systems employ a light source
(light-emitting diode) modulated by a voice or data
signal, and an optical “cable” (a bundle of hair-thin glass
fibers) in place of the electrical signal/copper wire
concept of conventional cable systems. An optical system,
in sharp contrast to existing transmission methods, has
the potential for extremely high capacity, very compact
size, resistance to common electrical interference, and a
high degree of compatibility with proliferating digital
voice and data transmissions. In addition to usage on
long-distance routes, the space savings achievable with
fiber optic cables make them ideally suited to connections
between central switching offices in urban areas. One
such system was first tested early in 1976, and another
underwent field trials in 1977 during which it actually
carried commercial traffic. It is in this capacity that
optical systems are first expected to be used for telephone
communications starting in 1980,5 although limited,
specialized applications may occur even sooner.
Although technological problems still exist, recent
breakthroughs have advanced optical systems into
consideration as one of the primary transmission media
of the future. Industry specialists believe that by the time
substantially higher capacity is needed on the long­
distance network, optical systems will have proven
sufficiently reliable and cost competitive with other
systems in high-density, long-distance transmission
applications. During the transition period to these high
capacity transmission systems, a different type of radio
transmission will be used. Called single side-band (SSB),
it will more than triple the capacity of the microwave
network with only minor equipment modifications at
transmission end points.
4American Telephone and Telegraph Co., Annual Report 1973, p. 6;

Annual Report 1978, p. 6.
5American Telephone and Telegraph Co., Annual Report 1978, p. 7.




31

Significant employment changes may occur. The
installation and maintenance of facilities associated with
transmission systems fall in part to line and cable craft
workers, a relatively small occupational group con­
stituting roughly 5 percent of the industry work force. As
is the case with ESS, the transmission innovations
mentioned (waveguide, optics, and SSB) greatly increase
capacity, with a corresponding decrease in unit labor
requirements. These technologies, in combination with
others described in following sections, may reduce
employment in this occupational group. The increasing
volume of calls, however, will at least moderate, if not
offset, any employment declines. As transmission
capacity becomes more dependent on the electronic
equipment at the end points of transmission systems
instead of the cable itself, a shift in emphasis from the
cable crafts to the central office crafts may occur.
Equipment modifications and new equipment in­
stallations may spur short-run employment increases in
the central office installation crafts.
The two innovative systems are not expected to
radically alter skill requirements. The millimeter
waveguide is not likely to require many new skills of craft
employees due to basic similarities with microwave relay
transmission technology. Well established cable-laying
procedures will continue to be used with only a few new
techniques of aligning and joining sections of waveguide
“pipe.” Optical transmission systems are likely to be
highly preengineered so that cable splicing may be
reduced to plugging together two connectors, simplifying
the skills needed for this task. In addition, transmission
end point equipment will remain principally electronic in
nature and not require central office skills beyond those
already needed for digital transmission equipment.
Satellite communication
Communication via satellite began in 1965 between the
United States and Europe (satellites linked about 100
countries in 1977), providing an alternative to undersea
cables for international signal transmission. In operation,
satellites in synchronous orbits serve as relay points for
transmissions between distant earth stations, which in
turn connect to the ground telephone network. Advances
in semiconductor technology and microminiaturization
of circuitry have increased the call-handling capability of
satellites to 25 times that of the original system and
increased the satellite life-span from 18 months to over 7
years.
Westar, the first domestic satellite system providing
communication between points within the United States,
was placed in operation in 1974 by the Western Union
Telegraph Company. Consisting of two satellites and
seven earth stations, it can relay 28,800 voice channels,
data traffic, and color television transmission on a leased,
private-line basis. Another domestic system, Comstar, a
joint venture of AT&T and GT&E, began operation in
1976. It has capabilities similar to the Western Union

through 1985.6 And, although growth in the absolute
volume of voice traffic is expected to exceed that of data
traffic for the foreseeable future, the impact of data
communications on the industry cannot be discounted.
The conversion to a telephone network based on digital
transmission will affect employment as the other,
previously mentioned transmission technologies will,
except that the impact will be much more immediate. This
technology is likely to reduce employment in line and
cable crafts. However, employment may increase in the
central office installation crafts. Skill levels for both
groups are expected to remain unchanged.

System but ties into the nationwide telephone network.
One other system is currently in use, and several more are
planned.
Aside from providing additional capacity, satellite
systems increase network versatility with a third transmis­
sion medium, which, in contrast to ground-based
systems, has transmission costs independent of transmis­
sion distance. In addition, satellite service capacity can be
shifted to reduce the load on ground facilities as peak
calling demand shifts between time zones, obviating
concentrations of capacity that are fully used only at
certain times of day. Data traffic, video, and other types
of one-way transmission will be the most important uses
of satellites; voice traffic is expected to be of secondary
importance due to time delays involved with transmission
over such great distances (nearly 50,000 miles in the case
of orbiting synchronous satellites).
The labor involved in satellite communication is
primarily in the field of research and development and
ranges from electrical engineers and physicists to
psychologists. In addition, personnel are needed in the
construction, operation, and maintenance of earth
stations. Modest employment growth can be expected in
these and associated occupations as satellite use becomes
more extensive. Since satellites provide only supplemen­
tal capacity, their use does not greatly affect the personnel
associated with ground-based transmission facilities.

Computer applications
The impact of computer technology in the form of
stored program control on the telephone industry will be
far-reaching, changing some segments not previously
affected and increasing efficiency in other areas. Office
administrative tasks were the first to undergo automation
in the late 1950’s, and various refinements in full-scale
data processing systems are still being made. Numerous
management information systems have evolved that
automate the processing of customer records, keep
inventory records, assign plant facilities, and perform
various analyses on pertinent data. Clerical personnel will
continue to be affected by these systems.
Currently, stored program control is being applied to
more operating aspects of telephone communications
than ever before. Undergoing automation are operations
such as switching and billing toll calls, interception of
calls to nonworking numbers, and maintenance testing
systems.
The operator’s duties are being changed by an
electronic console which automates most of the switching
and billing tasks on operator-assisted long-distance calls.
This equipment can increase operator efficiency by about
25 percent and has altered the toll operator’s routine job
to a more varied one which requires less physical effort,
somewhat more imagination and responsibility, and
different, but not necessarily more complex skills. About
75 percent of telephones, in primarily urban areas, are
presently serviced by this equipment. Its diffusion will
increase as new methods are developed allowing remote
centralized coverage of large rural areas.
An innovation which eliminates the need for one group
of operators is a device which automatically answers in­
tercept calls (vacant, changed, or disconnected numbers)
with a computer-assembled voice response explaining the
reason for interception and giving new number informa­
tion. Although intercept operators constitute a small
proportion of all operators, this equipment completely
eliminates their function. Automatic intercept is cur­
rently in use only in large metropolitan areas where de­
mand is greatest; however, systemwide implementation
is expected. In addition, a system to automate coin
telephones will be put into effect shortly that will monitor
and compute charges on coin phone calls without

Digital transmission
The major factor underlying the growing interest in
digital transmission is the basic need for increased
transmission capacity at minimal cost.
In allowing up to 24 simultaneous calls on a single
communication channel, digital transmission was
developed in the 1940’s as a method of increasing the
capacities of existing transmission systems at minimal
cost. While conventional transmission is in analog
form—continuous signals each occupying a single
communication channel—digital transmission converts
analog signals into electronic pulses, combines them with
others for transmission, then decodes and reconverts
them to analog form upon reception. Industry plans call
for the evolution of a primarily digital transmission
network by the end of this century with the utilization of
long-distance ESS, millimeter waveguide, and fiber optic
cables. Aiding in the transition is a relatively new
technique that transmits digital data and normal voice
traffic simultaneously on the nationwide microwave relay
network, making the construction of separate digital
facilities unnecessary. This system now links nearly 100
cities and could be expanded to the entire microwave
network.
Computer data traffic, although minimal at present, is
expected to increase at an annual rate of 35 percent
Frederick G. Withington, “Beyond 1984: A Technology Forecast,”

Datamation, January 1975, p. 73.




32

operator contact, thus eliminating another operator
function.
Perhaps most significant are the computerized
maintenance, quality-control systems now in various
stages of development. One system, expected to be in use
nationwide by 1980, tests trunk lines, analyzing problems
of signal loss and noise. Affecting line and cable repairers,
this system can increase by a factor of 25 the number of
lines tested in a typical time period.7 Central office craft
workers are being similarly affected by computerized
systems. One such system, now in use, tests crossbar
switching networks, locating and analyzing problems that
limit switching capacity. Another system, called com­
puterized line assignment, designates wiring attachments
on central office main distributing frames to ensure
proper load-balancing conditions and reduce wiring
congestion.
Another important maintenance, quality-control
system is now being installed. It is a computerized line
status verifier which is expected to eliminate one of the
top plant craft positions—the test desk operator. Under
the conventional testing system, this central office job
requires experience in both inside and outside plant crafts
and involves testing lines and switching equipment to find
customer-reported problems. The computerized line
status verifier performs most of'these tests automatically,
reducing the work of the test desk operator by roughly 60
percent,8 and is operated by someone of clerical status.
“No end in sight” has been said to describe expectations
for future computer use in the telephone industry.
Minicomputers and microprocessors integrated directly
into equipment will be commonplace. An example of this
is a proposed revenue accounting system based on
computer circuits built into individual telephones to
provide immediate revenue information. Another built-in
system would allow customers to perform certain quality
tests on their own telephones, decreasing the involvement
of telephone repairers in the maintenance process. A step
in this direction will be taken soon with the introduction
of the electronic telephone set that replaces most of the
mechanical parts of the older telephone sets with
integrated circuits, and provides higher quality at lower
cost.
As is evident from the foregoing, increased computer
use will significantly affect labor since it acts to reduce
unit labor requirements in almost all its applications.
However, the actual effects on employment will depend
greatly on changes in demand.

measured in terms of real operating revenue9 (chart 10),
more than tripled between 1960 and 1977. The rate of
increase was relatively steady at 8.1 percent annually,
continuing the upward growth pattern of the 1950’s.
Output advanced at 8.2 percent per year during 1960-67
and at an annual rate of 7.6 percent during 1967-77. The
lower rate in the later period was due primarily to the
1970-71 and 1974-75 economic recessions when output
growth dropped somewhat to the still relatively high rates
of 5.1 percent and 3.1 percent, respectively.
The rapid output growth rate since 1960 resulted from
the more than doubling of the number of telephones in
service to over 162 million and a substantial increase in
usage per telephone. Various social and demographic
factors have been primary causes of both these increases.
Among these are the trend toward single-member
households as children leave home at an earlier age; rising
income levels; increasing population mobility; and an
increasing reliance on communications by business and
government.
The outlook is for continued strong output growth as
residential and business demand increases. Although the
slower population growth rate could moderate growth in
demand in the long run, it is expected to be offset by
continuing societal changes leading to increases in the
number of households. Other factors will also contribute
to output growth, such as rising income levels, propor­
tionately larger increases in long-distance calls compared
to local calls, and growth in data communications.
Unknown at this point, however, is what effects
competition will have on industry prices and output
growth.
In addition to normal demand growth, new markets for
communication services are expected to develop very
rapidly in the next decade. Electronic funds transfer
systems, an electronic postal service, and home data
processing are important examples of future, nontraditional uses of the telephone network.
Productivity growth
Output per employee hour in the telephone com­
munication industry grew at an average annual rate of 5.5
percent between 1960 and 1977, well above the average
for the total private economy. The rate was 5.8 percent
per year during both 1960-67 and 1967-77. In the 7 years
from 1970 to 1977 however, productivity grew at a 7.1percent annual rate. It advanced even more rapidly in the
late 1950’s, averaging 9.2 percent annually from 1955 to
I960.1
0

Production and Productivity Outlook

9The output of the industry is defined as the real value of operating
revenues of all telephone carriers with $1 million or more in annual
revenue reporting each year to the Federal Communications Commis­
sion (FCC); and of selected large carriers, not subject to reporting
requirements, for which the FCC reports the data. The real value of
operating revenue is derived by appropriate deflation procedures.

Output
Output in the telephone communication industry,
’“Accentuate the Practical,” Bell Telephone Magazine, March-April
1974, p. 30.
8“Data Processing— Burning Through the Bog”, Bell Telephone
Magazine, March-April 1976, p. 16.




10Productivity Indexes fo r Selected Industries, 1978 Edition, Bulletin
2002 (Bureau of Labor Statistics, 1978), p. 106. Rates are derived by the
linear least squares trend method using annual indexes.

33

Chart 10. Output per employee hour and related data in telephone
communication, 1960-77
Index, 1967 = 100
Ratio scale

Source: Bureau of Labor Statistics.




34

Changes in the rate of productivity growth have been
largely associated with changes in employee hours, since
output, as previously indicated, moved up relatively
steadily. In the late 1950’s, for example, the peak growth
in productivity resulted mainly from reduced employee
hours due to changeovers to automatic dial systems and
electronic data processing. Hours remained fairly con­
stant through the first half of the 1960’s but were erratic in
subsequent years. They began rising in the mid-1960’s as
employment expanded in the relatively labor-intensive
occupations of installation and repair, necessary to the
maintenance of the growing system. (See chart 10.)
On the other hand, employee hour growth slowed in the
early 1970’s as a result of reduced labor requirements
realized from newer technologies and in response to
tightening economic conditions. During the economic
recession of the mid-1970’s, hours declined more sharply
than at any time since 1958, while output continued to rise
at a relatively steady rate. In summary, following a
decline of 0.5 percent annually from 1960 to 1963, hours
increased at 4.1 percent per year during 1963-70 but then
dropped to 0.3 percent annually from 1970 to 1977.

per employee however, were roughly similar—7.6 percent
and 8.0 percent per year, respectively.
Funds for research and development
Research and development (R&D) activities have been
instrumental in raising industry productivity and assuring
the most technologically advanced telephone com­
munication system. Although R&D data are not
available for the industry as a whole, data for AT&T
(which alone performed nearly 85 percent of the
industry’s 1977 R&D) indicate the magnitude of the
research effort in this industry.
A recent survey showed that, based on expenditures,
AT&T ranked as the fourth largest performer (behind
major automotive and computer manufacturers) of
corporate R&D in the United States in 1977, spending
nearly $718 million.1 Of annual expenditures, basic
3
research and fundamental development generally ac­
count for roughly one-third and are performed by the Bell
Telephone Laboratories for the Bell System. In addition,
more specific product development and design work is
done by Bell Labs for the Western Electric Company,
accounting for the remaining annual R&D expenditures.

Investment
Employment and Occupational Trends

Capital expenditures
Current-dollar expenditures for telephone plant and
equipment increased from $3.2 billion in 1960 to $14.4
billion in 1977 at an average annual rate of 10.3 percent.
Similarly, the book value of total plant in service
increased fourfold, nearing $130 billion at the end of
1977.1 Of yearly expenditures, a major portion generally
1
goes toward system growth—new telephone services for
new and existing customers. Plant replacement, mod­
ernization, and customer movement account for the
remainder.1
2
These data, however, reflect costs unadjusted for
changes in prices. Real dollar outlays (outlays after
adjustment by an implicit price deflator combining
communication equipment and structures) also rose
sharply from 1960 to 1977, 5.8 percent annually, more
than doubling over the period. Although sensitive to
general economic conditions in the short run, it is likely
that real expenditures will at least maintain their current
level over the next decade in order to accommodate
continued industry growth in response to competitive
pressure.
Between 1960 and 1976, expenditures per employee (an
indication of capital intensity) averaged about $8,500 in
the telephone industry, compared to about $1,200 in all
manufacturing industries combined (Bureau of the
Census data). The annual rates of growth of expenditures

Employment trends
Employment in the telephone industry has undergone
severe fluctuations in the post-World War II period due
to both changing technologies and varying economic
conditions. Through most of the 1950’s, employment
grew strongly, increasing 24 percent between 1950 and
1957. Later in the decade, the near complete diffusion of
direct dialing and increasing use of electronic data
processing combined with the effects of two recessions to
decrease employment almost 11 percent between 1957
and 1963.
Employment rose sharply after 1963 as increasing
demand for telephone service offset the effects of tech­
nological change. In the period 1960-67, employment
rose an average of 2.1 percent per year in spite of the sharp
decline in the early part of the period. (See chart 11.)
From 1967 to 1970, employment growth averaged 5.5
percent annually, reflecting expansion in the laborintensive craft occupations that were gaining in relative
importance at that time.
Thereafter, due to the effects of newer technologies and
tightening economic conditions, employment growth
returned to a 1.5 percent annual rate during 1970-74.
However, when these factors combined with the
economic recession, employment fell 2.4 percent annu­
ally between 1974 and 1976. Employment then in­
creased slightly in 1977 and more sharply in 1978. Thus,
overall in the period 1960 to 1978, total employment rose

“ American Telephone and Telegraph Company, Annual Reports,
various years; United States Independent Telephone Association,
Independent Telephone Statistics, various years.
12John G. Reynolds, “Telcos Plan $12.3 Billion Construction,”
Telephone Engineer and Management, Apr. 15, 1974, p. 77.




l3“R&D Spending Patterns for 600 Companies,” Business Week,
July 3, 1978, p. 77.

35

Chart 11. Employment in telephone communication, 1960-78,
and projection for 1978-90
Employees (thousands)

interest method for projection.
Source: Bureau of Labor Statistics.




36

from 706,000 to 992,400 at an average annual rate of 2.5
percent.
The outlook for employment as projected by BLS1 is
4
for a continuation of this upward trend at a moderate rate
of 1.0 percent annually between 1978 and 1990.
Underlying this projection are the expectations that,
relative to the 1970’s, the rates of growth of output and
productivity will decrease, with productivity growth
slowing slightly more than output growth.
However, some within the industry feel that, due to a
changed economic climate and impending competition,
reductions in labor intensity will have to continue. Thus,
the peak employment levels of the 1970’s may not be
achieved in the 1980’s, although additional labor
requirements in the middle of the decade may cause
employment to again start slowly rising at that time.
Nonsupervisory worker employment rose from
581,900 in 1960 to 738,800 in 1978 at an average annual
rate of 2.0 percent. As in many other industries, non­
supervisory workers decreased relative to supervisory
workers, declining from 82.4 percent of total employ­
ment in 1960 to 74.5 percent in 1978.
Women workers, primarily in operator and clerical
positions, have historically constituted a major portion of
telephone industry employment. However, technological
changes in the last two decades have adversely affected
the labor-intensive occupations held by women, such as
telephone operators. Jobs generally held by men in
such occupations as construction, installation, and
maintenance were not affected nearly as much. Thus,
although the number of women workers increased almost
23 percent from 1960 to 1978, their share of total
employment fell from 57.2 percent in 1960 to 50.0 percent
in 1978. However, if operator employment does not
decrease significantly through the 1980’s, and if greater
numbers of craft jobs open to women, their share of total
employment may stay near 50 percent.
The employment of outside labor on contract is
becoming more widespread, but its use has extended
almost exclusively to the provision of secondary services
such as cafeteria operation and janitorial work in
telephone office buildings. Most collective bargaining
agreements covering major industry occupational groups
make reference to subcontracting, prohibiting its use if it
provides services that can be performed by covered
workers or if it would cause layoffs or part-timing of
permanent employees.

late 1950’s), it continues to alter job content, skill levels,
and occupational distribution.
In general, technological change has been very effective
in reducing labor intensity in all segments of the industry,
and particularly in operator and clerical occupations.
But, while technological development has made the U.S.
telephone system the most advanced in the world, the
ability of technology to make significant additional
contributions to efficiency may be reaching a peak in
some operations. Nevertheless, labor intensity continues
to be reduced by relegating more of the communication
process to the customer. Just as the dial telephone and
direct long-distance dialing removed the task of call
switching from the operator to the customer, other
similar changes are now taking place.
Present examples include the toll operator’s electronic
switching console, which allows the customer to dial
special calls (collect, credit card, etc.) with only a
relatively short intervention by the operator for call
completion. Although not related to technology, some
reductions in operator service are being accomplished in
areas where charging for directory assistance has been
initiated.
Similarly, telephone installation and repair are
becoming less labor intensive. Changes began in this area
with the prewiring of buildings for telephone service
during construction. Although performed by telephone
industry employees, this task is much simpler during
construction than after. As a result of prewiring, a
concept of customer do-it-yourself developed to take
advantage of possible labor savings. The customer
chooses the telephone in a retail-type establishment, takes
it home, and plugs it in—effectively eliminating the
functions of the telephone installer.
As for maintenance, the modular assembly of
telephones, where components plug in and out, is
reducing the time and skills needed for telephone repair.
And, carrying the concept a step further, the technology is
being developed for customer participation in the
maintenance of the telephone, as mentioned in the
technology section of this report. This will also alter the
job content of the telephone repairer’s tasks. In coming
years, meeting competition in equipment supply is
expected to be the primary force behind employment and
occupational changes in telephone installation and
repair.
Important changes will also be faced by the central
office crafts, i.e., installation and repair of switching and
transmission equipment, in the next decade. As discussed
earlier, ESS installations, due to smaller size and
increased prefabrication, are considerably less labor
intensive than previous equipment, but the accelerated
pace of installations could increase labor requirements.
Once installed, ESS and its support systems, particularly
the facility for centralized remote maintenance and
control, will greatly affect the skills and labor re­
quirements of repair personnel. On the other hand,
increased modifications and installations of new types of

Occupational trends
As previously mentioned, telephone communication
has become a highly complex and automated process.
Although the impact of technological change on labor
may have been more severe in the past (particularly in the
14The projected data are BLS estimates of what the economy might
look like in 1990, given certain assumptions, for example, a fullemployment economy (4.5-percent unemployment). For further details,
see Monthly Labor Review , Apr. 1979, pp. 3-14.




37

transmission end-point equipment may increase the
requirements for craft workers in this area.
Line and cable craft workers, at one time the most
highly skilled craft group, are being affected adversely
by technological improvements in the local distribution
plant, i.e., the lines between central offices and local
subscribers. Changes such as dedicated plant (permanent­
ly installed lines and connectors in commercial and
residential buildings), buried cable, and quick-connect
terminals, although not as spectacular as some new
technologies, will nevertheless continue to reduce both
the labor requirements and skill levels of this oc­
cupational group.
In summary, as service demand continues to grow, it is
generally expected that many craft occupations will
increase in number through the 1980’s, although only
moderately due to the widespread diffusion of new
technologies. According to the BLS, craft and kindred
workers in the telephone industry are projected to
increase 27 percent from the 1976 level by 1985. (See chart
12.) Clerical employment, although affected by many new
computerized management information systems, is also
expected to increase in response to industry growth— 15
percent between 1976 and 1985. Telephone operators,
once the largest single occupational group, have been
declining in number since the mid-1950’s. The decline
however, may not continue in the 1980’s if reduced labor

requirements are offset by increasing service demand.
Some in the industry feel that unless a new technology is
discovered soon, operator employment may even
increase. While clearly unit labor requirements for almost
all these occupations are declining, the employment
outlook will depend on the growth in demand for services.
As for the professional and technical occupations, the
BLS projection is for an increase of 16 percent over the
1976 level by 1985. In this case, the continuing importance
of technological advancement is expected to lead to
strong growth of scientific and technical employment.
Managers and sales workers are also expected to
increase by 1985. Attempting to ensure service demand
growth and mindful of the newly competitive environ­
ment, the industry is at present in transition from a
technology-based organization to one of greater market
orientation. Increased emphasis on diversified customer
services is the major goal for the coming years. Versatility
will take the form of new customer equipment, already
apparent in the new varieties of telephones now available,
and the new types of services for both business and
residential customers that were described earlier.
Business and sales occupational groups will be primarily
affected by expansion along these lines, and these groups
are projected to achieve substantial gains in the 1980’s. As
shown in chart 12, the BLS projects a 38-percent gain over
the 1976 level by 1985.

Chart 12. Projected changes in employment in telephone communication,
by occupational group, 1976-85

Occupational
group

Percent of
in d u str y

P ercen t change

employment in

1976

-20

Professional and
technical workers

20

30

40

45.5

Craft workers

10

9.1

Clerical workers,
including
telephone operators

0

9.0

Managers, officials,
and sales workers

-10

34.4

Operatives,
service workers,
and laborers

2.0

I

Source: Bureau of Labor Statistics.




38

Adjustment of workers to technological change
Programs to protect the worker from the adverse
effects of changes in equipment and methods may be
incorporated into union contracts or they may be
informal arrangements between labor and management.
Adjustments to new technologies may relate to the
worker’s involvement through advance notice or
knowledge of workload changes, with possibilities of
retraining or transfer based on seniority rights. Where
reduction in force is a possibility, seniority may be
particularly important. Aid in adjustment to layoff may
include various types of income maintenance such as
supplementary unemployment benefits or severance pay.
In general, these provisions are more prevalent and more
detailed in formal contracts.
In the telephone communication industry, coverage of
nonsupervisory workers by formal labor-management
contracts is estimated to be essentially complete.
Covering by far the largest number of workers is the
Communications Workers of America (AFL-CIO); the
rest are covered by smaller unions, independent or AFLCIO affiliated. The Communications Workers estimate
their coverage of telephone operators and plant craft
workers to be roughly 80 percent and 60 percent,
respectively.
General provisions, such as a seniority basis for layoff
and recall, part-timing during slack work periods,
advance notice of layoffs, and severance pay, are found in
most contracts and afford some protection against the
effects of technological change. Other protective
provisions are also quite common. For example, in a
recent BLS study of 77 telephone industry contracts
covering 665,050 workers, provisions for interplant
transfers and on-the-job training applied to 88 percent
and 56 percent, respectively, of the workers. The most
recent contract negotiations also provided a supplemen­
tary income protection plan and a reassignment pay
protection plan. These provisions act to minimize
employee displacement due to technological change and
other causes of force reduction.
Some contracts contain provisions specifically geared
to the problems of technological change. Advance notice
of technological change, for example, covered about 15




percent of the workers in the aforementioned BLS study.
One agreement provided that, “. . . the Company will
notify the . . . Union . . . ninety calendar days in ad­
vance of a force surplus brought about by technological
change.”1 Another agreement states, “Advance estimates
5
shall be made of employee requirements as of the date the
technological change is to be made so as to determine the
number of employees to be retained and to be displaced,
and to permit the working out of an orderly plan of force
reduction.”16 The contract then goes on to provide either
transfer, leave of absence, or termination allowance to
displaced employees.
Labor-management cooperation in assessing employ­
ment needs has been notably successful in the telephone
industry. In one collective bargaining agreement,1 a joint
7
committee on technological change—formed by the
company—dealt with the problems created by new
technologies. Solutions to these problems included
transfers, on-the-job training for other assignments, and
the possibility of pensioning employees.
In general, since technological changes affected
occupations with high turnover rates, such as telephone
operators and clerical workers, the planned use of
attrition became a major factor in successfully reducing
employment. As employment begins to decline in the
more stable craft groups, however, increased emphasis
will be placed on retraining employees for new
technologies or different types of jobs, while slowly
decreasing the size of the work force through attrition.
One union official commented that, while jobs are lost,
people seldom are. Thus, since worker displacements are
minimized, technological change as a means of raising
productivity is generally accepted by telephone industry
employees.1
8
I5Agreement between the Michigan Bell Telephone Co. and the
Communications Workers of America, Aug. 4, 1974, p. 12.
16Agreement between the Southern Bell Telephone and Telegraph
Company and the Communications Workers of America, July 18,1974,
p. 40.
17Agreement between the Bell Telephone Company of Pennsylvania
and the Pennsylvania Telephone Guild, July 21, 1974, “Letter
Agreements”, p. 4.
18Improving Productivity: Labor and Management Approaches,
Bulletin 1715 (Bureau of Labor Statistics, 1971), p. 17.

39

SELECTED REFERENCES
U.S. Department of Labor, Bureau of Labor Statistics. Manpower

Brand, Horst. “Productivity in Telephone Communications,” Monthly
Labor Review, November 1973, pp. 3-9.

Planning fo r Technological Change: Case Studies o f Telephone
Operators, Bulletin 1574, 1968.

Capron, William M., ed. Technological Change in Regulated In­
dustries. Washington, D.C., The Brookings Institution, 1971.

U.S. Department of Labor, Bureau of Labor Statistics. Improving
Productivity: Labor and Management Approaches, Bulletin 1715,
September 1971, pp. 17-18.

Diebold Group. Automation: Impact and Implication; Focus on
Developments in the Communications Industry. Washington, D.C.,
April 1965.

U.S. Department of Labor, Bureau of Labor Statistics. Technological
Trends in Major American Industries, Bulletin 1474, 1966.

“Independent Phone Companies: The Best-Kept Growth Secret,”
Business Week, May 5, 1973, pp. 84-91.

U.S. Department of Labor, Manpower Administration. Technology
and Manpower in the Telephone Industry 1965-75, Manpower
Research Bulletin 13, November 1966.

Loewenberg, J. Joseph. Effects o f Change on Employee Relations in the
Telephone Industry. Harvard University Graduate School of
Business Administration, unpublished doctoral dissertation, June
1962.

U.S. Federal Communications Commission, Common Carrier Bureau.
Statistics o f Communications Common Carriers, annual.
Independent Telephone Association. Independent

McKinsey and Co. A Study o f Western Electric’s Performance. New
York, American Telephone and Telegraph Co., 1969.

United States

“Telephone Industry Forecast,” Telephone Engineer and Management,
Jan. 15, 1975, p. 6.

“The Changing Network,” Bell Telephone Magazine, JanuaryFebruary 1975, pp. 3-7.




Telephone Statistics, annual.

40

Chapter 5

Insurance

Summary

levels. A total of 1.2 million persons were employed in the
industry in 1978. The number of persons working in
clerical occupations is expected to rise at a slower rate
than total employment during the period 1978-85 as
computers and related technologies increasingly reduce
labor requirements in data processing tasks.

Insurance carriers (SIC 63) were the first industry to
apply computers to business office procedures on a wide
scale with the advent of electronic data processing (EDP)
in the early 1950’s.1 Since then, the industry’s substantial
accounting and statistical requirements, its vast data
storage and retrieval operations, and the mass of
paperwork it produces have pushed it to the forefront of
EDP utilization. Practically every function of an
insurance carrier has been computerized, and almost all
firms have applied EDP and related technology to at least
part of their operations. By 1985, the industry may
employ more than 30,000 persons in computer positions.2
The spread of EDP and the growth of the industry have
been mutually supporting. A rising population in a
growing economy, with concomitant increases in per­
sonal income and expenditures for insurance, have made
it nearly impossible for firms to function without EDP.
Moreover, computers have made it easier for carriers to
take advantage of statutes allowing the underwriting of
different lines of insurance by the same company. The
main problems created by this rapid growth have been
gigantic and cumbersome files, interminable transcrip­
tion of the same data from one form to another, and a
myriad of tedious and repetitive operations; for all of
these, EDP and related technology is ideally suited.
New technology has brought about substantial
improvements in productivity in a wide range of laborintensive insurance processing operations. The more
widespread use of computers, along with optical
character recognition equipment, remote computer
terminals, microfilm technology, and related in­
novations, has reduced unit labor requirements in data
storage and retrieval, computations, billing functions,
and processing of claims, bids, and proposals.
Employment in the insurance industry increased at an
annual rate of 2.0 percent during 1960-78 as personal
consumption expenditures for insurance reached higher

Technology in the 1980’s
Technological developments in the insurance industry
have centered on the application of EDP to an increasing
number of the industry’s functions, particularly to the
management of information. A summary of the major
technological changes is presented in table 4.
To cope with the huge volume of paperwork,
calculations, and records generated by rapid industry
growth, an increasing number of firms are using EDP.
Computer programs have been developed for a wide
range of insurance industry functions, ranging from
actuarial research to claims processing. In addition, EDP
is used extensively by the industry to perform basic office
tasks such as word processing (typing, copying, printing),
mail handling, and check writing.
Technological advances in the industry have led to the
merger of a vast electronic data base and computation
capability with on-line communications networks, output
devices, and office operations equipment. Utilizing this
technology, many of the major operating functions for all
insurance lines may be performed by a central computer
on demand from a terminal in the home office or in any
field office (including overseas offices), with the results
made available either through visual display devices or on
hard copy. More complex operations are constantly
being devised, and worldwide electronic communications
and operations networks are being created. In addition to
EDP, more extensive use of equipment such as closedcircuit TV and other audiovisual equipment for training,
new and improved copying devices, text-management
equipment, and electronic calculators also have improved
efficiency in insurance industry operations.
Planning and implementing EDP applications are
preceded by intensive analysis of existing procedures and
practices in order to develop the appropriate program,
and conversion to EDP (including personnel retraining)
is accomplished gradually to avoid disrupting current
operations. With the advent of the new generation of

‘Standard Industrial Classification 63 comprises stock and mutual
enterprises which underwrite all types of insurance, primarily life,
accident and health, property, casualty, surety (financial responsibility),
and title insurance. This study does not include independent agents and
brokers (SIC 64) who sell insurance underwritten by others or who
render services to insurance carriers or policyholders.
2Unpublished BLS data which include both insurance carriers (SIC
63) and insurance agents and brokers (SIC 64).




41

Modem information display system including control unit and printer.

small computers and the corollary drop in computer
system operating costs, EDP and integrated systems will
be widely applied in the industry during the 1980’s.

ly to perform such tasks as payment of policy dividends
and claims and, through a terminal, to edit and process
data prior to input into the central system. A minicom­
puter programmed for an increasing number of insurance
applications ultimately may replace the desktop cal­
culator in an insurance firm’s head office and
branches.3
Billing and collection. A common EDP application is
premium billing and collection. Although some carriers
prefer to collect premiums through their agencies, the
trend is toward home office collection, often through the
“turnaround” billing system.
In turnaround billing, a machine readable notice of
premium due produced by the computer is returned by
the policyholder with the remittance. The computer puts
the payment data on a magnetic tape or disk for the
accounting department, calculates the agent’s commis­
sion on each premium, and credits the appropriate
account. These systems are currently operating at the rate

EDP applications
The number of insurance industry functions which are
being converted from manual to EDP operation is
growing. Computers are being applied to a wide range of
major activities including billing and collection, actuarial
research, underwriting, and claims. The industry consen­
sus is that during the balance of the decade and through
the 1980’s computer technology will be extended to other
areas, with unit labor requirements in clerical operations
expected to continue to decline. Employment of com­
puter programmers, systems analysts, and other com­
puter specialists is expected to continue to increase as
computer use grows.
The further introduction of minicomputers is expected
to bring about additional changes in insurance industry
operations. Until recently, the insurance industry in­
stalled increasingly larger and more complex EDP
hardware. This compelled the user to attempt to process
through a large computer a growing number of minor
operations (as for example, the management of office
supplies). The minicomputer will be used more extensive­




3At present, branch offices have little or no processing equipment and
often no EDP systems whatever. Most branch equipment consists of
key-entry devices for input to home office computers. This is
particularly the case among property and liability insurance carriers.
Current technology permits the home office to transmit computer
programs from the central EDP installation, thereby eliminating the
need for programmers in field offices.

42

Table 4.

Major technological changes in the insurance industry
D e s c r ip t io n

T e c h n o lo g y

L a b o r im p lic a t io n s

D iffu s io n

(E D P )

E D P is b e i n g a p p l ie d t o a n i n c r e a s i n g n u m b e r o f i n s u r ­

EDP

reduced

EDP

a n c e i n d u s t r y f u n c t i o n s i n c l u d i n g b i ll in g a n d c o l l e c t i o n ,

u n i t l a b o r r e q u i r e m e n t s f o r f il e

fu sed

a c t u a r i a l r e s e a r c h , u n d e r w r i t in g , a n d c la i m s p r o c e s s i n g .

E le c tr o n ic d a ta p r o c e ss in g

c le r k s , t y p i s t s , a n d

n e x t d e c a d e a s n e w , le ss c o s tly ,

M in i c o m p u t e r s
v a r io u s

are

d e p a r tm e n ts

b e in g

in tr o d u c e d

w i t h in

an

m ore

in su r a n c e

w id e ly

f ir m

and

te c h n o lo g y

has

o t h e r c le r i ­

t e c h n o lo g y
m ore

w ill

be

d if­

over

w id e ly

th e

in

c a l s ta ff.

in

g r a m m e r s, c o m p u te r o p e r a to r s,

s m a ll c o m p u te r s b e c o m e a v a il­
a b le .

E m p lo y m e n t

s o m e in s ta n c e s a r e b e in g j o in e d w ith a c e n tr a l c o m p u te r .

and

T h e s e sm a ll c o m p u te r s e d it, c o r r e c t, a n d p r e p r o c e s s d a ta

a lo n g

a t t h e d e p a r tm e n t le v e l b e fo r e th e d a t a a r e tr a n sm itte d

o f pro­

and

t e c h n o lo g ic a lly

im p r o v e d

s ta lla tio n s .

r e la t e d
w ith

s ta f f h a s in c r e a s e d
th e

n u m b e r o f in ­

t o t h e m a in c o m p u t e r i n s t a l l a t i o n . T h e y a l s o r e t r i e v e a n d
m a n ip u la t e
d a ta

d a ta

a l r e a d y s t o r e d in i n t e g r a t e d e le c t r o n ic

b a s e /d a ta c o m m u n ic a tio n s sy ste m s a n d carry o u t

o th e r f u n c tio n s .
I n t e g r a t e d e le c t r o n i c d a t a b a s e /
d a ta c o m m u n ic a tio n sy ste m s

A ll d a ta a r e r e c o r d e d o n m a g n e tic t a p e , d is c s , o r d r u m s

R ed u ces

and

c le r k s r e q u ir e d .

p ro cessed

th r o u g h a c e n tr a l c o m p u te r in s ta lla tio n .

th e

num ber

of

f ile

T h e n u m b e r o f s y s t e m s in u s e
is i n c r e a s i n g . M o s t o f t h e m a jo r

I n f o r m a t io n c a n b e r e tr ie v e d i n s t a n t l y a t b a s e o r r e m o t e

c a r r ie r s

l o c a t i o n s a n y w h e r e in t h e c o u n t r y a n d d i s p l a y e d o n v i d e o

p l is h e d

s c r e e n s o r in p r i n t e d f o r m . T h e d a t a m a y b e u p d a t e d , d e ­

sy ste m ;

le te d ,

b u ild in g b lo c k a p p r o a c h , c o m ­

o r se g m e n te d

p r o c e ss in g
w h ic h

u n it c a n

fo r s p e c ific fu n c tio n s .
a c tiv a te

T h e c e n tr a l

v a r i o u s e le c t r o n i c

have
th e

a lr e a d y

accom ­

c o n v e r sio n

o th ers

to

th e

u s in g

are

th e

p u t e r i z i n g t h e ir f il e s a n d o p e r a ­

fu n c tio n s

w i l l u t il iz e t h e s t o r e d d a t a t o p e r f o r m

d e v ic e s

t io n s s y s te m s f u n c tio n b y f u n c ­

s u c h a s a c c o u n t i n g , b i ll in g , i n t e r n a l a n d s t a t u t o r y r e p o r ts

t io n ,

and

in te g r a tio n .

s t a t i s t i c a l t a b le s , c o r r e s p o n d e n c e , a n d

p r o m o tio n a l

w ith

a

v ie w

to

e v e n tu a l

b roch u res.
D a t a i n p u t d e v ic e s :
r e c o g n it io n

R ed u ces

th e

d o c u m e n ts , in te r p r e t th e m , a n d p r o d u c e a m a g n e tic ta p e

p u n ch ers

and

w h ic h t r ig g e r s o p e r a t i n g s y s t e m s a n d a l s o c o n s t i t u t e s a

O p tic a l c h a r a c te r

t e m s r e q u ir e d f o r E D P .

P h o t o e le c t r ic

d e v ic e s

are

b e in g

u sed

to

scan

encoded

num ber

of

key-

m e c h a n ic a l

sys­

W i d e s p r e a d , p a r t ic u l a r ly in p r e ­
m iu m

b illin g

o p e r a tio n s ,

and

c o lle c tio n

p r o m o tio n a l

cam ­

p a i g n s , a n d d a t a b a n k in p u t .

p e r m a n e n t r e c o r d o f e a c h t r a n s a c t io n . T h e y c a n p r o d u c e
o u t p u t a s d is k s o r v id e o d is p la y d e v ic e s .
S p e c i a l w r i t i n g t o o l s w h i c h t r a c e s y m b o l s ( li n e s , d o t s , o r

R ed u ces

c u r v e s ) o n o r d i n a r y p a p e r a r e b e i n g u s e d t o p r o d u c e in ­

M a rk s e n se in p u t s y ste m

p u n c h e r s r e q u ir e d f o r E D P .

th e

num ber

of

key-

f o r m a t io n r e a d a b le b y c o m p u te r s .
P o r t a b le c o m p u t e r
t e r m in a l

in t e g r a t e d

e le c t r o n i c

lin e
d a ta

to

u sed
g a in

E x p ected to

A s y e t m in i m a l.

as

y e t.

a c c e p ta n c e

Ex­
in

b e u sed m ore e x ­

t e n s i v e l y b y s a le s p e r s o n s .

p r in te r , a r e b e i n g j o i n e d t o
b a s e /d a ta

w id e ly

th e n e a r fu tu re .

M ic r o c o m p u te r s in b r ie fc a s e s , c o m p le t e w ith k e y b o a r d ,
v i d e o d i s p l a y u n it a n d

N ot

p e c te d

c o m m u n ic a tio n s

s y s te m s b y o r d in a r y te le p h o n e .

of about 5,000 remittances an hour, but equipment
already available is capable of handling over 40,000
remittances an hour.

possible related material, and coding, rating, and policy
issuance.4 Electronic processing can control and monitor
a policy application through the entire underwriting and
policy issuance cycle, producing daily reports on case
status at each work station, thereby saving time and
labor—an important factor since 10,000 new and renewal
applications may be processed daily in the underwriting
department of a major carrier. One property and liability
company, for example, reduced the personnel in its
policy-issuing operation alone by one-third after conver­
sion to EDP.5

Actuarial research. Computers also are reducing unit
labor requirements in actuarial tasks. In life insurance,
actuarial research yields studies and projections based on
mortality and morbidity (the proportion of disease cases
to population) rates as well as on records of premium
earnings and of policy lapses and maturity. An actuarial
department calculates each carrier’s premium and
dividend rates and provides risk selection guidelines,
among other things. Actuarial work is well suited for
EDP since it requires the quick retrieval of large amounts
of statistical data, the performance of sophisticated
mathematical analyses and complex computations, and
the production of statistical tables to meet the company’s
reporting requirements.
Underwriting.
Underwriters
review
all
policy
applications, pass upon endorsements (changes to policy
conditions), and determine the amount and type of
reinsurance required. Although the decision to accept or
reject each risk must still be made by a trained under­
writer, EDP experts and underwriters are working
together to expand the computer’s participation in under­
writing. Operations already performed electronically
include logging for transaction control, file search for




Claims. The application of EDP to claims processing
varies widely with the type of insurance involved; even
within the same line, the time frame over which a claim
must be serviced greatly affects the automated processes
insurance policies usually consist of three parts: (1) A jacket, or
printed section, which contains only constants applicable to a given
carrier or kind of policy; (2) the declarations—a printed form bearing a
typed description of the variables involved, such as premium or
particular risks; and (3) endorsements, which usually are extensions of
either the jacket or the declarations. (Both the printing and typing of
policies have been computerized.) Surveys in the property and liability
lines have shown that electronic processing of the declarations
eliminates an error factor of approximately 8 percent which plagues the
manual operation.

sLOMA

Resource,

March/April, 1976.

43

Life

Office

Management

Association,

to consolidate all data related to a single policy in the
company’s central computer installation. The systems
search capability permits instant identification of all
policies connected with one name and of all names
connected with one policy; review of all documents which
meet a given specification; and browsing through entire
files by flashing their contents on a video screen document
by document. In advanced installations, the information
is stored on magnetic tape or in disk packs which can hold
up to about 30,000 pages of data. The files may be
updated or deleted at will, and may easily be segmented
for specific purposes and the various segments protected
from unauthorized use. To protect the data from
accidental destruction, duplicate disks or tapes are kept,
usually off premises. Through advances in communica­
tion technology, data are accessible rapidly at all sta­
tions—immediate and remote—at terminals equipped
with video display devices and line printers. Each system
is linked by a communication and teleprocessing network
of ordinary telephone circuits and leased telephone or
telegraph lines. The integrated electronic data base/data
communication system produces internal statistical
statements on demand as well as the periodic reports
required by regulatory agencies. Because of their
capability to improve data handling, electronic data
base/data communication systems will be used more
extensively over the next decade.

involved. The widest variation in claims procedures
occurs within the life and health insurance companies.
Claims that call only for death benefit payments require
only eligibility verification and check issuance. In
integrated electronic systems, the search capability of the
system identifies all policies for a given claimant, and the
data base will show the current status of the policies,
compute the amounts payable, activate the check-issuing
devices, make the appropriate entries into the general
ledger, and block any other transaction from occurring.
Health and disability insurance claims involve more
intricate processes which require complex EDP
programs. These policies provide for payments for
services as well as income protection and indemnity.
Health and disability claims require large numbers of
examiners, file clerks, and typists. In an EDP system, the
examiner can view the claim history file on a video screen,
determine coverage, adjudicate the claim, calculate the
benefits, issue payment checks, and generate the required
correspondence.
In the property and liability field, the growing
complexity of the coverage has placed a strain on claims
processing and encouraged more extensive application of
EDP. For example, no-fault automobile insurance in
many cases sets a time limit for the insurer to respond to
the claim. To achieve growth with a stable work force will
require improvements attainable only through electronic
automation—a significant challenge in light of the
substantial manual processing of claims that occurs in
many property and liability companies. The potential of
EDP to improve efficiency in claim processing is
illustrated by the following example of a system in
operation. An appraiser involved in an auto damage
claim first checks eligibility and coverage through the
home office computer, assesses the damage, and then
writes a check to settle the claim. A form filled out at
settlement is fed into a transceiver which sends an image
by telephone line to the home office (usually at night) for
accounting and central files. At the receiving end, the
unattended device produces a photograph of the forms
and turns itself off when the transmission is completed.

Data input devices
Electronic devices which feed into a computer directly
from documents are increasing accuracy and displacing
keypunch operators. Optical character recognition
technology is expected to assist the industry to cope with
the massive increase in paperwork to accompany future
growth. Without such devices it would already be
impossible for the large carriers to handle expeditiously
the huge number of inquiries, applications, remittances,
and claims they receive every day.
Optical character recognition (OCR) is the instant
interpretation and transmission of the symbols and
alphanumeric characters which constitute a coded entry,
by a photoelectric device known as an optical scanner. In
the insurance industry, the optical scanner is used
primarily for premium billing and collection. Additional
uses are being developed in the processing of other
documents which can be preprinted or encoded in
machine readable form, such as policy applications,
surrender notices, and reinstatement requests, as well as
loan applications in life insurance and loss statements in
property and casualty claims.
Coded machine readable documents can be produced
by the computer or independently by special purpose
typewriters and by the “Mark Sense” system, which
involves the use of graphic input devices. These consist of
a form listing a number of specific pieces of information, a
writing tool for touching the items to be entered, and a
photoelectric device which converts the data to digital

Integrated communication systems
Electronic data base/data communication systems are
being applied to the substantial data handling re­
quirements associated with the insurance industry. These
data generally must be maintained in current form for
several decades and are periodically required for
immediate use at various locations in the home office and
in the field. As many as 12 separate records are
maintained on a given policy, spread among various
departments and often duplicated in field offices. In most
instances, these functional files include duplicate infor­
mation. The data overlap often results in one file being
current while its duplicates remain static and become out­
dated.
Integrated electronic data base/data communication
systems have several advantages, including the capability




44

have required 200 hours with an impact printer. Another
carrier, which produced nearly 300 million microfiche
frames in 1974, has plans to double this volume within the
decade. The COM process is particularly advantageous
for use in property and casualty underwriting where there
are frequent changes in policy data (as when an
automobile is traded in) many of which require
transferring or reprogramming data needed for historical
purposes.

form for the computer. Data from graphic input devices
can be fed onto magnetic tape through a multiplex unit
which can support up to 15 stations, each capable of
carrying the data stream for a different insurance
operation—such as underwriting, claims, or investments.
These devices generally cut data entry time by 30 percent.
In one instance, a carrier which processed about 400 bids
and proposals a month with a staff of 11 was able to
process nearly twice as many with a staff of 9 after
switching from keypunch to an electronic pen.
Increasing utilization also is seen for the portable
input-output device, or “briefcase terminal.” The latest of
these devices, which weighs under 15 pounds, is equipped
with a keyboard, a microprocessor, a small video screen,
and a compact line printer. Connected to an ordinary
telephone (by placing the telephone receiver on a cradle in
the device) and plugged into an electrical outlet, this
device links an agent anywhere in the world with the
company’s central EDP installation. Hard copy is
produced at the rate of 1,800 characters per minute. With
instant access to the company’s central computer 24 hours
a day the year round, the agent can make a presentation
and place the order for a policy.

Industry Outlook
The outlook is for continued expansion in the three
major segments of the insurance industry—life, health,
and property/liability. About two-thirds of the Nation’s
total population are covered by life insurance policies
issued by the 1,750 life insurance companies with
headquarters in the United States.7 The face value of
policies in force totaled $586 billion in 1960, $2,583 billion
in 1977, and was projected by the U.S. Department of
Commerce to reach $3,097 billion in 1979. The number of
life insurance policies in force totaled 390 million in 1977,
38 percent more than in 1960. Purchase of new life
insurance totaled $367.3 billion in 1977, compared to
$74.4 billion in 1960, with the average amount of life
insurance in force per insured family rising steadily and
amounting to $36,900 in 1977.
Group life insurance, in particular, is gaining rapidly as
life insurance benefits increasingly are being included in
employee benefit programs, with coverage extended to
dependents of group insurance certificate holders. Over
89 percent of all group life insurance contracts covered
employer-employee groups in 1973 (most recent year for
which data are available), and the average coverage per
employee for these contracts was about $12,000. In
addition, millions of employed and retired people are
participants in retirement plans operated by life insurance
companies. Even greater growth is anticipated in
individual retirement plans under the Employee Retire­
ment Income Security Act of 1974, which permits persons
employed in firms with no private retirement plan to
purchase an individual plan of their own.
Health insurance has expanded substantially. Expan­
sion has been accelerated by the increasing inclusion of
health benefits in labor contracts and by insurance

Microfilm technology
Advances in microfilm technology are resulting in
space savings in records storage, faster retrieval of policy­
holder information, and lower labor requirements for file
clerks, typists, and other clerical staff. Microfilm
processes are particularly advantageous to the insurance
industry since large quantities of records are produced,
such as policy and loan applications, paid drafts, and
Medicare reports, that cannot be stored in the computer
in digital form because of their format or statutory
requirements.
The original microfilming process (which insurance
companies pioneered in the 1940’s) is giving way to micro­
fiche, in which the roll film is replaced by 4" * 6" cards
each holding about 100 frames (microphotographs) of
legal size documents. (Already under development is a
high-reduction technique known as ultrafiche, which will
increase the capacity of the card substantially.) Micro­
fiche expedites handling of hard copy documents and
practically eliminates the storage space required for these
items: The contents of about 140 file cabinet drawers can
be stored in an 18-inch card tray. When microfiche is
coupled with computer-output-micrographic (COM)
devices, data are transferred directly from the computer
to microfiche without need for intermediate hard copy.
Multiple hard copies can be produced rapidly from the
microfiche through a nonimpact printer.6 Thus, the COM
system can produce in a few seconds, from data in the
computer, a microfiche frame for the record, available for
instant viewing on a screen, and a number of hard copies
for distribution. One life insurance carrier made two hard
copies each of 230,000 documents from computer tape
through microfiche in 15 hours—an operation that would



6Several printing techniques are available which do not involve
striking paper with a mechanical hammer, but use photographic,
chemical, or magnetic ink processes and specially treated paper. In one
of the most sophisticated of these, the Ink-jet Printer, a stream of
magnetic ink droplets is shot towards the paper and deflected by elec­
trostatic plates to form the desired character. Speeds in excess of 75,000
lines per minute are possible with the Ink-jet Printer, although such
speeds are not yet available in commercial versions.
7The sources of statistics on amounts of insurance in force, number of
policies in force, premiums written, number of persons covered, and
related data included in this section for these three segments of the
insurance industry are as follows: Life insurance, American Council of
Life Insurance; health insurance, Health Insurance Institute; and
property and liability insurance, Insurance Information Institute.

45

The accident and health segment of the industry (SIC!
632) is third in terms of employment, but it is the fastest
growing and accounted for about 12 percent of the work
force in 1978. Employment in establishments which
underwrite accident and health insurance reached
138,900 persons in 1978, more than double their 1966
employment.
The rise in total employment in the industry has been
accompanied by increased use of computer and related
technology. Despite the fact that in many applications
unit labor requirements have declined substantially, with
the computer doing in a few hours the work dozens of
employees formerly turned out in one day, the adverse
effect on employment has been mitigated by several
factors. The high rate of attrition which prevailed among
the clerical work force required to perform the industry’s
massive, repetitive data processing tasks has facilitated
conversion with minimum dislocation. Moreover, rapid
business expansion and advance planning of work force
changes appear to have obviated the need for any
significant layoffs, and conversion has been carried out
mainly by retraining and relocating personnel. Some
companies however, have imposed a total freeze on the
hiring of clerical workers for protracted periods after
computerization to facilitate reassignment of existing
staff.

company participation in the Medicare program enacted
in 1966. At the end of 1976 (latest year for which data are
available), 177 million persons were covered under
provisions of one or more forms of private health
insurance. Individuals under age 65 accounted for 93
percent of the total. The older groups were insured under
private plans to supplement Medicare benefits. Premiums
received by the industry for health insurance coverage
rose to $24.3 billion in 1976, nearly double the premium
income received in 1971.
The property and liability segment of the insurance
industry also has recorded substantial growth. Between
1960 and 1977, net premiums written for property and
liability insurance increased by almost 400 percent, from
$15 billion to $74 billion. Auto insurance in 1977
accounted for about 42 percent of total property / liability
premiums.
Accompanying the premium growth in the major
categories of insurance, as discussed above, has been
increasing diversification in the types of insurance under­
written by insurance carriers. Insurance companies also
are merchandising mutual fund shares and other
investment plans, and giant department store chains have
formed insurance subsidiaries and are selling policies
through in-store booths at their hundreds of outlets.
Already many carriers have formed holding companies
encompassing estate planning and equity investment, real
estate, and data processing.

Occupations
A wide range of occupations in the insurance industry
has been affected by the application of EDP and related
technologies. Because of these innovations, employment
in clerical occupations is expected to increase at a slower
rate than that envisioned for all employment in the
industry. Consequently, clerical workers, who constitute
nearly half of the insurance carrier work force, will make
up an increasingly smaller proportion of total insurance
industry employment by 1985. The demand for and
relative importance of a number of clerical positions,
including secretaries and typists, keypunch and other
office machine operators, bookkeepers, and file clerks,
is expected to decline.
However, employment in managerial and technical
positions including those related to the planning,
installation, and operation of electronic computer
systems is expected to increase. Demand will rise for
executives and other officials to determine EDP policy,
manage data base and teleprocessing networks, and
supervise program development and the recruiting and
training of computer applications personnel. Employ­
ment of systems analysts, programmers, and computer
console operators and related computer operating staff is
expected to continue to increase. The insurance industry
will continue to be receptive to further application of
technology to insurance operations since the industry
ranks second only to commercial banks in the proportion
of its work force engaged in data processing activities.
Employment of persons engaged full time in selling all
lines of insurance directly for the carriers (excluding

Employment and Occupational Trends
Employment
Insurance is a major industry that employed 1.2 million
persons in 1978, or about 1 out of every 4 persons working
in the finance, insurance, and real estate sector.
Employment in insurance has been rising steadily as gains
in personal consumption expenditures for insurance
resulted in a steady rise in policies issued, premiums
written, and insurance in force per insured family.
Total employment in insurance increased at an average
annual rate of 2.0 percent during 1960-78 (See chart 13.)
The annual employment growth rate was 1.8 percent
during 1967-78 and 1.7 percent during the earlier 1960-67
period. Employment in the three largest components of
the insurance industry—which combined account for
about 94 percent of the total industry work force—fluc­
tuated over the period 1967-78. Establishments primarily
engaged in underwriting life insurance (SIC 631)
continued to employ the largest number of employees,
522,500 in 1978, but their share of total employment
declined from over 50 percent in 1967 to about 44 percent
in 1978.
Second in size of work force is the fire, marine, and
casualty insurance segment of the industry (SIC 633)
which employed 460,600 people in 1978, a gain of 44
percent since 1966. Its share of total employment in the
insurance industry rose slowly, reaching 39 percent in
1978.




46

Chart 13. Employment in the insurance industry, 1960-78
Employees (thousands)

^Least squares trend method.
Source: Bureau of Labor Statistics.




47

industry growth has permitted absorption of displaced
personnel in all categories, and coordinated retraining
and relocation by the employers have reduced dis­
locations to a minimum.
Relatively few employees affected by new technology in
the insurance industry are union members. The principal
union in the insurance industry, the Insurance Workers
International Union (IWIU), thus far has concentrated
on organizing insurance agents (salespersons), and this
has been the category least affected by technological
innovation. In late 1976, the IWIU negotiated to organize
the clerks of one of the largest insurance carriers. The
Office and Professional Employees International Union
also has organized in the industry.
The very few union contracts in effect in the industry
incorporate specific provisions relating to technological
displacement. One such provision which provides job
security for employees whose jobs have been affected by
new technology reads as follows: “. . . It is further agreed
by the parties that no persons filling jobs within the
presently existing collective bargaining unit will be
subject to layoff in the event that jobs are abolished or
altered by the introduction of data processing equipment,
computers or other automated equipment. . . ” For
displaced workers, provisions are in effect which provide
retraining and preference for any jobs resulting from
automation or conversion to electronic data processing.
No information is available concerning the effect of
reorganizations, mergers, and consolidation of branch
offices on employment. There is, however, no evidence
that these trends have caused any widespread dislocation.

general agents and brokers) is not expected to keep pace
with the rapidly expanding volume of sales, primarily
because of the increasing number of policies sold to
groups and the increasing sales of policies which cover
several perils previously covered by separate policies.8
As indicated earlier, occupations in clerical fields have
been those principally affected by technological change;
these include file clerks, keypunch operators, and typists.
Although the insurance industry will continue to employ
substantial numbers of young high school graduates,
many of them women, computerization of practically
every mechanical operation is expected to reduce the
availability of low-skilled, entry-level clerical positions.
Adjustment of workers to technological change
The further diffusion of computer and related tech­
nology in the insurance industry is not expected to bring
about major displacement. In most cases, the initial
impact of the transition to new technology in data
processing operations has been slight because of the
increased workload entailed in the conversion. Often, a
special department was established during the early stage
of the changeover to handle the corollary personnel
problems. Moreover, as already indicated, a high degree
of attrition of clerical workers—the occupational group
most affected by new technology—has eased the
transition from manual operations to electronic data
pfocessing and made layoffs unnecessary. Continuous
8Occupational Outlook Handbook, 1978-79 Edition, Bulletin 1955
(Bureau of Labor Statistics, 1978), p. 763.

SELECTED REFERENCES
Bowers, Dan M. “Intelligent Terminals and Distributed Processing,”
The Office, September 1976, pp. 86 ff.

International Business Machines Corporation. Property / Liability Field
Office Application Systems—Executive Overview, May 1975.

Cantrell, Gary L. “Remote Job Processing as an Alternative,” Best’s
Review, Life/Health Edition, July 1976, pp. 68-70.

Life Office Management Association. Insurance Information Process­
ing: A Look at Our Future, LOMA Systems and Procedures Report
28, 1975.

Fischer, Robert A. “Insurance Tomorrow: The Data Processing
Picture,” Best’s Review, Property/Liability Edition, May 1975, pp.
104-09.

Roach, Thomas. “The Data Processing Organization of the 1980’s,”
LOMA Resource, November 1975, pp. 29-30.

Fromm, Erwin F. “The Mechanical Underwriter,” Best’s Review,
Property/Liability Edition, June 1975, pp. 16-18.

“Telecommunications Speed Settlement of Auto Claims,” Best’s
Review, Property/Liability Edition, November 1975, p. 102.

Goldbeck, George. “Mini-Computers—A Big Part of the Future,”
Best’s Review, Property/Liability Edition, January 1975, pp. 78-81.

U.S. Department of Labor, Bureau of Labor Statistics. Impact o f Office
Automation in the Insurance Industry, Bulletin 1468, 1966.

Goldbeck, George. “Information Processing in the P /C Business,” The
National Underwriter, Sept. 5, 1975, p. 2.

Valovic, Stefan. “Survey Shows Risk Managers Make More Use of
Computers,” Business Insurance, Dec. 1, 1975, pp. 19-20.

International Business Machines Corporation. Group InsuranceApplication Description and System Planning Guide. White Plains,
N.Y., May 1975.

Vanderbeek, Robert E., and H. Thomas Verdonk. “Conputer System
Offers Personalized Customer Service,” Best’s Review, Life/ Health
Edition, February 1976, pp. 66-67.

International Business Machines Corporation. Individual Life In­
surance: DBj DC Information Systems Design Concepts, January
1975.

Wray, Theodore S. “Field Office Video Units Improve Policyholder
Service,” Best’s Review, Life/Health Edition, June 1975, pp. 81-84.




48

General References

U.S. Department of Labor, Bureau of Labor Statistics.
Productivity Indexes fo r Selected Industries, 1978
Edition, Bulletin 2002, 1978.

National Science Foundation. Funds fo r Research and
Development. Annual.
U.S. Department of Commerce, Industry and Trade
Administration. 1979 U.S. Industrial Outlook, Jan­
uary 1979.

U.S. Department of Labor, Bureau of Labor Statistics.
Characteristics o f Major Collective Bargaining
Agreements, July 1, 1976, Bulletin 2013, 1979.

U.S. Department of Commerce, Bureau of the Census.
Annual Survey o f Manufactures, 1976, December
1977.

U.S. Department of Labor, Bureau of Labor Statistics.
Employment and Earnings, United States, 1909-75,
Bulletin 1312-10, 1976.

U.S. Department of Commerce, Bureau of the Census.
1972 Census o f Manufactures, General Summary,
November 1975.

U.S. Department of Labor, Bureau of Labor Statistics.
Occupational Outlook Handbook, 1978-79 Edition,
Bulletin 1955, 1978.




49

Other BLS Publications on
Technological Change

Bulletins still in print may be purchased from the
Superintendent of Documents, Washington, D.C. 20402,
or from regional offices of the Bureau of Labor Statistics
at the addresses shown on the inside back cover. Out-ofprint publications are available at many public and school
libraries and at Government depository libraries.
Publications marked with an asterisk (*) also are
available on microfiche and in paper copy from the
National Technical Information Service, U.S. Depart­
ment of Commerce, 5285 Port Royal Road, Springfield,
Va. 22161.

textile mill products, lumber and wood products, tires
and tubes, aluminum, banking, and health services and
discusses their present and potential impact on produc­
tivity and occupations.
Outlook fo r Technology and Manpower in Printing and
Publishing* (Bulletin 1774, 1973), 44 pp. Out of print.
Describes new printing technology and discusses its
impact on productivity, employment, occupational
requirements, and labor-management adjustments.
Railroad Technology and Manpower in the 1970’
s
(Bulletin 1717, 1972), 90 pp. Out of print.
Describes changes in technology in the railroad in­
dustry and projects their impact on productivity, em­
ployment, occupational requirements, and methods of
adjustment.

Technological Change and Its Labor Impact in Five
Energy Industries (Bulletin 2005, 1979) 64 pp.
Appraises major technological changes emerging in
coal mining, oil and gas extraction, petroleum refining,
petroleum pipeline transportation, and electric and gas
utilities, and discusses their present and potential impact
on productivity and occupations.

Outlook fo r Computer Process Control* (Bulletin 1658,
1970), 70 pp.
Describes the impact of computer process control on
employment, occupations, skills, training, production
and productivity, and labor-management relations.

Technological Change and Its Labor Impact in Five
Industries (Bulletin 1961, 1977), 56 pp.
Appraises major technological changes emerging in
apparel, footwear, motor vehicles, railroads, and retail
trade and discusses their present and potential impact on
productivity and occupations.

Technology and Manpower in the Textile Industry o f the
1970’s* (Bulletin 1578, 1968), 79 pp.
Describes changes in technology and their impact on
productivity, employment, occupational requirements,
and labor-management relations.

Technological Change and Manpower Trends in Five
Industries (Bulletin 1856, 1975), 58 pp.
Appraises major technological changes emerging in
pulp and paper, hydraulic cement, steel, aircraft and
missiles, and wholesale trade and discusses their present
and potential impact on productivity and occupations.

Manpower Planning fo r Technological Change: Case
Studies o f Telephone Operators (Bulletin 1574, 1968), 34
pp. Out of print.
Policies and experiences of four offices in adjusting to
technological change.

Computer Manpower Outlook (Bulletin 1826, 1974), 60
pp.
Describes current employment, education, and train­
ing characteristics for computer occupations, explores
the impact of advancing technology on labor supply and
education for computer occupations, and projects
occupational requirements and their implications for
training.

Job Redesign fo r Older Workers: Ten Case Studies*
(Bulletin 1523, 1966), 63 pp. Out of print.
Examples of redesign of jobs to retain older workers in
employment.
Outlook fo r Numerical Control o f Machine Tools* (Bul­
letin 1437, 1965), 63 pp. Out of print.
Outlook for this key technological innovation in the
metalworking industry and implications for productivity,
occupational requirements, training programs, employ­
ment, and industrial relations.

Technological Change and Manpower Trends in Six
Industries (Bulletin 1817, 1974), 66 pp. Out of print.
Appraises major technological changes emerging in




50

Characteristics of
Major Collective
Bargaining
Agreements,
July 1,1976
For the labor relations practitioner and student—
A handy statistical reference on 1570 of the largest col­
lective bargaining agreements in the United States.
More than 80 tables dealing with agreement
characteristics:
• Union security, management rights, and related
provisions
• Wages and wage-related clauses
• Hours, overtime, and premium pay
• Paid and unpaid leave
• Seniority and seniority-related provisions
• Job security arrangements
• Dispute settlement procedures
All data are derived from a broad review of agreements
currently on file with the Bureau of Labor Statistics
covering at least 1,000 workers and in effect on July 1,
1976, or later.
Bulletin 2013 reports the results of negotiations
involving some of the largest companies and unions in
the United States.

Please send________ copies of Characteristics of Major Collective Bargaining
Agreements, July 1, 1976, Bulletin 2013 No. 029-001-22086-7, price $2.75.

Fill out and mail this coupon to
BLS Regional Office nearest you or
Superintendent of Documents,
U.S. Government Printing Office,
Washington, D.C. 20402.
Make checks payable to
Superintendent of Documents.

http://fraser.stlouisfed.org/
U. S. G O V E N M E N
RI TING
Federal Reserve RBankTofPSt.NLouis O F F I C E

□ Remittance is enclosed

□ Charge to GPO deposit account no.________

Name ________________________________________________________
Address ______________________________________ _______________
City, State, and Zip Code _________________________ _________________

: 1979

0

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Bureau of Labor Statistics
Regional Offices

Region I

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G overnm ent Center
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Phone: (617) 223-6761

Region IV

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