Reich smokes peace pie with labor and management. (Secretary of Labor Robert Reich)

During the Reagan-Bush era, the U.S. Department of Labor was little more than a bureaucratic backwater, rarely consulted on major economic policy matters.

All that has changed since Robert Reich, Harvard political economist and Oxford classmate, close advisor and personal friend of President Clinton, was installed as Labor Department head. Under his aegis, the agency has become a policy and political hotbed of controversial proposals designed to create the high-skill, high-wage workforce that the Administration believes to be critical to make American businesses more competitive.

If American companies are to remain globally competitive, Reich believes, they must stop trying to compete on price alone. Cutting payroll or holding down salaries and benefits is shortsighted, he believes, since there will always be competitors that can find cheaper sources of labor offshore.

Instead, Reich wants industry to retool the skills and creativity of American workers--which he terms one of the few corporate assets that can't easily be replicated overseas. To effect this, the Administration is pushing a series of proposals that emphasize employee training and management/worker cooperation and that are designed to increase the effectiveness of American workers by creating the high-performance workplace that many management gurus believe will be the wave of the future.

Underlying Reich's proposals is an interesting dichotomy: Key to the Administration's plan for …