SINGING THE SHUTDOWN BLUES U.S. industry undergoes a wrenching change, but it could be for the good

Like athletes priming for the all-important championship elimination game, the United Steelworkers of America were girding themselves last week for a major performance. The 650,000-member union has declared June 21 Save American Industry and Jobs Day, and it hopes to turn out tens of thousands for major demonstrations. Rallies are scheduled in 100 cities, half of which will be linked by television satellite to the main conclave in Washington. The aim of all the excitement, says Steelworkers Vice President George Becker, is to protest the ''tide of imported goods that has threatened numerous American industries.'' Meanwhile, in Pittsburgh last week, steelworkers' representatives sat down for contract talks at U.S. Steel, the country's largest producer. The labor contract for 25,000 U.S. Steel employees expires at the end of July, and a strike is looming. Management has stated that it seeks a wage settlement ''competitive'' with the rest of the industry, which has gone through a massive economic shake-out. Union Negotiator James McGeehan, who is seeking wage increases of about 4% and lifelong job security, replies, ''We also need a competitive agreement. Our members cannot take their jobs and run.'' Too many, however, have had little choice. In 1983, on the eve of the last negotiations at U.S. Steel, there were more than 1 million American steelworkers. Today there are fewer than 700,000, and employment is projected to fall about 15% further by 1995. The anxieties and woes of the steel industry's shrinking labor force, and the debate surrounding that predicament, seem all too symptomatic of the troubles and uncertainties that are engulfing much of U.S. manufacturing these days. The hard fact is that the nation is coping with one of the most wrenching economic transitions since the turn of the century. Despite the Reagan Administration's upbeat talk of continuing economic growth and prosperity, workers in traditional American industries insist on singing the shutdown blues, sometimes in whole choirs. Four years after the official end of the last U.S. recession, American factories ranging from textile plants in North Carolina to machine-tool plants in Ohio are still closing their doors. In many cases, older installations have been replaced by hundreds of smaller, more competitive plants, but the powerful images of smokeless smokestacks and dying industrial towns haunt many corners of the American landscape. Amid that painful change, the number of U.S. blue-collar jobs has dramatically declined, just as employment in the newer and often lower-paying service sector has soared. The trend will continue. The U.S. Department of Labor has projected that between 1984 and 1995 the economy will add 16 million new jobs. Almost 90% of them will be in services, even though in that sector there are growing signs of new overseas competition (see box). Those American blue-collar workers who hold on to their jobs, however, will continue to be among the world's wealthiest, with average manufacturing compensation of $12.97 an hour, vs. $1.45 in Taiwan and $1.28 in Brazil. To many labor leaders, industrial scholars and worried politicians, the blue-collar decline is part of a dangerous challenge to U.S. welfare and security. They call the process deindustrialization, and argue that while the U.S. devours huge amounts of foreign industrial goods, the American economy risks losing the very industries that have kept it strong for decades. Says John Young, chief executive of Hewlett-Packard and former head of President Reagan's Commission on Industrial Competitiveness: ''Manufacturing is the foundation upon which a service economy is built.'' Fears of deindustrialization are a major force behind protectionist sentiments in Congress, which are rising in a new crescendo. In the past year more than 200 restrictive trade measures have appeared in the congressional hopper, aimed at sheltering a wide variety of American industries from foreign competition. Says Sidney Jones, an economist with the Brookings Institution in Washington: ''The whole trade situation right now is a 1986 election issue.'' Paradoxically, while nearly 2 million U.S. manufacturing jobs have disappeared since 1979, U.S. industrial output has not declined at all. Overall, the volume of manufacturing output has increased by 23% since 1982, and manufacturing still contributes roughly the same share of gross national product (around 22%) it has for the past 30 years. To critics, however, these seemingly encouraging figures conceal a worrisome ''hollowing out'' of U.S. manufacturing companies. As they see it, many American firms, while contributing their share to the GNP, have become reassembly plants for foreign parts and products. Nowhere is hollowing out more controversial than in the auto industry. Today some 15% of the parts in U.S.-built cars, ranging from engines to transmissions, are made abroad, and a United Auto Workers' study projects that the percentage will rise to 28% by 1995. Robert Reich, a political economist at Harvard and author of The Next American Frontier, is an outspoken critic of this development. Says he: ''If American workers get stuck assembling and distributing sophisticated gadgetry from Japan and elsewhere, they are not building world-class skills.'' The ultimate price for industrial obsolescence is now being paid in Homestead, Pa. (pop. 4,500). In 1892, on the banks of the Monongahela River, striking steelworkers fought Pinkerton detectives who had been hired by Carnegie Steel to squelch their protest. Ten workers died in the battle. In its heyday, Homestead's sprawling 400-acre U.S. Steel plant employed some 14,000 workers. Last month the Homestead mill was placed on ''temporary suspension,'' meaning shutdown. There is 52% unemployment in the Monongahela Valley; the local suicide rate is skyrocketing. Says Veteran Steelworker John Melechenko, 67: ''There's an old saying, When there ain't no smoke, there ain't no work. Now there ain't any smoke and there won't be any.'' Deindustrialization critics argue that some of the hardship could easily be prevented through enlightened protectionism. Barry Bluestone, an economics professor at Boston College and co-author of The Deindustrialization of America, argues for ''vanishing'' protective tariffs to rebuild the competitiveness of U.S. manufacturing. The tariffs would remain in effect only for a fixed period, perhaps five years, while a struggling industry regrouped. Bluestone also advocates a kind of supportive national planning to identify key industries that deserve help in recovery, in the same way that Washington helped Chrysler. However Bluestone and his allies are merely attempting to shore up an illusion, in the view of many other scholars and industrial experts. They argue that the American industrial base is not only surviving but is successfully cresting the challenge of change. In their view, the fear of deindustrialization is misleading. What is