Better Jobs Drive Better Business

Good jobs are hard to find.  Hard jobs – entailing bone-tiring work, low wages, and limited or no advancement opportunities — are all too plentiful.  And in our country that’s been a big and growing problem dating back at least three decades.

HouseholdIncomeSince the early 1980s, job growth — and especially job quality – wilted in the face of intersecting economic, political, and demographic forces.  As usual, the short end of the stick is found in the hands of the working class and lower middle-income households.  Earnings stagnated for these groups as poverty jumped and un- and underemployment took and continues to extract heavy tolls.

These aren’t just statistics for me.  They are also my family story.  My father and two siblings worked for most of their lives in manufacturing.  I made it to college by working a few summers in a local plant.  I took away both a withdrawal card from the Machinists Union and many lessons about work and life.  But my career trajectory changed, and I went to work for a series of state and federal elected officials. This was an “up close and personal” viewpoint on how government – at the state, federal, and local levels – can expand opportunities for good jobs and stronger, more resilient communities.  But lately, I’ve grown pessimistic about the prospects for political or policy changes that might make a real difference.  Gridlock and paralysis spread – perhaps an expected result of a “conservative” governance apparatus.  Politics can be a noble calling and sometimes produces courageous heroes.  But recently, we’ve seen too much ignobility and too little spine.

That’s part of why I left the public sector.  Now I work in the nonprofit and philanthropic sector, as a program officer in a foundation. Much of my work and that of my colleagues at The Hitachi Foundation focuses on how foundations can use their tools and resources to address challenges and expand opportunities for low wealth individuals, families, and communities.

Most philanthropy targets social, educational, or support services, while others promote policy changes.  A third category aims at organizing or direct action at the worker, community, city, or even national level.  Each has its merits, and the sector makes almost $50 billion in grants annually. But only a fraction of that, about $14 billion, is targeted to the “economically disadvantaged.”  If you divided that into equal shares and only consider the 46 million people living in poverty in the U.S., it would only deliver $303 per person each year.  That’s not much of a supplement.

So philanthropy in general and our foundation in particular must focus our efforts.  The Hitachi Foundation is working on the role that good businesses can play in creating many more good jobs and improving opportunities for lower-wage workers to gain earnings and advance.  Many philanthropists, like many in working-class studies, are skeptical of the business world.  But our experience suggests that business leaders are not monolithic in their viewpoints.  If we provide evidence that “good jobs” can generate growth, profits, and happy customers, many more businesses can be spurred to take action that will benefit lower-wage and frontline workers.

Over the past five years, we’ve amassed compelling evidence that some businesses create social value even as they pursue a profitable and sustainable bottom-line.  Before we did the research, we expected that specific HR and training practices would be the generator behind significant gains in earning and career acceleration for frontline workers.  That was true in part.  But we were surprised to see that workers and employers made the largest gains when companies innovated in the products or services they offered, in the methods for producing or delivering good and services, and in HR practices and training programs.  In retrospect, of course, these strategies are interrelated. With new products or services and/or innovation in methods for producing them, there’s a premium on engaging and retaining workers with skills and experience.  And on top of that, the talent and skills grown by workers who are already in the business are often the best and most valuable fit.  All that can yield a larger overall pie that can be shared with workers.  Mutual Gain Bargaining has a history of pursuing similar ends in the context of a labor agreement.  Whether a plant is organized or not, gains aren’t always shared.  But where they are not, the workers’ incentives are poorly aligned with business goals.  Good workers with skills will be more inclined to look for other options and leave when they find them.

In the Good Companies @ Work program, we’ve collected stories of just under 100 firms that attribute their success to their frontline workers. These companies outperform their peers while providing quality jobs and pathways to the middle-class.  For example, Marlin Steel made a dramatic transition from old technology, a product in declining demand, and outmoded methods to become an innovative leader.  This Baltimore firm made baskets for bagel bakeries and stores.  But demand declined sharply according to the company because the rise of low-carb diets. Marlin quite literally “reinvented” their business and that made it possible to shift from making bagel baskets to supplying Boeing.  Today, Marlin has a more flexible approach to manufacturing a different set of products.  In part, they use some advanced technologies such as robotics and laser cutters.  The company did not make a wholesale change in their workforce.  Their core group of workers was with the company before, during, and now after the transition.  The company and the workers did invest in training, and that expanded their ability to manufacture higher quality products with less time from the initial order through design and manufacturing and on to delivery.  Another innovation at the company directly ties  wages of production floor workers to skills.  The more machines and processes they are capable of operating, the higher their hourly rate.  The firm also has a production bonus system that shares profits with workers, who can earn as much as 40% above their hourly earnings by meeting weekly team goals.

Good companies are more likely to generate good jobs.  But we’re not naïve.  Many – maybe even most – corporate or business directors are driven by short-term profit maximization.  But many are not. They bring their personal values beyond the plant gate or office door.  And those values help interest them in offering opportunities to improve wages and working conditions.  But values and motivation take business owners only so far.  We find good evidence that for many businesses, doing the right thing for and with frontline workers is not just consistent with the imperative for businesses to survive and thrive.  In many cases, it is essential to staying profitable and positioning the company for the future.

We will continue and deepen our efforts to help businesses make that connection in the years ahead.  And we’ll share what we’re learning, because we see communication as key to altering the dominant paradigm that profit margins require companies to put the maximum squeeze on labor costs.

Why focus on business to expand opportunity for low wealth, lower-wage people?  Because we believe that it works.  We’ve seen sustainable, profitable models in action. Equally important, business has more resources to create more and better jobs than either philanthropy or government.

Our goals include supporting and fomenting changes inside the plant gate, or with patient care teams, or in other settings. If we can do so that will create progress that is not dependent on the next grant or election cycle.  Neither the public sector nor the foundation world has a good track record for sustained focus and effort.  Causes rise and fall with the next crisis or new opportunity.  But strategies that yield real benefits to the bottom line and the front line, generating economic gains for companies and workers, have the potential to stick, expand, and spread.

Mark Popovich

Mark Popovich is a senior program officer at The Hitachi Foundation.  Following two decades focused on public policy as a staffer, researcher and advocate, he’s spent the last fourteen years working at the intersection of philanthropy and business.

This entry was posted in Contributors, Guest Bloggers, Issues, The Working Class and the Economy, Work and tagged , , , . Bookmark the permalink.

3 Responses to Better Jobs Drive Better Business

  1. The commentator raises good points. Generally, it appears to us and many others that two powerful forces push publicly traded firms to very short term profit maximization. Short-termism often extends to squeezing spending on workers or training/development. The first factor is the constant pressure of quarterly earnings expectations and reporting. The second and related point is the large and growing share of management compensation directly tied to relatively short term changes in stock value. This is a very common practice in the U.S. and with U.S.-based multinationals. It is less common in other parts of the globe. While that seems generally true, it isn’t always true. For example, there are publicly traded companies who do NOT as a matter of policy make quarterly reports. They operated on the foundation that investors and company officials should all operate with a focus on longer term value. They are few and far between. At the same time, family or privately held companies are also varied. Some are patient investors with a long term value outlook. The company associates are not anonymous and aren’t an abstraction. In other cases, sometimes due to tight operating margins or high debt payments, they may be even more motivated or forced to maximize short term gains from minimizing costs including those investments in worker pay as well as training/development. So the underlying conditions are important to understand. AND they sometimes do not conform with the general view due to wide firm-specific variation.

    Like

  2. Fred Anderson says:

    I would also expect that — among publicly held companies — the more prosperous ones can more readily get away with such work-life improvements than can the ones with more marginal profit situations. If the stockholders are making out like bandits, they’re less likely to object to spending a little on such experiments.

    Like

  3. Fred Anderson says:

    An interesting speculation would be that such desirable development of workers’ work situations involve taking risk (not all innovations work out), and making an investment in the new approaches. It has been argued that privately-held and/or family firms are freer to take such risks and gamble such investments than are the hired managers of public companies. Public company managers can be on a very short leash — “did you make money for us stockholders this quarter?” Hitachi — or some similar public interest entity — should investigate this.

    Like

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s