We are in the midst of the longest period of economic expansion in U.S. history. Profits are up, the stock market is up, job creation is steady, and unemployment is low. But the story of broader economic growth masks serious problems of slow wage growth and rising income inequality. The truth is, far too many jobs—including jobs expected to be in high demand over coming years and decades—are low wage jobs that quite simply cannot sustain families, communities, or our economy over the long term. And that hurts all of us.
We didn’t start out this way. Since its founding, the United States has developed systems and structures that encouraged entrepreneurship, innovation, and opportunity which enabled many people to create a good quality of life. It created a robust business environment where 99% of businesses employ less than 500 people, but collectively employ half of all U.S. workers. It has weathered global conflicts and economic disasters and come out stronger by making choices that enabled full recovery.
How We Got Here
Forty-some years ago, we started making different choices, the kinds of choices that created today’s record-high income and wealth inequality, significant racial and gender disparities, and a job market where the bulk of new positions are low wage and low quality. These choices were driven by shareholder primacy—the belief that the sole purpose of a corporation is to deliver return for its shareholders, at the expense of the environment and the workforce. Businesses aggressively cut costs by offshoring jobs, restructuring, and eliminating resources for employee training and development, to the point where in-house training is a distant memory in many companies. Ironically, today these same companies decry a lack of skilled workers to fill critical positions.
The current trajectory is unsustainable, but global business leaders are starting to catch on. Last year the Business Roundtable redefined the purpose of a corporation beyond mere profit, and the conversation at the recent World Economic Forum in Davos was all about stakeholder capitalism.
We need to create economy-boosting jobs where the average worker feels valued and earns enough money to comfortably spend in their community and to enhance the well-being of their families. When workers can do that, everyone benefits. Henry Ford was right – his assembly line workers needed high enough wages to allow them to buy the cars they built.
We can create economy-boosting jobs by investing in what created our prosperity in the first place – workers. We need a shift in mindset so that we view workers at every level as assets to be maximized, not expenses to be minimized. When we invest in people, we create long term value with good outcomes for families and communities – and yes, even businesses.
Pulling the Levers of Capitalism
So, how do we get employers to change their mindsets? Every business needs these three things: customers for their products or services, a skilled workforce to produce their product or provide their service, and capital to operate their business. Could we incentivize businesses to create economy-boosting jobs if access to customers, talent, and capital depended on having high quality jobs?
What if the businesses who signed on to the Business Roundtable declaration or who praised stakeholder capitalism in Davos made it a priority to do two things: first, commit to creating economy-boosting jobs within their companies; and two, only do business with companies that provide economy-boosting jobs? The CEOs who signed the declaration run massive companies with large and complex supply chains. The ripple effect of requiring their suppliers and contractors – those small and mid-sized businesses that employ half of America’s workers – to have high quality jobs would be game-changing. And what if government contracts required the same? The message they sent would be undeniable: “Stakeholder capitalism is the best way forward to build an economy that works for all, and we are fundamentally changing how we do business internally and externally to bring this to life.”
Let’s explore each element of this access framework.
Access to Customers. The procurement departments of anchor institutions could change the conversation they have with potential suppliers or contractors so that in addition to asking for the usual price, quality, and schedule information, they also ask for data on job growth, wage growth, job retention (all broken out by race and gender), and company contributions to health care, retirement, and paid leave. If anchor institutions considered workforce-related data when making their sourcing decisions, they would clearly communicate their understanding that suppliers with good human capital practices provide superior products and services.
Access to Talent. An increasing number of workforce organizations are requiring employers to meet either wage thresholds and/or job quality standards before they provide training funds or connect job seekers to hiring managers. They are incentivizing employers to improve the quality of the jobs to gain access to a talent pool. What if they all did this?
Access to Capital. Many financial and philanthropic institutions seek to deepen the impact of their investments by looking at social outcomes. Because we know that a good job is a competitive advantage, investing in businesses with economy-boosting jobs delivers financial returns. What if equity investors, financial institutions, CDFIs, and economic developers required potential clients to provide workforce data on the relative quality of their jobs when considering them for capital investments or favorable interest rates?
Some of this is already happening, but it’s in pockets in one of these three points of access. Now it’s time to tie them all together. It’s time to build a comprehensive, transformative movement – using the levers of capitalism – to drive fundamental changes that boost the economy and repair some of the damage done by shareholder primacy.
Business and community leaders need to prioritize and incentivize the creation of economy-boosting jobs and have those who provide access to customers, talent, and capital develop a plan to operationalize this framework. We know that many small and mid-sized businesses will need help redesigning better jobs. We will need to activate a network of technical assistance providers to build their capacity. These proactive steps will set us on the path to transform communities in ways that benefit everyone – and without government regulation.