Volcanoes are erupting in The Philippines, but on-fire Australia received some welcome rain. The Iran war cries have been called off and The Donald’s military powers are about to be hamstrung by the Senate. Meanwhile, his impeachment trial is starting, and we’re all on Twitter for a front-row seat.
The Biden Administration is coming into office with a focus on work, as I’ve written in recent weeks. But what are the key business and government policy levers for good jobs?
For answers, I spoke this week with Zeynep Ton, a professor at the MIT Sloan School of Management, author of The Good Jobs Strategy, and cofounder and president of the nonprofit Good Jobs Institute. Here are excerpts from our conversation, edited for space and clarity:
How do you define a good job?
A good job needs to meet people’s basic needs related to pay and benefits, stable schedules that enable them to live a decent life, career paths that enable them to move up to higher-paying positions, and safety and security. These basic needs have to be there, but of course a good job also offers conditions for engagement and motivation. Those are the things that organizational psychologists have been talking about for a long time, meaning a sense of achievement, the sense of belonging, recognition, and creativity, and ability to learn—those higher-level needs that people have drive engagement and motivation.
What percentage of the American workforce doesn’t have a good job?
According to the Bureau of Labor Statistics, 46.5 million Americans work in occupations where the median wage is less than $15 an hour, so that’s a pretty good estimate. So that comes to about 30% of the overall workforce. Brookings has another estimate that 53 million Americans are in low-wage jobs. But that’s just the wage component. Then there’s stability, career path, safety and security, which are much harder to measure and assess.
If I’m a manager trying to determine whether our workers have good jobs, what are the specific metrics you would suggest looking at?
The first business metric that I’d look at is employee turnover. Of course employee turnover depends from setting to setting, but also look at the cost of the turnover. The second metric is annual pay, especially for full-time employees. I’d look at the pay distribution, compared to a [living-wage] budget, to see what percentage of them are making a living wage. Then my third would be what percentage of the frontline are promoted from within, because a good job offers a career path and opportunities. If I’m starting a job, and I know that this company only promotes from within, I have aspirations to go there. Companies that have 100% internal promotion policies like Costco, QuikTrip, a couple of other companies that I’ve studied, they tend to invest a lot more in hiring the right people.
Some employers argue that if they pay people better, they won’t be able to create as many jobs. By their logic, it’s better to pay people less, but then employ more people. How would you respond to that?
The future of work has been on the mind of my colleagues at MIT for the last couple of years; our task force just issued a report. The fundamental challenge in our economy is not the number of jobs going forward, it’s the quality of jobs. In fact, my colleagues argue that there will be plenty of jobs in the future, but unfortunately the economy is generating bad jobs. So our focus should not be on maximizing the number of jobs that we create—there are lots of other problems with that.
Another thing about higher wages requiring fewer people is that companies that pay their workers higher wages tend to have much higher labor productivity. That’s true. But there are many other opportunities to use people to increase sales, lower costs, involve them in improvements. So I don’t worry much at all about the number of jobs.
Can you talk about how you design the work to enable a given role to be a good job?
In my work, I studied a group of companies that were paying their employees a lot more than their competitors, so higher wages or providing more benefits, more stable schedules, etc, while having outstanding performance and low prices for their customers. Not charging the customers more for that. I asked, what did they have in common? The economist’s answer will be about how if you pay more, you attract a better talent pool, and then they work harder and that’s the outcome. But what I found in my research was a little bit more complicated than this. These companies designed the jobs in a way that enabled their employees to be more productive and contribute more to the company’s success. That design has lots of elements—and it’s a system.
The systems part is really important. Last year I was running a workshop with a huge retailer, and we were talking about Mercadona, a Spanish supermarket chain, and how they design work in a way that increases productivity and contribution. One of the things that Mercadona does is it empowers the employees to make decisions. Frontline employees can order merchandise. If a customer has a problem, they can resolve that problem without asking their supervisor for help. So that type of empowerment benefits customers, because the employee now is generating higher sales and can contribute to lower costs. If they identify improvement opportunities, you can pay them more because they are worth more. It’s better for companies because there’s an upside in sales and lowering costs.
So we’re talking about these benefits. Then one of the executives raised his hand and said look, a few years ago we empowered our cashiers and lost tens of millions of dollars. And I’m like, yep, I can totally see that. Why is that? Because empowerment has prerequisites. So you can’t empower people if you operate with high turnover, or if you haven’t paid high enough so that people are staying with you. Or if your environment is too complex: there are so many products, so many promotions, so many services that people can’t be knowledgeable and make the right decisions. You can’t empower people if you don’t have clear standards, clear boundaries—you can’t empower people if you don’t give them the time. So simplified work, empowered standardization, giving enough time, which I call operating with slack, and cross-training are all part of a system that enables people to shine and be a lot more productive and contribute higher. But you can’t just do one and not the others.
The Biden administration is focused on worker conditions. How optimistic are you that this will move America’s workers toward good jobs? And what would be the key policy components of that?
I guess I have to be optimistic, otherwise I don’t know what would drive me to go to work. If last year with the pandemic and with the racial injustice, if that hasn’t highlighted the importance of economic justice—we saw how essential these low-wage workers are to the functioning of our economy. We also saw that many of these workers tend to be people of color, immigrants, women. If this crisis hasn’t let us know about how important these workers are, I don’t know what will. This administration comes at a point where consumers are very aware of this; the American public is very aware of this. Just Capital does surveys with Americans, and job quality and pay tend to be the most important factors for customers in terms of the justness of companies.
So I am optimistic, and the fact is that this could be a driver of productivity growth in the United States that would benefit companies in the long-term. It would benefit consumers, and it would benefit our society by lifting up the working poor and enabling them to spend a lot more money. I’m hopeful that this administration will make changes that will move us in the right direction. Exactly what those changes are, which ones of them will be effective, we shall see. The fact that our federal minimum wage is at $7.25 is ridiculous. That needs to go up. I would look into scheduling legislation, but do it carefully, with company participation, to make sure that it ends up benefiting the workers and companies.
Some of the other policies about subsidies for child care, these are things that everybody would agree on for encouraging more companies to move into this direction. I think tax incentives, too—right now, we are providing tax incentives for companies to spend money on technology automation, but not on increasing wages. Creative ways to offer those types of incentives could help. And I don’t know if this will ever happen, but I wish that our government could also ask companies to disclose data on how much they are paying their employees. What is the distribution? Some companies are already doing this, as with how Intel discloses data by race and by gender. So having companies disclose pay data, turnover data, and percentage of managers promoted from within, those could all move the needle for workers and for our society.
You can read a longer transcript of my conversation with Ton here, including a discussion of whether companies can be more profitable by upgrading to good jobs and how companies not in front-line or services industries often fall short of providing good jobs.