This week, the chief executives of 181 of America’s most prominent companies released a statement through the Business Roundtable committing themselves to a new vision of corporate responsibility—one that focuses not only on maximizing profits but also delivering value to customers, investing in employees, and supporting communities. Though long overdue, it’s encouraging to see.
Now, the question is how. Whether this statement is merely a gesture or something more depends on the extent to which it results in real change—and that requires some attention to the specifics. What does it mean to invest in employees, for example? Bigger paychecks? Stock options? Free snacks? Nicer break rooms?
Those things are great, but they’re the wrong metrics. A better question is whether employees and their families are better off in the long term because of their employment with the company. At a basic level, is a job at one of these companies a pathway to a better life—or a dead end?
This issue has perhaps never been more urgent. Almost 80 percent of Americans live paycheck to paycheck. According to a major economic study released in 2017, economic mobility is declining in the United States. Ninety percent of those born in the 1940s went on to earn more than their parents. For workers born in the 1970s, it’s more like 60 percent (and declining). It’s not that Americans aren’t working. In fact, the unemployment rate has been historically low. Even in a booming economy, a significant number of families are stuck in place, raising odds that their children will be stuck, too.
What if the CEO’s who signed the Business Roundtable statement took the lead in championing mobility by adopting initiatives that increased opportunity for workers while strengthening their companies at the same time? To do this, they should focus on programs that support long-term, multigenerational outcomes, rather than just wages and safety net benefits that more narrowly address the needs of today. Such “opportunity benefits” position families for educational, financial, and health gains that can, over time, break cycles of poverty.
Employers can and should get on board. In past eras, companies frequently led the way in creating opportunity, far ahead of government mandates or pressure. The first private pension system was launched by American Express in 1875, 60 years before Congress created Social Security. In the interim, over 300 companies followed suit, including giants like General Electric, Eastman Kodak, and US Steel, providing plans that covered 15 percent of the entire American workforce. It was the government that modeled its own efforts during the Great Depression after those in the private sector. Even so, early pensions were not altruism. They were established through a clear-eyed recognition by employers that they were necessary to recruit and sustain the workforce that would best capitalize on the company’s opportunities. A good thing happened and it was also good business.
It’s time for employers to lead again. Today’s opportunity benefits can take any number of forms. What if companies paired higher wages with financial advising that helps employees make smart choices? Employees with this benefit might connect with sound banking services or plan to save for a down payment. They will improve their credit scores so they can borrow more easily and affordably, and be less vulnerable to endless scams. Thankfully, services like these already exist. But relatively few modest earning employees have access to them.
I work for an organization that partners with employers to help working families with education—another area where investing in the short term can pay off over generations. There are career development programs that allow employees to build more advanced skills or work toward higher-level positions. There are promising employer partnerships for college access that have been adopted by Disney and Starbucks. This start-up partners with employers to provide guidance to new and prospective parents from pregnancy through early childhood.
This is not a plea for charity on the part of employers. Dollars invested in opportunity benefits can have an outsized long-term effect because they target goods and services employees would not otherwise have to access to—but they also help employers strengthen their bottom lines. At EdNavigator, we work with some top names in the hospitality industry, where employee turnover runs between 30 and 70 percent annually, leading to steep costs for recruitment and training. Turnover for hospitality employees who are participating in our program is less than 12 percent. The benefit pays for itself in real dollars.
Earning $15 per hour is certainly better than earning $13 per hour for the same job. And along with healthy wages, employees should have robust benefits for health, retirement, and the rest. But this is insufficient if workers can’t also expect to see their grandchildren better off than they were. That’s the real promise that the CEOs of the Business Roundtable should make to their employees—not just a bigger paycheck today, but greater opportunity tomorrow.