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Guiding low-wage workers on the upward mobility path is a win for employees and companies

Report: Harvard Business School says investing in talent builds retention
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Low-wage workers are benefiting as others quit their jobs and employers work to attract talent with offers of incentives and bonuses. While the possibility of a bigger paycheck is a positive, new research from Harvard Business School examines what companies can do to help workers get out of the cycle of low-paying jobs.

It suggests businesses need to rethink how they view low-wage workers who make up 44% of the workforce and focus on carving out upward mobility paths for these employees. “It’s going to be really perilous for companies to keep running the old playbook. There just aren’t going to be enough workers,” says Joseph B. Fuller, professor of management practice and co-director of Managing the Future of Work at Harvard Business School.

Competition to Attract Employees

Fuller, co-author of the new report Building From The Bottom Up, adds, “You can see companies right now giving retention bonuses, signing bonuses, and referral bonuses. They are viewing this as, ‘If I can just get through the keyhole of COVID, then it will all go back to what I know how to do well.’” But Fuller warns that accepting high turnover rates as inevitable is a mistake that costs companies.

“It’s almost a universal truth in their mind that you don’t want to train people who are going to turn over at a high rate because you are going to pay for training and then those people will use training as a lever to get a better job somewhere else,” explains Fuller. He adds, “Our data doesn’t support that.”

In the report, a survey of 1,025 low-wage workers (individuals earning roughly $20 per hour or less or a household of three with an annual income of $39,970) finds 62% say the prospect of upward mobility would help induce them to stay at companies.

A number of companies are working to retain employees by providing opportunities. Home Depot, for example, is offering incentives that include tuition reimbursement for its workers.

What Workers Say They Need vs. What Employers Provide

The research finds that incentives alone won’t solve the retention problem. It highlights a gap between what low-wage employees say they need and what employers are providing. The report’s survey indicates among the top issues impacting low-wage workers from getting ahead is a lack of clarity and guidance on how to gain new skills needed for better jobs.

It also indicates that a majority of low-wage workers cite convenience of getting to work as one of the main reasons they switched jobs in the past. It also finds that this issue has not been on the radar of surveyed employers.

Creating Clear Paths to Better Jobs Can Help Both Companies and Employees
Joseph B. Fuller, Harvard Business School (Photo: Harvard Business School)

Employers, says Fuller, can do three things – he refers to as the “power trio” – to address the lack of clarity about job pathways and the understanding of required skills.

“It’s honest, actionable, regular feedback. Access to a pathway program that is designed around the user and what their requirements are, not the supplier of the skills,” explains Fuller. Lastly, he notes that employers need to provide guidance and support to low-wage workers. “Someone who is a mentor who is helping those people get over impediments, the barriers that are inevitably going to crop up.”

The report recommends employers recognize low-wage workers as “critical assets” instead of a “cost” which can help put these workers on a path to upward mobility, while helping companies retain their workers.

Fuller stresses that time is of the essence. With older employees retiring and labor participation low, companies will have a shrinking number of people who can fill positions. “In this new system, if that new person leaves, are they leaving at 100% or 50% a year? Or is your turnover rate down to 20%?” asks Fuller. “Yes, you lose some folks along the way but it sure beats having a 75% turnover rate.”

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