Commemorating Labor Day 2023, I take a look at some key trends and challenges that have emerged over the past 30 years, including:
- How technology and work design choices have allowed leaders to shift risk from the company to individual workers.
- Why this has created great strain and weakened employee commitment, productivity, and willingness to continue working for the company at full capacity.
- How leaders need to rethink the subtext of the choices they make, not just the dollar amounts associated with different work design options.
Where we are today
Today, there is a lot of labor market conflict:
- Hollywood writers and actors are jointly striking for the first time in over half a century.
- The automotive and airline workers’ unions are authorizing strikes in advance of upcoming contract negotiations.
- Over 300 Starbucks stores have been unionized in the past two years.
- Even as layoffs mount in some sectors such as technology, labor demand remains high in many industries nationwide.
- The Federal Reserve has raised interest rates rapidly, and threatens to keep them elevated for some time. This raises the cost of capital and forces companies to focus on increasing profits and returns to shareholders quicker than in the previous era of historically-low interest rates. Which in turn pushes leaders to demand greater productivity from their staff.
How did we get here?
Unemployment remains near historical lows, yet there is great discontent in the labor markets. The business and popular press focuses a lot on inflation as the reason why people are unhappy with their jobs and the labor market currently.
Inflation certainly is unsettling, especially the high inflation experienced in the past couple of years after decades of only muted price increases. Yet unhappiness with the labor market among frontline employees is due to much more foundational and persistent issues than just recent rapid price increases.
Labor is the biggest cost in many industries. Consequently, multiple generations of leaders have been taught that the only way to deliver profits to shareholders is to constantly find ways to increase productivity and/or cut costs among frontline staff. The challenge is when that is taken too far.
The first wave of “innovation” in work design in the 1970s through early 1990s was to shift away from full-time staff to more part-time and temporary positions. Adding part-timers enabled longer operating hours on nights and weekends, expanding beyond a 40 hour work week. Adding temps enabled postponing hiring decisions or doing away entirely with some regular positions. Both developments shifted the burden of finding enough hours of work from the company to the staff.
Separately, compensation for “regular” staff was deliberately kept low, falling behind inflation and eroding living standards in many cases. That strategy was enabled first by the offshoring of manufacturing (blue collar work) to lower-cost labor locations, and the deployment of technology that enabled global go-to-market operations for white collar work. Concurrently, retirement plans swapped out defined benefits for defined contributions. These developments shifted the burden of earning enough income for today – while working – and tomorrow – in retirement – from the company to the staff.
The most recent shift of risk from the company to the staff is due to rapid advances in scheduling software. These have enabled companies to make highly complex and quick calculations of staff needs, including forecasting vacancies and creating schedules on a moment’s notice. Consequently, many companies now publish schedules with very short notice, and offer only highly variable hours. This has greatly disrupted the amount and timing of hours available to work, shifting all the burden of adjustment to the staff.
What’s been the impact?
The consequence of shifting all this risk from the company to the staff is that many American workers are under great stress, even when labor markets are tight and unemployment is low:
- Many people struggle to find full-time employment that pays enough for them to have decent standards of living.
- Many are under great stress because of highly uncertain schedules that make it difficult to manage their lives outside of work.
This story is as old as time, and the struggle between capital and labor is portrayed as a zero sum game. Yet there are limits to how far labor can be squeezed before productivity and profits suffer. Eventually, you hit the wall of what people can handle physically, cognitively, and emotionally when shifting so much risk for employment, income, and reliable hours onto their backs.
What should leaders be doing differently?
Rather than stick with the status quo of frontline employees bearing all the costs of being the buffer for corporate profits, leaders should consider the benefits of restoring a greater balance of shared sacrifices among both the company and the staff.
There is a good argument that we passed the point of diminishing returns quite some time ago for many jobs and employment options available for frontline staff. This means that in many cases, lessening the productivity demands could, counterintuitively, increase productivity even while spending the same or more on compensation.
The foundation for this argument was recently addressed in my article on Getting Ahead of Rising Labor Costs and my colleague Jennifer Deal’s article When Employees Say They Are ‘Underpaid,’ Bosses Often Misunderstand. It is also based on work we have been doing with companies recently, looking at how job design and productivity demands have evolved over the years, and the impact on employee motivation, productivity and intention to turnover.
The bottom line is this: People have been resisting the pressures of unnecessarily shouldering all the risk by (a) voting with their feet – leaving for work elsewhere, and (b) by decreasing their voluntary contributions to corporate productivity and profits for many years now. The signs were there long before the very recent inflationary times. And the trends of increasing labor unrest and tensions are certain to continue unless leaders change their approach to managing labor costs and shifting so much risk onto the backs of their frontline staff.
