As employers grapple with turnover and talent shortages, while simultaneously trying to diversify their workforce, many seem to overlook a large segment of the workforce who may offer a solution to these challenges: low-wage, hourly workers.
These jobs exist in warehouses, factory floors, restaurants or retail shops, and they typically require no advance training, are low-paid, and offer little in the way of advancement. Today, leading employers are offering better pay and training to elevate this subset of employees into higher-paying roles.
“The most forward-thinking companies already focus on employee mobility, because if they don’t, as we’re seeing right now, workers will vote with their feet,” says Rachel Romer Carlson, founder and CEO of Guild Education, a $3.7 billion company that provides education-as-a-benefit services to Walmart, Lowe’s, Disney and others.
Carlson tells Fortune that workers who feel undervalued are increasingly seeking out jobs that offer skills training and education in order to progress their careers and strengthen their socioeconomic status.
Often referred to using outdated terms like “low-skilled” or blue collar,” employees who work low-wage jobs are brimming with potential. Retail workers, for example, can transfer communication and people skills to marketing or account management roles, while bank tellers can bring financial acumen and transactional knowledge to sales jobs.
Many employers have abstained from developing their internal lower-wage workers, preferring to instead “engineer their processes for maximum efficiency,” says Joe Fuller, a professor of management practice at Harvard Business School. Instead of treating them like valued members of the company, “they are, in fact, viewed as a commodity.”
A recent survey of more than 1,000 U.S. low-wage workers and an accompanying survey of 1,150 U.S. business leaders found a glaring discrepancy between how low-wage workers and C-suite leaders perceive low-wage positions. Surveyed workers say they feel stagnant and trapped in low-wage positions, while most leaders believe they provide mentorship, training and career pathways for low-wage workers. The study, led by Fuller, also found that even the best performing industries had 50% churn for low-wage employees.
By treating low-wage workers as commodities, companies are losing high-potential talent who would otherwise stay at their place of employment or advance into key roles. “The ease with which, until recently, companies could change out, with very little friction, one low-skilled worker for another, informed this efficiency logic with the idea that it does not pay to fight to reduce turnover,” Fuller told me. “Their entire process is set up to accommodate it.”
For the majority of low-wage workers, career advancement opportunities don’t seem to exist. Fuller’s study estimates that 44% of American workers are low-wage and, from 2012-2017, about 60% of them did not advance into the median pay range of more than $40,000 annually.
Employee mobility, or a lack thereof, is also tied to diversity. Women and people of color are overrepresented in jobs that sit below the poverty threshold and are more likely to work in low-paying occupations. For many low-wage employees, four-year degree requirements block pathways into higher-paying work.
“Bachelor degrees are expensive,” Abby Smith, partner at Bain & Company, says. “While the majority of high school graduates pursue post-secondary education, only 38% of American adults have a college degree. And only 28% and 21% of U.S. Black and Hispanic adults, respectively, have a bachelor’s degree, putting the great majority of these populations out of the running for jobs requiring a bachelor’s degree.”
About 60% of “good” job listings–defined as jobs that pay above a living wage and have limited vulnerability to automation–require at least a four-year degree, according to a January report from Bain & Company. But just one in four of those “good” jobs actually merited the four-year requirement. “Employers must broaden their perspective on what makes a good applicant,” Smith says
Byron Auguste, a former McKinsey director and a former deputy director on the National Economic Council during the Obama Administration, advocates tracking the economic mobility of employees. Now the founder and CEO of the nonprofit Opportunity@Work, Auguste helps companies hire, train, and create new career pathways for people who are “skilled through alternative routes” (STARs).
“By continuing to include degree requirements in the hiring and advancement process, employers are locking out STARs from higher-earning jobs that map to their current skill set—while, at the same time, contributing to the perception of a talent shortage,” Auguste says. He says STARs can gain equivalent experience if they have, for example, been in the military, attended community college or a bootcamp, or gained enough on-the-job skills to catapult to better paying roles internally.
A 2020 analysis by Opportunity@Work detailed a list of 51 “gateway jobs,” which are roles that act as entry points for people without degrees and offer on-the-job learning and upward mobility. Auguste says corporate leaders must acknowledge low-wage workers’ value, hire them for gateway jobs and measure their salary progress over time.
Fuller adds that tracking the mobility of workers should not be difficult. Since most payroll systems already have this data, companies simply need to set metrics for their employees’ advancement, track those goals, and hold leadership accountable.
“Employee mobility, for workers, is the difference between the dignity of a career, compared to simply having a job,” Carlson said. “It’s the sense of progression and the ability to advance within a company that allows someone to grow professionally and financially, and to take care of their family and their own goals.”
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Aman Kidwai
aman.kidwai@fortune.com
Headlines
Rising cybersecurity risk. In response to economic sanctions from the West, Russia may retaliate with cybersecurity attacks in the coming days, national security experts warn. Russia-linked cyberattacks affected several Ukrainian government websites on Wednesday. Washington Post
Board departures. Two former European prime ministers who were on the boards of Russian companies have quit their posts following Russia’s invasion of Ukraine. “Their departures highlighted the pressure on western business leaders and politicians to reassess their ties with Russian companies,” Joanna Patridge writes. The Guardian
Big Tech bets on offices. Tech companies are expanding nationally to meet people where they are. Tech companies like Google, Meta, Doordash, Robinhood, Apple are quickly buying and leasing properties around the country, even as they allow for some remote work. New York Times
How stocks react to war. Russia’s attack on Ukraine early Thursday morning sent global stocks reeling, with all major U.S. indexes plunging at the market’s open. Fortune’s Chris Morris details the history of stock market activity during times of conflict around the globe. He writes: "Past performance is no guarantee of future results. But amid the current market hysteria, perspective can provide a little bit of solace." Fortune
Google is back. The search engine giant is relaxing office mandates and even bringing back popular perks like massages and meals. The company plans to require most employees come to the office at least three days a week. CNBC
Reducing hierarchy. The CEO of Outschool Amir Nathoo, who does not refer to himself by that title, removed job titles in the C-suite. He made the decision when the company scaled from 25 to 180 employees and needed more managers. Protocol
Women only.The Modern Board's sister newsletter Term Sheet highlights a venture capital firm that's only recruiting women for its job openings. It has hired six women in the last six months, several of whom are women of color. The firm’s says its limited partner base is nearly 50% female. Fortune
4-day work week. Buffer, a social media SaaS company that is widely known for its radically transparent company culture, recently made the switch to a 4-day work week. One year after reducing meetings and pushing people toward 32-hour work weeks, 91% of employees reported feeling happier and more productive in a company survey. CNBC
Activision Blizzard CEO sees $$$. CEO Bobby Kotick has seemingly survived a shareholder campaign for his removal, and could earn $22 million for helping the company meet certain diversity goals. Microsoft has not made clear if Kotick will stay in his current position if its $68 billion acquisition of the gaming company goes through. IGN
Numbers That Matter
5%
Just 5% of listings for low-paying jobs mention career progress or mobility, according to a Harvard Business School study. As companies craft new recruitment strategies, promoting the potential for advancement may be a key differentiator for employers of choice.
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