Finding the business case for shared prosperity

A mid-sized manufacturing firm struggles to find skilled technical talent to man its digital factory floor. Managers at a retail company grapple with non-stop turnover. Human resources executives at a logistics firm hear that applicants need two hours—via multiple bus lines—to get to the location on the outskirts of town.

These sorts of challenges are increasingly heard across U.S. cities and regions as tightening labor markets have made it harder for firms to find, hire, and retain workers. They are also evidence of a common interest between employee needs—such as training and physical access to jobs—and employer bottom lines.

The notion of a “business case” for shared prosperity is gaining more attention. Last year, our colleague Joseph Parilla summarized research showing that reducing barriers to opportunity can enhance economic growth. Brookings Metro also explored with economic development organizations and chambers of commerce in three regions how they can begin to address some of these barriers through supporting practices and policies focused on developing worker skills, improving access to jobs, stimulating business dynamism, and convening broader coalitions of local leaders.

At a recent public forum hosted in partnership with The Atlantic, The Shared Prosperity Partnership—a national collaboration between the Kresge Foundation, Brookings, Living Cities, and the Urban Institute—convened a discussion with business leaders and experts that highlighted the value of emerging approaches to sharing prosperity between business and workers, as well as some of the tensions with prevailing business practices. Four messages stood out:

• Investing in employees can improve firm performance and productivity. Over the last several years, MIT professor Zeynep Ton has made the case that retail companies such as Costco and Trader Joe’s have improved their performance by investing in employees. Katie Bach, managing director of the Good Jobs Institute (founded by Ton), described how retail companies, in which workers traditionally focus on discrete tasks like shelving merchandise, are increasingly training their employees to inform decisions about stock and help customers solve problems. By redesigning positions to contribute additional value and paying workers more, such retailers have raised worker productivity, seen improvements in store operations, and ultimately boosted their bottom line. Dan Healey, head of Human Resources for SAP North America, described how SAP invests in employees through a share purchase plan, helping its workers benefit from efforts that ultimately raise the company’s market value. Increasing employee ownership is also a key feature of our colleague Belle Sawhill’s new agenda for helping struggling workers and communities.
• Investing in the pipeline can benefit workers, companies, and local economies. Even as U.S. companies point to difficulties in hiring skilled workers, experts observe that these employers under-invest in education and training for their workforces. Siemens, a multi-national company with strong roots in German practices around worker training, bucked this trend by launching an apprenticeship program to train local high school and community college students in the highly technical skills needed to produce turbines and generators at the company’s Charlotte plant. The program provides Siemens with access to skilled workers, while it helps local students get training, an associate’s degree, and a salary on the pathway to a job. SAP has partnered with local education officials and other leaders to launch STEM-driven high school programs in several cities. These strategies represent long-term, proactive bets to build more robust talent pipelines that also equip workers with marketable, in-demand skills.
• Employers need to seize the potential of an increasingly diverse population. As our colleague Bill Frey has documented, demographic groups that have long faced systemic barriers to opportunity represent a growing share of the U.S. labor force, creating urgency to better develop and harness their potential. To ensure its own future success, SAP has established affinity groups focused on fostering a welcoming environment, giving voice to diverse perspectives, and helping diversify the company’s talent pipeline. As Mark Muro and Andre Perry recently noted, companies can also source more diverse talent by intentionally partnering with historically black colleges and universities and designing customized interventions to invest in a broader array of students and workers.
• Job quality matters. The recent spread of business practices such as irregular scheduling and non-compete clauses, alongside the erosion of other worker benefits such as pensions, have raised concerns about American workers’ well-being and the fraying of the social contract. As the Good Jobs Institute’s Bach noted, consistent hours, stable schedules, and clear career paths with “good jobs” that contribute more value to the company are important markers of job quality that, in addition to higher wages, can enable employers to better harness employee potential. Supporting public policy changes that raise job quality across the board can also help businesses compete on a more level playing field.

As the United States weathers rapid technological and economic change with a less advanced economic adjustment system than other industrialized countries, ensuring that workers are equipped to succeed continues to be a growing concern. To achieve truly shared prosperity, cities will need to engage their employer communities as critical partners in pursuing productive and inclusive growth.

The Kresge Foundation provides financial support to the Brookings Metropolitan Policy Program.