- March 4, 2019
- by commonwealth
Employee financial security can help workers and companies of varying sizes and industries thrive together, not just in quarterly earnings but over a longer horizon. While we know that business executives alone don’t hold the power to fully transform industry norms, their influence and actions have enormous potential to spark change and improve the financial lives of their workers.
We started by looking at examples of CEOs who have successfully incorporated worker financial security into their business models. For example, companies like Costco, whose co-founder James Sinegal and current CEO Craig Jelinek have both publicly advocated for higher pay and benefits for workers and have seen success in providing for workers without harming their bottom line. A decade before the worker-led Fight for 15 movement began advocating for a living wage for service workers across the country, Costco was paying their average worker $22 an hour. Thanks to the company’s pay scale, benefits, and opportunities for horizontal and vertical movement, it is not uncommon for employees to stay with the company for a decade or more. Investment in workers results in less turnover, which generates cost-savings on hiring in the long run. Costco is able to do this without compromising on quality and while maintaining competitive pricing that attracts the company’s loyal following.
Costco recognized a strong business case for taking the lead in the retail industry on worker financial security. So why hasn’t Sinegal and Jelinek’s approach to worker financial security caught on throughout retail? The tendency for companies to benchmark themselves against peers in the same industry may be the culprit. We’ve found that even when there are positive industry leaders like Costco, peers see their success as serendipitous, rather than strategic and replicable. It’s unclear that these singular case studies, no matter how successful, will transform the thinking of entire industries and drive systemic change.
Still, research suggests that these business successes are not just lucky. Worker financial security has been shown to lower stress, which helps focus on the job. This not only impacts productivity but on-site safety as well. Companies save on the tremendous cost of recruiting, hiring, and training new employees when staff loyalty is high and turnover is low. Our publication Financial Security in the Workplace: Making it Work for Financially Vulnerable Workers makes the case that businesses can support the financial security of their workers in ways that also drive business success.
We are connecting with employers who are innovating around or investing in financial security programs and benefits. We’re learning more about how these programs are impacting both employees and company well-being and are excited about how sharing these product examples could inspire new ideas across the field. These programs tackle financial security’s core challenges: a lack of access to liquid savings, affordable credit, and tools to manage the mismatch between income and expenses (“volatility”). It is our hope that by disseminating case studies, identifying gaps in impact investing metrics, and exploring the role of shareholders we can inspire executive leadership to take the lead on worker financial security. We are also interested in working with executive leaders to pilot innovative, straightforward, and inexpensive solutions to boost workers’ financial capability.
At Commonwealth, we are taking a multi-faceted approach to building worker financial security in the US. In previous posts, we have discussed the roles of proxy voting and investors in promoting worker financial security at all levels of the company.
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