Three seeds for building an inclusive economy in 2021

Most people are happy to see 2020 in the rearview mirror. It has been a tumultuous, trying, unprecedented year and the opportunity to turn a new leaf and welcome 2021 holds great appeal. But we shouldn’t be too quick to leave 2020 in the dust, without recognizing the seeds of significant societal shifts that were planted amidst the turmoil and tragedy.

Three of the seeds of 2020, if sustained and elevated to action, hold promise for a more just economy and society: rising attention of the role for business in the fight for racial equity, the recognition of the “essential worker”, and the increasing understanding that work and life cannot be “balanced,” but are seamlessly interconnected.

To bring these seeds to fruition will take concerted effort and accountability measures, such as those we developed in the Impact-Weighted Accounts employment framework.

Let’s start with racial equity. In the United States, according to the US Bureau of Labor Statistics, black men and women are nearly twice as likely to be unemployed as white men and women, regardless of education level. A meta-analysis conducted in 2016 found that minority group applicants had 49% lower odds of receiving a job interview when compared to equally qualified candidates. In the days following the murder of George Floyd, many organizations made strong statements regarding their commitment to fight racism.

So, how will we know if companies keep their promises? We could start by measuring diversity within their organizations, including across different job types and job levels. In a sample of twelve companies, we compare workforce demographics to local demographics. In 2018, these companies generated combined EBITDA of $118 billion, simultaneously creating a negative diversity impact of ($16 billion). There is a wide range between companies; while one company in the semiconductor industry having a negative impact of 35% of EBITDA through poor diversity, while a pharmaceutical company generating a comparably low negative impact of (6%) of EBITDA. In 2021, we should continue to hold companies accountable not only for who they hire, but for the opportunities and growth they access once they are part of the organization. Every company that made a statement in Summer 2020 about fighting systemic racism should produce a year over year improvement in hiring, retention, and promotion of Black Americans, which we can measure through annual impact-weighted accounts.

2020, though grim, had other silver linings. Everyone is now familiar with the term “essential worker.” These roles are predominately low-wage, and overwhelmingly occupied by female workers and people of color. Under the magnifying glass of Covid-19, job quality within the essential workforce became suddenly relevant. Some companies announced a wage increase to $15/hour for all its employees. Sounds good, but $15/hour is still below the national living wage of $16.54/hour, according to the MIT Living Wage Calculator. Many companies implemented increased safety measures, which in some cases included providing workers with paid sick leave to reduce the likelihood of Covid-19 contagion in the workplace.

What if in 2021, society continued to esteem “essential workers” as heroes, and rewarded these heroes with a permanent living wage and a healthy working environment?

In 2021, we can measure whether job quality actually improves for essential workers. Impact-weighted employment accounts are based on the percentage of workers earning above the local living wage, the incidence of illness and injury in the workplace, access to paid sick leave, and whether organizations are creating opportunities in areas of high unemployment. Organizations create significant positive value through job creation, however our sample finds that some companies are destroying nearly 50% of the benefits of the wages they pay through poor job quality.  Companies ignore these issues at their own risk. JUST Capital shows that firms paying a living wage are outperforming.

Finally, what if a concept that took root in 2020 – that an organization’s workforce as comprised of individual human beings, rather than a cost center – continued to grow in 2021? Since the pandemic, the idea that we can separate work and life has been subsumed by our new reality. Colleagues have toddlers and dogs in their Zoom screens, working hours shifted to incorporate home schooling needs, and conversations about mental health are even becoming slightly less taboo. When the pandemic subsides, organizations are still run by people who have families and lives. In 2021, we should hold companies accountable for maintaining family friendly workplaces, and not only protecting, but promoting the health and wellbeing of their most valuable asset. At a semiconductor company, we found a negative health and wellbeing impact of ($263m) across its US workforce of over 52,000 employees. 

To be clear, Covid-19 has not been the great equalizer that many optimists associate with pandemics. Far from it, we’ve seen the economic devastation target portions of the workforce that were already hustling to catch up, including younger workers and people of color. We’re witnessing the unsurprising exodus of females from the workforce. Nor has there been an immediate turnaround in the myriad biases Black Americans face in the labor market. But 2020 has brought these issues to light and illuminated the role businesses can take. As a society of the 24-hour news cycle, there is no doubt our attention spans will be pulled in new directions in 2021. Now more than ever we can take this opportunity to create a better work working environment for all people.

This post was written in collaboration with Katie Panella at the Impact-Weighted Accounts Initiative.