In 2019, PayPal employee Mark Parker, along with a group of other PayPal employees, was invited to meet with company executives to discuss his financial wellness. They asked him what more he’d like from PayPal as an employer to be more successful inside and outside of work.
Mark said that while he loved the company and appreciated his market-rate salary, he’d love a raise and more comprehensive benefits. Sometimes, to make ends meet, he gave his plasma in exchange for extra income.
Several months later, PayPal CEO Dan Schulman and his C-suite team rolled out a comprehensive financial wellness program. Mark’s life completely changed.
Mark is just one of the nearly 1 million employees represented through the Worker Financial Wellness Initiative which helps companies take steps like raising wages or expanding access to benefits to help bolster the financial health of their employees. To explore how those actions have impacted their lives and livelihoods, we set out to hear from the workers firsthand through a compelling new video series.
This is Mark’s story:
“I just feel taken care of. I feel like I have all of the support that I need,” Mark said. “I’m able to give more of my heart, more of my personality into my work. I think the way that PayPal has embraced me, I’m able to then embrace PayPal,” he said in the video.
To ensure PayPal was living its mission of financial inclusion internally, the company conducted an analysis of worker incomes compared to the cost of living, to arrive at a net disposable income calculation. After learning many employees were struggling to get by, Schulman rolled out the pioneering Worker Financial Wellness Initiative in late 2019.
The new worker benefits included pay raises, a reduction of healthcare costs by over 60%, personal finance education programs, stock options, and more.
Productivity and culture improved and now PayPal is helping other companies conduct their own worker assessments through the Worker Financial Wellness Initiative with JUST Capital, the Financial Health Network, and Good Jobs Institute.
Franz Paasche, senior vice president and chief corporate affairs officer at PayPal, said participating in the Initiative has bolstered the company’s financial success.
“Talented and committed employees are the greatest competitive advantage any company can have,” Paasche told JUST. “Research increasingly shows that investing in the financial health and security of employees has a positive impact on engagement, retention, productivity, innovation, culture and more. That is good for our customers and good for our shareholders.”
Mark’s experience represents that of thousands of PayPal employees. He’s now more productive at work, and also feels incredibly loyal.
“Financial wellness just means freedom to me. It really does,” he said. “Because PayPal’s truly got my best interest in mind, I wouldn’t look for another company.”
He feels personally grateful to Schulman and PayPal’s leadership.
“I mean, it truly is coming from him and I feel that this is personally gifted from Dan Schulman,” he said. “Thank you.”
Paasche agreed that Schulman’s leadership on the issue has changed not only the company, but helped shape the public conversation around supporting America’s workforce.
“Dan has led from the front in putting our employees first. Throughout his leadership at PayPal, he has been outspoken about the inequities in our economy and financial system that result in so many people and families feeling financially vulnerable,” Paasche said. “Dan’s leadership on employee financial wellness is consistent with his deep commitment to fulfilling PayPal’s mission.”
Paasche said he’s excited to continue to build the coalition of companies committed to advancing the financial wellness of their workforces.
“We are working to do our part to make the global financial system more affordable, efficient, safe, and inclusive for everyone,” he said. “By prioritizing our employees, we can better serve our customers and shareholders.”
Hear from other employees about the impact worker financial wellness programs have had on their lives:
The Worker Financial Wellness Initiative is a vibrant and growing community of business leaders dedicated to improving the financial health and security of their workers. The Initiative includes peer learning opportunities for C-Suite leaders; creating resources and events for HR and compensation professionals; providing direct assistance to companies on how to develop and deploy a Worker Financial Wellness Assessment, and use it to identify areas for improvement and immediate next steps; and public opportunities to celebrate corporate leadership.
To learn more about the Initiative and how you can join, click here.
Corporate America is navigating yet another uncertain stage of the COVID-19 pandemic. The spread of the Delta variant has many companies delaying or scrapping plans to return to the office. And many workers are looking to employers to expand flexibility and caregiving benefits should schools need to shutter. All the while, companies are continuing to struggle to hire.
Employees are leaving jobs at record rates and many are choosing not to re-enter the workforce whether that’s due to caregiving strains, health and safety concerns, or, importantly, wages. A survey of the American public JUST Capital conducted with The Harris Poll in July found that a majority of respondents think that companies should permanently increase their starting wages to improve hiring. Many companies have announced wage increases in an attempt to attract workers and keep up with their peers, but it remains unclear if this marks a lasting trend or whether the numbers companies are choosing for starting offers is enough.
Workers are looking for action, like earning a living wage, that will help set them up for long-term financial stability. A Prudential Pulse of the American Worker Survey from January found that 77% of workers want companies to provide resources and solutions to benefit their financial well-being. Companies participating in The Worker Financial Wellness Initiative are showing how corporate leaders can respond to this demand, and discussed it recently on a panel with the Aspen Institute’s Economic Opportunities Program. The group represents around 260,000 American workers, including Chipotle, PayPal, and Prudential Financial, and is committing to both assess the financial health of their workforce and take steps to improve it through measures like lowering the costs of health insurance and other benefits, offering financial counseling, and increasing pay.
The Wall Street Journal’s Lauren Weber illustrated the role corporate America has in helping secure working families’ financial health in an anecdote she shared to open the conversation. Reporting on overtime, Weber spoke with a young forklift operator who’s currently working 72 hours a week due to staff shortages. He earns overtime pay for a good portion of that work, but loses quality time with his daughter as a result. When Weber asked what his ideal work situation would be right now, rather than reduced hours, he said receiving a raise.
Marissa Andrada, Chief Diversity, Inclusion and People Officer at Chipotle, Sarah Keh Vice President, Inclusive Solutions at Prudential Financial, and Franz Paasche SVP, Chief Corporate Affairs Officer at PayPal, recently joined Weber to share how, and why, companies should prioritize worker financial wellness as they look to strengthen their operations, recruitment, and retention in a post-pandemic economy.
Watch the full conversation here and read on for key takeaways.
As a first step, participating companies in the Initiative commit to conducting a financial wellness assessment of their workforce to understand workers’ financial vulnerability and where they can take action. For Paasche, this assessment brought PayPal’s challenges to light in new, unexpected ways. “We found that for close to a third of our employees, and typically those that were hourly workers, that many, many were living paycheck to paycheck,” he said. “It shouldn’t have been a surprise, but we pay market wages and we are competitive in what we offer in our pay packages.”
PayPal determined that benchmarking against market rates wasn’t right for its workforce and, instead, it needed to find a new metric. That’s how the company generated its own measure of employee financial well-being: net disposable income, which calculates the percentage of income an individual has left after paying for necessities. For Chipotle and Prudential, assessments were also key first steps. But Andrada and Keh noted that assessing whether and how employees are using the financial security benefits and resources provided is also important.
Keh raised that Prudential disaggregated the findings from their employee assessments to determine differences in what their employees might be looking for – whether it’s better retirement plan options or financial counseling – depending on their socioeconomic status or racial or ethnic background among other factors. Andrada shared that Chipotle conducted a “listening tour” with its workforce, determining what they could provide to respond to their employees’ needs. Realizing the need to better communicate about existing pay and benefits, Chipotle produced a “What’s In Your Burrito” breakdown for its workers that demonstrates the makeup of their annual pay and benefits. The company also offers financial counseling on-demand for employees, she said, where they can use the “What’s In Your Burrito” mechanism as a starting point to assess their baseline financial health and set goals.
Chipotle’s “What’s In Your Burrito” tactic is just one example of how the company’s work to invest in its employees’ financial well-being stems from its core values. Andrada shared that in 2018, after facing customer backlash and sales drops related to food safety incidents, Chipotle recommitted to its value of integrity – ensuring it informed everything from ingredients to how the company treats its employees. Ultimately, this approach also made it easier to sell financial security efforts to its C-suite, Andrada said.
“When we had big things like debt-free degrees as well as access to mental health benefits, when we wanted to introduce that, of course I would tell everybody ‘Make sure you have the business case.’ But, at the end of the day, if it’s aligned with the purpose of the company…it may get easy buy-in,” she said. With these values guiding its action, Chipotle saw growth in sales from 2018-2019, Andrada said, and pointed to the company’s current market cap of $52 billion as proof that these measures have tangible business results.
Being clear on core corporate values was also what made the results of PayPal’s worker financial wellness assessment particularly jarring to Paasche. PayPal’s mission was to democratize access to financial services and the company recognized that it needed to live up to this for its employees, not just its customers. As a result, PayPal’s seen record employee engagement scores, net-promoter scores with customers, and employee retention rates.
Keh linked Prudential’s decision to invest in employees’ financial security to the origins of the company, which was founded to provide burial insurance for low-income families. Today, though, the company leverages part of its core business in employer benefits to set goals and measure success with its worker financial wellness efforts. “What we are looking to do with this Initiative is not only advocate for the things that we’re doing with our own employees, but also think about how we encourage our employer clients to think about what financial wellness offerings or services that they could be providing,” she said.
In addition to noting the importance of working within each company’s walls, Keh expanded this idea to community and society as well. Prudential’s partnerships with nonprofits allow it to drive action outside of its own workforce through taking on systemic barriers to financial well-being that exist for working families across the country. By advocating for measures like universal paid family leave and making the child tax credit permanent, the company can extend its influence, she noted. “Philanthropy is not just on the side of things, but it’s right in-line with how we do our business because it’s trying to change some of the structural issues…to get to the point where it’s not just about our own employees and customers,” Keh said.
Keh also pointed to the fact that Prudential as a company is trying to close the financial divide and that this work cannot be divorced from efforts to close the racial wealth gap. Paasche seconded this, bringing PayPal’s commitment back to its mission of economic empowerment and increasing access to capital. To him, each company should be thinking about what specific structural issues they can tackle based on their core business and/or values and who they can work with to do so. Part of the benefit of participating in the Initiative, he said, is learning not just from the other companies involved but from nonprofit partners the Financial Health Network and Good Jobs Institute.
Andrada also emphasized that companies’ structural influence on financial well-being should not be separated from their diversity, equity, and inclusion (DEI) efforts. She specifically stressed the potential that lies in training and upskilling to promote individuals internally and, in turn, financially. Chipotle worked to prioritize this in its recruiting efforts, which has strengthened its own retention and helped open up opportunities to marginalized populations.
“We see that the labor pool, and who knew this would happen even after the pandemic, that there’s a finite group of workers out there in the world. And so how can we go from always churning people to actually being in the business of creating talent for the future?,” Andrada said. Companies like Chipotle, PayPal, and Prudential are proving that employers must be answering this question with worker financial wellness in mind.
Learn more about the Worker Financial Wellness Initiative and how your company can join leaders like Chipotle, PayPal, and Prudential here.
Jennifer Tescher, Financial Health Network founder and CEO. (Financial Health Network)
As politicians and business owners and leaders across America debate how much the government and companies can afford to pay in wages and which benefits encourage or discourage work, what is always central, whether explicitly or not, is the idea of Americans’ financial health.
That is, what does it take for people to make enough money to live, and are their benefits designed to actually be useful?
Jennifer Tescher, CEO of the Financial Health Network, is dedicated to helping institutions develop a holistic understanding of what it takes for Americans to lead lives where money is working for them, which in turn strengthens the communities they live in and the businesses they work for.
Tescher founded FHN in 2004 after first spending time as a journalist in the early days of data-driven journalism and then entering banking. In a recent interview, she told JUST Capital that with journalism, she was “in it for the issues, not the writing,” and when she ended up working for a bank, which she hadn’t initially planned for, she “came to appreciate the power of the private sector to achieve scale.” FHN became a way, then, the bring together her love of data and passion for finding ways business could help people live more fulfilling lives.
It’s why JUST and PayPal brought FHN on as a partner to our Worker Financial Wellness Initiative, a coalition built around the idea that when corporations commit to understanding the financial health of their workforce, particularly their lowest paid workers, they will be able to know how the benefits they’re providing are being used and whether their wages are livable. Along with our fellow partner the Good Jobs Institute and anchor member Chobani, we are asking companies to commit assessing the financial health of their lowest paid workers as an important first step toward building more resilient companies that benefit all stakeholders over the long term.
Before the pandemic hit last year, JUST Capital estimated that roughly half of the workers at Russell 1000 companies, about 10 million, weren’t making enough to support a family of three, even with a partner working full time. And as we discussed with Tescher, the past year’s pandemic and reckoning with racial injustice has made the project feel even more urgent.
Our conversation explored the interwoven business and moral cases for companies first understanding and then enhancing the financial health of their workforce, what companies can expect after joining our initiative, the value of PayPal’s example, and how leaders can best communicate their journey to workers and the public.
The following interview had been edited for length and clarity.
JUST Capital: What’s your elevator pitch to a CEO for joining the Worker Financial Wellness Initiative?
Jennifer Tescher: Your employees are one of your biggest expenses, they’re one of the most important inputs into a successful business, and the financial health of your workers is getting in the way of their performance. And, moreover, you’re not even sure whether the money you’re spending to support them with benefits, etc., is actually helping improve their financial lives or not.
What gets measured gets managed. And so starting to understand better the financial lives of your employees is going to help you be more strategic about how to effectively support them in a way that is good for them and good for your business.
JUST: What have your conversations with corporate executives been like recently? What are they looking for?
Tescher: Our history has been in financial services and we’ve expanded into broader workplaces over the last couple of years. What’s interesting and different about those two things is employers get it already. They already get that there is a challenge, particularly in the midst of the pandemic. If they weren’t thinking about the broader lives of their employees, they certainly had to in the face of the pandemic. “Are we going to make everyone work from home? Does everyone actually have a home?” And I’ve talked to executives where call center employees, a couple of them were homeless. That’s not going to work. And they had to address that.
I also think that right now financial wellness is very trendy in the workplace. There’s not a single RFP [request for proposal] that goes out from a company to vendors that doesn’t have on the checklist something around financial wellness, but most employers don’t fully understand what that means. In the vendor community, whether that’s plan sponsors, voluntary benefits providers, healthcare providers, they don’t really fully understand it either, particularly around retirement. Most of those folks are still thinking well, yeah, I have to provide advice about how to invest your retirement savings and provide a retirement calculator, but financial wellness is so much broader than that. And if people aren’t able to deal with their own day-to-day systems and needs, it’s a lot harder to plan for retirement and use those benefits effectively.
We’ve been working on both sides of the table, with employers who are being inundated with new tech startups and with their existing incumbent providers, all pushing new product, new platforms, new tools – it’s dizzying. They don’t know how to make sense of it. And on the other side of the house, we’ve been working with a whole range of different solutions providers to say your offerings need to be more holistic. They need to be more employee-centric. And they need to be based in the reality of people’s actual financial lives. Those are the conversations we tend to have with HR folks. I think HR folks in general know that their workforces are challenged and want to know what to do about it. And I think a lot of workforces, particularly the more progressive employers that are most drawn immediately to the initiative, in many cases they’ve already done a pay equity audit, or maybe they’re thinking about benefits a little bit but that’s as far as they’ve gotten.
The other thing I would say is in this moment of racial reckoning there’s a tremendous focus on racial equity in the workplace and the place that most often starts is around pay, but it’s so much bigger than that. If we don’t start to uncover the inequities in benefits usage, or in benefits plan design, or even understand the differential circumstances that people are facing, we really won’t close the gap.
The last thing I’ll say is a number of companies that we engage with believe that they have relatively well-paid, relatively white collar, middle-class and above employees – but they all have call centers. And I can tell you that one of the single biggest pain points for companies like that are their call centers employees. The other place where people have a pain point and may not even realize it is with all of the contractors they do business with, whether it’s their cleaning contractors, their security contractors – we haven’t even really begun to talk about what’s the responsibility that employers have for the people who are working for them through a contract company.
JUST: You mentioned how some companies you’ll work with have already done something like an audit, and further work might be appealing to them. What about companies where leaders would be much more focused upfront on how they will only want to do what will make more money for their business?
Tescher: We’ve got some research that really looks at the costs to the business of having a financially challenged workforce, and they’re pretty steep. The other thing that we know is what workers say they want out of a workforce and we know what’s actually happening – there’s a significant gap. Increasingly the quality of the job and the support that people get is is a big differentiator for talent. I often say you have to put your own oxygen mask on first. If you’re not treating your employees well on this front, it’s going to be hard for them to go and treat their customers well.
So, as an example, 78% of employees with high financial stress say it distracts them at work sometimes, often, or very often, and six in 10 workers would be more likely to stay at a job that offered financial wellness benefits.
So there’s a reduction in turnover. There’s a reduction in absenteeism.
I’ll give you some more top line findings. Currently less than one third of employees report having access to any given financial guidance benefit, even though a majority of employees express interest in these benefits. Emergency savings benefits from employers are still rare, with only 23% of employees indicating that they currently have access to an employer match for emergency savings. Yet that is the most in demand benefit of any that we polled on. Debt-related benefits are of interest to employees across the income spectrum. Even high income employees want support for managing their debt, but less than 20% of employees say that they have any access to that.
Then we also surveyed HR executives. A majority of employers consider themselves aware of the financial health challenges of their employees and are taking action to address those challenges. Employers are maintaining or increasing their investment in financial health benefits as a result of COVID, and think it’s a good time to be doing this.
Employer awareness of employee financial health challenges is largely based on limited metrics, contributing to this gap between employee needs and solutions. And so that gets back to this idea that they know there’s a problem. They know that they need to do more, but they don’t actually have the right information because most of the time, all they have is basic information about engagement, usage of benefits, or plan engagement. They don’t actually have anything that talks about outcomes.
JUST: If you work with a company to actually find this information, collecting it in the best way possible, what level of transparency do you then encourage in terms of what is shared with their workforce?
Tescher: We have an eight question survey, and employers can embed it in their existing engagement surveys. Lots of employers are regularly surveying their employees. If it’s going to be something that’s unique or separate, it will be particularly important to explain why they’re asking, and that it’s going to be used in an aggregated fashion, that they’re not looking at any individual employee but that it is about enabling them to make sure that they’re providing the things that workers need.
Eight indicators of financial health form the basis of the survey. (Financial Health Network)
We’ve built this platform that enables this end to end measurement, and there is a worker facing piece of it that tells them based on these eight questions, here’s how we think your financial health is, and here are some things you might want to think about, so that they at least get some benefit immediately.
But it’s also beneficial for companies to do this without sort of creeping out their employees. PayPal is a really great example of how to do it. You have to then show directly what action you’re actually taking. You ask questions because you’re committed to doing something. I think that’s really important.
JUST: There are plenty of situations where maybe a company’s already done an audit and they’ve communicated some degree of findings with employees, but they don’t want to go anywhere near releasing it to the public. What do you encourage there?
Tescher: Measuring the pay equity gap, whether it’s around gender or race or other characteristics, that’s been something that’s been encouraged for quite some number of years now, and there is increasing pressure for companies to be transparent about that publicly with their shareholders, and with all their stakeholders. This idea of a broader understanding of the financial health of of one’s workforce is newer, and there aren’t really even sufficient benchmarks. We have benchmarks about financial health nationally and regionally, but we don’t yet have enough benchmarks about what that looks like at a particular company, in different kinds of industries, or across peers – that’s where we’d like to go over time. As there’s more data available for benchmarking, then there’s an opportunity to start thinking about how and when to share that publicly, to create accountability.
Right now, there’s plenty of work that companies can do internally. PayPal CEO Dan Schulman has been terrific in speaking publicly about his experience, but remember he didn’t survey his employees, realize the situation, and then make an announcement. He went and took action, and he saw progress. Then he said, let me as a leader show you my whole process so that I can encourage the rest of you. Is there an opportunity to create opportunities to celebrate those companies who seem to be moving the needle most effectively on the financial health of their workforce? Absolutely. We’re still early days, though. So I think just getting companies to measure, and then to think about what it means and where they can do better is an important first step.
JUST: So OK, you have the information and then you’re ready to take action. That could require a significant investment made in the short term for long-term value creation. That could entail CEOs making these arguments for investments to their boards, and then communicating decisions to their investors, that look, this is going to be a big cost upfront, but this is something we have to do. How have you seen this play out?
Tescher: I don’t tend to see a lot of board pushback. Companies make decisions to invest all the time, it’s a question of where. We’re in an environment right now where these issues are top of mind. And certainly boards need to be prepared for the typical stock market response to an employee wage increase, which tends to take the stock down. But we’ve also seen that those tend to be short-lived negatives and they tend to bounce back pretty quickly, assuming the fundamentals are there. So from that perspective, yes, companies need to prepare themselves. But generally right now they’re getting lauded everywhere else for taking those kinds of actions. From a reputational perspective, if nothing else, it’s an incredibly positive thing to be doing right now.
And listen, companies need to create a roadmap for how they’re going to invest. They don’t have to do it all at one time, and many of them aren’t going to be able to afford to do it all at one time. That’s really important.
Increasingly, CEOs understand that they are responsible to numerous stakeholders and that the majority of their stakeholders are happy when they’re taking action to beef up their most important input into their products and services.
There is also an element of moral leadership here. You were asking like what’s a powerful way to make the case. Stories matter. And forget about investors for a minute. For the board to understand what it looks like for a call center employee, doing the math to show what that equates to in a year, laying out their various expenses, that’s really powerful. And I would like to think that most of us still have some humanity, some empathy in us. When you really understand what people’s lives are like, what their real financial lives are like, you can’t unsee that.
The government has a super important role to play in that, too. But employers definitely have a role to play.
JUST: Back to the Worker Financial Wellness Initiative specifically, if you’re speaking with a CEO or CHRO who’s interested, what else should they know before they sign on?
Tescher: They have to be committed to measuring on an ongoing basis and holding themselves accountable for the results. It’s great to take that first step of trying to really understand the lives of your employees. It’s another to then use that data to take action and then to measure again to see if it made a difference.
Can they hold themselves accountable for everything in their employees’ lives? Absolutely not. But it’s really important to set appropriate metrics that are within the control of the business and then make sure that you’re making progress over time. It’s what CEOs do in every other part of their business. Why should the way they manage their employees and the expense of their employees be any different?
JUST: So it’s really understanding that this is a long-term change. This is a way a new way of understanding your workforce. This isn’t just a one and done type of thing.
Tescher: That’s exactly right.
(Evgenia Eliseeva)
A company full of “good jobs,” as Zeynep Ton defines them, is built through years of careful, deliberate management – but on its own, it’s a simple concept. And when you hear Ton, a professor at MIT Sloan School Management and founding president of the Good Jobs Institute (GJI), talk passionately about it, it’s hard not to see it as a no-brainer.
If you pay the workers on the lowest rung of your business as little as you can get away with, you’re not being savvy, Ton explains, you’re building a vicious cycle of employees who hate their job, are struggling outside of work, and your organization will be the worse for it. A company that is built on top of bad jobs is going to have its productivity and customer service suffer, and turnover is going to be high. If you instead invest in those workers, you’re going to eventually exceed the cost in the value you create.
And as our own research at JUST Capital shows, there are roughly 10 million of “bad jobs” among the country’s largest companies: We estimated that 50% of workers at Russell 1000 companies weren’t making enough to support a family of three, even with a partner working part-time.
Ton and the GJI team have years of experience implementing their Good Jobs Strategy in companies large and small, and inspiring other leaders to adopt the approach. For example, Walmart U.S. CEO John Furner, former head of Sam’s Club, is an ardent supporter of the Good Jobs approach – on Thursday, Walmart announced wage increase for 425,000 workers under Furner.
That is why JUST Capital and PayPal knew they would be ideal partners for our Worker Financial Wellness Initiative. Recognizing that reinventing aspects of your operations is a big ask for companies, we’re starting with an important first step: actually assessing what all of your lowest paid workers are making, and how that compares against a living wage for their family size and their location.
We recently spoke with Ton about why her career has shown her that taking this first step can be the beginning of a journey that CEOs, boards, investors, and of course, workers, will all want to embark on.
The following interview has been edited for length and clarity.
JUST Capital: If you were to sit down with the CEO of a Russell 1000 company, how would you pitch them the Worker Financial Wellness Initiative?
Zeynep Ton: Many of your employees probably have a much worse job than you thought, and it’s hurting them. It’s hurting society, and it’s hurting your business.
A lot of executives are not quite aware of how bad things are for their frontlines. So unless you do this type of analysis, you don’t have that awareness, and financial insecurity hurts everyone.
JUST: What if they respond by saying they understand but say that we are still in the middle of a pandemic and ask how they’d be able to prioritize what sounds like such a big project?
Ton: Precisely because we’re in the middle of a pandemic we should prioritize this! This is a time where we set our priorities, we think about values, we think about what we stand for, and we think about what the strategy of the organization will be. And having that strategy people-centered is quite important.
I talked to a CEO yesterday, from my world of retail, and the CEO said, “Our employees have been heroes. And I realized how much our customers have recognized them, how much our customers have appreciated them.” Now it’s time for us to treat them as heroes not just during this pandemic, but to create a business around them. This is exactly the time to prioritize it.
JUST: Some companies may be wary of publicly signing onto the Initiative because they don’t know how to communicate to their workers, or the public, expectations of what they’ll uncover or what next steps will be. How do you recommend leaders communicate this process?
Ton: First, look at the data and see where you are. And I would maybe reach out to some other companies who have done this and see what the reaction has been.
Intel discloses pay by race and gender, and it brackets how many people make less than between $10,000 and $15,000 a year. And what I heard from Intel’s chief HR officer, on a panel that she and I were in together, was, “We want to hold ourselves accountable. And some of our ESG investors were asking for this type of data. So we want to set targets, we want to improve.” That that level of transparency is helpful, how exactly you communicate that is probably quite personal.
In an ideal world, honestly, I wish that companies had to disclose this data so that investors could see it. Then, creating a more financially secure workforce is a choice. But I think facing the facts is the first step.
JUST: How does diversity, equity, and inclusion factor into worker financial wellness?
Ton: If you look at the low wage workforce in the United States, you will see that it’s disproportionately people of color. There are a lot of Black and Hispanic workers represented in that community. And there are a lot of women represented in that community. So doing this analysis and looking, as you said, it’s a journey, right? First you find out the wages and you try to uplift that population to create more opportunities for them.
And then the second step: One of my favorite data points is looking at internal promotion rates, career paths within the organization, by race and by gender, to see if you are creating those types of opportunities. Like in retail, you find that there are a lot more cashiers that are people of color than first-line supervisors, as a percentage. You’ll find the discrepancies, not just in the internal promotion, but also in the wages part as well. This is where assessing the data of your lowest paid workers will play a role in being equitable.
JUST: Why do you think that CEOs, even those that genuinely care, are often so unaware of the state of their lowest paid employees? Why is there that disconnect, and is there something even beyond this that can be done toward fixing that?
Ton: I think there are two issues there. One of them is that it requires a fundamental shift in how they run their business. It’s hard. It’s so much easier to go out there and say, “Let’s invest in training programs, let’s do upskilling,” because those don’t require structural changes, system changes, inside their organization. So that’s number one.
Number two, and this perhaps comes back to racial inequity, involves our assumptions about people. Not everyone believes the ability and motivation of low wage workers can be high. Part of the reason is because they have been so disconnected from the frontlines, and they don’t know about the realities of what’s going on. And the other part is that so many of them have been operating with high employee turnover, and they have removed decision-making from the frontlines, which can verify some of their assumptions. Like they say, “OK, people don’t show up. Our attendance is very problematic.” That’s because wages are low and the work design is not good, but they see that as a function of the person and the person’s ability, rather than a function of the system that they’ve designed that creates these types of behaviors.
So many times when I’ve presented my work, I would receive this response: “But are most people worthy of $15 an hour?” And this response is so telling, because then I tell them, “Look, it’s not a function of the person, it’s a function of the system that you set up that creates $15 an hour. But we unfortunately have some inaccurate assumptions about people and we designed a system that just verifies those assumptions.
JUST: And so this is where that concept of the vicious cycle comes into where it just kind of feeds off itself.
Ton: Yeah. It feeds off itself. In the vicious cycle that I talk about, you under-invest in people, you have high turnover, you have operational problems, then performance is poor, and then your sales budgets decline, and then your labor budgets decline – and this vicious cycle continues.
High turnover means you’re not hiring the right people and you’re not spending enough time for training, so you’ve hurt the ability of people to perform well. And if you hurt the ability of people to perform well, you say people are unable to do so and that means I’m not going to empower them to make decisions. I’m going to make the job as simple as possible. And then that’s another vicious cycle that feeds itself.
JUST: What about when we do see some companies pushing for higher wage policies, like Amazon has been doing for the $15 minimum wage?
Ton: Look, the last couple of years have been scary for a lot of people. A good chunk of the population believes that capitalism is not working for them, that the system is rigged against them. There’s so much inequality that people are now in the streets. Business leaders are coming to a realization that this form of staying with the status quo may not be sustainable for us as businesses.
And I think that realization is creating this awareness that we have to lift up the bottom, we have to lift up the wages and working conditions of people for a better functioning society and economy. I think that that’s one of the motivations.
But I wouldn’t say that so many executives are embracing this.
JUST: Another thing that we hear a lot when introducing these concepts to different corporate leaders, is basically, OK, Dan Schulman with PayPal – they’re doing great, and they’re a tech company. But for the CEO of a company in an industry with low profit margins, like certain retailers, they’ll say it’s not the same thing and sorry, it’s not possible. How do you handle that?
Ton: That’s a very legitimate concern. For companies like PayPal or for JPMorgan Chase to ensure that everybody makes a living wage represents a small portion of their overall costs and it’s very doable. For leaders who want to do the right thing, they can do that tomorrow and create a good justification. And probably it will pay off, even if they do nothing else around lower turnover and higher productivity. If I were [JPM CEO] Jamie Dimon, I would do this in a heartbeat! You saw how much he committed to racial equity.
JUST: The $30 billion initiative.
Ton: Yeah. I mean, clearly you have a lot of extra money. But think about this for a large retailer, where the profit margins are in single digits, and labor presents the biggest operating expense. No amount of CEO compensation reduction is going to enable you to get to $15 an hour. So it’s not that easy. In those environments though, we have seen companies improve wages and working conditions a lot without hurting profitability. What it took was not just raising wages, but doing the whole Good Job Strategy that I talk about, changing the operating system.
One example that I can give you is Mud Bay. It’s a small to medium-sized retail chain. They have about 40-plus stores in the Northwest, 2% profit margins. They were able to raise employee wages 30% over a three-year period. Now, a 30% wage raise is big! How did they do that? Well, they made some other changes, like they simplified their product line and have done cross-training. They made decisions to improve the productivity and contribution of their employees. That along with lower employee turnover paid for those wage increases.
Sam’s Club, the wholesale club, they made wage investments $5-7 an hour for a good chunk of their workforce. And it ended up not costing them anything. Why? Because they made other changes to improve the productivity and contribution of their workforce. And it was a systemic change. So for those companies that are operating in low margin industries, I say, “I understand, wages alone will probably not be enough, but making the other changes to pay for this is a choice. It’s hard and it takes awhile to implement it, but it’s very doable and companies have done it.”
JUST: Are you able to translate lessons from companies to others, even if you’re looking at a case study with a small retailer and then go on to work with a large multinational organization?
Ton: Yes. Walmart is on this journey. It’s of course taking a long time for them – it’s a huge organization. Its subsidiary Sam’s Club is a huge organization. But I’ve seen it work in large companies, in smaller companies. I’ve seen it work in public companies, private companies. I’ve seen it work in the United States, and in a country like Spain. What it takes is a ton of courage and commitment to do it, and a lot of competence to be able to pull it off.
JUST: I understand that the timeline for a Good Jobs journey would be different from company to company, but can you give me a sense of what to expect?
Ton: It depends on how deep you are in a vicious cycle, and on the competence of project management abilities.
Sam’s Club started this journey in 2018 and they’ve already shown results. Quest Diagnostics did this in their call centers, and within 18 months, they cut employee turnover almost by half and they reduced their costs, even though they made wage investments and investments in career paths. They improved customer service, such as reducing transfer rates and improving call answers to within 60 seconds. Mud Bay, they started seeing benefits within three years. They had substantial improvements in their productivity, customer satisfaction, and turnover. So it’s not overnight – it doesn’t happen in a quarter or two – but it’s not 10 years, either.
There is a barrier for larger companies that we have noticed at the Good Jobs Institute. We have worked with lots of organizations where we have a workshop and people are very excited and they’re like, “Yes, we can do this. We want to do this.” And then they hear, well, it won’t be done in a year and create a return. So you see these short-term cost or sales pressures getting in the way of doing this and companies not prioritizing it. The tenures of CEOs of large organizations has been declining, and so it’s not unreasonable for them to think about what they can do that will be faster and easier.
JUST: Well, then how do you make the case against the short-term priorities for a long-term project to boards and investors?
Ton: It’s easier to connect to leaders who have come from the frontlines, someone like Jim Sinegal of Costco, or John Furner, who is now the CEO of Walmart U.S. – they started working on the frontlines and they understand the work and they believe in people. For them to make this bet in people is so much easier because they know the possibilities.
And yes, you need to bring the board on, but what you need to do is make this a strategic initiative. You have to say for me to win with my customers, to create things like omnichannel retail and a frictionless customer experience, I have to have this. That’s what convinces the board, that’s what convinces the investors.
JUST: Taking all of this into account, what do you want corporate leaders considering a worker financial wellness assessment to have as a takeaway?
Ton: We’ve done this kind of analysis with a few different companies now, and we had them present to each other in a workshop. Oftentimes when the data, like around take-home pay, there’s silence in the room. And what I have noticed is when leaders see these data, it gets to them. Not just from a business point of view, but from a moral point of view, too. When they see what percentage of their workers are making so little, that there’s no way for them to make ends meet, that brings a sense of urgency.
JUST: It’s a powerful first step. It really gets them.
Ton: It is. It gets them. We sometimes hear things like, “We truly care about our employees,” and many leaders do, but they’ve never looked at this before. So it is powerful. And I hope more companies will sign on.
2020 has been a year of profound change and upheaval – from the COVID-19 pandemic to our national reckoning with racial injustice to last week’s unprecedented election and the continued fight for American democracy. Amidst these monumental and unusual events, the call for stakeholder capitalism has continued to mount, with workers’ needs – health, safety, security, fair treatment, and pay – at the forefront of the conversation.
Earlier this year, JUST Capital and PayPal launched the Worker Financial Wellness Initiative, a new, critical project to make workers’ financial security and health a C-suite and investor priority. And at the Forbes JUST 100 Virtual Summit – where we celebrated the 2021 Rankings of America’s Most JUST Companies on October 14 – we discussed why worker financial wellness must be a priority for corporate leaders, now more than ever, in conversation with PayPal CEO Dan Schulman, JUST Capital Cofounder & Chairman Paul Tudor Jones, and Chief Strategy Officer Alison Omens.
Explore our key takeaways below.
Even before the COVID-19 crisis hit the U.S., far too many Americans were struggling to pay their bills each month, an issue that has only been exacerbated as our economy has contended with the impacts of the pandemic. In 2018, PayPal CEO Dan Schulman decided to find out whether employees were able to make ends meet – and because his company paid employees at or above market, he expected a good news story. But when he surveyed his workers, he learned that more than two-thirds of call center and entry level employees were struggling to pay their bills each month, let alone save for their futures or for emergencies. Dan explained that “our mission as a company is to democratize financial access,” and that while PayPal’s focus had been to achieve this mission for customers, its employees were being left behind. In better understanding the financial health and security of his workers, Schulman was able to evaluate the broader implications of his mission, and make critical changes to ensure that workers were not simply the purveyors of this mission, but also its beneficiaries.
In our six years of polling the American public, we’ve heard every year that workers are the most important stakeholder for corporate America, and that paying a living wage is critical to creating a more just form of capitalism (this year, and last, Americans agree that paying a fair, livable wage should be the top priority for companies). In discussing why this issue is so important, Tudor Jones emphasized that “paying a living wage is the first great step to reducing the inequality gap, taking care of employees, and hopefully building a larger pie for the entire country.” Today, among the 20 million workers who work for the Russell 1000 companies we evaluate, we estimate that 50% currently do not make a living wage. Tudor Jones identified Schulman as “the flag bearer” in driving change on this issue, and believes that boards, shareholders, and employees themselves will increasingly demand a living wage.
There is a pervasive narrative on Wall Street that raising wages destroys value – something we saw play out recently when Costco stocks dropped after the company announced that it was maintaining COVID-19 wage hikes for its frontline workers. Schulman called this narrative “fundamentally wrong” – noting that the single biggest competitive advantage for any company is the talent and passion of its workers, and that the most talented people want to work for companies that both stand for a purpose and ensure their financial security. “I actually think if you don’t have a purpose as a company and don’t treat your workers as your most valuable asset,” Schulman explained, “then you minimize your profitability going forward.” Tudor Jones agreed, suggesting that the market is beginning to understand this, bolstered by growing research to suggest that a company’s “net contribution to society” is key to the formula for raising the company’s net value overall.
Healthier employees not only have the ability to strengthen the financial health of their companies (and in turn, the economy), they create a healthier democracy. Schulman noted that “democracy asks us to rise above our own self interest to support what’s right for the whole,” but when employees are financially insecure, they question the system. A strong economy, a healthier capitalism that really cares about everyone, is essential for a strong democracy – and that begins with treating workers right. Tudor Jones emphasized the critical importance of this work: “We’re not going to change this country, we’re not going to feel embarrassed to be Americans, we’re not going to be proud of what we do every day unless we change where we work first. It’s the only way we’re going to get gender equity, income equity, wealth equity, or racial equity. It’s the only way we’re going to do it.”
You can watch the full JUST 100 Virtual Summit here.
This past year, JUST Capital and Harris Poll have surveyed more than 17,000 Americans, and one thing that’s clear, even in the midst of a pandemic, is that “Pays workers a fair, livable wage,” continues to be the single most important stakeholder issue, across all demographics. We also found that over 90% of respondents believe large companies should create an economy that serves all stakeholders, 87% believe they can shape the future course of business through their collective actions, and 80% believe that companies can be a force for positive societal change. (Click here to view and download our latest annual survey report.)
That’s why this week we were proud to launch in partnership with PayPal and the support of the Financial Health Network and the Good Jobs Institute one of our most ambitious projects yet: the Worker Financial Wellness Initiative.
It’s a project that draws from each organization’s expertise to craft a methodology and suite of tools and resources that will help companies to assess the financial health of their lowest paid workers, to ensure none of them are struggling to get by. It’s not simply the morally right or, as our polls showed, the popular thing to do – we are also producing research showing that investing in workers is a strategic investment to your bottom line, and a down payment on future growth. When you have a financially stable workforce, you have an engaged and productive one, and both customers and shareholders will benefit.
All that and we’ve still got our biggest project of the year coming up next week, the 2021 Rankings of America’s Most JUST Companies. Make sure you register for our Forbes JUST 100 Virtual Summit where you’ll hear from the likes of Microsoft CEO Satya Nadella, Merck CEO Ken Frazier, and many more on how they used a stakeholder lens for navigating one of the most difficult years they’ve ever had as business leaders. There will be a lot to unpack, and you won’t want to miss it.
Be well,
Martin Whittaker
The Business Roundtable issues a statement warning that failure to reach a deal on additional economic stimulus would “worsen and prolong the crisis for our country.”
Exxon Mobil faces criticism after leaked documents of internal projections expose plans to increase annual carbon-dioxide emissions by as much as the output of the entire nation of Greece.
JPMorgan Chase announces a major $30 billion investment to fight the racial wealth gap as well as a new financing commitment aligned with the Paris Agreement to help clients capitalize on a low-carbon economy.
Microsoft CEO Satya Nadella wants to see increased focus on internet safety in social media and encourages players to do a better job at self-regulation and expect more regulatory scrutiny.
Wednesday, October 14 from 4PM to 6PM ET
Please be sure to RSVP for what’s shaping up to be an amazing Forbes JUST 100 Virtual Summit with MasterCard vice chair Ann Cairns, General Catalyst chairman Ken Chenault, Merck CEO Ken Frazier, JUST board members Paul Tudor Jones and Andrea Jung, PayPal CEO Dan Schulman, Grammy award-winning artist, philanthropist, and entrepreneur, Pharrell Williams, and more!
Wednesday, October 28th at 2PM to 3PM ET
How to Make Worker Financial Wellness a C-Suite Priority
Learn more about why investing in workers improves key business outcomes such as productivity, customer service, and employee turnover. Join our webinar here. Participants will hear directly from PayPal about the actions they took after learning that nearly two-thirds of their hourly and entry-level employees were running out of money between paychecks.
As the 2020 election approaches, we asked Americans what role they think corporate America should play in upholding and protecting democracy. Hear what they said here, and check out coverage in Politico, as well as an editorial from Alison Omens in Forbes.
Insights from our 2020 Survey Report – Amidst Crisis, What Americans Want from Corporate America – were featured in Business Insider, Forbes, Triple Pundit, and a curated LinkedIn newsletter. And Schroders showcased our BRT analysis in “COVID-19 and stakeholder capitalism: actions speak louder than words.”
Martin spoke with Halla Tomasdottir and Jay Coen Gilbert of Imperative 21 on LinkedIn Live, for a conversation on why now is the right time for capitalism to reset.
Providing further urgency to the Worker Financial Wellness Initiative, Quartz reveals that 44% of low income Americans are dipping into their retirement accounts to pay bills during the pandemic. CNN estimates that the pandemic has eliminated 4 million jobs forever.
Bloomberg compares what S&P 100 companies pledged versus how they’ve acted when it comes to racial equity and brings the data to life with interactive infographics.
Bloomberg also reports Microsoft and Wells Fargo, which have both pledged to double their ranks of Black leaders, received letters from the U.S. Labor Department asking how their efforts comply with laws limiting the consideration of race in employment.
The Wall Street Journal creates a great primer on the myths of ESG investing. and chronicles a recent Labor Department regulation that would make it much harder for investors to incorporate ESG funds into their 401(k)s.
For our latest Chart of the Week, we’re lifting up our 2020 Issues chart from the 2020 Survey Report showcasing what Americans want corporate America to prioritize today. “Pays workers a fair, livable wage” was the single most important stakeholder issue in this year’s survey, and all five Worker issues – regarding pay, training, health, equity, and benefits – are among the top seven priorities of the public.
