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The Virus
The latest virus forecast: The US has had an 11% decrease from two weeks earlier, averaging about 54,000 new cases per day. More than 43 million Americans, or about 17% of the adult population, are now fully vaccinated, as the US on Friday surpassed 100 million shots delivered.
The business impact: “The US is poised for stronger economic growth in the second half of 2021 than we’ve seen in decades,” venture-capital firm Sequoia wrote to companies in its portfolio this week. The confidence of chief financial officers is rising, with 73% forecasting the North American economy will be improved 12 months from now. Nearly 60% of small businesses say they have fully reopened, with online sales representing 57% of revenue, up from 37% prior to the pandemic. Consumer spending over the next two quarters will be the strongest in at least 70 years, according to Wells Fargo economists. But jobless claims remain stubbornly high, possibly because some workers are cycling in and out of unemployment amid lockdowns and precarious work arrangements.
Focus on Myths about What We’re Paid
It’s conventional wisdom that people are generally paid based on the economic value that they bring to a company and that their salaries should reflect their individual performance.
In his new book, You’re Paid What You’re Worth, Jake Rosenfeld argues that conventional wisdom is a myth. Rosenfeld, a professor of sociology at Washington University in St. Louis, says that factors such as opacity around salaries have weakened the link between the value workers contribute to their employer’s revenue and their compensation. And, provocatively, he believes that it’s a fruitless effort to measure an individual worker’s performance in most jobs, because their contribution is so interlinked with that of others.
Here are excerpts from my recent conversation with Rosenfeld, edited for space and clarity:
How would you fix how workers’ pay is determined?
There are a series of actions needed both in the policy realm, especially in regulation, but also on the ground within firms themselves. There are textbook business school cases out there to draw from for employers who are wanting to move in a different direction. And there has been in the last couple of years movement, at least rhetorical movement, with the Business Roundtable coming out in 2019 saying they wanted to move away from a system of shareholder capitalism towards a more stakeholder model, a model that predominated in the past. There seems to be a thirst for new ideas for many organizations out there. But still it's the exception rather than the rule.
For firms that have been able to remain profitable, remain successful, and pay their workers more fairly—Costco comes to mind. Costco was in the news the other day for raising their starting pay up to $16 an hour. That's remarkable. Costco has been in the game for a long time now and is often used as this kind of strange and far-off example—but there's no reason why other firms couldn't follow suit.
One of the dynamics I trace in the book is how so much of pay determination, how we set wages and salaries, is simply firms copying one another. It's them looking around and saying, 'What are my competitors offering?' and especially 'What are the successful competitors offering?' Well, here's an example of a successful firm that's been around for a long time that pays their workers quite well and still has managed to stay in the game despite shareholders grumbling from time to time. Firms should recognize that there are well-documented positive benefits to treating workers well, to retaining them, to providing them with schedules well in advance, to instilling the loyalty and the goodwill that comes from recognizing that these are human beings. They have families to feed and they have all the other concerns we do. Everyone wants to be treated fairly and feel like they're getting a fair shake at work.
The current practice, as you say, is a comparative one. Companies get salary surveys that detail what competitors pay. If you say don't decide based on these surveys, how do you suggest determining pay?
I wouldn't be the one to recommend moving away from seeing what other firms are paying. All firms are in some sense operating blindly here and they need signals from other firms in terms of pay practices. But what I would say is aim high, right? So you get a sense of what the distribution is out there. Instead of trying to do what you can to just maintain your workforce and copy what the bottom-road firms in our industry are doing; rather try to say, okay, we're going to take the top 75th percentile or what have you and benchmark there. They should see it as a deliberate strategy to pay a bit more than your competitors. And if enough firms begin to do this, then all of a sudden you have a new norm in which bottom-rate pay has been raised, where wages for the middle grow as well through a number of dynamics.
What's your recommendation for how people should think about the balance of seniority versus performance in determining pay?
This was part of the book in which I tread lightly. Seniority-based pay is seen as stodgy and outdated, as in what you did when you had no quality measures of individual performance. I would urge employers and others to reorient their thinking on this. A lot of the book comes down to the fact that measuring individual performance in most jobs out there is often a fruitless task. Measurement problems are ubiquitous, and then there are disagreements about what we're measuring. Seniority-based pay, once you wrap your head around the difficulties in capturing individual performance, is a measure of performance. We get better at our jobs over time. There's plenty of literature to back that up. You can think of Europe, or you can think of your own experiences here.
It also accords nicely with our life courses. When you're just starting off and maybe have no other family members to feed, maybe just a dog, you can afford to be paid a bit less. Your middle years at a firm, you can have more responsibilities to take care of outside of work. So seniority-based pay tracks that life course quite well as management theorists recognized early on,. But it also gets at core equity concerns we have. We hear a lot about equal pay for equal work. One you look under the hood of that particular slogan, complications arise—what exactly do we mean by equal work?
Seniority-based pay took that phrasing very seriously and it meant equal pay for doing the same job, right? Based on how long you've been at a firm and what your job title is, people within your rank were paid relatively speaking the same. A lot of workers out there see it as fair. It does actually mean equal pay for equal work. And it's not perfect by any means, but no compensation system is, which is one of the key lessons of the book. It's one that has been unnecessarily cast aside, especially given the thinking that we have some other great alternative out there, which I think I've made clear in hundreds of pages: We just don't.
The obvious counter-argument is that performance-based pay is how people are motivated to do their best work. And if they just know what they're going to get paid just by occupying a seat—endurance, as opposed to performance—are you going to see that people just will be less motivated?
The research is increasingly clear that pay based mechanically on measures of individual performance oftentimes isn't that motivating. It frequently leads to a set of unintended consequences, and is exceptionally rare despite what we think and talk about. If you ask American workers—I've done a survey of employers, HR managers, and the like—what's the number one factor determining workers' pay, individual performance comes through loud and clear. But if you ask people, does your pay very mechanically by some measure of individual performance? The vast majority say, no, absolutely not. We know from the research that incentive-based pay structures really ramped up in the 1980s, peaked around 2000, and have been declining ever since.
Most of us aren't paid based on some individual measure of our productivity, and that's for a number of good reasons. There are motivation issues that arise—but there are a whole suite of other well-established means of motivating your employees to do the best job. You'll have to think of those when your pay structure is anchored in terms more of experience in job title versus individual incentive structures, which we know are incredibly rare.
What advice would you give employees about how they should think about pay and how to best ensure that they're fairly and maximally compensated?
One issue that comes up a lot and that I've done a lot of research on is transparency and how information does matter. At the very least you should arm yourself with relevant information when it comes to what the firms in your industry are paying and what your coworkers are making. I'm not advocating violating workplace policies around this. Although, as I made clear in the book, many of these workplace policies that prevent you from talking about pay or asking are actually illegal. But the first step is to find out if you're being underpaid relative to the person in the cubicle next to you, or on the Zoom call, who does the same job as you do.
That's important, to see whether you are being paid fairly based on a conception of fairness that you should be paid more or less what the people doing your same type of work are getting. One other thing I do try to make clear in the book is that the power dynamics are certainly tilted, and not in your direction. That's where you need some kind of collective help. That's oftentimes not there, especially in the contemporary United States where the organizational actor that has provided that collective help, labor unions, has just been devastated.
You can read a full transcript of our conversation, which includes discussion of the proposed $15 minimum wage and other policy approaches, and order a copy of Rosenfeld’s book, You’re Paid What You’re Worth. I also wrote a piece about pay for The New York Times DealBook newsletter yesterday, which references Rosenfeld’s arguments.
Content from our partner McKinsey & Company
Not your parents' HR department. Can HR, sometimes viewed as bureaucratic and transactional, become a force for strategic change? New research suggests it's possible—though it'll take nothing less than reimagining the basic tenets of organization. Here's how to start the transformation and build a more dynamic talent and work model.
What Else You Need to Know
Organizational responses to the violence against Asian-Americans point to the need to go beyond statements.
- The murders this week in Atlanta, and broader violence against Asian-Americans, are distressing and deserve loud condemnation. We stand against this racism and violence that took the lives of Delaina Ashley Yaun, Paul Andre Michels, Xiaojie Tan, Daoyou Feng, Soon Chung Park, Hyun Jung Grant, Suncha Kim, and Yong Ae Yue.
- The devaluing of Asian-American lives and work is a long and tragic part of our US story. From exploitation during the building of railways, to the Chinese Exclusion Act, to internment, to the “model minority” myth, to the horrors spotlighted this week, "resetting work" for Asian-Americans is a life-or-death question. Against this backdrop, corporate statements are a start but need to be backed by ongoing action.
When should an employee’s past activities be disqualifying? Some high-profile dismissals raise the question a lot of organizations are grappling with.
- The Biden administration asked some staffers to resign or work remotely after they acknowledged that they had smoked marijuana—despite that it’s legal in Washington DC and 14 states. The White House said there were “additional factors at play” for some of the employees terminated in connection with the drug policy.
- Condé Nast parted ways with incoming Teen Vogue editor Alexi McCammond, who posted racist and homophobic tweets around 2011 when she was a teenager, and appeared in a native-American-themed costume around that time. MacCmmond had previously deleted the tweets and apologized.
It’s hard to make general statements about the incidents—especially since critical details remain confidential. But they point to the challenging balance between taking a stand and believing that people can grow and learn.
- In the White House case, there’s an added confusion around an apparent shifting of requirements, since the Biden administration had previously said past recreational drug use wasn’t disqualifying.
Return to workplace speed round:
- The New York Times told staff it expects them to come to the office the majority of the week starting Sept. 7, and downplayed a fully-remote option. It expects to take on two-and-a-half additional floors in its headquarters building.
- “It's still very important to physically be in touch with one another because collaboration isn't always a planned activity," said Apple CEO Tim Cook, predicting his company will have “a hybrid environment [for] a little bit."
- JPMorgan Chase is planning a June start for in-person summer internships in London and New York.
- Prudential Financial expects most of its staff to work in the office half-time starting after Labor Day, and is reducing its office space.
- About 45% of Manhattan office workers are expected to return by September, up from 10% currently.
Research confirms the suffering of parents with kids in remote school. A new Centers for Disease Control and Prevention survey found that 54% of parents with children learning virtually had a moderate amount or a lot of emotional distress.
Venture capital remains shockingly gender biased. All-female founder teams attracted just 2.4% of VC investment in the first months of 2021, according to a preliminary estimate, similar to last year’s level.
- Coed founder teams attracted just 10.3% of VC dollars so far in 2021, compared to 10.8% last year.
- Investment size is smaller for female founders, averaging $6.8 million for female teams and $18.7 million for male teams last year. And just 12% of VC-fund decision makers are women.
Hefty executive compensation is in the crosshairs of some investors and politicians. Starbucks shareholders this past week voted down the company’s executive compensation proposal, including a bonus for CEO Kevin Johnson, though the vote was nonbinding.
- Senator Bernie Sanders introduced legislation that would impose an additional tax of up to 5% on corporations where the CEO makes more than 50 times the median worker.
Here are some of the best tips and insights from the past week for managing yourself and your team:
- Take vocal naps. Mask-wearing and video calls are contributing to vocal strain, causing swelling or stiffness of vocal cords. One doctor recommends 10 minutes of vocal rest for every hour of talking.
- Schedule and snooze emails. You can use “schedule send” to have emails delivered during business hours to colleagues, so you don’t interrupt their time off. And use the “snooze” option in Gmail to have an email you receive reappear when you’re able to deal with it.
- Start prepping pets for your return to the office. Sticking to a regular schedule for meals and walks will help reduce their stress when you go back. And your pet will develop more independence while you’re still at home if you keep them in a separate room from you for a few hours each day.
- Disclose salaries at your company. Chicago software consulting firm Tandem began publishing salary bands on its company site, in an effort to reduce any race or gender compensation gaps. Without pay transparency, underrepresented groups tend to make less money because of bias and other structural disadvantages.
Coda
A Covid baby bust is here—for rich countries. The US, Europe, and East Asia are experiencing record low birth rates amid the crisis, an effect which researchers expect to last into August.
- But less affluent countries face a different challenge. By UN estimates, the pandemic has resulted in 1.4 million unexpected pregnancies in low and middle income nations as travel restrictions disrupt contraceptive supply chains, exacerbating many families’ already deep economic wounds.
March Madness is expected to be even more of a distraction from work this year. The men’s college basketball tournament, which runs through April 5, is predicted to cost businesses $13.8 billion in lost productivity, compared to $13.3 billion in 2019. Some experts suggest managers embrace following the tournament as an activity that can help with team morale.
Fashion is going wide and baggy as we emerge from the pandemic. Designers believe baggy suits in the style of 1930s icon Marlene Dietrich will make for an easier transition to real fashion after a year in loungewear and athleisure. Looser-cut denims, abandoned for skinny jeans over the past decade, are also making a comeback in this comfort-conscious moment.More than half of American consumers are expected to buy new clothes in the next few months, after a dramatic drop in spending on apparel over the past year.
The handbook for this new era of business doesn’t exist. We’re all drafting our own as we go along—and now we’d like to start doing so together. You can sign up here to receive this briefing by email.