February 20, 2021
Are American workers feeling satisfied in their jobs? Do they look forward to each working day? Do they feel adequately and fairly paid for their work?
Studies of American workers toward their jobs reveal a disturbing finding: Over half of U.S. workers are unhappy in their jobs.
If they are unhappy, what are the main causes? Some workers find their jobs boring or mind destroying. They see these jobs as dead-ends. Some workers suffer from a bad boss or bad coworkers. The job involves a lot of stress without any breaks. The job presents safety issues. Some women complain of sexual innuendos or harassment. They aren’t paid a livable wage. Their health and other benefits are either non-existent or minimal.
If persons are unhappy in their jobs, many will be unhappy in their lives. Their stress may affect their mental or physical health. They might turn to drinking or drugs or sometimes just crying. Some employees will compensate by various pleasures they find after work in sociability, hobbies, and friendships. But a great many, especially who are at a lower income level, will remain unhappy in their lives.
Persons who are unhappy in their jobs still carry out their work but with less thought and effort. They might spend more time chatting with or complaining with other workers, more time in bathroom breaks, show more sick leaves or absences, or quit their jobs more often. These workers are not as productive as they could be if they liked their work and were given some recognition by their company. One study of more than 17,000 U.S. workers in 19 industries found that 71% were either “actively looking for new job opportunities” or had the thought “always, often, or sometimes” at work.
Many companies fail to give recognition or appreciation to their workers. Certain workers are complimented and paid better in an “I-Thou” relationship with management, but most workers are treated in an “I-It” relationship. In the latter case, these workers are just seen as objects, not human beings. This is unfortunate because for many workers, “high touch” recognition is as important as or even more important than their salary. Also, consumers might partly judge a company by how well the company treats its employees.
When these problems are recognized by management, management tries various solutions. Among them:
· Raise workers’ pay
· Introduce more work breaks
· Build more of a family or community feeling among workers
· Help workers achieve a better work/life balance
· Offer more employee benefits, such as free coffee, snacks, a napping room.
· Provide a paid leave program for workers with family problems
· Prevent discrimination based on age, gender, or sexual orientation
· Train supervisors to be more sensitive to workers and more freely give recognition and encouragement
· Human resources should study the causes of low employee engagement and develop tailored solutions
These actions might help and yield more worker enthusiasm and productivity, and ultimately more profitability. Studies by the Gallup organization shows that companies with better employee engagement have better earnings per share.
If these measures don’t work, the company needs to look for deeper answers.
Analyzing Worker Discontent at a More Basic Level
A deeper understanding of the worker discontent problem can come from looking at the structure of management/labor relations.
1. Companies exist to create value
2. Value is created with Capital and Labor
3. Capital gets to keep the profits (or losses)
4. Ordinary Labor only gets a salary and has no other means of support
5. Yet Labor might be responsible for creating between 40–70% of the profit.
Marxian economists hold that labor creates most of the value but most of the profits go to Capital (shareholders). Workers are never able to earn enough to buy shares in their or other companies to become capitalists.
Under these conditions, workers become alienated and will just do enough work to get by and not be fired. There is little they will gain by working harder. They are without any ownership or any voice in where their company is or should be going.
The unhappiness manifests itself in the shrinkage of inventory estimated to be 3–4% taken by workers unhappy with their company.
More Fundamental Solutions to Raising Worker Engagement
Recently, executive Pete Stavros of KKR & Company reported that he is on a mission to get more stock of industrial and manufacturing companies into the hands of their workers. He is promoting the benefits of awarding stock to factory workers and other hourly wage earners. Pete is launching a nonprofit called the Center for Shared Ownership and pledging $10 million to support it. The organization will provide companies with resources to help them adopt employee-ownership programs, funding academic research and potentially pushing for new government incentives. He believes that giving ownership to lower-level employees better aligns their interests with those of management and shareholders, makes them more engaged and creates a stronger culture.
Let’s discuss four different plans for lifting worker engagement and happiness on the job.
1. Create an Employee Savings Plan or Employee Profit Sharing Plan
2. Create an ESOP (Employee Stock Ownership Plan)
3. Create the Company as a Cooperative
4. Accept a Workers Union with Co-determination
Create an Employee Savings Plan or an Employee Profit Sharing Plan
Let’s start with the company creating an Employee Savings Plan (ESP). The employer allows employees to set aside a portion of their pre-tax wages for retirement savings or other long-term goals such as paying for college tuition or purchasing a home. Many employers match their employees’ contributions up to a certain dollar amount, or by a certain percentage. The most popular ESP in the U.S. is the 401(k) retirement plan. Under this plan, employees are able to save up to $19,500 a year for retirement, sometimes with additional contributions made by an employer match.
Alternatively, an employer can offer an Employee Profit-sharing Plan. This is a retirement plan that gives employees a share in the profits of a company. An employee receives a percentage of a company’s profits based on its quarterly or annual earnings. The company decides how much of its profits to share with employees. The company alone makes the contributions. Employees cannot make them too. This plan, also known as a deferred profit-sharing plan (DPSP), grants to each employee a share of the profits according to the employee’s share of total employee earnings. In some bad years, the company might make zero contributions. The company can establish an employee profit sharing plan even if its employees also have an employee savings plan. This is a great way for a business to give its employees a sense of ownership in the company. By employees holding stock in the company, this gives employees the same interest as stockholders in making the company successful.
Many companies would like their employees to hold stock in their company even if the company did not offer either an employee savings plan or employee profit plan. An employee is always free to buy shares of stock in the company in the open market. Some companies can offer their employees a plan to buy stock at a discount from the stock’s quoted price in the stock market. The company might make this offer occasionally to its employees.
Company Creates an ESOP (Employee Stock Option Plan)
Here we deal with a company that wants to be or become a partial or fully employee owned company. The employer sets up an ESOP trust fund that will belong to the employees. The employer either contributes cash or shares of stock to the trust fund or gets the trust fund to borrow money to be paid back over time. Note that setting up the trust fund does not involve the employees making any contributions. This differs from companies that set up employee savings plans or employee profit sharing plans.
The trust begins allocating shares to the retirement accounts of employees. Shares are distributed to employees according to their relative pay or some other formula to result in an equitable distribution. When employees leave the company, they cash out. They benefit from having received a significant retirement amount. The ESOP results in the company continuing as an employee-owned enterprise and going concern. The original owner can stay or cash out.
About two-thirds of ESOPs are used to provide a market for the shares of a departing owner of a profitable, closely held company. Most of the remainder are used either as a supplemental employee benefit plan or as a means to borrow money in a tax-favored manner. Less than 10% of plans are in public companies.
A 2000 Rutgers study found that ESOP companies grow 2.3% to 2.4% faster after setting up their ESOP than they would have achieved without it. Companies that combine employee ownership with employee workplace participation programs show even more substantial gains in performance. A 1986 NCEO study found that employee ownership firms that practice participative management grow 8% to 11% per year faster with their ownership plans than they would have without them.
Notable majority employee-owned companies include Publix Super Markets (200,000 employees), Amsted Industries (18,000 employees), W.L. Gore and Associates (maker of Gore-Tex, 10,720 employees), and Davey Tree Expert (10,500 employees). All these companies exhibit successful results. As an example, Publix is an employee owned company with 5% turnover, ranks 39th in happy employees, and the CEO earns 8X the lowest paid employee.
Companies with ESOPs and other broad-based employee ownership plans account for well over half of Fortune Magazine’s “100 Best Companies to Work for in America” list year after year. Being in an ESOP is associated with higher household net wealth, higher net income from wages, higher retirement savings, and longer job tenure.
Create a Cooperative
Members of the public can create co-operative organizations where worker ownership and rights are paramount over the rights of capital. A cooperative, or co-op, is an organization owned and controlled by the people who use the products or services the business produces. Cooperatives operate for the benefit of members, rather than to earn profits for investors. The profits earned are normally reinvested or part might be distributed to members. The aim of cooperatives is to provide members goods and services at reasonable rates.
There are different types of cooperatives. Producer cooperatives process their members’ products and service and market them and share the proceeds. An example would be agricultural cooperatives. A multi-stakeholder cooperative has members who share a common interest such as providing home care services. A worker cooperative provides their members with work and the coop is owned by the members. A consumer cooperative provides their members with goods and services for their personal use, such as a food cooperative or a housing cooperative.
Cooperatives are found in many nations of the world, including the U.S., Canada, Spain, India, and other countries. One of the best examples of a cooperative is Migros of Switzerland, organized originally in Zurich in 1925. Today Migros includes supermarket food stores, restaurants, gasoline stations, language schools, and a bank and an insurance company. It employs more than 100,000 persons. Here is a summary of some characteristics of Migros and its “responsible” philosophy:
· Does not pay any dividend;
· If the earnings before interest and taxes (EBIT) reaches 5% of the market value of the company, the supermarkets have to lower their prices;
· Organized as a cooperative (federation of regional cooperatives), with more than two million shareholders;
· Every adult living in Switzerland can become a member (receive a share for free) and vote at the general assembly;
· Uses 0.5% of its revenue to social and cultural projects.
Accept a Workers Union with Co-determination
Companies are typically set up by entrepreneurs with the purpose of making a profit for the company’s owners and shareholders. Companies proceed to hire workers and give them salaries plus some benefits. Hired workers have no official role to play in the company’s business strategy. Management, appointed by the owner and shareholders, sets up all the company systems and terms. Workers are expected to accept these systems and terms or leave the company.
Even workers who spend their entire life in one company typically do not participate in the profits that result from labor and capital. Capital keeps all the profit. Unless there is a profit sharing employee plan, workers simply earn a salary.
Worker unions were started in companies to address grievances and to press for higher pay and benefits. These unions were always met with strong company resistance, with company efforts to break them up or beat them down with the help of the police. Over time, each country had to pass laws regulating on how unions could be formed and voted on and how unions and management could conduct business together. Unions were limited in their use of their main weapon, worker strikes, by further legislation.
Union organizers understandably face difficult challenges in trying to bring a worker union into an ongoing business. Intense campaigns erupt for and against accepting a union. Laws are passed to establish fair results. From management’s point of view, unions threaten to raise labor costs (salary and benefits). Management sees unions as interfering with the rights of Capital to maximize shareholder return. Management doesn’t see any reason why workers should participate in company business strategy.
Workers, however, have a great interest in management decisions beyond worker pay and benefits. Is the company planning to move the factory to another location or overseas? Is the company’s operations polluting the air and water and hurting the quality of community life? Do workers agree with the chemicals that the workers use to produce the products? Is the company paying equal pay to men and women doing the same work? Is the company using the right promotion standards for selecting employees for promotion?
Germany provides a good example of how companies can shape an acceptable relationship between worker unions and management. Germany passed the Co-Determination Act in 1976 to require at least one third of company board seats to be assigned to employee union representatives in the planning, steering and organizational decisions of German companies. The number of employee board members is not to exceed one half. The idea is to avoid or reduce conflict between labor and management. In giving workers a voice in company decisions, German unions agreed not to agitate for a socialist state.
These employee representatives on the board participate in making high-level strategic decisions, including how to invest profits and whom to hire for senior management positions. Workers also elect representatives to works councils that deal with day-to-day issues such as overtime pay, major layoffs and monitoring and evaluation.
Has co-determination been good for German companies? Some research shows that co-determination has a positive effect, especially through work councils, and some research shows no effect. Co-determination didn’t seem to lead to more corporate growth and profits, nor did it seem to undermine growth either. U.S. Senator Elizabeth Warren found the idea of co-determination to be interesting. She proposed legislation to reserve 40% of board seats of U.S. companies with revenues over $1bn for workers’ representatives.
Recent Developments Affecting the World of Work
The life and well-being of workers are greatly affected by many trends occurring in the world and in the workplace. Consider the following:
1. Covid-19 has had a major impact on work and workers. Covid led to a great number of deaths, many businesses closing down, workers losing their jobs, and companies allowing many remaining workers to work at home. Vaccines were first allocated to senior citizens, health care workers, workers in food production and service, and workers in essential industries. Businesses had to construct new pay arrangements and benefit plans.
2. Companies experienced mounting civic pressure to increase the diversity of its workforce while preventing any discrimination by sex, age, or lifestyle variables.
3. Companies had to increase the flexibility of work schedules and deadlines to accommodate workers who had to meet various family needs.
4. Companies faced growing pressure to reduce the gender pay gap and the racial pay gap.
5. Companies had to establish better rules and regulations bearing on sexual discrimination or harassment.
6. Companies are under greater pressure to be careful on how much automation and digitalization to allow that will hurt the number of jobs.
As the world makes progress toward reducing Covid, will business return to the old normal? What will the workplace look like? Here are some likely outcomes that depart from the old normal:
· Companies will allow more jobs to be done at home. Companies will try to evaluate the relative effectiveness of both office and remote work. The fact that home workers won’t lose time in a twice a day commute to the office each working day needs to be taken into account. On the other hand, the divided workforce might impact negatively on innovation, mentoring, the initiation of new projects, and the company’s culture. Even those who work at home might be asked to work at the company one or two days a week. If so, home-based employees should have a desk or be able to book a desk on days when they will go to the office.
· There will be a reduction in the amount of needed office space and a decline in the earnings of owners of office real estate properties. Companies need to maintain a significant co-located workplace and use digital innovations to improve employee and customer engagement and safety.
· Companies that have good experience with employees working at home are at liberty to hire more persons outside the local area, persons who have talent or could add more diversity to the company’s workforce.
· Companies that resorted to selling their goods to online buyers who would pick them up or rely on the company delivering these goods would be wise to maintain these systems because of the likelihood of future viruses or pandemics.
· Workers will dress more casually in the office because of the freedom they had while working at home.
· Companies will learn more of the value of running a happy and satisfied workforce, even if this means involving some worker representatives to participate in company business strategy.
· More companies will expand their benefit package for employees, including nod pads, free snack food and coffee, and ping pong tables for recreation.
We started with the question of what percentage of U.S. workers are unhappy in their jobs. The answer is close to 50 percent. These workers are probably less productive, have their minds on other things, fail to think creatively about their job and company growth, and may deal poorly with other employees and even customers.
A company is advised to identify the unengaged or disengaged employees and find out the main forces at work. Employee disengagement can be due to bad bosses or supervision, low pay, low opportunity, bad working conditions and a number of other factors. The company must try to remedy each of these depressing causes. Overall, everything starts from the top. If management is casual about its workers, slow to acknowledge or appreciate its employees’ work, these ill effects will continue to occur. So much of this is correctible.
The more basic problem is that U.S. companies are set up to maximize profits. The profits are produced by labor and capital. Labor only receives wages, wages that are often insufficient to cover middle class living needs. Capital, represented by the shareholders, receive all the profits.
Would more workers be engaged if they owned some shares in the companies in which they work? Wouldn’t they see more purpose in helping the company grow and be profitable? This thinking leads alert companies to offer employee savings plans and even better, employee profit sharing plans. Privately held companies can be reformed into ESOPs to capture more employee interest. More new companies can be organized as cooperatives. More companies could accept a worker union with co-determination participation.
Employee experience in the workplace has been impacted in recent times by many factors, including the Covid pandemic, civic pressure to diversify the workforce and to prevent racial or gender discrimination, the rise of digitalization, automation and artificial intelligence, among others. Covid itself has led to more home based employees, more extensive use of digital systems to carry on co-located work, and more company flexibility allowing employees to handle family problems.
The diminution of Covid is unlikely to just restore the old normal. Many practices created in response to Covid are likely to continue in what will be the new normal.
Some Final Questions
Most of this discussion applied to employees working in large shareholding public corporations. The aim was to engage employees to be shareholders too. The assumption was that employees who are also shareholders would be more engaged in helping the company grow and make profits. This begs the question whether shareholding employees actually have enough shares to care. Or whether initial employee enthusiasm is sustained over time. Or the question of whether employees will be depressed as the value of their shares go down in bad times.
Our discussion does not cover employees working in other types of companies. There are a huge number of family owned businesses without stock shares. Family owned companies have to figure out their own solutions to engage and enthuse their employees. Going further, there are many workers who have one or more gig jobs and company loyalty and engagement is hardly likely to take place. We have less hope in these cases to turn employees into partial capitalists. Here unionization is the more promising answer.
- Jack Kelly, “More Than Half of U.S. Workers Are Unhappy in Their Jobs: Here’s Why and What Needs to be Done Now,” Forbes, October 25, 2019. The findings were reported in a comprehensive study of 6,600 workers conducted jointly by the Lumina Foundation, the Bill & Melinda Gates Foundation, Omiya Network, and Gallup.
 Companies with an average of 9.3 engaged employees for every actively disengaged employee in 2010–2011 experienced 147% higher EPS compared with their competition in 2011–2012. https://www.gallup.com/workplace/236927/employee-engagement-drives-growth.aspx: https://employeeengagement.com/gallup-employee-engagement-a-leading-indicator-of-financial-performance/
 Miriam Gottfried, “KKR Executive Sees Progress in Push for Employee Stock Ownership,” Wall St. Journal, February 19, 2001