Dangerous Territory

For many years, we have been working with clients to explain the difference between labor market differentials and cost of living differentials, two related, but different numbers.  Obviously, Mark Zuckerberg has never called us to ask for a tutorial. Put simply, it explains why a cold Midwesterner might give up a 4,000 square foot house to live in a 1,000 square foot home in San Diego—yet pay the same for both dwellings. While a basket of goods might cost more in San Diego, that same former Midwesterner will gladly pay it because they intend on never wearing a parka again, and spending more time outdoors, in the sun, than inside sheltering from the cold.

Labor costs, on the other hand, are all about the supply and demand of certain skills. If too many former Midwesterners with the same set of skills move to San Diego all at the same time, the labor market floods, and the price for their labor goes down. Perhaps the newly warm people don’t care?

Labor markets have been shifting along geographic lines since the US began to emerge from the 2008-2009 financial crisis. CHRC began to see it when clients would call with one-off jobs that were suddenly experiencing turnover, and they couldn’t believe it was due to an increase in wages, but it was. One project, in particular, clearly painted this new picture. We examined roles at various income levels across the entire US expecting all geographies to converge to a national geographic differential of 0% at some point; for all these geographies, north, south, east, west, rural, urban—they never did. The correlations that compensation consultants had typically seen to explain geographic differentials no longer held.  

Our observations are well explained by the writings of economist, Enrico Moretti, including his book, The New Geography of Jobs. He uses examples to explain how the concentration of industries and human capital in certain areas leads to innovation (e.g. Detroit at the beginning of the 20th Century or Silicon Valley at the end of the century).  

So, what will happen if tech talent is incented away from the Bay Area? Will this de-concentration dilute both talent and innovation? Perhaps it could drive down housing costs and the cost of living (but probably not proportionally). Our advice to Mr. Zuckerberg is that the law of unintended consequences will probably take over; the labor market pricing for talent will hold, people will take their talent to other firms, and move wherever they like.  The new recipients of their talent will innovate with it. Mr. Zuckerberg might very well be left with those workers whose skills are not nearly as in demand, who are less likely to innovate, and who are very grumpy about their cost of living. Read More Here

Deference: respect and esteem due a superior or an elder

Recently, when speaking with another woman of a certain age, we were both lamenting the loss of civility in the workplace. This loss of civility far predates working from home, Covid-19, and Zoom Meetings.  As we grappled with this loss and tried to determine just what seems to be missing from the workplace—it came to us: deference.

Our conversation and the death of deference had been sitting in the back of my mind for days. Then enter Memorial Day weekend filled with articles and stories about military heroes. 

One piece that appeared in my newsfeed over the weekend was about PT 109, the ship that President Kennedy skippered in WWII.  At first I couldn’t understand why there would be a new item about PT 109; when I looked more closely I realized it was a reprint of one penned in 1944, shortly after he had recovered from the injuries sustained in that accident. This piece was written more to educate the readers to the terrors of the war in the Pacific Theatre, than it was to make a hero out of a young lieutenant. But as we all know, the rest is history. 

I recently read how much President Obama admired President George H. W. Bush, and visited him just three days before he passed away. I re-watched the remarks and interaction when Number 44 awarded Number 41 the Medal of Freedom, and he began those remarks with “From a decorated Navy pilot who nearly gave his life in World War II …”

It’s history.  How can you have deference without history? You might still find deference in families, because in families we tend to know people’s ages and their histories. We used to have it in companies, because people stayed in organizations their entire careers.  I once was with a group of Nabisco professionals and one leaned over to me and whispered of another, “He is the guy who got the bubbles out of the Oreo cream”—not only with deference, but with awe! When I was a youngster at Coopers & Lybrand, someone confided about the nicest partner I’d met, “He was the youngest person to ever make partner.” 

When people worked together for longer periods of time, folks remembered who had saved your behind—and it didn’t need to be as dramatic as tugging you behind them while swimming three hours in the Pacific. It was the opposite of having to sing your own praises, people sang YOURS because everyone worked together long enough to know your strengths and weaknesses, why you could be counted on, and when you’d been a hero and saved the day.

Summer 2020: A whole new ball game

As the world begins to reopen and summer approaches, parents are still left juggling work and children. A (welcomed) end may be in sight for remote learning, but most daycares, summer camps, and kids’ programs are closed, leaving children perpetually home for the summer. How can America be open for business when so many parents need to remain home to care for children?  

The federal government has tried to help parents during this time, implementing the Families First Coronavirus Response Act (FFCRA), but the measures put in place really only benefit some parents. A recent Time article addresses this same concern. “Businesses with more than 500 employees are excluded from the mandate, and firms with fewer than 50 can ask for an exemption. That’s left more than 59 million Americans… uncovered by those government leave provisions.” Without the option to work from home, some parents are forced to resign in order to care for children.

Like the other structural flaws that Covid-19 has exposed, it’s abundantly clear that there’s a bigger problem with our current childcare system. Elliot Haspel, author of  Crawling Behind: America’s Child Care Crisis and How to Fix It, says, “I think that the crisis calls for a complete re-envisioning of the American childcare system.” Hopefully, we will take what we’ve learned during these times to create solutions that work for all families. Until we do, this will limit the labor supply of those 20 to 45, which are typically key earning years.  Read More Here

Photo Credit: ©Angelina Zinovieva
Photo Credit: ©Angelina Zinovieva

Two Full-Time Jobs

By Lisa Aggarwal

Photo Credit: ©Angelina Zinovieva

Looking for a new job? Many people have gotten one they didn’t ask for. Parents fortunate enough to remain employed have the additional unpaid role of providing full-time childcare, entertainment, and assisted education to their children. Schools are closed. Daycares are shuttered and an estimated 50% will not return to operation in the future. Try working while a two-year-old tugs on your sleeve for 8 hours…it’s great!

Many professionals are tending to their children’s countless needs during waking hours and then working all through the night. If you work outside the home, you may have no choice but to entrust your children’s care to someone else. If you are among the growing number of unemployed workers, finding childcare for when job hunting activities or once re-employed poses another real challenge. Not every household has a reliable caregiver available to remain home. Affordable and available childcare isn’t a hallmark of American culture. 

There are some options for working parents, however. A recent Time Magazine article outlining worker rights during the pandemic highlights that in companies who employ 50 or more people,  the Families First Coronavirus Response Act (FFCRA) could provide a solution. “The FFCRA was intended to prop up the U.S. economy during the pandemic, and includes some new or expanded worker protections that last through Dec 31, 2020. The FFCRA also extends up to 12 weeks of paid ‘expanded family and medical leave’ at two thirds’ pay to employees unable to work (or telework) because they are caring for a child whose school or place of care is closed because of coronavirus. It’s subject to caps and requires that employees have been at their company for 30 days before taking leave.”

Once areas emerge from the pandemic, will parents even feel comfortable sending their children to school and those daycare facilities that economically survive? New reports are surfacing of COVID-19 symptoms affecting children, and aggregate group settings are undoubtedly of higher risk. Childcare solutions are critical to having a population able to return to work. According to the Pro-Market, the blog of the Stigler Center at U of C’s Booth School, “While there is scope for a large rebound in employment even if schools and daycares remain closed, the economy will remain 17 million workers short of normal employment in this scenario. Furthermore, many of those working when schools are closed will only be able to do so if a spouse or partner or who would typically be working instead remains home.” It’s a tightrope we will all walk in finding a safe, yet economically viable way to proceed, and parents will likely continue to have a two-year-old tugging at their sleeve while we walk it. Read More Here

Essential Economics

For some time now, the compensation consultants at CHRC have been keeping an eye on the wages of those in the service sector. We watch the monthly JOLTS data aggregated by the Atlanta Fed and often have criticized news headlines that put an overemphasis on Manufacturing and Construction job gains and losses because they under-emphasize the large percentage of the U.S. economy that the service sector comprises.

We think Covid-19 has changed America’s understanding of how reliant the economy and all of us are on this service sector.

Given CHRC’s attention to this area of the labor market, and the recent wage pressure caused by over demand and under supply, this headline immediately caught our eye: Returning to Business Is Going to Take a Pay Raise. This sentence in particular caught our attention: “The coronavirus has laid bare that without workers to produce and consume their products, even the most formidable companies are just empty shells.” The author was not an HR consultant or a labor economist; he is an investment advisor who writes a column for Bloomberg. 

We agree. If there was already a shortage of workers for the service sector, when we return to normal, whatever the new normal looks like, and whenever normal kinda sorta returns, we do think that some of these roles will see an increase in wages.

Two weeks later we came across the same sentiments, in a theological magazine.  While this author’s vantage point was slightly different, his meaning was exactly the same: “Societal value is more subjective, and even higher-paid workers and executives are now recognizing that a well-functioning society really needs people to provide these services.” This author, like the Bloomberg columnist, referenced The Business Roundtable’s “Statement on the Purpose of a Corporation” that 181 executives signed in August 2019. In the statement, these leaders concede that in addition to shareholders, they also serve stakeholders, which includes employees and customers. 

Nobody knows what the new normal will look like, but we all know what the world’s been like without haircuts and without meals out, exchanging banter with our favorite servers. We know that many people that do invisible but essential jobs—from garbage collection, to hospital laundry, to first responders—have died from Covid-19. The hope of this Human Resource consultancy is that if financial and theological magazines are publishing pieces that reach the same conclusion, perhaps business leaders are synthesizing similarly and the new normal will involve some evolved compensation conversations. Read More Here and Here

Learning Curves

The Covid-19 pandemic has had many learning curves, and no doubt there are many still to come. Those amongst us who never much liked science or statistics have now become quite comfortable with the concepts of R0 and R1, exponential curve rates and trajectories of respiratory droplets. 

Hidden behind the vast statistics of those who have died are the lives lived by each of this virus’ victims. Americans have gained a new-found appreciation of the vital role that “essential workers” play in our everyday life. Not just the essential workers that are first responders and medical workers, but those in so many businesses that do the invisible work. In the case of Cesar Quirumbay, truly invisible work. 

One of those lives prompted Matthew Miller to write to the New York Times to laud the talents and mourn the man from the back room who could sew invisible stitches and smooth wrinkles away. He instructs us that “every obituary is both a remembrance of a life ended and an instruction to those of us still living.” In HR terms, the author and the late Mr. Quirumbay’s boss describe competencies that any employer dreams of: modesty, diligence, collaboration, teamwork, attention to detail, and sophisticated communication skills. For a labor economist, Mr. Quirumbay’s death highlights another cost of this pandemic—the cost of losing human capital while still on the upwards arc of the productivity curve. As for valuing that work, that invisible work, it is skilled labor that took over 20 years to develop and hone. It cannot be replaced easily. Read More Here 

Patiently Potting

During the world wars, people planted victory gardens for food, but also to boost morale. While quarantined in our homes, we are being forced to adapt to an uncomfortable reality: uncertainty. The age of the internet has conditioned us to instant answers and complete information; right now, it seems there is just plenty of instant incomplete information. Each day yields a new study with seemingly contradictory results. With so much uncertainty, we all keep trying to adjust our thinking. But how can we become more mentally resilient?  

Remember when we were in grade school, and we ventured into the scientific method via gardening skills by growing beans in small Styrofoam cups? Every day we would rush over to the windowsill, check on our beans, and watch for new signs of development. The beans sprouted unevenly, at their own pace, and there were one or two that never sprouted at all. We peeked constantly, never knowing when we’d see a change, but we trusted that it would happen.  

Today we wait for the sprouts of hope and conclusive information—which is testing our dedication to the scientific method. Let’s return to that hopeful grade school windowsill to work on coping with uncertainty and practicing our patience. Read More Here 

A Firm Plan for Flexibility

During this time of Coronavirus, we’re all finding ourselves forced into spots we wouldn’t necessarily choose for ourselves. Given the option, many of us would rather exercise at the health club, work down the hall from our colleagues, and enjoy dinner out with friends.  However, when we’re given clear guidelines to steer our behavior, we adjust—yoga and a 7-minute workout at home, zoom meetings and excel spreadsheets at the dining room table, and baking extravaganzas at home. It takes forethought and planning, but for the most part, we’ve successfully adjusted our daily routines. (Or maybe you’ve discovered that without a plan, it all falls apart and the day ends feeling like an unproductive loss!)

This article, posted on the Harvard Law School Forum on Corporate Governance, reminds us that the same holds true in our work lives. We don’t know exactly what the future will hold, but by planning now, and putting some guidelines around Executive Compensation, you won’t need to end the year feeling like your incentive program was a loss. Read More Here

What new reality?

You may have recently seen this funny take on that BBC interview a couple of years ago, or this recent piece in the New York Times. In any event, I think that women who have been working from— and at—home for years, if not decades, are finally having our moment to shine.

My husband would often bluster, “I just can’t work from home; I need to be at the office.” With our current enforced stay at home orders, my husband has been coping by commandeering the desk in our daughter’s now abandoned bedroom. The other day, he found me curled up in the bedroom window seat, hyper focused, engrossed in a project. He very excitedly announced that he had just done his first Zoom call with video. I peered over my glasses and said, “You’re joking?” He replied, “No, why would I have done one before? You know I prefer face-to-face.”

Well, because sometimes…face-to-face isn’t possible.

I have done calls (at kids’ practices) in the rain
And in the dark. And on a plane and a train.
And in a car. And (at other practices) under a tree.
See, it’s really all the same for me.

So I will do them in an old call box.
And I will do them in comfy sox.
I have done them at my parent’s house.
I can control Zoom without a mouse.
And I can host them here and there.
Say! I can do them anywhere!

Maximum Reasonable Adversity

A long time ago in a galaxy far, far away…. a galaxy that did not know Excel, but used a language called Lotus 1-2-3, I was a credit analyst. There I learned financial modeling and was taught a concept called Maximum Reasonable Adversity. In our modeling class, we were assigned a case study about a company that catered meals to airlines. Our credit officers were trying to impart the wisdom that a swing in interest rates or inflation were not the greatest threats to repayment. The greatest risk was an exogenous shock, which while possible might not be probable, at least not highly probable. After much debate, my case partner and I settled on an airline strike: How many weeks of an airline strike could this company withstand and still stay afloat and cover their interest payments?

Enter COVID-19 which seems to have taken the world by surprise. Experts who study pandemics, however, have been modeling the adversity scenarios preparing for the next pandemic. 

A recent Economist article highlights another sort of expert who is always looking around the corner anticipating some exogenous shock that could put a company on its back foot and necessitate an immediate and intelligent human response. For those of us who have been in the HR field for decades, this article is a long overdue exposé on what we really do. For those who complain that HR is always planning for worst case scenarios, constantly assessing risk, and planning for succession, perhaps now you will start to understand the lens through which strategic HR views business: how to stock and cultivate human capital inventory not just for the good times, but to weather maximum reasonable adversity.  Read More Here