If you work at a foundation, there’s a good chance you’ve participated in at least one conference on the so-called future of work. The conversation usually follows a familiar arc: The rate of technological change is accelerating, automation is threatening many of today’s jobs, and current worker skills are rapidly becoming obsolete. The solution: Improve skills and retrain workers so they can get good, decent-paying jobs.
This narrative has shaped philanthropic and government funding priorities for decades, resulting in millions of dollars in grants funneled to workforce-development programs. The narrative that workers need to change is deeply embedded in media stories and the minds of workers themselves. After all, who can argue with the benefits of more education and more training?
The problem is that education and training address only one side of the labor-market equation — the production of good workers for companies to hire. They ignore the kinds of jobs these companies create. Increasingly, these jobs are low paying and lack security, which explains, at least in part, why employers in areas such as hospitality and retail are currently struggling to hire workers. Consider that the nation’s two largest employers, Walmart and Amazon, offer average annual compensation of just $25,000. Raising wages by $1 or offering retraining is unlikely to generate better economic outcomes for workers if the jobs themselves don’t measure up.
In a recent study, my organization — Institute for the Future — conducted in-depth interviews with more than 50 predominantly nonwhite workers from across California, all making less than $15 an hour. Despite their diverse backgrounds in terms of age, race, gender, education, and professional expertise, their work experiences were strikingly similar. Instead of steady jobs with predictable schedules and decent pay, all were cobbling together incomes from various part-time jobs, gigs, and contracts.
They all showed remarkable levels of inventiveness and agility. Most were working on improving themselves — taking online classes, finding online mentors, reading how-to books, attending college. They were fulfilling their part of the bargain, but in the process, they had become more overworked, more stressed, and less economically secure. Why?
The problem was with the jobs themselves. The opportunities available to them were in companies that rely on contingent, low-paid labor and provide paltry or nonexistent worker benefits — a problem that has been exacerbated by on-demand platforms such as Uber, DoorDash, and Instacart. This corporate model, which dominates the economy today, disempowers workers and perpetuates economic insecurity. It has led to stunning wage disparities between executives and workers — 320 to 1 on average.
We are witnessing a historic transformation in the nature of work and jobs, and it needs to be met with an equally robust response from philanthropy. To draw greater attention to this issue, the Institute for the Future this week launched the Equitable Enterprise Initiative with initial support from four major grant makers — the Conrad N. Hilton Foundation, the W.K. Kellogg Foundation, the James Irvine Foundation, and the Robert Wood Johnson Foundation.
The two-year research initiative will serve as a hub for research and policy innovations aimed at promoting and establishing what we call “equitable enterprises,” which include models such as worker-owned cooperative businesses and community trusts. We hope this work will inspire more foundations to shift priorities from only retraining workers to also promoting the creation of good, economically secure jobs.
Changing Narratives
That process starts by supporting efforts to change the narrative about the root causes of low wages and economic insecurity from a focus on individual worker responsibility to a focus on how the corporate structures that predominate today create economically precarious conditions for many workers.
This is analogous to the narrative shift about Type 2 diabetes from blaming individuals for not eating well or exercising to emphasizing changes needed in a larger system responsible for producing unhealthy foods and lifestyles. Our study found that many low-income workers internalize blame for their precarious work conditions and see themselves as the only thing they have the power to change. Philanthropy can help change the narrative by refocusing investments on the systemic conditions that lead to economic insecurity for many workers.
Beyond fueling a narrative shift, philanthropy can play an important role in promoting new types of business structures that put worker and societal interests above or at least on par with profits.
Equitable enterprises exist today but operate on the margins of mainstream business activities and have trouble obtaining capital. This is unfortunate since they have proven especially resilient during the Covid-19 pandemic. While mainstream businesses often responded to the health crisis by laying off workers and cutting pay, many equitable enterprises took a different course.
Employee Ownership Works
A study conducted by Rutgers University and funded by the Employee Ownership Foundation found that during the pandemic, employee-owned firms were “three to four times more likely to retain non-manager and manager employees, 3.2 times more likely to retain staff,” and “significantly less likely to reduce employees’ hours or pay.”
One such company was Taylor Guitars in El Cajon, Calif. In January, the founders transferred ownership of the guitar manufacturer to its 1,200 employees through an employee stock ownership plan, or ESOP, which eliminates conflicting interests between employees and shareholders. Early on in the pandemic, while many businesses around the country were laying off workers, Taylor retained its full staff.
Another example, Mondragon Corporation in Spain, did not lay off any of its 70,000 workers during the health crisis. The $14 billion company, which consists of 96 worker-owned cooperative enterprises producing a range of products and services, avoided layoffs by temporarily trimming wages by 5 percent when the businesses were forced to shut down during the height of the pandemic — a solution the workers themselves supported. The Mondragon cooperatives must generate profits to stay in business, but their primary mission is to provide economic security for worker-owners — not lavish dividends and shareholder returns.
Some communities are also starting to broadly embrace cooperative business approaches. The city of Santa Clara in the heart of Silicon Valley launched a Worker Cooperative Initiative this year to help privately held companies transition to employee ownership when owners retire — rather than see those businesses potentially sold to outside buyers.
Philanthropy can elevate knowledge about the benefits of equitable enterprises by investing in their creation and growth. The James Irvine Foundation, for example, supported the creation of Turing Basin Labs, a worker-owned cooperative staffing agency that matches Bay Area residents with jobs paying $20 an hour and up. Purpose Foundation works with businesses such as Firebrand Artisan Breads in Oakland, Calif., to help them convert into employee-ownership models.
Filling Information Gaps
Unfortunately, there is a dearth of information and knowledge about how to start and manage such enterprises. The estimated 13,000 business schools worldwide focus almost exclusively on the gospel of shareholder value creation and profit maximization. Apart from a few events and gatherings, where does one learn how to start an equitable enterprise? How many lawyers, accountants, and consultants are available to provide advice to budding leaders of these organizations?
Philanthropy can assist here as well by investing in academic centers and schools that educate people about different enterprise models and train a new generation of leaders in their creation and stewardship. One goal of the new Equitable Enterprises Initiative is to provide tools and resources to leaders in different fields, including those in business schools, about how to adopt these models.
We recently marked the 50-year anniversary of Milton Friedman’s famous declaration that the only social responsibility of business is to increase shareholder profits. After half a century of living Friedman’s dictum, it’s time to issue a new declaration: The only responsibility of business is to maximize the equitable distribution of its economic returns. Philanthropy can help lead this transformation to equitable economic prosperity.
