Field Notes: Impacting Job Quality & Quantity

Morgan Simon of Pi Investments, a 100-percent impact investor, recently shared in the Stanford Social Innovation Review how she worked with Huntington Capital to increase the fund’s impact management practices. As a Limited Partner in the Huntington Capital Fund III, Pi wanted to see jobs created–but not just any jobs:

“[J]ob creation” is a slippery concept: Outside of true innovation and demand generation, we can’t do much more than move jobs from one zip code to another. And even when jobs are created in a low-income community, if they are low paying, then by definition they are precisely what keep those communities locked into cycles of poverty.

How does that work? In general, we don’t just have a national unemployment problem; we have an employment problem, where more than two-thirds of children in poverty live in households where one or both parents work. The vast majority of these households are led by people of color, notably African Americans and Latinos who are twice as likely to be working poor.

This is simply because the minimum wage does not provide a living wage for most American families. To earn a living wage, a typical family of four collectively needs to work more than three full-time, minimum-wage jobs (a 68-hour work week per working adult, if there are two adults). Certainly many of us are used to long hours, but I doubt we would be willing or happy to do so—let alone be able to support our families—for $7.25 an hour!

They started by doing research into the job-quality needs of beneficiaries in order to ensure that those needs were taken into account when developing metrics for success. Some key highlights from their research are featured below:

• Paid sick day provision increases morale and productivity. A 2014 study on Connecticut’s paid sick days law—the first state-wide policy in the nation—found that after the law was implemented in 2012, one-third of businesses reported improved worker morale, while 15 percent saw increased productivity and a reduction in the spread of illness. Moreover, only 1 in 10 businesses reported a 3 percent or more increase in payroll cost, which gains in productivity and morale likely offset.
• Paid sick days prevent “presenteeism” (when sick workers report to work, but are unwell and unproductive). The business cost actually exceeds that of absenteeism—$160 billion higher than that of absenteeism, according to one study.
• Paying a living wage reduces turnover, which is widely recognized as costing as much as 1.5 to 2.5 times an employee’s annual salary.
• Paying a living wage reduces employee theft. Employees are less likely to steal and less likely to collude with others to steal if paid higher wages.
• Worker ownership decreases turnover, and increases productivity and overall commitment to the well-being of the enterprise—which anyone who has ever held stock options knows intuitively. According to research from Rutgers University, implementing employee ownership leads to a 4 percent permanent increase in productivity and 2 percent increase in shareholder value.

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