IWER Faculty Members Coauthor New Report on Management Practices that Foster Economic Mobility

A new report by MIT Sloan scholars reviews and synthesizes research on employer practices that foster economic mobility for disadvantaged workers.

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WorkRise, a research-to-action network on jobs, workers, and mobility hosted by the Urban Institute, has published a new report that reviews and synthesizes academic research on employer practices that foster economic mobility for disadvantaged workers. The report, "Employer Practices and Worker Outcomes: A Landscape Report," was coauthored by faculty affiliated with the MIT Institute for Work and Employment Research (IWER).

Increasing economic inequality is a major problem in the U.S., and the management practices that organizations choose can have an important impact on the lives of workers. Employers have considerable discretion in the management practices they implement; research has shown, for example, that different companies offer different levels of pay and provide different work environments even when hiring workers into seemingly similar jobs.

With that in mind, WorkRise commissioned MIT Sloan Professors Erin L. Kelly, Hazhir Rahmandad, and Nathan Wilmers, together with MIT Sloan doctoral student Arya Yadama, to analyze which employer practices are most beneficial to economic mobility and security for disadvantaged workers. At MIT Sloan, Kelly is the Sloan Distinguished Professor of Work and Organization Studies as well as Co-Director of IWER; Wilmers is the Sarofim Family Career Development Associate Professor, an Associate Professor of Work and Organization Studies, and a member of the IWER faculty; and Rahmandad is the Schussel Family Professor of Management Science, an Associate Professor of System Dynamics, and a faculty affiliate of IWER.

The authors reviewed more than 100 rigorous empirical studies on pay, scheduling, leaves, hiring and promotions, work systems, and diversity, equity, and inclusion (DEI) initiatives. Here are a few of their key findings:

  • Although firms vary in their pay scales, the evidence doesn’t support the idea that pay raises for frontline workers automatically pay for themselves through increased productivity or lower turnover. However, external pressures such as tight labor markets, minimum wage legislation, labor union pressure, or informal norms across an industry sector all can motivate employers to raise wages for low-wage workers.
  • Unstable work schedules reduce workers’ economic security, because such schedules increase workers’ income volatility and increase the likelihood they’ll quit. What’s more, evidence shows that greater scheduling stability can also benefit employers through reduced turnover and greater productivity.
  • In the U.S., employer-provided paid sick leave and family leave benefits are more likely to be available to higher-wage, white-collar workers; public policy interventions are required to promote economic mobility for low-wage workers through paid leave. Research suggests policies requiring employers to offer paid family leave and sick leave could support workers’ economic security while increasing women’s labor force participation.
  • Internal promotion is currently not a dominant pathway out of low-wage work because low-wage workers are often segregated into organizations or job tracks and limited by insufficient high-wage positions to move into. Structured career ladders and clear pathways for skill-building and job-switching are necessary for low-wage workers to achieve mobility through promotion practices.
  • Sector-based training programs that move beyond single-employer strategies for hiring and promotion show promise in creating pathways out of low-wage work. Programs like WorkAdvance in Oklahoma work closely with multiple employers and help train workers for higher-wage jobs.
  • How jobs are structured and designed can provide opportunities for workers to build skills, contribute to the organization, and stay motivated and engaged. A set of complementary management practices known as “high-involvement work systems" have the potential to improve job quality and worker satisfaction and increase job tenure while also making firms more productive. But more research is needed about the effects of these practices—which involve employee participation, teamwork, and training—on low-wage workers’ economic mobility.
  • Research suggests a number of management practices can be effective in broadening access to good jobs for workers of color, who experience historic and structural disadvantage in the labor market. These practices include: goals and numerical targets for recruitment and hiring; employee resource groups and structured mentorship opportunities; and diversity task forces and committees to gather data and oversee firm-wide DEI initiatives and diversify management ranks. Mandatory diversity training is a less effective strategy for creating inclusive workplaces as evidence shows it can create backlash or bias against workers of color.

Read the new WorkRise report by Kelly, Rahmandad, Wilmers, and Yadama.