15/12/20: Impact of Covid19 on families & labor

 

Some interesting research on the less tangible differential impacts of Covid19 pandemic via McKinsey: families with children and families without children

In all categories, impact of the pandemic has been more severe on families with children. Predictably, as parents are facing increased demand on household work and higher pressure of increased density of living.

Closure of schools or flex-model (partial closure) are probably one of the key drivers:

Public safety during the pandemic might (rightly) be the overriding concern when it comes to designing strategic approach to managing the pandemic responses, but as the pandemic drags on, the above impacts are likely to cumulate. Something has to give. One example of appropriate response should be changing or suspending all traditional job performance assessment metrics, and doing so formally. Another point is that allowing increased mobility for smaller families, while keeping restrictions for larger families - an approach that is consistent with the argument that public health restrictions should be applied predominantly to families with greater vulnerabilities (e.g. families with children) is likely to widen the gap between the Covid19 impacts on families with kids and those without. A third point is that public supports should be extended and increased for families with children. 

These points might appear to be obvious in light of the above evidence, but they are by no means a norm in the public policies deployed in many places. 

In some areas, it is harder to design specific policy responses that can target the prevalence of the more severe impacts. For example, McKinsey reference a substantial gender gap in severity of the aforementioned effects: "Our survey data also show that more mothers struggle with household responsibilities and mental-health concerns compared with fathers (at 73 percent versus 65 percent, and 75 percent versus 69 percent, respectively, citing these challenges as either acute or moderate)." However, as McKinsey research shows, there are some responses that employers have been taking to try and mitigate overall negative impact of Covid19 pandemic on social and physical well-being:

The problem is that (1) the above measures are clearly not enough, and (2) the above measures are not targeted specifically to help families with children. Nor do all of these measures apply to all types of employees. In fact, the more vulnerable employees (termed contracts, contingent workforce, etc) are clearly put at a greater disadvantage by many of these measures. At least four of the ten measures listed in the chart above are clearly associated with increased risk of lower earnings and greater sense of precariousness in one's employment/career prospects. Something that is counter-productive in the pandemic over the long run, even if it appears to be accommodative in the short term. 

The implementation and effectiveness of the above measures are also wanting. Furthermore, the above responses tend to apply across the entire workforce, and do not reflect the fact that pressures of the pandemic are distributed disproportionately across different demographics (I mention families with children and women, but the same concern applies to POC households, LGBTQ+ households and so on):

Something has to give. And the public policy responses should lead, not lag, these developments.

Note: McKinsey's full research paper is available here: https://www.mckinsey.com/featured-insights/diversity-and-inclusion/diverse-employees-are-struggling-the-most-during-covid-19-heres-how-companies-can-respond. 

17/4/16: Human Capital, Management & Value-Added

The value of management to a given firm rests not only in more efficient use of physical resources and financial capital, as well as corporate / business strategy, but also in the ability of the firm to identify, hire, retain and enable high quality human capital. This is a rather common sense conclusion that might be drawn by any analyst of management systems and any business student.

However, the question always remains as to how much of the firm value-added arises from managerial inputs, as opposed to actual human capital inputs.

Stefan Bender, Nicholas Bloom, David Card, John Van Reenen, and Stephanie Wolter decided to attempt to quantify these differences. In their paper “Management Practices, Workforce Selection and Productivity” (March 2016, NBER Working Paper No. w22101: http://ssrn.com/abstract=2752306) they note that “recent research suggests that much of the cross-firm variation in measured productivity is due to differences in use of advanced management practices.”

“Many of these practices – including monitoring, goal setting, and the use of incentives – are mediated through employee decision-making and effort. To the extent that these practices are complementary with workers’ skills, better-managed firms will tend to recruit higher-ability workers and adopt pay practices to retain these employees.”

The authors then use a survey data on the management practices of German manufacturing firms, as well as data on earnings records for their employees “to study the relationship between productivity, management, worker ability, and pay”.

Per authors: “As documented by Bloom and Van Reenen (2007) there is a strong partial correlation between management practice scores and firm-level productivity in Germany. In our preferred TFP [total factor productivity] estimates only a small fraction of this correlation is explained by the higher human capital of the average employee at better-managed firms. A larger share (about 13%) is attributable to the human capital of the highest-paid workers, a group we interpret as representing the managers of the firm. And a similar amount is mediated through the pay premiums offered by better-managed firms.”

Human capital value-added is neither uniform across types of employees, nor is it independent of the management systems, which means that increasing the value of human capital in the economy requires more emphasis on the structure of the overall utilisation of talent, not just acquisition of talent. This is exactly consistent with the C.A.R.E. framework for human capital-centric economy that I outlined some years ago, here http://trueeconomics.blogspot.com/2013/11/14112013-human-capital-age-of-change.html, the framework of Creating, Attracting, Retaining and Enabling human capital.

The study also confirms that “looking at employee inflows and outflows, … better-managed firms systematically recruit and retain workers with higher average human capital.”

Overall, the authors concluded that “workforce selection and positive pay premiums explain just under 30% of the measured impact of management practices on productivity in German manufacturing.”

These results should add to questions about the ability of the Gig-economy firms, e.g. online platforms providers for labour utilisation, such as Uber, to significantly improve productivity in the economy. The reason for this is simple: contingent workforce talent pool is at least one step further removed from management than in the case of traditional employees. As the result, it is quite possible that contingent workforce productivity does not benefit directly from management quality. If so, that sizeable, ‘just under 30% of the measured impact’ in terms of improved productivity, arising from better management practices, workforce selection and pay premiums can be out of reach for Gig-economy firms and their contingent workers.

Again, as I noted repeatedly, including in my recent presentation at the CXC Global “Future of Work” Summit (see here: http://trueeconomics.blogspot.com/2016/04/7416-globalization-and-future-of-work.html), the key to developing a productive and sustainable Gig-economy will be in our ability to develop institutional, regulatory and strategic frameworks for improving management of human capital held by contingent workforce.