Escaping the Poverty Trap

The lowest-paid workers in the United States do its most punishing and tedious work, and they are also the least likely to achieve economic success.

During the first wave of the coronavirus pandemic, the importance of low-paying jobs was recognized and many were called “essential workers.” Yet research shows that the majority of these workers–6 in 10–never escape these low-wage, “poverty trap” jobs. At a time when business leaders are struggling both to fill low-level positions and retain current staff, it’s crucial to understand how workers get stuck in those roles.

To study the complex difficulties facing the low-wage job market, the Bill and Melinda Gates Foundation approached the Managing the Future of Work Project at Harvard Business School. The resulting report, “Building From The Bottom Up,” shows patterns shared among workers that broke out of low-paying jobs, the disconnect between employers and employees in understanding their situation, and how businesses can reinvest in these workers to strengthen the bottom line.

What can employers do to support and retain low-wage workers?

Show them how to advance. The report’s authors, Joseph B. Fuller and Manjari Raman, found in a survey that almost two-thirds of workers would prefer to remain with their current employer if opportunities for advancement were available. Employers often approach low-wage staffing like high turnover is inevitable, but the report shows that isn’t necessarily the case.

Instead, Fuller and Raman found three major themes among workers who started in jobs with low earnings and moved up the career ladder. They had access to:

• Mentorship Opportunities
• Career Pathways
• Skills Training

It’s within employers’ power to provide many or all of those resources, which means it’s within employers’ power to improve worker retention. By investing in career development, and by clearly communicating to employees that opportunities to advance exist, companies can help secure their workers’ economic success.

Listening to workers and recognizing their concerns is the biggest step employers can take to keep their workers happy and retain them at work. That includes factors that prevent their upward mobility (like transportation or caregiving concerns), but also factors improving that mobility.

The current pattern of churn for low-wage workers costs employers far more than retention would, especially when considering indirect costs like the competence an experienced worker provides. This can create a cascade of benefits; employers can help their lowest paid workers and also improve their own business prospects.

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