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Investors Urged to Use Great Resignation to Drive Change

Exacerbation of long-standing issues means women feel forced to choose between quitting work or facing burnout.

The high participation rate of women in the Great Resignation highlights the prevailing gender inequality issues at many firms, recent analyses suggest, but may prove a catalyst for investor advocacy for reform.

Experienced in the US and other large, developed economies, the Great Resignation has been partly categorised as workers moving jobs in a buoyant market to achieve higher pay, as business levels recover from the pandemic. Other evidence suggests it was likely also caused by the exacerbation of long-term inequity in gender, class, and race. A recent study from McKinsey showed parents were leaving jobs in higher numbers and that the issue affected non-white people more than white in the US, finding also that burnout-induced resignations were afflicting women more.

Women left the workforce in the US at twice the rate of men in late 2021. Overall, a record 3% of the US workforce quit their jobs in September 2021.

The trend has been felt most sharply in the US, because of factors such as no state-level maternity care, sub-minimum wage for restaurant workers (nearly 70% of servers are women) and healthcare often being linked to a job.

Gender equality still lags in the workplace with women paid less, affected more by poor childcare options, and doing more unpaid work outside formal employment.

The majority of US parents responsible for all household duties reported symptoms of burnout, said the McKinsey study. “These responsibilities, for example, including caring for older adult family members, most often fall to women, who have also been more likely to cut back on paid work during the pandemic to provide childcare.”

The pandemic affected women in different ways. As women – particularly those from black, indigenous and people of colour (BIPOC) communities – work more in retail, hospitality, care and other sectors that were shuttered during the lockdowns, which are often lower paid, many lost their jobs completely.

Women in white collar jobs who didn’t lose their incomes but worked from home have also resigned in greater numbers. Joe Keefe, President of Impax Asset Management, said women working from home quit largely due to childcare commitments. “The great resignation is mothers forced to leave the workforce. They don’t feel like it was a choice,” he said.

The balancing act of home schooling and working full time meant many women felt forced to choose instead of risking burnout. “In December in the US, we lost 140,000 jobs. 100% of those were women. In the last two Septembers (2020 and 2021) we lost 600 to 800,000 jobs in the US, almost all [of these were] women because that is when the school year starts,” said Keefe.

Wider economic factors

Several stakeholders spoken to by ESG Investor said the issues around gender equality in the workplace should be viewed in the context of racial justice protests, calling on investors to monitor companies’ human resources policies more closely to improve employee satisfaction and retention rates.

Workforce turnover affects parents of colour more than their white colleagues, McKinsey’s study said. “Businesses focused on diversity, equity, and inclusion efforts have cause for concern since as many as 50% of non-white parents indicated in our recent survey that they planned to leave their jobs.”

Meredith Benton, CEO of investment consultancy Whistle Stop Capital and Consultant to As You Sow, said investors should ask why companies are having trouble retaining staff, which could be directly linked to the equity of employees in terms of their gender and race. “We see an increase in attention to retention data because people staying in their job is a big part of responding sufficiently to the variety of forces that are leading companies right now.”

She encouraged companies to release more data on recruitment, retention and promotion by gender, race and ethnicity. “We know the impact of gender and race on staff retention levels in the US is significantly skewed by Covid-19.”

More workforce data, which includes race and gender, is now available due to more companies reporting to the US Federal Equal Employment Opportunity Commission.

Benton said granular metrics are critical to understanding how individual firms are managing social issues, but asserted that there is overall evidence of positive change. “We spoke with close to 100 companies over the last two years and [change in attitude to retention] has come alongside a cultural shift in the understanding of racial tension and dynamics. We have seen a tangible change from companies and investors in their expectations.”

Investors are also now exploring data for potential correlations between employee welfare metrics and overall business performance, Benton explained. “The likelihood of good employees wanting to stay at a company being linked to a company’s overall management performance hasn’t been seen for a very long time in US work culture,” she said.

Systemic change

There has been evidence showing some overall positive effects of Great Resignation. In the UK, according to WTW’s – formerly Willis Towers Watson – Salary Budget Planning Report, inflation and talent shortages pushed companies to increase pay rises to 3.2% this year. “Anticipated pay rise budgets for 2022 rose from an average of 2.9% in July last year,” it said.

Keefe said the pandemic had prompted some companies to adapt their approach to nurturing human capital. “We believe those that empower their employees with choices on working arrangements are more likely to thrive, especially at a time when workers have more bargaining power than in most people’s memory,” he said.

He added it was important for investors to encourage companies to commit to improvements in the areas of paid leave, flexible work arrangements, and remote work arrangements as part of risk management and business continuity strategies.

Organisations such as Interfaith Center on Corporate Responsibility (ICCR) are also using the flux to push for systemic changes, including policies to tackle the US restaurant industry’s low minimum wage. “It is a well-known embarrassment globally that the US doesn’t have maternity leave,” said Nadira Narine, Senior Program Director at ICCR. “Affordable and quality childcare is non-existent in the US. We are going to keep talking about the obstacles that were in place before the pandemic and the ones that are even more exacerbated because of it.”

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