Two Sigma Impact aims to promote positive social change by scientifically leveraging workforce issues as a driver of value-creation. A new paper describes how.
A new paper by the Two Sigma Impact team outlines our approach to workforce issues as a driver of value-creation–not just for workers themselves, but for companies, investors, and society, too. Inside, we
- Summarize some of the main stressors holding U.S. workers and companies back
- Show how a focus on workforce investment can help, and
- Explore the broad positive impact they believe this approach can create
Why meaningful, high-quality jobs matter
One of capitalism’s great promises, dating back at least to Adam Smith, is that competition in the free market benefits all of society. By many measures, it is true that Americans’ standard of living has improved steadily through much of the postwar era. In recent decades, however, something has gone wrong. Amid the rise of automation and globalization, millions of workers are clearly struggling, even as U.S. companies earn record profits.
People can feel themselves losing ground. More than 90% of those born in 1940 earned more than their parents in real terms, but only about 60% of those born in 1965 did. This figure drops to roughly 50% for those born in the 1980s.¹ A majority of Americans today are pessimistic about the future, don’t think elected officials care about them, and are unsatisfied with the way capitalism is working.2,3 Compounding the challenges are a pandemic that has claimed more than 30 million jobs4 (along with access to healthcare for millions), and the country’s continuing struggle for greater equality and justice.
High-quality jobs lead to improved economic stability and greater opportunity. They offer a path for underrepresented groups to make real progress, and they lead to rising standards of living and life expectancies.
The difficulty millions face in finding solid, meaningful work is directly related to many social ills, while greater availability of good jobs helps individuals and communities to thrive. Indeed, workforce issues are associated with at least six of the UN’s 17 sustainable development goals.5
High-quality jobs lead to improved economic stability and greater opportunity. They offer a path for underrepresented groups to make real progress, and they lead to rising standards of living and life expectancies. As MIT professor Zeynep Ton notes in a recent Harvard Business Review article, improvements in wages and work conditions contribute to “fewer unmet medical needs, better nutrition, less smoking, less child neglect, fewer low-birth-weight babies, and fewer teen births,” among` many other positive effects.6
Searching for a better way
Orthodox management science (embraced successfully by the private equity industry, among others) has incentivized corporate efficiency gains above all. Capital continues to flow toward tech and data-driven businesses, leaving relatively less of it to create and grow businesses that depend more heavily on human labor.
Meanwhile, private equity has tended to view labor as a line-item to be reduced rather than a place to invest, resulting in a large blind spot for the industry. What if there were another, more fruitful way of looking at workforce issues?
What if a specific focus on workforce investment—in effect, helping companies create not only more but better jobs—could both benefit workers and unlock previously untapped value for companies? We believe that it can, and this belief lies at the heart of Two Sigma Impact’s mission.
A growing body of research, supported by years of practical experience across the Two Sigma Impact team itself, indicates that human capital can be a crucial competitive advantage: something companies should invest in, rather than simply a cost to be minimized. Cultivating good jobs can make companies more valuable not only because engaged employees are more productive than disengaged workers, but also because employee turnover can be a tremendously wasteful expense.
More broadly, we believe that by paving the way for greater acceptance of these views, Two Sigma Impact can contribute meaningfully toward a society in which quality jobs underpin better outcomes across many different dimensions, including stronger communities, broader equality and inclusivity, better health, and greater prosperity.
To learn more, download the full paper below, and visit twosigmaimpact.com.