Income inequality highlights US manufacturing stress

02 November 2017 Consulting.us

Stagnant salaries and global supply chain flux are hitting US workers where it hurts the most - in their pockets. A new report assesses the challenges facing the US manufacturing sector and growing income divide between knowledge and labor intensive workers. 

America’s growing divide between the haves and the have-nots has been starkly illustrated in a new report from McKinsey & Company. In ‘Making it in America’ the leading consultancy firm assesses the changing landscape of the US labor market over five decades, concluding that lower-income and middle-class demographics have seen their incomes stagnate in relative terms, while a super-rich minority have enjoyed a wealth explosion.

Many workers not making it in America

McKinsey researchers found that, for the vast majority of American workers, incomes adjusted for inflation are no higher than they were in the early 1980s. The top quintile, however, has flourished with a compounded annual growth rate (CAGR) of 1.83% from 1983 to 2013. Average income in the top quintile now stands at $160,000, double that of the second-best performing quintile.

Labour incomes not growing in real terms

Workers with no college education are less secure against the wave of outsourcing and job cuts since the recession. Almost 8 in 10 (77%) of the 7.2 million job losses caused by the economic slump affected workers with no more than a high school diploma. Meanwhile graduates losing out on tighter competition in the white collar sphere have colonized traditional blue collar sectors.

The consequence is a double blow for unskilled workers, McKinsey reported, who bear the brunt of redundancies and are forced to compete with higher-qualified rivals for limited jobs. Talent is wasted in both directions, with overqualified graduates occupying blue collar space while expensive college educations are forgotten.

Capital intensive industries hit hardest

A graduate debt crisis was highlighted by the McKinsey researchers. National student debt has exploded to $1.34 trillion in 2017. Little over a decade ago in 2005 the debt was less than a third the size at a still alarming $400 billion. Saddled with debt, the under 35 graduate cohort have also seen their real wages shrink in the past three decades.

Regardless of education, all workers are also confronted with rapidly rising rental costs and unaffordable property values. Employees in the bottom quintile can expect to fork out at least half of their salary on rent and utilities alone.

Labour share of national incomes declined

Changing times

The employment landscape is changing in a way that poses serious obstacles for workers who lack the flexibility to cope with global business trends. Outsourcing, the use of contractors and temporary workers, the emerging ‘gig economy’, and harsher contractual stipulations have undermined the stability employees enjoyed in decades past. At the same time companies are cutting back on health, insurance and pension plans that have provided a lifeline for millions of families.

Automation-effect

The impact of automation will fill volumes of future McKinsey Global Institute reports but was given special mention here as likely to disproportionately impact lower skilled workers. In such sectors - which include hospitality, transport, and manufacturing among others - more than 60% of current jobs face being automated in the near future.

Even without the threat of automation or the impact of the recession, capital intensive industries have been in broad decline in the US for decades, McKinsey found. The biggest real wage drops were found in construction, transportation, and retail - which employs 10.9% of the private sector’s working population.

By contrast salaries in the financial sector - which accounts for 5.3% of private sector workers -  have shot up. McKinsey reports that this complements a broader productivity shift from labor intensive work to knowledge intensive processes. Within the world of capital-light industry, the report suggests that ‘superstar’ companies are absorbing huge profits and filtering them in-house among executives and highly-ranked professionals.

Boosting the manufacturing sector should be a pillar of US economic policy over the coming decades, McKinsey notes. Targeted spending could help generate millions of jobs but technology and global supply chain flux will be powerful factors in determining the satisfaction, health and take-home pay of the majority of workers.

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Korn Ferry rolls out SoFi financial wellness products to its US workers

16 April 2019 Consulting.us

Consulting firm Korn Ferry has partnered with personal finance firm SoFi to offer financial products and tools to its US workforce.

Financial stress is a heavy burden on US workers, with long-term stress often leading to mental and physical conditions. Stress reduces the ability of the immune system to fight off bacteria and viruses, while chronic stress can impair memory and increase aggression.

Financially stressed workers are also less productive, with an estimated $250 billion in US annual wage losses attributed to the effects of stress, according to a 2017 Mercer study. The average American employee spends 13 hours per month worrying about their financial security.

The central issue related to stress at work is low pay, according to surveyed employees, followed by inadequate staffing and company culture.Korn Ferry rolls out SoFi financial wellness products to its US workersFirms will sometimes implement financial wellness programs as a part of their overall benefits package, aiming to create happy and healthy workers with hopefully less outlay than massive salary increases. For firms that pay competitive wages – like most consultancies – financial tools such as investment advice and budgeting software are another feather in the cap of an impressive overall benefits package meant to attract and retain top-end talent in a shrinking market.

Likewise, human resources consultancies such as Korn Ferry have to set a good example with their own benefits and practices outside of the simple goal of effective talent management. After all, how can you expect companies to trust you as a benefits advisor if your own organization doesn’t have a first-class set-up?

To this end, Korn Ferry has further expanded its financial wellness offering for its US employees through a partnership with online personal finance company SoFi. Korn Ferry workers will now be able to access SoFi’s student loan refinancing, personal loan, home loan, and investing products, as well as financial guidance via SoFi financial advisors.

“We offer a complete package of wellbeing benefits that appeal to our colleagues’ physical, emotional, financial, and social wellbeing,” Brian Bloom, vice president of global benefits at Korn Ferry, said. “This new financial offering from SoFi is a natural addition to our Korn Ferry Cares package. We continue to look for new offerings and services to help our global Korn Ferry colleagues and their families.”

Korn Ferry’s global workforce is more than 50% millennials and Gen Z – groups that would be especially well served by SoFi’s refinancing, loan, and advisory offerings.

SoFi’s roots trace back to a loan pilot project devised by a group of Stanford business school graduates, wherein alumni would offer loans to low-risk students. Since 2011, the San Francisco-based firm has expanded to employ more than 1,000 people, and posted $547 million in revenue in 2017.

Korn Ferry and SoFi previously worked together on KF Advance, which expanded career development offerings to SoFi’s 600,000 members. The platform delivers online assessment, resume review, career coaching, and other services drawing on Korn Ferry’s extensive expertise in the area.