Commentary: A pay raise isn't everything in avoiding a wave of resignations

LONDON: A meeting with a group of manufacturing company executives cannot be guaranteed to surprise, but I recently found myself in a gathering that did exactly that.

The managers came from a mix of businesses. Some made cars, one made fertiliser, others produced steel or glass or perfume.

All present were troubled by the COVID-related shortages that have struck supplies of everything from computer chips to Ikea mattresses. The lack of workers in what has been called the Great Resignation was also vexing.

More striking though, was what was said about the prospective shortage of employees, especially younger ones, once the pandemic ends.

“We need to revolutionise the way we make roles in manufacturing appeal to younger generations,” said one executive from a global company with thousands of employees. “If we don’t, we’re not going to have a workforce to make our products.”

STAFF TURNOVER BECOMING COMMON

Most staff at this company did not have the luxury of worrying about whether they could work from home or not. They did shift work on a production line in a hot factory.

Isolation was common, so was staff turnover at a time when, as the executive said, “there are so many other options out there”.

Factory owners faced a staff crunch well before COVID-19 struck. Studies as far back as 2018 predicted US manufacturers risked a shortage of 2.4 million workers before 2030, largely because of the industry’s “negative perception” problem.

But sitting in that meeting, I was reminded of the advice Joe Biden offered recently when he was asked about labour shortages that have left US businesses struggling to find workers: “Pay them more.”

Would it help, I asked the manufacturing executives, if they simply paid young people more? Not as much as you might think, I was told.

PAY ISN’T THE INCENTIVE IT USED TO BE

As one person put it, pay is obviously relevant but it is “absolutely not the kind of incentive that it’s been for older generations for many decades and we can’t rely on it”. 

The manager said this was already the case for millennial workers, the oldest of whom turn 40 this year, but was even more apparent among the so-called Generation Z employees born since 1997.

The idea that pay is not everything is not new.

The influential American psychologist, Frederick Herzberg, showed in the 1960s that pay rates are a “hygiene factor” that do not foster job satisfaction by themselves, but prevent dissatisfaction — just as good hygiene does not cause good health, but will cause disease if lacking.

THE ‘GREAT RE-EVALUATION’

Still, if attitudes to pay are shifting, it has profound implications for employers, and not just factory owners.

It would also chime with what might be called the Great Re-evaluation of working life that the pandemic seems to have spurred for some employees.

A striking 15 million-plus Americans have quit their jobs since April, and 40 per cent of employees in the US, Australia, the UK, Canada and Singapore say they are at least “somewhat likely” to quit within the next six months, a McKinsey report showed last month.

Worryingly for employers, nearly two-thirds of those thinking of leaving say they are ready to go with no new job in hand.

Tellingly, pay was not the main reason cited for jumping ship. Rather, the top three factors people mentioned were feeling undervalued by their organisations, or by managers, or not feeling as if they belonged.

MORE RECOGNITION, MORE AUTONOMY, MAKE WORKING LIFE MORE ENJOYABLE

So what is the answer? Several executives cited more autonomy, more recognition, more flexible hours, better holidays and anything that generally made working life more enjoyable.

I suspect they are correct, especially after speaking last week to a 34-year-old Brit named Sophie Munn, a digital marketer at consumer goods group Unilever.

Four years ago, she was on the verge of marrying a school teacher who had two months off in summer, when she decided to take advantage of Unilever’s unpaid leave scheme.

It allows UK staff to take up to six months and return to either their old job or an equivalent role, without leaving their pension plan or losing other benefits.

As a result, Munn’s planned three-week honeymoon turned into two months of travel, from Bali to Borneo and California, that left her feeling grateful and with firm views on the significance of pay.

“Salary is important,” she said. “But I want to live my life.”