It is a simple equation: we provide our labor in return for compensation. That compensation is valuable in so far as it helps us meet our needs. And our current system is failing to do that.
Maslow identified our primary needs as “Physiological.” Food, water, shelter, warmth, rest, and health top this list, and these survival instincts are the most powerful voices in our head. Most working Americans’ incomes leave these needs to chance: almost 8-in-10 live paycheck-to-paycheck and almost 7-in-10 have less than $1,000 saved. That means groceries—the #1 reason people carry credit card debt—are at risk. Housing—the cost of which is rising over four times faster than income and just hit another record—is at risk. And health—now correctly defined through mental terms in addition to physical safety—is deteriorating through burnout.
If work cannot even reliably meet primary, physiological needs, then work is not a sustainable choice.
Employers—by force of the labor market—are starting to realize this. Spending on employee well-being strategies is expected to rise about 22% in 2021. While that is a good sign, the still leaves the average budget per employee at a paltry $238 per year.
The core problem is that wages are not keeping pace with the costs of essential needs (much less the safety, relationship, esteem, and potential needs) and the only solution employers have come up with is to try to raise wages. Unfortunately, with only 15% of American workers confident in their ability to manage their money, giving them a little more does not solve the problem.
Increasingly complex compensation and benefit structures combine with higher costs of living and confusing financial systems (i.e. mortgages, insurance, and debt vehicles) to keep the average consumer thoroughly confused on how to navigate their spending plans. Employers—instead of providing direct relief to the most challenging problems—respond with nominal wage increases.
The solution is clear but difficult: employers must find a way to create a compensation system that reliably meets the needs of their people. That means focusing on the outcomes of the compensation instead of the inputs. How can employees leverage the potential value of their cash, benefits, and rewards to not only meet their basic needs, but their personal goals? Right now, employers lack of direction and innovation is putting their workforce at risk.
Instead of wage bumps that are likely to be outdone by competition, why not spend more than 0.4% of salary on well-being programs that can directly impact outcomes? Why not provide guidance and solutions that meet the immediate needs of your team? To put it another way, instead of providing a 3% cost-of-living wage increase, why not raise wages by 2.5% and invest in programs that create meaningful outcomes and leverage dollars instead of just throwing money at the problem?
Employers who think outside of traditional compensation structures and embrace the needs and wants of their people will win the war for talent and profit in the next decade. Instead of focusing on how to get employees invested in their organization, it is time for organizations to think about how they can invest in their people.