The government, from Congress down to local boards, needs to step up support for programs like apprenticeships that would help small businesses compete in attracting a diverse group of workers, according to executives meeting with lawmakers this month to tackle the issue.
Corporate leaders are appearing before the House Select Committee on Economic Disparity and Fairness in Growth to consider alternative ways for companies to hire and retain employees. The hearings come as businesses across the country are facing pressure to make their hiring more equitable.
The panel is set to hold its second meeting Thursday to discuss how to build up the domestic labor force in sectors such as manufacturing, clean energy and infrastructure and ensure that workers can move up the corporate ladder without needing a bachelor’s degree.
One area of focus will be on apprenticeships and other skill-building initiatives. Business leaders say that expanding the talent pool is necessary not only for corporations, but also for the country’s smaller businesses that have fewer resources to invest in employees and potential hires.
“The talent shortage is very real, and it’s even more real for small and medium-sized businesses because they can’t pay what a larger business can pay,” said Portia Wu, managing director of public policy and U.S. government affairs at Microsoft Corp.
“They often feel like they can’t get the folks they need,” Wu said during the committee’s first hearing last week. “The alternative pathways to getting into jobs and looking at the skill, not the school, as people are hiring make a huge difference. …This is where I think government policy, local workforce boards can be helpful because a small business doesn’t have a dedicated HR person.”
Rep. Jim Himes, the panel’s chairman, said the committee is preparing a report on the private sector’s initiatives to improve employee skills. The panel also is focusing on policy proposals that can support professional development models that have already been successful for major companies as well as small businesses.
“I get really interested in scalable proposals, examples of what the private sector is really doing in addressing the challenges of their lowest-paid employees,” Himes, D-Conn., said last week. “What really moves the needle? What can demonstrate that doing good can also mean doing well?”
An area that will likely come up in the committee’s eventual report is “open hiring,” a recruiting practice that focuses on employing people on a first-come, first-served basis without using background checks on their criminal or educational history.
Roundtable participants noted that opening up opportunities for people who have criminal records is critical to improving the labor market.
“The stigma of these records can hinder the job search or advancement process,” said Svenja Gudell, chief economist for job search website Indeed. “Fortunately, we are seeing some positive trends in labor market consideration for justice-impacted job seekers. Job postings on Indeed noting fair-chance employment policies have climbed 31 percent from May 2019.”
Companies’ diversity, equity and inclusion programs have gained traction in recent years as workers and investors have become more interested in how businesses tackle environmental, social and governance issues.
Corporate America’s embrace of certain DEI initiatives varies. In an analysis of Russell 1000 companies’ DEI programs, nonprofit Just Capital found that even companies that performed the best on racial equity and opportunity metrics may only support certain types of professional development and hiring practices.
In its latest Workforce Equity and Mobility Ranking, Just Capital found that 53 percent of the top 100 companies with the best DEI initiatives disclosed they had an apprenticeship program, compared with 22 percent of the rest of the 900 companies in the Russell 1000 index. Meanwhile, 12 percent of the top 100 companies had a reentry program that focuses on hiring people with criminal records, while just 1.6 percent of the other companies had such policies.
The House committee’s roundtables come as the Securities and Exchange Commission mulls asking the country’s largest companies to provide more information about their workers.
The SEC’s Investor Advisory Committee, which counsels the SEC on regulatory priorities, convened last week for a discussion on which human capital disclosures are the most useful. Panelists told the advisory board that disclosures on wages, equity, training and turnover rates are critical data for investors when deciding on a company’s value.
The SEC in 2020 started to ask companies to list such resources on their Form 10-K annual report disclosures, although companies could cherry-pick metrics and exclude others, such as workplace safety measures and financial benefits.
“I think understanding the strength of wages is actually really important,” especially when the data is compared to a benchmark like a living wage, said Kavya Vaghul, senior director of research at Just Capital. She also mentioned the importance of workplace equity, such as diverse representation measured against population representation in the United States.
“But beyond that, I just want to emphasize that I can’t say that any three key metrics are the most important because I think job quality, as has been focused on historically, has really only looked at regulations around wages and hours. We need to move beyond that,” Vaghul said.
Sarah Wynn contributed to this report.