Most executives say they want more contract and temp workers. A majority of those workers say that’s not good enough.

Prop 22 protest
Jorge Vargas joins other rideshare drivers in a demonstration in November 2020 urging voters to vote reject Proposition 22, a ballot measure that exempted companies like Uber and DoorDash from California’s AB-5 law.

  • Contract workers “overwhelmingly” want to be permanent employees, according to a new McKinsey-Ipsos survey.
  • But executives say they plan to rely more heavily on contract labor, McKinsey previously found.
  • The findings reveal a huge divide between workers’ wants and those of their bosses.
  • See more stories on Insider’s business page.

Around a quarter of Americans say they work mostly in the gig economy, and 62% of those workers say that they’d rather not, according to a survey published Wednesday by McKinsey and Ipsos.

“Gig workers would overwhelmingly prefer permanent employment,” the survey found.

That preference is even stronger among immigrants and workers of color, who disproportionately make up the gig workforce.

Among those groups, 72% of Hispanic and Latino gig workers, 71% of Asian American gig workers, and 68% of Black gig workers said they’d rather be permanent or non-contract employees, as did 76% and 73% of first- and second-generation immigrants, respectively.

McKinsey and Ipsos surveyed 25,000 Americans over the spring of 2021, and 27% percent of those surveyed said their primary job at the time was as a contract, freelance, or temporary work.

But their resounding preference for the security, benefits, and legal protections that come with employee status could encounter some tough resistance: their bosses.

Globally, 70% of executives – mostly from large US firms – said they plan to ramp up their reliance on contract and temporary workers, according to a McKinsey study from September.

Corporate America has aggressively opposed efforts to reclassify contractors as employees, in many cases arguing that workers prefer the flexibility that gig work claim to offer. But McKinsey’s latest findings suggest that executives – often citing surveys that their own companies funded – may not be as in touch with workers’ needs and wants.

While companies like Uber, Lyft, DoorDash, Grubhub, Amazon, Facebook, and Google have played leading roles in familiarizing American consumers with the gig-based business model, they’re far from the only ones who have leveraged contractors to skirt labor laws and minimize their costs. (Insider has contacted the above companies for comment, and will update this story if they respond.)

Executives in the lodging, food service, healthcare, and social assistance sectors, are especially keen on relying more heavily on contractors, according to McKinsey.

As Insider previously reported, the COVID-19 pandemic exposed how the tech industry’s push to build their empires on the backs of contractors has failed American workers, who abruptly found themselves without healthcare, sick pay, workers’ compensation, and other benefits guaranteed to employees.

Read more: Biden could be the most pro-labor president in decades. These 81 government power players will take a major role in shaping policy during his administration.

That model also hit taxpayers hard, as they subsidized unemployment benefits for contractors laid off by multibillion-dollar corporations that, despite record profits, hadn’t contributed a dime to those funds on behalf of their workers. Taxpayers coughed up $80 million in pandemic assistance for around 27,000 Uber and Lyft drivers who lost their incomes.

State and federal lawmakers are increasingly considering ways to secure better pay, working conditions, and legal protections for contractors, from California’s AB-5 to recent talks between unions and app companies in New York, though experts say more wide-reaching labor law reforms are needed.

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Stimulus and COVID fears are keeping millions of Americans from rejoining the labor market, BofA says

hiring sign coronavirus
  • Some 2.5 million Americans won’t rejoin the labor force until late 2021, Bank of America said.
  • Virus fears and boosted unemployment benefits are keeping them from seeking work, the bank added.
  • Retirements and COVID-19 deaths will leave a more permanent drag on participation, BofA said.
  • See more stories on Insider’s business page.

The rapidly accelerating economic recovery is running up against labor shortages. The snags are temporary, but they hint at permanent changes to the US job market because of the coronavirus pandemic, according to Bank of America economists.

Stimulus, COVID-19 vaccinations, and reopening all helped hiring rebound in recent months. March job additions were the strongest since August, and consumer spending gauges suggest healthy demand will keep payroll growth robust into the summer. Yet as businesses rehire in preparation for a pickup in demand, some are reporting difficulties in finding workers.

While some 9.7 million Americans are officially tallied in the government’s unemployment gauges, another 4.6 million workers exited the labor force during the pandemic, the team led by Joseph Song said in a note to clients. More than half of those workers will likely rejoin the labor force by the end of the year, but face a few obstacles before they do so.

For one, fears of catching COVID-19 and its more contagious variants still loom large. Those concerns are likely playing a role inkeeping Americans from rejoining the workforce and looking for jobs, the economists said.

Low-income Americans might also hold off on seeking work because of stimulus’s disincentive effects, the bank added. The Biden administration’s $1.9 trillion support package included a $300-per-week expansion to unemployment insurance through September. While smaller than the CARES Act benefit, the latest boost could be leading some Americans to stay on the sidelines for now, Bank of America said.

“Our estimates suggest that those who previously made less than $32,000 would be better off in the near term to collect UI benefits than work,” the team added.

Still, Bank of America expects those 2.5 million Americans will rejoin the workforce by the fall as vaccination continues and the stimulus benefit fades. The remaining 2.1 million will take much longer to join the job market, or may not rejoin at all.

About 700,000 Americans are expected to have left the workforce due to a mismatch between their skills and available job openings. Training programs can help close the gap but bringing those workers back will take some time, the economists said.

Separately, 1.2 million workers retired during the health crisis and are unlikely to seek work once the country fully reopens. Another 140,000 workers have been lost due to COVID-19 deaths, the team estimated.

These longer-term worker shortfalls will influence economic data in two ways. At first, accelerated hiring will see the unemployment rate fall throughout the year. Tighter labor-market conditions will then lead to faster wage growth as businesses pay more to fill their openings.

BofA
Source: Bank of America Global Research

Yet those encouraging readings will rest on a less optimistic foundation. The millions of Americans that are unlikely to rejoin the workforce until the fall will leave the labor force participation rate well below its pre-pandemic level.

There is a “high risk” the participation rate doesn’t fully recover, and demographic trends could drag participation steadily lower over the next decade, the economists said.

Bank of America reiterated its forecast for the unemployment rate to fall to 4.2% by the end of the year. The benchmark will then return to its pre-pandemic low of 3.5% by the end of 2022, the team said.

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Out of 1,548 Goldman Sachs US executives, 49 are Black

David M. Solomon, President and Co-Chief Operating Officer of Goldman Sachs, speaks during the Milken Institute Global Conference in Beverly Hills
David Solomon, CEO of Goldman Sachs, speaks during the Milken Institute Global Conference in 2017.

  • Out of 1,548 top executives at Goldman Sachs in 2020, 49 were Black, the bank said Tuesday.
  • The 49 Black leaders represented 3.2% of all executive leadership at the bank, a slight rise from 2.7% in 2019.
  • Goldman Sachs CEO David Solomon said he would make improving the diversity of the bank’s workforce a “personal priority.”
  • See more stories on Insider’s business page.

Goldman Sachs said on Tuesday that out of its 1,548 senior executives in the US, 49 were Black.

Out of those 49 Black executives, 25 were Black women and 24 were Black men, according to its 2020 sustainability report.

The 49 Black executives represented 3.2% of all executive leadership at Goldman Sachs in 2020, which was a slight improvement from 2.7% in 2019.

The bank employed a total of 21,040 people across the US in 2020. Tuesday’s report showed that 1,425 of these workers were Black, including 649 men and 776 women.

This means they made up 6.8% of the bank’s US workforce – a step up from 6.6% in 2019. Census data shows that 13.4% of the US population is Black.

In the executive summary of the report, CEO David Solomon said there was “still a long road ahead” on improving the diversity of the bank’s workforce, adding that he would “continue to make this effort a personal priority.”

Read more: Which Wall Street banks and private-equity firms are handing out special bonuses and pay bumps to junior talent

He added that Goldman Sachs has “set additional goals for retaining and promoting talent at the vice-president level.”

Goldman Sachs didn’t immediately respond to Insider’s request for comment.

The report comes one month after the bank announced it was set to invest $10 billion in an initiative called “One Million Black Women.” The project aims to reach 1 million Black women by 2030 through investment in healthcare, jobs, education, and access to capital.

Goldman Sachs has a higher proportion of Black employees in senior executive positions than Morgan Stanley, which revealed in its 2020 Diversity and Inclusion report that it had 37 Black leaders out of 1,705 executives in the US.

Bank of America’s 2020 Human Capital Management report showed that 201 out of its 4,191 executives were Black, while Citigroup’s 2019 Diversity report said that out of 108 executives, four were Black men, but there were no Black women.

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The pandemic could accelerate job automation – here’s how the change would impact cities, the labor force, and inequality

automation
According to the World Economic Forum, nearly 40% of US jobs are at risk for automation.

  • Hyejin Youn is an assistant professor of management and organizations at Northwestern University.
  • She says the pandemic may speed up job automation and widen gaps in wages, skills, and social capital.
  • This could lead to the downfall of many US cities, but Youn hopes it will instead spur innovation.
  • See more stories on Insider’s business page.

For more than a year now, many of us have worked from home, pets on laps, children babbling just offscreen. The experience has been a revealing one. Some of us have learned to embrace the flexible hours, the five-step commute, and the relative dearth of pointless meetings; others have felt disengaged and burned out by the challenges of collaborating on Zoom.

But the pandemic has also exposed a more significant split in the labor market, one that has experts worried as they speculate on the long-term impacts of the crisis.

“What we now see very clearly is that some jobs can be done from home, and others simply cannot,” said Hyejin Youn, an assistant professor of management and organizations at the Kellogg School. “Distinguishing between these types of work can help us track inequities in the labor market across cities.”

So far, the trends are worrisome. Those who can log on from home have been largely unaffected, whereas those whose jobs require a physical presence have either been laid off or faced with the choice of protecting their health or guaranteeing their next paycheck. And as companies look to cut costs, more and more jobs are now under threat of automation, which Youn fears may widen the gap between cities that flourished pre-pandemic and those that were already struggling.

“There’s always the hope that a crisis like this will spur innovation,” Youn said, “and nobody knows precisely what the long-term outcomes will be. But the concern is that rather than shaking things up, the pandemic might simply reinforce the system we already have.”

From “optimization” to automation

One consequence of remote work is that companies might accelerate the pace of automation, in part because they’ve had a chance to monitor more workers online and assess which tasks – or entire jobs – a machine might do more quickly.

With nearly 40% of US jobs at risk of automation, according to the World Economic Forum, the performance data from 2020 might have significant implications. When an employee’s every click, step, or delivery stop is recorded in digital form, a company can learn to optimize that work – and perhaps codify human routines into processes that are better suited to machines.

Using digital information, companies can identify and optimize certain task routines by finding better ways of arranging the tasks within the routine, micromanaging human workers, and developing machines to take on the tasks.

“This is the uncomfortable truth,” Youn said. “Recording an employee’s work is preparing for the day when you replace them with a machine. And this will lead to further gaps in wages, skills, and social capital.”

And while there will still be some tasks that are not codifiable – especially ones that require tacit knowledge or empathy and hospitality – certain jobs are sure to be streamlined and passed on to less-skilled laborers or organized into routines that can be handled by machines.

“Technology has always increased inequity,” Youn said. “Now we just have the means to make it happen even faster.”

The impact on cities

If these trends do accelerate, the effect on America’s urban landscape could be devastating. Youn has previously studied the ways in which automation affects US cities unequally, and she worries that this disparity will only worsen as businesses adapt to post-pandemic life.

“Cities might segregate further,” she said. It’s likely that wealthy, productive hubs like Silicon Valley will return to something resembling business-as-usual, given how valuable in-person collaboration can be for the kinds of breakthroughs on which tech thrives. On the other hand, the outlook for a small or medium city might be even more bleak than in 2019.

The impact of this geographic rift is hard to measure, Youn said, but it likely doesn’t bode well for the effort to solve the nation’s social and political polarization.

“It might make the echo-chamber problem worse, with certain kinds of high-skilled workers hermetically sealed from everyone else,” she said. Mountain View might come to seem even further away from Baltimore. And the prospect of remote-work patterns extending beyond 2020 is threatening to exacerbate the winner-take-all economy.

“It’s a well-known phenomenon in economics that social mobility increases after certain kinds of crisis, like war,” Youn said. “But this crisis appears to be different. It’s pushing us in the opposite direction.”

Reactive innovation

One source of hope is that the pandemic might spur new innovation. It’s certainly been a time when people and businesses have had occasion to reconsider their purpose and goals.

But Youn said we should distinguish between two kinds of innovation. The first is endogenous innovation, or change that evolves from within a business, society, or ecosystem. The second is reactive – change in response to external events.

“The pandemic is clearly a major event that will force some kind of innovation,” she said. “But this doesn’t mean we will innovate in the direction we aspire to as a nation or society. It’s less endogenous, more reactive.”

And some of this reactive innovation – including the many creative ways companies learn to digitize jobs – might have negative long-term effects. In fact, the focus on maximizing efficiency may actually limit endogenous innovation: in particular, optimizing technologies to execute processes leaves little room to come up with the kinds of breakthrough ideas that reshape industries.

For companies that have the luxury of focusing past their immediate survival on long-term innovation, Youn advised bringing employees back to the office whenever feasible. Because in her view, the early work of endogenous innovation cannot be done remotely, at least not very well.

“When it comes to arriving at ideas that are not well defined, thinking far into the future, that’s tough over Zoom.”

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Aviation unions are asking congress for $15 billion to extend furlough protections

Sara Nelson
Sara Nelson, president of the Association of Flight Attendants-CWA.

  • A coalition of aviation unions asked congress for $15 billion to extend furlough protections.
  • Without the funds, “wide-scale layoffs” may begin as early as March 31, they said in a letter.
  • This is a “critical moment for the country and the industry,” the unions said. 
  • Visit Business Insider’s homepage for more stories.

A coalition of aviation unions has asked congress for a $15 billion extension for a furlough protection program, warning a lack of funding would lead to layoffs.

The funding would extend the current Payroll Support Program through September 30. Otherwise, it would expire on March 31. 

“Without these actions, wide-scale layoffs in the industry will begin as early as March 31st,” the unions wrote in a letter addressed to House Speaker Nancy Pelosi and Senate Majority Leader Chuck Schumer, along with others.

The letter was signed by seven unions, representing pilots, flight attendants, and other aviation workers.

Delta Airlines JFK Ground Crew cleaning Plane August 2020.JPG
Delta Air Lines pre-flight cleaning crew members work on an aircraft at JFK International Airport.

“With vaccination in its early stages, this is a critical moment for the country and the industry. The continuation of PSP will ensure that we emerge from the pandemic in the strongest possible position and ready to get America moving,” they wrote. 

Read more: Moody’s says COVID-19 relief for airport stores and restaurants may help the air travel sector survive, but the outlook remains bleak

The payroll program has supported hundreds of thousands of workers at a time when airline revenue has plunged due to the pandemic, said the unions. Southwest Airlines, for example, furloughed 7,000 workers for the first time in its history. 

United Airlines, meanwhile, warned about 14,000 employees they may be furloughed starting on April 1, if the program isn’t extended, according to Reuters.

In December, United recalled about 13,000 furloughed workers when the payroll protection program got $15 billion in funding, according to Reuters. In total, the program helped airlines bring back as many as 32,000 staffers, Reuters reported. 

“The payroll support program was a grant program to go to the airlines that could only got to pay in benefits to workers – 2.1 aviation workers,” said Sara Nelson, president of the Association of Flight Attendants-CWA, which represents about 50,000 workers at 20 airlines. 

As originally designed, payroll program funded about 70% of airline payrolls, with no reduction in hourly pay until March 31, 2021, according to the Association of Flight Attendants-CWA.

The measure also limited stock buybacks and executive compensation. 

 

 

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