Business: Ally or Obstacle?

By now, the stirring images are familiar to television viewers: teary-eyed father recounting beloved child's battle with life-threatening illness … child enjoying miraculous recovery thanks to world-class health care at Mayo Clinic … grateful dad's glowing tribute to beneficent employer for picking up tab, supporting family values, and investing in hard-pressed workers like him.

The sponsor? Wal-Mart, epitome of the low-wage economy. Wal-Mart offers health insurance, but the premiums and co-pays are so high that most workers don't take it. Wal-Mart does maximize the publicity value of the fortunate few.

Broad cynicism about corporate motives and chronic anxiety about job insecurity and stagnant wages leave Americans wondering whether businesses can be trusted to value ordinary workers. A generation ago, a job with a very large company usually meant good wages and benefits. When the nation's economy was dominated by oligarchic corporations, often with stronger unions or government regulations that limited wage competition, millions of Americans could count on their employer for decent pay, decent health care, and the promise of a solid pension. Low-wage workers certainly existed outside these big businesses. But today, even a job with a large company is no guarantee of job security, good pay, career prospects, or fringe benefits. And while some corporations still have decent health and retirement plans, hardly any big companies offer the fringe benefit most desired by today's two-income or single-parent families: paid child care.

In this context, is it possible to convince well-intentioned corporate executives that their struggling workers are assets worth investing in? Or must political forces, such as government regulation, social investment, and trade unions, complement enlightened self-interest?

Advocates like Donna Klein think the private sector can -- and must -- see the wisdom of investing in its workers. Klein, an executive for many years with Marriott, now runs Corporate Voices for Working Families, whose 45 member companies promote family-support initiatives for their own employees and advocate others to embrace them. “Corporations are increasingly willing to step up on issues that have a direct impact on the quality of their workforce,” Klein says, because they've come to see the economic imperative of doing so.

A decade ago, Marriott pioneered a toll-free hotline to help its employees find child care -- but not subsidize it. The hotline now also offers confidential counseling and referrals for employees facing financial crises, domestic violence, and more. Recently, in partnership with the federal and local governments and community organizations, the company helped launch a subsidized child-care center for low- and moderate-income families, including many of its own hotel workers, a few blocks from the White House.

The low-wage workforce is disproportionately young, female, and minority. Its members are more likely than other workers to be single moms, more likely to need child care, and -- most predictive of poverty -- the least educated. Compared with better-paid peers, these employees have less access to the range of workplace perks enjoyed by millions of Americans. They're half as likely as others to receive employer-sponsored health insurance for themselves or their children, less likely to get help with child care, and much less likely to enter employer education or training programs leading to better-paying jobs.

Equally troubling to the workers themselves is a general lack of control over their day-to-day fate. In surveys of thousands of low-wage-earning Americans by the nonprofit Families and Work Institute, respondents said they'd value workplace flexibility -- paid time off, ideally, but also flexible hours and unpaid leave, especially to deal with their kids' health-care needs -- as much as traditional fringe benefits. But here, too, they are less likely than their well-off colleagues to enjoy such options and more worried about jeopardizing their job advancement by seeking them.

Given these many challenges, is corporate America truly coming to the rescue? Some individual companies do take the high road that Klein commends. But in its role as a political force, business fiercely resists mandates to assist struggling workers. Over the years, the nation's leading organized business groups -- the U.S. Chamber of Commerce, the National Federation of Independent Business, and the National Association of Manufacturers among them -- have opposed most progressive efforts in Congress to ease the burden on working families if it will cost their members money. (In one notable exception, they now actively promote promising career-ladder programs for lower-skilled workers.) Yet again this year, the Chamber of Commerce vows to “aggressively oppose union-backed election-year proposals [like] a minimum-wage increase.” Perhaps the single biggest workplace triumph for families in decades, the unpaid Family and Medical Leave Act, was passed over the relentless opposition of every major business group; later, a proposal by President Clinton simply letting states opt to extend modest paid leave sent the Chamber of Commerce and others into a frenzy of litigation. In other areas most important to lower-wage working families -- notably health insurance and subsidized child care -- the long-standing business record is equally discouraging.

Even when it comes to policies as seemingly benign as flexible work schedules, organized business has often weighed in on the wrong side. The Bush administration touched off a firestorm with proposed changes in the Fair Labor Standards Act governing overtime pay. A business-promoted version of this approach -- taking effect before Labor Day if Congress doesn't block it -- could well deny overtime pay to an estimated 6 million workers, including some making as little as $24,000 a year, according to the Economic Policy Institute. Similarly, using the lure of more flexible work hours, the president recently endorsed a plan to let employees trade paid overtime for future “comp” time -- but strictly on their employers' terms. It has outraged workers' rights advocates but won praise from prominent business leaders.

Less than 10 percent of the nation's private-sector workforce today is represented by labor unions, yet this minority enjoys some of the most progressive “work-life” benefits nationally. In some cases, collective-bargaining agreements have made child care more accessible or affordable for union members' families. New York's Service Employees International Union broke new ground in 1992 with the nation's first labor-management child-care fund; today, 400 health-services employers contribute to its vast network of day-care and after-school programs, assisting nearly 10,000 youngsters a year. Elsewhere, unions have won hefty employer subsidies for on-site child-care centers, emergency “backup” care, and more. They've negotiated other important rights for members, too, like paid maternity leave for grocery workers, paid family sick leave for office workers, and numerous flexible work arrangements. In Los Angeles, service employees even won a guaranteed day per year of paid stress leave -- something every working parent would envy.

At the same time that organized business represents an obstacle, individual corporations can boast of worker-friendly initiatives, though rarely ones that cut deeply into the bottom line. Whether motivated by enlightened self-interest, benign paternalism, or union pressure, more and more civic-minded corporations are indeed expanding workplace initiatives to promote career ladders, offer flexible work schedules, and even assist with the cost of child care. Their efforts run the gamut, from cost-free job-sharing arrangements to far-reaching investments in career training, subsidized child care, and more, says Jennifer Swanberg, professor of social work at the University of Kentucky and co-author of a new report on the subject from Boston College's Center for Work & Family.

At Kraft Foods, for example, managers recognized the difficulties faced by the company's manufacturing plant workers: 60 percent of them are hourly employees, many juggling graveyard shifts, overtime work, and family demands. Under Kraft's flexible scheduling program, an employee needing a few hours off for personal matters or to attend to a sick child can simply swap shifts with a co-worker or use vacation time for a single day, options previously unavailable. Similarly, managers at the Texas-based H-E-B Grocery Company were concerned that conflicts between duties at work and home put struggling workers in an untenable position. “They essentially had to lie to care for their family,” said one. Since H-E-B started MedBank, a generous sick-leave program, employees can use paid time off for their own illness or that of a family member on a moment's notice.

Beyond offering basic autonomy and flexibility, companies can also become economic advocates for their neediest workers, giving them a vital financial boost by increasing their take-home pay. Most low-wage workers with kids qualify for the federal Earned Income Tax Credit (EITC), for example, but many still don't receive it. Officials at Hyatt Hotels teamed with nonprofit advocacy groups to identify eligible workers and help them file required returns. The TJX Companies -- parent of TJ Maxx and Marshalls department stores, among others -- went a step further, launching its TJXtra! initiative to promote a full range of publicly funded supports for low-income workers. Store associates -- including some 5,000 employees the company has hired under its welfare-to-work initiative -- can access information about the EITC, food stamps, nutrition programs, the Children's Health Insurance Program, housing subsidies, and more.

These efforts can yield real dividends for needy workers. Save-A-Lot Ltd., the nation's fastest-growing “value” grocery chain, hires its workforce from the inner-city and rural markets it mainly serves. Despite the company's commitment to pay starting wages averaging 40 percent above the federal minimum and automatic raises, many employees still struggle. According to company estimates, a part-time hourly employee might make $13,174 a year to start. Adding the value of the EITC and food stamps, which the company actively helps them pursue, that worker jumps to $18,127 -- hardly a king's ransom, but effectively a one-third pay raise. “We want to do whatever we can to help our employees stay with us long enough to get promoted,” says Wendy Ardagna, Save-A-Lot's director of government programs and community relations.

For many low-wage workers, the toughest obstacle to long-term success is unreliable or inadequate child care. Bank of America saw this some 15 years ago when a company study turned up a close link between employee absenteeism and child-care problems. Its Child Care Plus initiative has since won national acclaim, offering cash reimbursements of up to $175 a month to eligible employees, mainly those earning less than $34,000 annually. IBM donates land or money and has helped build 74 child-care facilities worldwide in communities where the company has a big presence. While it typically turns the centers over to local operators, IBM reserves designated slots for its employees' children at market rates. And IBM makes additional investments to boost the quality of care -- funding teacher training, for example, and providing computers for kids.

Increasingly, independent analyses confirm what enlightened corporate managers acknowledge: By helping relieve financial burdens and the other numerous stresses resulting from work-life conflicts, these investments reduce absenteeism and staff turnover, improve job retention, and increase productivity -- thereby saving companies the related costs of recruitment and retraining. The cost-benefit calculus seems especially robust for child care. At Bank of America, associates receiving day-care subsidies in 2003 were twice as likely to stay with the company as those who weren't. And a study of JP Morgan Chase's backup child-care program showed a 100-percent return in a single year because 98 percent of the parents would have taken unscheduled time off if it hadn't been available in a pinch. Overall, payoffs like this may be biggest for low-wage workers, who seem most responsive to even small efforts on their behalf.

But high-priced corporate initiatives like these remain the exception to the rule. More commonly, companies find low-cost ways to help workers juggle work-life demands -- by contracting child-care referral hotlines, for example, or offering pre-tax flexible spending accounts for day-care costs. However, “cafeteria” benefit plans force working parents to trade off child-care benefits over other needs such as health or pension benefits.

Some corporate leaders fault government for not doing more. “We're being expected to pick up where schools have failed, where parents have failed,” says Ardagna of Save-A-Lot, “but we can't make up for broader societal failures.” She notes that some employees joining her company arrive with high-school diplomas -- but such poor literacy skills that they can't take advantage of basic training manuals. That has put the onus on Save-A-Lot to seek out literacy programs in several communities it serves.

“Companies have been anointed by default,” agrees Klein. “They are getting involved in what have traditionally been public-sector roles because a lot of problems aren't being addressed and someone needs to address them. It's a new role, and one they've stepped up to very, very reluctantly.” Like her colleagues, she laments the limitations of the most noble private-sector efforts in the absence of credible public-policy solutions. “We could have doubled the wage of every low-income employee at Marriott,” she says, “and they still would not have been able to afford quality child care.” She also notes that high-quality programs far exceed $200 a week in the many metropolitan areas where Marriott operates.

Government policies are, of course, the product of politics, and organized business remains a major political player. In this respect, business seems to be sending a double message, as corporate America generally resists social investments that would increase taxes. It is certainly heartening that a growing number of companies perceive value in investing in their low-wage employees. But it's also telling that many of their own initiatives, like the EITC or food-stamp-awareness programs, piggyback on public subsidies. A survey of the most forward-looking of businesses suggests that even the best of corporate efforts can't hope to compensate in the absence of greater government investments to improve the lot of working families. And that, in turn, may require a dramatic reversal of the organized business community's resistance to major social investments and public regulation.

In the end, challenges facing hard-pressed working families -- from woefully inadequate child care and health insurance to deep structural flaws in the way America educates today's students and tomorrow's workforce -- must be addressed by Congress, the White House, and the business community. Enlightened self-interest (and public relations) might have prompted Wal-Mart to help some of its neediest employees. But that company's workers, and millions like them, will be far better served by a living-wage mandate, comprehensive health insurance for all, and serious public investments in job training -- priorities the private sector has too long resisted as national policy