Labor

The key to retaining low wage workers? Opportunity for growth, survey says

New research from Harvard Business School may help employers keep workers.
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Francis Scialabba

· 3 min read

Certain industries have long contended with a perpetually revolving door of workers, and the rate of churn is especially stark in sectors that typically pay lower wages. Even prior to the “Great Reshufflesignation,” low-wage workers were changing jobs in greater numbers than in previous years: In July 2019, for example, 12% of low-wage workers making less than $60,000 a year switched jobs, marking a five-year record at the time, according to the Fed’s SCE Labor Market Survey. The trend only accelerated during the pandemic; Bloomberg reported last September that quits in retail, accommodation and food service, and health care and social assistance were at or near record rates.

High turnover, even when voluntary, is costly for companies, and the current tight labor market makes the impact of voluntary churn even more of a challenge than it was before Covid. However, new research from Harvard Business School professor Joseph Fuller and Manjari Raman, director of the school’s Young American Leaders Program, suggests that low-wage workers aren’t inherently destined to leave their jobs, and organizations that give these employees a path to career growth may have more success with retention.

“Employers have come to accept that there is this inevitable high rate of churn [and] high rate of turnover; it’s like a carousel that never stops,” Fuller told HR Brew. For workers who are part of the broader churn, it becomes harder to escape the cycle of one low-wage job to the next.

A hand up. The report, called “Building from the bottom up,” draws from a survey with 1,150 US employers and 1,025 low-wage workers. The team defined “low-wage” as making $20 an hour or less for 40 hours a week, surveying workers in retail, food service, hospitality, and other industries. The survey found that 60% of workers who started in a low-wage job failed to move to a different one above the median annual wage threshold of $39,970 between 2012 and 2017.

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Fuller explained that many of these workers don’t feel like employers are investing in their potential, so when obstacles such as a bus-route change or car troubles occur, the decision to quit and find a different but similarly paid job elsewhere is made easier.

However, the report says that when workers feel that their presence matters to an organization, they are less inclined to leave their jobs: “Workers sought stability and expressed a preference for staying with their current employers—but there was little investment by employers in communicating career pathways or taking actions that would help workers grow within the organization.”

Keep your people, people. Fuller noted that workers need to know that there’s a pathway toward advancement. Things like tuition reimbursements are nice, but showing a concerted interest in professional development matters more, he said. Mentorships, pathways programs, clarity of communication about feedback—actionable feedback—to get a promotion or get the next raise, you need to do these skills,” Fuller said.

Moreover, workers appreciate these efforts, the survey found, as “almost two-thirds of low-wage workers indicated a preference to remain with their current employer if opportunities for advancement were available.”

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