- Inflation will remain elevated this year, bolstered by low labor participation.
- Corporate America needs to get creative with sustainable paths to upward mobility for Americans.
- This article is part of the "Financing a Sustainable Future" series exploring how companies take steps to set and fund sustainable goals.
US inflation has hit its highest point in decades as prices climb 7.5% from 2021. Economists blame supply-chain disruptions and exploding pent-up consumer demand — while predicting that the buying frenzy will abate. Spending on goods will likely slow, but demand for services, such as those around restaurants, travel, healthcare, and education, will grow by all estimations. And the cost of services is driven primarily by the cost of labor.
Let's take a peek at labor. While unemployment is dropping, participation in the workforce remains sluggish. There are still just about 60 unemployed people for every 100 job openings. Job openings cruise above pre-pandemic levels, and businesses struggle to find skilled workers. The pandemic-induced uncertainty continues. A LinkedIn survey found just one in 67 paid jobs in the US offered remote work in 2020, and that number this year grew to one in six. But remote or hybrid work may not be viable for every business.
The labor shortage is compelling companies to boost pay. That, in turn, is inflating prices of goods and services. And for those who see rising wages as an offset, the 3.9% wage bump that most employers have budgeted for won't cover for inflation. With US consumer prices having jumped 6.2% last year, those who don't receive a wage increase of at least 6% will have less purchasing power than before.
Employers, unsurprisingly, are accelerating their adoption of automation. In Chicago, for example, 10 McDonald's restaurants now use artificial intelligence to tackle drive-thru orders. This came after McDonald's made headlines last year for offering $50 to candidates who showed up for job interviews. It's not uncommon, either, to find grocery stores and pharmacies replacing cashiers with self-service kiosks. This is just the beginning.
So what about the American worker who isn't ready to hand over their job to automation?
The path with the most prospects for advancement is upskilling workers for higher-level roles as technology takes over simple, repeatable tasks. In addition, there's significant payoff for broadening someone's capabilities to include digital skills that allow the person to participate in the economy that creates and deploys technology.
As environmental, social, and corporate-governance issues become salient, and corporations scrutinize their role in society, I believe corporate America is keen to adopt a more sustainable template to alleviate the labor shortage, with a mitigatory influence on inflation, while also empowering American workers.
We need to chart disruptive paths to progress. When we hire for skills, not degrees, we can engage with a bigger workforce and help close the opportunity and employment gaps for the almost 65% of US adults who don't have a college degree. This also means transitioning to an always-on skills-based employment infrastructure that embraces not just credentials and certification but also fitness for a job and employability as outcomes. Employers can be instrumental in progressively moving people up with social mobility through smaller sprints of education delivered throughout their lives. The Google Career Certificates program is a great example. This education can also bring college credits when executed in partnership with instructors, similar to the way one forged by Infosys and Arizona State University works.
We need to embrace AI and automation fearlessly. Tasks that were once executed by people are now carried out by both humans and machines. Low-complexity jobs will inevitably be automated, given the acute labor shortage, and the real opportunity will be in training people to take on higher-order responsibilities, which will allow enterprises to scale business purposefully. More progressive organizations will also ensure they nurture a rich cognitive diversity of talent, from across various walks of life, to enrich their workforces' problem-finding quotient as AI takes over the problem-solving.
We need to transform more places into workplaces. Remote work means more people otherwise limited by their circumstances — like caregiving adults, students, and people with disabilities or in rural areas — can now be included in the nontraditional American workforce and gig economy. Remote hiring can also blunt the edge of workplace bias influenced by social norms, race, academics, and more.
Smart American corporations will reset human capital to run their businesses at full throttle but equally and purposefully let human and ESG considerations lead the way.
Ravi Kumar is president of Infosys