Much of the developed world is looking forward to a strong economic recovery, as vaccinations allow life to get back to something resembling normal. Yet there's a great risk that large swaths of the population won't share in the gains, leaving the gap between rich and poor even larger than it was before the pandemic hit.
Global corporations must recognize the threat to society — and to their own businesses — that such an outcome would present, and do their part to address it.
The world's wealthiest people, including many CEOs, are emerging from the coronavirus crisis even better off: According to Forbes, the planet's billionaires became nearly $2 trillion richer in 2020. At the same time, the World Bank estimates that by the end of 2021, the pandemic will increase the number of extreme poor — people living on less than $1.90 a day — by as many as 150 million.
By forcing companies to think harder about how to do without humans, the pandemic is also likely to accelerate the trend toward automation. This, in turn, threatens to further aggravate inequality by rendering certain occupations obsolete. By one recent estimate, automation will disrupt 85 million private sector jobs globally by 2025.
Given the real potential for social and political upheaval, activists and institutional investors are right to call upon corporations to act, and act fast. But what can they do? I see four main areas where they can make a difference.
- Ensure an orderly transition to automation. As machines assume a greater role, the division of labor and the nature of work will change. To prepare employees, companies should provide them with ample opportunity to gain the skills needed to meet the demands of the digital economy. Also, rather than laying people off outright, explore keeping them on staff in part-time roles and shorter-term contracts, or assigning them to new ventures and to strategic work, mapping out options that the company does not yet have the bandwidth to pursue. To ease such transitions, consider expanding the definition of employees eligible for benefits, to include subcontractors, some suppliers and even zero-contract workers. Such measures will add costs, but the alternative is widespread unemployment that would render too many consumers unable to buy the goods and services that companies produce.
- Enhance employee benefits, particularly mental health. The pandemic has taken a heavy toll on people's sense of well-being. In a recent survey by the National Institute for Health Care Management, 51% of employees reported worse mental health at work, while 55% said they felt they had no one to turn to at work with such issues. Even before the pandemic, research suggested that productivity lost to anxiety and depression cost the global economy more than $1 trillion a year, and that each dollar invested in treatment would return $4 in improved health and output. Hence companies stand to benefit by providing mental health counseling, funding prescribed treatments and fostering a culture where employees feel comfortable to come forward with their anxieties.
- Allocate capital responsibly. No doubt, investors are already committing significant resources to funds that consider environmental, social and governance issues as part of their mandate. That said, business leaders can do more to contribute to public goods such as infrastructure, healthcare and education, both directly and indirectly. One important vehicle is pension funds: Both companies and governments at all levels should focus more on the longer-term societal benefits of their investments — for example, by earmarking funds toward the physical infrastructure needed to support everyone's prosperity.
- Unlock the potential of all workers. Discrimination worsens inequality and undermines productivity, by preventing people from occupying positions where their talents can best be applied. It's thus in companies' best interests to elevate people from underrepresented and minority communities. This should entail not only ramping up recruitment efforts and scholarships, but also working to diversify suppliers, subcontractors, pension advisors and the legal and accounting firms that support a company's operations.
With power comes responsibility. Global corporations' vast influence requires, at times, that they take on issues that have traditionally been the purview of government. Right now, that means looking beyond short-term measures of profit and loss to transform the K-shaped recovery into one that is shared across society.
Disclaimer: This article first appeared on bloomberg.com, and is published by special syndication arrangement.