Bill Kerr: It’s difficult to overstate the economic significance of the care crisis, which by some estimates reduces U.S. productivity by tens of billions of dollars annually. The toll affects businesses through lost revenue, absenteeism, presenteeism, and employee turnover. Workers and their families lose earnings, opportunity, and stability, and the cost is borne unevenly, disproportionately affecting women. Employers have tended to steer clear of the issue, and those willing to address it can find it daunting to the point of paralysis. But the inevitability of the underlying demographic trends means businesses will have to act.

Welcome to the Managing the Future of Work podcast from Harvard Business School. I’m your host, Bill Kerr. My Managing the Future of Work Project co-chair and podcast co-host, Joe Fuller, joins me today to talk about the project’s latest report, Hidden Workers: The Case for Caregivers. Joe is a longtime observer of the care economy, and in this new work, he examines the barriers caregivers face in the labor market. He also explores what employers can do to tap into this significant portion of the population eager to participate more. Joe, it’s great to see you.

Joe Fuller: Bill, likewise. It’s exciting to talk about some of our research.

Kerr: Joe, why don’t we begin with where caregiving ranks as a topic in the future-of-work space. And is it becoming a more pressing topic? Is it one that’s kind of stable? Or is it maybe one that’s diminishing a little bit with time?

Fuller: Caregiving, for a long time, has been in the background of issues as it relates to the workforce, and I think several things have brought it to the foreground. The first is what happened with Covid. So many white-collar workers, who went in[to] some type of hybrid or remote work, began to understand just how intrusive work was in obliging them to make trade-offs as it related to caregiving—and I’m thinking about caregiving written broadly: for dependent children, for teens, and increasingly for seniors that adult children are taking care of—their parents or in-laws, other older relatives. So that came to the fore, but also, we have a couple of other significant trends in the labor force. One is, we really have stagnant workforce participation. We’re going to have to start thinking about what it is about work outside the home, what is it about job descriptions, what is it about employers’ policies and practices that discourage people from working? Then, finally, we have the issue of women in the workforce, because women are now significantly over-represented in higher education, and they consistently outscore men in the evaluation of what we call “social skills,” which are increasingly important in the labor market, given that so many technical skills are now displaced by technology. So you’ve got a lot of things all causing it to bubble to the surface, but historically employers haven’t really thought about it. It is something they need to consider, and therefore, we think they’re systematically overlooking opportunities to build bigger, more diverse, and happier, more engaged workforces.

Kerr: Yeah. We’re going to have a lot to unpack there, but maybe let’s continue with the size of the issue. It was maybe not as apparent as it should have been, and Covid helped unlock it, but do we have any sense of the aggregate costs that are involved with the caregiving challenges that people face—for the economy, for workers, and for firms?

Fuller: I think there are a couple of illustrations that really bring it home. One is, in previous research, we’ve identified this population of so-called “hidden workers,” and by that we mean workers who are essentially systematically screened out of consideration. They’re hidden to potential employers because of something in their background or their resume. Something they put in their submission for a job, their job application, causes them to be ignored. Eighty-six percent of hidden workers in our sample—and that was a sample that covered the U.S., the U.K., and Germany, so it’s not just the U.S.—were caregivers. We also found systematically that very few employers actually target caregivers as potential employees, saying, “I can relax some constraints that allow people to fulfill their care obligations. We can empower them to work for us.” Fewer than 25 percent of employers prioritize that segment—so a big population of people on the margins of the labor force, a small minority of employers recognizing that there’s talent there. Another thing is that we found that a third of workers had left a position because they couldn’t reconcile the needs of work and their caregiving obligations. Interestingly—and contrary to a lot of people’s off-the-cuff hypothesis—that percentage rises as you move up the organization. So almost 50 percent of people in the top quartile of pay reported that they had done that. So there’s a very, very significant number of workers who are either isolated from the workforce or obliged to work far fewer hours than they’d like to in part-time positions because they’re just not viewed by the hiring process of companies as well suited to full-time positions that are available.

Kerr: And just to connect the dots here, we are in an era where we have persistently low unemployment, and a lot of companies are struggling to find workers or can’t find the pool of talent that they’re after. And so this participation margin, if there’s a way that they can operate on there, could provide them a new source of talent. How do companies tend to think about that margin, versus trying to fight for the people that are already part of the labor market?

Fuller: Well, too few employers think about that as a trade-off. The vast majority of employers still essentially use an approach technique and mechanisms for filtering a very large applicant pool into a much smaller pool of candidates, people that would be actively considered, that they’ve used the same metrics and the same filters they’ve been using all along. What we’re saying is, if you want to expand the population of workers—and so many employers complain that they get too few qualified applicants—perhaps what they need to do is start looking for pools of talent that, for some reason, other than their aptitude and desire to work, have been dropped from consideration. Furthermore, we think that employers, because of the way employment is structured and the way they capture data, very seldom understand the extent to which the care is motivating workers who they currently employ, know to be productive, and want to retain, to leave—what we call voluntary turnover”—quit their job, move to another employer. You used the phrase “connect the dots.” Employers don’t do a very good job connecting those dots, in terms of what drives turnover. So what we’d like them to do is invest in understanding why so they make better choices.

Kerr: You earlier noted that you’ve done work on this in the earlier hidden workers report in the U.S., the U.K., and Germany. I’d love to reflect a little bit of, were they all in a similar spot? Was there evidence of policy differences in the results? Is one faring better than the other two?

Fuller: They are quite different, and up to and including societal differences. But in terms of the actual needs of caregivers, the relative magnitudes of caregivers in the hidden worker population were roughly equivalent—a little bit higher in the United States—and that the factors excluding them were pretty much universal. It’s because companies all rely on tools like applicant tracking systems and the imposition of ways of gauging the relative attractiveness of a candidate that are similar across economies. So it’s more similar than un-alike.

Kerr: As we think about workers and their caregiving needs, what have been the traditional ways that employers have tried—when they tried, and they didn’t always try—but when they have tried, to help on those fronts?

Fuller: Many will offer an unpaid emergency leave, and that could be for bereavement or for a care emergency. Some will offer programs where an employee can solicit personal days, vacation days, from their colleagues in the workforce to extend their opportunity to be paid while not at work. You’ll have also what are called “employee assistance programs,” which often companies will have employee groups that get some marginal support for what I’ll think of as subpopulations of the caregivers in the workforce. So as an illustration, there’ll be a group of employees who all have special needs kids, and the company will provide them a little sponsorship for that. They can use conference rooms. Maybe there’s a catering budget or something like that, but it’s very modest. But it’s only when you get to the level of things like paid parental leave—which has, of course, been a very controversial topic in the United States, very widely debated—that you see pretty economically significant investments by companies in caregiving. In certain, very large companies, you’ll see a few will have things like on-site childcare facilities. We have one here at Harvard. You’ll see, particularly in white-collar occupations, for higher-paid workers, you’ll see a benefit of a limited number of emergency caregiving support with a vendor like Bright Horizons or Care.com, where the company has an account, and if my child comes down with strep, but I’m supposed to fly to Cleveland for a meeting, I can get someone to come and sit with a child or even stay overnight with a child. But those are very few and far between. And other than core healthcare benefits and a few of those low-cost programs, there’s not much that companies really have on offer.

Kerr: Yeah, but Joe, if we think about things like flexible work and remote work, do they picture into the caregiving role? Is there a way that they’re not labeled as being about caregiving, per se, but they play a significant part of this?

Fuller: Remote and, certainly, hybrid work has come into the workforce, but not as a response to caregiving responsibilities; as a direct function of Covid. And a lot of the friction and upset I think we’re seeing in larger companies, as they impose more traditional expectations of return to work, are, in fact, the employee base’s response to returning to a world where a lot of their caregiving obligations would be harder to meet. We can see this in lots of industries, but a good illustration is professional services, where you can see that, during Covid, professional services reduced travel burdens, people were spending more time at home. The other thing that you mentioned, of course, are flexible arrangements. There are eight to 10 attributes of work that really do make it difficult, let’s say, for parents of children on things like school pick-up and drop-off. What hours am I expected to be in the office? But most of those arrangements in companies are not a function of policy. They’re a function of a direct dialogue with the supervisor, which is fine, except the larger the company, the more likely they are to have hard-and-fast policies and rules that do not allow the supervisor any latitude. Many, many companies—let’s say, in retail food service—will have an automatic policy that someone who’s late, more than a certain number of days in a month or a quarter, is terminated by policy with no discretion by the supervisor. That’s understandable if you’re running a workforce of 100,000, 200,000 people. You can’t just have exceptions all over the place. It would make the company unmanageable. But rules like that are very, very taxing on caregivers, because one of the attributes of caregiving events is, a lot of them are unpredictable.

Kerr: Well, that’s kind of a nice segue into maybe looking at a more positive bent on this, which is what today would constitute a caring culture. Like, if you pointed to some of the best-in-class firms on this dimension, what sets them apart? And this goes beyond just the policies that are in the book, but how do the leaders lead the company in a way that creates the caring culture?

Fuller: Well, the first is to make the issue of caregiving obligations discussable and legitimate, that our research shows that, very often, employees are nervous or reluctant to bring it up, that they have a caregiving need that’s intruding on their work. Why? Well, they don’t want to go to their supervisor and say, “I’m really not being very productive this week because my high schooler is really having problems. I’ve got to go see the guidance counselor and the principal. It’s really on my mind, and I know I’m behind on that project, but I just wanted to share that with you.” They’re nervous about saying that. They’re nervous that it’ll be a signal they’re not really committed to the team to their work. They’re nervous that they’ll lose out on future opportunities for advancement or be on projects they think that’ll be exciting, where their employer will want them to be all-in. Making it discussable is often a function of leaders in the company sharing the way they confronted or are confronting care obligations, that how it affected them, that this isn’t just all about some worker who’s feeling self-conscious and nervous about bringing it up, but this is part of life. Many years ago, companies have talked about creating a high quality of work life, QWL. In the 21st century, that I believe requires employers to recognize that people’s willingness to stay with your firm, their productivity, their attendance are all being influenced by this life path that unfolds in parallel to their career path, and ignoring the fact that that happens and the obligations for caring for others, or ultimately for self-care, are very predictable demographically. They don’t just conveniently fit with career paths, most of which were designed in the ’60s. A final thing is just to understand what the care demographics of your workforce look like and give supervisors more tools, skills, and coaching in how to make that discussable, and give them more flexibility to try to accommodate for good workers who are productive that will increase their engagement with the company and reduce their likelihood of moving on to work for someone else because they cannot balance your requirements and their family’s requirements.

Kerr: Joe, I think we can all appreciate the value of that culture. But now I’m going to ask you to speak to that curmudgeon CFO, who hears the CEO describe this wonderful place and says, “Wait a minute. What about all the costs that we’re going to bear here? Do you know how much this will raise the expense of the firm?” What’s the business case that can be provided to that CFO?

Fuller: For U.S. companies, the dominance of budgeting for health benefits really causes HR functions to be reluctant to expand the horizon of what they’re covering simply because the appetite of that curmudgeon CFO, or yet the curmudgeon asset manager who own the stock, is not for spending more on indirect costs related to staff and personnel. What our research shows, and I believe now with increasing fidelity, is that when caregiving benefits are viewed as some additional expensive accommodation, that the proposition is completely unsalable to a kind-hearted and gentle-spirited CFO, let alone their curmudgeonly brother or sister at another company. There are hard economics at stake here, and what we have found through research, using data from a company called Wellthy, founded by a graduate of our school, a young woman, is that when you look at the systems effects of providing care economics, they actually have very attractive return profiles. It’s largely driven, but not exclusively, by reducing turnover. It’s expensive to replace somebody. Even for a low-paid, frontline worker in a hospitality or retail business, people agree that the average cost of replacing that worker is about 35 percent or more of what you pay them in a year, and that ratio goes up the more senior that person is. So very often, if you start talking about replacing somebody, let’s say at a VP, a senior vice president or even higher level, you’re getting to costs of over 100 percent of their salary. At senior executive ranks, it could be multiple hundreds of percent, both between what you pay consultants to find the person, but also things like signing bonuses or cashing out people’s unvested incentive comp, and things like that. If you have a substantial percentage at all levels of the company of employees voluntarily leaving because they don’t know how to take care of their mother who’s just moved in with them, who’s got early-stage dementia, and their 11-year-old, their 9-year-old, and their 7-year-old when they get home from school, without being there personally, you are driving that cost. Be aware, when you make put that employee on the spot to decide whether they can stay in the role or not because of policies like “everyone’s got to be here five days a week” or “you’ve got to be at your desk at nine o’clock” or “you only get a certain number of personal days irrespective of what’s going on” or “you’ve got to case manager mother’s medical care because we don’t provide any assistance doing that,” you are inviting someone to leave, and the cost to that could be 40, 60, 80, 100 percent of what you pay them annually to replace them. So this is not, “We spend money, and we get no return.” You are getting a return in the same way you get a return in investing in quality in your operations, you’re avoiding scrap, you’re avoiding waste. It’s the exact same thing with personnel. If I can help those employees avoid circumstances that cause them to opt out, I end up with superior system economics, even though this indirect relationship. It’s not immediate cause and effect.

Kerr: Joe Industries are certainly going to differ, at least with one element of this, in terms of how much they have typically employed young workers who are starting families, or maybe the older sandwich generation workers. I guess my question is, if you took an industry where this group is a very large part of the workforce, do you think that they’ve kind of got it figured out at this point and it’s more for the others, or is it that the opportunity there is ever larger?

Fuller: I think it’s larger than we realize. I think for entry-level jobs, particularly in service industries, there’s a little bit more of a systems effect. It’s not just that care can intrude—let’s say, the birth of a first child or a parent with a tough medical diagnosis or a significant other with an issue—but it’s also that what that event does, if it causes a young person to churn in their job, that actually contributes to what can become a kind of growing incoherence to that individual’s job history or them being in a succession of what I’ll call “low-skills threshold jobs,” jobs that really don’t require a lot of specialized skills or knowledge to be productive at. A large number of entry-level jobs in a company that are designed that way, and they’re designed that way through the circular logic of, “These jobs don’t pay well and don’t require a lot of skills, because people keep leaving them.” And of course, people leave them because they don’t see an upward mobility associated with getting skills and then not being paid very well. But those two things can conflate to really do damage to someone’s long-term prospects. So we have to think about the whole person, and we do know that life does begin to accelerate and happen to you in your 20s, and that makes the ability of companies to create some stability in those younger workers advantageous, because the same turnover logic, economics of turnover, applies.

Kerr: Yeah. That’s a great kind of segue to raise up here, which is employers are asked, and we can even recognize our project produces various studies that point to issues around training, education, mentoring, or mental health. There’s a number of ways that they could be investing into the workforce. How does care sit in that bundle of activities?

Fuller: Well, I think it’s one of the largest variables in doing two things: retention, which we’ve talked about, and also improving productivity. There’s a phenomenon, which we call “presenteeism,” which means you’re at work but you’re too distracted to really get something done. Think back on my analogy of someone maybe with an ADHD child, who’s in middle school or high school, and is in perpetual conflict with school leadership or teachers, and that really of a distraction. We know that also people are highly motivated by the basic attributes of employment, and if they don’t see the current employer as paying them what’s available in the market or offering them a pretty clear pathway to earning more and being better situated in a more secure job over time, they will switch. So it’s very important that the core economics of offers be competitive, but to do that, to free up the ability to invest in things like career development, you have to start managing your systemic costs more wisely. And one way to do that is to examine your policies and practices to see which really can contribute to this very, very expensive phenomena called “voluntary turnover.” If you could unlock that, you not only get a return on the investment you made in unlocking it, but you can create additional flexibility in your system, that you can invest in other elements that may not be directly care related.

Kerr: Yeah. Let’s imagine that the CEO fully buys into this and says something along the lines of, “Joe, who should I get around the table in order to start making progress on this?” What’s the dream team of the employee base?

Fuller: Well, the first people that are very seldom at that table are operators, are people who are running functions, the operations function, that are running P&Ls, that are running sites, because they understand the cost of having churn or having distracted workers. They see it every day. Obviously, HR has got to be involved, and they need to have a different mandate. Their mandate shouldn’t be, “Make sure our costs are competitive now on compensation and benefits, and when in doubt, find me more savings.” Their mandate should be, “Give me the most economically effective human asset base I can have, and not dictated by managing the following costs. Let them manage those costs.” If you get those two groups in the same room, both will hear things from the other that really triggers learning and innovation. There’s really a lack of talent management using supply chain management principles. We would no more send operators ball bearings the way we send them staff, because machines would be breaking every day, planes would be falling out of the sky because of the lack of total quality management. All that literature ports entirely overlooking for human talent. Now, there’s some good news here, which is that generative AI should be very, very effective at addressing a lot of problems that have been difficult to understand historically because of its capacity to link data from different pools of information that do exist in most companies but have never been connected.

Kerr: That’s great. I want to circle back with our time remaining to think about the role of the government in this. Obviously, this has both got public issues and private issues, something like paid family leave—as both an employer policy, it’s also has some government side to it, and this even featured in the vice presidential debate recently. So as you think about the role of government and also this election cycle, what are you seeing?

Fuller: Well, it’s clear that certain governments, and the German government is an example, that have had long-standing commitments to certain parts of the care economy, have addressed directly some of the things that are common challenges for particularly women choosing to work outside the home in Germany. Having said that, what we know is that governments, when they impose by policy fiat obligations on employers, often suffer from the same phenomena I was describing earlier, which have not really understanding the systems effects of what their policy will unleash. Where I think government can play a very, very important role is, first of all, encouraging companies through incentives to try some things: set up demonstration projects, give people tax credits. They should also audit policies of the government that inhibit workforce participation. For example, many people with health issues, who are hidden workers, hit thresholds of outside income, which cause them to be disqualified from receiving benefits they’re currently receiving. Another example would be positive incentives for workers to stay in the workforce. A good example of that is all the epidemiological studies indicate that if you’re a worker over the age of 65, or you’re coming to the age of 65, actually if you’re interested in staying employed, that has lots of great benefits systemically. You stop, you don’t draw down your savings as early. You are more likely to have a non-government-supported health care plan. Your likelihood of developing a chronic disease is lower. Mental acuity rates are higher over time. So we ought to have very active policies in the United States to encourage people who are willing and able to keep working after the age of 65 to do so. Now, in the U.S. political debate recently, the idea of just making all Social Security recipients, their benefits, to be tax-free, which is an immensely expensive policy, might be in the right direction. I think it’s the wrong policy. But how about not charging social security taxes to both employers and employees if that employee’s over the age of 65? That’s an 8 percent raise to the worker; it’s an 8 percent incentive for that employer. The government often wants to drive outcomes in the labor market. That’s extraordinarily hard to do, given the hugely complicated economies of all sorts of different industries, different skills involved, provide catalysts for employers and employees to make the labor market work differently to address issues. That’s what I’d really love to see in the debate.

Kerr: That’s great, Joe, and maybe on both the caregiving or going over to just the hidden worker agenda more broadly, what’s the question that lies next for you?

Fuller: Well, I think there are a couple, which we’re excited about. We’d really like to get a better handle on how workers really define a good job that they’re excited to have and keep, and how that contrasts with the way employers understand that. That brings me to a second question, which is: How good is the economy at creating good jobs? If you get into the attributes of a lot of those job postings that are available in the United States, I think most of our listeners agree they’re not very attractive work in terms of what they pay, the terms of employment, the stability of jobs. Coming back to this issue of policy, I think any government would be well served to be both thinking about future-oriented policies and revisiting current policies through the lens, “Are these policies that encourage the creation of good jobs?” by which I mean jobs that provide decent, not extravagant, but decent levels of discretionary income, of economic stability, that are in safe environments, that cultivate skills, that have ongoing value in the labor market. I think the final thing is, we really have to understand with more subtlety and definition why is workforce participation—particularly for men in so many economies—stagnant or declining? I think some of that is a composition of work. I think it has to do with the education system, how work is structured, how it’s described—and how people develop skills for work needs to change so we have better outcomes in the future. So pretty rich agenda, Bill. I hope I didn’t scare you with that. We got a lot of work to do.

Kerr: You did. We have to raise a lot more money, I guess. No, but Joe, the current report is Hidden Workers: The Case for Caregivers. Thanks for walking us through it, and we look forward to the next installment.

Fuller: Thank you, Bill.

Kerr: We hope you enjoy the Managing the Future of Work podcast. If you haven’t already, please subscribe and rate the show wherever you get your podcasts. You can find out more about the Managing the Future of Work Project at our website hbs.edu/managingthefutureofwork. While you’re there, sign up for our newsletter.