Fostering equality and unity in the workplace becomes even more challenging amidst the paradoxes of today’s economic landscape.
The gulf between young generations strapped for cash struggling to make ends meet and older wealthier generations who have been in the housing market for decades is creating a divide in our society – one that ripples into the workplace. Persistent inflation, higher interest rates and housing pressures have taken their toll on younger generations, who are cutting back on spending and, in some instances, moving back in with their families due to soaring rent prices.
Spending also varies wildly between the generations. CBA data shows customers over 65 are forking out for holidays, travel and entertainment, which increased by 4.8 per cent in the year to June. Meanwhile, non-essential spending fell among customers aged under 34 years. Worryingly, the 25-29 cohort was the only age group to cut back on both essential and discretionary expenses.
This growing divide between those with financial security and those without has split the nation into “haves” and “have-nots,” and this disparity is not only generational but also geographical.
In Australia’s resource-rich states, for example, workers appear shielded from the worst of the cost-of-living pressures due to faster-growing salaries and a generally lower cost of living compared to other parts of the country.
National Australia Bank CEO Andrew Irvine raised issues around a two-speed economy recently, outlining the fact that customers in certain sectors and geographies are doing well and are ambitious to grow. These include mining and resources businesses and consumers living in parts of Western Australia, the Northern Territory and Queensland.
But other sectors and geographies are doing it much tougher, including retailers and parts of the construction industry, where there have been considerable lay-offs. But people are getting by and budgeting hard, he says.
“Victoria and New South Wales are under more pressure than other states. Our data shows people are having to make tough decisions about where they spend their money. They are getting by, but it’s tough. Not unexpectedly, we saw some asset deterioration in our balance sheet in our most recent quarter,” Irvine said.
The rise of the two-speed economy
These trends have forced economic heavy-hitters like Deloitte and the banks to admit a two-speed economy is rising in Australia. The financial divide was laid bare in recent profit results posted by major Australian companies in recent months as economists note young people are struggling while wealthier consumers are spending up on travel and luxury items like jewellery.
The divide between renters and homeowners is also growing larger. Renters have been particularly hard hit. CommBank Household Spending Insights in July highlighted the disparity in spending across home ownership status, as spending by renters remains close to flat this year amid significantly more cutbacks on discretionary spending compared to homeowners or those with a mortgage.
Small businesses are also struggling, with data from millions of transactions processed on Square in the past year revealing micro and small businesses recovering slower than their mid-market peers in the first half of 2024, and mid-market businesses growing at different rates depending on their location, sector and size.
The Australian Securities and Investments Commission (ASIC) reports an alarming increase in small business insolvencies, particularly across construction (2142) and accommodation and food services industries (1174), which are among the 7742 companies entering external administration between 1 July, 2023 and 31 March, 2024.
Meanwhile, luxury brands are on easy street. High end accessories retailer Cartier recently opened in Perth, joining other high-end brands including Tiffany, Dior and Gucci, which have expanded from the eastern states to capture the riches experienced in the booming mining towns.
“HR [practitioners] provoke the appetite for doing things differently by helping leaders look up from the pursuit of short-term gains to see the bigger, long-term impact of their efforts.” – Dr Cecelia Herbert, Qualtrics workplace behavioural scientist
Widening equality gaps
The economic disparity is a growing headache for HR practitioners, acutely aware of the fact that the erosion of trust, social cohesion and equity will ultimately impact team dynamics.
Meanwhile, relatively recent legislation enabling employees to share their salary details with each other leaves it wide open for employees to ask HR for more money in their take-home pay, especially if they feel their current salary doesn’t align with that of their peers.
If mismanaged or ignored, the financial gap that exists today could grow and the downstream impact could be exponential, especially for those who are already marginalised.
As male-dominated industries such as mining grow and thrive, the gender pay gap is pushed even further apart, points out Gabrielle Roux, founder of consulting firm, The Human Strategist.
“Opportunities in thriving industries can mean a need to potentially relocate for work, which can post some large challenges when it comes to family networks,” says Roux. “If women are primary carers, relocating away from their local support network can present challenges such as isolation, disconnection and greater pressure on the primary caregiver in a family.”
These challenges can have lasting effects on women’s career advancement, as they may be less able to pursue roles in high-paying sectors like mining. This dynamic not only widens the gender pay gap but also restricts access to career-advancing roles, further reinforcing inequities within the workforce.
How can businesses help?
NAB’s consumer sentiment survey outlined cost-of-living pressures causing the greatest level if stress, with one in three Australians reporting very high financial stress.
To protect employees’ wellbeing holistically, and create unity and equality within the workforce, senior business and HR leaders need innovative strategies to help them do things differently.
PwC’s 2023 Employee Financial Wellness Survey revealed that 60 per cent of full-time employees feel stressed about their finances, prompting many companies to roll out financial wellbeing courses. But the solution has to go beyond that.
HR can act as a mediator by fostering open communication, helping leaders understand and address the frustrations that may arise between employees in different regions. A focus on building flexible, resilient teams that can respond to shifts in the economy, including workforce mobility, skills retraining and ensuring that employees in struggling sectors aren’t left behind, is critical.
Ensuring these capabilities is a total business responsibility, says Roux.
“Every person within an organisation has a level of responsibility for the wellness of the team within a business. This needs to extend beyond gym memberships to provide a more personalised approach to [wellbeing].
“There are lots of fantastic programs and resources available to people in this space but often they aren’t aware they even exist, therefore, it requires some commitment and energy from businesses and their leadership team to find the most relevant and helpful resources and present them in a meaningful and impactful way.”
Bridging the divide
Uncertainty and the relentless pace of change can be huge sources of anxiety within workplaces, says Dr Cecelia Herbert, Qualtrics workplace behavioural scientist.
“Young workers are feeling the pinch, which is creating issues from food and financial insecurity through to long-term career goals and aspirations. We know they are engaged, working hard to build careers and have a positive view of the future, but they face very real obstacles as they strive for these goals,” she says.
The key to solving the tensions arising is trust.
“People need to feel their leaders have their best interests at heart, but the reality is that’s not often the case right now. Only half of workers in Australia believe their boss would prioritise their wellbeing over short term gains,” says Dr Herbert.
“Qualtrics research shows that young employees are invested in creating a positive future for themselves and the organisations they work for. But if they continue to feel stereotyped and judged, or their voices are not heard due to being outnumbered or having lower economic influence, we will all miss out on the potential of our future workforce.”
Russell Ayles, retail and fashion recruitment founder at UNRiVALLED, has spent time on both sides of the fence in both retail and talent acquisition in Sydney and the UK.
He says some areas of the business are going to grow while others might start slowing down in a two-speed economy.
“Instead of focusing on just filling roles, you need people with skills that can be used across the board. That way, you can shift staff to where the action is happening, keep things moving without needing to constantly hire or cut. It’s about being smart with the talent you’ve already got,” he says.
Create a culture where teams are agile and ready to adapt, he says.
“Build and train teams that are comfortable stepping into new roles or supporting different departments when needed. They can shift with the market, fill gaps and keep the business performing, no matter what the economy throws at you.”
Dr Herbert believes the solution lies in a collaborative effort between government, industry, educators and the workforce to ensure equitable opportunities so teams can thrive.
“HR [practitioners] provoke the appetite for doing things differently by helping leaders look up from the pursuit of short-term gains to see the bigger, long-term impact of their efforts.
“There’s two ways to achieve this – by being able to demonstrate the business impact of bridging the divide, and by appealing to their sense of leaving a positive legacy.”
Learn more about addressing polarisation in the workplace and creating inclusive cultures for marginalised groups at AHRI’s DEI Week webinar series, running from 19-21st November, exclusive to AHRI members. Sign up today.