News

A pause in the punishing series of back-to-back Reserve Bank rate rises could come as soon as next week, after inflation decelerated sharply to 6.8 per cent in February, from 7.4 per cent the month before.

Economists are confident the worst of the inflationary shock is behind us, although cost-of-living pressures remain intense and a decision to hold the cash rate steady at 3.6 per cent at Tuesday’s RBA board meeting after 10 straight increases was no foregone conclusion, they said.

With Australian Bureau of Statistics figures showing electricity prices increased by more than 17 per cent in the year to February, Jim Chalmers welcomed the ongoing “moderation” in consumer price pressures but said addressing the still “unacceptably high” rate of inflation remained at the centre of the government’s economic strategy ahead of the May 9 budget.

“We do understand Australians are under the pump from cost-of-living pressures,” the Treasurer said in question time.

There may be some good news for mortgage holders, who have suffered a steep increase in interest payments since May when the RBA began the most aggressive rate hike cycle since the 1980s.

Capital Economics head of Asia-Pacific Marcel Thieliant said “the further sharp fall in inflation coupled with the softness of consumption will probably prompt the Reserve Bank of Australia to pause its tightening cycle next week, though we still expect one final rate hike at its May meeting”.

By category, the biggest price rise in the year to February was a 9.9 per cent jump in housing costs, ABS figures showed.

While asking rents are reportedly rising at double-digit rates, rent inflation in CPI figures was steady at 4.8 per cent, if remaining on an upwards trend.

Similarly, electricity prices accelerated to 17.2 per cent from 16.8 per cent, although building cost growth eased to 13 per cent from 14.7 per cent in the year to January, the ABS data revealed.

The data showed food prices were 8 per cent up on a year earlier, relatively unchanged from 8.2 per cent in January, but recreation and culture inflation fell sharply to 6.4 per cent in February, from 10.2 per cent, as the end of a bumper holiday season saw travel and accommodation price rises fall from 17.8 per cent to a still-high 14.9 per cent.

Fuel prices climbed by 5.6 per cent in the year to February, after rising at annual pace of 7.5 per cent the month before.

In the wake of the Russian invasion of Ukraine, petrol prices were climbing year on year by more than 40 per cent.

Minutes from the March meeting showed the board had considered holding rates steady, before ultimately deciding to hike.

RBA governor Philip Lowe has made it clear he will be guided by the data – including Wednesday’s inflation report.

Monthly annual inflation reached a high of 8.4 per cent in December before dropping to 7.4 per cent in January and 6.8 per cent in the most recent figures

While ABS figures underlined a disinflationary trend taking hold in early 2023, ANZ senior economist Catherine Birch said there was still too much momentum in consumer price growth, and the RBA would hike again on Tuesday.She pointed to three key pieces of data since the last central bank board meeting – including February’s strong employment report, ongoing cost pressures in NAB’s business survey, and ongoing strength in services spending – pointing towards ongoing economic resilience.

“Moreover, the banking sector issues over the past few weeks seem (at this stage) to have been ring-fenced by quick action from central banks,” Ms Birch said. “The US Fed, the ECB (European Central Bank), the BoE (Bank of England) and the SNB (Swiss Nat­ional Bank) have all raised rates over the past few weeks, signalling that financial stability concerns, while under close watch, are not outweighing ongoing inflationary concerns.”

The relatively new monthly CPI data do not include the full basket of consumer goods in each month, with the quarterly report offering the most complete picture. Despite those drawbacks, the RBA has made it clear the more frequent inflation number provides a useful and more up-to-date guide on price pressures.

Inflation based on the quarterly figures reached 7.8 per cent in December, and the March quarter report is due on April 26.

Westpac senior economist Justin Smirk predicted quarterly inflation in the year to the March would drop to 7.2 per cent, but Wednesday’s soft CPI figures suggested the figure could come in meaningfully lower.

Surging population growth and a squeeze on new supply triggered by the fastest rate-rising cycle in three decades are expected to exacerbate the predicted shortfall of homes over the next five years.

The National Housing Finance and Investment Corporation predicts a faster-than-expected rise in borrowing costs will reduce the net supply of new houses to 138,100 homes annually over the three years to 2025, down from the 180,000 it predicted a year earlier.

At the same time, the NHFIC predicts 268,000 more people will migrate to Australia between 2022 and 2024 than it anticipated in its State of the Nation’s Housing report last February.

The downturn in supply at a time when population growth is surging has widened the predicted housing shortfall from 62,900 to 106,300 by 2027.

“The rapid return of overseas migration together with a supply pipeline constrained by decade-high construction costs and significant increases in interest rates is exacerbating an already tight rental market,” NHFIC chief executive Nathan Dal Bon said.

The expert housing advisory body’s diagnosis of a further deterioration in the country’s chronic housing shortage comes as the federal government’s ability to respond to the crisis weakens.

Last week the Albanese government was forced to shelve legislation to create a $10 billion Housing Australia Future Fund that would fund the development of 30,000 new social and affordable homes over five years – with an additional 10,000 affordable homes – in the face of opposition from the Greens and independent Senator David Pocock because it did not go far enough.

The Housing Australia Fund Bill 2023 the federal government had hoped to pass in the final sitting week before the May budget would also have expanded the role of NHFIC – rebranding it as Housing Australia – while also creating a new advisory body, the National Housing Supply and Affordability Council, to be led by former Mirvac CEO Susan Lloyd-Hurwitz.

Federal housing minister Julie Collins said the report was another reminder that too many Australians were struggling to secure safe and affordable housing.

“The findings highlight the need to pass legislation currently before the parliament,” Ms Collins said.

Australia’s housing sector has been hit by a raft of detached home builder collapses. High-rise developers are unable to sell new developments even with vacancy rates at record lows and rents soaring.

The Reserve Bank of Australia has lifted the benchmark lending rate from 0.1 per cent in May last year to 3.6 per cent in 10 consecutive moves. The odds of a further increase at Tuesday’s April meeting are evenly balanced.

Higher borrowing and construction costs halved sales of greenfield lots for detached homes last year, a report by developer group UDIA found, while a separate report by commercial agency JLL showed apartment completions in mainland state capitals slumped 45 per cent last year and that there would be no material increase in large-scale projects until 2025 at the earliest.

Holistic approach

“Housing affordability and supply are likely to remain challenging for some time, underscoring the need for a holistic approach to mitigate the housing pressures Australians are facing,” Mr Dal Bon said.

It will hurt vulnerable people the most.

NHFIC estimated that 377,600 households were already in situations of housing need, 331,000 households were in rental stress – typically spending more than 30 per cent of their household income on rent – and 46,500 households were experiencing homelessness.

Migrants aside, Australians account for a large slice of the growing demand for housing, with the pandemic-era growth of single-person households likely to keep influencing demands on housing supply beyond the immediate five-year horizon.

In its report last year, NHFIC predicted the number of single-person households would rise from 25 per cent of the national total to about 27.5 per cent in 2032.

Australia’s ageing population is a key driver of growth in single-person households. The rising median age of Australians accelerated during the pandemic as fewer migrants – typically younger people – entered the country.

Older households, particularly females, are more likely to live in smaller, lone-person households than other age groups, the report says.

Single-person households make up the third-largest group at 2.7-million households, after couples without children (2.72 million) and couples with children (3.1 million).

This will create more demand for apartments, with a shortfall that will be more severe over the next five years, before the market responds to rising prices created by tight demand to develop greater numbers of homes.

Over the five years to 2027, NHFIC forecasts a national shortfall of 62,300 apartments and medium-density dwellings, and a shortfall of 44,000 detached homes.

Over the decade from 2023 to 2032, NHFIC forecasts a shortfall of 77,600 apartments and medium-density dwellings, while the equivalent 10-year forecast for detached houses is a deficit of 10,900.

When we talk about preparing people for the workforce, it is often framed as being a choice between vocational education, going to university, or on-the-job training.

The problem with that paradigm is that the speed of technological advances means future workers will probably need to do all three, and not just once. They will need to constantly move in and out of education throughout their careers to update their knowledge and skills.

The sensible first response is to make it easier for students to move between the three settings, and to ensure they receive recognition for their previous learning – no matter where it occurred. But a new experiment in Sydney’s north-west goes a step further by looking at how a fully integrated approach could work.

Earlier this year, the Institute for Applied Technology (Digital) opened its doors on a site at Meadowbank TAFE. It brings together the University of Technology Sydney, Macquarie University, TAFE NSW and Microsoft.

It aims to take the best of each type of training, giving learners a rigorous yet practical and industry-relevant education in digital technologies such as big data, cybersecurity, software development and artificial intelligence. Employers are crying out for graduates in these areas, and that demand is only expected to increase.

This is a significant moment for those of us who have been trying to offer integrated educational offerings in Australia.

IATs were originally recommended by Professor Peter Shergold and David Gonski in their 2020 review of the NSW vocational education and training sector. The report’s findings were clear: the future of education must involve a more seamless, connected approach that puts the learner at the centre of the system. The IATs are one model to achieve this.

Progressive pathways

IATs are a distinctive, and new, form of tertiary education – blending VET and higher education with a focus on preparing students with industry-based employability skills to meet emerging workforce needs.

IATs are not super-TAFEs, nor dual-sector institutions. Nor do IATs replace university-based programs that already deliver foundational or bridging courses to higher education students.

IATs integrate curriculum with progressive pathways, through which students will be able to stack meaningful qualifications that are valued and recognised by industry.

It is the education delivered that is distinctive: IATs integrate practical and theoretical components of education by bringing the best of academia and industry together. They address shortcomings in the tertiary system, such as responsiveness to changing industry training needs. Students gain skills and microcredentials that are recognised by education partners.

The national universities accord process has this in its sights, as does the new Jobs and Skills Australia.

The Productivity Commission recently recommended other states and territories follow the example set by NSW’s IAT model. The point has been made repeatedly that the current system does not work for students. It would seem the political appetite to find solutions is finally here. So, what are the possible solutions?

Changes to current funding settings must better incentivise collaboration, co-design and innovation across industry and providers.

For the IATs in NSW to succeed, we need to spend the next four years expanding the program and evaluating what works, with continuing state government support and, ideally, additional federal support.

Other individual universities and TAFEs are collaborating in parts of the country, but this activity is ad hoc and, by all accounts, many of the same pain points are being felt. We need a determined push by state and federal governments to evaluate the various pilot programs, catalogue the barriers and commit to breaking them down.

In the longer term, governments need to work together. Changes to current funding settings must better incentivise collaboration, co-design and innovation across industry and providers, and provide students with a smoother transition across different loan and fee settings.

This work is complex and won’t be done in a year. One of the outcomes of the universities accord process should be the initiation of a formal co-ordinating council to address issues at the intersection of VET and higher education, including qualifications, reciprocal recognition of prior learning, collaborative courses, provider funding models and student funding, preferably with a commitment to Commonwealth Supported Places for joint courses like those on offer at the IATs.

This would go a long way to creating a future nation that has the individual students and their future employability at its heart.

Professor Bruce Dowton is vice chancellor of Macquarie University and Professor Andrew Parfitt is vice chancellor of University of Technology Sydney.

Australia's economy is still holding up on the back of household spending, but there are warning signs that a severe downturn may be nigh, with business confidence falling and consumer confidence at sustained lows not seen since the 1990s recession.

Melbourne butcher Madina Halal Meats has already seen a shift in behaviour.

Customers are trading in prime steaks and poultry in favour of "mince, cheaper cuts of steak [and] casserole dishes".

"That's mainly due to the higher cost of living," manager Amoon Dennaoui said.

She said the shop's customers were spending about 10 per cent less per order, and she had noticed the downturn take hold since the middle of last year when the Reserve Bank of Australia started raising interest rates to tackle soaring inflation.

It is an early manifestation of the plunge in consumer confidence since rates started rising in May last year.

The widely watched Westpac-Melbourne Institute survey of sentiment came in below 80 for the second month in a row — 100 is the level where optimists equal pessimists.

"Runs of sub-80 reads have only been seen during the late 1980s/early 1990s recession and in the 'banana republic' period of concern in 1986, when the Australian dollar was in freefall after the federal government lost its triple-A rating," noted Westpac's veteran chief economist Bill Evans.

Delaying major purchases

Things are shaping up to be even tougher for businesses that sell big-ticket items.

Tony Dagher works in a furniture and home appliance shop on Sydney Road, the same street as Ms Dennaoui's butchery, and has sold fewer beds, couches and electrical goods than this time last year.

"Last year, I was working full-time hours. Now I'm working far less," Mr Dagher said.

But it is not just in Melbourne's north where consumers are holding off on big purchases, according to Westpac's survey, which found most people thought now was a bad time to buy a major household item.

"Apart from two brief tumbles during the global financial crisis — both monthly falls that were quickly reversed — this is the lowest read on this component in the history of the survey going back to 1974 — weaker than the poorest reads during the recessions of the mid-1970s, the early 1980s and the early 1990s," Mr Evans said.

Data released by the Commonwealth Bank also saw a marginal decline in the spending intentions of households by 0.1 per cent, led by a drop in spending on entertainment, retail and travel — categories that saw a major increase post-pandemic.

CBA noted, however, that while people were spending about the same amount of money, there were telltale signs "consumption is beginning to slow" due to higher prices and interest rates.

This emerging change in spending habits also helps explains results from NAB's business survey, which found business confidence entered negative territory in February, falling to -4 index points despite "solid" business conditions for retail and personal service businesses.

"Confidence has been volatile over recent months," NAB chief economist Alan Oster said.

"Confidence fell late in 2022 as concerns about the global economic outlook increased. There was a respite in January as those concerns appeared to ease, but the decline in February suggests the outlook remains clouded."

Even in the current economic climate, people are still looking to enjoy themselves — but many are turning towards cheaper alternatives.

Centrestage Costumes owner Mary Gurry has seen several recessions during her 40 years of running the shop. She remembers the downturn in the 1990s as the worst for her business.

"I have weathered every storm since 1980," she said.

While she believes costume shops are somewhat recession-proof because "people love to party" especially when times are gloomy, she expects another downturn to hit her business later this year.

"We will see a downturn in the next 18 months … there's no doubt because there's mortgage stress out there already," she said.

But Ms Gurry's suspicions of a business downturn are not just a hunch. Mr Oster said they were likely to become a reality.

"We continue to expect a more material slowdown in demand later in the year when the full effect of rate rises has passed through," he warned.

Signs of tougher times ahead

ANZ senior economist Adelaide Timbrell, who has been tracking consumer confidence and spending, said Australians had weathered the RBA's interest rate hikes well so far.

But she warned tougher times were ahead, with mortgages set to come off ultra-low fixed rates onto much higher variable ones later this year.

She said initial signs of a downturn had been patchy until now, and people with savings had been spending on things they were unable to enjoy during years of rolling lockdowns and closed borders.

"If people want to shop on a luxury right now, they're making it travel post-pandemic, rather than an expensive dress or TV," Ms Timbrell said.

The data backs this up. ANZ figures show people are spending 87 per cent more at travel agents than a year ago. This suggests forward spending too, as people book these trips in advance.

But Ms Timbrell said the downturn hitting specific sectors, such as furniture, could also be linked to the housing-market decline, which was seeing fewer people buy new homes and therefore fewer new products for them.

ANZ data suggests people are switching to buying second-hand items to reduce the amount of money they are spending.

"We're seeing a bigger focus on the part of consumers to the cheapest products, and that generally means larger businesses," she said.

"Small businesses are going to be a little bit more impacted by an economic downturn because they don't have the scale to fall back on."

Women are doing more to support employee well-being but face higher stress levels as a result. Here’s how leaders can help.

In this episode of The McKinsey Podcast, senior partners and leaders Alexis Krivkovich and Lareina Yee join Lucia Rahilly, global editorial director, to discuss some of the startling and hopeful results recently released in the Women in the Workplace 2021 report. An edited version of their conversation follows. After, we hear from senior partner Sven Smit and what happened when, about 20 years ago, while at McKinsey, he asked for time off to spend with his young daughter. The McKinsey Podcast is hosted by Roberta Fusaro and Lucia Rahilly.

Burnout

Lucia Rahilly: Today, we welcome back to the podcast Alexis Krivkovich and Lareina Yee, both senior partners and leaders here at McKinsey. Alexis and Lareina, thanks so much for speaking with us today.

Alexis Krivkovich: It’s great to be here.

Lareina Yee: Thank you for having us.

Lucia Rahilly: As always, this year’s Women in the Workplace research covers wide-ranging ground, but today we’ll home in on three areas, and I’d like to start with a topic that many of us have felt personally and painfully during this pandemic. And that topic is burnout.

Alexis and Lareina, as part of your research, you and the team interviewed a variety of women across corporate America. I’d like to read a redacted version of one of their stories on the topic of burnout. And then I’ll ask you to react. And, for context, the woman sharing this particular story self-identified as being at the director level in her organization, a Latina immigrant to the US, and a mother of kids under four. Here’s what she told us:

“I’m feeling long-term burnout. I’m someone who always prided myself on being in control and having strong, emotional resiliency. And I am not doing great. My manager checked in on me, and I know he’s trying to empathize, but he said something like, ‘Oh, so-and-so keeps calling me to make sure you’re OK. We know you’re a flight risk.’

“We’re all aware of the social context we’re operating in, especially women working in corporate America. For me, I think, am I going to be another one that falls from all this? I’m fighting so hard, but it feels like the odds are against me, and it hurts.”

I find that incredibly powerful as an encapsulation of the battle that many women have waged internally over the course of the pandemic. And the numbers seem to bear that out.

The research shows that the burnout gap between women and men has almost doubled since last year’s report. Lareina, help us understand the dynamics here. Why are so many women so tired?

Lareina Yee: Well, frankly, women are hanging on. And that is probably the most blunt and simple way to put it. Forty-two percent of women report being burned out.

And, Lucia, as you mentioned, that is higher than last year and higher than men. So a little under half of your population of women are burned out. And that’s where we stand today. What’s fascinating about your story, the vignette, is the raw honesty with which that woman is sharing her experience from many different perspectives.

Also, a frankly cold response from her manager—in this case a man, but it could be a woman—of, I know you are someone we’re trying to retain. I mean, that makes you feel like a number, not a human who’s going through an incredibly tough time.

And, by the way, I don’t know how this woman’s performance is, but what we see across corporate America is that productivity is at an all-time high. And so what we often see is that women are delivering the performance and business results but at a great personal toll.

Women support colleagues more often than men do

Lucia Rahilly: The report also says that despite their own increasing burnout, women take action more consistently to fight burnout—and generally to extend their support to colleagues and reports—than men in similar positions do.

I will confess that I love and simultaneously loath the phrase “office housekeeping” that is used in the report. Alexis, what exactly is this extra work that women are doing?

Alexis Krivkovich: One of the most fascinating findings this year was how women leaders are really stepping in, in this moment, to be the type of leaders that companies say they most need and most value.

That role that they’re playing is really instrumental, frankly, to keeping a lot of companies going. Women senior leaders do more to help their employees navigate work–life challenges, relative to their male peers. Similarly, they spend that additional time helping manage workloads, and they’re 60 percent more likely to be focusing on emotional support.

To employees, these things matter not only because they feel good, but employees say when they’re receiving that type of additional support, they’re happier in their job. And they’re less likely to be thinking about a move.

In a moment where we’re facing the great reflection, where so many employees are thinking about making a big move, having women leaders stepping in—this is really critical. But it explains a lot of this sensation that we hear regarding burnout and fatigue because they’re disproportionately doing this additional work in the office context, and we already know, because we’ve measured it in the past, that they’re disproportionately doing it at home too.

A talent crisis looms

Lucia Rahilly: Alexis, I love that you mentioned the great reflection, or some are calling it the Great Resignation.

Lareina, you recently wrote a piece on the “third shift” for Fast Company, and there’s a great line in that piece toward the end: “Leaders can lurch from a health crisis to a talent crisis. Or they can take preventive measures that show they value their people.”

What are these preventive measures that leaders can take? What should leaders be doing differently at this time?

Lareina Yee: First? Let’s not just wait for this to play out. And, quite frankly, I think a lot of companies, unconsciously or consciously, are just letting it wait out: “Let’s just see what it’s like when we return to office. Let’s see what it’s like in a couple of months.” You know, “Let’s see what it’s like when we have another vaccine rollout.”

That’s not the right mindset here. As you said, you face a potential talent crisis, because as women—and as your workforce overall—have been reflecting, you don’t know if they’re going to make a move, and if they were to make a move and you were to lose half of your women senior leaders, that would take you back decades.

So, Lucia, to your point, what can leaders do first? They can acknowledge where we are. Second, they can think about what is the professional progression for these talented women. Third, they can start actually forming the work routines for a return to office, not waiting for the physical workspace but actually starting to live into it today.

Instead of having completely unchecked boundaries, start to put those in, start to put in the talent-management processes, the manager support, and the actual individual experience. And if you need to start asking different questions of your workforce in your pulse, do so.

What leadership can do to avoid a talent crisis

Lucia Rahilly: Alexis, is there anything that leaders can do to rebalance the workload that women are disproportionately shouldering in this “emotional housekeeping” area?

Alexis Krivkovich: Well, let’s start with the facts because it’s so astounding to me that, in this day and age, they still hold true. One in three women, and 60 percent of mothers with young children, just like the example you shared at the beginning, spend five or more hours a day on housework and caregiving. Five hours a day is at least another half-time job. And COVID-19 sort of stripped bare for us what was already under the surface and well understood by every working woman I know, which is how imbalanced those responsibilities outside the workplace are. Because these imbalances are not well recognized, and historically companies have not played a role in feeling a responsibility for that.

One in three women, and 60 percent of mothers with young children,...spend five or more hours a day on housework and caregiving.

Alexis Krivkovich

So one role for companies is to be thinking about how do we reflect performance reviews and expectations. For the majority of women, the thing they most worry about is how they’re going to be evaluated in their performance. It’s not “how much extra work I’m doing at home.” It’s, “Am I going to be penalized because this will have a hangover effect?”

We see the companies that are out in front of this right now. And what I mean by “out in front” is outperforming year over year on diversity goals. The companies that are outpacing their peers are leaning forward on things like childcare, elder-care supplements, thinking about flexibility, reimagining the roles. And, in particular, focusing more on the outputs and less on the inputs. “I don’t need FaceTime with you 24/7 if you get a great job done.”

The second thing they’re doing is they’re actually rewarding that extra work that women are doing in the workplace. When [women] show up as leaders who care for employees and their well-being—in the ways they disproportionately are holding the responsibility for DEI [diversity, equity, and inclusion]—only 25 percent of companies reward that in their performance reviews. But that 25 percent of companies is disproportionately those companies that are out in front on DEI overall.

Burnout for intersectional women

Lucia Rahilly: Speaking of DEI, the story we heard was shared by a working mom who is also Latina. Lareina, can you speak to burnout for women at the intersection—women of color, for example, or LGBTQ+ women?

Lareina Yee: Let’s start with something that Alexis just said, which is that, in this period of time, women have stepped up. Only a quarter of them say that that extra work was reflected in their performance review, a promotion, or a raise. So you’re doing extra and being largely unrewarded for it. That’s the starting point for all women.

To your point, as we look at intersectionality, the challenge is that the barriers all around you, from the very moment you start, are so much steeper. You have that extra context as well.

So let’s make that specific. Let’s say you are an Asian woman starting out. Perhaps you are someone like me. I am Asian American. You go through the corporate world, doing the extra work, less recognized even before. And still now you are much less likely to be promoted.

We see that Asian women account for one in 15 roles in the entry level among women, but they’re only one in 50 in the C-suite. We see that if you’re a Latinx woman, if you’re a Black woman, if you’re a woman with a disability, that at each of those intersections, the likelihood of being promoted, the gaps in terms of getting to the next level, the broken rung, they’re not just at the entry level. They’re there every step of the way.

We also know that things like microaggressions or the experience of being an “only” are so much more acute. If you put yourself in her shoes for a moment, you have to say, my goodness, she must really be committed to this organization, with all of those headwinds, with all of those barriers, to still be delivering results and putting in extra.

At some point, are we going to have the ability to recognize that informal performance in feedback and in actually thinking about the way in which we support talented people in our organization?

The broken rung of advancement

Lucia Rahilly: Let’s turn to this question of advancement and mobility for women—specifically, to the phenomenon you just referred to that we call the broken rung.

And here, I’ll share a story that was, again, part of your qualitative research. This was shared by a Black woman who is a senior manager in her organization. Here is what she said:

“At my company, we have these different leadership programs, which no one really knows about nor has the qualifications to get into. It tends to be people who are friendly with each other. And people tend to gravitate toward people who are like them and who look like them.

“I’ve talked to folks that have been here their entire career, White males, and they started off perhaps in the warehouse. Now, they’re at the VP [vice-president] level. I’ve also talked to a lot of Black and Brown associates that have been here for 18 years and are barely above the level they were initially at, or they were a little bit higher, but nowhere near their White peers, and no one really to talk to them and say, ‘Hey, let me fight for you.’”

Alexis, Lareina just mentioned the broken rung. And we’ve talked about that in our publishing before, but, for context, for new listeners, what does the phrase “the broken rung” really mean?

Alexis Krivkovich: The broken rung is the phenomenon that, for many people, feels really counterintuitive. The most inequitable, the most uneven, promotion between men and women is not actually at the very top, in those coveted C-suite and highly visible leadership roles. It’s, in fact, at the very first step up to manager. It’s that very first leap into management and early management that unlocks that entire pathway that that woman was describing—a future opportunity. Where men disproportionately, relative to women, get access again and again, year over year.

For every 100 men who leap forward, only 86 women do. And while that difference might feel small because it’s happening at the very start of careers, it’s amplified across huge numbers. And what it means is that women’s career progression is slowed down right out of the gate, and they never have that opportunity to catch up.

It also means that the future pipeline of diverse leaders we would want to see for those later opportunities never appears in equal numbers. And that’s why so many companies look at their leadership ranks and say, “Even if I now want to accelerate diversity and representation, I haven’t built and cultivated the generation of leaders that I need.”

The long game to achieve equity

Lucia Rahilly: So you’re speaking to progress over time. What progress have you seen so far? Have we seen improvements in the ways that women are faring relative to men vis-à-vis being promoted over the years that we’ve been doing this research?

Alexis Krivkovich: Interestingly, the most progress has happened at the very top. In fact, the biggest gain in the past seven years has been in the C-suite, the roles right at the table with the CEO.

That’s really encouraging because these are highly visible and high-power positions, but it’s also where we started furthest from equity to begin with. So we have gained ground, yes. But we’re now at one in four, when we start out with men and women at nearly 50/50 at the beginning of the pipeline.

So while we’ve seen incremental gains, what we haven’t seen is this tidal wave that I think, frankly, by 2021, so many of us expected, recognizing how much diversity exists at the beginning [of the pipeline]. Some of the bright spots that are out there have been in the past year. Even that increased focus that’s been placed on race and intersectionality in particular has meant that the gap between women of color and White women has closed some.

And that’s a really good thing. But overall, we’re still so far from where we need to be to get to equity. To your point, this is a long game, right? It takes a long time to build a next generation.

So there’s the thought that companies could be in this perilous moment, where if we double down, we have a real opportunity to win this moment of reflection. But if we don’t, there are so many talented, diverse colleagues in companies that will be thinking about, “Am I getting the return on the investment I’m putting in when I know I’m giving extra, and I know that my company self-describes they don’t reward it, formally.” That’s the perilous moment we face.

Women of color in the workplace

Lucia Rahilly: Let’s take that point and segue to our last segment, turning specifically to the experience of women of color in the workplace. And here, we’ll hear a bit of a story from an East Asian woman working in an entry-level job. Here is what she said:

“Because I’m the only woman of color on my team, there’s a visible difference between me and the other people on the screen. That can be intimidating. It makes me cautious and more reserved about what I say or do. I feel, in those spaces, like I’m representing either women or my race or ethnicity. So I don’t want to say or do something that could contribute to a stereotype about women or people of color.”

Lareina, you’ve written much about the phenomenon of “onliness.” Anything to say in response to that story?

Lareina Yee: That story captures being an only so well. It is the simultaneous experience of feeling isolated and also worried and pressured to represent the most positive stereotypes. You think about that surge of, frankly, negative energy, fear, self-consciousness. And, by the way, all of that is distracting you from the purpose for why you are in that room, which is about the work itself. And that happens to you at 8:00 a.m., 12:00 p.m., 1:30 p.m., five o’clock—and that’s Monday, Tuesday, Wednesday, Thursday, Friday, and probably a little bit on Sunday, just for kicks.

And you wonder why, over the course of five years, ten years in the workplace, that doesn’t have an impact on you. So on the one hand, you can say, “Sell, I guess, the upside,” she says a bit sarcastically. “You’re driving an enormous amount of resilience and training.” But I think we would all say that that’s not the way to bring out the best in people. Particularly, your quote, your story, was of an Asian woman. What’s really interesting about Asian intersectionality is it’s often less spoken about. That story isn’t one that a lot of people understand.

And saying, oh, your experience is the same as a White woman’s experience or the same as a Black woman’s experience is incredibly wrong. Each of these experiences has unique dynamics to it. So then it goes back on you to explain that to somebody.

I think after all of that you’re just exhausted, and I go back to 42 percent of women are burned out [and probably thinking] “Well, you know, I’m exhausted just even thinking about that, never mind delivering on my job, delivering on the targets and expectations, going home, and if I have children, in the evening, doing my second shift.”

The power of allyship

Lucia Rahilly: We talked earlier about new commitments to DEI initiatives, which would presumably help or mitigate some of this exhaustion of having to explain to and educate colleagues and so forth over the past couple of years. Certainly, and particularly since the killing of George Floyd, many leaders have become galvanized and spoken publicly about taking action on racial equity. What did the Women in the Workplace research tell us about how that revitalized focus has played out so far in the workplace?

Lareina Yee: The corporate commitment is at an all-time high toward improving racial equality in local communities across all of the states, across all our urban centers, across rural places. I mean, that’s extraordinary.

The challenge is that commitment isn’t backed up by the experiences we’ve seen this year. And I’m sad to say that, but the facts tell the story.

Let’s just take the very simple concept of allyship. What we see this year is that the number of leaders, both men and women, of any race, of any intersection, are raising their hand. And they’re saying, I absolutely want and believe it’s important to be an ally. But the very same phenomenon we saw last year, we continue to see, which is, when we start to ask questions about the day-to-day actions of an ally, we see a huge drop-off.

So while close to 80 percent of managers in the United States will say, “I am an ally,” when we actually look at brass tacks—practical actions of offering an opportunity for a woman of color, bringing someone into a circle they weren’t in before, actually asking them how they’re doing, supporting them—that drops off to the low teens. That disconnect between recognition and action? That still holds us back in the day-to-day workplace.

While close to 80 percent of managers in the United States will say, ‘I am an ally,’ when we actually look at brass tacks...that drops off to the low teens.

Lareina Yee

Lucia Rahilly: Lareina, any specific ways you’ve seen leaders support women of color successfully?

Lareina Yee: It absolutely starts with advocating for new opportunities for women of color.

How often have you opened an opportunity professionally at a meeting—in terms of a promotion, in terms of opening up your network—to women of color? Secondly, have you really stepped up to go beyond mentorship to sponsorship? By the way, that goes back to my first point, which is opening up opportunities professionally, not just being empathetic.

Third, do you publicly recognize women of color, give credit to them for their contribution? All too often, what women of color, particularly Black women, experience is that their judgment is questioned. Do you actually stand up for women of color when their judgment is questioned in the moment, in the meeting, at that time?

Another one is, do you confront and question and challenge discrimination? When you see it, do you interrupt behavior that is not inclusive to women of color, as it happens? If you think about these actions, they’re incredibly tactical.

There are things that happen at any given moment of the day, and that is where we fall. It is not just the big committee decision to promote a woman of color, although that’s important. It’s also all the grains of sand that hold you back on a daily basis, and that’s where real allies shine. They do it when no one’s noticing, and they’re consistent, and they show up minute-to-minute. If you’re a woman of color, you know who those people are, and you know how few there are in the world.

Alexis Krivkovich: We see that women do twice the sponsorship of their male peers in the organization, a phenomenal amount of lifting up of women and men who are below them and rising in the organization as talent.

Very often I hear from male leaders, “Well, I’m not sure if I’m the right person to support this woman of color, because I don’t have that experience. I won’t know what it’s like to be a mother, to be Hispanic, in some cases to have a disability, or some other form of intersectionality as well.” And my answer is always, “If you are a leader, you are the person, because if you don’t, then you leave all of that to someone else, and, disproportionately, what we see, to women.”

We can measure that women who say they have allies in their organizations show much lower levels of microaggressions, much higher levels of overall support. They’re happier, and they’re more likely to stay. So getting this right is actually about unlocking the key to getting all talent to feel like they have a fair and equal shot and are excited to stay to see that through.

Lareina Yee: I think Alexis captured it beautifully. It’s a huge talent unlock. Instead of thinking of this as a risk to be managed, think of this as an opportunity.

Optimism heading into 2022

Lucia Rahilly: Sometimes, I feel that we’ve been talking about these issues since I was in college, and that can feel discouraging. What are you most optimistic about going into 2022, coming out of this Women in the Workplace report?

Alexis Krivkovich: I’m most optimistic about the fact that we’re having an honest conversation, and now with a real fact base. We’re not talking about these things as perception but as real and measured experiences that companies can’t hide from—and they don’t want to.

As a mother of three young daughters, it gives me real hope because I’ve been thinking about this question for 20 years. But in 20 years, when they’re fully in the workplace, maybe we’ll have a totally different paradigm.

Lareina Yee: What we see year over year is that sunlight is the greatest disinfectant.

As Alexis said, you can’t escape the facts. That allows us to have a really honest conversation. Sometimes, that’s not very comfortable, but through that process, we’re actually going to get to a better place. So every year, and this year is no exception, I end the research feeling incredibly optimistic.

And while the stories and vignettes that you shared are incredibly harrowing, there are also some incredible stories. I met somebody who introduced herself to me at a cocktail dinner party, and she said, “I heard you and some of your colleagues talk about the Women in the Workplace report. I read it. And it was just an outpouring of emotion, of being heard, being recognized, seeing myself, my experiences in the data, knowing I wasn’t alone.”

And she’s also a sponsor of other women now. She’s helping five other women. That gives me a lot of hope.

Lucia Rahilly: Any example from your own career of someone acting on your behalf as an ally in a way that helped you move forward?

Lareina Yee: I was just starting out at McKinsey. I was a business analyst. We had been working really hard on a project, and I was working on my work stream heads down. We were getting ready for an executive meeting with, I think it was, the president of the group, someone very senior. I was so nervous. Again, my nose was in the books, and I show up to the meeting and I sit down, and then the other people saunter in, and I am ready to answer any question. And the president looks over at the table at me and says, “Who is that?” Literally says that out loud. I think he thought I was the coffee person.

And so his question and his body language is like, “Why is she sitting down at the table?” And the senior male partner didn’t skip a beat. He looked at the senior executive straight in the eyes and said, “She is in charge of the most important analysis that’s going to fix your company. So we’ll be following her direction at this point.”

I was the most junior person in that meeting. Let’s be honest—my piece was one of many pieces that contributed to the growth of the company. But him saying that, not hesitating to assert my value in that meeting, made all the difference. And I’m still so grateful for not feeling like an imposter in that meeting but feeling like I belonged at that time.

Lucia Rahilly: And that so easily could have gone a different way.

Lareina Yee: The typical thing that would happen is no one would say anything. It would just be a bystander, like, “Oh, well, you know, that was kind of uncomfortable, moving on.” And you spend the rest of the meeting thinking about that moment or coming back to that moment—it does something to your confidence. And it does something to your confidence the other way when someone steps up as an ally. That’s the power, the positive power, of someone actually being an ally to you.

Alexis Krivkovich: Let me share a personal story of my own about sponsorship. A number of years ago, I found myself as a new parent and in a really challenging project situation [at work].

It was a new set of leaders I was working with. There were politics involved, a lot of travel, long hours. It was a really tricky project, and it didn’t go particularly well. And at the end of it, I recall one of my biggest supporters set me down for what I thought was going to be a really tough-love conversation about all the things I needed to improve.

It was a moment where I felt really low in my own confidence. And instead, he started by saying, let’s just shake it off. You don’t need to take big lessons from this. Not every moment has to be the one where you knock the ball out of the park. I know you and your potential, and I can see everything great you’re going to do from here.

And for me, in that moment, having someone who was really focused on the long game of what I was most capable was the thing I most needed.

Lucia Rahilly: That’s really inspiring. Let’s close there. Alexis and Lareina, thanks so much for taking the time to speak with us today.

Lareina Yee: Thank you so much.

Alexis Krivkovich: Thank you.

Lucia Rahilly: For more on our Women in the Workplace 2021 report, look for the link in our show notes or visit us at McKinsey.com.

Roberta Fusaro: A flexible work schedule is top of mind these days for many. As it was about 20 years ago when Sven Smit, senior partner at McKinsey, asked for the unusual—time off to care for his young daughter. This is from our My Rookie Moment series, which you can find on McKinsey.com.

Sven Smit: When I was an associate, which was a long time ago, we actually still were on a schedule at McKinsey that on Saturday morning, we would have our training days, once every two weeks. They were great fun. We learned a lot, but, you know, it was on a Saturday, kind of atypical if you compare it with these days.

And I would also say there was an ethos in the firm that if you were to go home at 6:00 p.m., people would jokingly tell you, “Are you taking the afternoon off?” And for many personal reasons, particularly because I wanted to be with my daughter and help her grow up, I had decided that I wanted to go part-time. I was the first male person at McKinsey that would consider [working part time]; there was one woman before me that actually did work part-time.

And, you know, I was young. I had no reputation whatsoever. And I had to explain this to my office manager, who was of the entire spectrum of hard workers, the most hardworking person. And I remember that my feeling was that I would go into his office and say, “I’m going to go work part time, at least. You know, be home on time on Wednesday and Thursday and not be traveling on those days, and Friday take off to be able to care for my daughter.”

And I thought he would just basically say, “That’s not possible.” So I had sort of resigned myself mentally to the fact that I would be resigning by saying this. And to his credit, he said, “Well, probably you’re going to do this better than I did. Good luck.” I learned a lot from going part-time and doing it for the first time.

This might be a dated story for those of you that hear it now. In 1996, this was quite unusual. At the moment, it’s totally usual. At our firm, it’s not even a question when people bring it up—we know how to do it, and we’re well organized. But at that time, I fully thought I would be leaving the firm by asking the question. And I was proud that this person said, “You’ll be able to do it. Good luck.” And, you know, I had some luck. I’m still here.

Business leaders warn the country risks missing out on a generation of talent after Home Affairs Minister Clare O’Neil dashed hopes that major fixes to the broken migration system would be revealed in the May budget, declaring the overhaul a time-consuming and complex project.

BHP criticised the government’s retrograde introduction of multi-employer bargaining as adding complexity for a sector already paying its workers well. The miner was joined by conglomerate Wesfarmers in warning the government’s next industrial reform targets relating to casual workers and labour hire could also disrupt their workforces, just as Australia falls behind in the global race for talent.

Large employers also urged a dramatic shake-up of the education system to encourage more women into STEM subjects to boost the pipeline of home-grown talent with software billionaire Richard White urging schools to make maths and science more “fun”.

Executives from across the country’s leading hospitals, banks, miners and property companies said while they recognised fixing the migration system was a large, intractable problem, the government needed to move faster on quick, simple solutions, as well as continuing to clear the visa backlog.

“It’s not something that can be fixed overnight. So, the businesses in this room will have to wait a little bit before there is the easing in the labour market that we need to see,” Ms O’Neil said in response to questions at the Summit.

“I’m an incredibly impatient person. I want to get this done as quickly as possible [but] we need to recognise that this is a massive change,” she told the Summit. “Our migration system is a huge driver of where Australia will be in 10 or 20 years.”

Macquarie University chancellor Dr Martin Parkinson, who next week will hand his draft report on Australia’s migration system to government before a final report in April, also played down expectations, saying “we’ve got to be realistic”.

“We’re not going to have all the answers, what we’re trying to do is identify key areas of reform for the Minister and for the department to pursue.”

But Carmel Monaghan, Australian CEO for Ramsay Health Care, the country’s largest operator of private hospitals, said there were some obvious quick fixes. She called labour market testing to prove employers cannot source local workers as “ludicrous” given Australia faces a shortage of 100,000 nurses.

“Globally there’s been a war for talent and I think other countries were quicker and slicker and more cost-effective at migration than we have been,” she told the Summit.

Head of human resources at the Commonwealth Bank, Sian Lewis, agreed that while a long-term overhaul was welcome, some quick decisions were also needed.

“Speed is always of the essence ... we all run big organisations that are more like tankers, as is the government even bigger, but I think really [we need] some speedy decisions,” she said.

Ms O’Neil said the government had driven down the visa backlog from a peak of over a million applications to 580,000 and was “fast approaching” a more normal level of 500,000.

But BHP chief people officer Jad Vodopija said the miner was often still waiting for “months and months and months” for skilled employees from overseas.

“Clare [O’Neil] described the system ... as complex, expensive and slow. It is. On a good day we could wait weeks, but we could be waiting months and months and months. I’m terribly encouraged by what they have to say, but Australia will miss the boat,” she told the Summit.

“People can walk into your Singapore, Canada, European countries and get a very attractive role whilst we are still working our way through these much-needed improvements.”

In a landmark speech on cutting red tape to overhaul the “outdated” visa system as part of a business-friendly shake-up, Ms O’Neil told the Summit the government would shift the balance from temporary foreign workers in favour of permanent migration.

But business leaders warned the country is losing the global race for talent after Ms O’Neil warned an overhaul of the “Byzantine” system would take time and that substantive changes would not be ready by the May budget, despite acknowledging the urgency of the problem.

“I don’t think we are at risk of losing people, we are losing people,” Ms O’Neil told the Summit, during a frank discussion after her speech. “We are not the favoured destination of many of the world’s highest skilled migrants.

”If you’ve got skills that are in demand all over the world and you’ve got a chance of going to Canada where you can get a really fast outcome on a visa decision. Then you look at Australia where you might have to wait six months or 12 months to get a visa decision. These people can live anywhere in the world – why would they want to come to Australia when we are putting up those barriers?”

Ms O’Neil said the next step would be the report by Dr Parkinson, but that substantive changes would not be ready for the May budget.

The budget would instead focus on getting the visa backlog down while Australia’s net immigration intake of 195,000 was likely to be higher than the budget predicted, due to international students returning “much more quickly than anyone had anticipated”.

Dr Parkinson’s report will lead to the creation of an “architecture document” by April which “takes those big directions [and] puts them into a structure of what a new system might look like”.

“Once we resolve that, I think we can quickly move to some decision-making,” Ms O’Neil said.

Dr Parkinson said the directions in his report – which focuses on delivering the “maximum bang for your buck” – also needed to work alongside changes in the education system.

“We’ve thought a lot about how we could ensure the programs better target the people we need for our economic and social objectives ... we really want to address both today’s skill shortages, but we have to work the migration program alongside the education and training system,” he told the Summit.

“Who should we pick? There’s really two criteria which stand out. It’s age and it’s skill. The higher skilled you are and the younger you are, the more likely you are on average to make a significant contribution to Australia.”

Raising concerns about the government’s industrial relations reform agenda, BHP’s Ms Vodopija said the miner would push back against the adoption of a “blanket approach” to the government’s “same job, same pay” policy for labour hire workers.

In addition, the miner said the introduction of multi-employer bargaining was unnecessary in high wage sectors like mining. “It creates another level of complexity in a workforce we believe is functioning quite well … in terms of wages, conditions,” she said.

Australian household disposable incomes have fallen as higher taxes, interest rates and consumer prices take their toll on family budgets, with experts warning of more pain to come amid forecasts of a sharp economic slowdown and more rate rises.

The economy expanded by a softer-than-expected 0.5 per cent, in real terms, in the final three months of last year, held up by a fall in imports and higher exports as international students returned to Australia, according to the Australian Bureau of Statistics (ABS) on Wednesday.

The annual growth rate fell from 5.9 per cent to 2.7 per cent, and is tipped to slow further as the Reserve Banks’ most rapid interest rate tightening cycle in a generation forces households to tighten their belts and the tight labour market to cool.

A pick-up in wages growth did not prevent household disposable incomes falling by 0.7 per cent in the quarter in nominal terms, and by 2.2 per cent after inflation, as higher wages were offset by an increase in taxes, mortgage interest payments and consumer price inflation.

Households spent 4 per cent of their gross incomes on mortgage interest, the highest level since 2015.

As wage inflation pushed wage earners into higher tax brackets, personal income taxes jumped to 15.7 per cent of household earnings, its highest level in two decades.

As the budget supports from the pandemic run out, the increase in taxes and mortgage interest prompted households to save less of their income, reducing the household saving ratio to 4.5 per cent of income, its lowest level since September 2017.

Treasurer Jim Chalmers said the national accounts showed the economy was moderating as expected, with substantial challenges in the year ahead.

“This is an inevitable consequence of a global economic slowdown, high inflation, rising interest rates and an international energy crisis,” Dr Chalmers said.

“These numbers reflect the reality of rising interest rates and capture the impact of the cost-of-living pressures affecting Australians.”

So-called net exports contributed 1.1 percentage points to the economy’s 0.5 per cent expansion in the December quarter.

Higher prices for resource exports such as iron ore, coal and gas helped drive a 2.1 per cent increase in national income in the quarter, and 12 per cent over the year, along with a 12 per cent quarterly lift in mining sector profits.

But business groups pointed to the 1.4 per cent real fall in private business investment in the quarter as a warning sign for the economy’s growth prospects.

Business Council of Australia chief executive Jennifer Westacott said the data showed the need for a 20 per cent investment allowance for businesses.

“If we don’t act to lift productivity by driving investment, innovation and new industries, the hip pocket gains for Australians will be short lived and they’ll continue to fall behind,” she said.

Westpac chief economist Bill Evans said the national accounts depicted an economy where the pressures from rising interest rates and falling real wages were weighing more heavily on household spending than expected at this stage of the cycle.

“Inflation remains too high but there are signs that despite tight labour markets, wage pressures are easing – exerting even more pressure on the household sector through persistent falls in real wages,” he said.

Growth in discretionary spending slowed to 0.4 per cent in the final three months of last year, including for clothes and household furnishings.

The Reserve Bank has increased its cash rate from 0.1 per cent in May last year to 3.35 per cent last month.

Financial markets slightly reduced pricing for the central bank’s peak cash rate from 4.3 per cent to 4.2 per cent after the December quarter GDP growth figures came in below forecasts of a 0.7 per cent quarterly gain. Growth in household spending fell for the second quarter in a row.

The monthly ABS inflation indicator for January, released on Wednesday, came in considerably softer than expected at 7.4 per cent year-on-year, but remains well above the RBA’s 2 to 3 per cent target range.

Exports were bolstered by a 20 per cent lift in the value of travel services trade in December, as more international students returned to Australia after being locked out in the first two years of the pandemic.

Inventories subtracted 0.5 percentage points from growth, while a fall in non-residential property construction and ongoing declines in stamp duty volumes collectively shaved 0.2 percentage points off activity.

Commonwealth Bank chief economist Gareth Aird said strong population growth meant quarterly GDP growth needed to be at least 0.4 per cent to ensure living standards didn’t fall on a per capita basis.

“Indeed the ABS today reported that GDP per capita was flat over the December quarter. We expect a per capita recession in 2023,” he said.

Shadow Treasurer Angus Taylor said the decline in the savings rate was evidence that households were pulling back to make ends meet.

“The combined impact of rising inflation, rising interest rates and rising taxation is a real battle for so many Australian households, a real battle that are going to be grappling with for many, many months for a long time yet,” Mr Taylor said.

JP Morgan chief economist Ben Jarman said the softness in consumer spending was further evidence that domestic demand was moderating.

“We should expect further headwinds to nominal consumption from here, given the lack of further space for the saving rate to fall as it did over 2022,” Dr Jarman said.

Economists and the RBA expect growth to cool as the effect of higher rates and cost of living pressures force households to cut back on spending.

In its latest statement on monetary policy, the central bank forecast GDP growth would fall to an annual rate of 1.4 per cent in June 2024.

Goldman Sachs chief economist Andrew Boak said the softer-than-expected growth figures were unlikely to stop the RBA from delivering further rate hikes.

“Beyond the usual quarterly volatility, we note that the national statistician flagged that severe flooding weighed temporarily on activity in the quarter, and we expect the RBA to remain focused on accelerating labour costs,” Mr Boak said.

“In particular, nominal unit labour costs have now accelerated to an annual rate of 7.1 per cent, far above the pre-COVID decade average of 1.6 per cent, and this will keep upward pressure on the consumer price inflation.”

The biggest reason so many workers are still staying home isn’t because they are antisocial, or quiet quitting, or want to wear sweatpants.

Last year was supposed to be the one of returning to the office. The same could be said for 2021, and even the second half of 2020. The office seems to have become a place where we’re always “returning” but never quite “arriving”.

Although office occupancy rates have risen meaningfully, they are still nowhere near pre-pandemic norms in most of the country. In most big cities, offices are still empty more than half the time. Even in Austin, Texas – which has the highest occupancy rate among large cities, according to Kastle Systems badge-in data – workplaces are still much emptier than before the pandemic.

So, what have we learned about hybrid work the past 12 months? Hybrid work is the norm. The idea of a tug-of-war between managers and employees over spending time in the office has been a bit exaggerated. Polls have shown consistently that employees do value some degree of face time and want to be in the office roughly two days a week. Managers would prefer three. For those keeping score at home, that’s a difference of … one day.

“Overwhelmingly, managers are pretty much aligned with employees,” Stanford’s Nicholas Bloom says. The exceptions he has found are people who have “30-plus years of work experience, and have been very successful and have done that all in person … but they are real outliers”.

Instead, most bosses are gradually becoming comfortable with managing and evaluating employees they don’t see every day – and not with creepy surveillance software, which Bloom dismisses as “awful”.

As evidence, he points to data he said surprised him: that after resisting giving employees Mondays and Fridays at home in 2021, in 2022 managers seemed to become more comfortable with an in-office schedule that consistently allows for remote work on four or more contiguous days.

One-size-fits-all arrangements don’t work. It’s tempting to look for best practices that can be transferred across teams and companies. But what strikes me about the last 12 months is the experimentation that has taken place. Some teams (and some employees) are going to benefit from being together more often. Others will thrive with more autonomy.

“It’s more difficult to make blanket statements now than it was even a year ago,” says Barbara Larson, a professor of management at the D’Amore-McKim School of Business at Northeastern University.

The reality is that every team and every employee is going to be in a slightly different situation. Someone who works primarily with clients in other cities or countries is essentially a fully remote employee whether they are in an office or working from home. A person without a lot of experience may need more in-person mentoring. Remote work has been a boon for people with disabilities. With such diversity of experiences, I’m more and more sceptical of anyone claiming to have a single answer.

Bosses have only so much power. In the companies that do truly want workers back in person more often, managers have tried insisting they return to the office; they’ve tried luring them back with perks; they’ve begged. Despite this, hybrid seems here to stay.

Perhaps that comes as a surprise to powerful people who are used to having their orders followed. But probably a significant portion of anything managers request gets ignored; think of the struggles involved in any change initiative.

Channelling the tides of change

Smart managers find ways to channel the tides of change instead of trying to turn them back. Consider Citigroup chief executive officer Jane Fraser’s offer to let employees work remotely the last two weeks of the year. How humane. And how politically savvy because in our new hybrid reality, many workers probably would have done so – without permission – anyway.

Long commutes are the chief obstacle to in-person work. The biggest reason so many workers are still staying home isn’t because they are antisocial, or quiet quitting, or want to wear sweatpants. It’s because the commute gobbles up hours of the day, and the internet has made the trek optional.

That’s why RTO rates have remained lower in the cities with the longest commutes. There are some things governors, mayors and transportation officials could do to make those journeys shorter and more pleasant, but none of them come quickly or cheap. In the latter part of 2022, city officials seemed to realise this – and shifted to thinking long term about zoning and transit, whether they are openly planning to repurpose office space for housing, as Chicago is doing, or discussing ways to reduce the length of residents’ commutes, as New York has done.

Hybrid is more than a schedule. Some companies have developed something of an attendance-taking mentality, obsessing over which employees or departments are in 2.1 days a week instead of 2.9. This energy could be better deployed – first, in finding ways to make in-office time feel worth the commute, and second, in thinking about how communication happens when workers are at home.

In a hybrid workplace, the centre of gravity isn’t necessarily the office. It’s technology and communication platforms and the norms that shape their use. And in a truly hybrid workplace, tasks are designed so that heads-down work can happen at home, with the office reserved for tasks that require interaction.

At companies still struggling to make this transition, Larson says, it would help if senior leaders stopped coming in five days a week. “C-suite people hate it when I say this,” she admits. But by showing up every day, they’re signalling that hybrid work isn’t compatible with a senior role and undercutting their efforts to help employees establish a new rhythm.

Finally, hybrid is about more than just showing up. Driving into the office only to send emails or sit on Zoom is annoying – and a missed opportunity. We could all probably make a bit more effort to maximise our in-person time, whether that’s mentoring or just making small talk. Those social bonds are part of what make work more than just a grind.

We have learned a lot from our experiments last year, but companies are still in the early days of determining what works best for them.

Some friction is inevitable along the way, Bloom says. Consider that 70 per cent of workers want to choose the specific days they work from home, but about the same number – 75 per cent – say that when they do come into work, they would like their colleagues to be there. Workers can’t have it both ways.

Perhaps in 2023, we’ll finally figure that one out.

Sarah Green Carmichael is a Bloomberg Opinion editor. Previously, she was managing editor of ideas and commentary at Barron’s and an executive editor at Harvard Business Review, where she hosted “HBR IdeaCast”.

Need help taking the plunge to quit your job? Take the advice of the expert who accidentally coined the term ‘The Great Resignation’.

Pre-pandemic, the idea of quitting your job may have sent you into a nervous tailspin. 

Slate’s resident Ask a Manager columnist, Alison Green, said that based on a decade of writing her column, one of the most common queries she came across was how to push through the nerves of resigning. People want advice on how to say it, when to do it and whether or not the risks outweigh the rewards. Some people even admitted to lying about the true reason for their departure.

It makes sense, right? Good managers have usually invested a decent amount of time and money into their employees’ development, so announcing a resignation could feel like you’re being ungrateful or disrespectful.

However, Anthony Klotz, Associate Professor of Organisational Behaviour at UCL School of Management in London, thinks the pandemic has changed the way we think about resignations – at least for some people. 

The prolific nature of the ‘The Great Resignation’ – a term Klotz accidentally coined during a 2021 interview with Bloomberg – has given a voice to a lot of employees who were feeling that the pandemic had fundamentally changed how they felt about work, life and the boundaries between the two.

“It was sort of taboo to talk about quitting and resignations before this,” says Klotz. “I think the reason it became so popular is because it gave a voice to individuals who felt like, ‘I don’t want to go back to how things used to be because I feel I’ve changed.’”

But just because the motivators for quitting your job might feel stronger now than in previous years, that doesn’t mean it’s not still an uncomfortable and sometimes clunky process to wade through.

Klotz has been studying the ways in which employees resign and the effects of different resignation styles for years now, so if there’s anyone to take advice from on this topic, it’s him.

If you feel at your wits end with a job, or have been enticed by an attractive offer from another employer, Klotz recommends keeping the following things in mind.

1. Consider what’s motivating you

In an episode of Adam Grant’s podcast Work Life, Klotz and Grant talk about three important things to consider before pulling the plug on a job: voice, loyalty and alternatives.

Ask yourself questions, such as: Am I aligned with this organisation’s mission? Do I feel my voice would be heard if I spoke out about the aspects of my job that I’m not enjoying?

For example, if you’re getting bored or disengaged with the kind of work you’re doing, Klotz says now is the time to speak up.

“People often leave a job because they don’t like 20 per cent of it. This might be a relationship they have or a task they need to spend time on. At the moment, bosses are really keen to talk about how to retain people, so this is a great time to engage in what’s known as ‘job crafting’. 

“This is when employees proactively go to their boss and say, ‘Can you help me turn the job I have into my dream job? To do that, it would mean getting someone else to do these reports because they’re draining the life out of me and ruining my day.'”

Consider if you could re-design aspects of your role to better suit your personal passions.

2. Consider what you’re losing

As well as weighing up the benefits of taking a new employer up on their job offer, Klotz suggests weighing up the pros of staying in your existing job.

“When people make those pros and cons lists, there are some benefits that they [overlook]. And one of them would be social capital. 

“If you’re at a job where you have some friends and a good reputation – if you need to get something done, you know who to go to, or you make a mistake and you know who can bail you out – remember that won’t follow you to your next job.

“In fact, you’ll start at zero in terms of your social capital in the next job. And there’s no guarantee that you’ll be able to build it back up to the level you currently have.”

“You’ll start at zero in terms of your social capital in the next job. And there’s no guarantee that you’ll be able to build it back up to the level you currently have.” – Anthony Klotz

You should also consider the special skills you have that are specific to that company, he adds.

“This is expertise you’ve developed during your time at the company; it’s what people know you for. You can’t expect that it will follow you into the next job. You might mess up in your first week, and therefore your reputation as an expert in that area might be hard-earned from then on.”

Weigh expertise and social capital into the equation in the same way you would pay and benefit differences, he suggests.

3. Keep wellbeing front of mind

Next, consider the alternatives you have on offer and make sure you’re not viewing a new job opportunity through rose-coloured glasses.

“Quitting a job voluntarily often results in regret,” says Klotz. “It’s not unlike leaving any relationship in your life.

“Quitting your job is an emotional decision, and emotions get in the way of us making rational decisions. So you have this emotional decision to leave and then this other decision where you have to figure out what to do next. And whether that’s another job, another career or taking a career break, you don’t know what that’s going to be like. 

“Often we see that through a very positive lens – it’s that, ‘the grass is greener’ thinking. We’re often making these decisions with incomplete information, which often leads people to regret the decision they’ve made.

“I’ve seen that regret kick in almost instantly during people’s notice period because all those annoying things that led them to quit melt away.”

And there’s solid reason to believe that this regret is justified.

In his podcast, Adam Grant quoted recent research, published in the Journal of Applied Psychology earlier this year, which used the Household, Income and Labour Dynamics in Australia data to determine the relationship between quitting your job and your wellbeing.

“Even though people left because they were dissatisfied, they actually became more dissatisfied in their new jobs for several years afterward,” Grant said.

Klotz applauds this research for its comprehensiveness, tracking 2565 employees over multiple years.

The researchers found that people who quit their jobs were more likely to experience decreased job satisfaction and vitality in the future, and were more likely to experience work-family conflict. These risks were most pertinent within the first five years of moving to a new job.

“The findings surprised me a little, just because of the prevalence of the negative wellbeing effects,” says Klotz. “But the reality is that transitions are difficult. People tend to undervalue their social capital and expertise – things that can take years and years to build back up.

“Quitting a job voluntarily often results in regret. It’s not unlike leaving any relationship in your life.” – Anthony Klotz

“We often go into new jobs with very high expectations and are disappointed when they don’t live up to our expected reality – and disappointment is a feeling that can linger.”

The takeaway here is to carefully consider the realities of your options before quitting.

“You’re going to have bad days, you’re going to have bad weeks, you’re probably going to have bad months at work. But take into account the whole time that you’ve been working at this organisation and take your time to decide if you want to quit or not.”

4. Be helpful as you leave, but know when to cut the cord

During his interview with Grant, Klotz told the story of resigning from a job he really loved and  how he mismanaged the process because he was overly conscious of other people’s feelings.

“I felt really guilty when I resigned,” Klotz said in the interview. “And so I gave three months’ notice, which is way too long for that context. And after about two weeks, my employees had moved on. My boss had moved on.”

There’s no secret formula for the right length of a notice period, says Klotz. It should always happen on a case-by-case basis.

“Two weeks’ notice might be too much in some circumstances, but it could be an insulting amount of time in others. You need to consider the industry norms.”

After you’ve ripped off the Band-Aid and made the announcement that you’re leaving, Klotz suggests taking time to think about all the ways you could minimise disruption to the rest of your team.

“List all those different ways and then consider what you could reasonably do to minimise that disruption. Perhaps you could stay on to train your replacement or make yourself available, within reason, after you leave?”

You also want to avoid leaving a bad taste in your employer’s mouth by airing your dirty laundry on your way out. Even if you’ve had a not-so-great experience with the company, that’s not to say that’s everyone’s experience. If you make people question the culture on your way out, all you’re doing is leaving behind a mess that others have to continue working in.

“Be a cheerleader for the company when you leave to prevent turnover contagion from happening. You might say, ‘I’m just leaving because I want to move overseas. It has nothing to do with this organisation.’ That’s how you resign in a positive way.”

The maker of Dove toiletries and Streets ice creams will allow 500 Australian employees to work shorter weeks after a pilot found staff could be just as productive in four days as five by removing low-value tasks such as meetings and emails.

Unilever Australia will test a four-day workweek for at least 12 months from November 14, and will base its trial on the 100:80:100 model, whereby employees retain 100 per cent of their pay but reduce their hours to 80 per cent, provided they maintain 100 per cent productivity.

All staff except for factory employees covered by existing enterprise bargaining agreements will take part in the trial, which comes after Unilever achieved good results with a four-day workweek experiment in New Zealand.

University of Technology Business School monitored the trial across the ditch. Based on three company-wide online surveys and 57 in-depth interviews between December 1, 2020 and June 30, 2022, it found that staff were less stressed, more productive and more committed to the organisation after the introduction of reduced working hours.

Staff took 34 per cent fewer sick days in 2021 than in 2020. And across the full 18-month trial period, stress fell by 33 per cent, work-life conflicts dropped by 67 per cent, and feelings of strength and vigour at work increased by 15 per cent.

The experiment, which covered about 80 employees in New Zealand and has since been extended, also allowed for strong results against the company’s business objectives. Targets for overheads, market-winning share and sales and revenue growth were either met or exceeded.

The vast majority of employees embraced the change, with 72.8 per cent saying they were frequently sticking to reduced hours, and 88.5 per cent describing the trial as a positive experience.

Fewer emails, fewer meetings

Anish Singh, the head of HR for Unilever Australia and New Zealand, told The Australian Financial Review that moving to a four-day workweek was about giving staff greater autonomy as well as the opportunity to try different ways of working.

He said he hoped a shorter workweek in Australia would lead to happier and healthier employees at the same level of productivity – or even higher.

Key to the trial’s success in New Zealand, he said, was prioritising some tasks while eliminating those that added little or no value.

As a result, the company reduced the average time employees spent in meetings by 3½ hours per week, slashed the number of emails sent and adopted technology such as Microsoft Teams for video calls.

Bronwen Dalton, head of the department of management at UTS Business School, said one of the two big takeaways from the New Zealand trial was that companies had to change the way they worked for a four-day week to be successful.

“[You need] fewer emails, fewer meetings, less time on the phone and other distractions, and [you need to adopt] a practice of deeper work,” she said.

The second major takeaway was that companies should not make a four-day workweek compulsory for all staff, as this takes away the extra autonomy typically given to employees when moving to a work practice focused on outcomes rather than the number of hours worked.

Asked whether the study’s findings were reliable given they were based on surveys, Professor Dalton said the research would be subject to a peer review and used well-established academic techniques, known as “verifiable academic instruments”, to compensate for biases.

She added that employees were likely honest about their experiences, as the surveys were conducted by UTS rather than Unilever, and the university made the data it collected anonymous before sharing it with the company.

A six-month pilot program run by 4 Day Week Global that covered 73 organisations in Britain has also shown positive results for the four-day workweek.

At the UK program’s halfway point, companies were sent questionnaires to capture their experience. Of the 41 companies that responded, 88 per cent said the shorter week was working “well”; 46 per cent said productivity had stayed the same; 34 per cent said it had “improved slightly”; and 15 per cent said it had “improved significantly”.