The Missing Metric: Measuring Employer Value-Added
For the past few weeks I've been thinking about a question that started much smaller than where it ended.
What if companies' ability to easily lay off employees has contributed to the decline of employee loyalty?
Not because layoffs make people angry, although they certainly can.
Because they fundamentally change the economics of the employment relationship.
A Feedback Loop We Rarely Talk About
A generation or two ago, many large employers operated under an implicit bargain:
We'll hire you, train you, develop you, promote you, provide benefits and a pension, and perhaps employ you for most of your career.
In return:
You'll give us loyalty, institutional knowledge, and years of increasingly valuable expertise.
That system had serious flaws and wasn't equally available to everyone. But it created one important economic incentive:
If an employee is likely to stay for twenty years, investing in their development produces a return.
Now change one assumption.
Suppose companies expect shorter tenure. Labor becomes more flexible. Capabilities can increasingly be purchased on the external market rather than developed internally.
The economics change.
Employees respond rationally by investing in portable skills and switching employers when better opportunities arise.
Companies observe that behavior and become less willing to invest in employee development.
Which makes job switching even more rational.
We've created a reinforcing feedback loop.
Lower expected tenure → less investment in development → greater employee mobility → lower expected tenure.
But feedback loops work in both directions.
What if companies that genuinely invest in developing people eventually become the employers talented workers actively seek out?
That would create the opposite dynamic:
Investment in people → stronger capability → longer tenure → greater return on development → more investment in people.
That led me to a much bigger question.
What If We're Missing the Most Important Labor Market Metric?
We spend enormous effort measuring workers.
Resumes.
Degrees.
Skills.
Experience.
Compensation.
Performance.
But we have remarkably little objective information about employers.
If I'm deciding where to spend the next five years of my career, I can compare salaries and Glassdoor reviews.
What I can't answer is:
Which employer is most likely to make me more valuable?
Imagine if we measured employers the way we measure universities.
Not simply by prestige.
But by value added.
Did graduates become more capable because they attended?
Did their earnings improve?
Did their opportunities expand?
Why don't we ask the same question of employers?
Introducing the Employer Value-Added Hypothesis
My hypothesis is simple:
Some employers consistently increase the long-term value of the people who work there. Others primarily consume existing talent.
If that's true, we should be able to measure it.
Not through employee opinion surveys.
Not through "Best Places to Work" awards.
Through observable labor-market outcomes.
Questions like:
Do employees develop more valuable skills?
Are they promoted internally?
How quickly do careers progress?
Do people leave with stronger opportunities than they arrived with?
Does the company develop leaders or primarily hire them?
During periods of technological disruption, does the company redeploy workers or simply replace them?
Those aren't philosophical questions.
They're empirical ones.
A Possible Methodology
Today's labor-market datasets already contain much of the raw material.
Longitudinal career histories.
Skill development.
Job transitions.
Internal mobility.
Compensation estimates.
Hiring patterns.
Layoff activity.
Career pathways.
The challenge isn't collecting entirely new data.
It's asking a different question.
Instead of asking:
"How valuable is this worker?"
Ask:
"How much value did this employer add to this worker's long-term career trajectory?"
That means comparing people with similar backgrounds who join different employers.
Control for:
Occupation
Experience
Geography
Education
Previous employers
Industry
Labor market conditions
Then observe what happens over time.
Do employees at Company A consistently outperform comparable employees at Company B?
If so, employer quality may be measurable in a way we've never seriously attempted before.
Why This Matters
This isn't about rewarding "nice" companies.
It's about making an invisible investment visible.
Today, companies that spend years developing employees often receive little market credit for doing so.
Employees can't easily compare employers based on long-term career outcomes because that information largely doesn't exist.
Imagine instead choosing between two companies.
Company A pays slightly less today but has a demonstrated history of increasing employees' skills, leadership opportunities, and long-term earnings.
Company B pays more today but rarely develops talent internally.
That's an investment decision.
Not just a salary negotiation.
If workers could see that information, companies would have an economic incentive to compete on employee development.
Not because of altruism.
Because the labor market would finally reward it.
A Better Objective Function
This entire idea started with layoffs.
But I no longer think layoffs are the core issue.
The deeper issue is what we measure.
Markets are extraordinary optimization engines.
But every optimization engine depends on its objective function.
Today, we have sophisticated ways to measure financial performance.
We have much weaker ways to measure whether organizations increase or decrease the productive capacity of the humans who work inside them.
Perhaps that's why employee development is often treated as a cost instead of an investment.
Maybe the missing market isn't labor.
Maybe it's information.
If we could objectively measure which employers consistently create human value, we might discover that investing in people isn't merely good ethics.
It becomes good economics.
And if that's true, the labor market itself could begin rewarding the companies that make people more capable, more resilient, and more valuable over time.
That seems like a future worth measuring.
