Get the latest delivered to your inbox
Privacy Policy

Now Reading

AB: A Changing World: The New Psychological Workplace Contract

AB: A Changing World: The New Psychological Workplace Contract

Published 12-06-23

Submitted by AllianceBernstein

An incomplete bridge over a large body of water.

Saskia Kort-Chick| Director of Social Research and Engagement—Responsibility

Ariel Avgar, PhD| David M. Cohen Professor of Labor Relations, Law and History, and Senior Associate Dean for Outreach and Sponsored Research—ILR School at Cornell University

A new psychological contract is transforming the modern workplace, highlighted by an increase in collective actions and changing employee expectations.

A central feature of the employment relationship is the set of expectations that employers and workers have of one another. Sometimes less visible are the expectations that workers have of their employers. It’s all part of a psychological contract between employers and their workers. We are currently undergoing a fundamental change in the core foundation of the existing psychological contract—one that is likely to have material implications for investors.

The Importance of Psychological Contracts at Work

Irrespective of industry, workers and their employers operate within the context of a general psychological contract—informal, implicit, trust-based agreements about reciprocal commitments and expectations. Although they’re stable in the short run, these unwritten contracts evolve and shift over decades.

Traditionally, psychological contracts have been internally focused. Employers were willing to offer their employees job security, competitive pay and mobility within the firm in exchange for effort, commitment and company loyalty.

Owing to competitive pressures, psychological contracts in the developed world began to change in the late 1990s. In an effort to adapt to changing employer needs, the terms of the psychological contract were revised to include providing transferable job skills and real-world experience in exchange for effort and employee engagement.

At the same time, companies weakened job security and abandoned long-term commitments like defined benefit pension plans. Firms also shifted their focus from job security to employability security. Perhaps not surprisingly, employee loyalty declined as these pacts became less relational and more transactional.

The New Values-Based Psychological Contract 

Today, the psychological contract at work may be undergoing another once-in-a-generation change. Emboldened in part by the tight labor market of recent years, employees are using their newfound leverage to craft a new contract—one that focuses more on worker expectations than merely on employer needs.

Key among these expectations is that employers take a firm stand on political and value-based debates. These include issues like social justice; diversity, equity and inclusion (DEI); human rights; sexual harassment; and a range of political issues, such as voting rights. As a result, the boundary between work-focused activities and social causes is blurring in ways that are upending existing organizational models.

A case in point: In 2021, leaders of more than 100 firms issued public statements voicing opposition to voter suppression efforts in the US—due in part to pressure from their own employees. And, following nationwide protests and social movements during the height of the COVID-19 pandemic, many companies responded with enhanced investments in DEI initiatives.

As part of the new psychological contract, workers also expect employers to allow for individual expression and to accommodate family commitments and work-life balance. Increasingly, this includes flexible work arrangements, which would’ve been unheard of only a few years ago. The shifting power dynamic is prompting employers to accede to workers in fundamentally different ways.

And what happens when employees’ needs aren’t being met? This is perhaps the most impactful dimension of the new psychological contract—an expectation for collective representation in the workplace.

Info chart "In the US, Strike Activity Has Picked Up After a Long Lull" Number of Workers Involved in Strikes (Million) from years 1947-2022.

Collective Actions Are on the Rise

In many parts of the developed world—particularly the US—collective actions are gaining steam. This has taken on different forms, including a resurgence in traditional unions; representation petitions within industries not historically associated with unions; and even the growth of employee resource groups. In some cases, the movement is still in the early stages. In recent years, a number of well-known companies such as Uber Technologies, Lyft, Starbucks and Amazon have seen an uptick in collective actions.

In fact, since the pandemic, there has been a 40% increase in worker activism—primarily in the form of petitions to unionize. According to the National Labor Relations Board, Starbucks alone saw more than 7,000 employees file for union elections by July 2022—up from near zero just one year earlier. As a result, 360 Starbucks stores have unionized to date.

To be sure, the US is still well behind its contemporaries, however, making it an exception in its low union membership and coverage rates. This divide stems in part from less-restrictive legal frameworks in Europe and, in some cases, the involvement of European unions in the administration of social benefits like unemployment insurance. By contrast, right-to-work laws and a host of other factors have created structural barriers in the US that have contributed to declining union membership over the past 50 years.

But even with these barriers, the US is seeing a resurgence in collective action, sometimes within the traditional union model, and sometimes in alternative collective representation forms (Display).

One of the hallmarks of the shifting psychological contract is the increase in collective action taken by workers outside of the traditional union model. Thus, even where unions are not being formed, groups of employees are gathering collectively to discuss issues that affect the entire organization. Sometimes, these take the form of employee resource groups comprising employees with a shared set of interests. Other times, workers may collectively place pressure on employers to act on political or social issues.

Investors Should Take Heed of Collective Actions

Tension between employers and workers is nothing new. As the labor market weakens or strengthens, it’s normal to see workers’ power ebb and flow. But in our view, the new psychological contract is more than a response to cyclical economic conditions. It reflects a confluence of social, political, generational and, yes, even economic forces that should give it staying power—even when the labor market weakens.

And given today’s evolving psychological contract, traditional labor-relations tools and processes may no longer be sufficient. Across industries, companies are under pressure to develop new organizational strategies aimed at addressing the new set of employee expectations. This is upending the delicate balance between workers and their employers.

In the coming years, we believe investors will need to reconsider how companies address employment and labor relations. Traditionally, firms have managed their workforces with an eye toward company-specific concerns. But as employees become more vocal in their expectations, investors should expect the line between external public relations and internal labor relations to become hazier.

Investors will also need to come to terms with the scale of unionization, which is no longer occurring on a one-off basis. Collective actions are likely to continue expanding into industries not traditionally associated with organized labor. This trend could materially affect labor costs, organizational structures and operational strategies.

It could also benefit employers. Across many decades, voluntary turnover in unionized organizations has been shown to be lower than with non-union employers, while productivity is also higher in a number of different settings and industries.

Regardless, collective actions are here to stay, and the demarcation lines between labor and management are shifting in ways that few could have imagined in decades past. With the boundaries blurring, investors will need to sharpen their focus.

The authors would like to thank Roxanne Low, ESG Analyst with AB’s Responsible Investing team, for her invaluable contributions. 

The views expressed herein do not constitute research, investment advice or trade recommendations and do not necessarily represent the views of all AB portfolio-management teams. Views are subject to change over time.

Learn more about AB’s approach to responsibility here.

AllianceBernstein logo



AllianceBernstein (AB) is a leading global investment management firm that offers high-quality research and diversified investment services to institutional investors, individuals, and private wealth clients in major world markets. We believe corporate responsibility, responsible investing and stewardship are intertwined. To be effective stewards of our clients’ assets, we strive to invest responsibly—assessing, engaging on and integrating material issues, including environmental, social and governance (ESG), and climate change considerations in most of our actively managed strategies. We also believe that strive to hold ourselves as a firm to similar practices that we ask of issues. Our stewardship practices, investment strategy and decision-making are guided by our purpose, mission and values.

Our purpose—pursue insight that unlocks opportunity—inspires our firm to act responsibly. While opportunity means something different to each of our stakeholders; it always means considering the unique goals of each stakeholder. AB’s mission is to help our clients define and achieve their investment goals, explicitly stating what we do to unlock opportunity for our clients. We became a signatory to the Principles for Responsible Investment (PRI) in 2011. This began our journey to formalize our commitment to identify responsible ways to unlock opportunities for our clients through integrating material ESG factors throughout most of our actively managed equity and fixed-income client accounts, funds and strategies. AB also engages issuers where it believes the engagement is in the best financial interest of its clients.

Because we are an active manager, our differentiated insights drive our ability to deliver alpha and design innovative investment solutions. ESG and climate issues are important elements in forming insights and in presenting potential risks and opportunities that can have an effect on the performance of the companies and issuers that we invest in and the portfolios that we build.

Our values provide a framework for the behaviors and actions that deliver on our purpose and mission. Values align our actions. Each value emerges from the firm’s collective character—yet is also aspirational.

  • Invest in One Another means that we have a strong organizational culture where diversity is celebrated and mentorship is critical to our success. When we invest in one another, we empower our employees to reach their potential, so that they can help our clients realize theirs. This enables us to partner with clients to design and deliver improved investment outcomes.
  • Strive for Distinctive Knowledge means that we collaboratively identify creative solutions to clients’ economic, ESG and climate- related investment challenges through our expertise in a wide range of investment disciplines, close collaboration among our investment experts and creative solutions.
  • Speak with Courage and Conviction informs how we engage our AB colleagues and issuers. We seek to learn from other parts of our business to strengthen our own views. And we engage issuers for insight and action by sharing ideas and best practices.
  • Act with Integrity—Always is the bedrock of our relationships and has specific meaning for our business. Unlike many other asset managers, we’re singularly focused on providing asset management and research to our clients. We don’t engage in activities that could be distracting, or create conflicts—such as investment banking, insurance writing, commercial banking or proprietary trading for our own account. We are unconflicted and fully accountable.

As of September 30, 2023, AB had $669B in assets under management, $458B of which were ESG-integrated. Additional information about AB may be found on our website,

More from AllianceBernstein

Join today and get the latest delivered to your inbox