It’s not news that governments across the globe are having a harder and harder time getting things done. Partisan political lines are being drawn in starker contrast, and finding common agreement across parties seems less likely than ever. Government dysfunction is becoming the norm. The net result is that governments are becoming less effective at setting and adjusting policies that affect the workforce, such as minimum wages or parental leave guarantees. Many companies have gotten frustrated with this lack of action and are now taking it on themselves to, in effect, create labor and social policy on the ground rather than wait for politicians to put new regulations on the books.
Peter Cheese, CEO of the CIPD, highlighted this at CEB’s ReimagineHR event in London on Wednesday as part of a conversation about the ramifications of Brexit and the future of work. If UK employers sit and wait for the government to figure out what Brexit means for them, he pointed out, they are likely to experience paralysis, uncertainty, and inertia among their workforce. The result: an enormous productivity drag that could last for years.
Instead, Cheese continued, companies need to take a much more aggressive approach to working with the government and with other companies to start to build a set of expectations about how the UK should regulate the movement of talent across borders after Brexit. It’s a matter for debate whether the business community or the government can come up with better standards, but businesses can certainly move much faster in shifting practices than the government can in rewriting laws.
We also see this trend occurring in other countries and other policy areas. While the US government has struggled to forge bipartisan consensus on the federal minimum wage or a parental leave mandate, businesses are moving ahead on these issues on their own, raising their pay floors and introducing ever more progressive parental leave offerings. At first, these new policies give early adopters a strong competitive advantage in the labor market: Who wouldn’t prefer to work at a company that has a higher entry-level wage, or more robust benefits for working parents?
But what happens next is more interesting, as these innovations evolve into new standards. Once a critical mass of companies has coalesced around a higher level of support, other companies must match that support to be competitive at attracting and retaining talent. In effect, the new level of support becomes standard without the government writing a new law mandating it.
As governments continue to struggle in setting new laws and regulations, we are likely to see more companies taking on this critical role and establishing standards by their own initiative.