The Talent Ramifications of the Brexit Deal (or No Deal)

The Talent Ramifications of the Brexit Deal (or No Deal)

The UK’s planned exit from the European Union is fast approaching, and a new deal over the terms of that exit faces an uncertain future in the UK parliament. Whatever happens, there will be talent implications for employers and HR leaders in the UK and Europe. Below is our broad look at the background of the process and terms of the latest proposed deal, and what the potential consequences could be — viewing several key issues through the lens of HR, including immigration, employment law, and the risks of a no-deal Brexit.

Fast Facts

  • The UK will formally exit the European Union on March 29, 2019, marking the deadline for UK and EU negotiators to reach a deal on an orderly Brexit transition. UK Prime Minister Theresa May has reached a draft agreement with the EU that would provide for a 21-month transition period, after which the UK would be able to control immigration from the EU, while backstop measures would allow the UK to remain in the EU customs union and enable a soft border between Northern Ireland and the Republic of Ireland if a final trade deal is not reached by December 2020. The transition period could be extended once, into 2022, if the UK and EU agree to do so.
  • A scheduled Parliament vote on the deal with the EU was delayed on December 10 after the May government realized the agreement would most likely be rejected. May then survived a confidence vote two days later, and plans to continue lobbying for the deal, which will not be scheduled for another vote in Parliament until sometime in January.
  • May’s deal, as drafted, would preserve the free movement of labor between the UK and other EU countries for the duration of the transition period, while any EU citizens living in the UK before the end of that period would have a right to stay, but would have to apply for residency documentation. Afterward, EU citizens would no longer have special privileges in immigrating to the UK. May has proposed a skills-based system for admitting immigrants after Brexit, but some business leaders and the National Health Service fear this system will leave them short-staffed in roles that would not qualify as high-skill under May’s scheme but for which native talent is in short supply.
  • The UK government has pledged to uphold employment laws based on EU regulations after Brexit, but some of these laws may be partly amended to be more flexible for employers or to reduce their liabilities. Unions, however, fear that these protections may be weakened substantially.
  • If there is no deal by the March 29 deadline, the UK will face a “messy” exit from the EU—likely causing severe economic disruptions. In the event of a no-deal Brexit, the UK would revert to trading with Europe under World Trade Organization guidelines, reintroducing customs and border controls. A no-deal Brexit can be expected to hurt the pound and cause instability in the British financial sector, which could spread to continental Europe and the rest of the world.
  • In a no-deal scenario, the government has promised that EU citizens’ immigration status would not change before 2021, but it remains unclear what employers will have to do to ensure that their European employees are able to continue living and working in the UK. Many businesses have put contingency plans into action to protect against the consequences of a no-deal Brexit, but most HR managers in the UK are underprepared for this scenario. In any case, Brexit is expected to result in a labor supply shock and make it more challenging for UK employers to fill job vacancies.

Background

On June 23, 2016, citizens of the UK narrowly voted to withdraw their country from the European Union. The “Brexit” referendum sent a shockwave through the British, European, and global economies, and prompted concern and uncertainty at many organizations in the UK and abroad.

Conservative Prime Minister Theresa May, who came to power shortly after the referendum in 2016, has worked to cut a deal with Brussels that preserves the UK’s strong trade ties with the EU, but has also stressed that no deal is better than a bad deal as far as her government is concerned. UK and EU negotiators deadlocked over several key points where London and Brussels are at cross-purposes, and uncertainty over whether and how these obstacles will be overcome has been a major source of anxiety for UK businesses over the past two years.

Chief among these issues are immigration and the free movement of people between the UK and the rest of the EU. May has stressed the need for the UK to “take back control” of its borders, even if it meant losing access to the EU’s single market. Free movement of people is one of the “four freedoms” underpinning that single market; the UK wants to preserve free movement of goods, services, and capital, while regaining the right to restrict immigration from the EU. For its part, Brussels has resisted creating new forms of special treatment for the UK that would make Brexit easier, partly to discourage other EU countries from pursuing exits of their own. Another, related area of disagreement is the border between the Republic of Ireland and Northern Ireland, which forms the UK’s only land border with another EU country. Many businesses on the island of Ireland have supply chains that cross that border every day and employees living on both sides of it; creating a hard border with customs and immigration controls would be costly and complicated for these organizations.

The deadline for reaching an agreement is March 29, 2019. If no agreement is reached, the UK will “crash out” of the EU and trade with the bloc under World Trade Organization guidelines. May announced on November 25 that her Brexit negotiators and their counterparts in Brussels had reached a draft agreement that would solve some of these challenges.

A vote on the deal in the UK Parliament had been scheduled for December 11, but May called it off one day before when it was clear that the deal was going to be rejected. Many MPs opposed the agreement, claiming the proposed Brexit is too hard or not hard enough, or because they believe the country should hold another referendum on the question before proceeding.

Prime Minister May said on December 10 that she would ask the EU for new “reassurances” on the deal, and in particular the backstop plan for the Northern Ireland border, which many MPs said they opposed. The EU has maintained they will not renegotiate the agreement, however. May’s government offered no specific timeline as to when there would be another scheduled vote in Parliament on this or any revised deal — but has said it will not happen until January. There is also a January 21 deadline to present the deal to Parliament. May survived a confidence v

Here is a broad outline of what might happen next and the key issues HR leaders need to understand:

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PwC Study: Improving Vocational Training Would Lead to Billions in GDP Growth

PwC Study: Improving Vocational Training Would Lead to Billions in GDP Growth

In its 2017 Young Workers Index, PwC surveyed the economies of the 35 OECD member countries, creating an indexed ranking of the countries’ expected productivity from younger workers. Switzerland, Iceland, and Germany, were the top three, while the US finished 12th and the UK landed in 18th: both moved up two spots from last year’s rankings.

Germany’s result is probably the most impressive given that it also has the fourth-highest GDP in the world. The US has the world’s largest GDP while the UK is fifth in the measure of economic productivity. France, which stands sixth in GDP, was ranked 29th in the Young Workers Index while Canada, with the world’s 10th-largest GDP, was ranked sixth.

The study also looked into the effects automation will have on job prospects for workers in this age cohort. It found that 39 percent of jobs for US workers aged 15-24 are at risk of being lost to automation, compared to 24 percent in Japan, 28 percent in the UK, and 38 percent in Germany.

One of the metrics tracked in the Young Workers Index, the NEET (not in education, employment or training) rate, is identified as a key metric for overcoming the risks of automation and driving growth. The study claims that if all 35 of the OECD countries lowered their NEET to that of Germany (9.3 percent), it would lead to $1.2 trillion in GDP growth. For the United States, it predicts a $428 billion, or 2.2 percent, rise in GDP by lowering NEET from 15.8 percent down to Germany’s level.

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Nonprofits Competing with Socially Conscious Corporations for Purpose-Driven Talent

Nonprofits Competing with Socially Conscious Corporations for Purpose-Driven Talent

The 2017 Nonprofit Employment Practices Survey, published recently by Nonprofit HR, shows how the nonprofit sector is being affected by the tight market for talent in the US and the growth of social enterprise organizations as a competitor in that market. Overall, the survey finds, the nonprofit hiring market is robust, with half of the 420 US and Canadian nonprofits it surveyed saying they planned to add staff in 2017. That figure declined by seven percentage points from 2016, however, whereas corporate hiring expanded, which the report attributes “at least in part to the growth of social enterprise and purpose-driven business.” In other words, the candidates who would normally seek out jobs at nonprofits are being attracted instead to socially conscientious for-profit businesses.

As the millennial generation has grown up to become the largest segment of today’s workforce, this generation’s values and interests are significantly influencing the way employers engage candidates and employees. Millennials do have a particularly strong interest in making a difference in the world, with a recent survey finding that 75 percent of US workers between the ages of 18 and 34 expect their employer to take positions on social issues affecting the country. Yet even though millennials may be driving the trend of a purpose-driven workforce, these interests are not unique to them.

Despite facing increasingly stiff competition, most nonprofits are not taking steps to improve their recruiting, talent management, and culture practices, the Nonprofit HR survey shows. 64 percent of organizations said they had no formal recruitment strategy, while the number that said they did has been declining over the past two years. Additionally, 70 percent have no dedicated recruiting budget, 69 percent have not engaged in an employment branding process, 81 percent have no formal retention strategy, and 52 percent do not have a diversity and inclusion strategy.

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More Than Half of US Workers Satisfied with Their Jobs

More Than Half of US Workers Satisfied with Their Jobs

After six straight years of improving numbers in its annual job satisfaction survey, the Conference Board announced last week that more than 50 percent of US employees are happy with their jobs for the first time since 2005:

The increase in job satisfaction is largely due to the improvement in the labor market in recent years. “Workers are benefiting from historically low layoff rates, which adds to a greater sense of job security,” said Michelle Kan, Associate Director, Knowledge Organization, and a co-author of the report with Rebecca Ray, Executive Vice President, Knowledge Organization and Human Capital Lead, Gad Levanon, Chief Economist, North America, and Allen Li, Associate Economist at The Conference Board. “Employees have more opportunities at other companies and more confidence in pursuing those opportunities. And, as it becomes harder to find qualified workers and retain existing ones, employers are gradually accelerating wage growth and improving other job features.”

“The US labor market will likely remain tight for most of the next fifteen years,” said Levanon. “With the massive retirement of baby boomers continuing through 2030, we expect the US labor market will be quite tight during that period, contributing to higher job satisfaction levels in the coming years.”

Despite the expectation of a continuously tight labor market, Levanon notes that US job satisfaction is unlikely to rebound to the levels seen 20 or 30 years ago, a prediction he attributes to other factors such as “the emphasis on maximizing shareholder value, declining unionization, outsourcing (both domestic and foreign) and market concentration.” While job satisfaction climbed from 49.6 percent last year to 50.8 percent this year, that’s a far cry from the 61.1 percent who said they were happy in their jobs in 1987, Washington Post columnist Jena McGregor points out.

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Massachusetts Becomes First State Where Over Half of Workforce Holds a Bachelor’s Degree

Massachusetts Becomes First State Where Over Half of Workforce Holds a Bachelor’s Degree

By at least one measure, Massachusetts has the most educated workforce of any state in the US, according to a new report from the Massachusetts Budget and Policy Center. Citing an analysis of Current Population Survey data by the Economic Policy Institute, the report reveals that 50.2 percent of Massachusetts workers hold at least a bachelor’s degree. New Jersey is the second most educated state, with 45.2 percent of workers holding BAs, followed by New York, Maryland, and Connecticut. Nationwide, 35.5 percent of the workforce has a bachelor’s degree.

The report, titled “Education and State Economic Strength: A Snapshot of Current Data,” also notes that these high levels of education correlate with high median hourly wages: $21.35 in New Jersey and $21.22 in Massachusetts compared to a national average of $17.80.

“While it might seem obvious in 2017 that higher levels of college education would be associated with higher earnings at the state level,” the report adds, “this relationship is actually a fairly recent feature of the US economy. In 1979, the correlation between the educational attainment of a state’s workforce and its median hourly wage was weak.”

Indeed, the EPI’s latest research has found that the college wage premium is at an all-time high since economists began measuring it over 40 years ago. Other studies have shown that the class of 2017 stood to earn higher starting salaries than their peers who graduated in other recent years, while holders of two-year associate degrees are also finding more decent-paying jobs than they were a generation ago.

Wages in Massachusetts have also been growing faster for more educated than less educated workers, and a key challenge for the state today is ensuring that young people can afford the advanced educations they need to remain competitive in a highly educated job market, the Boston Globe’s Katie Johnson points out:

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States, Too, Must Court Workers in Tight US Talent Market

States, Too, Must Court Workers in Tight US Talent Market

On Thursday, the Wisconsin State Assembly was poised to approve a $3 billion tax break to incentivize the Taiwanese multinational Foxconn Technology Group to build a display panel factory in the state. The deal, which still must pass the state Senate, would see the electronics giant invest as much as $10 billion in Wisconsin and hire as many as 13,000 people, but it has proven controversial, with opponents saying it isn’t worth the cost.

Another objection opponents raise is that with an unemployment rate of just 3.1 percent, Wisconsin doesn’t have enough workers to fill thousands of jobs. “Which is why,” Bloomberg View columnist Conor Sen infers, “the Foxconn strategy is really a bet that Wisconsin can recruit workers from other states”:

Illinois’s unemployment rate is 4.7 percent. Ohio’s is 5 percent. So the bet Wisconsin wants to make is that it can recruit a high-profile factory, which will draw in factory workers from other states, and that movement will have a multiplier effect creating even more jobs, leading to even more recruitment of workers from other states.

US states have long used tax and regulatory policies to differentiate themselves and attract business investment and talent—or to attract talent in order to attract businesses. With the US labor market the tightest it has been in a decade, states now face the same challenge as employers, of courting scarce talent by offering the right set of incentives. Sen points to Maine, where local employers and Governor Paul LePage are looking at ways to bring back natives of the state who have moved away:

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If Men are Gaming Instead of Working, Maybe the Games Aren’t the Problem

If Men are Gaming Instead of Working, Maybe the Games Aren’t the Problem

I’m what many people would call a gamer. I own and play a lot of video games, I see games as my primary source of entertainment, and I’ve even built my own high-end gaming computer. I’m also pretty well connected with the gaming communities studied in the recent controversial paper claiming that better video games may account for why young men are declining to pursue full-time employment. I don’t dispute the data backing up these economists’ argument, but I do take issue with their framing.

The premise of the paper (as it has been described in the popular press) is that young men are choosing video games over potential jobs because video games are as good at building the social networks and feelings of self-fulfillment as those jobs. However, my experience with this community suggests the opposite: Gamers who choose not to work do so not because because games are a great substitute for a career, but because the jobs they would qualify for don’t make them happy.

Among the gamers I know who best fit the profile of the demographic examined in the study, many are vocal about the dissatisfaction they feel with the roles available to them. This seems to be reflected in the data itself: The paper also finds that while more educated young men are also playing more video games, this has not led to a significant decline in their average work hours. Undereducated gamers, by comparison, tend to qualify only for jobs that are dull and menial, with low pay, poor mangers, no upward mobility, and high and risky barriers to better job opportunities (particularly, college education). Many don’t see gaming all day as a goal, but the best of several bad options—the exception being those few gamers who believe they can play competitively.

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