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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UK Government Seeks to Reassure Workers, Businesses Over No-Deal Brexit

UK Government Seeks to Reassure Workers, Businesses Over No-Deal Brexit

The March 2019 deadline for negotiating terms for the UK’s departure from the European Union is fast approaching, while major points of contention between London and Brussels still remain to be ironed out. While the likelihood of a “no-deal” Brexit, in which the UK would crash out of the EU with no special trade arrangements, is generally considered low, the final outcome remains uncertain with just six months to go, so British companies like London-based financial firms have been taking steps to prepare for that contingency. At the same time, European manufacturers operating in the UK have made clear that they might have to pull out of the country if the deadline passes without a deal, as the removal of the UK from the European customs union would be hugely disruptive to their supply chains.

At the same time, Europeans already living legally in the UK have been assured that they will be allowed to remain under any deal, but it is less clear what will happen to them if there is no deal. Trade unions and other labor groups have also expressed concern that Brexit could mean a reduction in the rights employees enjoy under labor laws grounded in EU policies. The bill drafted last year for removing the UK from the legal, political, and financial institutions of the EU preserves regulations derived from European labor laws, but employee advocates still fear that a weakening of these rights is in the pipeline; the possibility of a no-deal outcome compounds those suspicions.

In the past week, the government has issued several statements meant to reassure employees and employers that a no-deal Brexit remains unlikely and will have no such dire consequences if it does occur. A guidance document issued last week as part of a series of advice papers concerning a potential no-deal Brexit addressed the issue of workers’ rights, saying there would be no change to these protections in any event, Personnel Today reported:

[T]he government said domestic legislation already exceeds the level of employment protection provided under EU law. It intends to make small amendments to the language of workplace legislation to reflect that the UK will no longer be a member of the EU. No policy changes will be made.

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Fewer and Fewer US Workers are Moving for New Jobs

Fewer and Fewer US Workers are Moving for New Jobs

The number of people in the US who relocated for a new job last year declined to 3.5 million from 3.8 million in 2015, the Wall Street Journal‘s Rachel Feintzeig and Lauren Weber reported on Sunday, citing census data. Even as the US population has grown, the number of relocations has been on a downward trend overall since the government began tracking this data in 1999. A new analysis from Challenger, Gray & Christmas looks back even further and concludes that the percentage of job seekers willing to move for new jobs has fallen dramatically since the late 1980s: Between 1986 (when Challenger began collecting data) and 1990, the average annual relocation rate was 35.2 percent, compared to just 11.3 percent on average between 2007 and 2017.

Various factors can discourage candidates from taking jobs that require them to move, experts tell Feintzeig and Weber at the Journal. One major variable is housing costs: If candidates can’t afford to live in the high-cost cities where jobs are abundant, they won’t take those jobs. The high rents and other costs of living in powerhouse cities like New York, San Francisco, Boston, and Los Angeles can make it difficult for Americans from less expensive parts of the country to move there, even for comparatively lucrative work. When real estate values are low, on the other hand, candidates may be reluctant to move if they own a home they can’t sell; this is why, when General Electric moved its headquarters from Fairfield, Connecticut to downtown Boston in 2016, the company offered to buy relocating employees’ houses if they were unable to sell them.

Beyond housing considerations, workers may be unwilling to move because they don’t want to disrupt the lives of their spouses or children. Dual-income families may hesitate to relocate when one partner gets a job offer in another city, if that means the other partner will have to quit a good job in their current location. Such a move often means temporarily losing household income earned by the second partner and might also depress their future earnings.

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Glassdoor Study Examines Where US Talent Is Moving to and From

Glassdoor Study Examines Where US Talent Is Moving to and From

A recent study from Glassdoor uses the site’s job search data to track how many candidates are looking for jobs outside their home cities and figure out which of the 40 largest American metro areas are the biggest talent magnets. Using a sample of more than 668,000 online applications on Glassdoor during the week of January 8-14, 2018, the study looks at where Americans are looking to move for work, who is moving, and why, Glassdoor’s chief economist Andrew Chamberlain elaborates in his introduction to the report.

One key finding is that while the prospect of a higher salary might seem like the most likely reason for a candidate to skip town (our research at CEB, now Gartner, shows that salary is consistently the most powerful attractor of talent), Glassdoor finds that it’s not the strongest driver of these moves:

  • Salary drives candidates to move. But the effect is small. An extra $10,000 higher base salary predicts candidates are about a half percentage point (0.41 percentage points) more likely to be a metro mover — a statistically significant, but small effect.
  • Better company culture is more attractive. Having a 1-star higher overall Glassdoor rating predicts candidates will be 2.5 percentage points more likely to move metros for a job. That’s statistically significant, and roughly six times larger than the impact of offering $10,000 higher pay.

Metro movers tend to be younger, better educated, and earn higher pay than candidates who stay put. This makes sense, insofar as moving cities is expensive and more likely to be worth the trouble for a high-paying job. The most mobile jobs, Glassdoor’s study found, include chemical and industrial engineers, software developers, and data scientists (and of course, flight attendants). All of these jobs pay enough to be worth moving for, but also aren’t available everywhere: A software engineer in rural Idaho, for example, has a much better chance of getting a job if they are willing to move to a tech hub like the San Francisco Bay Area. By comparison, the least mobile job title—bartender—is available anywhere.

San Francisco is indeed the most common destination for metro movers, Glassdoor notes in a press release, along with New York:

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US Workers’ Sinking Labor Mobility Hurting the Economy

US Workers’ Sinking Labor Mobility Hurting the Economy

In 2016, US labor mobility fell to an all-time low since the Census Bureau began collecting data after World War II. Increased economic uncertainty for lower- and middle-class workers paired with cultural and political polarization have made it tougher for those in distressed, typically rural, regions to accept higher-paying jobs in thriving urban centers, if they can even get them. This has hindered the ability of growing companies in America’s most productive cities to attract talent from outside these urban cores, while also contributing to reduced socioeconomic mobility.

Problems that were previously linked to struggling cities, such as high unemployment and reliance on social services and low-income housing, are now rampant in rural areas. For those who own homes there, local housing markets have failed to recover from the late-2000s crash due to a drop in demand caused by the significant reduction in farming, manufacturing, and other blue-collar jobs. Even if a better opportunity came along somewhere else, selling their property would be tough.

Small-town workers are also put off by the socially liberal attitudes and lack of community in larger cities, so even if they can manage the financial and logistical challenges, the metropolitan culture may be too distant from their own to bear. Eventually, they begin to believe they are stuck. Examining this dilemma at the Wall Street Journal last week, Janet Adamy and Paul Overberg noted that the rate of people in rural America moving across county lines has dropped from 7.7 percent in the 1970s to 4.1 percent in 2015, and this reduction in mobility is having a significant impact on the country as a whole:

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Survey: When Americans Move, It’s Usually for Work

Survey: When Americans Move, It’s Usually for Work

Some economists have expressed concern that the US labor pool is insufficiently mobile to fill in the gaps in local labor markets with talent shortages, which contributes to wide disparities in unemployment rates among various metropolitan areas. The concentration of jobs and workers in certain areas also drives up housing costs in places like Silicon Valley, making it that much harder for those who do want to “go where the jobs are” to actually do so.

Yet Roy Maurer at SHRM passes along some new survey findings from Indeed showing that when Americans do move, they often do so in pursuit of a better job:

Indeed’s survey of 4,000 respondents showed that 45 percent of people who relocated within the past year did so for occupational reasons—either for long-term career prospects or for a job offer they couldn’t resist. Personal reasons play a key role in the decision to move for many as well, selected by nearly a quarter of respondents (24 percent).

Sixty percent of those who moved for their careers cited a stronger job market as a driver, while 48 percent chose better opportunities for skill-building and 43 percent moved for increased compensation and benefits.

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Office Parks Have Problems Beyond Millennials

Office Parks Have Problems Beyond Millennials

The suburban office park, of the type popularized in the 1980s and ’90s and the subject of many an office comedy ever since, is the latest alleged victim of the millennials, Business Insider’s Chris Weller reports, as companies find they can’t entice younger employees to live in a suburban environment like they could a generation ago:

“Companies want to move to areas where millennials are located,” Robert Bach, director of research at the real-estate advisory firm Newmark Grubb Knight Frank, tells Business Insider. In 2015, Bach’s firm published a report on the state of office parks around the US. It concluded that between 14% and 22% of the “suburban inventory” in the country faced a degree of risk in becoming obsolete. Some parks needed only a cosmetic changes, while those beyond help were suited for rebuilds.

The report found that two main factors could predict that level of obsolescence: proximity to mass transit and access to amenities like lunch and shopping. Bach says it’s no coincidence that fitness-focused and food-savvy millennials share those preferences. …

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