Will Trump Deregulate Employment to Create New Jobs, Gigs or What?

President Donald Trump recently said to a group of senior business leaders: "We think we can cut regulations by 75%. Maybe more." This group included Marillyn Hewson of Lockheed Martin, Mark Fields of Ford Motor Company, Michael Dell of Dell Technologies, Jeff Fettig of Whirlpool, Alex Gorsky of Johnson & Johnson, Andrew Liveris of Dow Chemical, Mario Longhi of U.S. Steel, Elon Musk of SpaceX, Kevin Plank of Under Armour, Mark Sutton of International Paper and Wendell Weeks of Corning.

Trump also said, “Now, we’re going to have regulation, and it’ll be just as strong and just as good and just as protective of the people as the regulation we have right now. The problem with the regulation that we have right now is that you can’t do anything… I have people that tell me that they have more people working on regulations than they have doing product.”

So considering the evolving and heavily regulated labor market, how should we read these tea leaves?

Trump has committed to more jobs and more on-shore manufacturing (with jobs). But he has said little else about how that will be accomplished both through less regulation and new – presumably, streamlined and lighter-weight – regulation. He has never discussed the fact that the service sector accounts for around 80% of all jobs in the US, while manufacturing, construction and mineral extraction account for less than 15%. He has also never discussed skill shortages and talent gaps, which affect a range of professions, from data scientists to trades workers.

For contingent workforce management practitioners, it should be notable that President Trump has never mentioned the growing contingent segment of the labor force. Many businesses, whether in manufacturing, logistics, retail or – yes – hospitality, find value in contingent/alternative work arrangements.

The now well-cited Katz and Krueger study* indicates that somewhere around 16-17% of all jobs in the U.S. were alternative work arrangements in 2015 (see below). And while the percentage of alternative work arrangements barely grew from 1995 to 2005, it went from about 10% in 2005 to 16-17% in 2015.

*The Rise and Nature of Alternative Work Arrangements in the United States, 1995-2015 Lawrence F. Katz; Harvard University and NBER and Alan B. Krueger; Princeton University and NBER; March 29, 2016

The study also reported that the “implied conclusion is that all U.S. net employment growth (for main jobs) has occurred in nonstandard work arrangement over the last decade. As of late 2015, we had not yet quite fully recovered from the huge loss of traditional jobs from the Great Recession.”

This may not reflect well on President Obama’s labor policies. Or it says more about the ongoing changes in the labor market driven by a range of different factors, such as the marginal return on labor in an advanced economy or businesses’ requirement for a highly flexible workforce.

A 2014 Longitude Research study (“New Ways of Working: Managing the Open Workforce”) that surveyed more than 1,100 senior executives from 35 countries posted these statistics:

Certainly, there is a range of detailed data and facts that will need to be taken account of in developing job creation policies. Loosening of regulations will certainly be one policy lever. But where will it take us?

Of course, none of us has a crystal ball, and future outcomes will be driven by many complex factors. But there are questions that we can ask, such as:

  • If there is a border tax and reshoring of American manufacturing, what kinds of new jobs will there be, given broader labor market trends and whatever regulatory regime is in place?
  • If marginal returns on labor are diminishing, will businesses substitute more capital (automation) and contingent workforce (especially if regulations that govern employment and protect workers will be cut “massively”)?
  • Will replacement regulations reduce the frictions in the labor market concerning workers who do not work for one company for extended periods of time (e.g., misclassification risk) and provide new protections and social benefits for workers engaged through alternative work arrangements (e.g., portable healthcare benefits)?
  • Will restrictions be imposed on businesses that rely heavily on offshore labor for services outputs (such as software development, call center work, et al)?
  • Will businesses also be required to fund education and skills training to fill their own talent gaps with American workers?

The main question here for procurement organizations (focused on cost savings, risk, etc.) is not so much if workers will be better off, but rather whether the businesses they work for will be better off. The combination of the pressure for cost reduction and flexibility and the reduction of risk through regulatory relief would suggest on-going or potentially accelerating growth in the use of contingent workforce — at least up to certain limits. At some point, though, worker well-being matters, for productivity and quality reasons and because consumers need disposable income to buy products.

Of course, no matter what sector of the economy we work in, we’re going to have to wait and see what happens. But it seems quite possible that contingent workforce sourcing and management may become more important than ever before.

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