The Impact of Regulation on the Labor Market

Businessman Conducting a Meeting with His StaffOne of the best articles I have read recently on the state of the labor market was an interview with Bob Funk, president of Express Employment Services, in The Wall Street Journal on September 20, 2013, titled “Where the Jobs Are—and How to Get One”. Express Employment Services is one of the largest temporary employment agencies in the U.S., which gives them a front-row seat at viewing the changes in hiring across the nation.

As I read the article, I was reminded that when I managed the recruiting function at my former employer, we used to say “follow the want ads, to follow the labor market.” We could tell which jobs were in demand by looking at which jobs were advertised most frequently. We knew which jobs were no longer viable when we noticed that no one was advertising them. Moreover, the number of pages in the want ads section of the paper was a good gauge of the general state of the economy.

Now, I suppose, it is job boards and online hiring forums that rule, rather than want ads, but the principle still applies. Jobs are more plentiful when the economy is good. And which jobs are in demand changes over time. Applicants need to be ready for these changes.

In the opening paragraphs of the interview, Mr. Funk states

“ObamaCare has been an absolute boon for my business . . . . But it’s just terrible for the country. . . .  The problem isn’t just ObamaCare, though. It’s the entire regulatory assault on employers coming out of Washington—everything from the EEOC [the Equal Employment Opportunity Commission] . . . to the Dodd-Frank monstrosity. Employers are living in a state of fear.” [emphasis added]

Employers are reluctant to make commitments to full-time hires in the current regulatory environment. Instead, they turn to temporary employees sourced by Express Employment Services and similar agencies.

I encourage anyone with an interest in the labor market to review the new white paper from Express Employment Services, Changing Dynamics, available here.

In this white paper, Mr. Funk is quoted as saying:

“The ACA [the Affordable Care Act] may already be redefining what it means to be gainfully employed in America.”

In support of this broad statement, the white paper argues three trends have emerged since passage of the ACA:

  1. A threat to the traditional 40-hour work week.
  2. “Small” businesses are trying not to become “big” businesses.
  3. Increased use of staffing companies, such as Express Employment Services.

I’m not sure I agree that the ACA is responsible for these trends. The use of staffing companies was increasing when I managed Human Resources departments ten years ago. As an attorney specializing in employment law twenty years ago, I gave advice to clients about their use of agency employees. We worried about the fifty-employee threshold for “big” businesses in 1993 when the Family & Medical Leave Act became law.

But my experience was before the Great Recession. The trends of the past ten to twenty years have only accelerated since that economic downturn. CEOs are increasingly reluctant to take on new costs.

The ACA and other employment regulations, together with increasing regulations in fields as diverse as the environment and financial disclosures, increase the costs to businesses and make corporate leaders less certain about the future.

Their uncertainties turn inevitably into a desire to make fewer commitments. And that hurts their employees.

Businesspeople Running Towards Finish LineWhat can we do about this? In The Wall Street Journal interview, Mr. Funk advocated

the first step would be to start shrinking the “vast social welfare state programs that have become a substitute for work. There’s a prevalent attitude of a lot of this generation of workers that the government will always be there to take care of them. It’s hard to get people to take entry-level jobs when they can get unemployment benefits, health care, food stamps and the rest.”

While some social welfare will always be necessary, this nation needs to have a serious debate about how much of a safety net is appropriate and whether the federal government is the right entity to provide it.

What do you think about the impact of regulation on the labor market?


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Filed under Benefits, Human Resources, Law, Management, Politics, Workplace

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