November 16, 2016

A Look Ahead at the Policy Landscape

Charles Merin

As we go through this Presidential transition period, it is important to take a brief look ahead at the policy landscape.

practice-areas-retail-icon@2xLabor

While we can expect relief on the joint employer and overtime regulations front, relief is likely not to be immediate. Unless a Federal judge in Texas today blocks implementation of the OT rule scheduled to take effect December 1, the most likely outcome is that at some point well into next year the salary threshold number is revised downward by the Trump Administration. Complicating the atmospherics on this issue, is a just released CBO report that indicates that repeal of the pending regulation would increase employer profits while reducing employee pay for some 900,000 workers nationwide. For a President–elect committed to addressing the stagnant wage challenge, the optics on this one aren’t great. The redefinition of a joint employer relationship will be satisfactorily resolved, either by legislative fiat or by Administration action later in 2017. Minimum wage creates its’ own problematic situation for a President-elect who has publicly vacillated between supporting an increase in the Federal minimum wage and wanting to leave it to the states.

practice-areas-defense-icon@2xBorder Security

My belief is that the rhetoric about building a wall gives way to greatly enhanced border security efforts that will include everything from border structural impediments; to an enormous increase in security force presence;  to an enhanced use of technology for interdiction purposes. I anticipate a critical review of the E-Verify program and subsequent adjustments to make it “stronger”. Will workplace raids to check on the legal status of employees increase? How will business respond to that challenge? Border security adjustments will certainly extend to a critical review of entry/exit procedures for International visitors, whose engagement with our economy fuels the profitability of most of your industries. If an ever increasing portion of the world views the United States as a hostile, non-welcoming destination, at what point to they opt to go elsewhere, taking with them the huge economic ROI they bring? How does that change business planning and marketing assumptions for many diverse sectors whose annual profitability is “made” by their visits? I fear that too many clients are underestimating the economic power of the travel experience.

trade-iconTrade

Not to belabor a self-evident truth, but the American economy is fundamentally interconnected with the large world. Tough talk about imposing 35% tariffs, renegotiating trade agreements, and making “better deals”, makes for great talking points. As with all things, the proof will be in the details. For example, while the US is in a much more strategically powerful position with respect to our trade relationships with Mexico, we’re in a far different place with China, where the trade differential greatly advantages them. Given that most of the growth and bottom line profitability for so many of my clients come from their International experience, any meaningful change from the present vigorous International commercial engagement by US brands, could be telling. If China refocuses its’ investments away from America, the consequences will be real. If America’s image around the world takes a serious hit over the next few years, because of a series of significant adjustments ( border security;  trade practices; International defense agreements and/or the use of military force; any economic downturn; and more), there will be real world consequences. From my service on the board of Business for Diplomatic Action in the early 2000’s,  the attitudinal effects became clear. American brands, especially iconic ones, became far less appealing in worldwide markets. Calls for boycotts of those same brands became a reality in different parts of the world. Our engagement in the Iraq war became a catalyst for a much more creative and conspicuous engagement by the George W. Bush administration on ways to marshal the non-governmental power of public diplomacy. All of this was driven by worsening International perceptions of America and its’ brands. As I have often noted, perception is reality in life. Everyone and everything is a brand, which creates its’ own imperative to jealously protect brand value.

practice-areas-financial-icon@2xEconomy

A major infrastructure initiative and action on the tax policy front seem likely. The former enjoys considerable bipartisan support ( though details matter) as does the latter (at least conceptually). However, the most immediate net economic impact will be a dramatic increase in projected fiscal deficits. Some projections suggest that the cumulative impact in the increase in federal debt by 2026 might be as high as 25% of GDP. Coupled with a likely increase in defense spending and significant changes to domestic benefit programs ( Medicare?), and the outlook for the American economy becomes highly complex. I will leave it to professional economists to suggest its’ long-term micro and macro impacts. A stronger US dollar coupled with rising deficits and more protectionist trade policies, will affect our export capabilities and world perceptions about our brands. A true global trade war would affect American consumer access to cheap imported goods, at the same time that rising productivity and technological advances will incentivize even labor intensive workforces to downsize.

practice-areas-travel-icon@2xWorkplace

The face of work in America is being transformed. How we work; where we work; under what terms we work; the redefinition of the pursuit of careers versus ad hoc, interim employment; are all here and now realities. You have often heard me criticize policymakers for their failure to recognize the emergence of the service sector and their concomitant responsibility to develop policies to nurture its’ growth. The rise of the service and interrelated sharing economies demands an immediate and revolutionary approach to the social safety net; job portability and benefits; job training and certification; and more. The looming reality of America’s changing demographic face accelerates those trends. Government will not lead this discussion. Therefore, it’s incumbent upon the business community to drive this forward. If you accept the thesis that job retention and training are legitimate national imperatives for American business, then this conversation must begin today.

So, here then are my takeaways: