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Is the Tide Turning, Starting in the U.K >.?

The < U.K >. government's recent arguments for better treatment of workers are about as clear a manifesto for the importance of human resources as a function as one could imagine. Will it have a ripple effect on this side of the pond?

Monday, August 10, 2015
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The United Kingdom has more in common these days with the United States than most any other country, especially in the area of employment, where both countries over the past generation have pushed back on the power of labor to give business and employers more freedom to operate.  

There is a tendency for trends in one country to play out in the other. Sometimes, it is deliberate copying, as when we borrow each other's TV shows-The Office comes to the United States, America's Got Talent goes to the United Kingdom. (I think we got the better of that deal.) Sometimes it's because forces at play in the environment of the two countries are similar. That's why what is happening in across the pond has more than a little relevance here.

A fascinating analysis in the Financial Times this past month by George Parker, its political editor, describes how the current Conservative government-which has always been the reliable friend of business-is turning on that constituency with a series of new proposals to make employers treat their workers better. 

What's on the government's list? A national minimum "living wage" that would be roughly $15 per hour. A new apprenticeship program funded by a tax on large businesses. Requirements to publish the difference in pay for a company's male and female employees. There are even suggestions that the high level of executive pay might be next on the government's agenda of problems to address. 

What's behind this change in direction? Of course, nearly everything in government comes back to politics. But in this case, with a parliamentary system and a majority, the government doesn't have to float trial balloons in order to pass legislation. This is a done deal.

An explanation can be found in this remark from an unnamed government minister quoted in Parker's piece:

"It's right for us to say to business that if we cut taxation and regulation, you have to give something back. They have not been reinvesting enough in improving productivity."

It's not just playing up to employees-although, no doubt, there is some of that. The idea here isn't that what business is doing is bad for workers. It is the belief that what business has been doing is actually bad for both business and the economy-that the additional freedom governments have given the employer community over time have not been used well.  

The government's concern is that businesses have fallen into a pattern of trying to use the cheapest and lowest-skilled workers, churning through them to keep costs down, and not investing in skills and training.  As a result, companies can't be as effective because they are losing out on what a skilled, committed workforce could provide. As another unnamed minister put it, "Some companies are excellent, but others are shockingly bad at seeing their workforce as a resource."  This is one reason, the argument goes, that productivity has been lagging in the United Kingdom.

If we think about this for a minute, the < U.K. government's arguments are about as clear a manifesto for the importance of human resources as a function as one could imagine. Yes, it is government telling business that the businesses don't know how best to run their operations-something we usually laugh off in the United States. Those of us who are a little older may remember the arguments being made in the 1990s in the states (with the backing of the Clinton administration) about the superiority of high-performance work systems, and why investing in higher skills and worker empowerment would be good for businesses, for workers and for the economy. Even though the evidence still supports all that, all those exhortations went out the door with the Great Recession, when most businesses went into survival mode.   

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It's the same argument now in the United Kingdom, 20 years later. The fact that these arguments are coming from a Conservative government, whose party is dominated by business interests, is what makes this so astonishing.    

Will this happen in the United States? So far, the arguments from the Obama administration about the need to raise the pay of employees, expand paid leave for employees and manage employee work schedules more responsibly have all been about improving the lives of workers. But the notion that many employers "are shockingly bad at seeing their employees as resources" certainly holds true here as well.

Whether the rhetoric here turns back to the idea that not seeing employees as resources is bad for business will be interesting to watch, regardless of which side of the pond you're standing on.

Peter Cappelli is the George W. Taylor Professor of Management and director of the Center for Human Resources at The Wharton School of the University of Pennsylvania in Philadelphia. His latest book is "Will College Pay Off? A Guide to the Most Important Financial Decision You'll Ever Make."

 

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