The Election of Donald Trump: The Implications and Key Lessons for the Professional Staffing Industry
Ok, first thing, I am not going to share my personal opinion on the election of Donald Trump. That is reserved for family and friends or those with whom I am sharing a good bottle of red Zin or a Brunello (especially if you are buying). Besides, as we have seen, this is essentially a 50/50 country and alienating half of your audience/constituency is not a good way to start. I am also not going to do a post-mortem on why he won. That is being addressed ad nauseam by your choice of website, publication or TV network. What I do want to tackle is what I think it means for the professional staffing industry.
First, anyone offering their take on what to expect needs to do so with humility. Why? Because, no one really knows. On most issues, even the President-Elect and his entourage don’t know given they have not developed their position on key issues. Trump makes the exercise even more challenging. As we saw during the campaign and its immediate aftermath, Trump’s positions have lets say . . . . evolved over time. Further, while one can reasonably predict the policy positions of a traditional mainstream Republican, Trump is clearly not so easily categorized. While some of his announced legislative priorities and picks for senior leadership positions show a decidedly pro-business anti-regulation bent typical of mainstream Republicans, there is also the anti-immigration populist side to Trump---policy positions that clearly contributed to his victory. Which “Trump” shows up could well be determinative of his Administration’s policy position on a particular issue. So, let’s dive in.
Overtime Rules: As everyone knows, the Obama administration spent the last two years writing new regulations governing the white collar overtime rules in particular more than doubling the salary level required to be deemed exempt from overtime. Finalized in May with an intended effective date of December 1st, late last month a Texas federal judge temporarily blocked implementation of the new rules. Recently, a federal appeals court granted the Obama Administration’s request to expedite briefing on an appeal. Despite the expedited briefing schedule, the appeal will not be heard until after inauguration.
How does the Trump Administration figure into all this? In multiple ways. Once the new Administration takes office, its Department of Labor and Justice Department could decide not to pursue the appeal leaving the injunction in place. Further, Congressional Republicans are planning on using the Congressional Review Act to annul the new overtime rules. While technical in operation, the CRA would give the new Congress that is seated in January 2017 an opportunity to pass a Resolution of Disapproval invalidating the regulations. Had Hillary Clinton won, it would been a useless exercise as she would almost have certainly vetoed the resolution. However, Donald Trump is far more likely to sign the legislation which is not subject to being filibustered by Democrats in the Senate. While potentially inconsistent with his populist message, I think it is far more likely the pro-business anti-regulation Trump shows up here. I do think there is a good chance alternative rules will be proposed either by legislation or by new rulemaking that would raise the salary threshold more modestly with the increases phased in over a longer time-frame. If such legislation is proposed, does that open up an opportunity for other reforms to the antiquated overtime rules such as revising the long-outdated computer professional exemption? Perhaps, but still too early to tell. Clearly, we will be watching for an available opportunity.
Tax Reform & Independent Contractors
One of the top priorities of the new Trump Administration is tax reform. What that looks like, and more particularly, who are the winners and losers—it is too early to tell. Of particular interest to our industry will be any changes to the rules around independent contractor status. Previous efforts to draft tax reform legislation have included revamping the rules related to who is eligible to be treated as an independent contractor. With a large swath of consultants in our industry operating as independent contractors, we will be closely watching the development of any new rules and its implications for our business model. Stay tuned.
Trump has talked about spending a trillion dollars rebuilding crumbling U.S. infrastructure. While the proposal has buoyed stocks in the construction and engineering space and may bode well for business in general, it remains to be seen how he will pay for it. While many Congressional Democrats have expressed support for such a stimulus, Republican deficit hawks in the House and Senate have been cool to the idea. With Republicans in charge, this is far from a done deal.
If there are any policies from the new Administration that could potentially threaten to disrupt segments of our industry it is more restrictive policies impacting high-skilled immigration. With a shortage of qualified IT professionals in many high-demand skill sets, access to qualified foreign talent is critical. Even if we discount Trump’s anti-immigration comments as campaign rhetoric, there are troubling signs post-election. In a video-taped message, Trump identified “visa abuse” as an important issue. This language reflects the influence of Senator Jeff Sessions (R-AL), a key Trump advisor on immigration policy. Sessions has consistently advocated for more restrictive immigration policies. In addition to being a key advisor, Sessions is Trump’s nominee for Attorney General. As Attorney General, he could have considerable impact on the enforcement of U.S. immigration policy.
On the legislative front, we could see more onerous requirements imposed on H-1B dependent firms to an outright prohibition on third-party placement of H-1Bs. If enacted, such a prohibition would have the effect of barring all staffing firms from placing H-1B beneficiaries at client sites---a potentially devastating outcome. It goes without out saying, we intend on being extraordinarily vigilant in watching and weighing-in on immigration policy in the coming months.
The Key Lessons of the Election of Donald Trump
I am going to surprise you. I think the key lessons of this election (at least as it relates to our industry) have nothing to do with politics or policy. It has to do with the concept of disruption. For those that saw my multi-city roadshow presentation where I talked about our benchmarking data and key industry trends last spring and fall, it was infused thematically with insights drawn from the election. In summing up, I drew lessons from a number of the candidacies in the 2016 election cycle. For lessons learned from Trump’s candidacy (remember this was all done pre-general election) which I characterized as disruptive of the Republican nominating process, I had:
- Challenge conventional wisdom
- Play your own game
- Understand the landscape well
- Wage an unconventional war against conventional foes
It was eerily prescient, though I was no better than others in predicting a Trump victory. For lessons learned from Jeb Bush’s candidacy who had dropped out early in the primary process, I offered “Being the presumed victor does not mean you will win.” Of course, this lesson was even more dramatically demonstrated by Hillary Clinton’s failed candidacy in the general election.
Why is all this relevant to the Professional Staffing Industry? Because it highlights the need to constantly innovate, seek ways to differentiate your firm, and be prudently paranoid about future competitive threats. At this year’s annual conference, we spent a lot of time exploring potentially disruptive forces at play in our industry including threats (and opportunities) presented by the explosion of talent acquisition technology. Even if those threats are not existential in nature (and they may be), you must have a plan for differentiating yourself in an increasingly commoditized marketplace or be relegated to subpar growth rates and margins.
The election of Donald Trump was cheered by some and vilified by others. Whatever your camp (or even if you were in neither camp), the election should underscore the need to not take anything for granted in electoral politics or in business. How will you wage your campaign to succeed in the face of the ever-present forces of disruption?