Influencing Private Regulation to Support Low-Wage Workers

It does not take a policy wonk or Beltway insider to know that change in public policy is often slow and incremental even with the hard work of advocates. While progress is slow, low-wage workers and their families continue to struggle. However, private regulation – voluntary efforts by private sector companies to define or restrain their behaviors using some or all the elements of regulation – can help effect change. For advocates, understanding why and how companies voluntarily take these stances is critical to shape strategies for corporate influence. Public Private Strategies, with support from The Robert Wood Johnson Foundation, set out to better understand private regulation as a tool to advance policies that benefit the health and well-being of low-wage workers.

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Why Companies Self-Regulate

Corporations have increasingly adopted private policies and taken public positions to shape policy. CVS Health in 2014 decided to stop selling tobacco in their stores to reposition CVS as a company “helping people on a path to better health.” Data published in the American Journal of Public Health found that CVS customers were 38% more likely to stop buying cigarettes after CVS’ decision. This was a textbook example of private regulation that reflected the strategic interests and culture of an individual company, and that had a real social impact.

Other times, corporate actions are a response to external pressures. In 2017, a group of leading small business lenders launched an industry-led pricing disclosure tool for entrepreneurs seeking capital in part as a response to the threat of legislation. The participating companies made standardized pricing comparison tools available to small business borrowers in a manner that satisfied the calls from many advocates for greater pricing transparency.

For advocates, understanding motives and methods is helpful to anticipate likely corporate actions. Companies self-regulate for several reasons, including to preempt government action, influence their competitors, and other internal considerations like financial position and the values of its board of directors. Private regulation can be carried out via compensation, benefits, and investment decisions, internal policies and programs, and campaigns. For example, in a decision to offer benefits that were not mandated by law, Starbucks began offering U.S. employees and eligible family members access to 20 free sessions with a mental health therapist or coach in March 2020.

A Framework for Advocates to Understand and Leverage Private Regulation

As part of this project, we created a simple tool to help advocates refine their strategies. The below chart shows how we identified three ways that private regulation can influence policy outcomes related to workers: 1) shaping policy, 2) persuading peers, and 3) mobilizing customers. For advocates, thinking about the broadest set of tools available to influence corporate action can be helpful to increase impact, particularly during this current state of chronic partisan gridlock in public policy.

1. Shaping Policy

Many companies invest considerable resources to create a more favorable federal, state, and local policy environment that gives them a broader competitive advantage and contributes to value creation. Those that do engage in shaping policy frequently lead or participate in campaigns, litigation, and government relations activities (often in tandem) to influence policy to their benefit and adjust as the landscape changes. In 2019, McDonald’s shifted from opposing a $15 minimum wage to seeking to influence the terms of the rollout. For advocates, traditional responses to counter or amplify corporate influence, such as public relations campaigns and grassroots advocacy, are appropriate and will likely continue.

2. Persuading Peers

Some companies may lead by example to influence stakeholders, other companies

and/or to mobilize industry responses or solutions. Several tools are at their disposal, including: benefits and investments; policies, procedures, and programs; campaigns and some government relations activities. For example, in 2018, PayPal launched its employee financial wellness initiative after an assessment of its hourly and entry-level workers found many employees were struggling to pay their bills each month. The company is now working to help other companies follow in its footsteps. Advocates should consider whether a company’s internal policy or program serves as a source of competitive advantage, as this may factor into whether the company is willing to promote its adoption among peers. Advocates can join forces with companies that lead in worker health and well-being by raising awareness about these strong practices and creating incentives for other companies to follow.

3. Mobilizing Customers

Some companies want to invest in improving worker health and well-being but are constrained by tight margins. In these cases, a single company or group of companies could rely on campaigns to inform, influence, and organize consumers to act or spend on behalf of worker health and well-being. Companies are increasingly taking public stances on social issues at the same time that social media is making new forms of engagement with customers possible. One example that could be instructive is Product RED. Launched in 2006, Product Red was a marketing campaign focused on raising awareness and funds to help eliminate HIV/AIDS in sub-Saharan Africa. Consumer product companies licensed the Product Red brand and customers purchased the licensed products, with a portion of the licensing royalty stream going to a fund for AIDS. The program raised at least $650 million for AIDS prevention and treatment. Possible motivations for participating companies include a benevolent view from consumers for being involved with a social cause and brand association with other participating companies.

A slightly different model with a similar intent of mobilizing customers to act on behalf of worker health and well-being is Grab Your Wallet, a campaign to influence corporate decisions, employer practices, and workplace cultures through effective social media campaigns. Advocates can spur companies to mobilize their customers for a particular cause by tying activism and corporate pressure to drivers of company value.

Observations for Advocates

As we reflect on what this means for advocates looking to influence large corporations, we have a few observations.

First, large corporations are generally giant, complex institutions. Success for advocates seeking to influence companies typically requires openness at the top in the form of senior executive sponsorship, and then the persistence and skill to move through and across the company. Strategies that promote the business case for a policy and then identify and support a champion within the firm or industry can drive efforts to improve worker well-being across departments.

Second, it is important for advocates to account for industry-specific constraints that may impact a company’s decision to advance policies that support low-wage workers. Identifying and mobilizing influential companies to help move the private sector toward initiatives and investments that improve the wellbeing of low-wage workers could affect the rate at which other companies adopt similar efforts.

Lastly, now is the moment to act as attention to public health, worker safety, and racial equity presents an opportunity to advance solutions for low-wage workers. This is an opportunity for advocates to leverage events like the COVID-19 global pandemic and the racial justice movement to illustrate the need for policies that benefit low-wage workers.