2025 Policy Outlook: Addressing Modern Workforce Challenges

Key Workplace Challenges That Need Policy Solutions

SHRM believes that to address the key challenges facing work, workers, and the workplace, it’s essential for all stakeholders to have a seat at the table and for all perspectives to be considered. To improve U.S. competitiveness and boost the labor market, policymakers must address near-, medium-, and long-term needs, which will require bipartisan collaboration.

Additionally, the business community must advocate for policies that offer the incentives and flexibility needed to deliver robust, comprehensive benefits to recruit and retain a talented workforce. SHRM is ready to work with policymakers and the business community to navigate policy shifts and emerging issues in the years ahead.

Closing the Workforce Participation Gap in the AI Era

U.S. businesses cannot access the talent they require to fulfill current needs, much less future talent needs. This trend is due to several factors, including shifting skill needs, retiring Baby Boomers, declining birth rates, and the workforce participation gap, characterized by disparities in employment rates between different groups.

The workforce participation gap is a complex issue with many causes, including inadequate access to educational and learning opportunities tailored to businesses’ shifting skill needs. New technologies such as AI require workers to learn new skills to make the most of these tools. The demand for AI literacy and skills will only grow as more businesses integrate AI into their workflows.

SHRM’s 2024 AI in the Workplace research found that 83% of HR leaders saw upskilling as essential in an AI-driven job market, and 82% said the success of AI use depends on the user’s proficiency with the technology. Many workers will be able to look to their employers for essential training on AI tools, but people outside the current workforce may be left behind if they cannot receive the training they need.

In an evolving business landscape, the workforce participation gap will only widen without creating broader access to learning new skills, which requires collaboration between the government and the private sector. As a result, the U.S. could see a return to policies proposed during Trump’s first term to expand apprenticeship programs and short-term career training initiatives.

Professional development opportunities can lead to a future-proof workforce and keep organizations ahead of emerging business trends. Closing the workforce participation gap will require workplace laws and policies that allow organizations to shape strategies that advance the recruitment and retention of top talent.

To close the skills gap and enhance economic well-being, employers and public policy must support skill-based hiring, reskilling and upskilling workers, inclusion and diversity initiatives, and opportunities to support education and training efforts, including tapping into nontraditional talent pools. 

Shaping the Future of Work

The workplace of the future will be very different from the one we know today. Unfolding social, political, economic, and technological trends will shape virtually every aspect of the workplace in the years ahead. Now is the time for employers to prepare for the coming shifts in the world of work. Expect remote work and the gig economy to play a significant role in how work will be done, who will be doing it, and from where. 

SHRM has been at the forefront of guiding policymakers and the business community in understanding and adapting to the future of work, projecting how the workplace will evolve in the years ahead. Preparing for the future of work is critical, regardless of industry or business size, because decisions made today will have profound implications, particularly in these areas:

AI and job displacement. With the rapid adoption of AI and automation in the workplace, the fear among workers of AI displacement looms. The nation needs policies to ensure responsible AI implementation and to help workers thrive, innovate, and compete.

AI is an augmentative tool that can create new opportunities and capabilities for workers. SHRM recognizes that to see a true return on investment, AI must be paired with human intelligence as AI transforms jobs and creates roles emphasizing human skills, such as creativity and critical thinking.

Alongside responsible AI adoption and concentrated efforts to upskill and reskill, policymakers should support initiatives that encourage the adoption of AI to enhance recruitment, learning and development, and performance management to ensure that organizations can meet the complex demands of the modern workplace.

SHRM supports a federal AI standard to address the inconsistencies created by the patchwork of state and local regulations. Such a standard should aim to prevent unlawful bias and promote responsible AI use, while also educating stakeholders on AI’s benefits and risks.

Caregiver policies. Additionally, providing benefits to help alleviate pressures felt by workers with caregiving responsibilities will be essential to accommodate the growing needs of “sandwich generation” workers—specifically, those caring for an aging parent while also raising children. Research from the Rosalynn Carter Institute for Caregivers found that as many as 1 in 5 full-time workers juggle work and caregiving responsibilities. Those responsibilities can extend to children, parents, other family members, and friends. 

Flexibility. Over the past five years, flexible work benefits have fundamentally redefined the workplace, with organizations increasingly committing to hybrid work opportunities. The SHRM 2024 Employee Benefits Survey found that leave benefits are tied with retirement benefits as the second most important to employers (81%), behind only health-related benefits. Flexible working benefits are fourth (70%).

Inclusion and diversity. Creating truly inclusive workplaces is about removing arbitrary barriers to entry for your organization. That is why SHRM is committed to advancing policies that create inclusive workplaces and offers a comprehensive suite of resources and tools to help HR professionals build inclusive workplaces and develop diverse talent pipelines.

Modernizing Workplace Policies: 3 Key Laws for Congress to Update

Federal law is not keeping pace with organizations that must invest in their workforces to meet modern workplace needs. Rapid technological, global, and societal changes demand an agile legal framework. However, due to congressional inaction, there has been an overreliance on regulatory bodies, leading to confusion with each new administration’s regulatory agenda.

Lack of federal legislative action has pushed important workplace issues to either federal regulatory or judicial bodies or to the states, leading to a patchwork of laws and compliance challenges for employers.

Additionally, the U.S. Supreme Court’s 2024 decision in Loper Bright Enterprises v. Raimondo, which overturned the long-standing Chevron doctrine, will continue to impact the authority of regulatory bodies in interpreting ambiguous statutes. 

“As we look to 2025, the regulatory environment will likely be characterized by cautious rulemaking and increased judicial scrutiny,” said Dickens.

Now more than ever, it’s critical for Congress to pass bipartisan legislation that ensures clarity and consistency in workplace laws. SHRM is committed to advising policymakers and supporting members in this evolving regulatory environment. For the 119th Congress, SHRM’s legislative priorities focus on three of the most influential and impactful laws affecting workplaces:

The Fair Labor Standards Act (FLSA)

The FLSA has been the foundation of U.S. labor law since its passage in 1938. It establishes a minimum wage, overtime pay, and other employee protections. However, the FLSA has not been adequately updated to meet the needs of the modern workplace, and many of its provisions are now outdated, inflexible, or inadequate.

Any FLSA legislative update should address critical issues, such as increasing worker flexibility, defining worker classifications, and concisely outlining employment relationships. Congress must pass legislation that supports organizations to offer skills development, increase workplace flexibility, and develop talent pipelines. All of this would benefit employers, workers, and the economy. 

The Family and Medical Leave Act (FMLA)

As the cornerstone of federal leave in the U.S., the FMLA provides eligible employees with up to 12 weeks of unpaid, job-protected leave. However, the FMLA’s application in the modern world has become unclear due to the significant shifts in the paid and unpaid leave landscapes, federal accommodations, worker classifications, and the overall culture of work in the 32 years since it became law.

Federal legislation and regulatory updates should clarify employee and employer rights and responsibilities, better align the FMLA with other leave and accommodation laws, expand the scope of qualifying events and covered family members, and seek to reduce administrative burdens. The 119^th Congress has a responsibility to revise the FMLA to meet the current and future needs of work, workers, and workplaces.

The Immigration and Nationality Act

This comprehensive U.S. immigration statute needs updating because the entire culture of work has shifted drastically since the last major amendment more than 30 years ago.

The workplace immigration system should stop hindering the ability of U.S. workplaces to remain competitive and thrive. The federal government should work in tandem with employers to address the needs and shortcomings of the workplace immigration system, including investing in the overall immigration infrastructure and streamlining the adjudication of work authorization documents.

The Trump administration is expected to emphasize domestic workforce development while expressing openness to merit-based immigration plans and work authorization (i.e., green cards) for noncitizens who have graduated from college. However, Trump will likely prioritize border security, and this green-card proposal would only apply to the most thoroughly vetted candidates.

Federal policymakers must collaborate to modernize the outdated immigration system and advance commonsense policies that remove arbitrary barriers, allowing U.S. companies to access educated and legally authorized workers.

Opportunity for 2025

SHRM’s workplace advocacy recognizes the crucial role of all policymakers across the global, federal, state, local levels in shaping workplace policies, and it reflects our commitment to engaging at every stage and level of policymaking.

This year, federal policymakers have the opportunity to work together, display civility, and create policies that make for a better workplace.

As the new administration lays out its policy priorities and new leadership emerges in regulatory bodies and Congress, SHRM is committed to engaging with policymakers to help shape effective workplace policies.   

KEY POLICY AREAS THAT COULD SEE ACTION IN 2025

Shifts in government policy could affect HR departments in several key areas this year, including:

ARTIFICIAL INTELLIGENCE. With states and local governments already taking steps to regulate AI, the federal approach advocated by the Trump administration will be crucial in setting a unified framework that will have a wide-ranging impact in the workplace. During President Donald Trump’s previous term, he signed an executive order urging the federal government to use trustworthy AI systems. He also recognized AI’s potential to increase productivity, create new industries, and maintain the U.S.’s technological edge.

INCLUSION AND DIVERSITY. Trump is expected to revisit federal I&D programs in light of recent Supreme Court rulings. His approach will likely discourage federal support for any employment action motivated (positively or negatively) by characteristics such as race or sex. As employers implement I&D initiatives to enhance productivity, boost their bottom line, and meet compliance obligations, they should consider enacting policies that are inclusive of underrepresented workers. HR departments must remain agile and ready to adapt their policies to align with new laws, regulations, and expectations.

CAREGIVERS IN THE WORKPLACE. Caregiving challenges place a significant strain on both workers and employers, as more employees these days are balancing work with their responsibilities for children, older adults, and family members with disabilities. SHRM research showed that 80% of working caregivers expect their caregiving to be long term. Due to insufficient support, 28% of caregivers have reduced their work hours, 21% have reduced their workload, and 14% have changed jobs for more flexibility in the past year. The Council on Aging reported that employees lose up to $3 trillion annually in wages and benefits due to their caregiving needs, while employers face $17 billion to $33 billion in losses due to related absenteeism and turnover. These circumstances should drive policies that support caregiving through tax incentives, employer-sponsored benefits, job training, and immigration reform to expand the caregiver workforce.