The Labour Market Context of

HRM
Human Resource Management
 Session Objectives
• To define internal and external labour markets
• To identify changing labour market conditions
• To outline how labour market trends are
impacting upon HRM practice
• To outline the various ways that firms can
respond to different labour market conditions
• To outline forms of employment flexibility
 What are Labour Markets?
• Mechanism through which human labour is
bought and sold as a commodity
• Means by which labour demand (the number
and type of available jobs) is matched with
labour supply (the number and type of
available workers)
• Nature of interaction between organisation
and labour markets reflects choice of ‘make’
or ‘buy’ strategies for employee resourcing
 The internal labour market
• An organisation’s internal supply or stock of labour
• Mechanism for attribution of work roles
• Device for managerial control over the workforce
through stratification, division and the detailed
allocation of responsibility
• ‘Form’ determined by HR practices, contextual
factors and organisational characteristics
• Potential source of ‘positive’ employment experience
• Erosion of ‘strong’ internal labour markets?
 The external labour market
• External supply of labour; the stock of available labour
• Segmented labour markets – Geography, skills,
educational level, etc.
• Labour market ‘power’ through legitimate and
illegitimate means
• Shaped by a range of processes which can be both
planned and directed or largely uncontrolled and
unpredictable
• Reflexive relationship between the supply and demand
for labour
Labour Market Supply and Demand
Labour market supply
 Changing societal attitudes to work
and education
 Economic conditions (regional,
national and international)
 Changing demography
 Government policy – Both national
and international (e.g. European
Union)
o Employment regulation
o Level and target of investment
in education and training
o Industrial policy
o Wider social policy
Labour market demand
 Changes to the external business
environment
 Changes in the internal business
environment
 Changing communications and
production technologies
 Changes in the political context
 Economic restructuring
 Changing skills requirement
 Regional, national and
international economic conditions
– Inflation, level of unemployment
and interest rates
 Globalisation of labour markets?
• Globalisation creating significant
interconnectedness of national and regional
labour markets
• Changes to the availability of labour in one
part of the world impact on the relative
demand for labour in another
• Developing international division of labour
• Alters the dynamic between labour supply and
demand
 Economic Change and the Labour
Market
• Service-dominated economy
• Advent of ‘post-industrialism’/knowledge-intensive economy
• ‘Type of economically advanced social order in which the
centrally important resource is knowledge, service work has
largely replaced manufacturing employment and knowledge-
based occupations play a privileged role’. (Watson, 2008: 21)
• Economic complexity and uncertainty
• Bi-skill labour market changes: ‘Mcjobs’ and ‘iMac jobs’
• Importance of ‘thinking’ skills and ‘person to person’ skills
 The restructuring of internal labour markets
The flexibility of organisational structure

• Contested argument that rigid bureaucratic

organisational forms are inadequately adaptable
• Replaced with ‘post-bureaucratic forms that are leaner,
flatter and consequently more responsive, flexible and
focused’ (Morris, 2004: 264).
• Downsizing, rightsizing, delayering, restructuring,
business process re-engineering, project working, etc.
• Implications for work in terms of job content, employee
motivation, job security and organisational commitment
 The restructuring of internal labour markets
The flexibility of labour

• Workforce flexibility and adaptability key to an organisation’s

ability to respond to change
• Flexibility of labour is reflected in an employers’ ability to:
– Recruit or dispose of labour as required;
– Alter labour costs in line with market needs;
– Allocate labour efficiently within the firm;
– Fix working hours to suit business requirements (Reilly,
1998).
• Cost-minimisation (‘flexploitation’) or quality enhancement?
• Mutual gains?
Approaches to labour flexibility

• Functional Flexibility
• Financial (or wage) flexibility
• Numerical Flexibility
• Temporal flexibility
• Spatial (or locational) Flexibility
 Employer reasons given for introducing flexible
working practices (IDS, 2006)
• To improve staff retention • To stay competitive in the market
• To enhance reputation as an • To improve productivity
‘employer of choice’
• To encourage diversity
• In response to requests from staff
• To reduce sickness absence/help
• In response to Government those returning from long-term sick
legislation leave
• To improve work–life balance • To limit overtime costs
• To improve staff morale • To encourage loyalty
• To attract job applicants/widen • To address environmental/travel-to-
recruitment pool work issues
• To provide adequate cover for • To reduce property costs
extended opening hours
• To enable a young workforce to
• To meet seasonal fluctuations in the pursue their personal interests
market
 Atkinson’s (1984) Flexible Firm
First peripheral group
Secondary (internal)
labour market Self-employment
Numerical and functional
flexibility

Core group
Agency Primary (internal) labour Sub-
workers market contracting
Functional flexibility

Second peripheral group

Numerical and functional
flexibility e.g. part-time
workers, job-sharing and
temporary workers Outsourcing
 Implications of flexible working
practices
• ‘Employee-friendly’ and ‘employee-unfriendly’
variants
• ‘Casualisation’ of employment at odds with
importance of employee commitment to
performance
• Non-standard employment (part-time, temporary
and fixed-term) increases workers’ exposure to
‘bad job’ characteristics
• Multi-skilling often means multi-tasking
 Implications of flexible working
practices
• Some groups are more likely to benefit than
others from flexible working arrangements
– Managerial, professional and clerical workers
• For manual and lower-skilled workers, flexibility
often means insecurity and unpredictability
• Flexible working can reinforce patterns of social
exclusion
• Ethical debate regarding flexible working is micro
version of wider political dilemma
 Summary points
• Labour markets are highly fluid and unpredictable
• The supply of and demand for labour is subject to a range
of pressures which form the conditions under which
organisations manage their workforce
• Knowledge economy has become a useful shorthand
means of describing a set of processes shaping the labour
market context of contemporary firms.
• Bi-skill labour market changes – ‘Mcjobs’ and ‘iMac jobs’
• Increased emphasis on organisational and labour flexibility
– Variable impact on workers
 References
Atkinson, J. (1984) Manpower strategies for the flexible
organisation, Personnel Management, August .
Income Data Services (2006) Survey of flexible working practices,
HR Studies Update 834, November, London: IDS.
Morris, J. (2004) The future of work: Organisational and
international perspectives, International Journal of Human
Resource Management, 15(2): 263–275.
Reilly, P. A. (1998) Balancing Flexibility – Meeting the Interests of
Employer and Employee, European Journal of Work and
Organisational Psychology, 7(1): 7–22.
Watson, T. J. (2008) Sociology, Work and Industry, (5th edn),
London: Routledge.