1. The Labour Market Context of HRM
Human Resource Management

2. 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

3. 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

4. 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?

5. 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

6. Labour Market Supply and Demand
Labour market demand
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)
Employment regulation
Level and target of investment in education and training
Industrial policy
Wider social policy
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

7. 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

8. 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

9. 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

10. 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?

11. Approaches to labour flexibility
Functional Flexibility
 Financial (or wage) flexibility
 Numerical Flexibility
 Temporal flexibility
 Spatial (or locational) Flexibility

12. Employer reasons given for introducing flexible working practices (IDS, 2006)
To improve staff retention
To enhance reputation as an ‘employer of choice’
In response to requests from staff
In response to Government legislation
To improve work–life balance
To improve staff morale
To attract job applicants/widen recruitment pool
To provide adequate cover for extended opening hours
To meet seasonal fluctuations in the market
To stay competitive in the market
To improve productivity
To encourage diversity
To reduce sickness absence/help those returning from long-term sick leave
To limit overtime costs
To encourage loyalty
To address environmental/travel-to-work issues
To reduce property costs
To enable a young workforce to pursue their personal interests

13. Atkinson’s (1984) Flexible Firm
Core group
Primary (internal) labour market
Functional flexibility
Outsourcing
Agency workers
Sub-
contracting
First peripheral group
Secondary (internal) labour market
Numerical and functional flexibility
Second peripheral group
Numerical and functional flexibility e.g. part-time workers, job-sharing and temporary workers
Self-employment

14. 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

15. 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

16. 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

17. 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.