Labour Market Dynamics and Economic Impact

Introduction

The labour market is among the pillars in an economy that directly impacts the lives of citizens. The progressions in the labour market have the capability of influencing various aspects such as the security of jobs, employment opportunities, and the skill needed in the labour market. Despite its influence on job security, the labour market is also an essential factor when it comes to analysing and monitoring the business cycle in a country. Specific elements in a labour market such as jobs, costs, wages, labour, and opportunities are critical both as drivers of a labour market and indicators of business cycle development. The projections in the labour market determine temporary economic fluxes from real business cycle fluctuations. This leads to a central issue on the identification of a labour market and the advantages and disadvantages of the same. In most economies, there are available statistics that relate to the labour market. However, one cannot use any individual statistic to determine the type of the labour market or have a clear picture of the trends in the labour market. It only through analysing various indicators in tandem with each other in a structured manner that can help one to determine the type of labour market (Ndou and Gumata, 201, p. 201). Therefore, by comparing the realization of the selected indicators, one can adequately define the market type. Some of the statistics that one can use to classify a labour market include the following elements; the variations in the composition of the economically active population, the changes in unemployment rates, legal labour restrictions, and the dynamics of the desired skills in the labour market. Górecki, Matuszczyk, and Stec (2019, p. 111) wrote that the current trends in the USA labour market, which has seen the increase in the use of freelance workers, smart machines and robotics, is already an indicator that the workforce is changing rapidly. The changes experienced by the country cannot be perceived as mere development trends. Instead, its effects are directly felt in the labour market. For instance, for an increase in automation activities, an employer would require a set of new skills in the years. Therefore, in the near feature, companies would need a flexible and highly skilled workforce that would be able to adapt to the current changes in the system.

The concept of defining a labour market

Various theorists and scholars have established a different framework for assessing whether a labour market is tight or loose. However, this study would use the model established by Afonso (2016), which analyses the labour market from a business perspective? It implies that the central area of focus is not on structural factors of the labour market, such as long-term progressions like employee shortages, participation, and aging among similar factors. Instead, the focus would be the influence of business in the labour market. The framework majorly identifies and analyses various periods of high and low labour tensions., which are likely to take place in midterm frequencies. In this framework, classifying the state of the labour market can be attained, examining whether the labour supply is tight or loose, and whether the labour demand is strong or weak. Figure 1 gives a summary of how the framework works.

In this regard, table 1 will give a clear difference between a loose and a tight market

In short, the difference between a tight and a loose labour market is majorly seen in the supply of additional labour, the demand for additional labour and the general economic conditions. For example, currently, the United Kingdom has a tight labour market, which has been improving from an increasing tension labour market due to the Eurozone crisis and the Brexit move. It can be proven by; considerable growth in the Gross Domestic Product as compared to the recession period in 2007 (Gumata and Ndou 2017, p. 291). Apart from an increased GDP, the country has also experienced an increased number of workers moving from one job to another in contrast to the previous years where most people moved from becoming employed to unemployed. The movement from one employment position to another is an indicator of strong demand for qualified employees. Otherwise, if the economy were in increasing tension, the country would have witnessed an overall increase in employment and a reduction in unemployment

The Essence of a loose or a tight Labour condition

As stated by Górecki et al. (2016), tight labour markets have led to shortages of skilled and knowledgeable workers in a certain period. Conversely, loose labour markets have led to an increase in knowledgeable and skilled works. The surplus availability of knowledgeable and skilled workers who can undertake various roles helps companies to plan for the future. The roles undertaken by skilled workers in a loose market are encompassed within the initiative of recruitment, employee retention, and the design if the organization. In this regard, Berk et al. (2019) stated that loosing and tightening labour markets have an impact on the recruitment processes. A loose labour market will need the company to have an effective recruitment process and employee retention among the employees who are working in the competitive sector of the market. On the other hand, a tight labour market means that companies will have to compete for skilled and talented employees in an industry fiercely. While in loose markets, potential employers have plenty of supply in the competitive industries in the market. Even so, Berk, Bertsimas, Weinstein, and Yan (2019, p. 636) Warns that there are various consequences of deliberately tightening up or loosening the labour market because this process could be cyclical; this because tight labour markets can develop to become a norm. In the case of a tight labour market, such patterns can be conducted using the excuse of various challenges such as an aging population or the variations in the nature of work.

Consequently, Jha and Singh (2017, p. 126) argued that for employers to compete for skilled employees in a tight market effectively, the labour market needs a reduced number of individuals with the needed capabilities to handle various tasks. This group of employees should be aware of their position and their respective power balance. In loose labour markets, employees do not have the power to demand even the most essential things that an employee can demand, such as pay increase. Due to an overwhelming supply of labour, they cannot freely demand better working conditions, flexible pay, and opportunities to develop themselves in the competitive market sectors. For example, in a competitive industry like the Retail industry, companies like Walmart would be forced to reach out to job candidates who might have been excluded before, because of the scarcity of skilled employees in a tight market. It implies that there would be more opportunities for veterans, disabled workers, and older workers, which is good for the economy, unlike in situations where the market is loosening. Besides, due to this scarcity, the company would do its best to retain its workers, because replacing them would be a challenge. At this point, the company might resort to giving competitive wages, flexible schedules, and more benefits to employees. For employees, this would mean better welfare, while for employers, it means more recurrent expenditure.

Evaluating human Resource Planning activities

Human resource planning is well-defined as a course through which an organization's management determines how the entity should shift from the existing human labour arrangement to a more defined and desired structure. Using strategic planning, the human resource officer aims to recruit the right number staffs with the desired qualifications at the right time and undertaking the necessary actions that would result to long term benefits to both the organization and the individual. Human resource planning is the first step towards human resource management. It involves examining and identifying the need for and recognizing the availability of human resource to help the entity to attain its objectives. The main emphasis of Human Resource Planning (HRP) is to make sure that the company has the right number of employees with the relevant capabilities to help the organization (Birch,Tomblin Murphy, MacKenzie, Whittaker, and Mason 2017, p. 818). In HRP the company ought to consider the convenience and apportionment of people to jobs in the long terms and not just in a year or month. Besides, as part of the evaluations, H.R. plans involve various approaches. These actions include but are not limited to changing employees to other positions in the organization, reducing the sum of personnel in specific departments through layoffs, and increasing the number of employees in some departments. Factors that ought to be considered before undertaking such actions include the skills and abilities of individual employees, the changing nature of the industry, and the anticipated vacancies which result from promotions, retirements, and transfers. For example, currently, with the existence of the COVID-19 pandemic that has led to restriction of people's movement and gathering, a company like Walmart is expected to have increased online orders and door-to-door deliveries as compared to the past (Brewster 2017, p. 27). Therefore, if the H.R. were to plan during this time, then it would be wise to reduce to the number of staff in the physical mall or transfer them to the logistics department where they can help the company with processing online orders and subsequent deliveries.

Classification of Human Resource Planning

The process of human resources can be perceived as a simple process, and at the same time, it is a complicated process. For instance, focusing on the labour demands of a company like Walmart could be as simple as relying on a casual conversation with human resource personnel. At the same time, it can be as complicated as relying on complex econometric frameworks. Waheed, Xiaoming, Karamat, and Waheed (2016) stated that human resource planning could either be strategic or operational. By strategic, the authors refer to the general and long-term purpose of the HRP process, while operation refers to the short-term goals of a company in regards to its labour needs. The process could be focused on bringing changes to the whole organization or, in some cases. It could be restricted to various departments or a specific group of employees. The process itself is not a one-time affair. Instead, it is recurrent in accordance with the organizational needs, policies, objectives. For example, some organizations conduct it annually, while an organization like Walmart conducts HRP sporadically, for example, when a new product is being launched.

The Human Resource Planning Process

The process of HRP majorly consists of four steps which are, the evaluation of the current human resource capacity, predicting human resource needs, analysing the existing gaps, and developing the necessary strategies the whole process.

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Evaluating the Current human resource capability

The first step to HRP is to evaluate the capability of the current employees in the organization. The assessment ought to include identifying the knowledge, skills, and abilities of the current employees. The process of identification can be conducted by coming up with an inventory that shows the skills of every employee. It is essential that the skill inventory ought to go beyond the qualifications needed for a particular position. Preferably, the inventory should include the skills of each person plus their education levels and certificates (Baumann et al. 2016, p. 97). Once this has been conducted, the human resource manager can review them and determine if an individual would be willing to take up more responsibilities concerning their developmental plans.

Predicting human resource requirements

A practical forecast of organizational human resource necessities revolves around the valuation of the labour demand and supply. Whenever predicting the human resource requirements of a group, it is critical to consider the following issues, the type of jobs that need to be filled, the number of staff that will be needed to attain the premeditated goals of the organization, the type of academic qualifications and skills that would be needed, and the possible challenges that the organization would meet when staffing. The process of modelling and focusing can help the management to have vital information on the effects of various H.R. strategies that can be utilised to aid the group to achieve its goals. Because human resource modelling can be a complicated task, H.R. managers should always give preference to using a straight forward model that they and the organization's management better understand to increase the chances of accepting the results (Ramli, ABAS, Arif, and Desa, 2016,p. 909). Among the common modeling frameworks that are widely used include; regression analysis, time series analysis, and percentage changes, among others.

Gap Analysis

It involves the gap between the future or the objectives of the organization and the current position of the organization. The gap analysis process involves identifying the number of staff and their respective skills and abilities needed in the future. It is also vital for the H.R. department to analyse the current H.R. practices and identify various opportunities that could help in improving the organizational capacity. Among the most fundamental issues that the H.R. should evaluate in this context include the type of the new job that will be needed in future, the employee skills that will be needed, assessment of the current employees' abilities and whether or not the company has enough managers and supervisors to help in the process (Kushwaha, Yadav, and Prasad 2018, p. 612). For the human resource department to bridge the gap between the future needs of the organization and the existing resources, they need to establish an approach that would connect various individuals to their needs, drive the organization to their objectives that would lead to the desired outcomes, define the methodology that would be used by the human resource and drive the employees to find their sense of purpose.

Developing Supportive human resource frameworks

Aviso, Chiu, Demeterio III, Lucas, Tseng, and Tan (2019, p. 811) identified five significant frameworks that a company could take advantage of for it to meet their future demands, these include; restructuring, recruitment, collaborations, outsourcing, and training. These strategies are meant to empower the organization with the right systems and human labour that would help in achieving the desired goals. However, it is essential to note that this is one of the most critical parts of HRP and can determine if an organization will have an effective human resource or not. It also draws the difference between successful organizations and struggling ones. Therefore, human resource managers should consult more and work closely with various stakeholders in the organization when undertaking this process, as it has the potential of making or destroying an organization.

The essence of Human Resource Planning

Through the process of human resource planning, the organization can identify its personnel requirements. By knowing these requirements, the management can effectively anticipate labour shortages and the possibilities of having surpluses; this insight would help the organization to correct the H.R. issue before it develops into a severe issue. HRP also helps in the process of selection and staffing through the use of a direct system of forecasting of employee requirements, which helps the company to establish the right sources of recruitment. The organization can also implement an appropriate recruitment procedure depending on the arising vacancies. Through planning the company can rightfully place personnel. The process facilitates the appropriate placement of the employees in an organization, which majorly involves assigning the right person to right position (Elfassy and Kratina 2016, p. 95). A proper placement framework would lead to employee satisfaction, and improves their efficacy. Lastly, the process also helps in the formulation of employee appraisal mechanisms; this is major because an H.R. manager can identify the strengths and weaknesses of the employees regarding their job. As much as an organization can hugely benefit from the process of Human Resource Planning, it can also incur losses as a result of this process. Some of the shortcomings of the HRP include the long time needed and the complex process of conducting a correct focus. Basu and Pak (2016, p. 105) state that proper planning needs time. For an organization, especially like Walmart, where sales per day determine the overall revenue of the company, time is a precious commodity. Secondly, the whole planning process might not be accurate. It could be subjected to various unpredictability, such as economic factors, the variety of skills, and employment levels, among others, which might end up demanding various contingent strategies.

Barriers to the Human Resource Planning Process.

As much as every organization wants to undertake a comprehensive HRP process, various barriers have hampered the whole process, which made businesses question the worth of HRP. First, H.R. practitioners are indeed experts in handling employee issues and the human resource need of the organization. However, they are not experts in business and finance. Therefore, there is a possibility that the H.R. plans could conflict with the business plans of the organization, which renders HRP as defective. Secondly, in most cases, the information that the H.R. has would not tally with the information used in creating the businesses' strategy (Haraj and Hameed 2019, p. 629). For a long time, the strategic objectives of business have been tied to financial projection, and in most cases, they would ignore the H.R. predictions and expectations. Lastly, in some cases, the operative managers fail to involve themselves in the HRP process because of a common perception that the HRP process is the sole mandate of H.R. personnel. However, a successful planning regime would need a coordinated effort among mangers and the H.R. department.

Conclusion

From the analyses, it is clear that various factors affect the H.R. planning; some can be corrected by the H.R. personnel in collaboration with the other organizational leaders while others are beyond the control of the organization. For example, factors such as the level of tightness in the labour market cannot be controlled by a single organization. Therefore, such situations present various challenges in the process of HRP, which can render the whole process void. However, since HRP is not a one-time affair, the human resource department is expected to be continuously updating their plans.

References

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