Key Features of Labour Market - Coursework Example

Technological advancements, changes in the way businesses operate due to globalization and internationalization, intense competition and the drive tocut costs have affected the labor market the world over. Large business houses outsource routine work while keeping the core functions in-house. This has led to increased demand for personal services have stimulated the growth of small businesses and self-employment. According to the UK’s Federation of Small Businesses (FSB) small businesses currently provide 75 million jobs in the EU (HL, 2007). These structural changes have raised concerns of personal economic security. It is debatable whether such changes lead to higher employment or loss of jobs, but the fact is that it has altered the labor market. In the EU different nations either protect the jobs by erecting trade barriers or by placing legal restrictions on the ability of the organizations to restructure. Thus it is essential to discuss the prevalent labor markets in UK, Spain and Italy, with special emphasis on the labour turnover and staff retention in these three nations. The traditional model of labour market has undergone change in most economies as lifetime employment is considered a thing of the past and jobs are replaced by projects and careers by portfolios. Thus institutional restructuring has led to short-term, contractual labour. Now there is a disposable labour force that can be automated/ hired/fired or offshored depending upon the demand and the market conditions (Doogan, 2003). The new service industries have replaced the stable employment with precarious work conditions. The reorganization of the employment conditions and the remuneration packages has given rise to insecurity. The causes of the changes in the labor market have arisen due to various factors – flexibility, work-life balance, delayering, downsizing, mergers and acquisition, outsourcing, de-industrialization and technological changes. Labour market UK has a high employment rate of just below 75% which indicates a strong and healthy labour market. The unemployment rate is as low as 5.5 percent. UK has the highest employment rate in the G8 leading industrial countries 23% of unemployed people in the UK had been jobless for a year or more (HL, 2007). The UK labour market is one the most flexible in the world which benefits both the workers and the employers. The UK labour market exhibits a high degree of labour turnover. Around 6 million leave jobs every year and similar number find new jobs. The study suggests that these job changes are voluntary and generally workers feel secure in their jobs. UK has plenty of migrant laborers who are exploited as they are unaware of their legal status and rights. Between 1992 and 2002 there was total jobs gain of 8.3m in the EU of which the UK and Spain contributed for major employment expansion while Italy had a very modest employment expansion (Doogan, 2003). By the end of 2000, long-term employment increased in Italy and Spain while it was at the lowest end of the spectrum in the UK. The table below demonstrates that unemployment in Italy has marginally declined after peaking in late 1990s while in Spain it has been consistently rising. In the UK, it has been declining after peaking in mid-80s: Source: Nickell (2003). In Spain, the labour market is considered to be very rigid. While unemployment increases in recession, it does not significantly reduce during economic growth (García-Pérez, & Muñoz-Bullón, 2003). The Italian labour market has a primary with a stable skilled labour force and a secondary sector characterized by unskilled workers, lower wage levels and higher job turnover rates Peironi & Pompei, 2006). Long-term changes in the UK labour market include the increased participation of women (despite low wages and no career progression), and more part-time work among students (ESAD, 2004). The temporary and part-time workers are given more rights in employment law and the employers feel “the best flexibility is that of well-trained, motivated and adaptable employees”. A high proportion of temporary workers is detrimental to the economy as it reduces the incentives to offer training and development opportunities and upgrade technology. In 2002 while UK had 6.2% temporary workers, Spain had 31.2 percent. UK has higher levels of part-time work than temporary work. Employment growth is expected in the UK labor market as new ways of delivering public services are taking shape, like the NHS Direct and Jobcenter Plus. The nature of the advice involved the local knowledge necessary ensures that these cannot be offshored. Business services like finance and communications have increased by 31% between 2001 and 2003. Outsourcing to India had has only a marginal impact on job loss. Labour market deregulation does not affect the productivity. Re-regulation of the labor market has resulted in job growth in UK between 197 and 2002. While there has been an increase in the temporary, part-time and full-time workers, there has been reduction of temporary workers. Labour turnover is affected as the women and the ethnic minorities are treated with discrimination. The employers must avoid this and accept workplace diversity. If the black workers and the women are not ensured career enhancement, they will not be able to give their best to the company. This indirectly affects productivity. Employment protection laws generate labour market inflexibility (Nickell, 2003). Flexibility and turnover Turnover of staff in the labor market is the rotation of workers between firms, jobs and occupations – between the states of employment and unemployment (Bontis & Fitz-enz, 2002). This can either be voluntary or involuntary. Voluntary turnover occurs when the employee resigns. Labour market flexibility has now become a pre-requisite for progress. Flexible labour markets lead to a high rate of employment combined with low stable inflation. It helps to maintain a high rate of employment stability over the economic cycle and raise the rate of growth of productivity. Flexibility in the labour market refers to flexibility in working time schedules, numerical flexibility, functional and wage flexibility. These changes are the result of the changed demand pattern in the labour market. In the UK, employees have been seeking something beyond the traditional 9-5 view of employment in their effort to maintain a work-life balance to accommodate family and other requirements. The issue of balance becomes difficult according to Wilson, Polzer-Debruyne, Chen and Fernandes (2007), when the “work” in the work-life balance is a series of rotating or shifts that result in discontinuities between workers and the rest of their life. The idea of flexible work schedule has gained momentum with increase in the women workforce, changes in family structure and an ageing population (Lewis & Smithson, 2001). Employers have responded by applying different forms of working-time flexibility to enable employees to manage multiple roles. The youth labor market has undergone transformation as there is a rising participation of students in full-time education that opts for part-time work. Most often students start working during their teens due to financial reasons or for funding their studies (Lucas & Ralston, 1997). This is also the result of broken homes or single-parent families. There are more young female workers than male workers. Women comprise 40 percent of the labor market and majority of them are mothers of dependent children. This has not resulted in a decrease in the male labor market nor has there been an increase in the number of men returning home for childrearing or housekeeping (Drago, Pirretti & Scutella, n.d.). Family forms have become diverse with more incidences of divorce, non-marriage partnerships, and single-parenthood casing more women to seek part-time employment. Hence women continue to shoulder the bulk of unpaid care giving which makes it necessary for them to seek part-time employment. The right flexibility is essential for long-term benefits. The period of unemployment is very long in Spain. Liberalization of employment regulations increased temporary labour contracts but even for these the duration remains short. This results in higher turnover and is determined by the duration of the fixed-term tenure (García-Pérez, & Muñoz-Bullón, 2003). Besides, those with low qualifications and the women are more likely to become unemployed. Long duration of unemployment further reduces the chances of employment. The middle-aged men with intermediate qualifications have higher chances of entering employment. Layoffs and recalls are frequent in the Spanish labor market where the workers receive compensation during the period of layoff and are then called back when the economic situation improves. Workers with new permanent contracts issued in late 1990s were not affected by the huge labor turnover and escaped unemployment. Temporary employment has significantly declined in Spain (Bertola & Boeri (2001). In Italy, the labour markets experience low mobility as the employers make a conscious effort to reduce turnover in order to preserve skill-specificity (Peironi & Pompei, 2006). This is the reason why there is higher mobility within the firm than between firms. Thus the labour market protects the accumulation of skill-specificity and promotes innovations within the firm. Gradually there has been a shift from mass production to flexible specialization systems. Labour flexibility seems to be common to all labour markets. Italy too has wage flexibility, functional flexibility and numerical flexibility. Labour turnover in Italy is guided by the wage structure. Low wages result in higher turnover which in turn affects labour productivity, labour costs and human capital accumulation of workers. Labour turnover increases in the short-term if wages are increased and the labour layoff rules are prohibitively expensive. Tertiary education system The expansion of the tertiary education system has profound impacts on the labour markets (Machin & McNally, 2007). In any economy when the supply of the graduates increases because of tertiary education, the wage premium reduces as the employers have a wider choice of qualified people to choose from. At the same time if the employers demand more graduates, the wages may not decline. In the UK, the wage premiums have risen despite a massive expansion in the supply of graduates with a tertiary education. The employers look for skilled workers who can operate with technologies. Hence the average wage gap between graduates and non-graduates remains high. In Spain, the IT industry has changed the organizational structures due to which there are now more educated workers who have replaced the less educated ones from their traditional jobs. This has led to a decline in the returns of higher education. In the UK, the 2001 Skills Survey demonstrated that 37% of the workforce is overeducated while 18% were under-educated. Over-qualification leads to skill mismatch and this is quite common in all of the three countries under investigation here namely, the UK, Spain and Italy. The probability of being over-educated is lowest in Italy and highest in the UK. In Spain there has not been an increase for educated workforce as the tertiary education increased. Employers do provide training in certain market conditions. Retention Increased retention promotes a firm’s resistance to change. Repetition of any activity leads to increased competitiveness which fetches rewards for the employee and the firm would tend to retain those personnel (Madsen, Mosakowaski & Zaheer, 2002). Thus, as retention intensity in a firm increases, there will be a decrease in human capital inflow or reduced turnover. Gordon (2002), states that organizations encounter difficulties in recruiting and retaining top talent because they have yet to deal with today’s most critical human resources issues. It is essential to create a talent powered company consisting of highly motivated, skilled and loyal employees because such companies not only recruit the best but also retain the best through employee-centered strategies. In toady’s world compensation packages do not matter. What is important is for the managers to take responsibility for retaining the best people. Managers need to meet their employees to discuss workplace concerns and possible solutions People have a strong desire to belong. They look for security and also want to be involved in something bigger than themselves. Job security reduces job destruction. This affects quality because there is no incentive to create new jobs for new products or production processes in Italy (Peironi & Pompei, 2006). It has also been found that a deregulated labor market is not desirable. When the turnover is high, firms are reluctant to invest in technology and training of the workers because the workers will leave the job soon. The beneficiary will be the worker and not the company. At the same time, if the firm does not invest in technology, the workers remain stagnant as far as skills enhancement is concerned. Their ages remain constant and hence life-time employment is not desirable. In Italy, the hi-tech companies had high turnover rates due to the process of re-organization. Retention of employees and the valued skill sets are important for continued business achievements contend Mak and Sockel (1999) and retention of employees leads to preservation of knowledge within the organization (Cappelli 2000, cited by Acton & Golden). Employee training programs lead to greater employee commitment and it creates a culture that leads to values of long-term employment. Once the employees become committed, monetary incentives are no more important for them. In Spain, there is skill mismatch which implies that the right training and development have to be concentrated upon. According to the reforms in the labour laws, the job must provide opportunities for acquiring professional experience. This could substantially increase employee retention in Spain. The service industry and more specifically the hospitality industry in the UK employs a large number of workers that are women who are not keen for career progression. Retention is difficult as the demand also varies according to season.. Women change jobs twice as often as men, which is a reason for concern and warrant research. They even switch jobs between sectors and prefer a job where they can make a difference (Womenomics, 2006). They prefer jobs which offer facility for skill development to increase their employability. For this, they are even willing to work at low pay. Studies suggest that when women do get access to functional roles in their current employment, they either stall in their career advancement or move to other employers. Hence retention is a major issue in the hospitality industry. Thus the labour market is Spain is the most rigid while in the UK it is the most flexible. Workers prefer flexibility although the temporary workers count in the minimum in the UK. Turnover of labour is largely dependent on the industry. In Italy and Spain, as organizations are not keen to invest in training and development, there is low economic growth. They fear the benefit would be reaped by the workers who would leave anyway. This in turn leads to high turnover as they are unable to retain workers. The level of education also matters and very often skill mismatch has been found in all the three countries. This too results in high labour turnover. Workers need to feel secure and are willing to be committed but they need the support the employer by way of involvement and training and development. There has been a major employment expansion in the UK and Spain and a very modest expansion in Italy. Long-term employment is more prevalent in Italy and Spain which is the reason for low technological development. 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