Opening Labor Markets Advantages and Disadvantages - Essay Example

Opening labor markets advantages and disadvantages Place Introduction With the integrating of different countries in their political, societal, economic and cultural dimensions, there appeared more opportunities for opening labor market between such countries. Culturally, such integration is beneficial since people are earning from other countries and bridge any possible gaps between them. Due to this reason, globalization is viewed as something positive as it gives possibilities for sharing ideas and in turn works for the good of the entire world. However, there are believers that find globalization a certain obstacle for the countries due to the problems with immigrants’ flow, which negatively impacts the economy of that country where immigrants come. Such negative aspect touches labor market because moving from region to region in searching for better working conditions, make other countries suffer from the oversupply of workforce and shortfall of the skilled workers. The following paper will investigate the question of globalization impact on the labor markets; it will also view how strategic management intersects the human resources management. The advantages and disadvantages of opening labor markets will be highlighted. Globalization impact on the labor market and overall incomes  Much debate has been raised in order to investigate the impact of globalization on the future workforce, its trends and possible public policy responses. These are the question of the influence of globalization on productivity, real wages and incomes of employees as a whole. Besides, researchers think over how globalization affects the demand for different groups of workers and the distribution of real wages and incomes. In addition, the experts consider the extent of which the globalization limits the ability of governments to take functional actions for workforce and disadvantaged groups. Here the response can be viewed from the point of view of expanding trade (Cosar, Guner & Tybout, 2014). One of the major indicators of globalization is foreign investment, which include direct investment that organizations make. These investments are as financial made by foreign citizens or companies in domestic stock and money markets as well. Another dimension of globalization is the growth of the international capital market. Financial flows across different countries are increasing in comparison with the previous ten years. Foreign currency and interest rate risks and speculative investments are managed by markets, companies and individuals have. The international financial markets enlarged growth in foreign trade and investment. However, experts are concerned about the international financial markets to take too much power from their national policymakers if they use their constrained ability to make different macroeconomic decisions that would tax, raise government spending and set labor standards (Spence, 2011). The other dimension that shows the level of globalization across the countries is the immigration, which has been expanding along with the growth of trade and financial flows in the world. One-third of U.S. population growth is estimated as those of people who came to the country, beating the equals of its previous historical peak. Around one million of legal and illegal immigrants come to U.S. every year, concentrating in different regions of the country. While most immigrants come from less-developed countries, that calls for mass debate and discussions that economists conduct in order to see or foresee the general favor of free trade as a consequence or the method for raising real incomes within the country to where people are coming. Earnings from labor represent the main source of income, which constitute the importance in studying the effects of globalization. This essential factor lies in the fact that most of the population in developing nations and the poorer groups of workers lack ownership for any assets (How does Globalization affect the labor market? n.d.). This does not mean that globalization negatively impacts the way developed countries live. Among the positive effects of globalization over labor market occurs as a result of  the increased capacity of developing countries and their ability to give new possibilities for work and production following the weakening of price strains with respect to labor and capital. Foreign direct investment has direct and indirect effects on employment development in the countries with high level of immigrants. Such situation depends on the size and type of investment and the type of technology that is adopted. Besides, the ability of the host country to master the imported technology and adapt it to its needs has also indirect effects on employment. There are negative effects that appear due to the large-scale technological developments and which reduce the demand on unskilled labor. While direct foreign investment does not take cheap workers as a serious issue, the traditional nature of work disappears because of the rapid advances in technology and creations of new and innovative occupations in favor of the highly specialized employees. Impacts of opening labor market on HR Today, the roles and responsibilities of Human Resources are transforming due to the globalization that creates pressures for a common and best and transferable set of HRM practices (Bae & Rowley, n.d.). The supply for talents on the global scale is short with the long-term demand and this gap exists for the employers in every country. Such shortage is likely to enhance as a result of high skilled workers lack. That is why now organizations need to pay greater attention on attracting human capital rather than gathering financial capital. The major goal of Human Resources is to diverse global staffing and management of a workforce in cultural and language skills. In addition, due to the opening labor markets companies need to adapt their human resource practices to the constant changing global labor market conditions (Kapoor, n.d.). In the recent years, the function of human resources was typically concentrated on the cost center and administrative overhead. In the modern world, their role is the establishing of long-term objectives, which are the constant development of workforce and future orientation of their capabilities and skills. Moreover, human resources should play roles in leading organizations towards openness to cultural diversity. Besides, with opening labor market, human resource departments should revise their thinking and vision of the employers’ needs and thus to create data of employees taking into account and respect them despite their ethnic, gender, cultural and nationality peculiarities and apply such analytical information in order to have possibility to insight and predict changes and also make informed decisions about the operational and strategic levels for the companies. Moreover, they should also think over new strategies for processing selection and hiring of employees, developing programs of compensation and benefits. The effective performance of human resources provides each organization with structure and the ability to meet business needs by managing companys most valuable resources, which are people. Analysis of advantages and disadvantages of opening labor markets New trends and new circumstances have created a direct impact on human resources management. Such trends or circumstances are seen as increasing competition, management of international business, technological innovation, operations in accordance with current regulations, union activities and the best practice. The new thing about the human resource management is that it faces contemporary environment in its growing competition in the area of labor market that lowers prices and affects the organizational unit of human resources. If companies decide to enhance the value and quality and pay less attention to the reduction of prices, such condition will entail the need for finding and motivating highly skilled workers (Lojic, Skrbic & Ristic, n.d.). In the age of globalization, more and more corporations and firms across the world seek for the most favorable workforce opportunities. Thus, Germany and Austria are opening their labor markets to the citizens of Eastern Europe in order to attract enough skilled workers. Workers from Poland, Czech Republic, Slovakia and the Baltic states as well as from Hungary and Slovenia will be allowed to live and work in Germany and Austria. Poland also opened its doors for developing business for such countries as USA with its Xerox and Kraft Foods companies (Dettmer & Puhl, 2011). U.S’s Labor Department has also reported about the job openings that are done to make certain progress in the market. However, thigh level of immigration has raised concerns in the population and the workforce of receiving countries. U.S. focus more on the ability of immigration to reduces wages, while in Europe, where labor market institutions have been more rigid and unemployment rates higher, the question is about the immigrants ability to take jobs away from natives has been much more important. The latest findings of the literature indicated, after all, that native workers in the developed countries tend to benefit from immigration without any policy changes (Brucker, 2011). Due to the rapid changes in the world economy, demands of the society and other important aspects that can impact the way businesses run their activities, companies should be able to adapt their performance to these conditions. In such case, flexible labor markets give a minimum of government regulations and allow organizations to imply wages and conditions to be determined by market forces and not governments or trades unions. Flexible labor markets involve easy way to hire and fire workers, labor is available with it wide variety of occupations and geographical mobility. Here the government intervention does not distort the market in fact (Tejvan, 2012). Flexible markets allow skilled workforce to be able to adapt to changing requirements; they offer flexible and working contracts such as more temporary employment and availability to work from home. Among the advantages of flexible labor markets are the abilities of firms to be more effective and competitive, flexible labor markets to keep costs down for firms. Thus, firms can get rid of surplus workers and help prevent the organization go bankrupt and protect more jobs in the long term. It is an essential factor for the companies to remain competitive within changeable global economy. With the increased labor productivity the increase in output and exports will be also possible. Many workers prefer flexible employment as it more suits their life style and such way of employment is able to offer a greater range of choices. For instance, flexible labor markets have played a role in increasing female participation rates. Besides, flexible labor markets encourage inward investment and enable multinational firms to be attracted for investment. More flexible labor markets are able to present more jobs in the first place. Arguably countries with restrictive labor market practices, such as France or Spain experienced higher rates of structural unemployment. Such and other disadvantages of flexible labor markets give experts think that part time and temporary staff is not able to get sufficient training from companies since they only have short term contracts. Therefore, many low- skilled workers remain under-skilled and they never obtain job stability. Another disadvantage of flexible labor markets is the inability of the organizations to create job security and avoid stress. Job security is often an important to workers as certain level to their wages. The insecurity leads to lower level of morale and lower productivity that negatively impacts the firms’ performance as in the short as in the long term. Flexible labor markets create a bigger gap between insiders with secure job contracts and outsiders without such job contracts. In addition, firms have higher replacement costs because of the need in hiring more workers. Besides, with the opening labor markets, there appears one more problem modern organizations face today- the immigration. An increase level of migration has already significant effect on the labor market of individual countries and wider macroeconomic specter. Such situation causes effects on such variables as economic growth, unemployment and inflation. Thus, foreign workers now account for over five percent of the UK labor market (Labor Market Migration, 2012). The main reasons why people want to move to another country are the desire to increase in earnings in the new location. However, due to the significant differences in average wage levels in many countries, there are also variations in the cost of living. Besides, purchasing power parity  is important for establishing the real income, tax and welfare systems, opportunity to study in a foreign country, along with the ability to learn a new language, join family members or improving standards living and seek a better quality of life are the most common benefits of migration. However, the opponents of labor migration state about the potential costs of a growing inflow of new workers lead to the increased supply of the low skilled employees, lower educational level of workers. These types of workers are more likely to stay unemployed. The taxpayer in the country that is good for immigrants may eventually have to pay for the increased level of government spending that is needed to extend the economy’s infrastructure due to the immigrants’ inflow. Such inflow into an area increases the demand for housing and push up the cost of living as well. Conclusion The theoretical impact of immigration is not clear so far because immigrants are expanded all sectors of labor force and capital stock in the same proportions, by which they raise the immigration need (Lerman, Schmidt, n.d.). According to the economies of scale, immigration actually raises incomes of those non-immigrants. However, if immigrant inflow is concentrated among low-skill workers, it will not match the added capital and then immigrants will perform against native-born workers. Immigration directly increases the supply of labor and thus can lower average wages (Greenaway & Nelson, 2001). The enlargement in hidden unemployment, a lack of new job openings and a worsening of real rates of wage are the consequences of globalization in most developing economies, which are unable to adapt to new technologies. Labor clause will also have a negative impact on economic growth and employment in many developing countries, which use child labor or bad working conditions. References Bae, J. & Rowley, C. n.d., The Impact of Globalization On HRM, Journal of World Business Brucker, H. 2011, The Labor Market Challenge Does International Migration Challenge Labor Markets in Host Countries? Research Report, Institute for Employment Research and University of Bamberg Cosar, K., Guner, N. & Tybout,J. 2014, Globalization, job security and wages, CEPR’s Policy Portal, Available from http://www.voxeu.org/article/globalisation-job-security-and-wages [Accessed 18 of January 2015]. Dettmer, M. & Puhl, J. 2011, About Time: Germany Finally Opens Labor Market to Eastern Workers, Spiegel online international, Available from http://www.spiegel.de/international/europe/about-time-germany-finally-opens-labor-market-to-eastern-workers-a-759325.html [Accessed 18 of January 2015]. Greenaway, D. & Nelson, D. 2001, Globalization and labour markets, Edward Elgar How does Globalization affect the labor market? n.d., Globalization and the labor market, Available from http://www1.aucegypt.edu/src/globalization/labor_Market.htm [Accessed 18 of January 2015]. Kapoor, B. n.d., Impact of Globalization on Human Resource Management, Cal State University Lerman, R. & Schmidt, S. n.d., An overview of economic, social, and demographic trends affecting the us labor market, Available from http://www.dol.gov/dol/aboutdol/history/herman/reports/futurework/conference/trends/trendsVI.htm [Accessed 18 of January 2015]. Lojic, R., Skrbic, Z. & Ristic,V. n.d., Strategic approach to human resources management, European Defendology Center, doi: 10.5570/dfnd.en.1231.04, Available from http://www.defendologija-banjaluka.com/Pdf%2031-e/04%20Lojic-Skrbic-Ristic-%20engleski.pdf [Accessed: 1st of January 2015]. Tejvan, R. 2012, Advantages and disadvantages of flexible labor markets, Available from http://www.economicshelp.org/labour-markets/adv-disadv-flexible-lm/ [Accessed 18 of January 2015]. Labor Market Migration, 2012, Markets and Market System, Tutor2net, Available from http://www.tutor2u.net/economics/revision-notes/a2-micro-labour-market-migration.html [Accessed: 1st of January 2015]. Spence, M. 2011, Globalization and Unemployment, Foreign affairs, Available from http://www.foreignaffairs.com/articles/67874/michael-spence/globalization-and-unemployment [Accessed: 1st of January 2015]. Read More