Consequences of labor market flexibility: evidence and trends

Labour Market Flexibility

Causes and Consequences of Labour Market Flexibility

The world has been going through dramatic changes for the past few decades. Uncountable inventions are made which influence not only the life of an individual but also the face of economy and nature of political affairs. Particularly speaking in the context of 21st century, the world has become so dynamic that everyday brings some news of invention and innovation. This change is reflected both positively and negatively in the matters of world.

Globalisation, IT advancements, convergence of products and integration of operations are only a few major names in the list of changes brought about by the time. There is not a single field which is left intact of the changes and advancements brought in. The industry of education has been enriched with many new fields which were unknown to the man of previous ages. The concepts which were taught in a chapter in 20th century have developed themselves into the complete body of knowledge. Students are invited from all over the world to get education from the top ranked universities of the world. The concept and practice of e-learning has further removed the barriers for knowledge seekers.

In the field of healthcare, advancements in the shape of evidence-based medicine are noticeable. Gone are the times when patients were reluctant to consult a chiropractor. Nowadays, the medical practitioners themselves refer the patients to chiropractors showing great deal of trust in their capabilities and method of treatment. Previously the industries were production centric and catered for the demand of their immediate market; be it business customers or the final consumers. Now, the organisations are penetrating the global markets and analysing the demand of entire world before finalising their production plans.

The supply chain management is getting high importance all over the world and its integration is the goal of all major industry players. Previously, the organisations striving for growth used to conduct surveys to penetrate the other markets. Now, the Internet has blessed the customers to access virtually any organisation and place the order. The business sector has become an electronic world where the digital communication has revolutionized the communication channels and patterns.

The most important commonality in all the changes is the loosening of the standards. The rigidity is replaced by the flexibility in all areas. It has been accepted at universal level that innovation cannot be standardised and the creativity knows no boundaries and rules. Nowadays, success is characterised with thinking out of the box and implementing the solutions which appeared impossible to few and funny to others.

Since all personal, organisational, social, political and international matters are linked to the economical perspective, this paper focuses on the same dimension of development. It will cast light upon the element of labour force, its essence and importance in the dynamic world and how the changes are influencing the labour market. The primary focus of the discussion is flexibility in labour force, its possible causes and consequences. The paper will highlight whether it has served in good faith to the development of human being and industry hence should be promoted or it has made the things complicated and should be shunned.

The next sections are related to the discussion of labour force flexibility.

Labour Force Flexibility

In the view of all these changes, the significant impact has been made in the perspective of labour force. Since the organisations are facing the challenges which were quite unknown to the world few years ago, the organisations are in the need of workforce who can manage these challenges effectively (Robbins and Coulter, 2007). Since challenges emerge prior to their solution and academic sources are silent about the guidelines about these challenges, the eligibility criteria about the jobs have also been changed. The organisations have become flexible in their hiring policies and placement criteria. This flexibility in appointing the source for the designated job is referred to as labour force flexibility in the literature (Muffels, 2008).

Labour force flexibility is defined as relaxation in the number of hours an employee is required to spend at workplace, permission to work from home, leave early if task is completed, waiver from certain qualification and experience. It also includes relaxed hiring and firing requirements and processes, employment agreement and compensation structure.

The concept of labour force flexibility is in the air since the inception of new trends in the industrial settings and business practices. Its origin is from the basic dilemma the hiring mangers face when they come across a person whom they find capable enough to perform a specific job on excellent scale but does not possess the required level of qualification or years of experience. The practices of head hunting often highlight the same dilemma. A person is found perfectly suitable for the job but the eligibility criteria in the organisations do not let him qualify for the same job.

The emerging leaders at workplace whom team members love to follow face the single barrier in the way to promotion that they have not completed specific number of years in the same organisation. The managers do not want to lose the talent while the policy makers are not willing to give an undue favour to the emerging leaders.

The mentioned situations are typical to the organisations regardless of their being old or modern. With the changes in business scenarios, the dilemma emerged on more frequent basis. Eventually it recognised itself as a matter of concern and forced people to consider it on serious grounds. As a solution, the concept of labour force flexibility was introduced.

Causes of Labour Force Flexibility

As mentioned earlier, the basic cause behind the emergence of labour force flexibility is the availability of a person who appears fit for the job but does not fulfil the formal laid down criteria. There are certain other causes as well, which are described below.

i) Disequilibrium of Labour Supply and Demand

The dynamic requirements of organisational work setting call for a dynamic individual who finds himself aligned with the job requirements. At times, such individual does not exist. If he is present, he is already employed with some other organisation and cannot switch job. If he switches job, his previous position becomes vacant. In the nutshell, the labour market always remains deficient of such specialised individuals.

An example in this regard is of Supply Chain Managers who have degree in supply chain management and experience of five years. It is interesting to note that supply chain is an emerging field and a person with five years of experience is too old to have this degree option in this student life. Same is the case with many other emerging disciplines.

Another example is of conflict management experts. The alternate dispute resolution (ADR) is an emerging field because of its portrayed efficiency. The U.S. court system wants to distribute its burden to the ADR methods hence the science is promoted. Since the present era is highlighting its need, it is impossible to imagine that its body of knowledge is developed, degree programs are launched and the experts are trained who can efficiently run the ADR systems. Getting these systems run by inexperienced professionals may add fuel to the fire and the dispute between individuals and organisations may further aggravate.

In this scenario, it is mandatory that labour force flexibility is enacted. The decision makers have to introduce some flexibility in their requirements to run a system. Though the systems needs close monitoring but monitoring is the requirement of even the systems which are run by experienced and established practitioners.

Another aspect of labour force disequilibrium is about surplus labour force (Hall and Lieberman, 2007). It is noted that at a certain point in time a field or industry flourishes and everybody rushes towards it. An example is of Information Technology (IT). The first decade of 21st century was characterised with high boom in the field of IT and every student wanted to have an IT degree. Every entrepreneur was after business process outsourcing and every organisation looked for the resources to digitize its operation. The end of first decade of 21st century witnessed downfall in the jobs of IT experts and people hunted freelance industry to earn bread and butter.

ii) Economic Changes

Another important trigger to labour force flexibility is the economic changes. The recession of 2008 deprived many people of their jobs and organisations faced a tough time in managing their funds to meet their operational requirements (Krugman, 2009). As cost cutting initiatives, the organisations slashed many benefits offered to the regular employees. These benefits included provident fund loans, bonuses, pension and gratuity. Many organisations made hiring on contractual basis where no fringe benefits were offered. People were still ready to accept the job offer so that they have some source of income. The organisations offered promotions to the employees without salary raise.

These steps brought drastic decline in the loyalty level of employees and they became vigilant to find other sources of income. Part time jobs, serve-when-required and home-based jobs gave birth to flexible working hours everywhere. Both organisations and employees accepted this change as they found it convenient to engage in other useful activities. From the organisational perspective, it saved them from the cost of hiring a full time resource.

Statistics of 2011

TOTAL

Looking for Full Time Work

Looking for Part Time Work

Total, 16 years and over

11,914

1,833

16 to 19 years

16 to 17 years

18 to 19 years

20 years and over

11,180

1,167

20 to 24 years

1,932

25 years and over

9,248

25 to 54 years

7,536

55 years and over

1,712

Men, 16 years and over

6,903

16 to 19 years

20 years and over

6,461

20 to 24 years

1,130

25 years and over

5,331

25 to 54 years

4,326

55 years and over

1,005

Women, 16 years and over

5,011

1,052

16 to 19 years

20 years and over

4,719

20 to 24 years

25 years and over

3,917

25 to 54 years

3,210

55 years and over

Table 1: Unemployment Data of 2011

Source: Bureau of Labour Statistics

iii) Social Changes

Social changes particularly those related to promotion of female employees at various fields made employers think of labour force flexibility. Females on the ground of their physical characteristics and family roles could not serve as good as their male counterparts did, however, their performance in their normal hours was commendable. The economy of United Arab Emirates witnessed considerable boom with the involvement of female entrepreneurs.

This factor promoted the female workforce but in order to reap the maximum possible advantages out of them, flexibility had to be introduced. Pi-Sigma Groups offered flexible hours to their key manager who was female and wanted to go on a long maternity leave.

Particularly speaking about the blue collar jobs where no special expertise is required, the organisations offered temporary jobs to the unemployed lot. It includes serving the sales counter for defined number of hours, distributing newspapers and magazines, collecting feedback from the customers, data entry and telesales. For such types of jobs, only a short training was required which did not incur much cost for the organisation. On the other hand, it helps the people break the monotony of their job routine and engage into multiple tasks.

iv) Globalisation

As mentioned earlier, globalisation brought major changes in the labour market. The free movement of labour force across the globe (Milward, 2003) enables the international organisations to unleash the potential of migrating employees. However, to win their loyalty, the flexible working plans suiting their religious, family and other commitments were introduced. The customised leave plan was made for people belonging to different schools of thought.

Another important point in the context of globalisation is about the equivalence of educational standards of various countries. There is a huge difference between educational standards of developing and developed country. In order to bring them at par, workforce flexibility initiatives were taken so that they can elevate the education while remaining the employees of organisation.

In other words, the increased diversity at workforce led the decision makers consider the need of labour force flexibility.

v) Government Policy Directives

An important responsibility assigned to business sector by the government is creation of employment opportunities for the people of that very country in which business operates (Jennings, 2012). Since globalisation has paved way to attract talent from all over the world, most of the times, other organisations are not comfortable with this requirement. The solution they find is, to hire the local workforce for the jobs which do not comprise the key components of the business functions and hire the talented individuals at key position. The talented people may have been invited from various other countries.

Another possibility in the same context is about the level of accountability attached with the local workforce. Since the organisations are restricted by law to hire them at certain posts (may be), the organisations do not hold them accountable for the tasks as they have not assigned them any considerable task. They are part of the organisation payroll and get their salaries yet their contribution in the organisational functions is deliberately reduced by offering them flexibility in time to spend at workplace.

After explaining the cause of labour force flexibility, it is important to highlight its consequences to judge how successful these initiatives have been. The next section gives insight into the positive and negative outcomes of labour force flexibility.

Consequences of Labour Force Flexibility

i) Favouritism, Prejudices and Biases

This is the biggest drawback of labour force flexibility. Since policies and rules are established to standardize the operations and procedures, the privileges to bypass these rules give birth to many ethical issues (Crane and Matten, 2004). If an employee is hired or promoted on the grounds of labour force flexibility, uncountable employees become annoyed and keep grievance for life time. At times, it is impossible to convince the annoying candidates and employees that the hired or promoted one was better. Most of the times, the organisations do not bother to convince them either. People assume that he was given favouritism and it is always like this, that bosses have biases for the one who is in their good books. Particularly speaking about the ones who is ahead in the queue of seniority waiting for promotion, are seriously hurt.

This issue can also rise among the members of hiring or promotion board. Since rules are not there to govern the decision, every influential person wants his say to be honoured. People comprising hiring or promotion board may have different personalities and perceptions which lead to make different and at times conflicting decision. The victims of labour force flexibility do not bother to look into the essence of this step rather they give vent to their negative emotions which hurts organisational image.

ii) Misuse of Privileges

In the absence of any monitoring and controlling mechanism, it is quite possible that the employees who enjoy flexible working hours or work from home privilege misuse this relaxation. Usually the only mechanism to ensure one's presence for organisational task is his online status at specified messenger. One may log in and ask some buddy to respond to the buzzing messages disguising his presence.

In case of hiring, where eligibility criteria are relaxed and candidates are required to possess certain skills instead of qualifications, the candidate can play smart to boast of his skills. Since organizations do not have time to conduct deep analytical settings with the candidate to judge his skills, at times, the decisions prove wrong. It is also a negative aspect of labour force flexibility.

iii) Right Person for the Right Job

The biggest advantage of labour force flexibility is the cushion to the hiring manger to place the best talent for the specified job. In many societies, it is a common trend that students get enrolled into the study discipline which is in limelight at those days. Hardly a few students are successful in exploring their real interest and adopt the field of their choice. Rest of the students enter the job market without a clear vision of their interest. After performing at certain level for sometime, they come across their zeal and zest for the job. This passion to take interest in their job and serve the position that fits their interests (though not qualifications); they strive for excellence in that area.