Based on Human Resource Management (4th Edition) by Alan Price - published by CENGAGE
The purpose of this section is to:
- Outline some of the major theories about why people work.
- Develop an understanding of the conditions and salaries for which people work and the expectations they have of employers.
- Explore the relationship between human capital and national employment levels.
- Determine some of the effects of competitor activities on employee availability.
- Investigate the patterns of work that are replacing nine to five jobs.
or job market is the ultimate source of all new recruits. Human resource
managers need to understand the dynamics of this market in order to deal
properly with resourcing, set competitive salaries and obtain people with
You might have noticed that the terms 'job market', 'labour
market' and 'employment market' seem to be used interchangeably. But this book (and HRMGuide)
rarely uses 'labour market', whereas economists and sociologists tend to prefer that term over
the other two. This is partly a matter of preference and tradition - economics and sociology
evolved much of their jargon in a pre-technological age. But it also reflects some of the underlying
thinking: which are the commodities in this market - people or jobs? Earlier theorists seem
to conclude that people (or, at least, their efforts, i.e. labour) are the commodities in the
tradition of the slave or cattle market.
There are some flaws in this approach. Firstly, not many of us 'labour' in a physical sense
any more (in industrialised countries at least). Secondly, it implies that people have no say in
the jobs they take on - and, again, in industrialised countries, few of us take just 'any job'
on the basis of the pay involved. (There is also the confusion with 'Labour' or 'Labor' as a
political party label). So, you could argue that jobs are the commodity in a market exchange, but
in a more complex relationship than the old-fashioned 'effort for money' theories can ever
explain. However, you might conclude that it may be more appropriate to use the neutral term
Why do people work?
The simple answer in most cases is that they have to. (...) but the issue becomes
more complex on examination.
As yet there have been few attempts
to link economic theories of the employment market with HRM. The task is
all the more complicated because economists have provided several different
and contradictory theories in this area. They can be divided broadly into
two main approaches: competitive and institutional. The monetary reward basis of competitve theories align them more closely to hard HRM,
whereas institutional theories are more organizational in approach and have parallels with
Competitive market theories
The assumption here is that individuals choose jobs which offer
them maximum benefits. (...) The outcome of this process is a dynamic and shifting
equilibrium in which both employees and organizations compete to maximize
benefits for themselves. (...) In reality, it is obvious that the job market
does not work in such a simple fashion: people do not move readily between
organizations in search of higher wages; most firms do not cut benefits
when unemployment levels are high and cheaper workers are available.
An alternative approach places its main focus within the firm rather
than the external job market.(...) Individual workers are less concerned with
maximum benefits than achieving a fair rate compared to their peers. (...)
Employers set wages for a variety of reasons ranging from profitability to
tradition - competition with other firms is a relatively minor consideration.
Institutional approaches have a greater affinity with 'soft' HRM (...) recognizing that
group effects underlie notions of fairness and loyalty which are fundamental to the
principle of commitment.
Participation in employment is not an 'all-or-nothing' decision.
Individuals also determine the amount of time they are prepared to devote to paid work.
(...) Deciding to take a job, or not, involves a trade-off between family members. (...)
However, most organizations pay little attention to the domestic influences
on an employee's motivation and performance.
(...) people do not behave as mere commodities. Human behaviour
involves deep complexities which bring unpredictability and apparent contrariness
into the employment market. Most people's motives and ambitions involve
much more than seeking the highest salary.
Participating in the employment market
Who is involved in the job market? (...) People can be divided into three groups, the first two of which can be described as economically active:
- The employed, those in paid work
- The unemployed, those who are looking for paid work but are unable to find it
- The economically inactive, those neither in paid work nor seeking jobs
What exactly is 'full employment'? In fact, it does not mean zero
unemployment - this is impossible because of various factors such as individuals taking their
time to obtain work after completing university, a serious illness, etc. Can you find an exact
percentage quoted anywhere which is accepted by a particular country or international body as
the equivalent to no unemployment? There are other complicating factors to do with calculating
relevant statistics, such as the way in which some people who are not working are regarded as
'unemployed' (perhaps claiming state unemployment benefits) whereas others are not (not claiming/
>Another aspect to consider is the desirability of full employment. This might lead to an inflexible job
market which would stifle growth or the development of new industries.
Employee supply and demand
Individuals determine how much time they devote to paid work for a variety of reasons. (...) Demographic
effects are also an important factor.
Demand for workers is linked to the economic cycle, increasing in boom
times and decreasing in recession. Other factors include the adoption of
new technology, productivity improvements and changing skill requirements.
Superficially, calculating employment supply and demand seems easy. In
practice, a combination of factors make it extremely problematic. In the
last decade, for example, commentators have confidently predicted both
permanently high levels of unemployment and shortages of labour.
Developments in telecommunications and computing are dramatically changing the nature of work and the way
it is performed and managed. (...) the importance of skill and knowledge will increase commensurately. (...) Technology is also changing the organization
of work. (...) People management must change to meet new realities.
Part-time and temporary working
A number of trends have coincided so that we have seen the virtual disappearance
of that Victorian middle-class ideal, the nuclear family, with mother staying
at home to look after the children and father going to work. (...) Why
has this happened?
(...)The twentieth century concept of the nine-to-five job and a lifetime career
is disentegrating in favour of much more flexible arrangements. Levels
of stress and insecurity are rising as people have increasingly uncertain