The Employment Market

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.


The employment 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 essential skills.

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 'employment market'.

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 soft HRM.

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.

Institutional theories

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.

Social preferences

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.

Individual preferences

(...) 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/ entitled).

>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 working lives.

HRM and the State   >  Chapter 7