Human Resource Management: Flexible Labour

INTRODUCTION: Why Flexibility? Need for Flexibility:

The concept of flexibility has permeated much of current human resources management thinking, providing justification for recent developments in more flexible and variable working patterns. Its need arises from the following:

The changing business environment- highly competitive "global" product markets, an increasingly rapid advancements in Information and Communication Technology (ICT) and increasing capital intensity of production.

A changing social environmentвЂ" for example, the increasing female participation ratio and the trend towards early retirement and rising divorce rates.

Government policy environment вЂ" a desire to reduce unemployment and make the economy attractive to inward investment as a source of employment and long-term growth

Flexible Firm Model:

Atkinson and Meager’s model of �flexible firm’ identifies four types of flexibility that companies seek:

1. Functional: This refers to a firm’s ability to adjust and deploy the skills of its employees to match the tasks required by its changing workload, production methods. This is done by multi-skilling / dual skilling / dismantling of traditional rigidities between occupational groups (horizontal and vertical flexibility). This is designed to improve efficiency and reduce costs.

This is a core area of traditional conflict within the division of labour between distinct skilled groups and between the skilled and the non-skilled (Penn, 1985).

2. Numerical: This refers to a firm’s ability to adjust the level of labour inputs to meet fluctuations in outputs. There is increased use of part-timers, temporary, short-term contract staff, job sharers and agency workers.

There is a contrast between �core’ permanent workforce and �peripheral’ non-permanent. The general idea is that an increasing mixture of non-standard employment forms will be more efficient and cheaper.

3. Distancing Strategies: This refers to the increased use of other firms that undertake non-core activities such as catering, cleaning and transport. Such a strategy will be cheaper.

4. Financial: This refers to achievement of flexibility through the pay and reward structure.

5. Temporal flexibility: It is concerned with the pattern of hours worked and linked to the demands of the business. Seasonal or demand work is provided leading to Flexi-time systems. In addition, annual hours contracts allotted with increase in evening working.

These flexibilities are achieved through a division of employees into:

• Core workforce: The core group is composed of high-skill and high-pay workers recruited from the primary labour market. These workers are expected to deliver functional flexibility. Core group workers have brighter career and promotion prospects and they usually are provided with comprehensive training and development.

• Peripheral workforce: The peripheral group consists of two-types of group. The first group consists of generic-skill (e.g.: word processing) workers recruited from external labour market. The second group consists of workers recruited as required on variety of contracts (e.g.: Government trainees, job sharers, sub-contract labour, temps etc.). This group workers have low job security.

Flexible Labour Markets. - Benefits and Disadvantages

Flexible labour markets involve a minimum of government intervention, they are labour markets which work efficiently and are competitive. Many supply side economists argue flexible labour markets are of great importance in reducing unemployment and improving the competitiveness of the economy.

Advantages:

1. Opportunity to exploit 24-hour economy

2. Contributes to an improvement in the inflation-unemployment trade off

3. Flexible wages and flexible employment helps to ensure that markets clear rapidly eliminating any excess supply or demand, so economies automatically move into long run equilibrium at potential output.

4. Higher productivity growth in the long run (which then helps to improve competitiveness)

5. Flexible employment suits more flexible life-styles

6. Stronger employment creation during an economic upturn

7. Flexibility makes the economy more attractive to inward investment

8. The economy can respond more flexibly to an external economic shock вЂ" because wages and employment are more flexible

9. Increases Labour Participation Rates: Flexible labour markets can be beneficial for workers. This is because it gives them more options of, when and where to work. This is particularly helpful for women with young children, for example, they can work part time and still look after their children. However, although flexible labour markets have created work in the part-time, service sector, there has been less success in creating permanent, full time jobs.

10. Flexible labour markets help to reduce costs for firms; for example, workers can be employed when they are needed. It is not necessary to pay for workers who are not productive. This will help attract inward investment. It is argued one reason, for higher unemployment in France is that there are costs in hiring and firing workers, this reduces the incentive for firms to expand.

However, although they have some benefits, these advantages of flexible labour markets are not equally shared. In particular, there are concerns over the negative impact on job insecurity. Criticisms are made based on its disadvantages:

Reduce Classical (Real Wage) Unemployment

Real wage unemployment occurs when wages are set above the equilibrium, for example, through trades unions or minimum wages. Flexible labour markets help to keep wages close to the equilibrium and therefore avoid creating unemployment.

However, it is worth noting that minimum wages and trades unions don't always cause unemployment. For example, if firms have monopolistic power, wages can be kept below the equilibrium. A true flexible labour market would require both workers and firms to lose their market power.

However if labour markets are very flexible workers may have greater job insecurity,