International Human Resource Management
Development in IHRM: Increase in Temporary Employment
Part-Time Work
Part-time work is the most commonly used type of flexible scheduling option worldwide (1993; 1997). Part-time work started to grow after the second World War. Part-time work is now one of the major labor-market developments. There are several demographic and economic factors behind this development of part-time work (1994; 1996; 1997). More women have entered the workforce since the late 1970s, many with small children. The economy has changed from a production-based economy to a service-based economy and part-time work is more prevalent in service industries. Many workers prefer to work less than a full-time schedule in order to balance work/family obligations, return to school, or pursue other interests. At the same time, companies have increased the use of part-time workers as a strategy to reduce labor costs (2001).
Contract Work
Employees of contract companies may work either at the client’s site or offsite. Contracting arrangements are used for various reasons: to meet increased demand, to provide skills that are nor available in-house, and to reduce costs (2000). Generally speaking, contract companies supply workers to client companies to provide a variety of services that the client companies prefer to be carried out by contract staff rather than in-house employees (1996). In recent years, we saw multinational companies contracting both production and services not only outside the organization but also outside the parent country. Contracting according to (1998) refers to the change in organizational boundaries resulting from decisions to contract out activities undertaken within the organization.
Contract Work and Outsourcing of Work in China and India
China and India are among the most important countries for outsourcing of jobs. China in the past years is number one when it comes to electronic manufacturing (2007). Telecoms and other industries are outsourcing their production and services to cheaper and possibly creative locations, such as India’s software cluster around Bangalore. Multinational enterprises are dispersing their technological capabilities between countries, regions and localities (2005). India has experienced an increase in contract works because of its attractive economy. Electronic businesses for example, are keen to increase sales in the country. Demand is increasing due to the expanding economy. In addition, multinational firms are exploring the potential of the country as a low-wage manufacturing base (2007).
Factors that Fueled the Increase in Temporary Work
Advancements in Information and Communication Technology
In the early 1990s, China’s economy was still known primarily for simple, low-tech manufactured goods, such as textiles, shoes and plastics. Now the Chinese economy is moving to produce more complex, high-tech ICT goods. After almost a decade of explosive growth in the electronics sector, China overtook the United States as the world’s biggest supplier of ICT goods in December 2005. According to the OECD, China’s ICT exports – including laptop computers. Mobile phones and digital cameras – increased tremendously in 2004 (2007).
For decades, India sought its place in the sun as a tourist destination yet received fewer tourists than Singapore. Meanwhile the government ignored the entrepreneurial firms-driven sector. That has changed. By year-end 2005, India had 44 per cent of the global market for IT and business process outsourcing (BPO) off-shoring (2007).
Emergence of Multinational Enterprises and the demand for Flexibility
Many Multinational enterprises are increasingly led and managed by highly driven local residents. Initially, the senior executives and workforces of these companies came from the home base and the headquarters, but, in most cases localization has been very, very rapid (2007).
Because of the emergence and growth of Multinational enterprises in China and India, jobs are created. These multinationals bring with them ‘western way of working’. According to and (2002) FDI provides a means for MNCs to exert considerable influence on work and employment as they introduce new working practices which often filter down to local firms. Technology transfer through MNCs also has the ability to transform work practices, social relations in the workplace, and the employment practices. In particular MNCs develop employment strategies which tend to follow their global strategies. Hence more and more innovation in working practices developed in one part of the world are being implemented in other parts of the world by means of the diffusion of MNCs’ policies.
In the West part-time work and other alternative working arrangements are common. When a multinational enterprise opens up a business in countries like China and India, these alternative working arrangements are introduced. Alternative working arrangements are also being embraced by employees and employers worldwide because of different reasons. The most significant reason is flexibility. Organizations need to be flexible in order to succeed in the fast changing business environment. Sluggish economic growth triggered high unemployment that made it clear, that economies were incapable of generating enough jobs to [roved full-time wage employment for all workers. The adoption of part-time work was facilitated by technological improvements in communication and information systems that made it easier for organizations to specialize their production, assemble temporary workers quickly for projects and rely more on outside suppliers. Labor laws designed to protect permanent employees also fueled the growth in nonstandard work by encouraging employers to avoid the mandates and costs associated with these laws. The changes in the labor force, such as the increase in married women workers and older workers, who often preferred the flexibility available through non-standard work arrangements ( 2000). Faced with the imperative of globalization, management constantly seek greater wage flexibility, functional and numerical flexibility. Thus, the competitive pressures associated with economic globalization induce shifts in workforce composition, labour demand and the inter-temporal deployment of workers. According to de Ruyter and Burgess (2000) as the idea of a permanent job disappears, short-term contracts and part-time work also increase.
Globalization and Increase in Foreign Direct Investment (FDI)
Globalization calls for economic liberalization. In recent years many countries particularly those in the developing world, have opened their economies to FDI by liberalizing FDI regulations and hence made it easier for foreign companies to enter their markets. Governments in many developing countries have created opportunities through the liberalization of their economies for firms in their countries to attract FDI and this in turn has opened the doors to MNCs to expand their network in developing countries. and (2001) show that since the early 1980s many developing countries have initiated economic liberalization programmes which have as their essential elements privatization and the attraction of FDI. Countries worthy of mention here include China, India, South Africa, Brazil and Russia but equally such regions as Latin America, Sub-Saharan Africa, Eastern Europe and South Asia are also involved.
The Indian economic liberalization programme began in 1991. According to (2001) the pre-1992 centralized economic planning system brought India to its knees and this galvanized the forces of change. By 1991, India had a double digit rate of inflation, decelerated industrial production, fiscal indiscipline, an astronomically high ration of borrowing to the GNP and abysmally low level of foreign exchange reserves. The Indian government initiated a series of economic liberalization policies which included the devaluation of the currency, and the introduction of new industrial, fiscal and foreign investment policies were reformed.
The ‘New Economy’ and its Effects on Work and Employment
The economy has shifted from production-based to service based. This new form of economy has given rise to alternative work arrangements such as part-time work and contract work. With the shift towards a more integrated and interdependent world economy, the emergence of a global marketplace where firms compete fiercely is apparent. This globalization of markets has facilitated the globalization of production which makes it possible for firms to source goods and services from dispersed global locations. The economy is characterized by fierce competition at the firm and national level. At the national level, governments all over the world are under pressure to internationalize their economies to satisfy the requirements of MNCs and foreign investors. With intensified competition standards organizations according to and (1999) are making efforts to meet international competitive standards on the three Ps – price, productivity and profits – and this has implications for work and employment. Under global competitive pressures, employers are more likely to resort to the hiring of employees on fixed-term (temporary) contracts, contracting out and casualization, rather than lifetime employment. In both developed and developing countries, more and more employees now work in an environment where permanent and secure employment contracts are being replaced by less stable, less secure and ‘non-standard’ forms of employment (2000; 2000).
Who are the Gainers and Losers?
Globalization, assisted by technological changes has encouraged the spatial transformation of both production and work. Production sites and economic activity are now more dispersed globally and new activities start up in underdeveloped sites as production sites are more easily relocated. Firms seek competitive advantages by selecting physical sites that are regulated by advantageous labor policies, competitive labor costs and cheaper taxes (1998). We ca say that the increase in temporary work caused by globalization and other factors benefits both the firms and governments. Jobs are created and economic development are facilitated in exchange of labor policies, low wage and cheaper taxes. However, it is also feared that globalization, which has fueled economic liberalization and the desire to attract FDI may lead to high transitional unemployment and increase wage and income inequality. It is also feared that increasing economic integration and its consequent fierce competition have the potential to cause a downward spiral on labor standards in developing countries ( 1996). It is important to consider that although globalization and liberalization has the potential to create jobs, if the government fail to protect its workers, the labor standards will be affected negatively.
The rise of part-time work and contract work is both advantageous for the employee and the employer as it offers flexibility. The organization is more capable to adjust to changes in the external environment. Production can be improved and costs can be cut. The employees, are given more time to attend to family issues. As more women enter the labor market, flexibility allows them to balance their responsibilities at home and at work. Flexibility also allows employees to go back to school and improve their knowledge, skills and abilities. However, temporary employment also has a downside. Employment becomes less secured. Employee commitment and loyalty are harder to achieve.
Will Temporary Work continue to Increase?
The forecasted continuous growth of the Chinese economy (2007), the increase in FDIs and the attraction of multinational enterprises will continue to propel the increase in temporary work in China. Economic growth will continue to be the focus of president . Economic expansion will continue to attract foreign investors, creating more jobs. Chinese leaders will continue to promote economic liberalization and sustainable growth alongside enduring political control. The economy will continue to open up due to China’s accession on the World Trade Organziation (2007). Over the next five years, China is expected to remain as one of the top destinations for foreign direct investment (FDI) (2007). India on the other hand is expected to experience in FDI inflows over the medium term, but will remain well below potential because of continuing political resistance to privatizations, inflexible labor laws and poor infrastructure (2007). The Indian economy is forecasted to slow down over the next two years (). Given the continuing economic growth and continuing attraction of multinationals, jobs will continue to increase in both India and China. Contract work and outsourcing of jobs will continue as both China and India remain top destinations for investment. I also want to add that the changes in the socio-demographics of the workforce also lead to the increase of temporary work. As more and more women join the labor market, temporary work and other flexible working arrangements are becoming in demand. In addition, organizations are making use of temporary work to improve production and cut cost.
Credit:ivythesis.typepad.com
0 comments:
Post a Comment