Deregulation of the labour market & the adoption of Low road HRM policies

Abstract

Some countries adopt the deregulation of the labour market by reducing the implication of the government. This leads the labour market to manage itself and companies can apply HRM policies without restriction such as; reduce the wage, offer multiple forms of the employment contract and fire employee. Consequently, firms adopt the Low-Road HRM policies, i.e. reduce the salary and decrease the security of the employment relationship for increasing profit. This article aims to understand what is the component and driver of the employment system; HRM, Labour market, Employment system, Firms.

Introduction

In the intersection of the economy, sociology and politics, the management science rise to face the market changes, globalization and the intensification of the competition, moreover, the HRM appears by the end of 1980 as a new practice for companies to create value. As ‘assets’ not ‘costs’ HRM views employees of the organization as a central point to improve organizational outcomes.

HRM Increase individual productivity and performance, commitment and motivation, and tackle many problems surrounding the control of the labour process which result positively by;

·     Increasing productivity and business performance

·     Creating competitive advantage

·     Reduction in conflict

·     Increased job satisfaction and stress minimization

·     Opportunities for further development

However, research still ambiguous about the effectiveness of HRM practices (Procter, 2008; Frost 2008; Askenazy & Forth, 2016). The success of the adoption of an HRM strategy depends on various nested factors that are closely related to the employment systems.

In this article, we aim to explain and describe what factors impact the labour market and by the way, impact the type of HRM policies that firms adopt.

·     What are the concepts that are related to the adoption of HRM policies?

·     How can we explain the adoption of low-road HRM policies in a deregulated labour market?

Part1:

As a focal point, HRM is practised in the context of the labour market, which is a field where companies adopt HRM policy to benefit from it. In turn, the labour market (employment system) is Influenced by the external environment. It may take two forms according to the type of policy, culture and institution that govern, i.e. regulated or deregulated.

In this part, we will see the description of each concept related to the adoption of HRM policies.

1)HRM

HRM is a managerial and individualistic way to manage the employment relationship; it aims to increase the employee’s performance by adopting practices such as:

·     Resourcing, development pay, grievance and disciplinary actions

·     Improve the security and adopt a selective hiring process training

·     promoting the self-management teams in a flatter hierarchy

·     improves communication and dispute resolution in an egalitarian culture.

However, these practices change according to the labour market context (employment systems) in which firms interact. Consequently, the employment relationship is a legal and social contract conditioned by the context and where not all practices are applicable and efficient (Hyman 1989).

2)The Labour Market

As the field where employment systems actors interact, the labour market is the interaction of the available quantity and quality of workers with employers, i.e. demand and supply of labour (Boeri, Van Ours, 2013).

The labour market is characterized by two from, regulated and deregulated depending on the government implication and the cultural/institutional context.

3)The deregulation of the Labour Market

The deregulation is the movement from centralized to decentralized employment systems, this Increase the labour market flexibility by the emergence of flexible forms of employment (part-time contracts, temporary agency workers, zero-hours contracts, bogus self-employment etc.) and precarious employment.

In the other hand, individual bargaining will replace collective bargaining as a determinant of the terms and conditions of employment. www.oecd.org

Furthermore, it reduces labour cost and influence HRM practices that will adapt to the new nexus of law. (Kornelakis et al. 2017; Kornelakis et al. 2018)

4)Strategic HRM

The strategy HRM is the way that organization plan to improve its performance successfully, and the reduction of the turnover rates/conflicts. To deal with the employment system, the organization must adopt a suitable strategy and choose a model as; ‘Low road’ HRM policies or ‘High road’ HRM policies (Teague & Roche, 2014)

After describing the fundamental concept of the adoption of the HRM policies in a labour market, the next part aims to explain the adoption of Low road HRM policies in a deregulated market labour.

Part 2:

The adoption of HRM policies in a labour market is a complex interactive process depending on macros and microenvironment factors and elements. This next part aims to explain the complexity of this interactive process and focus on the case of the adoption of low road HRM policies in a deregulated market.

1)The complexity of the adoption of HRM policies in a labour market 

The following graphs aim to simplify the relationship between factors that can influence the employment systems;

The elements that influence the way business is conducted and the HRM policies, we have:

·     The institutional context of HRM (political, legal, economic, social, cultural)

·     Country specificities (Soskice & Hall 2001)

·     The employment relationship institution such as; trade union/collective bargaining and wage determination/ workers participation voice

·     The variety of capitalism typology that is characterized by the national industrial relation and pay arrangements, vocational training and education, corporate governance and interfirm connection.

·     The nexus of law to define the main actors of the employment relationship and the minimum way that the employment relationship shall be managed

In the other hand, among the multiple factors that impact the employment systems, we have;

·     Hofstede cultural dimension especially; Individualism vs collectivism/large or small power distance/Strong (Hofstede, 2001:9)

·     Labour migration, i.e. (new entrant in local labour markets/implication for wage skills availability)

·     Employment and unemployment rates

According to the previous point, the adoption of the HRM policies is the result of employers adaptation to the labour market. By turn, the labour market is influenced and governed by the factors and elements described above.

1)The adoption of Low-road policies in the deregulated labour market

In a deregulated labour market, the employment relationships institutions are less potent than employers. As well as in a liberal country, the culture is:

·     More collectivism than individualism, i.e. the employee are not sensitive about wage

·     More power distance than small power distance. i.e. employers reduce the cost of labour instead of developing it.

·     The high rate of labour migration, i.e. provide the firms with available skills

·     The High unemployment levels, i.e. increase competition for labour

As the main aim of HRM is to satisfy the managerial interests, in a deregulated market the employers have the right to adopt a low road HR policy to focus primarily on cost reduction rather than human capital development.

Conclusion

To conclude, we find that many elements and factors influence the employment system. The deregulation of the labour market impacts the employment system and the relation between employee and employer by giving more freedom to firms in the management of their human resource. Consequently, employers will take the opportunity to enhance productivity and performance of their organization by reducing wages cost, creating new flexible forms of employment and increase the commitment due to the lack of law protection.