The Labour Market Condition in the Developing Countries - Case Study Example

PART An analysis of the labour market conditions within setting own business. Labour market segmentation The labour market condition in the developing countries is based on the fact that these countries have a greater degree of unskilled labour than that prevalent in other counties in the world. In the developing economies there is a marked tendency for demand of labour to increase as exports increase. This, in effect, would also raise wages and employment levels. Similarly, when it comes to exports, the output would decrease due to the decrease in demand for inputs. In the case of labour supply, wages would increase as labour supply decreases, and vice versa. Although the features of labour market conditions vary due to market forces, plurastic and regionalistic factors with socio-economic influences, they could be broadly be divided into four main divisions which are as follows: - 1. Formal Rural Markets 2. Informal Rural Markets 3. Formal Urban Markets and 4. Informal Urban Markets. Formal Rural Markets: This market is chiefly constituted of medium and large-scale commercial agricultural activities, including cultivation and distribution of crops. Proprietorship or partnership firms chiefly own them. Most of the workers engaged in the formal rural markets are unskilled and semi-educated and their main activities are in the areas of crops and agricultural produce. 2. Informal Rural Markets This market segment is chiefly indulging in small-scale operations involving self employed persons along with the assistance of unpaid family members. Like formal rural markets, this segment is also characterized by unskilled or semi-skilled labour force who are involved in small-scale activities with low productivity and hence, low level of wages. The main functions in informal rural markets are in the raising of exportable cash crops. 3. Formal Urban Markets This segment consists chiefly of Medium and Large Scale enterprises producing commercial and non-tradable goods using a combination of skilled and semi-skilled workers. They constitute private or state owned enterprises where the wage levels are regulated by the Government and by local state laws. The requirements of Minimum Wages and Allowances and benefits to workmen are also applicable in this segment. Since this market segment is in the regulated area, the workers and staff are protected by the Trade Labour Unions, who play an important role in labour matters, and trade unionism activities are also present in this segment 4. Informal Urban Market: This segment comprises of self-employed professionals in the urbanized sector and represents privately owned enterprises. They are mainly dealing with manufacturing, trading and distribution of non-tradable items and this segment is, more often than not, in the unregulated sector. The wages and job security in these segment is low and benefits enjoyed by workers in formal urban markets like Bonus, Life Insurance, Social Security, Medical benefits, etc are non-existent. There is no State intervention in the workings of this sector since state investments are not present and trade unionism is also not present. Legal wages are not being enforced and wages are flexible. This sector is also known for underemployment and low wage rates. Role of Informal sectors The informal and sector comprising of the informal rural and the informal urban are the major players in the economies of the developing 3rd World countries. The main deployment and concentration of labour force is agriculture where almost 60% of the labour force is deployed. This is followed by the service sector having 25 % and industry, which contributes just 10% of the total. 1 Although the characteristics of labour markets may differ from region to region basis, it could be safely be said that the informal sections constitute the major part of the economies of developing countries and 80% of the economy is controlled by this informal segment. Even in highly developing, high GDP countries, the informal sectors constitute around 30% of the total economy. 2 .Government Domination The chief characteristic of the labour market of developing economies is the preponderance of the Government sector and the considerable influence that it wields in the decision making process. The domination of the Government and public sectors in and labour areas may be due to the development strategies employed by many 3rd World countries. In these countries, the Government plays a pivotal role and is stereotyped as the catalyst for social and economic redemption. The private investors are not in a position to invest heavily in industries, and therefore, it has been left to the Government to provide the necessary capital for investments. Further, job opportunities in the public sector organizations are considered attractive because of the salary scale and benefits which they offer. Besides, indirect benefits like job security, subsidized housing, pension and other incumbent benefits are also available in the Government jobs. 3 The attraction for Government jobs in developing economies received a major up thrust due to the decline of the import substitution sectors, the result of economic liberation ushered in during the later half of the 20th Century which gained momentum during the 21st century. The world wide economic liberalization also brought a large number of educated skilled work forces that were either under employed or unemployed. Since the private sector, being predominantly in the informal sector, was unable to provide jobs, the onus fell on the Government to arrange to provide the necessary jobs. Later, due to the worsening of the job markets due to economic recession and high rates of inflation, the Government took over the responsibility of providing jobs to the unemployed in many countries of the Developing economies. Aspect of Underemployment There is an increasing trend for underemployment in developing economies due to shortages of work for skilled workmen. Underemployment occurs when employed persons work less than the desired hours per day at a lower rate of pay. Since underemployment is subjectively different from unemployment, it does not fall in the class of unemployment. Therefore the unemployment figures published by Govt. Departments are skewed, since it does not take into account the incidence of underemployment, and for their practical purposes, even underemployed are treated as fully employed earners. In a World Bank survey of certain developed countries, it was found that the high rates of unemployment were disguised as underemployment. 4 Moreover, in certain developing economies, the rates of underemployment was as high as 60%. Work force in the formal sector may align with the informal sector where they would be rendered unemployed, especially workforce migrating from rural to urban settings. Therefore it is necessary to consider the indicators of actual employment statistics to determine the growth rate, and not other parameters. However, in the 21st century, the developing economies have a vocal and strong work force reinforced by trade unionism and powerful labour laws and legislations. The labour market could rise out of its present quagmire and reassert itself through new job opportunities in the 3rd World Countries. The lack of unity among the work force is because of the urban divide which polarizes the labour sector between skilled, unskilled and semi-skilled .It is further divided due to Minimum wages guaranteed to regularized workmen and also equilibrium wages. This polarization is the reason why, despite high levels of unemployment in the developing economies of the 3rd World, wage levels are still very high and prohibitive. PART-2: Internal SWOT Analysis Strengths Weaknesses Opportunities Threats Level of Education Practical exposure Demand for product Labour force Experience Administrative skill Critical functions Competition Building models Communication Employment scope Fuel prices Acquiring new skill Interaction Use of latent skills Heavy investments TEXT I propose to carry on the business of Generating Sets set up by my Father for making best use of the opportunities and career growth avenues in order to make it a viable business proposition. I am aware that the business of generator sets is a challenging and intrepid one, which could test the limits of my strength and endurance, and could also highlight areas that need improvement. I confidently feel that I could rise to the occasion and perform well in my chosen area of business endeavour. STRENGTHS My greatest strength is my level of education. I hold a Masters’ Degree in Electrical Engineering with specialization in Electronics and Electrical. This basic degree, along with the background knowledge of functioning of electrical equipment would definitely stand me in good stead in my business. Besides I have relevant Experience of working in this field for last 5 years. Through this process, I have equipped myself to take care of the theory and practice of Gen sets mechanism and its functioning. I also have a passion for repairing and remodelling electrical and electronic equipment, and also made some innovative product models during my college days for which I have received awards and appreciations from the judges. I am confident that I possess the necessary aptitude, skill sets and bend of mind to succeed in this business of mine. Another aspect about me is the urge to learn new skills and redefine existing ones. I have a roving mind which challenges existing matter and seeks out newer and more exciting ways of improving things. I could put this aspect into my business with caution and circumspection which, while keeping the present aspects intact, would research on better, effective and efficient methods of doing things and creating innovative products for betterment of society WEAKNESSES My greatest weakness have been my technical background because of which, I could not devote time and attention to the practical and demonstrative aspects of different subjects. Although I am well versed with the intricacies of Generating Sets, the different stages of its manufacturing process from components’ assembly to the finished product, I do not have the practical knowledge of its workings. Since I am a technocrat, I have limited exposure to administration and management skills. These skills I would need to acquire in order to succeed in this competitive business of Generating sets since the basic aspect in any business in the management of people .I also need to work in areas of written communication skills since till now, my skills have been technically oriented towards my academic subjects and professional writings. The need for effective communications skills, especially to make a power point presentation to potential customers or to negotiate with Government officials for Sales Tax matters etc could require training and exposure. I need to improve in the area of Business Communication skills in order to interact with people. Besides I do not have first hand knowledge and skills in marketing of generating sets and would need to be become proficient in these areas since my main business would be to create and satisfy generator sets customers. For this purpose, I need to develop interpersonal skills arising out of wide interaction and interfacing with a variety of customers, listening to their problems and ensuring that optimum service being provided to them, thereby enhancing the image of my business and ensuring a constant flow of orders into my business with the active help, co-operation and skills of my dependable and trustworthy executives who would stand by me. OPPORTUNITIES The energy sector is an area which offers tremendous potential for growth since the demands are very much more than the supply, and the energy sector needs to address itself to this vexing problem to save the fate of many industries crippled due to lack of adequate power to facilitate the production process. Since the energy demands far outstrip the supply, it has become vital to seek alternatives to keep the energy economy on its rails. The Generator sets industry, at the macro level, seeks to supplement this lacuna by converting fuel energy into electrical energy for industry, and in the future, it is expected that it would be the most favoured alternative, after captive generation of power. At the micro level the generator sets industry caters to the shortfall in powers in many critical areas like health care, banking, education, water supply, etc and ensure uninterrupted power for critical functions in these areas. The manufacture of generator sets industry would guarantee employment opportunities to skilled and unskilled workers besides executive support for management in crucial decision making for the progress of the organization. By investing my specialized knowledge and training in this field of engineering, I would be making optimum use of my latent skills and talents for the betterment of economic welfare of the state and also serve to contribute to the vexing problem of energy shortages in the country. Through exports, it is believed that quality standardization and international benchmarks could be achieved for our brand of Generating Sets, which would set the precedent for achieving future growth and progression of the business in the years to come THREATS The main threat is from the labour force, which forms the nucleus of the business enterprise. Since my business is in the Informal Urban sector, it is unregulated with no legislative compulsions. The question of Minimum Wages or obligatory payment does not arise and trade unionism is absent. Under such circumstances, the wages are decided on individual’s experience, work ability, sincerity and business commitment .However, the labour force, being unregulated, cannot refer labour disputes to arbitration from trade unions. If there is labour unrest, it would affect productivity and profits. This is a major threat which needs to be addressed to. The second threat is from competitors- big and small. The Big competitors have niche markets which cannot be tapped by our business, since a lot of their investments have been locked in these markets. Therefore our main thrust would be in smaller and medium industries and retail selling. Here, pricing is a sensitive factor which eventually effects buying decision. In order to face competition, we would first have to make ourselves Competitive in all aspects of the business. The availability of the lifeline of generating sets – fuel is a major threat. With the international prices of crude soaring and the oil producing and exporting countries (OPEC) showing no signs of arresting the rising trend, the onus of controlling the availability of fuel would rest with the respective Governments. In our business, fuel is a major requirement to fire generating sets and its availability and pricing would play a significant part in our business dealings. Heavy investments in this field are also necessary since generator sets are basically capital intensive industry. It may be necessary to seek institutional financing at a later stage to sustain the market demands and build a strong and competitive business enterprise. Works Cited Fosu, Augustin. Kwasi. 2000. International Trade and Labor Market Adjustment in Developing Countries. http://www.nottingham.ac.uk/economics/iea/fosu.pdf (accessed May 3, 2007). Read More