The Role of Human Capital in the New Global Economy - Essay Example

The Role of Human Capital in the New Global Economy Introduction Since the last twenty years, both the European and the American labour markets have confronted with serious problems. However, their manifestations have been different. While the European nations have suffered from high and persistent rates of unemployment, the figures of which have reached double digits, America is confronted skill shortage and rise in wages. The reason why the two developments are considered in a single framework is because they are part of a single global economy and the web of trade not only links their product market but also their prices. It is seen that human capital plays a major role in the labour market developments in nations. This emphasizes on the role of labour market institutions across the world. The idea is to remove the possibilities of skill shortage or skill crisis which forms one of the most critical components of a productive economy (Davis & Reeve, “Human capital and the global economy”). The role of human capital in the new global economy It is seen that with the growth of the population towards their age of retirement, nations tend to face a shortage of labour. The economy faces a labour shortage crisis which fails to meet the desired level of skill requirement of the society and economy on the whole. Thus it is crucial that nations maintain a certain amount of skill within the economy which meets its output and productivity requirement. In other words nations need to maintain a balance in their labour markets (Turner, “Executive Summary”). Technological advancement has also played a significant role in the increasing competitiveness of nations. Moreover it forms a primary component behind the competitiveness and competitive advantage of nations in the international market. This has called for a labour force which is highly competent in the field of information technology in order to sustain and survive in the global markets. Nations suffering from less advancement in technology and communications has suffered skill shortage and labour efficiency which is the reason why they have lost their competitive position in the market among global competitors (Turner, “Executive Summary”). With globalization, the prevalence of trade and commerce has also increased substantially. Global economies’ reliance on international trade has increased substantially over the years. In order to survive in the global competition and improve performance nations’ businesses need to create wealth and the colleges and universities in the nations need to keep producing high skilled and educated personnel who would be responsible for driving that economic development. Skilled and educated labour force forms a major component of a nation’s ability to compete in the international market. Globalization has come with a lot of challenges for nations. While a number of them have been able to adapt themselves to the global reality in terms of their operations, a number of them have failed to develop their human resources policies, practices, services and structures which support globalization. The major human resource challenges that organizations are confronted with are the creation of a global mind set in the human capital or even maintaining the local practices and cultures and also communication of a single corporate culture across the entire organization. Organizations are required to formulate their human resource functions in accordance to its strategic business objectives. The human resource functions are to be aligned with the long term strategies of the companies operating within their own territories or across borders (Rioux, Bernthal & Wellins, “The Global Picture”). Among the other important HR functions in organizations is the creation of a centralized relationship across the globe. There also needs to be the prevalence of a standardized development, assessment and compensation practices. The creation of global processes and policies for managing data, performance, education, compensation and development are among the other importance functions of the human resource departments in organizations. The human capital in organizations is also required to keep them constantly updated about the continuous changes in the new and global environment and have global awareness. It is important to have a multicultural HR team in order to be able to handle the challenges of cultural issues due to globalization. The role of schools, colleges and universities play an important role in the context of globalization. Since most of the economies of the world are highly dependent on trade and commerce, they are required to be extremely competitive and keep their performance level at a higher edge than their competitors. This requires the global businesses to create wealth, in the form of both financial and human capital. Thus the colleges and universities are required to provide enough educated and skilled personnel who would be responsible for driving the growth of the business. Nations are required to invest in university research and higher education for producing people and ideas as these businesses need to be innovative and compete in the international market. The university research environment should be such as to attract and retain the topmost researchers in the world. Nations being able to attract such researchers are likely to be ahead of competitors in terms of ideas, innovation and long term strategies (Nilsson, “National Systems of Innovation”). ‘ Most importantly the performance of employees is a reflection of the performance of the performance of the organization. Thus the development of skills and expertise of employees has emerged as being among the major priorities of employers recently. Organizations have been increasingly targeting to improve employee productivity and performance through the development of training and development programs. The provision of the right kind of training and development programs and targeted education lies mainly between the employers and governments. Also the constant advancement of technologies and abrupt changes in business strategies due to the changes in external environment and competition have made it imperative for organizations to impart the requisite training for keeping their workforce at par with the business requirements and strategies (Ashton & Green, “Global economic transformation and skill trends”). Conclusion The paper presents the role of human resource in organizations operating in the global business climate. The business performances of organizations are an actual reflection of the extent to which its human capital has been able to adjust to the global environment and strategies. It is increasingly felt that the biggest challenge faced by the global organizations is that of adopting their workforce to the external changes and challenges. It is seen that organizations failing to do so have been failing to the ones which have been considering their human capital as prime importance and investing in the development of that capital. First of all it is seen that with globalization, the skill requirements of businesses have undergone change. In such a condition nations have been confronting with skill shortage or adequate skills which meet the business requirements. This has been retarding the business growth which has been consequently retarding the growth of the nation on the whole. Also globalization has been increasing international competitiveness and the human capital in nations has increasingly merged as the critical component behind keeping businesses ahead of competitors. This is the reason why businesses have been considering training and development programs as one the main components of heir HR practices. The workforce is given adequate and specialized training to compete in the international market and stay ahead of competitors. In this regards, the role played by colleges and universities cannot be ignored. Nations are required to invest in education and training and produce such skills which would drive the economy towards growth and progress. On the other hand, employers have been investing on the development and implementation of training and development programs to keep their workforce updated with the latest skill and expertise requirements. Reference Ashton, D. N. & Green, F. Education, training, and the global economy. Edward Elgar Publishing. 1996. Davis, D. R. & Reeve, T. A. Human capital and the global economy. 2002. Human Capital, Unemployment, and Relative Wages in a Global Economy. August 11, 2011. < http://www.columbia.edu/~drd28/humcap.pdf>. Nilsson, J. E. The role of universities in regional innovation systems: a Nordic perspective. Copenhagen Business School Press DK. 2006. Turner, A. Executive Summary. 2006. Skill Shortages in Australia’s Regions. August 11, 2011. < http://www.bitre.gov.au/publications/19/Files/wp68.pdf>. Rioux, S. M., Bernthal, P. R. & Wellins, R. S. The Global Picture. 2000. The Globalization of Human Resource Practices. August 11, 2011. < http://www.ddiworld.com/DDIWorld/media/trend-research/the-globalization-of-hr-practices_es_ddi.pdf?ext=.pdf>. Read More