Labour Flexibility in Australia and the US - Coursework Example

Approaches to labour flexibility in various countries. Introduction In Economics, labour refers to any physical activity that is directed towards an activity in order to achieve a positive desired outcome. Labour is one of the key factors of production and in its absence the other factors of production cannot be effectively utilized. Labour flexibility on the other hand refers to the ability of a market (in this case a country) to easily adapt to changing economic times as well as other social and political changes. With time the supply of labour in key markets fluctuates as a result of a number of factors. These factors include technological development, as well as low birthrates in some countries. Labour flexibility can be divided into two distinct groups. On one extreme end we have the internal labour flexibility while on the other we have external labour flexibility. External labour flexibility refers to the extent to which a market accommodates labour from external markets. For example a developed country may tap highly qualified staff from other less developed countries. Internal labour flexibility refers to the steps taken by firms in a market to either save on cost or increase productivity. This mostly involves working in shifts. The human population is the major supplier of labour. Blean (1994) argues that it is due to scarcity of qualified labour in key fields such as engineering, medicine and scientific research that different countries have unique approaches to labour flexibility especially external labour flexibility and movement. He further argues that the ever increasing number of less qualified labour has led to outsourcing and exploitation of employees. Due to this scenario of inadequate supply of critical skills and excess supply of less qualified labour, different companies have taken steps to correct this anomaly and balance the equation. According to Whitley (1994), multinationals especially in the United States and Europe have resulted to outsourcing less critical production processes to countries where cheap labour is available so as to cut on production and increase profitability. Brief literature review Various writers have taken a keen look at the ever changing government policies on labour movement and flexibility. Blean (1994) points out that there is a reason why the US government offers the Green card. The writer argues that the HIB visa which allows highly qualified personnel to live and work in the US is a strategy to take the best brains. This ensures that there is constant supply of innovators and this keeps the largest economy steps ahead. This policy has also been adopted by other industrialised countries such as Canada, Australia and to some extent the UK. Whitley (1994) sees the bad side of labour flexibility among the industrialised countries especially when it comes to highly technical skills. The gist of the matter here is that less developed countries will actually never catch up their developed counterparts if all the best brains are not around. This thought is however countered by Frenkel and Harrod (1995) who point out that we are in a capitalistic world and consequently it is up to the less developed countries to give the experts what matches their qualification if they are to stick around. Various writers have speculated on why different countries have varying degrees of labour flexibility. However none confronts the issue head on than Morley (2006). He says that the issue of labour flexibility can be compared to wild animals. He further says that in this case it is survival for the fittest. A typical scenario of everyone for himself and God for us all. The acclaimed author says that in today’s world labour has been liberalised and one can work anywhere he/she deems fit as long as one is comfortable. Bottom line is that whoever offers the best package no doubt gets the best employees. Country comparison For the purpose of this study, the author will compare and contrast two countries as far from each other as the earth is from the sky. No doubt this has to be Australia and the United States. Brief country profile The United States is no doubt the largest economy in the world. It is the only super power and the third largest country by size. The US as it is popularly known has an estimated population of about 300 million people. This country has the largest number of immigrants from around the world due to its economic power and excellent living standards. It is the hub of technological innovation and the major technology giants are based here. Talk of Google the largest search engine, Yahoo the frontrunner in the world of electronic mail and Microsoft the world’s largest software manufacturer. The United States is the favourite destination for expatriates who are given the HIB visa that allows individuals to live and work in the US. This type of visa is given to highly qualified individuals such as engineers, medical doctors as well as scientists. The country also runs the green card programme which allows foreigners to live and work in the US. Although it is billed as a lottery, insiders point out that it is a means of getting highly qualified labour to work in the US. Labour in the US is quite expensive and this is the major reason why major multinationals outsource less skilled processes to countries where there is cheaper labour. These countries are mostly found in Asia and Africa. Australia is the only country which is also a continent. It has an estimated population of 20 million people. Australia is one of the few countries that experience dry climate all year round. Unlike other countries in Europe and America, Australia does not experience extremely cold conditions hence making it very popular among workers in Europe who are tired of the extreme cold conditions. In the year 2008 to 2009, Australia admitted slightly over 300,000 new migrants. Most of these are skilled workers from countries in Africa and European residents running away from harsh climatic conditions. A comparison of Labour Flexibility in Australia and the United States Prevalence of external labour flexibility and movement Outsourcing of labour is common in both countries Internal labour flexibility is on the rise in both countries High levels of labour stability Job tenure is quite high External labour movement is common in both countries(Nationals moving abroad) Both countries are well industrialised and technology is the key driver of both economies. Consequently both countries require labour which is technical in nature. Both countries give permanent residency to highly qualified individuals. In the United States the highly qualified individuals get the HIB Visa. Thus the two countries have actively engaged in external labour flexibility by absorbing external labour in their markets. Due to the increased labour costs, both countries have actively pursued outsourcing as a cost cutting measure. Felstead et al (1999) argue that outsourcing of labour is one of the major methods used to cut costs. Major firms operating in these two countries have actively been engaged in outsourcing of less important manufacturing processes. Their major destination is Indonesia an Asian country that borders Australia. Internal labour flexibility has also been actively pursued in both countries especially in the wake of the financial crunch that has hit the world. Major companies operating in these markets have been forced to reschedule working hours. Multinational giants such as Toyota, GM among others operate in these markets and they have cut working hours as a cost cutting measure. As noted earlier, international labour movement has been widely practiced in these two countries. This does not necessarily refer to foreign workers coming to work in the two countries but the direct opposite. Highly qualified personnel have moved from these countries to other countries either as owners or experts of companies that pursue diversification. These companies are found in technical areas such as oil drilling, road and bridge construction as well as in the world of finance. Citizens of these two countries have actively been involved in the reconstruction efforts in countries in the Middle East such as Iraq and other war ravaged countries like Afghanistan. Expatriates from these two countries have also moved to Africa and Asia to offer highly technical skills. Human resource experts point out that labour flexibility is crucial in any market given the uncertain business environment in which firms operate. Both external and internal labour flexibility are important if countries are to survive during times of recession and whenever there is need of technological change and innovation. There are some unique industries in Australia and the US that have experienced the highest activity when it comes to labour flexibility and movement. The health industry is one area that has experienced high rates of external labour movement both in the US and Australia. Blean (1994) has an explanation for this occurrence. He argues that the population in the western world (The US and Australia) included is ageing and this has led to a depleted workforce. He further observes that careers such as nursing were not given high priority in the past and this has led to a severe shortage. Highly qualified professionals in medicine such as doctors are also scarce. This has witnessed a number of doctors from Africa, Asia and the Middle East leaving their mother countries and relocating to seek better fortunes in the US and Australia. Currently the US has a shortage of more than 180,000 nurses according to the Bureau of Labour statistics. On the other hand Australia is facing a scarcity of about 65,000 nurses. Labour stability is a key parameter that is used in the study of labour flexibility and movement. Statistics show that there is relative labour stability in both Australia and the US. The rate at which firms downsize or layoff workers is fairly low in these two countries. The sub prime mortgage crisis and the worldwide crunch may have affected labour flexibility in these two countries but economists see this as a temporary setback. In the long term both economies are expected to stabilize and this will ensure even more labour stability. Another key factor that is used in determining job flexibility is job tenure. This simply refers to the cumulative amount of time that workers stick to a company. According to the International Labour Organization, job tenure is highest in the US and Europe. However it is also considerably high in Australia and thus we can say that there is a similarity when it come to job tenure in the two countries. Data collected by the International Labour Organization between 1980 and the year 2008 show that the levels of job security and job tenure between the US and Australia were almost even. This can be attributed to the favourable working conditions that are available. In the future economists predict that external job flexibility will still be prevalent both in Australia and in the US. The major reason behind this phenomenon is the high number of ageing population that is found in these two countries. The coming up of new industries will also require more technical staff who may not be readily available. Therefore in the long term external labour flexibility will still be practiced in these two countries. The almost stagnant population growth in both countries will also perpetuate the cycle of external labour flexibility. Differences in labour flexibility and movement between United States and Australia. Larger labour market in the US External labour flexibility is higher in the US than it is in Australia The US labour laws are more strict than those of Australia The cost of labour is higher in the US than it is in Australia Dislocation of labour is more common in the US than it is in Australia. While the labour market in the US has some similarities with that in Australia, it also has some glaring differences. Let us start with the all important issue of size. In comparison with the American labour market then the Australian one is quite small. The US is home to the biggest technology companies and a number of manufacturing giants. Thus we can authoritatively say that the US labour market is larger than that of Australia. External labour flexibility is also more prevalent in the US labour market than it is in Australia. While labour stability is high in both countries, economists point out that it is higher in Australia than the US. Due to the sheer size of the country, new companies crop up everyday and this makes employees shift jobs in search of new well paying jobs. This therefore means that the internal labour flexibility is less stable in the Unites States than it is in Australia. The Information Technology sector has been rapidly growing in the united state and this has created new job opportunities. This scenario has also been witnessed in the manufacturing as well as the engineering sector. This has made qualified staff switch jobs and move to new start up companies that have better working conditions and improved financial rewards. Dislocation is a key factor that is used in the measure of labour flexibility. It refers to the probability that an employee will be laid off either as a cost cutting measure or due to harsh economic conditions. Before the world wide economic crunch, this was a rare occurrence in the two countries but it is now too familiar. However not taking into consideration the current economic crunch, the levels of job dislocation were considerable higher in the US than in Australia. Most companies in the US opt to outsource their less important production processes in order to save on labour costs. This in most cases leads to massive layoffs and has always been a thorny legislative issue in the US. Although outsourcing is common in Australia, it takes place on a much lower scale and has had little effect on labour stability. Hence dislocation is less common in Australia. The cost of labour is another major difference between the US and Australia. Labour is more expensive in the United State than it is in Australia. Blean (1994) argues that this is because of the fact that the US is the largest economy in the world and has excellent living conditions. The level of innovation is considerably high in the United States and this means that only the cream gets the chance to work there. As always, highly qualified staff requires good pay and other perks such as holidays and bonuses. This can only be provided by the largest economy in the world. The resultant effect is that external labour flexibility is more common in the US than it is in Australia. Otherwise put, expatriates would rather work in the US than in Australia because of certain unique and historical advantages that the country holds. It is the most diverse country in the world with people from diverse backgrounds working there. The H1B visa which is given to experts has always been over subscribed by expatriates around the world. On the other hand the cost of labour is way much lower in Australia when compared with the US. Labour laws are also quite different in the two countries and this has a significant effect on the external labour flexibility and movement. The United States has very strict laws that govern its labour market. The major reason for this is to guard against illegal immigrants. There is a large inflow of foreigners in the United State who go there on a visitor’s visa only for them to turn around and start looking for jobs. There is also the problem of migrants from Mexico and other neighbouring countries who close the border into the US. To guard against this phenomenon, the government has a very strict labour policy that prohibits employers from employing people with no proper work documents. While Australia has tough labour laws, they are not as strict as those in the US. The major reason is that there are few illegal immigrants. The location of the country is one major factor that prohibits illegal immigrants especially from poor countries. There are also fewer opportunities in Australia than there are in the US. Why the difference. It is quite clear that there are some differences between the labour market in the US and that of Australia. Some of these differences are as a result of historical reasons while others are as a result of the dynamic world that businesses operate in today. Bottom line is that most of these differences can be traced to capitalism which is practiced in both countries but at different levels. The United States is no doubt the mother of capitalism and most firms that operate in this market play by the rules of a free market. Profit maximization is their major goal and they will go to any length to achieve this goal. This explains the cost cutting measures that are taken courtesy of outsourcing. Labour outsourcing was first introduced in the US before it was taken over by other countries albeit at a much lower scale. On the other hand Australia also plays by the rules of capitalism but using a different approach. Whitley (1994) points out that the ultimate goal is not only profit maximization but also the welfare of the employees and the environment at large. Questions have been asked by players in the Australian economy on how free should a free market be. At the end of the day the government intervenes especially when the welfare of employees is at stake. This explains why labour stability is higher in Australia than it is in the US. Some of these differences can also be linked to the culture of the people. The United States is known for its innovation and addiction to technology. Its entrepreneurial culture is also unmatched in the entire world. This factor has easily made it the largest economy in the world and the pace setter when it comes to new technology. This characteristic has made it the favourite destination for innovative and entrepreneurial people. Thus external labour flexibility takes place on a wider scale in the US than it does in Australia. Conclusion As noted earlier, labour is one of the key factors of production. In its absence the whole production cycle grinds into a halt. Most countries always seek to have a highly qualified labour force to meet its economic objectives. It is this thirst for innovative and highly technical skills that leads to labour flexibility and movement across the world. It is not by coincidence nor is it an act of God that most industrialised countries are in the habit of tapping highly skilled immigrants. Economic scholars argue that this is an investment that keeps their economic engine running. Australia and the United States are two countries that have seen the benefits of labour flexibility and movement and they live by this doctrine to this date. Reference: Blean, J (1994) Employee relations, Polity press London Felstead, A and N. Jewson (1999), Global Trends in Flexible Labour (ed). MacMillan Business. Frenkel, S. And Harrod (1995), Industrialisation and Labour Relations: Contemporary Research in Seven Countries. New York: ILR Press. M J Morley, P Gunnigle & DG Collings (Eds) (2006), Global Industrial Relations, London Routledge, 2006. Munck, R (2002), Globalisation and Labour: the new `Great Transformation’. London: Zed Books. Whitley, R (1994), European Business Systems: firms and markets in their national contexts. London: Sage. Read More