Globalization and Its Impact on Global Economy Towards Employment

Introduction

Globalization is one of the most important and stages of global development and economic progress. Globalization is the main driving force of the global economy, which promotes global prosperity. Its dimensions work in all spheres of the state (social, economic, cultural, etc.) and main features are international trade, the movement of capital, the growing role of multinational companies (MNC’s), the development of international manufacturing and technology (James, Steger 2014). One of the areas it has impacted greatly are companies, specially their expansion into increasing territories. Opening up of national markets in both goods and services has created opportunities for firms and has changed the way they operate. Although there are companies who does have presence in more than one country, globalisation has impacted them through competition from other companies and global customer expectations.

One approach is that globalization has put pressure on the convergence of different countries in labor relations (Kerr, Siegel 1955). Employment practices have been tremendously affected by this phenomenon all over the world. The main aspects impacted by economic globalization according to Di Pietro, Girsberger and Vuille (2007) is number, structure and composition of jobs, R&D, job earning compensation and migration as well as employment conditions. The major consequences for companies was the shift in balance of power between firm and employees also have changed management of human resources. However, it has changed in favor of employers, MNCs and investors, but not for the working class. This is especially valid for developed countries and low skilled workers and has happened due to several factors. This essay describes globalization influence with respect to firms and employees as well as human resource practices, also identifies and analyze specific issues and consequences.

Rodrik (1997) has developed explanations of the impact of globalization on labor markets in the developed world. He argues that there are two channels through which globalization makes workers insecure in the labor market. First, trade with developing countries displaces unskilled workers, since local low-skilled labor force production has now been replaced by imports. Secondly, globalization leads to wage and employment instability, as workers are more interdependent with market integration. This substitute effect applies, in principle, to all employees, regardless of skill levels, but less educated, less skilled workers are more vulnerable, since they are easier to replace by definition.

Firms gains from globalization

Power and influence are two important factors in organizations and management. According to Lucas and Baxter (2011) power is defined ‘as the ability to impose one’s will even against resistance of others’. Same authors define influence ‘as compelling behavior change without threat of punishment or promise of reward’. These factors shape relationship between firms and employees. Equal power balance should be aimed in work environment and business leaders should create the most healthy and productive atmosphere, however with globalization and other evolving processes one side gains more power than the other.

One of the biggest changes is the loss of jobs in developed countries and their transfer to lower cost countries. Manufacturing jobs have become increasingly low paid in mature countries, because lower skilled tasks can be moved to lower cost locations. Lower safety requirements, longer working hours or trade union prohibition may be attractive to multinational companies and may lead to reorientation (Di Pietro, Girsberger, Vuille 2007). Rapid adoption of information and communication technology (ICT) helps to transfer service jobs, like customer information call centers. From political concern also, only skilled workers wages have risen in comparison to less skilled (OECD 2007). For this matter skills training opportunities for less educated workers are needed to curb smaller payrolls and income inequalities, as skill requirements increase.

Offshoring and labour mobility

To understand power balance between multi corporations and employees, it is important to analyse the tendency between trade and jobs that has moved towards offshoring. Offshoring occurs when companies transfer their production activities to another country, whether they are performed by independently owned suppliers or a wholly owned (captive) subsidiary (Sako 2006). Offshore outsourcing is currently driven by the fact that many companies have recognized the benefits of outsourcing as a business strategy. In industrial countries, it is assumed that, labor intensive production is transported abroad, allowing to pay more attention to skill and capital-intensive production at home.

Offshoring jobs results in increasing productivity in the business, operating more efficiently, expand sales, increasing employment. There are direct effects, however, there are two forms of indirect effects too. First, services become cheaper due to relocation and companies have more opportunities to increase in size. Second, because of offshoring, end users get better prices, meaning they can also spend more money on domestically produced goods, which would rise employment too (Gorg 2011). For example, Nike outsources footwear to various manufacturing plants. Largest share has gone to China, but also Thailand, South Korea, Vietnam and India (Iti Manufcturing 2018). Spreading their production choices helps them to be the most efficient for the lower price, also less dependent on certain source.

Looking from another perspective of firms and employees power balance is important aspect of labor mobility. Capolupo (1998) claims that the openness of the economy is characterized by labor mobility. In industrialized countries, rapid economic growth is driven mainly by the labor force, which is characterized by discipline, eagerness and qualification levels. Ozden, Rapoport, Schiff (2011) notice that the movement of people is a result of search for a better and safer environment seeking. Migrant population can improve living conditions by changing living and working places, immigrant countries are the source of new labor force, in addition, workers can move from country to country to market their skills. Migration flows must be regulated in such a way as to foster the growth of a highly qualified workforce whose work contributes to economic development. Weiss (2003) states that migratory flows typically run from a low-wage to high-income countries. However, the negative aspect is the falling birth rate and the population, aging society, respectively, the labor shortage, brain drain and the downfall of production and investment.

Replacement of jobs from home to host areas is more likely to lead to cost-saving investments (OECD 2007). On the report of estimates by Robert Scott of the Economic Policy Institute, giving China’s most favored nation status has reduced 3.2 million jobs in US, including 2.4 million manufacturing jobs. It generates net losses due to trade deficit with Japan ($78.3bn in 2013) at 896,000 jobs together with 682,000 jobs from Mexico, which is U.S. trade deficit between 1994 and 2010 (Forbes 2015). This way the culture of fear for employees was created in developed countries by facing demands for reduction in wages, also employment been adjusted to rapidly changing demand. On the other hand, many industries have more important factors than labor costs, including market access, technologies and other resources that can have human resources (National Research Council 1990).

Thus, the emergence and spread of new forms of work are illustrated by changes in the labor market adapted to globalization and the impact of advanced technologies. Agency work (staff lease), telework, work on a call, various fixed-term employment contracts, part-time contracts, self-employed persons, etc. The listed new (non-spatial) forms of work help to respond more flexibly to market needs and family responsibilities for employees (Jaumotte, Tytell 2007). It means that the existing professions are changing, they are modifying, interconnecting, and there are completely new types of occupations and ways of organizing work. New demands are made for the readiness of people to work in the information (knowledge) society - to continuously improve their knowledge throughout the working age. Along with specific professional knowledge and qualifications, employees thinking, foreign language skills, application of information technologies, communication, management and other abilities and skills are required.

Role of human capital in globalisation

Another aspect that makes a big impact in firms and employees relations is human capital. Human capital is what leads firms to sustained competitive advantage. People who work, their unique skills and the unique team, what they produce cannot be easily repeated as technology or organization design can be (Clegg, Kornberger, Pitsis 2016). Cristian and Laura (2008) argues, that there are two aspects in human capital increase, developing primary level of employment overall, that would help low paid working class in developing countries and minimize the number of skillful workers.

Even so, in Solerin and Eric (2015) research, results indicated negative globalization impact on human capital development, opposite from economic growth that has positive relationship. As a consequence, when skilled labor is transferred abroad, specific knowledge they have may not be used, and it discourage investments in education and further skill training. Wasmer (2002) claims that labor markets differ from European and U.S mainly because of different factors of human capital investment, U.S concentrates on general human capital while European more specific.

In other cases, globalization offers new ways to improve the conditions that workers are facing. In addition, poor domestic working conditions are often not same as international ones. Multinational companies usually not only prioritize costs, but as well as quality of goods and labour, reputation and good governance in host countries. Evidence suggests, that MNCs pay extra wages relatively to employers from home country, also developing countries that attract more foreign investments often ensures better protection to workers (Lipsey, Sjoholm 2004). By investing in installation of equipment in other countries transnational firms together provide employment for the people that is in poverty. Moreover, manufacturing jobs also generate higher domestic export earnings, which can increase the tax base of governments in less developed countries.

Law legislation towards globalisation

Pressure is also felt on the states with strong labor law legislation. As trade in global capitalism fluctuates without state political control and independent economies, the protected workforce differs over time from state systems of labor rights, ultimately becoming part of unregulated employment (Held 1991). Employment law becoming increasingly interdependent, at the same time, the fragmentation of legal sources increased. It is considered that democracy can only be maintained in the countries of the nation by the creation of a global governance system that supports the power of individual states. The conclusion is, for example, that labor rights can only be maintained if national states ‘work together to control the results of policies’.

Private and private-public regulatory enterprise can help employees by monitoring labour standards, but success on this depends not only on managers and shareholders initiatives, but local and national governments too. However, private regulations do not replace public management but complement it (Mosley 2016). As far as working conditions in many places in the world are not ideal, globalization and technological change gives opportunity to publish cases of forced labour, child labour, poor working conditions.

HRM practises importance in globalisation

Schuler and Jackson (1987) explained human resources management (HRM) practices ‘as a system that attracts, develops, motivates, and retains employees to ensure the effective implementation and the survival of the organization and its members’. HRM is an important function within organisation, that focuses on employee recruitment, performance management, employee involvement and training to improve knowledge, skills and abilities of the firm (Huselid 1995). Globalisation has implications on HRM too, and in order to keep efficient it has to adopt multi-national approach by adjusting to different cultures, practises and policies.

HRM has to become champion of globalisation. The role and responsibilities of human resources departments are changing because business is facing globalization pressures. One of the major changes is innovation in the workplace, and companies are increasingly committed to achieving productive work organization (Chaykowski, Giles 1998). Firms need to focus more on attracting human capital rather than financial capital. Demand for talented people grows not only from developed countries but also from developing countries as they seek to build their own country. The primary goal of global human resources is the worldwide management of staff and diverse workforce in the areas of cultural and linguistic skills that are distinguished in different countries.

Previously, the human resources function was generally considered to be the cost center and administrative costs. The human resources departments focused on short-term profit, savings and on administrative efficiency and enforcement. They usually accumulate investments in talented intangible assets, rather than capitalizing and promoting increased short-term profits by reducing discretionary costs for people to develop (Bryan 2007). The role of the modern human resources departments is to focus on the organization's long-term goals. Alternatively, focusing on internal human resource issues, the modern HRM has a balanced and wider approach. They highlight future plans and objectives and value-added initiatives (Adler 1997). For instance, Boots is characterized by better staff managers, improved relationships among colleagues, discourages unfavorable work environments and encourages philanthropy through information activities. The company believes in entry-level vocational training, offering space to move upward over time. In 2001 Boots has become the first such type of company offering formal accreditation to work in the community. This is a model that is now the core of staff innovation.

Since most modern organizations are extremely open systems that are increasingly active in temporary networking tools, Black (1998) suggests that process of globalization has different dimensions, such as economic, social, political, religious and etc. and global firms have to operate in varied countries and territories with diverse, culture, laws and regulations. Passaris (2002) argues that those dimensions can be properly achieved only in borderless, globalized world. Multi-national companies have to execute strategies which is global, meaning - need to embrace closer global and regional integration. As per Vladimic Pucik of IMD, developing and supporting the global mindset is the main strategic driver of global human resource management.

Diversity and its issues in management

The concept of diversity of human resources is presented as differences and similarities and the tension and complexity associated with them, which may include a set of differences and similarities of any kind. According to Thomas (2010), in terms of labor force diversity, we mean derivatives made up of different employees, clients, functions, citizens, family members or religious movements. This means that the greater the variety of all these factors, the greater the tension is felt and the more difficult and more important it is for human resources practices to manage it. Those factors include gender, age, sexual orientation, ethnicity, external signs such as skin color, religion, beliefs, and health aspects, and also includes different lifestyles, thinking styles, different education and experience.

Diversity management practices can be described as an environment, in which all different employees, irrespective of their similarities and differences, can actively and effectively contribute to the competitive advantage of a company or organization. Kreitner (2001) highlights key issues related to diversity management: diversity applies to all employees, not only covering a range of differences, but also a full range of individual differences that make people unique. In the context of diversity management, differences and similarities are two aspects that need to be addressed and managed at the same time. Managers are therefore expected to integrate the collective mixture of similarities and differences between workers into the organization.

For example, Accenture is a global management consulting and professional services firm that has over 375,000 employees worldwide. They believe that no one should be discriminated against because of differences such as age, disability, ethnicity, gender, sexual identity and expression, religion or sexual orientation. Diversity training in the company is divided into 3 different categories: 1) Diversity awareness - helping people understand the benefits of working with a diverse organization; 2) Diversity management; - managing various teams; and 3) Professional development - creating conditions for women, workers from different ethnic groups build skills for success.

Globalization touches a number of key assumptions about the importance of international ideas and knowledge flows, closer economic integration of countries through the growing flow of goods, services, capital and labor, and cross-border movement of people. Cross-border global assignments will have to become a very important part of career planning and development. Pucik (1998) argues that lesser need for knowledge transfer will be required and most expatriates will be as students, who is going to learn through experiences about markets and different cultures together developing long lasting relationships and networks. The development of global leadership has to be facilitated through internal education which emphasises on global experience, furthermore, environments has to be created and supported where global networks are generated and can flourish.

Distance management and the role of technology

Other consequence that human resources practices has to manage is employment relations within a distance. International human resource management functions also include international taxation, international relocations and orientations, administrative services for emigrants, host and government relations and language translation services, and therefore international human resource management is more complex to research and manage (Dowling, Festing, Engle 2008). Managing employees over long distances and possibly in several worldwide sites, HR departments face greater challenges when communicating with their employees.

Siebdrat, Hoegland and Ernst (2009) argues that distant communication is more difficult for collaboration and no presence of coworkers decreases close relationship and lead to conflict. To manage stress between employees some complimenting services are suggested, such as manpower consulting, phycological counsellors, stress management trainers, gyms and etc. (Narkhede, Joshi 2008). Moreover, with assistance technology and good planning skills, workers communication can be managed in the effective way.

Technology has changed the way human resources are managing processes, the way firms collect and store information about employees. Innovations such as distance work, virtual teams and online work programs are related to relevant technological innovations. In addition to the impact of technology on human resources processes, Kiesler, Siegel and McGuire (1984) claimed that IT is now mediating between individuals and organizations and relationships between subordinates and supervisors. Information technology can help attract talented workforce, assure effective recruitment, also learning and training. E-selection is being used to select the most talented applicants in four steps: job analysis, job application, tests and interviews.

Conclusion

Globalization, as any other economic phenomenon, has advantages and disadvantages in labor market. The power balance between firm and employees distributed more on the organizations side. However, as globalization is unavoidable, managing it in the right way and applying certain policies can help developing countries increase employment, help people train skills and minimalize inequalities, provide social security (World Bank Policy 2002). Private and private-public enterprises can monitor labor standards together with governments. People are mobilized and can adapt their skills to the certain market worldwide.

Developing countries that have not been able to globalize their economies are at risk of becoming alien to their situation far from the economic development of other countries. Therefore, economic globalization is a fact of life in the global economy. Developing countries should develop their own internal technologies to benefit from globalization. Globalization should provide opportunities for increasing the supply of goods from developing countries to the global market, improving the output of goods and services and, in the long run, improving labor market performance in these countries.

Human resources management has an important role in globalization too. HR must focus on the organization's long-term goals and future-oriented plans. Instead of focusing on internal human resource issues, human resources departments have to follow a balanced and broader approach (Adler, Ghadar 1990). By applying information technologies advanced analytical techniques, human resources professionals will gain business insight, predict change, and make informed decisions at operational and strategic levels. Global organizations need not only networks that are collaborative and open to diverse cultures, but also have a great deal of talent. It is crucial to learn manage diversity, avoid cohesion issues and develop global leadership.

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