Resourcing the Organisation HRM 13 Report: Labor Market Dynamics

This report provides a comprehensive analysis of tight and loose labor markets, exploring their definitions, characteristics, and practical examples from the UK and Saudi Arabia. It examines how labor market conditions impact talent planning and resourcing within organizations, specifically focusing ...Read More

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Introduction:
The essay aims at drawing an insight into the tight and the loose labor market. Labor
market commonly known as job market represents the demand and supply of labor where
employers put across the demand and the employees provides the supply. It represent key
component of an economy that remains tied intricately with the market for goods, services and
the capital. At macroeconomic level, the demand and supply remains influenced by the dynamics
of the international and domestic market along with factors like immigration, age of population
and the levels of education. The relevant measure includes productivity, unemployment, rate of
participation, gross domestic product (GDP) and overall income. While at microeconomic level,
firms have been found to interact with the employees, firing or hiring them along with raising or
cutting the hours and wages. The relationship between the demand and supply influence the
hours that employee work and the compensation he/she receive in terms of wage, benefit and
salary. The essay commences with a detailed understanding of the tight and the loose labor
market conditions. The essay also analyzes differences between the tight and loose labor markets
by drawing in practical examples that will help in better understanding and gaining deeper
knowledge. The essay also highlight how the labor market create an impact on the talent
planning and resourcing in Tesco. The essay also analyzes and critically evaluates the planning
activities of HR in Tesco along with a mention of practical examples that portrayed the
evaluation in a manner that seemed applicable in practice.
Discussion:
Definition of the Tight and Loose Labor Market
The macroeconomic overview puts across a vital indicator for the activity of the labor
market that shape the scope through which organizations retain, recruit and develop the people in

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line with wider strategy of the organization. Through becoming increasingly aware regarding the
interconnected factors that persist within this particular dynamic, the HR professionals can
monitor the likely developments with enough pro-activeness and adapt the changes with greater
level of agility. The labor market seems to be that aspect of an economy which has an immense
impact on the lives of the people (Kroft, Lange and Notowidigdo 2013). Developments in the
labor market embarks an influence on the job prospects and security which is central to the future
plans and the wellbeing of the people. The labor market also acts as the key for tracking and
analyzing the business cycle. This is because labor cost, wage, vacancies and job are key
indicators and drivers of developments in the business cycle. Developments in labor market seem
to discriminate the temporary level of economic fluctuations from the changes in the actual
business cycle. Hence, the present state of labor market is a matter of concern. The essay in this
section focuses primarily on the tight and the loose labor market.
Tight labor market is described as a situation when the economy remains closer to full
recruitment and employment and it necessary to place upward pressure on the wages (Jahn and
Rosholm 2014). In other words a tight labour market remains characterized by lower rate of
unemployment, higher quit to employment ratio, short spell on unemployment and an upward
pressure on the wages. The figure depicted below portrays what really happens to the labour
market of the economy that reaches closer to the full employment situation. Once the economy
approaches the full employment increasing level of output is required to be made for meeting the
rising demand for the products. When the economy is closer to the full employment situation
additional labour cannot be easily hired since the pool of the additional workers becomes
smaller. Hence, the aggregate demand for the labour curve moves to the right as the firms prefers
to employ workers however supply does not seem to be available. Finally, the additional demand

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causes the existing wage to rise steadily with workers holding a higher level of bargaining
power. This is indicated by the point C in the diagram which represents a higher wage rate for
cancelling out the additional demand for the labour.
Figure 1: Graphical Representation of a tight labour market
Source: (Krueger 2015)
Loose labor market is described as a situation when there is an excess supply of labor in
an economy that has a constant demand for job. This causes a downward pressure on wage. In
other words, loose labor market can be defined as the employers or the buyer’s market where the
organizations have huge pool of available and potential employees for hiring in a situation with
scarcity of jobs (Nunley et al. 2017). Here the job seekers competes amongst one another for
acquiring same position. The loose labor market is primarily characterized by increased flow of
the immigrants and higher level of unemployment. The figure below represents a loose labor
market where there an increased supply of labor marked by S1 with demand remaining constant.

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The new set of equilibrium, marked in red in the diagram can only be achieved by lowering the
wage rate.
Figure 2: Graphical Representation of Loose Labor Market
Source: (Chen 2015)
Practical Examples to Analyze the Differences between Tight and Loose Labor Market
The labor market of UK is considered to be comparatively tight. During the period
between August and October 2019, the rates of unemployment, employment and the inactive
rates remained hugely unchanged compared to preceding months (ons.gov.uk 2019). The period
witnessed a rise in the employment as well as a fall in the unemployment. The latest Monetary
Policy Report (MPR) put forward by the Bank of England portrayed that the rate of
unemployment for the three months up to August2019 has been 3.9 percent which has been

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lower than the estimated rate of unemployment equilibrium calculated at 4.5 percent (Binette and
Tchebotarev 2017). The tight situation of the UK labor market has also been highlighted by
‘KPMG and Recruitment and Employment Confederation (REC) UK Report on Jobs’ that
reported the fall in the recruitment of the permanent post due to the uncertainty associated with
Brexit. The reports indicated a sharp decrease in the number of candidates with a weaker demand
for the workers. The recent survey data on vacancy showed that post vacancies reduced by close
to 18,000 in three months following October 2019 and by 20,000 in three months till November
(Turrell et al. 2018).
As far as employment is concerned, the number of employed people rose by 24,000 in the
first quarter to close to about 32.80 million in the three months till October 2019 (Friedman
2014). Employment thus reached its peak at about 76.2 percent. The growth of employment
slowed in the year 2019. The figure below portrays the growth in the employment between
January and March 2014. It also portrayed how the growth in employment weakened between
January and October 2019. The slowing growth of employment has been due to the availability
of the few workers.

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Figure 3: Quarterly Figures Showing Weakened Growth in Employment Since 2019
Source: (Pessoa and Van Reenen 2014)
The productivity in UK remained below the pre-downturn level partly due to weakness in
the investment and the uncertainty about futuristic trade relationship with the European Union.
Thus, the weaker growth in the productivity along with a pay growth increased the labor cost per
unit with firms absorbing them in the profit margins instead of passing it down to the consumers.
Saudi Arabia on the other hand faced a loose labor situation since 30 percent of the
population of the country has been immigrants from the other countries (epod.cid.harvard.edu
2019). Changes in the labor laws not only impact the workers but also their families across the
world. As put across by the IMF study, it has been found that remittances from the foreign labor
in the Saudi Arabia accounted for close to 6.2 percent of the GDP of Saudi Arabia (McKenzie,

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Theoharides and Yang 2014). The loose labor market in Saudi Arabia has witnessed higher
unemployment levels in past decade.
The country happens to have a growing and young population. Although an absolute
increase in number of unemployed are expected with the growth in the population of the country,
nevertheless the percentage of the unemployed people amongst the job seekers has substantially
risen from close to 6.8 percent in the year 1999 to about 12.8 percent in the year 2017. The trend
has been driven the rising level of unemployment amongst the women. Figure 4 shows that a
decreasing level of unemployment rate amongst the male while a steady rise in the women
unemployment. In Saudi Arabia the Female Labor Force Participation (FLFP) has been quite low
on global scale and thus it rose from 16 in the year 1999 to about 22 percent in the year 2018
(Wahba 2014). Figure 5 shows how unemployment has been a major issue for the young. The
number of the unemployed individuals portrayed an overwhelming majority of the unemployed
especially between the age group of 20 to 29.
Figure 4: Unemployment rates of Saudi Nationals between 1999 and 2018
Source: (Al-Manaseer and Al-Qudah 2018).

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Figure 5: Rate of Unemployment amongst Saudi Nationals
Source: (Ramady 2013)
How the Labor Markets Can Impact on Resourcing and Talent Planning in an Organization
The impact of the labor markets on the resourcing and talent planning of Tesco has been
described in the following paragraphs.
Initiation of the Zero Hour Contract: This puts across the fact that there should not be
any constraint on the paid hours put across by firms (Rubery and Grimshaw 2016). This helps in
increasing flexibility and reduce the level of uncertainty associated with the job.

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Figure 7: Diagrammatic Representation of Zero Hour Contracts
Source: (Pessoa and Van Reenen 2014)
Growth in Participation of the Female Labor force: This should include boosting the
female labor force through creation of new opportunities of employment. Thus, families with
dual income will have reduced level of dependency on the organization for social and
employment benefits.

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Figure: Graph Showing Participation Rate of Women
Source: 21 (Blundell et al. 2016)
Encouraging Growth of Self Employment: The percentage of the self-employed
workers amongst the overall employment has been found to trend upward during the period
August to October during 2005. This proportion was found to be flat at around 15.1 percent
between the period January and October during 2019 (Aronson 2019). Self-employed workers
had higher level of flexibility over the working arrangements compared to the employees. They
have an enhanced leisure time and on the average seems to earn lower compared to employees.
The aspect of self-employment doubled between 2009 and 2017 with increased number of
people living healthier and longer lives.
Encouraging Growth of Real Wage: Talent retention has become quite vital compared
to the past. The constant labor supply and increase in demand for greater output have encouraged
retail firms like Tesco in doing more for keeping the current employees in job through offering
increased level of benefits, wages and the flexible schedules.

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Encouraging more Flexibility in Labor Market: UK has been found to experience a
fall in work contracts, rise in flexibility of work and introduced short term and zero hour
contracts. In other words, businesses like Tesco are going the extra mile in reaching out to and
accommodating the job candidates who has faced exclusion in past. This implied increased level
opportunities for the caregivers, working parents, older, disabled and the veteran workers.
Analysis and Critical Evaluation of the HR Planning Activities in an Organization
According to Hoch and Dulebohn (2013), human resource planning (HRP) represents an
uninterrupted procedure of systematic planning for ensuring optimum level of use of quality
employees who are considered as one of the most valuable asset. Human resource planning is
known to ensure best fit between the employees and the job while keeping aside the manpower
shortage or the surplus. The HRP process comprises of four key steps which includes analysis of
the present supply of labor, forecasting of the labor demand, balancing the projected demand for
labor with supply along with supporting the organizational goals. HRP thus can be considered as
a crucial investment as it enables the organization to remain both profitable and productive.
Nagendra and Deshpande (2014) put across that the human resource planning allows the
companies in planning ahead such that they are able to keep steady supply of the skilled
employees. Thus, it is also termed as workforce planning. The procedure would enable the
companies in evaluating the needs and thereby plan ahead for meeting the needs. According to
Pournader, Tabassi and Baloh (2015), human resource planning must be flexible for meeting the
short challenges of staffing while getting adapted to the changing situations of the business
environment over long term. The process of human resource planning begins by auditing and
assessing the present capacity of the human resource.

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Nevertheless, the challenges of HRP has been the forces that has constantly been changing like
the employees falling sick, going for the vacation or getting promoted. However, human resource
planning ensure the best fit between the jobs and workers and avoid surplus and shortage within
employee pool. Therefore, in order to satisfy the objectives, the HR managers initiates plans for
finding and attracting the skilled employees, training, selecting and rewarding best candidate,
coping with the conflicts and absence, promoting the employees while letting some to move off.
Thus, Prashanthi (2013) stated that the investment in the human resource planning has
been the most crucial decision on part of the company. This is because the goodness of an
organization depends on the employees. When an organization has the best practice and
employees in place, it can understand the difference between sluggishness and productivity that
results in the profitability
Noe et al. (2015) talks about the four broader steps integrated within the process of
human resource planning. The initial step in HRP lies in the identification of present supply of
the human resource of the company. In this particular step, the human resource department
studies the organization’s strength based on skills, total number of the employees, benefits,
positions, performance level and the qualification. The second step require the firm to outline
future of the workforce. Here, human resource department might consider the issues like
promotions, layoffs, retirement and transfer and any other factor that drives the future needs of
the firm. The third step lies in demanding and the forecasting of employment. The human
resource is known for creating gap analysis that portrays the particular needs for narrowing the
labour supply of the company against the future demand. The fourth step will revolve around the
goal of the HR planning that focuses on having optimal staffs to ensure that the company earns

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its desired benefits. HR planning need to be a steady occurrence due to the change in strategies
and goals of the firm.
Two Examples of Human Resource Planning to Evaluate its Implication in Practice
A good human resource management and planning results in stronger communication and
rapport between the management and the employees. It is also the result of the development
plans for an individual development of employee, lower turnover of the employee, lower level of
absenteeism, lower level of safety incidents, compensation program, higher morale, better output
quality, effective operations, satisfied customers and the well trained employees. However,
employee benefits and salary competitiveness requires regular review in each two year. Thus, the
plan must identify the promotion and hiring policies and the plans for employee development for
the improvement of the employee performance.
The first example shows how employee are ensured safe and supportive workplace
through implementation of safety plan by the human resource. As far as the objectives are
concerned, the HR department put across safety checklist and ensure business operation that
meets all the safety regulation. The workplace injuries are also reduced to the zero level. The HR
tries to involve the employees through internal committee or team thereby making the
environment a better place to work for. The HR also tries to support the health and the wellness
program through an additional cost and benefit program. The strategy will mean supporting the
company’s program in engaging the employees in the health improvements and practices that
would ensure safety of the physical work space. The HR also provides an access to the flexibility
of the work programs to ensure an effective work environment. However, the success of the HR
plan is marked by the reduction in the injury, reduction in the time off request, reduced level of

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absenteeism due to job related injury, getting the employees to work, regular inspections of
safety measures and regular meetings on the safety of employees.
The second example will focus on the HR plan to reduce turnover of employee and
enhance the retention of employees. As far as the objective is concerned, the HR plan reduces the
turnover of employees through retaining the better employees and making suitable hiring
decisions. The strategy thus revolved around reducing the turnover of employee and increasing
retention through the mentorship programs, initiating new orientation program for employees,
recognition program and offering compensation program for the employee. As a measure of
success, the orientation program must be completed within 30 days and mentor feedback and
evaluation of performance carried out annually and timely. As a part of HRP, exit interviews
were carried out for discussing the reasons for employee departure and thereby acting on the
information. The HR also tries and increase the new positions and fill them from the existing
positions within company. Here, as a part of the plan, the HR also undertakes an annual
employee survey for assessing their feeling regarding the firm and listen to the employees
thereby acting on key elements.
Conclusion:
On a concluding note, it can be said that tight labor market conditions persist when labor
supply is constant but there is a higher demand for the labors thereby leading to a hike in the
wage rate. While the weak labor market is a condition when the demand for labor is constant but
there is always an excess supply of labor thereby causing a downward pressure on the wage rate.
The essay also portrays how UK seems to experience a tight labor market condition with an ever
increasing employed population. While loose labor market situation is portrayed by Saudi Arabia
due to the higher percentage of immigrants in its population and rise in the women

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unemployment. The essay also evaluates how the labor market condition evaluates the talent
resourcing and planning in Tesco. One is also able to get an insight into the aspects of human
resource planning along with insight to examples that explained its practical application. Human
resource planning acts as the key activity in the business which includes planning of workforce,
initiation of development plans for employee, building of salary programs and employee
benefits, development and training and the firing and hiring of the employees. Hence, human
resource planning acts as the critical element of the business plan.

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