Labour Market Context

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The Labour
Market Context of HRM

Chapter Objectives
• To define internal and external labour markets
• To outline the role of HRM as the interface between an organisation and its labour markets
• To identify the changing labour market conditions under which contemporary organisations operate
• To critically evaluate the implications for HRM of the ‘knowledge economy’
• To outline how labour market trends are impacting upon how organisations utilise labour and how HRM practices are driving labour market change
• To outline the various ways that firms can respond to different labour market conditions
• To outline the notion of organisational flexibility and how various forms of flexible working practices impact on both employers and employees.

Introduction
The purpose of this chapter is to provide an assessment of the contemporary labour market context of HRM and the impact of current trends in labour supply and demand on the practices associated with HRM. Labour market context inevitably shapes the approach a firm takes to HRM and is one of the key factors in determining an organisation’s ‘degrees of freedom’ in HR strategic formation (Boxall and Purcell, 2003). In particular, the extent to which the

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demand for labour, both in absolute numbers and in the availability of particular skills, knowledge and expertise, can be met by the available supply is a key constraint on the range of choices that an organisation has when determining an appropriate HR strategy. Over recent years a range of developments in the economic, political, technological and social spheres have significantly altered the composition of the labour supply and the types of labour required by contemporary firms. Subsequently, an understanding of the labour market context of work organisations is essential to appreciate the challenges faced by
HRM in the twenty-first century.
This chapter begins

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