Introduction.
Globalisation has reached the four corners of the Earth, during the past few years: in fact, we have witnessed a definite increase in the number of international companies operating globally, and in the number of products and services available on the market. The European Union serves as a clear example of globalisation practice, with the creation of the Single European Market: the EU has allowed for higher mobility levels among Member States - the free movement of goods; services; people and capital.
Globalisation means that for instance, Asian products can be purchased in Europe; likewise European or American products can be found in Japan, China etc. Undoubtedly, technological advancements - telephone, fax and more recently, the internet - have paved the way for globalisation's fast development. Now, people and goods are just one phone call or one email away. To arrange for goods to be collected in a foreign country, is just as easy as arranging for them to be collected and shipped domestically. Inevitably, these 'closer' interactions among international companies and consumers have led to increased labour mobility among countries - more and more people choose to live and work abroad, as languages are more widely spoken.
However, an argument that has often been put forward, by anti-globalisation parties, is that globalisation has negatively affected employment rate levels in developed countries. The question we attempt to answer in this paper is whether or not, higher unemployment levels have directly resulted from the impact of globalisation.
Free trade has meant that numerous trade barriers among countries, have been abolished or 'eased' - e.g. some import tariffs - in order to allow for a better flow of goods around the globe; and at the same time, to take advantage of the availability of resources, which might be cheaper to acquire in a foreign country, rather than acquiring them domestically. As pointed out by Burtless (2000):
The point of trade is to exploit the advantages of differences between nations. The gains from trade would be vastly smaller if all countries were identical.
The advantages, therefore, of a globalised world - as mentioned previously - consist of: the wide range of products and services available on the market - thus the consumer has a wider choice, leading to a higher bargaining power; organisations have easier or improved accessibility to global resources, e.g. raw materials; the transfer of technology and knowledge; and generally, the move toward greater economic integration.
The side effects comprise: an increase of imported goods which are in direct competition with the local products; thus hindering domestic production, as a result of lower demand; and the switch to cheaper locations for the procurement of resources.
The impact, as many people claim, that globalisation has had on labour, falls under the latter category. Over the last ten years or so, we have seen many international organisations moving their production facilities to those countries were resources are cheaper: specifically, where the local workforce is less costly to maintain. As a consequence, a very high level of 'organisational restructuring' has taken place in the Western world: the workforce has been dramatically reduced or made redundant altogether, and entire production units have been moved to places where labour is cheaper. For example, recently Ford shut their production plant down in Belgium and relocated to Spain. Obviously, this was a terrible hit on the local population and the relative unemployment rate. There are numerous examples like this.
However, has this trend of switching to a cheaper labour force - therefore resulting in a drop in domestic employment in those sectors - been caused by the advent of globalisation? People have the tendency to believe that globalisation and increased free trade, will cause them to lose their jobs; and of course, there are a number of examples that support this belief - e.g. companies relocating. As stated by Burtless (2000): fear of global integration taps into a large reservoir of public anxiety about slow income growth, potential job loss, rising inequality, and a seeming loss of control of our economic destiny.
However, there's no statistical evidence that supports this claim. On the contrary, overall unemployment rates seem to have gradually improved, worldwide. What world economies have experienced, instead, is a change in the structure of the labour force: as advanced economies develop new technologies and change their working practice, different sets of skills are required from the workforce. Consequently, new jobs are being created in those areas where skilled- or high-skilled workers are needed; whilst, jobs in those areas that require less skills, are being eliminated and exported to those countries where it makes more economic sense. Slaughter and Swagel (2000) write that, An important trend in labour markets in the advanced economies has been a steady shift in demand away from the less skilled toward the more skilled. This shift in demand toward a better-skilled workforce has caused relatively large income gaps among countries and between less- and high-skilled workers. As Slaughter and Swagel (2000) state,
This trend has produced dramatic rises in wages and income inequality between the more and the less skilled in some countries, as well as unemployment among the less skilled in other countries.
The difference between incomes and employment levels in various countries widely depends on the structure of the labour market: countries with a 'decentralised labour market and flexible wages have experienced lower incomes for the less skilled workforce'; and 'countries with a centralised labour market and fixed wages, have experienced higher unemployment rates'.
As far as the effect of importing is concerned, some countries might experience a slight fall in employment level. According to economic theory, imports cause the price of the local products to drop, which leads to lower incomes or possibly, redundancies. Nonetheless, jobs are being created in those areas a specific country has competitive advantage in. Slaughter and Swagel (2000) write that,
Firms respond by shifting resources toward industries in which profitability has risen and away from those in which it has fallen. Trade flows thus give rise to shifts in the demand for labour, as more workers are needed in newly profitable sectors.
Therefore, there is no much proof that globalisation and free trade have a direct negative effect on the labour market. It can be argued, that labour is more directly affected by the change in technology instead, leading to new ways of working and also, the fact that advanced economies are increasingly switching to the service industries, as opposed to 'manufacturing'.
We have stated that, in the global economy, as a result of lower trading barriers, goods and people move and circulate more freely. It has been pointed out that international organisations take advantage of economic differences among countries, and increasingly move those less-skilled jobs to countries where labour costs are lower. What are the issues, in terms of Human Resources Management, which the organisation is faced with?
The first and probably most important issue that companies will be faced with is the impact of culture. Understanding the cultural elements of another country or society must be the top priority for companies wishing to succeed across borders. Today's managers have to have the ability to understand and discern cultural factors. An obvious and important factor facing the company operating globally is the different languages spoken. Although, more and more people adopt English as the business language, still, miscommunication can and does take place because various groups might not understand a word, or sentence in the same way.
Culture describes the set of values and beliefs different societies identify themselves with. What constitutes culture? A sense of Self and space, as described by Harris (1989): some people require more space between one person and another. Language and communication: these include all aspects of communication - oral and body language (even gesture means different things to different people). Appearance: how people dress, style etc. Time / timeliness: Anglo-Saxon people seem to be more punctual than Mediterranean. Values and beliefs: how people tend to think; what they like or don't like; religious influence. Understanding cultural differences is key to the company's success and people management. To be 'culture-unaware' causes troubles within and between organisations, as many of them have experienced.
As Cascio and Bailey (1995) write: Cultural blunders by well-meaning but misinformed managers have led to major problems in international operations. It's important to understand different cultures because different management and organisational approaches need to be adopted in different countries or at least, in countries which are in the same geographic region. It has been proven, time and time again, that many of the Anglo-Saxon's developed management techniques are not always helpful when applied, for instance, in Southern European countries. Again, Cascio and Bailey (1995) write: General principles of management and specific human resources practices evolving out of management theories are currently being seriously questioned in various cross-cultural settings.
According to a recent survey (Cascio and Bailey, 1995), the following trends or factors were identified as being the most crucial, by companies spread in every continent:
1. The role of human resources in international operations
2. Managing a multicultural workforce
3. Developing management talent in a global business environment.
Both Schein and Hofstede offer good insights on how to understand and approach cultural differences between employees in an organisation.
Schein (1992) separates culture into 'levels' where, as he writes levels refer to the degree to which the cultural phenomenon is visible to the observer. He implies that, often, culture is not properly understood because people do not differentiate the levels at which it manifests itself. Schein's cultural levels can be described as follows (please refer to Appendix 1):
. Artifacts - this is the first level and it comprises all the elements which one 'sees and hears' when first being in contact with a different culture. This includes things like: language, behaviours, technology, products, style, values, artistic direction, myths about the organisation; the environment, in general.
. The next level is defined as espoused values - this level indicates the individual's values; for instance, what is right and what is wrong. When working as a team, and there's a problem to be solved, the solution or solutions that will be provided will be based on the employee's personal assumptions. Schein writes that (1992), Those individuals who prevail, who can influence the group to adopt a certain approach to the problem, will later be identified as leaders.
. The last level in Schein's hierarchy, comprises 'basic assumptions'. Schein explains that people have the tendency to take things for granted. If, for example, a certain solution to a problem was successful once, people tend to assume that it will always be that way. Basic assumptions include: feeling, thoughts and perceptions, which ultimately are the elements that form culture. Schein refers to culture formation as the shared patterns of thought, belief, feelings, and values that result from shared experience and common learning, results in the pattern of shared assumption - of a group.
It follows that, within an organisation, it is vital to understand how the employees, managers etc., act and react in a given context, according to their assumptions; and as Schein writes, along which dimensions leaders think in creating and managing groups.
Hofstede (1980), on the other hand, discusses four dimensions of culture. The first dimension is 'power distance'. In general, this is a concept based on 'human inequality': when considering society, it refers to differences in 'wealth, power and prestige'. In an organisational environment, power distance refers to the formal boss-subordinate relationship. Hofstede writes (1980), According to Mulder's Power Distance Reduction Theory, subordinates will try to reduce the power distance between themselves and their bosses and bosses will try to maintain or enlarge it. However, the 'optimal' power distance between boss and employee will depend on societal belief. This implies, for instance, to which degree subordinates will be willing to disagree with their bosses. Furthermore, according to Hofstede, inequalities within an organisation point to the employees' different qualities, abilities and power.
Another dimension of culture is 'uncertainty'. Everyone lives with a certain degree of uncertainty, and various cultures have a different way to deal with it. Uncertainty is often linked to anxiety. Within an organisation, uncertainty is related to the environment - basically, all those factors which are out of the company's control. The third dimension is individualism. This dimension differentiates between people who prefer to be part of a group and people who are more 'solitary' - individualism versus collectivism. This depends on the type of society people live in: some people grow up in small family units - parents and children; other people have contacts with more relatives - grand-parents, under/aunts and cousins. Hofstede (1980) writes, The level of individualism/collectivism in society will effect the organisation's members' reasons for complying with organisational requirements.
Lastly, sexes and sex roles in a society are determined by the prevailing culture. How women are viewed, what their role in society should be, as opposed to men's role. In the working environment this is visible in the division of labour. For instance, most managing positions are still filled by men.
Following the process of studying and understanding cultural differences, the Human Resources' managers' task should be to learn about the local government and employment policies, and business protocol, before hiring foreign staff. Human Resources Management has the daunting task to comprehend the complexity of the workforce mix (Cascio and Bailey). This, together with a clear plan for selecting and training foreign employees will play a major role in the company's success. One way to develop a better understanding of cultural elements is to hire managers with international experience and background, if possible; companies are increasingly approaching the issue this way.
Brown (1995) discusses 'cross-cultural training' in his paper, as an important aspect of international staffing, which HRM should consider. Brown writes that cross-cultural training should be concerned with teaching people how to deal with cultural different others. Unfortunately, it seems that due to the lack of 'awareness' on behalf of employees, trainers are often forced to having to explain why it is important to understand cultural differences, instead of providing the right knowledge. Brown identifies four elements which people should be trained on: awareness; knowledge; emotional challenges; skills/behaviours. Therefore, a good cross-cultural training should equip the employee with the proper level of understanding, to be able to face multi-cultural challenges. HRM has a difficult task in identifying and applying the right strategies suitable for an international workforce.
Conclusion
Although globalisation is viewed by many, especially politicians, as the main cause of unemployment, it has been stated that there is no empirical evidence to support this claim. As a matter of fact, globalisation and free trade have led to economic development and integration; they have allowed firms to compete internationally and to exploit the differences between countries, thus to maximise their potential and relative profits. Globalisation has allowed world markets to 'come closer' and the result is that consumers have access to a wide range of high quality products and services. The fact that the labour force has been, in some cases, negatively impacted is to be attributed to other causes, namely technological developments and different working processes.
As we have seen, Human Resources Management will play a major role in dealing with international staff, successfully, as it will have to take cultural differences into consideration and ensure that appropriate training programs are set up for all involved parties.
Bibliography
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Shenkar O.; 1995. Global perspectives of Human Resources Management. Published Englewood Cliffs, New Jersey: Prentice Hall.
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