As a Human Resources Manager, the level of supply and demand in the labour market affects the recruitment and retention of employees. Before I analyse the impacts of supply and demand in the labour market, I will first define what the labour market is in the context of HRM. According to Wilton 2013, labour markets are “the mechanism by which human labour is bought and sold and how the number and type of available jobs, the labour demand, is matched with the number and type of available workers, the labour supply.” In other words, employers are the buyers of labour with the employees being the seller. Labour markets can be segmented in many different ways, such as geographic location, occupation, or industry but for the purposes of this
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These schools of thought are known and the Radical, Institutional and Neoclassical theories. The Neoclassical view takes the stance that the wage or remuneration of the employee is determined by the interaction of the demand and supply for labour (Ross & Whitfield 2009.) Intervention isn’t necessary and is a market imperfection as both the suppliers and buyers of labour are viewed to have equal amounts of power in determining wages and working conditions.
The Intuitional approach views the labour market through the assumption that organisations are embedded in a winder institutional context and that the labour market cant be understood through traditional market principles (Najeeb 2014.) Institutionalists view the market as incapable of creating fair outcomes with demand and supply not providing sufficient explanation for the level of wages. The view is also more open to intervention in the market as other organisations such as trade unions are seen as a natural development and counter to the power held by employers.
Finally the radical approach believes that the employers desire a high rate of return on their capital by minimising labour costs and maximising work. It divides the economy into two divisions: the owners of capital (the employers) and the suppliers of labour power (employees), the interests of both clashing (Ross & Whitfield 2009.)