Governmental intervention in trade includes economic and non-economic measures. Economic measures include the prevention of unemployment, the promotion of industrialization and the improvement of the position of the country vis-a-vis other countries are the possible rationales. Non-economic measures conform to the maintenance of essential industries, the prevention of sensitive technologies (e.g. diodes, data converters and resistors) or strategic materials, the maintenance of the sphere of influence and the protection of national products that preserve national unity (2006).
When wages are behind the prices, over-manning/featherbedding, unnecessary positions in the market are produced, the credibility of trade unions will be questioned and the management of investment will never prioritize modernization. Commerce will be subjected to restrictions. The trade system whose duties are levied only for revenue will somehow disregard its effect on home industries and home country employers. Such trade restraints will motivate the exportation unemployment. One incontestable effect of government intervention though is employees’ safety and security. Labour legislations provisions for employer’s responsibility about workmen’s compensation when industrial accidents happen (2006).
In the United Kingdom
The imbalance between British consumption and production affects greatly on employment managing and relationships in efforts to maintain the value of pound/euro versus dollars. The UK will seek help from allies and resort to complex form of financial measures. The unfavourable balance of trade where British consumers are buying more products from foreign markets and investors in the euro-zones than the British could sell.
In order to restore the balance between British spending and producing, the government may freeze wages and prices. Deficits may be lessened, the public will prosper –inspite of high taxes and inflation--, the prices will reach its equilibrium but the wages will be retained. Employee, employers, stockholders and the English working men are also consumers. Not to mention that they are already paying high income taxes.
Economic policies such as anti-trade union legislation, privatisations and general free market approach serve as hindrances to the development and improvement of employment relationship. . Anti-trade union legislations infringe on the provision of benefits to members such as ensuring members against unemployment, ill-health, old age, and funeral expenses; collective bargaining power where negotiations with employers over wages and working conditions; industrial actions like organizational strikes or lockout-resistance. It is hard to maintain and improve the employment conditions of the wage-earners without trade unions (2005).
Privatization, as a part of government intervention, has a negative effect on the employment relationships. State-owned enterprises may borrow money from debt markets cheaply than private enterprises. Privatizing may force the company to raise prices, lay-off workers and/or lower wages. Essential profitability of private organizations’ operations will be done by contractual employment and payment blocking or wage obstruction.
Moreover, dangerous cost-cutting measures might be taken in order to maximize profit. Such measure can fuel misunderstanding and disagreements between employees and employers. Interference can also harness confusion in organizational relationship regarding the power structure from a state-owned asset into private hands. Trade unions oppose privatization because of corruption and accountability, lack of market discipline, cuts in essential services, natural monopolies, concentration of wealth, political influence, downsizing and profit ( 2006).
Non-transparency is going to serve those who can pay disregarding the needs of the majority which is anti-democratic. Furthermore, this can lead to the abandonment of the social obligation to those who are less able to pay and where service is unprofitable. A true competition may be at risk and profit is concentrated to owners instead of the common good. A conflict may arise wherein service level is at stake. More likely, private companies cut back on maintenance or staff costs, trainings, and etc., sacrificing the development and improvement of its workforce ( 2001).
Privatization, in some cases, is acceptable as it consistently improves efficiency through improved incentives and reduced cost. In the public sector, advantages of privatizing a company include improved transparency, accountability of management, improved internal controls, regulatory systems and better financing. Perhaps, the intervention must deal with redistribution and employee retraining (2006).
Sustainability hass also “to do with job retention, job stability and career advancement”, employee and employer behaviour, employment measures, sufficiency and technical and economic change (2001),
Policy options includes intensive and flexible sequencing options, trainings to support advancement, impact of labour markets on retention, pilot testing of pre- and post-employment services and role of intermediary organizations in delivery of services. Employment sustainability can be addressed in a number of ways including: job matching mechanisms, work trial supports and preparation assistance, development and further development of skills, expansion of discretionary approach, utilization of knowledge and skills, continuation of support in the workplace, liaison and mentoring system. All of these can develop strategies to maintain a sound relationship between employees and employers through the improvement of by-laws, economic laws and codes, and existing policies in accordance with Labour Party’s objectives and the goal of trade unions.
Through employment sustainability, individual and family welfare is enhanced; the skill-base of the economy is increased with positive benefits for international competitiveness; and the public expenditure on welfare benefit is reduced” (2001).
Positive interventionism might be of big help if the policies will include addressing supply and demand, targeting to ensure employee-employer effectiveness, seamless service provision which transcends across the working public, and support on cases of unemployment.
In macro dimension, the government regulates through monetary and fiscal policies in pursuing of economic objectives. While, in micro dimension, the government focuses on both labour and product markets to support and achieve policy objectives. These policies include agricultural, education, training, manpower, competition, energy and transport. It iis often viewed with multi-national complications and burdensome regulations (2003).
Regulations and deregulations build structural and organizational confusion within an employer-employee relationship and the economic spectrum in general. In January 1994, the Deregulation and Contracting Out Bill proposes 23 measures including 605 regulations. Mr. Michael Heseltine, then Board of Trade President, states it was the ‘largest bonfire of controls that has taken place’. It introduces legally-binding undertakings in merger cases to avoid investigations and small companies with less than £90K are released to have their accounts audited. These changes bring the administration to mandate compliance costs of new regulations. However, the weakness of these new regulations imply intersection on traditional practices of long-time companies. Adaptability to ever-changing policies and regulations produces bewilderment among the employers and employees.
The Labour Party, in order to adjust quantifies the costs and benefits of the regulations in 1997. Regulatory Impact Assessment (RIA) proposes UK legislation that has an impact on businesses and company models including employment relationship within a certain organization or body to reduce ‘red tape’ (2003). Some people questioned the particular relevance of regulation and deregulation, as a form of intervention, in the industry and the economy as it is not making things better, but, in fact has worsened matters specifically in underlying consequences of employment relationship. For example, the Department of Trade and Industry intervened in addressing the needs of the manufacturing industry which is beyond their jurisdiction (2003).
On a more positive note, intervention may aim at increasing competition with regards to the effect to strengthen the competitive pressures in the market. For example, in December 2002, the Office of Fair Trading proposed to deregulate the market for dispensing National Health Service prescription as an acceptable mean of encouraging competition. The greater the competition is, the more companies will emerge and the more jobs are created. Through intense competition, the public is also benefiting because of low prices, the existence of reliable services and the power to have options. Accordingly, government interventionist policies are basically argumentative the way it is perceive by the major political parties in the UK.
In both directions, the government affects HRM approaches and practices and the characteristics, context and priorities of the organization. Recently, HR policies and management “rights” are increasingly recognized to upgrade the capacities of the workforce ().
Intrusion in HRM in the UK has something to do with the management of opportunities and risks and the location of authority. The HRM strategies must be related to changing environmental conditions. Moreover, sustainability and growth must be protected from potentially harmful influences and must be ready to take maximum advantage of the challenges and opportunities. Provided that there is a need for innovation, it is the top management’s duty to carefully manage those opportunities and risks and development of such in relation to its resources and those that the company chooses not to pursue. Government interference can alter the company’s direction as to what to develop and not to develop and may command things that do not relate with the company’s cultures and practices like positions differentiation among senior workers and expertise (1995).
Positively, the interference in the matters of peopleware management is the development of shared beliefs in values, standards goals and ethics. Stratification is another good effect of interventionism which leads to cooperation and monitoring of performance achieved. Thus, conflicts, grievances and disputes are settled into a group-specific approach.
Centralization of management standards that are imposed by the state may not be applicable to HRM in different sectors. There is no single approach applicable to any people management because of distinct practices in every company. An ethnocentric approach for a company may not be suitable for another. In the European context, corporations vary in business models. The government’s intrusion might affect the competitiveness and constructive flexibility of a company. This concepts state that national competitiveness may best be achieved by minimizing restrictions on managerial prerogative. Implicitly, workforce flexibility can be successful through minimal legislation and removal of barriers (1992). The government may intervene through extensions of legal rights and social costs for the workforce.
Through government intrusion, the company’s identity, quality circles and quality work of life and social responsibility suffer. Local authority jurisdictions, in effect, are influencing the general movement of major organizations and the increasing scale of privatization. Legislative acts for local government services are putting companies out to compulsory competitive tendering. As a result, confusion and tension between the extent of generic nature of HRM and the manner in which the company must be structured and managed are built ( 1992).
The basis of ownership, financing and profit motivation between organizations and companies when interfered might create problems regarding accountability and credibility of the HRM staff. There will be differentiation on planning and operations and imbalance between commercial interests particularly on profit, return on capital employed and market standing and social interests. When the conservative government embarked on a major denationalization or privatization, it involved the selling off of shares and subsidies and increased competition for public monopolies. The public sector organizations, on the other hand, were run autonomously on a day-to-day management but the government still controlled such companies for national interest. The government required public corporations to make efficient use of their resources by ensuring a given minimum rate of return on investments. They were also mandated to charge prices based on actual cost of supplying goods or services to certain groups of consumers ( 1992).
The government’s intrusion replaced the goals and objectives of the organizations and how they were going to carry out their social and commercial responsibilities at the expense of their financial stability. However, the intrusions gave clarity to distinction between commercial and social. It was now divided as profit organization and not-for-profit. Non-profit organizations include charities, private societies and religious organizations. Even though, not-for-profit public sector organizations must ensure cost-effectiveness, efficiency and economy in their operation and still allowed government’s intervention.
The efforts of the European Union to harmonise employment practices among member states may hinder competitiveness and relationship development. According to (1999), best practices, contingency and linkages contribute to and improve business performance. Such identified practices, approaches and strategies when passed through interventionism can affect the effectivity of HRM in the long run. A most recent issue on HRM interference is offshoring. This can reduce costs and enhance service but it can also unnerve and demotivate home country employees said Jonathan Gardner, an economist at Watson Wyatt. Among country employees this produces job-insecurity in UK-based companies. Perceived threats to UK employment from offshoring to developing countries weaken security policies. Great job migration and/or offshore outsourcing are increasingly alarming. Companies neglect the idea of combining business models and setting rather than focusing on offshoring to reduce labour costs (2007). This is high time for the government to intervene and trade unions to realize the economic implications on the rights and interests of home country employees.
As I mentioned above, intervening factors in HRM focuses on training on employees. Since the UK lacks skilled workers, training and retraining is a must. The (BCC) reports 55% of the employers are finding it hard to recruit skilled workers. As the effects of globalization is more widely felt, the British economy must remain competitive and the government must support initiatives in employee development (2007).
The tariffs change the movement of costs of the business and companies but it can also protect domestic workers from competition from abroad. The companies may resort to cut other costs to maintain competitiveness, increase in prices, market the product more effectively or find ways of increasing productivity.
In the United States
In the United States, President tested the protectionism technique to extend support to in the steel industry workers in the Midwest of the United States. The industries in Illinois, Iowa, Ohio and Wisconsin complain that “foreign steel producers were ‘dumping’ cheap steel onto the US market and thus, making them uncompetitive”. Such protections are directed to the protection of infant industries. This measure is an opportunity to grow and compete in an equal basis (2003).
What Bush did is that he imposed a tariff on steel imports into the US up to 30%. The new tariff regulation benefited steel producers but dismayed the steel users. The latter faced the choice of either continuous buying from foreign suppliers at a higher price or buy from the US producers. Contrary to the real purpose of the tariff-imposition, US steel producers took advantage of the protection and raised their prices.
The companies in the US steel industry rearranged the supply chain and the production process. The tariff did not affect steel imports towards Canada. The process helped keep costs low because they did not have to pay the tariff. The problem of the steel industry in the US was solved by market interference but it created a problem somewhere else. Steel manufacturing, when transferred to Canada, created a no-need scenario for the workers in the US. There must be costs and benefits balance.
There is a certain adaptation limit to the extent to the principle of comparative advantage. The significant impact of comparative theory may result to many assumptions. Comparative advantage assumes that: political and economic conditions are right for free trade; countries adopt global welfare view, factors are movable from use to another and countries are in the position of directing resources to differing uses.
Trade barriers are government policies or regulation that restricts the international trade. These barriers decrease the overall economic efficiency. Trade restraints motivate the government to prevent and diminish unemployment in the market (2003).
Policies may directly or indirectly favour an industry, product, services or company over the other by means of regulation. An example of a regulation is government inspections on meat production. In order to encourage production to influence the meat purchase, the government may favour large producers instead of small ones.
Tax, labour and production subsidies, on the other hand, benefit the workers and small companies more than the large ones. Labour subsidies are use to pay for labor costs. It includes the tax deductions of the workers. Tax subsidies provide accelerated depreciation for certain industries or in equipments and/or consumption tax exemption. In developing a particular industry which will be of great benefit to the government and the people, the government may provide direct production subsidies through cash payments.
The labor relations law governs relations between unions and employees. It guarantees employees’ rights in organizing, forming and joining labor organizations, collective bargaining with their employer, choosing a representative or refraining from activities. The federal courts, in accordance with these laws, may interfere against boycotts of unions and, therefore, suppressing the rights and interests of the employees and union members. On the other hand, the federal injunctions may be applied to employers who are practicing unfair labor practice ( 2003).
Some laws are very limited in scope that they are almost promoting discriminations. The State Labor Relations Act (SLRA) of Connecticut intends to equalize the bargaining power of employers and employees. They are supporting the collective bargaining agreements and regulate relationship of employees and employer. The act also provides remedies for unfair labor treatment. However, the act does not apply to members of religious orders, agricultural workers, domestic workers and person’s employed by their parents, spouses or children (2003).
The New South Wales Legislative Assembly came introduced the Workplace Surveillance Bill. Without a court order, the employers who are engaged in surveying emails and website access or the use of tracking device will be charged offensive. Interceptions of employers to private communication will lessen. It will promote transparency in the workplace (2003).
Higher inflation and interest rates, as macro-economic indicators, are affected by out of control pay drifts. The rise of earnings reflects flexible pay conditions and a highly-skilled workforce. If the government will let the pay drift continue the danger will be extra earnings will exceed performance gains.
The trends in pay influence the level of interests. It can jeopardise planning by affecting the costs of capital relatively to business. The government’s intervention and decision-making will be focused on exchange rate. The effect of out-of-control pay drifts is felt by the part-time employees more compare to the pay of individual workers. The average earnings are results of changes in labour force structure (Super Stock Picker).
The pressures on starting salaries and work-pay schemes are the effects of pay drifts. In this situation, the employees suffer more than the employers specifically part-time workers because they are not enjoying bonuses and other pay benefits. The cost of living will rise but the payment level will not (Super Stock Picker).
So much movement in the employment market leads to job destruction and not creation. 2.65 million British private jobs are destroyed annually while 2.76 million created. Aside from regular skills upgrading, provided by the government, they must also intervene on policy development regarding provisions for employment security, extensive training, improve intranet policy management, reduce status distinctions and barriers between large- and small-scale industries and policies on compensation linked to performance (2007).
Interventionism may affect either public or private organization, domestically and internationally (1973). However, interventions of the government must be placed where intervention is needed so as not to worsen the situation and hamper employment relationship and HRM goals, objectives, vision, cultures and practices. Sustainability, both for employment and managerial aspects, competitiveness and flexibility must be maintained and appropriately structured for a higher profit and workforce efficiency.
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