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Managerial Implications of Changing Workforce Demographics

Challenges

Shakti Singh Vinayak & Shaon Banerjee

12/31/12

Xavier Institute of Management Bhu!anes!ar

Contents

Abstract
" 2#1# stu$y %y Stanfor$ Center on longevity title$ &'o(ulation "ge Shifts !ill resha(e the )lo%al *orkfor+e, In$ia is all set to overtake China as the +ountry !ith the largest *orking "ge 'o(ulation %y 2#-#. Moreover China/s !ork for+e is estimate$ to re$u+e %y 110 in the same time1frame after
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(eaking %y 2#1-. 2e+lining fertility rates among other reasons many of the mature e+onomies like 3a(an an$ )ermany have alrea$y %een $e+lining. 4o!ever 5m(loyment is not a linear fun+tion of availa%ility of a vast la%or (ool. 5m(iri+al analysis suggests that the unem(loyment rate $e(en$s vastly on the gro!th of the +ountry. 6hough in theory In$ia has a very high (otential $emogra(hi+ $ivi$en$ the young (o(ulation !ill only +ontri%ute to the e+onomy of In$ia only if they re+eive the right e$u+ation an$ training o((ortunities. )enerali7ing the tren$s %ase$ glo%ali7ation of the !ork1for+e is not via%le %e+ause organi7ations $iffer %ase$ on their 8o+al 9es(onsiveness an$ )lo%al Integration. In e+onomies like China either $ue to (o(ulation +ontrol measures or some other reasons the (er+entage of young (eo(le is re$u+ing +onsistently. If this tren$ +ontinues then they !ill not enough em(loyees to meet the in$ustry nee$s !hen the +urrent generation retires. In su+h +on$ition three things +an %e $one.

6o set u( units in su+h +ountries !ith sur(lus man(o!er availa%le. 4ire la%orers from outsi$e the +ountry. "utomate as many (ro+esses as (ossi%le.

5a+h of the o(tions !ill have to %e e:er+ise$ +onsi$ering the legal environment of the +ountry !orking +on$itions of the foreign nations an$ te+hnologi+al a$van+ement in the nation. 6he organi7ations !hi+h may run short of man(o!er in future shoul$ start (re(aring for it from no! on to maintain a sustaina%le +om(etitive a$vantage.

Objective
6he aim of this (a(er (resentation is to i$entify an$ analy7e ho! this (henomenon is going to im(a+t !ork1for+e management in the ne! age. *e have trie$ to take into a++ount all the relevant tren$s in !orkfor+e management (ra+ti+es from over the !orl$. *e have also trie$ to e:ten$ the s+o(e of this re(ort to i$entify the various em(loyment relations +hallenge in the In$ian +onte:t o!ing to the se+toral shifts in em(loyment to the servi+e se+tor.

The Changing Face of Labor demographics orld! ide


6he nature of the glo%al !orkfor+e has %een in a +onstant state of flu:. 6he re(er+ussions of this (henomenon have varying im(li+ation for the la%or market of the e+onomies %ase$ on its nature. )ermany a +ountry !ith a %irth rate of 1.3; is estimate$ to have one1thir$ of its (o(ulation a%ove ;# %y 2#3#. 6he retirees are <ualifie$ for (ension at almost =#0 of last $ra!n !ages. 4o!ever the +iti7ens of 5ast )ermany ma$e their +ontri%utions in 9u%les a !orthless +urren+y at (resent. 6herefore mu+h strain is (ut on the !elfare state. 6he ne! generation no! looks at a (ension (lan !here they !ill +ontri%ute more for less returns. 4o!ever )ermany/s 'rofessional servi+es an$ %usinesses are heavily regulate$ making it $iffi+ult for foreign nationals to get !ork.
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Mean!hile ?S" a +ountry re+overing from re+ession has seen its total jo% o(enings to have in+rease$. 4o!ever ne! offers of em(loyment remaine$ sluggish. ". )arry Shilling of Bloom%erg suggeste$ that this is %e+ause the +om(anies are !aiting for the right1fit for the (ositions. Mean!hile in "ustralia entry un$er the >-= su%1+lass of Visa has seen +ontroversy re+ently. 6he hol$ers of su+h long term !ork (ermits are %elieve$ to have long1term im(li+ations on the o((ortunities of em(loyment of "ustralian Citi7en. 6he $ynami+s %et!een the mi:ing of the ol$ an$ the ne! !orkfor+e in re+ent times has also given rise to fri+tion. 5+onomi+ Cy+les also have a major im(a+t on re+ruitment (atterns. In +ountries like the ?nite$ @ing$om !here the total !orkfor+e is relatively sta%le %ut !ith num%er of jo%s re$u+ing the (ra+ti+e of testing first an$ then intervie!ing has starte$ making inroa$s. In 2#12 in 5nglan$ = million a((lie$ for 2;#### Call +enter jo%s. 'ro+essing su+h a large num%er of resumes !here most of them are em%ellishe$ is a very time +onsuming task. So some +om(anies are +on$u+ting online tests for skills even %efore +onsi$ering the resumes.

Fertilit" #ate and the Ageing Workforce$ %apan&s Dilemma


6he fertility rates of 3a(an has %een $e+lining ra(i$ly to 1.32 in 2##; from > in 1A>#. 6o offset the effe+t 3a(an entere$ into Bree 6ra$e "greement !ith "sian Countries like In$onesia an$ 'hili((ines. 6he Ministry of Boreign "ffairs of 3a(an on the CBasi+ (oli+y of Com(rehensive 5+onomi+ 'artnershi(/ on the issue of movement of natural (erson states that &The Government of Japan will consider measures to address the issues relating to the movement of natural persons from abroad, such as nurses and certified careworkers, on the basis of its efforts to promote the "employment and human resources strategies , 4o!ever as (er D5C2 the ?nem(loyment rate in 3a(an !as at >.E0 as o((ose$ to the youth unem(loyment rate !hi+h !as at aroun$ E0. 6he im(asse lies in the fa+t that the strong (rote+tion offere$ to the em(loyees !ith long1term almost life1long em(loyment ultimately results in the +om(anies having re$un$ant (ermanent !orkers in its rolls. Birms +o(e u( !ith this +ost %y ty(i+ally re$u+ing !ages for these !orkers. Contrastingly only a thir$ of 3a(an/s total la%or for+e are in the am%it of su+h +ontra+ts. 6he majority of the la%or for+e has tem(orary +ontra+ts !hi+h have mu+h lesser (ay an$ no jo%1se+urity to s(eak of. 6he situation +an %e summari7e$ %y the D5C2 statisti+ that 3a(an/s in1!ork (overty is the fifth !orst among all D5C2 +ountries.

Foreign #ecr'itment related implications$ The Tale of T o (eighbors


In$ia/s young !orkfor+e !ill form the major (ortion of the total !orkfor+e. 4o!ever in China the (ro(ortion of the young !orkfor+e is re$u+ing +onsistently $ue to the (o(ulation +ontrol measures of the Chinese government. Faturally the +or(orations of these t!o +ountries !ill have very $ifferent a((roa+hes in ta+kling Sour+ing an$ 9e+ruitment relate$ issues. 6he (ro%lem !ith In$ia !ith regar$s to em(loyment is Cem(loya%ility/ of the !ork1for+e !hi+h !e !ill $is+uss at a later stage. 4o!ever for +ertain +ountries fa+e !orkfor+e shortage as the e:isting em(loyees retire !ithout a((ro(riate (eo(le to re(la+e them. Moreover an e:(erien+e$ !orkfor+e also +omes !ith a su%stantial +ost im(li+ation to!ar$s the +om(anies.
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China/s +or(orate houses are a$$ressing the issue %y automating some of their (ro+esses. 6hese firms are thinking on these lines %e+ause of aging (o(ulation +ou(le$ !ith annual !age hikes of 2#0 for nearly a $e+a$e. Com(anies like 8ever Style are of the vie! that o(erating in Southern China is a %reak1even (ro(osition at %est. In 2#13 Cro+s re$u+e$ its share of +olorful shoes to %e ma$e in China to ;-0 $o!n from E#0 last year. 8ever Style is in the (ro+ess of shifting its (ro$u+tion to Vietnam. Dutsour+ing is therefore one of the results of this $is(arity of 8a%or for+e $emogra(hi+s. 6he issue +an %e a$$resse$ %y $evelo(ing !ays an$ metho$s to sour+e (otential +an$i$ates from +ountries !here there is sur(lus !orkfor+e availa%le. It re<uires +hanges in the visa relate$ (oli+ies. 9e+ruiting (eo(le from $ifferent +ountries !oul$ a +hallenge for the managers %e+ause it !oul$ involve some more formalities relate$ !ith visa an$ +iti7enshi( of their +ountry. South @orea %enefiting from glo%al integration %y !ay of (henomenal gro!th in re+ent years still fa+es long1term +hallenges. 6he +ountry also has one of the lo!est %irth rates in the !orl$ at 1.2> (er !oman as of 2#11. 6he e:(atriate (o(ulation in the @orea has in+rease$ from -># ### in 2#13 from >A -## in 1AA#. 6hey are (rovi$e$ !ith e:+e(tional su((ort from the )overnment %y !ay of free me$i+al +are +ounselling an$ +hil$ +are. 4o!ever in re+ent times it is struggling to attra+t foreign !orkers. 6he em(loyment (ermit $ra!n nine years ago un$er !hi+h many !orkers have +ome are in+re$i%ly restri+tive in nature. 6he !orkers un$er this (ermit are a+tively $is+ourage$ from settling there. 6he ma:imum stay allo!e$ un$er this (ermit are t!o se(arate terms of four years an$ ten months just t!o months short for five years !hi+h is the minimum time one has to stay in @orea to a((ly for (ermanent resi$en+y. 6he +ir+ulatory metho$ of engaging foreign la%or at the lo!er levels (oses a signifi+ant la%or issue of skill shortage !hi+h in turn !ill a+tively harm the manufa+turing se+tor !hi+h is (resently (ro(elling its e+onomy. Dnly re+ently in 3anuary @im Choong1Soo the )overnor of the Central Bank +alle$ for a more o(en immigration (oli+y.

The )'est of the *+mplo"able ,kill-$ The Cost of a .o'ng Work!Force/


Region World Developed Economies and EU Central and South-Eastern Europe East Asia South East Asia and the aci!ic South Asia
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Unemployment rate 12.6% 17.9% 18.0% 9.8% 1"."% 9.#%

Region $atin America and the Cari%%ean 'iddle East (orth A!rica Su%-Saharan A!rica

Unemployment rate 1".&% &9.1% &".9% 11.7%

G5:hi%it 1H 6he unem(loyment rate of various +ountriesH S9C I8D 6he reality of !hat the in$ustry refers to as em(loya%le skill in In$ia is very %leak. "++or$ing to the 'lanning Commission/s re(ort just a tenth of those looking to join the !ork1for+e re+eive (ro(er training. " re(ort %y the Be$eration of In$ian Cham%ers of Commer+e IBICCIJ In$ia has the +a(a+ity to train a%out 13 lakh +an$i$ates through its vo+ational training institutes !hi+h is less than 1# ### in num%er. Contrasting these num%ers !ith the fa+t that ;#01A#0 of the !orkers in $evelo(e$ nations re+eive some form of skill training. 5sta%lishments like 9aviraj Boils in Sanan$ )ujrat !hi+h has a re<uirement of 2-# traine$ em(loyees to +ater to the nee$s of the (harma+euti+al an$ +onsumer goo$s in$ustries are for+e$ to em(loy untraine$ lo+al (o(ula+e. In this (ro+ess su+h firms have to in+ur heavy losses %y !ay of !astages sin+e one untraine$ em(loyee re<uires u( to three years in %e+oming (rofi+ient !ith the (ro+esses as the !ork $eman$s high levels of (re+ision. 'allam 9aju In$iaKs Minister for 4uman 9esour+es has gone on re+or$ LI think the problem has been particularly acute in India, both in terms of the education and skilling. And this is where I think we need to get our act together, 6he )overnment has set an am%itious target to im(art skills training to -# +rore (eo(le %y 2#22 an$ ho(es to get the in$ustry involve$ in some !ay. 6here is a huge skill shortage is there for the %lue +ollare$ +lass of em(loyees. Contrasting to this (henomenon the e+onomi+ slo!$o!n of re+ent years have resulte$ in the $rying u( of the tra$itionally higher (aying !hite +ollar o((ortunities. In$ustry lea$ers an$ re+ent in$e(en$ent re(orts like the &Fational 5m(loya%ility 9e(ort on 5ngineering )ra$uates, %y "s(iring Min$s have gone to suggest that less than 2#0 of a total sam(le si7e of --### res(on$ents are a+tually em(loya%le. 6o un$erstan$ this (henomenon !e have to look at the issue from t!o (ers(e+tives. 6he first %eing that the e+onomi+ slo!$o!n has in$ee$ taken its toll. "s the Business +y+le shifts the unem(loyment !ill effe+tively +orre+t itself. 4o!ever there is another lo+ali7e$ issue (arti+ular to In$ia is the mismat+h in e:(e+tations %et!een the a+a$emi+s an$ the in$ustry. 'rof. S. )ana(athy 2ean I'la+ementJ S9M ?niversity says 1 &As academicians, it is our ob to produce good clay and not beautiful dolls for the industry. It is for the respective industry to shape the right dolls suiting its need and preferences ., 6he In$ustry on the other han$ has an e:(e+tation that the gra$uates !ill +ontri%ute in some meaningful !ay from the +ommen+ement of em(loyment. "nother issue that aggravates this matter is (er+e(tion. 6ra$itionally the In$ian Cor(orate toile$ to se+ure the %est +an$i$ates for their (ositions as evi$en+e$ %y the fa+t that most of the re+ruitment at entry levels of !hite +ollare$ in the )overnment Se+tors ha((en %y !ay of a +om(etitive e:amination !hi+h +an %e a test of skills an$ kno!le$ge of su%je+ts !hi+h have no im(li+ations on the a+tual em(loyment that is offere$ to the su++essful +an$i$ates.
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D!ing to the sur(lus of a((li+ants for $esira%le jo%s many +om(anies have trie$ to re$u+e its re+ruitment +osts %y restri+ting its a((li+ant (ool to limite$ sour+es !hi+h they +lassify as (remier. In +ase of In$ia these sour+es +an %e the (remier institutes. I$eally the +om(anies !oul$ have looke$ at Mua$rant 1 an$ Mua$rant 3 of the 5:hi%it 2 for +an$i$ates that have high em(loya%ility. 4o!ever they no! have a++ess to only Mua$rant 1 an$ Mua$rant 2 as their a((li+ant (ool. 6here%y giving rise to a (er+e(tion of la+k of <uality talent.

5:hi%it 2H1 6he Sour+e vs 5m(loya%ility Matri:

Attrition and Migrant Workforce of Asia$ The +"e of the storm


" re+ent stu$y (u%lishe$ %y the 4ay grou( +on$u+te$ in asso+iation !ith C5B9 %rings u( a fe! startling revelations. *ith a++elerating gro!th an$ in+rease in em(loyment o((ortunities em(loyee turnover has %een fore+aste$ to a++elerate a+ross the glo%e.

5:hi%it 3H1 H " +om(arison of e:(e+te$ turnover rates for 2#13H Sr+ 4ay )rou( " total of 1;1.= Million of the glo%al !orkfor+e are (re$i+te$ to leave their (resent jo%s. 6his is an in+rease %y 12.A 0 !hen +om(are$ to the tren$s of 2#12. 6he num%er is set to es+alate to 1A2 million %y 2#1E. 6he rates as fore+aste$ are high in +ountries !ith high em(loya%ility (ros(e+ts. 6he emerging markets an$ "sia1'a+ifi+ region in general has seen high levels of attrition. 6he 5uro(ean ?nion %y +ontrast $emonstrate$ lo!er attrition rate o!ing to the generally gloomy e+onomi+ s+enario. Mark 9oyal senior (rin+i(al at 4ay )rou( +ommentsH &The turbulent labor market associated with the economic downturn has held down turnover rates in many firms. !ut as the economy recovers and global employment becomes less volatile, dissatisfied workers are a significant flight risk for organi"ations across the world., 6he stu$y also i$entifies t!o $istin+t +lasses of em(loyees !ith res(e+t to their (ro+livity to seek greener (astures. 6he stayers ICommitte$ to the organi7ation for at least 2 years or moreJ an$ the 8eavers Ithose (lanning to leave their (resent em(loyment %y the ne:t t!o yearsJ. 6he fa+tors i$entifie$ that $ifferentiate$ these t!o +ategory of em(loyees are as follo!s
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Confi$en+e in the organi7ation an$ its lea$ershi( Buture )ro!th 'ros(e+ts.

" (ro(ortionate value atta+he$ %y the organi7ation on the efforts of the em(loyee. "n environment that lea$s the em(loyee to feel that he is %eing su%stantially +hallenge$ intelle+tually. 6he sense of %eing a%le to e:er+ise a +ertain level of autonomy an$ influen+e out+omes.

In the light of these revelations organi7ations must fo+us on Mission Criti+al resour+es an$ in+rease their 5m(loyee Value 'ro(osition. 6he fo+us shoul$ not %e only limite$ to the high (erforming em(loyees. 6he efforts shoul$ fo+us on the +ore em(loyees as !ell.

0ender related implications


6he (arti+i(ation of *omen in !orkfor+e (arti+ularly in the In$ia +onte:t has %een on the rise only re+ently. It is therefore only no! a stru+ture$ effort has %een seen to %ri$ge the gen$er $ivi$e. 4o!ever this is not a (ro%lem that is (arti+ular in In$ia. )en$er issues have %een felt in many major e+onomies in+lu$ing the ?nite$ States of "meri+a as !omen (arti+i(ation starte$ on a signifi+ant level in the !ork1for+e. Bor instan+e a reno!ne$ +or(oration like IBM till as re+ently as 1A-1 re<uire$ its female em(loyees to resign after marriage an$ $i$ not +onsi$er em(loying a marrie$ !oman.

5:hi%it 3H 6he Memo that &6em(orarily Mo$ifie$, IBM/s 'oli+y on hiring an$ retaining marrie$ !omen It !as only in 1A=> that the A of ?S"/s largest steel +om(anies rea+he$ an agreement !ith the 5<ual 5m(loyment D((ortunity Commission the ?.S. 2e(artment of 3usti+e an$ the 8a%or 2e(artment that they are going to (rovi$e 2#0 em(loyment to Minority grou(s an$ !omen. 6he +ost im(li+ation of ignoring Se:ual 4arassment regulations +an %e !i$e s(rea$ an$ a%solute. 6he first ever +lass a+tion la! suit on Se:ual 4arassment at *ork(la+e in ?S" 8ois 5. 3enson v. 5veleth 6a+onite Co resulte$ in a settlement of N 3.- Million in favor of the fifteen !omen.
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It +an %e seen that histori+ally the legislation an$ the ju$i+iary has ha$ +lose involvement !ith the (ro+ess that $ealt !ith su+h issues a+ross most +ountries. 6hough 'revention of Se:ual 4arassment at !ork(la+e !as gui$e$ %y the gui$elines from the Vishaka gui$elines from the #ishaka v. $tate of %a asthan for the longest time. 6he im(lementation of gui$elines in various state fun+tionaries an$ $e(artments !as not (ro(er as note$ %y 6he Court in the &edha 'otwal (ele v )nion of India +ase. In "(ril 23 2#13 the legislature finally %rought into for+e the 6he Se:ual 4arassment of *omen at *ork(la+e I'revention 'rohi%ition an$ 9e$ressalJ "+t 2#13 !hi+h %rought even $omesti+ hel(s. 6he a+t re<uires setting u( of 8CCs at %lo+k levels an$ ICCs at !ork(la+e to take +are of grievan+es among other reforms. " %reakthrough in a+hieving gen$er $iversity at !ork(la+e !as a+hieve$ !ith the ne! Com(anies "+t. 6he ne! la! (asse$ in 2#13 re<uires a +ertain +lass of +om(anies to have at least one *oman mem%er on %oar$. 6he a+t $emonstrate$ the nee$ of this timely in+lusion %y the va+uum for In$ian !omen lea$ers it has e:(ose$. 5:H 1 In 2#13 a former (artner at M+@insey Irena Vittal has joine$ the %oar$s of ":is Bank )o$rej Consumer 'ro$u+ts )la:oSmith@line Consumer 4ealth+are 6ata )lo%al Beverages *i(ro an$ 6itan. Several +om(anies no! have e:ten$e$ the (i(e1line to train an$ (re(are *omen lea$ers to assume (ositions at the %oar$.

In Concl'sion$ The #oad Ahead for India


Shifts in the !orkfor+e $emogra(hi+ has %rought a%out +onsi$era%le im(a+ts on strategies of !ork1 for+e management glo%ally. It has a+tually e:(ose$ the la+una in (ersonnel management that !ere alrea$y (resent for everyone to see. In$ia/s jo% market throughout the (ast +entury has al!ays %een $ominate$ %y the em(loyers. So mu+h so that in those situations one +oul$ get a!ay !ith a lot of $efi+ien+ies in terms of em(loyment +on$itions. 4o!ever !ith the o(ening u( of the e+onomy an$ the em(o!erment of the em(loyee it is only natural that su+h (ra+ti+es !oul$ +hange. Be+ause this !orkfor+e is not afrai$ of +hanges an$ taking +han+es. In$ia %y an$ large are going to %e the talent (ool of the )lo%al Cor(orations. 6he Ooung In$ian *orkfor+e !hi+h values )ro!th a%ove everything else therefore re<uires a +on+erte$ effort from the )overnment an$ the In$ustry to %e a%le to +arry out its res(onsi%ilities.

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#eferences

4B9 Fovem%er 2#13 *hen 4iring Birst test 6hen Intervie! Basi+ 'oli+y on Com(rehensive 5+onomi+ 'artnershi(s htt(H//!!!.mofa.go.j(/(oli+y/e+onomy/fta/in$e:.html 6he )uar$ian Mar+h 2#13 )ermany fa+es u( to (ro%lem of ageing !orkfor+e Fe! Oork 6imes 1AA= ItKs Ooung vs. Dl$ in )ermany "s the *elfare State Ba$es 8aggar$s an$ 8ea$ers in 8a%our Market 9eformH Com(aring 3a(an an$ "ustralia Binani+al 6imes 2e+em%er 2= 2#13 3a(an !ages halt 1=1month $e+line BBC Fovem%er 2E 2#13 6raining In$iaH Is the skills ga( hol$ing the e+onomy %a+kP *all Street 3ournal May 1 2#13 China Manufa+turers Survive %y Moving to "sian Feigh%ors Business !orl$ 2e+em%er 2#13 'aying the China 'ri+e 5+onomi+ 6imes1 Cos 9ush to Buy +over against se:ual 4arassment 8ia%ilities 5+onomi+ 6imes1So+ial Fet!orks 9eferrals are In$ia In+/s 4iring 4ots(ots 4B9 Se(tem%er 2#13 Brom the 5$itor *here are the 8ea$ers Stanfor$ Center on 8ongevity 2#1# &'o(ulation "ge Shifts !ill resha(e the )lo%al *orkfor+e, 6he 4in$u "ugust 11 2#13 " <uestion of em(loya%ility 4ay )rou( 2#13 're(aring for 6ake1Df 6he 5+onomi+ 6imes 2#13 Fe! +om(any la! gives a %ig (ush to gen$er $iversity at !ork(la+e Fational *omen/s 4istory Museum &9eal *omen of Forth Country,

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