Financial markets, human resource policies, and flexibility

Abstract

Financial systems that are bank-based such as in Germany and Japan employ an internal strategy of managing human resources via job ladders and screening whereas in market-based systems such as in the UK and the US an external strategy where recruiting and laying off occurs as demand changes and market signals help set wages. India is a bank-based system that in the organised sector till recently followed the internal strategy of managing employment. But as product markets are liberalised and firms face increased competition, the ability to pass on the costs of worker privileges such as job security diminishes depending on the state of capital markets. The new epoch of competition based on the use of more flexible technologies and forms of work organisation thus calls for job enlargement and multiskilling and in some cases rearranging employees rather than recomposing the tasks they perform.