Internal and External Factors of Labour Market



Labour market of Europe is suffering for aging workforce issues. Study suggests that there will be 4% hike in aging population within next eight years (Krenn and Oehlke, 2001). Companies are aware of the fact but they do not have much choice left due to following reasons: The world is going through one of the most turbulent financial period in the history of mankind. Companies are struggling due sluggish growth rate and low return on investment. They are not ready to invest money on recruiting new staff and designing training &amp. development. Companies like P&amp.G use “Build from within” strategy in order to give new job responsibility to existing employees without hiring external candidates. Many companies use “Build from within” strategy in order to reduce cost of developing untrained and fresh human resource pool. In 1993, Polachek and Siebert proposed Human Capital theory in order to address aging population issue (Polachek and Siebert, 1993, pp. 23-67). They have pointed out that life can be segregated into two phases. In the first phase young people develop human capital in terms of skill, knowledge and education while in the second phase they earn employment on the basis of developed human capital. The study suggests that substandard aging population has less human capital in comparison to talented young human resource. Human capital decreases due to aging. Labour market is heterogeneous because employers can never forecast accurately future productivity of particular employee.