CATEGORIZATION OF LABOUR MARKETS

Categorization of Labour Markets

Categorization of Labour Markets

A labor market is the geographic area from which an employer recruits applicants qualified to fill a particular position. The size of the geographic area often changes depending on the nature of the skills needed for that position. For lower-level administrative or laborer positions, the labor market typically consists of the immediate surrounding area. However, for highly technical positions, positions that require specialized skills, or those that necessitate advanced education, a wider geographic area is often needed to obtain qualified applicants. Applicants are willing to relocate or commute for these types of positions, so the labor market can be regional, nationwide, or even international in some cases. Labor markets are often described as either “loose,” meaning that several qualified applicants are available to fill the particular job, or “tight,” meaning that few qualified applicants are available to fill the job.

Human resource professionals in organizations keep track of the number of qualified individuals available to fill positions for two key reasons. First, labor market data are used for strategic decision-making purposes. When the labor market is tight, organizations are competing for a small number of qualified applicants. Accordingly, they may choose to start the recruitment process for job openings sooner and offer appealing compensation and benefits packages to attract the best workers. In extreme situations, organizations may need to provide remedial training to newly hired workers if the labor market is so tight that no qualified applicants can be found. In contrast, when the labor market is loose, organizations typically have a broad array of applicants to choose from. As such, competition for these applicants is lessened and may lead to reductions in efforts to attract applicants.

The second reason why organizations monitor labor market data deals with legal compliance. In affirmative action plans, labor market data are used as a standard to determine if organizations employ appropriate proportions of workers from various race and gender categories. If the proportions of the race and gender of those employed do not closely match the proportions available in the relevant labor market, corrective action must be taken as specified in the affirmative action plan. Similar comparisons are made in adverse impact court cases and Equal Employment Opportunity Commission (EEOC) claims when determining if a company has discriminated against a certain protected class of workers. Discrepancies found when making these comparisons between the organization and the relevant labor market are often sufficient evidence for a case to move forward.

Labor market data are often available for each state and its regions through the state department of labor, and an extensive report based on national census data is generated and managed by the EEOC. Although these reports typically provide sound information on the number of workers available in a geographic area, it is much harder to determine the number of individuals who can be considered “qualified” to fill a particular position in a particular industry. For this reason, determining the state of the labor market for a particular job ...