Why is Globalization of Labor all of sudden important now? The barrier for job migration has dramatically lowered lately making it easy to move the jobs where the labor is. When we talked about globalization, a decade back, it meant only two things-
1. Movement of goods: A typical export/import business. Goods from one country shipped to another country.
2. Movement of capital: Investment in companies and infrastructure around the globe.
Movement of Labor was not on the globalization agenda, because of the obvious reasons – high barrier for immigration. Although forced labor movement like slave labor and indentured labor has been going on for centuries – voluntary labor movement was a rarity. Most of the developed countries were self sufficient as far as labor pool was concerned and did not want to deal with social change brought by mass immigration. With the visa regime, many countries have set up high bar for easy immigration. Over the past decade 3 things have happened that has enabled globalization of labor.
1. Demographic Shift: Majority of developed countries lately have lower birth rates causing labor shortage. This has forced the companies in these countries to look for labor in other countries.
2. New Market: Chinese and Indian economy has been growing at more than 9%, lifting large number of people out of poverty. The companies in developed countries are now exposed to this new largely underserved market. They have stepped up effort to seek local knowledge to sell their products in these countries. Hence, there is a strong need to hire labor close to this new market.
3. Technological advances: Due to dot com bubble in late 1990s, several companies over invested in communication technology bringing down the cost of communication. Internet, Email, Web 2.0 etc. opened up new avenues for collaboration where the need to co-locate employees became less important.
These three main trends have lowered the barrier for labor movement. The result is not that the labor can now move easily to where the jobs are but jobs can move where the labor is! Today, Globalization not only means movement of goods and movement of capital but also means movement of labor or movement of work towards the region that has abundant labor supply.
Currently Corporate Executives are taking advantage of Globalization of Labor only from the cost savings perspective. By focusing on the ‘Labor Arbitrage’ the companies have been able to successfully cut cost. But, some recent studies and surveys* shows that cost savings are minimal in the long run because of added complexity in management of resources. Little consideration has been given to some of the long term issues like – how do you build the ‘relationship with the labor’, when the labor is dispersed all around the globe? How do you manage different cultural and ethical values? How do you marry their unique cultures (including their regional and country culture) with the corporate culture? Executives with the focus only on cutting costs have made no investments in these areas and will fail to realize full potential of Globalization of Labor.
Executives need to look at Globalization of Labor from a different perspective. The main reason or the only reason the organizations should go for global labor distribution is to achieve diversity. Diversity means (1) Acquiring human resource with differing/unique skill sets (2) Getting multiple perspectives on problem definition (3) Building ability to collaborate in order to solve complex problems (4) Understanding different ways of solving problems at hand. As the market expands, especially in Asia and Latin America, the labor diversification in those regions will also mean local knowledge in that consumer market. Finally, diversity of labor is diversification of labor and sensible human resource risk management.