Economic, Social, Technological, and Ethical Influences (HSC SSCE Business Studies): Revision Notes

Economic, Social, Technological, and Ethical Influences

Introduction

Human resource management does not operate in isolation. External forces constantly shape how businesses manage their workforce. Understanding these influences helps explain why HR practices evolve and how businesses adapt their strategies to remain competitive while supporting employee wellbeing.

Four major categories of influence affect human resource management: economic conditions, technological advancement, social trends, and ethical considerations. Each plays a distinct but interconnected role in determining workforce planning, employment conditions, and workplace culture.

Economic influences

Economic conditions create the broader context within which businesses make decisions about hiring, wages, and workforce size. These conditions fluctuate over time and require businesses to adapt their human resource strategies accordingly.

The economic cycle

The business cycle describes regular fluctuations in economic activity over time, moving through distinct phases that directly impact labour demand and employment conditions.

During expansion phases and at peak periods, economic growth accelerates. Consumer demand for goods and services rises, prompting businesses to increase production. This creates labour shortages as businesses compete to attract workers. In these conditions, employers typically offer higher wages to secure talent. Trade unions leverage their stronger position during growth periods to negotiate substantial wage increases for members. However, this upward pressure on wages can contribute to inflation by pushing up business costs and prices throughout the economy.

Conversely, during recession phases and at trough points in the cycle, economic activity contracts. Demand for products and services falls, forcing businesses to reduce production. This leads to downsizing – reducing workforce numbers through redundancies or natural attrition. During recessions, businesses face pressure to control costs and typically limit wage increases. Workers have less bargaining power, and unemployment rises as more people compete for fewer available positions.

Recent economic trends in Australia have shown subdued wage growth, with increases at their slowest pace since the late twentieth century. Multiple factors contribute to this pattern, including:

• Pressure for businesses to remain globally competitive
• Technological displacement of workers
• Higher rates of casual employment reducing workers' negotiating power
• Spare capacity in some economic sectors

Structural change

Structural change refers to fundamental shifts in the composition of economic activity within a country. This encompasses changes in which industries dominate the economy and how production is organised.

Australia has experienced dramatic structural change over recent decades. The services sector now accounts for 86 per cent of total employment, representing significant growth in areas such as:

• Property and business services
• Retail and wholesale trade
• Tourism and hospitality
• Education and training
• Healthcare and community services
• Personal services

This shift contrasts sharply with mid-twentieth century patterns when manufacturing represented approximately 30 per cent of GDP and one-third of employment. Australian manufacturing was historically protected by high tariffs – sometimes reaching 200 per cent on imported cars – which encouraged domestic production and consumption of local goods.

The COVID-19 pandemic exposed vulnerabilities in Australia's small manufacturing base, particularly when global supply chains for medical supplies and other essential goods were disrupted. Uncertain trade relations with China have compounded these concerns. Government advisory panels have identified potential growth areas for manufacturing renewal, including:

• Food production
• Defence equipment
• Mining technology
• Medical supplies
• Engineering
• Space industry
• Renewable energy

The transition to renewable energy presents particular opportunities for Australian manufacturing. The country possesses abundant natural resources for alternative energy generation – extensive sunshine, wind resources, and land availability. Developing this sector could potentially add $180 billion annually in new output, increase GDP by $50 billion, and create over 650,000 direct and indirect jobs. However, this would require reconsideration of employment arrangements, as the most efficient manufacturing operations typically run continuously (24/7), requiring shift work and appropriate compensation.

Globalisation

Globalisation has intensified international competition, fundamentally altering how businesses structure their operations and manage human resources.

Australian businesses now compete directly with subsidiaries of transnational corporations operating locally. To maintain competitiveness, many businesses have restructured their operations, outsourcing non-core functions or subcontracting production activities. Corporations – both domestic and transnational – increasingly relocate production to cities, states, or countries where labour costs, dispute levels, and regulatory requirements are lower.

This competitive environment creates several HR imperatives:

• Greater need to attract and retain motivated, effective core staff
• Continuous improvement in productivity, costs, innovation, quality, and customer service
• Enterprise bargaining allowing employers to negotiate removal of restrictive work practices in exchange for wage increases
• Training in management of multicultural workforces with diverse approaches to authority, power, and individual versus group orientation

The pandemic severely impacted sectors exposed to international markets. Tourism employment declined from 748,200 jobs in December 2019 to 611,700 by November 2020 due to combined effects of bushfires and COVID-19. Higher education similarly experienced approximately 21,000 job losses as border closures reduced international student numbers.

Technological influences

Technological advancement represents perhaps the most significant driver of productivity improvement, enhanced communication, and intensified competition between businesses. Technology fundamentally changes how work is performed, what skills are valued, and where employment occurs.

Technology drives job transformation – creating new roles while rendering others redundant. Many businesses have re-engineered operations and restructured organisationally, increasingly using networks (often offshore) and "virtual teams" connected through video technology. Electronic communication tools enable businesses to operate "anywhere, anytime," harnessing staff through telecommuting arrangements.

This flexibility has created opportunities for employees who might otherwise be disadvantaged. Workers can contribute from home despite traffic congestion or geographic distance from traditional office locations. Businesses can access talent in developing nations where workers previously lacked employment opportunities. However, this accessibility comes with challenges around work-life boundaries, as society increasingly expects people to be "always on call."

The NSW Intergenerational Report (Future State NSW 2056) projected ongoing technological impact on work patterns, including:

• More flexible arrangements (outsourcing, portfolio careers, telecommuting, remote working)
• Extended workforce participation beyond traditional retirement age
• Increased skill requirements across occupations

Social influences

Social trends and changing societal expectations profoundly affect human resource management, influencing work patterns, workforce composition, and employee expectations.

Changing work patterns

Over the past two decades, part-time and casual work have grown dramatically, particularly in finance, retail, hospitality, and community services. This trend, termed "labour fragmentation," represents a fundamental shift from traditional full-time employment patterns.

Part-time employment has increased substantially. In 1979, only 16 per cent of workers identified as part-time employees; by 2012, this had grown to 32 per cent. Part-time work is especially common among women. Most part-time workers do not seek additional hours, valuing the flexibility that part-time arrangements provide for balancing work and personal responsibilities. Businesses seeking workplace flexibility increasingly offer part-time options, which workers appreciate for achieving better work-life balance. Part-time work also appeals to those undertaking education and training or transitioning toward retirement.

Casualisation of the workforce has similarly increased, with casual workers growing from 17 per cent in 1992 to approximately 25 per cent currently. While popular in retail and hospitality, many casual workers would prefer additional hours and access to benefits like paid holiday and sick leave. Despite seeking flexible arrangements that casual work provides, most would appreciate greater security and entitlements.

However, the "gig economy" presents more concerning aspects of changing work patterns. The term emerged during the 2009 global financial crisis when unemployed and underemployed workers took various odd jobs to cover expenses. A decade later, gig work remains prevalent, extending beyond blue-collar delivery and hospitality roles into white-collar professions like media, arts, and higher education.

Career flexibility and job mobility

Workers increasingly take control over their career paths. Approximately 14–16 per cent of employees are considered job mobile, with only 44 per cent of full-time employees remaining with their current employer for more than five years. The most mobile employees are aged 20–24, Australian-born or from English-speaking backgrounds, and found in retail or hospitality industries.

Many workers develop specialist skills and experience in full-time positions before leaving to become independent contractors or consultants. Creative and knowledge-based fields – education, design, writing, information technology – provide greatest workplace flexibility. Workers in these occupations, especially women, increasingly seek part-time, casual, flexible work day, and work-from-home options. Both businesses and government recognise this demand and provide increasing employment options.

Increased participation rates for women and older workers

The participation rate measures the percentage of working-age individuals who are employed or actively seeking work. Over three decades, increased participation by women and older people has driven overall participation growth.

Female participation among those aged 25–54 has increased by over 20 per cent since 1980. This reflects multiple factors including changing social expectations about women's roles, increased education levels, improved childcare access, and more flexible work arrangements. Australia's female participation rate remains approximately 4 per cent lower than countries like New Zealand and Canada.

Older worker participation (aged 55 and over) has increased by 10 per cent as people have incentives to work longer, better employment opportunities, increased opportunities in the physically less demanding services sector, and better health enabling longer working lives.

There is an increasing global trend for women to be families' primary breadwinners, improving financial security. This challenges traditional male-breadwinner, female-homemaker models and will generate important research topics for human resources in coming years.

Ageing of the workforce

Ageing of the workforce results from sustained low fertility and increasing life expectancy. The population has proportionally fewer children under 15 and more people in older age groups. This demographic shift will likely create significant skill shortages.

Flexible working arrangements – job share, part-time work, contracting – will be critical for utilising aging workers, particularly women concentrated in health, education, and society and culture occupations. Businesses and government must respond by:

• Upskilling the population
• Creating incentives encouraging delayed retirement
• Implementing appropriate HR strategies to transfer skills to remaining workforce members
• Removing discrimination in recruiting older workers
• Providing opportunities to update skills
• Offering targeted health and safety programs

Early retirement

Early retirement from full-time work has become popular, with average retirement age increasing to 53 years (58 for males, 47 for females). However, participation in part-time work among retirees is higher, suggesting older employees use gradual withdrawal approaches. Common retirement reasons include superannuation eligibility and health issues. Growing numbers return to part-time work following retirement for financial reasons or to relieve boredom. Compulsory retirement is now illegal unless specified in federal awards or agreements.

Living standards

Australians enjoy some of the world's highest living standards. These include work health and safety protections, regular wage increases, performance bonuses, fringe benefits, leave entitlements, and superannuation benefits. Australians remain keen to preserve these hard-won conditions while aware of pressure from global competition.

Companies attempting to undercut conditions through excessive outsourcing, workforce casualisation, or offshore relocation to reduce costs face union challenges aimed at preventing erosion of living standards. Casualised workers experience higher stress levels due to difficulty purchasing assets (including homes) and managing finances with unstable income.

Electronic communications (email, mobile phones) blur work-home boundaries, creating expectations that employees will be "always on." Concerns also focus on lack of support for carers. Government has responded with legislation encouraging family-friendly workplaces through carer's leave, job share, part-time work, and flexible hours.

Ethics and corporate social responsibility

Ethical business practices are those that are socially responsible, morally right, honourable, and fair. A wide range of human resource issues arise in workplaces, and handling them unethically, illegally, or irresponsibly leads to poor morale, low productivity, heavy costs, and industrial disputes.

Corporate Social Responsibility (CSR) refers to how businesses consider financial, environmental, and social impacts of their decisions – often called the "triple bottom line." Human resource policies and procedures are integral components of CSR.

How businesses exhibit corporate social responsibility in human resource management

A socially responsible, ethical employer recognises several key principles:

• Pleasant working environments and good conditions are valuable for motivating and retaining staff
• Performance and motivation are maximised when staff feel secure, confident, recognised, safe, equally valued, and rewarded
• Effective workplaces benefit from good working relationships and teamwork
• Businesses depend on community support as sources of staff, customers, and resources
• Management must commit to ethical workplace culture
• Customers eventually discover which businesses act responsibly and which do not

Ethical frameworks must be developed collaboratively with major stakeholders. This may include a code of conduct (statement of acceptable and unacceptable behaviours) and a code of ethics (statement of firm's values and principles). Key principles typically ensure equity in workplace processes, legal compliance, and commitment to customers.

Benefits from ethical practices include:

• Improved staff retention – reduced absenteeism as staff feel valued and motivated
• Reduced business costs – lower recruitment and training expenses, enhanced performance
• Marketing opportunities – best practice employers (those meeting highest industry standards) enjoy regular positive publicity in media, journals, and online

Working conditions

Ethical employers achieve safe and fair working conditions that improve employee welfare through:

Legal compliance and safety

Compliance with social justice and industrial legislation covering WHS, anti-discrimination, and equity is essential. Providing safe, healthy working environments with safe practices, equipment, appropriate supervision, and safety training helps prevent workplace incidents.

Meaningful and rewarding work

Creating challenging, interesting, meaningful work stimulates intrinsic rewards. This includes:

• Improving communication and fostering teamwork
• Enabling staff empowerment
• Providing study leave and training opportunities to reduce skills obsolescence and improve management access
• Offering equitable, open rewards and benefits subject to clear criteria

Work-life balance support

Offering flexible working hours and conditions promoting work-life balance is crucial. Strategic plans supported by management should incorporate specific ethical responsibilities and implement change through staff collaboration.

Transparency and accountability

Establishing codes of practice (statements of principles used in operations, referring to ethical or socially responsible practices) for customers, employees, and suppliers helps guide behaviour. Evaluating and benchmarking performance ensures best practice operation.

Exploitation of adult workers through outworking and subcontracting (locally and offshore) raises major ethical concerns. Child labour globally concerns many observers, who view it as a "race to the bottom" to secure cheapest labour. Businesses argue that highly skilled jobs are retained while only unskilled jobs offering major labour cost advantages are relocated offshore. They cite shareholder pressure for ongoing profits requiring constant search for efficient approaches to managing their costliest resource – employees.

Businesses are sensitive to consumer concerns due to successful consumer lobby groups, actions, and media scrutiny. Ethical businesses demonstrate CSR by regularly auditing factories abroad and working with agencies supporting ethical practices in local and offshore operations. In the clothing industry (traditionally known for sweatshops), businesses seek accreditation from agencies like Ethical Clothing Australia and Fair Wear Foundation.

Investments acknowledged as "ethical" have experienced success, particularly when large occupational investment groups pressure pension funds to invest in ethical businesses.

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