Macroeconomic Conditons and HRM‐IR Practice

Although macroeconomic developments may seem removed from the world of micro‐level HRM‐IR practices, such practices are heavily influenced by the macro economy. Wage and price inflation, for example, are closely related, and the general state of the economy influences decisions on hiring, layoffs, and hours. The labor market's tendency toward periods of extended labor surplus or shortage condition the nature of the employer‐employee relationship. Economic circumstances affect the labor relations climate and that climate has a bearing on national productivity trends. Government policy in the future may seek to encourage certain kinds of compensation systems, such as profit sharing, for macro reasons. HRM‐IR practitioners, too, may benefit by reconsidering policies which make wages relatively inflexible.