EMERGING ECONOMIES

September 2010

The emergence of several new economic powers on the world stage is having a profound impact on the way the global economy works. That, in turn, is changing the world of work as we know it. Human resources professionals all across the province need to be aware that an ambitious steel company from India, an aeronautics company from Brazil or a telecom leader from China do affect the way human resources professionals work here in Ontario. If it is not visible today, it will be in the near future.

Rapid Growth
These emerging economies are enjoying growth rates that have not been seen in North America for years. China's average growth in gross domestic product over the past four years has risen more than 10 per cent, with a peak of 13 per cent in 2006. India's GDP growth rate has averaged 8.5 per cent over the same period, dipping to 6.7 per cent during the global economic crisis when Canada and the U.S. were both recording negative growth.

Some of these new players, in addition to just shaking up the world economic order, are also coming up with completely new business models, just as the Japanese did two decades ago. A special report in the April 2010 issue of The Economist magazine noted that Japanese and South Korean companies grew organically in the 1990s. These new-economy companies are driven by mergers, acquisitions and exports. Sure, Japan exported cars and electronics, the report notes, but the new players are into everything from steel to IT to home appliances, and they are hungry for new markets. They do not rely on high profit margins but on volume sales and they are targeting untapped markets.

And, as The Economist points out, the West is "ripe for frugal innovation." As a result, western companies are setting up research and development centres across the globe, and emerging market countries are "becoming powerhouses of innovation in everything from telecoms to computers."

Workplace Relevance
So what does this have to do with the North American workplace? For starters, in a world where executive bonuses are frequently more than their employees' annual salaries, it would seem that to remain competitive, some employers are going to have to constrain wage increases as they face the challenges posed by other powerhouse economies in the world. I believe that there will come a time— and maybe it is already happening in some industries—when Ontario organizations, both public and private sector, will have to start looking at new ways to improve their total compensation packages instead of limiting their objectives to straight salary increases and bonus plans.

Trying to keep organizations competitive will no doubt pose some challenges for recruitment and retention and it will be up to HR to devise creative plans to keep employees engaged and satisfied with their compensation structure. It is certainly something to consider as Ontario starts to dig itself out of debt and tries to re-establish itself as a have, rather than a have-not, province.

Antoinette Blunt is the chair of HRPA's board of directors.

HR Magazine September 2010

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