The Role of Human Capital in the New Global Economy Essay

The Role of Human Capital in the New Global Economy - Essay Example It is seen that human capital plays a major role in the labour market developments in nations. This emphasizes on the role of labour market institutions across the world. The idea is to remove the possibilities of skill shortage or skill crisis which forms one of the most critical components of a productive economy (Davis & Reeve, â€Å"Human capital and the global economy†). The role of human capital in the new global economy It is seen that with the growth of the population towards their age of retirement, nations tend to face a shortage of labour. The economy faces a labour shortage crisis which fails to meet the desired level of skill requirement of the society and economy on the whole. Thus it is crucial that nations maintain a certain amount of skill within the economy which meets its output and productivity requirement. In other words nations need to maintain a balance in their labour markets (Turner, â€Å"Executive Summary†). Technological advancement has also played a significant role in the increasing competitiveness of nations. Moreover it forms a primary component behind the competitiveness and competitive advantage of nations in the international market. This has called for a labour force which is highly competent in the field of information technology in order to sustain and survive in the global markets. Nations suffering from less advancement in technology and communications has suffered skill shortage and labour efficiency which is the reason why they have lost their competitive position in the market among global competitors (Turner, â€Å"Executive Summary†). With globalization, the prevalence of trade and commerce has also increased substantially. Global economies’ reliance on international trade has increased substantially over the years. In order to survive in the global competition and improve performance nations’ businesses need to create wealth and the colleges and universities in the nations need to keep producing high skilled and educated personnel who would be responsible for driving that economic development. Skilled and educated labour force forms a major component of a nation’s ability to compete in the international market. Globalization has come with a lot of challenges for nations. While a number of them have been able to adapt themselves to the global reality in terms of their operations, a number of them have failed to develop their human resources policies, practices, services and structures which support globalization. The major human resource challenges that organizations are confronted with are the creation of a global mind set in the human capital or even maintaining the local practices and cultures and also communication of a single corporate culture across the entire organization. Organizations are required to formulate their human resource functions in accordance to its strategic business objectives. The human resource functions are to be aligned with t he long term strategies of the companies operating within their own territories or across borders (Rioux, Bernthal & Wellins, â€Å"The Global Picture†). Among the other important HR functions in organizations is the creation of a centralized relationship across the globe. There also needs to be the prevalence of a standardized development, assessment and compensation