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Relation between Economics & Human Resource Management

Economics can be a tricky subject. Building its relation with any other field is essential, but can be difficult as well. For college students who are reading this article, I understand your concern. If you are looking to pay someone to do your economics homework, you are not the only one.

Let’s begin by imagining ourselves in a situation. There is a budget meeting at your workplace. The marketing department makes a quote demand, while stating why they need the specific budget. The finance department does the same, sharing the return on investment as well.

Now comes the human resource department, where the quote has been made, but without any promises i.e. return on investment. This is because it is difficult to quantify the results HR wishes to demonstrate. For instance, there is no way to quantify how to improve the morale of employees.

This however, is a wrong way to deal with human resources and its management. Given that 50 to 60% variable costs come from people, this highest variable budget needs to be quantified. Thus, HR needs to focus on marking their economic value.

In today’s competitive climate, HR professionals need to reevaluate things and need to take actions like an economist. They need to direct and evaluate the allocation of resources. There is no surprise that each company focuses on their very own leading indicators. But for an economist-minded HR specialist, they would consider looking outward. The indicators of macroeconomics, such as public infrastructure spending, employment shifts and domestic product are essential elements that revolve when it comes to making decisions for businesses.

Let’s take an example of employment shifts. Due to COVID-19, for instance, there is a global job insecurity dilemma. In this case, the shifts of employment are bound to change. Therefore, HR leaders need to be responsive towards the future and current macroeconomic trends to make their workplaces more successful.

Conclusively, HR decisions are as important as any other type of decisions taken by businesses. There is a cause and an effect concern; there’s supply and demand. For an HR leader, it is important that the focus is on the complex concerns, which is how they are aligned with other leaders of the organization as well.

Let’s take an example of acquisitions and mergers. Commonly, targeting the value of a workforce is one of the many reasons why companies go for acquisitions. The economic data, in this case, can aid the HR specialists. This data will help the HRM department look for companies where employees with most skill sets are employed. For instance, which country houses the most start-ups, where can you find employees with scarce skills, which country imports specialized talent the most and which companies in which countries are increasing their market share in, let’s say, innovative markets such as biotech? These are just some of the questions that the economic data can help you with. When an HR leader thinks like an economist, they will know how to read this data and how to target the audience they are looking for.

Be it HR or any department, for those in leadership positions, it is important that they devote their time looking at operational-related concerns. When you start thinking like an economist, you need to take a step back and look at things differently for strategic reasons.

When you speak numbers, everyone listens. HRM needs to focus on bringing numbers and think about talent the way an economist does. This does not mean that you reduce people to just numbers, because that may be taken as dehumanizing. However, numbers allow the leaders to understand how they can address the specific challenge when they have the right people, holding the rights skills under their roof.

All business departments are linked. HRM’s connection with economics is not different. Numerous business trends rely on how the economy reacts. Therefore, handling HRM differently to what the economy projects is unrealistic.


  1. Relationship between Economics and Human Resources was very complicated I also try so hard to build better relation od these two thing in my office but there is an edge always available.

  2. Economics and Human Resource Management (HRM) are closely related disciplines. HRM is a subset of economics that focuses on the management of human resources within an organization.

    Labor markets: Economics studies the supply and demand of labor in the market. HRM applies economic principles to manage the recruitment, selection, and retention of employees, considering factors such as labor market conditions, minimum wage laws, and the impact of labor unions.

    Compensation and benefits: Economics examines the determination of wages and salaries in the labor market. HRM uses economic analysis to design compensation systems that attract and retain talent while aligning with the organization's financial constraints and objectives.

    Workforce productivity: Economics analyzes factors that influence productivity, such as the allocation of resources, technology, and incentives. HRM focuses on managing the workforce to enhance productivity through strategies like training and development, performance management, and motivation techniques.

    Labor laws and regulations: Economics studies the impact of labor laws and regulations on labor markets and overall economic performance. HRM ensures compliance with labor laws and regulations, such as employment contracts, equal employment opportunity laws, health and safety regulations, and labor standards.

    Human capital: Economics recognizes human capital as a valuable resource for economic growth and development. HRM emphasizes the importance of attracting and developing human capital within organizations through strategies like talent acquisition, training, and career development.

    Organizational behavior and performance: Economics explores how individual and collective behavior affects organizational performance. HRM applies economic concepts to understand and manage human behavior within organizations, focusing on areas such as employee engagement, team dynamics, leadership, and organizational culture.

    Overall, economics provides the theoretical framework and analytical tools to understand the broader macroeconomic and microeconomic factors that shape the labor market, while HRM applies these principles to effectively manage human resources within organizations.


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