Stuart Gentle Publisher at Onrec

When HR Meets Economics: How is Your Economics Degree Related to HR?

Often, students before and perhaps during their undergrad confuse themselves between Business studies and Economics.

Did you know: a study revealed that 46% of new employees generally fail at their jobs and are requested to leave within the first 18 months of their employment?

Often, students before and perhaps during their undergrad confuse themselves between Business studies and Economics. Well, for starters, Business and Economics have major differences; in terms of theory and in terms of practicality. However, just like most of the degrees are associated in some ways (such as Sociology and Public Administration), Business and Economics are interlinked to somewhat extent. The biggest example is: how businesses and industries can benefit a countrys economy. However, the economy does not depend on just transactional businesses. Foreign relations, healthcare and many other factors weigh in as well.

Moving on to the point, we are here to discuss the relation shared between HR degree and Economics degree. If you are Economics major, and perhaps this is one your home-works, you have come to the right place for some answers.

Business Studies Vs Economics

Business and Economics are vast fields in their respective areas. Economics is a social science subject that focuses on exchange, consumption and production of goods. Labor or Personnel Economics is a field offered for specialization in Economics. On the other hand, Business major students get to study how these goods are produced, how do they need to be produced, where are they consumed and much more. One of the specializing fields offered in Business studies is Human Resource/Human Resource Management. This particular specialization is relevant to human resource management as it deals with employment changes, hiring practices, human capital investment and wages.

The Shared Relation

As such, labor economics deals with human resource management with respect to mathematical and economic point of view. With respect to wages, wage incentives and productivity share a direct relation. Employees who earn more wages are generally the ones who provide higher productive value to the organization/employer. Additionally, incentives such as promotions and bonuses are motivators for employees so that they work with more dedication and give high quality results that is beneficial for the employers. Labor Economics also sheds light on the conditions of the market (demand and supply) and how they affect the advancements of the employees and employers. On the other hand, human resources studies how employees and employers can navigate through chances with respect to employment and take decisions in the light of the requirements of the market.

It is important to keep in mind that the movements and conditions in the market with respect to unemployment and employment react to the shifts in wages, labor supply, labor demand and in general, the economy. For example, the recent COVID-19 outbreak has increased unemployment all over the world. In Latin America and the Caribbean alone, 41 million people were recorded as unemployed. These market shifts largely depend on how the market reacts and recovers from various shocks that also include regulatory oversight, product demand, interest rates, and higher raw material rates.

Lets take example of increased government oversight. In this case, firms go for higher investments in their physical capital, such as machinery and tools, as compared to the human capital, meaning hiring of the employees. At the same time, they might look into offshore labor options to offload the work on their at-present employees. Another example can be the oil price hikes and fluctuation in exchange rates, which can in the long run effect the levels of employment. The biggest example of the shared relation between economics and HR is the participation of unions and their demands.

Wrap Up

While there similarities are not a lot, it is important for an individual to understand the market and how it works. Therefore, Business students shouldn’t think “is there someone who can do my economics homework for me?”, but instead should study basic Economics courses and do economics assignments to understand the underlying concepts of how an economy works.