Labor market segmentation
Labor market segmentation is the division of the labor market according to a principle such as occupation, geography and industry.[1]
One type of segmentation is to define groups "with little or no crossover capability", such that members of one segment cannot easily join another segment.[2] This can result in different segments, for example men and women, receiving different wages for the same work.[3] 19th-century Irish political economist John Elliott Cairnes referred to this phenomenon as that of "noncompeting groups".
A related concept is that of a dual labour market (DLM), that splits the aggregate labor market between a primary sector and a secondary sector.[1]
Neoclassical economics
The theory of labor market segmentation contrasts with
The theory of labor market segmentation posits that differences on the demand side imply differences in compensation that are not explained by individual worker characteristics. Labor markets are not
All workers should be subject to the same employment standards, such as minimum wages, maximum hour laws, occupational safety, security and health laws, regardless of sector.[4]
History
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Modern labor market segmentation theory arose in the early 1960s. It changed the view of many economists who had seen the
Theory
The market segmentation model was developed to accommodate the differences in job markets. For example, lawyers and fashion designers work in different markets. Such markets arise from the division of labor, increasing differentiation and specialization. These workers are unable to switch between occupations because they require different skills and investment in training and qualifications. For example, nurses and doctors form separate occupational labor markets even though they work side by side in the same organizations.
Geographical labor markets emerge because of the costs and disruption workers incur in changing locations. As a result, wages for the same work can remain higher in some locations than others. Conversely, employers would incur costs and disruption if they attempted to relocate to an area of lower labor costs, and might experience increases in non-labor expenses. Cultural differences such as preferences for leisure time versus work may follow geography. As ever more work becomes transacted over digital networks, in some industries, geographical labor markets have become less relevant, and we have seen the rise of a so-called planetary labor market.[5]
Geographical segmentation also occurs on a global basis, specifically between developed and less-dedeveloped countries. However, when labor migrates to developed countries, migrants tend to remain within their original segment, receiving less compensation than native workers.
Sectors
One important segmentation is primary/secondary.[8] The two markets allow limited movement between them. The concepts of primary and secondary labor markets have now passed into conventional thought.[8]
Primary sector
In a primary sector the workforce receives significant wages and benefits. The job market consists of a majority of
Secondary sector
Secondary sector jobs are mostly low-skilled, require relatively little training, and can be learned relatively quickly on the job. Many such jobs feature high turnover, and/or variable demand. Employers are reluctant to invest in such workers, via advanced training or other employee development activities. Wages are low, and the terms and conditions of the job are less favorable.[9]
The two key formulations are labor market theory and internal labor market theory. The labor market segmentation theory revolves around the identification of a split between two analytic divisions in the economy and the labor market.
See also
Notes
- ^ a b "labour-market segmentation – Dictionary definition of labour-market segmentation | Encyclopedia.com: FREE online dictionary". www.encyclopedia.com. Retrieved 2016-01-26.
- ^ "Segmented Labor Market Theory". Archived from the original on 2008-04-18. Retrieved 2008-04-09.
- ^ Lips, Hilary M. "The Gender Wage Gap: Debunking the Rationalizations". Archived from the original on 2009-02-14. Retrieved 2009-01-16.
- ISBN 0815791410.
- S2CID 108292032.
- ^ Bauder 2006.
- S2CID 145514921.
- ^ a b "Labor Market Segmentation -- Notes". myweb.lmu.edu. Retrieved 2016-01-26.
- ^ "Fields + note" (PDF). info.worldbank.org. Archived from the original (PDF) on 2018-09-20. Retrieved 2018-09-20.
References
- Bauder, Harald (2006-02-23). Labor Movement: How Migration Regulates Labor Markets. Oxford University Press. ISBN 9780195346220.