Labor Market AnalysisEconomics 421Abstract The primary focus of this course is the theory of labor market segmentation. The theory of labor market segmentation has passed through a number of stages. The first part of the course will trace these developments and will discuss the topologies introduced to describe non-competitive markets. In the debate that followed the earlier work, different and opposed hypotheses have been put forward, trying to give insights to the questions raised and, in more general terms, to identify the factors determining the structuring of the labor market. Three different hypotheses can be singled out. The first, which is directly related with the dual labor market theory, emphasizes the role of technology. The second, which originated from structuralist analysis of the American economy, emphasizes the role played by employers in managing labor. The third approach, which is based on several empirical studies carried out by researcher of the University of Cambridge, emphasizes the active role of unions in the process of labor market segmentation. The bulk of the course will focus on these three alternative hypotheses. Through this discussion the course will address four central questions: (i) Why do labor market structures differ? (ii) Which worker gets which job? (iii) What is the nature of mobility between market segments? (iv) How useful are the categories for the analysis of labor market structures? Most recently, an international comparison of industrial economies has led to a synthesis which points to the interaction between different forces -- technological, economic, and institutional. The course will end with a discussion of the interaction of these forces which help explain the divergent paths of development in industrial economies. Introduction The primary focus of this course is the theory of labor market segmentation. In the 1960s economists became increasingly concerned with the problems of poverty, inequality, underemployment, and social discrimination, and began to call attention to the functioning of the labor market in an attempt to understand the concentration of disadvantaged workers among specific groups. A new set of categories, such as segmentation, stratification, and internalization, were introduced. The ideas and concepts incorporated into labor market segmentation theory were not new. The hypothesis of a market stratified into non-competing groups was first formulated by Cairnes (1874). The institutional labor economists in the 1920s and 1930s also analyzed the functioning of the labor market which led in the early 1950s to the hypothesis of "balkanized" labor markets between unionized and nonunionized sectors. The existence of non-competitive markets was explained by the balkanization of free-choice markets, as the result of formal and informal rules. This early literature attempted to describe the structure of the labor market by working out a topology of non-competitive segments. Kerr (1950) introduced the concept of the institutional labor market; Fisher (1951) wrote about the structureless market; Dunlop (1966) introduced the concept of the internal labor market and Doeringer (1967) developed the determinants of its structure. The debate on urban poverty and discrimination which emerged in the 1960s pushed for a reconsideration of the factors influencing the structuring of labor markets. A more comprehensive approach, usually referred to as the dual labor market theory (DLM), was proposed by Doeringer and Piore (1971). The basic hypothesis of this theory is that the market is separated into two sectors, in which workers and employers operate according to fundamentally different behavioral rules, and which display distinct and identifiable features. The labor market is no longer perceived as a unified phenomenon, but as a plurality of markets, each distinct in its structure and characteristics. The notion of a dual labor market, as first expressed, was widely acclaimed by economists as providing a useful conceptual construct for the analysis of the labor market. But the original hypothesis was criticized because it tended to be more descriptive than explanatory. For this reason, the DLM theory raised questions rather than answered them. In the debate that followed the earlier work, different and opposed hypotheses have been put forward, trying to give insights to the questions raised and, in more general terms, to identify the factors determining the structuring of the labor market. Three different hypotheses can be singled out. The first, which is directly related with the DLM theory, emphasizes the role of technology (Sabel, 1979). The second, which originated from structuralist analysis of the American economy, emphasizes the role played by employers in managing labor (Edwards, 1979). The third approach, which is based on several empirical studies carried out by researcher of the University of Cambridge, emphasizes the active role of unions in the process of labor market segmentation (Wilkinson, 1981). It is useful to note that, although labor market segmentation theory originated in the United States, it has taken on an international flavor. The methodology utilized by researchers is comparative which thereby isolates important factors between industrial economies. Perhaps the most important international study is "LEST" (Laboratoire d'economie et de sociologie du travail) comparing the organization of industrial work in France and Germany. The LEST researchers found that the same work in France is organized completely differently from that in Germany. Simplified, the French make a much more radical separation between the tasks of conceptualization and execution than do the Germans, and French lower-level managerial workers carry a range of design and planning functions that German rank-and-file workers perform themselves. This difference is in turn related to the observation that the distribution of wage and salary income is much wider in France than it is in Germany. The international comparison of industrial economies has led to a synthesis which points to the interaction between different forces -- technological, economic, and institutional. The theory of labor market segmentation has passed through a number of stages. The first part of the course will trace these developments and will discuss the topologies introduced to describe non-competitive markets. The bulk of the course will focus on the three alternative hypotheses which attempt to explain non-competitive labor markets. Through this discussion the course will address four central questions: (i) Why do labor market structures (both intra- and internationally) differ? (ii) Which worker gets which job? (iii) What is the nature of mobility between segments? (iv) How useful are the categories for the analysis of labor market structures? The course will end with a discussion of the interaction of forces which explain labor market segmentation as well as the divergent paths of development in industrial economies. Bibliography
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