Labor Market Segmentation - Theoretical Explanation

Theoretical Explanation

This model of the labor market segmentation has been developed over the years to accommodate the fact that different job professionals work in completely different job markets. For example, Lawyers and fashion designers work in different markets. Some of the major dividing-lines that have been identified are occupational, geographical, and industrial. Occupational labor-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 extensive 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. For examples specifying the minimum qualifications and experience requirement it restricts the entry into an occupation even if they work side by side in an organization. Geographical labor-markets are also defined considering that neither employers nor workers can move to another location without acquiring considerable amount of costs. As a result wages can remain higher in big cities as opposed to smaller cities. For example there are a vast number of unemployed people in certain parts of the world as opposed to others primarily because of the demographics, is it a town, city or near to home work place\The workers differ in their tastes and preferences for leisure time rather than work and for financial reasons rather than rewards. Their investment is their education, training, work skills, and experience. But it still makes sense to analyze labor supply and demand in the aggregate.The primary sector and secondary sector, both these sectors possess different wages and each employment characteristics are different. The concepts of primary and secondary labor-markets have now passed into conventional thought, with the primary labor-market commonly understood to mean people with secure jobs and good conditions of work in public-sector employment, the large corporations and highly unionized industries; while the secondary labor-market is understood to cover small employers, non-unionized sectors of the economy, competitive industries such as retailing, where jobs are less secure and conditions of work and pay generally poorest.

The two markets are connected, with movement between them at specified ports of entry and exit. The jobs in the primary internal segment are those typical of the hard core of stable employees in a firm, need long on-the-job training in firm-specific skills, have security and good promotion prospects, a high span of discretion, and high material rewards. Professional and skilled craft work requiring occupation-specific rather than firm-specific skills, and often supplied on a contract or self-employed basis. The secondary external segment provides jobs that are low skilled, offer little autonomy and responsibility, low and unstable earnings, and poor working conditions, including casual and seasonal work. The secondary internal sector offers jobs that are generally low grade but with some on-the-job training, security, and promotion prospects.

The concepts of primary and secondary labor-markets have now passed into conventional thought, with the primary labor-market commonly understood to mean people with secure jobs and good conditions of work in public-sector employment, the large corporations and highly unionized industries; while the secondary labor-market is understood to cover small employers, non-unionized sectors of the economy, competitive industries such as retailing, where jobs are less secure and conditions of work and pay generally poorest..

New theoretical developments include the concept of International Segementation of Labor, which considers the different circumstances of the labor process in the global south and north. When labor from the south migrates to the north, this international labor segentation tends to remain intact within the destination country (Bauder 2006). The concept of "Globally Segmented Labor Markets" by John Asimakopoulos. argues within a Marxist political economy framework using Social Structures of Accumulation theory, developed by American economist David Gordon, that neoliberal globalization has expanded labor market segmentation internationally. Accordingly, there are two global regions. The first is in the West where affluent citizens consume global products and services. The second is in the poor global regions e.g. China where poorly paid workers produce the global products and services. Asimakopoulos argues this is a natural evolution of Capitalism’s pursuit of profits through surplus labor.