Dual Labor Market Theory

Muhammad Saud PhD
Muhammad Saud PhDMuhammad Saud PhD
Dual Labor Market Theory
Muhammad Saud Kharal
PhD in Social Science,
Department of Sociology Faculty of Social and Political
Sciences, Universitas Airlangga, Surabaya Indonesia
Migration
Migration involves the (more or less)
permanent movement of individuals or
groups across symbolic or political
boundaries into new residential areas and
communities.
The Dualist theory
The dual labor market theory depicted a primary market of unionized jobs
with higher pay and a secondary market of the low-paying jobs characterized
by job-instability;
This ‘dualisation’ argument to neo-classical school was developed in US labor
market research. This division of labor market corresponds to the empirical
observed structural wage differences unaffected by demand and supply
conditions
The distinguish between primary and secondary labour market lies in the
market regulation and its feedback mechanism-
Primary labour market- characterized by long-term employment contracts,
career growth patterns, limited affect of market fluctuations; in effect it does
not behave as a market
Secondary labor market-wage level fluctuations, manpower requirements,
employment decisions effect performance and pay scales
Thus market regulative are mostly operative in the secondary sector; this gives
rise to segmentation
The radical approach of DUALISM to labor market theory has been based on
observed empirics of American capitalism; i.e. political and economic forces in
the monopoly capitalist structure have given rise segmentations(primary
internal and secondary external) and the sources of these segmentation are
internal to the economic system
We thus define labour market segmentation as historical processes of political
and economic forces that have brought about segregation into separate sub
segments, distinguished by behavioral rules and labour characteristics
Internal and external labour market
The internal labour market represents a heterogeneous
collection of compensation and HR management policies
that effect the growth possibilities of the employee in the
current organisation
ILM are basically long-term contractual agreements; the
rules are characterised by match-specific investments,
asymmetric information, risk aversion and transaction-
costs. The agreement includes wages, hours of work,
promotion opportunities and grievance procedures.
These agreements, however long-term in nature are
incomplete and could be affected by exogenous future
events
The external labour market represents a collection of
heterogeneous employment opportunities available to
an individual as an alternative given the person’s
current job status.
Thus external labour market signifies the returns to
human capital and search costs involved among
potential employers; it implies fluidity in worker
movement across firms and wages being decided by an
aggregate process
The existence of the external market implies that hiring
patterns are influenced by external forces, i.e. worker
mobility, wage bargaining power of the labour outside
the firm and market structure
Dual Labor Market Theory
Propositions:
People at developed societies faced motivational problems to enter the
bottom of job hierarchy because there is no status in society and few
channels for upward mobility. Such job vacancy creates demand for foreign
workers who do not have the motivational problems because they do not
expect bottom level jobs anything beyond means to earn money.
Migration is usually initiated or pulled by recruitment on the part of
employers in developed countries, or by governments acting as agents of
employers.
Dual Labor Market Theory
Core and Peripheral
◦ Core firms have internal labor markets that have well developed career paths
and offer opportunities for upward mobility.
◦ Technology and tools to enhance their positions.
◦ Peripheral firms make no long-term commitment to their employees.
◦ Paid per job and when job done you’re done.
Typology of Labor Market
Primary Labor Market
◦ One with high wages and promising opportunities
◦ Education (Higher)
Secondary Labor Market
◦ One with low wages and dead-end jobs
◦ Education (Lower)
Discriminatory factors among Divergent Labor
Groups
Wage
◦ A group (frequently women or minorities) are paid less for the same type of
work.
Employment
◦ A group receives inferior treatment in hiring, promotions, etc
Occupational
◦ A group is arbitrarily restricted from entering more
desirable occupations “glass ceiling”
Human Capital
◦ A group doesn’t have the same access to productivity enhancing investment.
Push and Pull Factors (Labor)
Unemployment
Working Conditions
Job descriptions
Salary
Gender discrimination
Devaluation of Money
Living standard
Security situation
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Dual Labor Market Theory

  • 1. Dual Labor Market Theory Muhammad Saud Kharal PhD in Social Science, Department of Sociology Faculty of Social and Political Sciences, Universitas Airlangga, Surabaya Indonesia
  • 2. Migration Migration involves the (more or less) permanent movement of individuals or groups across symbolic or political boundaries into new residential areas and communities.
  • 3. The Dualist theory The dual labor market theory depicted a primary market of unionized jobs with higher pay and a secondary market of the low-paying jobs characterized by job-instability; This ‘dualisation’ argument to neo-classical school was developed in US labor market research. This division of labor market corresponds to the empirical observed structural wage differences unaffected by demand and supply conditions
  • 4. The distinguish between primary and secondary labour market lies in the market regulation and its feedback mechanism- Primary labour market- characterized by long-term employment contracts, career growth patterns, limited affect of market fluctuations; in effect it does not behave as a market Secondary labor market-wage level fluctuations, manpower requirements, employment decisions effect performance and pay scales Thus market regulative are mostly operative in the secondary sector; this gives rise to segmentation
  • 5. The radical approach of DUALISM to labor market theory has been based on observed empirics of American capitalism; i.e. political and economic forces in the monopoly capitalist structure have given rise segmentations(primary internal and secondary external) and the sources of these segmentation are internal to the economic system We thus define labour market segmentation as historical processes of political and economic forces that have brought about segregation into separate sub segments, distinguished by behavioral rules and labour characteristics
  • 6. Internal and external labour market The internal labour market represents a heterogeneous collection of compensation and HR management policies that effect the growth possibilities of the employee in the current organisation ILM are basically long-term contractual agreements; the rules are characterised by match-specific investments, asymmetric information, risk aversion and transaction- costs. The agreement includes wages, hours of work, promotion opportunities and grievance procedures. These agreements, however long-term in nature are incomplete and could be affected by exogenous future events
  • 7. The external labour market represents a collection of heterogeneous employment opportunities available to an individual as an alternative given the person’s current job status. Thus external labour market signifies the returns to human capital and search costs involved among potential employers; it implies fluidity in worker movement across firms and wages being decided by an aggregate process The existence of the external market implies that hiring patterns are influenced by external forces, i.e. worker mobility, wage bargaining power of the labour outside the firm and market structure
  • 8. Dual Labor Market Theory Propositions: People at developed societies faced motivational problems to enter the bottom of job hierarchy because there is no status in society and few channels for upward mobility. Such job vacancy creates demand for foreign workers who do not have the motivational problems because they do not expect bottom level jobs anything beyond means to earn money. Migration is usually initiated or pulled by recruitment on the part of employers in developed countries, or by governments acting as agents of employers.
  • 9. Dual Labor Market Theory Core and Peripheral ◦ Core firms have internal labor markets that have well developed career paths and offer opportunities for upward mobility. ◦ Technology and tools to enhance their positions. ◦ Peripheral firms make no long-term commitment to their employees. ◦ Paid per job and when job done you’re done.
  • 10. Typology of Labor Market Primary Labor Market ◦ One with high wages and promising opportunities ◦ Education (Higher) Secondary Labor Market ◦ One with low wages and dead-end jobs ◦ Education (Lower)
  • 11. Discriminatory factors among Divergent Labor Groups Wage ◦ A group (frequently women or minorities) are paid less for the same type of work. Employment ◦ A group receives inferior treatment in hiring, promotions, etc Occupational ◦ A group is arbitrarily restricted from entering more desirable occupations “glass ceiling” Human Capital ◦ A group doesn’t have the same access to productivity enhancing investment.
  • 12. Push and Pull Factors (Labor) Unemployment Working Conditions Job descriptions Salary Gender discrimination Devaluation of Money Living standard Security situation