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In principle a labor market is the primary method of allocating people to paid work, of whatever nature, within capitalist economies/societies. Within capitalism, the separation of the producer of a good or service from the means of its production has rendered a situation where labor power (that is, the capacity of a person to work) has become a commodity to be bought and sold. In theory both buyers and sellers of labor power are free to choose from or to whom they would like to buy or sell. Thus, the ”market” can be represented as an efficient, voluntary mechanism of exchange wherein the economic rules of efficiency, perfect competition, and supply and demand apply, and equilibrium will be achieved. From such a perspective market imperfections (or disequilibria) when they occur do so because interest groups within a market are, for example, able to strengthen their position, restrict entry to their group, or force pay changes. Actions or events such as these are regarded essentially as ”glitches” and, over time, theory suggests, equilibrium will be reachieved.
From a general picture of labor markets within the context provided, we can hone our examination by considering the notion of both external and internal labor markets. The model of the dual labor market developed by Doeringer and Piore (1971) introduced the idea of the primary and secondary sectors. The primary sector represents core skill areas for which employers were prepared to pay higher levels of wages and provide better employment terms and conditions as a means of ensuring as far as possible a secure, committed, and competitive labor force. By contrast, workers in the secondary sector would not expect to have so secure a position. Indeed, it is this sector which facilitates flexibility for employers, as workers within this context would tend to have contracts based on, for example, seasonal requirements or part-time availability of or for work. Within this sector would be subcontracted workers or even businesses, and significant levels of labor turnover would be both expected and tolerated.
From a sociological perspective, focus is placed upon the relationship between those groups within the labor market and within individual workplaces and occupations. Broadly speaking there is a rejection of the economists’ notion of market efficiency. The basis of this alternative position is the inequitable nature of the employment relationship. The root of such inequity is firmly planted in the nature of capitalism and the dispossession of workers from the means of production, of either goods or services, including their lack of ownership of raw materials, tools, and places of production.
Sociologists developed an ongoing theme which challenges the dominant economic perspective on labor markets, including the notion that buyers and sellers of labor power are free to choose to whom they would like to buy from or sell to. From this perspective, we can see that the concept of the efficient market, perfect competition, and the achievement of equilibrium is highly questionable. A more realistic position recognizes market imperfections, or disequilibria, and that they emerge because of the varying strengths of the numerous interest groups.
- Doeringer, P. B. & Piore, M. J. (1971) Internal Labour Markets and Manpower Analysis. D. C. Heath, Lexington, MA.
- Jenkins, R. (1986) Racism and Recruitment: Managers, Organizations and Equality in the Labour Market. Cambridge University Press, Cambridge.