Economics explains discrimination in the labour market
Economics explains discrimination in the labour market

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Economics explains discrimination in the labour market

6 Segmented labour markets

6.1 Introduction

In recent years different explanations of how labour markets operate have been proposed by a number of economists dissatisfied with neoclassical theory in general and its explanation for labour market disadvantage in particular. Some of these alternatives simply extend neoclassical models to include the effects of various institutional factors. Others, however, have sought to develop a new theoretical approach. All reject a predominantly competitive analysis and emphasise instead the fragmented nature of labour markets and the importance of institutional and social influences upon pay and employment. A common label for these alternative approaches is segmented labour market theory. The underlying theme of these approaches is that the labour market should be viewed as a collection of parts or segments. One segment may consist of high-waged, male, white workers, for example, and another of low-waged, female, non-white workers.

The concept of a segmented labour market has been applied in a variety of ways. Analyses differ in the outcomes of interest (pay, employment stability or mobility), in the delineation of segments (by job, industry, gender, race or age) and in the methodology of investigation, whether qualitative or econometric (McNabb and Ryan, 1990). There is, however, a consensus among segmentation economists about the way the labour market can be conceptualised and about how segments function. This convergence of views is primarily encapsulated in one particular variant of the segmentation approach, the dual labour market theory.

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