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Conversely, employers would incur costs and disruption if they attempted to relocate to an area of lower labor costs, and might experience increases in non-labor expenses.

As a result, wages for the same work can remain higher in some locations than others. Geographical labor markets emerge because of the costs and disruption workers incur in changing locations. For example, nurses and doctors form separate occupational labor markets even though they work side by side in the same organizations. These workers are unable to switch between occupations because they require different skills and investment in training and qualifications. Such markets arise from the division of labor, increasing differentiation and specialization. For example, lawyers and fashion designers work in different markets. The market segmentation model was developed to accommodate the differences in job markets. The idea of non-competing groups developed under the general label of labor market segmentation theory. This perspective was intended to help explain the demand-side of the market, and the nature and strategy of employers. It changed the view of many economists who had seen the labor market as a market of individuals with different characteristics of e.g., education and motivation. Modern labor market segmentation theory arose in the early 1960s.

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Non-market institutions such as craft unions and professional associations affect employer strategies, producing different results for workers with similar characteristics.Īll workers should be subject to the same employment standards, such as minimum wages, maximum hour laws, occupational safety, security and health laws, regardless of sector. The theory of labor market segmentation posits that differences on the demand side imply differences in compensation that are not explained by individual worker characteristics.

Put another way, differences in compensation for labor arise only on the supply side. On the latter, as part of the theory of compensating wage differentials, those who prefer risky or dirty jobs receive higher compensation than those who take safe or clean ones. In this model, the difference between different workers' wages and conditions arise from individual differences in their human capital (skills, experience, or formal education) or tastes. The labor market thus functions as do other markets. This site does not host pdf, DOC files all document are the property of their respective owners.The theory of labor market segmentation contrasts with neo-classical economic theory, which posits the existence of a unified market for labor, consisting of buyers and sellers in open competition. Market Pdfinfo.marketĪll books are the property of their respective owners. Market PDFINFO-MARKET =pdfinfo.market Pdfinfo.

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