Dualistic Labor Market Segmentation Theory

Introduction

The dual-labor market theory is a well-known economic theory that suggests that the labor market can be divided into two distinct sections. The division is based on the idea that two separate markets exist in the same geographic area, each providing different employment opportunities that can lead to significantly different wages and opportunities for advancement. The theory was first introduced in the 1970s by John T. Dunlop, a professor of economics from Harvard University.

First Market – The Primary Market

The first division of the labor market is referred to as the primary market. Companies in this market typically require skilled workers who are able to meet their specific job requirements. These workers tend to have higher wages, are more secure in their jobs, and have greater options for advancement.

Second Market – The Secondary Market

The second division of the labor market is referred to as the secondary market. Companies in this market typically require unskilled or semi-skilled workers who are able to meet the organization’s basic needs. These workers tend to have lower wages, are less secure in their jobs, and have fewer options for advancement.

Reasons For The Increasing Divide

One of the primary reasons for the increasing divide between these two markets is economic globalization. Economic globalization has allowed companies to move production to countries where labor is cheaper. This has resulted in less jobs being available in higher-paying industries and an increased demand for lower-paying jobs. Additionally, technological advancement has also resulted in a decrease in the need for some types of skilled labor and an increase in the need for unskilled labor.

Conclusion

The dual-labor market theory suggests that the labor market can be divided into two distinct sections. The primary market consists of skilled workers who are able to meet company-specific job requirements and typically have higher wages and more options for advancement. The secondary market consists of unskilled or semi-skilled workers who are able to meet the organization’s basic needs and typically have lower wages and fewer options for advancement. The increasing divide between these two markets has been attributed to economic globalization and technological advancement.

Binary Labor Market Segmentation Theory

The binary labor market segmentation theory is a sociological theory that suggests labor markets tend to be divided between two distinct classes: the primary labor market, which offers relatively good jobs with fair wages, benefits and job stability, and the secondary labor market, which is characterized by low wages, bad benefits and job instability.

Primary labor markets are typically filled with people of higher education, experience and skill, while secondary labor markets cater to low-skilled laborers and those looking for short-term employment. In most cases, the primary labor market is dominated by professionals and high-skilled workers who are in demand and are generally paid a higher wage. These highly-skilled workers tend to have more job stability and access to benefits and better working conditions.

Secondary labor markets typically involve low-skilled employment, often in jobs that lack wages, benefits and job security. This type of labor market, unlike the primary labor market, usually has few restrictions on economic mobility within, which means that workers can hold more than one job, often simultaneously. However, wages are often low and consistent and job instability is an issue as employers often frequently lay off workers.

The binary labor market segmentation theory has implications for both workers and employers, who must compete in a system in which job mobility and wages are limited, and job opportunities may be restricted to the primary labor market. While some argue it is beneficial, since those in the secondary labor markets have more employment options, it also contributes to income inequality, as those in the primary labor market tend to have higher wages and more job security. This can have a negative effect on the economy if the income disparity is too large.