Segmentation in the US labour market: its effects on the mobility and earnings of whites and blacks

Abstract

Neoclassical theory assumes that individual workers can freely make a choice among a wide range of job options in the labour market, based upon their personal tastes and preferences. To the degree that institutions such as unions or monopoly producers are recognised in this process, they are considered to be aberrations which distort but do not displace the basic tenets of the theory. Segmentation theory, on the other hand, focuses on groups or classes of workers who face objectively different labour market situations which systematically condition their tastes and restrict their range of effective choices. The development and operation of institutions, which are central to segmentation theory, result in several, rather distinct segments within the labour market. Jobs within one segment differ from jobs within another segment along a number of dimensions, including wages, promotion opportunities, returns to education and training, and employment security. This paper examines the effects of segmentation on two important labour market processes—mobility and the determination of earnings. Labour market segmentation does not constitute a single, unified alternative to neo classical theory, f Segmentation proponents differ in the number and type of distinct segments they propose. Many investigators have focused on occupational divisions of the labour market, in the USA as well as other economies (e.g. Doeringer and Piore, 1971; Harrison, 1972; Reich, Gordon and Edwards, 1973; Rubery, 1978; Velloso, 1975; Liu, 1975). Some sociologists in the USA have recently focused on industrial divisions of the labour market, examining the effects of firm size, market power and unions on the earnings attainment process (e.g. Beck, Horan and Tolbert II, 1978; D'Amico, 1978). Finally, new variants attempt to combine occupational and industrial divisions into one, more complete, notion of segmentation (e.g. Carnoy, 1978; Edwards, 1979; Levin, Carnoy and others, forthcoming).