Skilled and unskilled labor

Abstract

In the approach of this study, people’s abilities are characterized by two dimensions: the skills which are relevant for individual productivity in a specific task, and the abilities which determine the costs of organizing the interaction of individuals. So far the analysis has been focused on heterogeneity of workers with respect to their interactive abilities. In particular, it was assumed that there is only one type of labor which can be used in non-production as well as production work. In the presented model non-production work comprises all activities which are necessary to transform individual labor inputs supplied in the labor market into earnings in the product market. In modern business, these activities require high knowledge, for instance, of legal and financial matters, of marketing and management methods, or of training, developing and supervising manpower. It is thus unrealistic to assume that each worker can be employed more or less efficiently in both production and nonproduction. This chapter accounts for this fact by extending the analysis to two types of labor. The labor market is assumed to be segmented into workers with high formal education (skilled or high-skilled labor) and workers with no higher education (unskilled or low-skilled labor). Whereas skilled labor can be employed in production as well as in non-production activities, unskilled labor can only be used in production.