Understanding Class Segmentation in the Labour Market: An Empirical Study of Earnings Determination in Australia

Abstract

This paper suggests that, at least amongst employees, social classes may be thought of as having effects on labour market outcomes because they create segmented labour markets. Thus each social class of employees defines the boundaries of a labour market which is at least partially separated from those defined by other employee social classes. This implies that standard labour market variables such as education and labour market experience may have impacts on earnings which vary across class-defined labour markets. Based on a three class picture of the employee class structure (experts, managers/bureaucrats, workers), predictions about the relative impact of education, labour market experience, gender, sector of employment and unionisation on earnings in each class are outlined. These are then tested on data from two Australian national representative samples. Results show that, as predicted, the impact of important variables (notably education and labour market experience) on earnings appear to be quite different for workers than for experts or managers. This supports the view that the labour market is segmented between workers and the middle class. There are other interesting variations in the impact of variables across class-defined labour markets, variation in gender effects being notable. However, evidence for a sharp differentiation of expert and managerial labour markets is more limited than predicted. Overall, the equations used explain far less of the variance in working-class earnings than of expert and managerial earnings, primarily because education and labour market experience appear to be less closely tied to earnings for workers than for experts and managers. Implications of these results for class theory and human capital theory are outlined.