Labor Market Segmentation -- Notes.

 By James Devine, Loyola Marymount University

December 14, 1999

Starting in the 1960s if not earlier, labor economists began to realize that there is no such thing as "one big labor market." The kinds of jobs that people get -- the pay and conditions -- depends not just on their individual characteristics (education and motivation) and the technology of using labor to produce output, but also on the demand-side of the market, the nature and strategy of the employers. Below are some of my notes on the nature of this segmentation, with special attention to the situation in United States.

Unlike the neoclassical perspective, I would start with the efforts by capitalist employers to control their labor forces. There are basically two ways that employers can control the labor process, what Andrew Friedman terms "responsible autonomy" and "direct control" (see his book INDUSTRY AND LABOR, London: Macmillan, 1977). In the former, workers are given some freedom to make decision on their own but are then held responsible for their actions by management. The latter follows the Taylorist model, simplifying the job so that it can be more tightly controlled by management. (Rick Edwards' book CONTESTED TERRAIN presents a similar perspective, which also appears in Bowles & Edwards' UNDERSTANDING CAPITALISM, 2nd ed. The classic book in this vein is of course Gordon, Edwards, & Reich, SEGMENTED WORK, DIVIDED WORKERS.)

This conception of what might be called "equiprofitable management strategies" (given technology) is the basic idea behind labor market dualism. In plain English, because management is not totally constrained by technology, there's more than one way for an employer to skin a cat. As a friend said to me (and she should know, since she was a skilled machinist), there are two types of jobs: those that treat workers as assets and those that treat them as assholes.

In primary jobs, workers are allowed "responsible autonomy" and are then motivated to serve the boss via a wage premium, job security, defined-benefit pensions, other decent benefits, etc. (It's related to Edwards' idea of "bureaucratic control.") They are assets to be invested in, getting on-the-job training and the like. From most workers' perspectives, these are the ideal jobs -- or rather, careers -- so that there is sometimes a queue of workers trying to break in, proving themselves to be worthy using their educational credentials and the like.

In secondary jobs, on the other hand, management treats workers like interchangeable parts. If they don't like the job, they can leave. There's high turnover, so the ones who leave (or are fired) can easily be replaced by workers from the reserve army and from similar jobs. Concerns with motivation and morale are minor, while "simple control" (intense supervision) and "technical control" (machine-pacing) strategies are pursued (to use Edwards' terms). The working poor are typically stuck in this labor market segment, finding it difficult if not impossible to rise into the primary segment. This is part of the problem of poverty: the "good jobs" of the primary sector correspond to (and to some extent are paid for by) the "bad jobs" of the secondary sector.

Edwards associates labor segments with socioeconomic strata within the working class. While those in the secondary labor market are the working poor, the primary segments involve the white collar and blue collar middle classes.

The actual appearance of these two strategies in different parts of the economy depends on matters in the both product markets and labor-power markets. Having a stable oligopoly or monopoly (as in John Kenneth Galbraith's planning sector) allows "core" firms the luxury to choose the primary labor market strategy, because they can think about the long-term benefits arising from it. However, they don't automatically choose it. It also applies best in the bureaucracy of the line of command and the staff, toward the top of the company. In many cases, however, it has been won by pressure from below, from unions, especially in mass production. The former is called the "independent primary segment," while the latter is called the "subordinate primary segment." In the subordinate primary segment, technical control is typically combined with some kind of bureaucratic control. (The assembly line -- technical control -- helps create the conditions allowing successful unionization, while bureaucratic control (rule by a contract, pensions, etc.) result from the union.)

 In Galbraith's market (competitive) sector, companies have little ability to plan ahead. So responsible autonomy, bureaucratic control, and primary labor market relations, are almost impossible. It's also very hard to unionize a company with little or no market power. So we see a secondary labor market, which also includes the out-sourced jobs of "core" corporations and the jobs of companies that are really hard to unionize (e.g., McDonald's).

What's missing in the standard labor market segmentation story is the craft segment (which includes not only the building trades but also Hollywood). The employers there are typically competitive, but a primary strategy is imposed by the workers, who not only have craft unions but have skills that have not yet been totally Taylorized and are thus not yet possessions of management. In fact, they are still be taught via union apprenticeship plans. The unions not only share control of the labor process with management but prevent chaos in the labor-power market. In some ways, this sector can be seen as an interface between the purely capitalist economy and the precapitalist craft economy left over from previous centuries.

 In recent decades, the interrelated trends of increasing product-market competition (due to globalization, deregulation, antitrust, etc.) and deunionization have led to a shrinkage of the primary job markets and a growth of the importance of secondary jobs.

 Comments are welcome at

These notes are also available in tabular form, in addition to the below:






Firms have monopoly power?


Core firms forced to pursue primary labor-market strategy by unionization or the threat effect.

Voluntary pursuit of either the primary or secondary labor-market strategy.


Craft segment: unions impose primary labor-market strategy on firms.

Secondary labor-market strategy.

Some of these themes are developed in my manuscript on Paul Krugman's vision of increasing wage disparity. A short version of this can also be accessed on-line.