Dual Labor Market

What is the dual labor market? 

The dual labor market is a theory that was introduced by American economists, Michael Piore and Peter Doeringer, in 1971. This theory was borne out of their observation that the economy seemed to be divided into two parts: the primary sector and the secondary sector. 

What are the significant differences between the primary sector and secondary sector of a dual labor market?

According to the dual labor market theory by Piore and Doeringer, the two sectors differ greatly in terms of employment, working conditions, and job security. Let us look at each sector individually. 

In the primary sector, the economists suggested that jobs generally offered higher wages, job roles were higher-level, and with clean and safe working conditions. Additionally, individuals in the primary sector had the potential of being promoted. Positions also tend to be unionized which were beneficial in terms of employee benefits, job security, and career advancement. Furthermore, the theory suggests that these jobs were often filled by individuals who were born in the divided market. 

On the other hand, the conditions in the secondary sector would be the complete opposite. The jobs available in the secondary sector offered lower wages, job roles were less attractive, and working conditions were poor. Aside from these, there is a pattern of job instability with little to no opportunity for promotion and career advancement. Because of these factors, secondary sector jobs have a high turnover rate compared with those in the primary sector. Lastly, the authors suggest that secondary sector workers are composed of mostly migrants, those who belonged to minorities, and generally individuals from economically disadvantaged backgrounds and upbringing.

What is the relevance of the dual labor market in economics? 

The labor market in itself is a big component of an economy. It has a great impact on the economic health of society. Alternatively called the job market, the labor market refers to the availability of jobs and employment. In terms of supply and demand, people who are looking for jobs (employees) provide the supply, and employers (jobs) provide the demand. 

In times of economic struggle, one of the first to be affected is unemployment. This happens because the supply of people looking for jobs far exceeds the demand for the labor needed. An extreme imbalance between the supply and demand for jobs is dangerous. High unemployment rates can lead to more problems, including poverty and economic stagnation. 

Ideally, there should be an optimal balance between supply and demand. Or, in this context, there should be a good balance between the number of people looking for work and the available jobs for them to fill. While a perfect balance is not attainable, a healthy economy is one wherein the ups and downs of supply and demand are manageable.

Concerning the dual labor market, the challenge rests on the existence of a dichotomy. The stark differences between the primary and secondary sectors in terms of education level and skills are factors that can affect the balance of labor supply and demand even further. 

What is the meaning of a segmented labor market? 

The concept of a dual labor market attracted attention from different analysts and contributed to more observation on a wider concept of labor market segmentation. Generally, a segmented labor market, as the name implies, refers to the existence of further segments or submarkets within the labor market as a whole. This means that the primary and secondary sectors may themselves have subsections within them. 

A segmented labor market is influenced by multiple factors and accommodates the differences in job markets. For example, engineers and chefs belong to different markets. They have different job specialties and skills that cater to different groups of people. They are not able to easily cross from one job to another because of their skills specialization, education, and work experience requirements. 

Another example would be professionals who may be seasonal workers in the primary sector and may receive higher wages compared to workers in the secondary sector. However, while these seasonal workers are in the primary sector, they have little job security and career advancement opportunities just like secondary sector workers. 

Geographical differences also play a role in a segmented labor market. People who have the same job but in different locations may experience differences in pay, benefits, and career opportunities. Compensation for the same work may vary from one location to another. This factor is also seen on a global scale, giving rise to the migration from one country to another, especially in underdeveloped countries.