Internal labour market essay

However, internal labour markets are not only the consequence of a deliberate strategic choice made for efficiency reasons. They have been mainly generated by three factors not envisioned in the conventional economic theory.

Moreover, firms often favour accomplishing it as it enables a reduction in turnover costs. It is what connects the internal labor market to the external labor market ELM. Others specialists have claimed that if the market fails to establish a pay premium for dangerous jobs, again a feature of some ILMs, there should be a government regulation that imposes stricter safety standards and closer supervision.

In fact, the labour market does not have a unique identity. In fact, the destabilization of ILMs also derives from factors such as the slowdown in economic growth, globalization, intensification of competition, changes in funding modalities, and the new forms of labour organization.

However, the birth and development of these conditions do not necessarily stem from within the firm, but rather the legal, political and social background may affect it. Organizations have found it easier to justify pay differences based on different formal job descriptions than on performance differences between workers Scott p.

Nevertheless, after numerous structural changes in the labour markets over the last decades, it has become clear that internal labour markets were too dependent upon the surrounding situation to be considered simply as the result of a deliberate strategic choice.

Once into organizations, women are also rounted into different organizational roles that are paid less as well. The Model A thorough explanation of internal labour markets requires the analysis of three factors: Sex segregation of job types is one of the major reasons why women are paid less than men.

Internal and External Labor Markets: A Personnel Economics Approach

In conclusion, such analysis suggests that, perhaps, under different background circumstances, internal labour markets would have not been able to spread so to such a great extent. Also, this way of promotion encourages on the job training, since the eldest worker is not afraid that the young one replaces him.

Firms want to maintain the investment afterwards; therefore they offer the employees job security and structured promotions.

European Single Market

All these changes have borne considerable consequences in terms of salaries and jobs. For the unit, the decision of whom to hire for these jobs is crucial because the worker will ideally be with the firm for a long time, and the firm will invest in the worker in the form of often-expensive firm-specific training.

The first is ILMs which consist of clusters of jobs related by the skills and capacities required for their successful performance. I am of the idea that trade unions were not decisive in the process of creating ILMs, rather, it is only natural that their role has been significant after ILMs came about.

Skill specificity[ edit ] Skill specificity has two effects important to the generation of the ILM: Yet, there are other important reasons that warrant attention. This is exactly the case regarding trade unions.

Internal labor market

But the stability and control of internal labor markets have an inherant cost, and some firms are actively reducing the attachment between employers and workers Scott p. Statistical models are often used to explain and predict outcomes because internal labor markets are a complex system of interactions between workers, company management practices and labor market dynamics.

Employers benefit from this more stable relationship because they reduce the cost of training. Due to the importance of on the job training, the promotion is often given by seniority. What factors lead to the creation of internal labor markets?

The advantage for the worker consists in defending their job from external competition. Besides financial aspects, the globalization of the goods and services markets has resulted in greater competition.

Customary law is of special interest in the analysis of internal labor markets both because of the stabilizing influence which it imparts to the rules of the workplace and because the rules governing the pricing and allocation of labor within the market are particularly subject to the influence of custom.

The existence of ILMs diminishes the role of exit as a mechanism for securing labour market adjustment and the voice mechanism is therefore prominent in this context.Conclusion: This essay in essence has attempted to answer that Internal Labour Markets are more than a device that permits managers to promote their friends.

ILM is a tool that has been used by firms to promote current employees to different jobs, either within the same or different department. The internal labor market is composed of many facets. The first is ILMs which consist of clusters of jobs related by the skills and capacities required for their successful performance.

Second, the sets of skills required within one job cluster are similar, but different from those required in other job clusters. The idea of an internal labour market was conceived by Kerr (), and perfected by Doeringer and Piore ().

Recently, more and more contributions by various experts are coming to light. Nevertheless, there are no unambiguous answers to the questions about the causes that have led to the origin of this concept which are fundamental [ ]. Mercer’s proprietary Internal Labor Market (ILM) Analysis provides a fact-based platform to provide critical insights.

A labour market is a mechanism which matches potential employers of people - the demand for labour - with people who are available for work - the labour supply.

Internal Labour Market Essay

Labour markets operate at local, regional, national and increasingly international levels, reflecting how economies operate. The European Single Market, Internal Market or Common Market is a single market which seeks to guarantee the free movement of goods, capital, services, and labour – the "four freedoms" – within the European Union (EU).

Internal labour market essay
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