Internallabourmarketspromotionladders.pptVIP

Internal labour markets promotion ladders Internal labour markets (ILM) Predictions of ILM theory The assignment problem Asymmetric information Promotion tournaments 1. ILM versus competitive market Competitive pay determined by market forces pay = MPL= f(worker characteristic) Relative pay (in firm) = relative pay (market) Practice Pay rises at intervals - scale - seniority, length of service Internal promotion ILM (cont.) ILM - subject to different forces Dual, or segmented, labour market Primary LM v. secondary LM Type of worker Mobility ILM similar to ‘primary’ sector ‘Career labour markets’ Doeringer Piore (1971) An ILM is ‘…an administrative unit… within which the pricing allocation of labour is governed by a set of administrative rules procedures.’ ports of entry v. promotion open to closed ILMs Examples: nursing, teaching, professions 2. Predictions of ILM (i) Pay not determined by market forces (ii) Promotion from within (tournaments) ‘job ladders’ (iii) Low turnover \ long job durations insiders v. outsiders (iv) Specific skills rise with tenure ‘tenure-earnings profile’ earnings rise with promotion resolves agency problem Pay MRPL = early career Pay MRPL = later career Quits fall, effort rises (avoid layoff) 3. The assignment problem Job slots worker skills = productivity Workers vary in their comparative advantage Which slots are workers allocated to? Asymmetric information Learning – stochastic process Probationary periods Temporary contracts Matching workers to slots to maximise Q Conclusion ILM are important feature of the labour market Systems of incentives to Solve the agency problem Learn workers productivity See tournament theory promotions * * DL = MRPL MLI SL MCL H1 HF W1 WF A B Outcome A to B - bargaining