Title

Employment in Low-Income Countries: Beyond Labor Market Segmentation?

Publication Date

6-2006

Abstract

[Excerpt] Throughout the world, there are fundamentally two, and only two, ways that people can escape from poverty. One is by earning their way out of poverty. The other is by receiving socially-provided goods and services that lift them out of poverty. Even with multilateral and bilateral assistance, low-income countries are too poor to be able to make a significant dent in poverty by the social services route alone. This means that creating more and better earning opportunities for the poor is the only other option available.

In policy discussions, two mistakes are often made. One is to assume that policy interventions need to be made in the sectors of the economy where the poor are. Such interventions would raise the earnings of the poor in the low-earning sectors. The other mistake is to assume that the most appropriate interventions are in the parts of the economy where the poor are not, so that more of them can be drawn into the higher-earning parts of the economy. Neither is correct. What is required is a careful comparison of the benefits and costs associated with each approach to policy.

In what I just said, I have implicitly adopted a labor market segmentation approach to the analysis of employment and labor market policy in low-income countries. Before proceeding, I would like to try to establish agreement on the meaning of these terms. Employment, as I shall use the term here, is of two types: wage-employment (in which the worker is hired by an employer and paid a wage or salary) and self-employment. “Employment” is to be contrasted with “unemployment” which, according to standard ILO definitions, consists of people who a) did not work even one hour of work for pay in the preceding week or fifteen hours of unpaid work in a family business or on a family farm, and b) were actively looking for work. Labor market segmentation is the idea that the labor market consists of various segments with qualitatively different types of employment. When there are just two segments, we have labor market dualism. Because the segments differ qualitatively, access to the good job segments is restricted in the sense that not all who want to work in those segments are able to be employed there. Such rationing is an essential part of the idea of labor market segmentation.

My current thinking is influenced heavily by two well-developed strands of work in economics: the dual economy models of development economics and the dual labor market models of labor economics. At the same time, I will argue that we need a third duality: the duality that arises within the informal sector. Bringing together these three types of duality into a coherent analytical framework is a task that remains to be completed; it constitutes the frontier of future work on employment in low-income countries.

I shall begin this note by talking about these three types of duality. I will then go on to put forward a number of propositions about labor markets, after which I will consider the implications of these propositions for analytical and policy purposes. Finally, I will answer the specific questions posed to me by the conference convener.

Comments

Suggested Citation
Fields, G. (2006). Employment in low-income countries: Beyond labor market segmentation? Retrieved [insert date], from Cornell University, School of Industrial and Labor Relations site:
http://digitalcommons.ilr.cornell.edu/workingpapers/87/

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Copyright by author.