Labor Markets LIR 809
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This 17 page Class Notes was uploaded by Dr. Dolores Kreiger on Saturday September 19, 2015. The Class Notes belongs to LIR 809 at Michigan State University taught by Staff in Fall. Since its upload, it has received 32 views. For similar materials see /class/207599/lir-809-michigan-state-university in Law, Societies, and Justice at Michigan State University.
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Date Created: 09/19/15
INTERNAL LABOR MARKETS LiR39 ana DEFINITION OF INTERNAL LABOR MARKET Market where pricing amp allocation of labor is determined by a set of administrative rules amp procedures LiR39 ana ADMINISTRATIVE RULES amp PROCEDURES Determined by set 9Rues substitute of economic for individualfirm political Prefer iquot sociological 8i defirm39mfng My war 5 a w a historic forces Price and Amy plus custom Mm job ICan Ibe explicit or Bequot describe quotquotPI39C wfIh org marrefs LiR39 ana COMPETITION IN ILM Workers in internal labor markets sets of non competing groups Workers may or may not compete with each other within ILM but never between I Ms ILM as short termquot constructs UR ana WAGE DETERMINATION IN ILM Pricing Rates vs Structures N oclassica market determines single wage rate for labor market ILM determines wage structure Individual pay depends on place in structure UR ana REFERENCE POINTS FOR WAGE STRUCTURE Infernal Ref Pailrs Exrema Ref Pailrs J ob Clusters Wa R Co t D f Stable groups of D f Stable group of job classifications firms or other units Linkod throng Linkad by product ucnnoiogy m administrative o structu custom Dim nsions Multipl clusnrs in Occupation Industry snuns organixa ion coo ropn On39ented around Kez On39ented around Kez Rate Rate mane AN EXAMPLE MSU Administrative Clerical Job Faculty in Provosts Exec Sectr same dept Directors Of ce Asst By rank StafflSpecialist Secretary min Assts Faculty in Priv Sector Each Other Same college Foundations m Faculty in Govt Sim Dept Other Univ other Univ MSU Clerical LlR39 ana MOVEMENT IN THE ILM Allocation Access to ILM Usually entry level Lowest skill in job cluster Movement within ILM Relatively clear pre defined steps Based on skill acquisition 8i seniority Variabiity in length permeability organizational setting LlR39 ana Important differences bn ILM and Neoclassical How decisions made ILM is rule based neoclassical is market based Motivations Neoclassical is response to prices ILM is response to mix 0 factors 55 my mm m Pricing 8i allocation Neoclassical is constrained individual choice determined by place in structure Neocassical assumes 0 transaction costs ILM built because of transaction costs LlR39 ana WHY ILMS ARISE MARKET EXPLANATION ILMs Efficient Training Solution to Maniforing g fg ti39gg and Recruitment PrEblems Mobility amp Job Complex Economy Assignmem Problem Firms complain about constraints of ILM Are ILMs really efficient LlR39 ana WHY ILMS ARISE INSTITUTIONALIST VIEW Firm39s Perspective Idiosyncratic requirements of the firm Workers39 Perspective 95helter from competitive Pressures Equity concerns Reative Wage Equity Mastery over market forces LlR39 ana WHERE DO ILMS ARISE In Industriesorganizations that have MAME mm to sustain stable employment Important ILM as relatively short term construct inevitability of market forces LlR39 ana Sequence from Market Conditions to Career Paths Product Market J Stab yin Production Process Stability in Level amp Composition of and for Labor Stable Career Paths UR ana ILM increasingly less descriptive of reality Maninn years nfsnrulne win nllrrem empnnyer men and wumen age 3554 Wage group 19 mm mm Mn Vainn Years a mum A9935 mm ma sum 25 mm 5lu 5m was 4 45 u 3 50 A9 5 mmazwu 033 UR ana CURRENT MISMATCH ES Between existing firm structures and increasing competitiveness in the product markets Between production and consumption of goods Overcapacity for mass produced goods Need for niche production Leads to uncertainty UR ana South Africa s Culture g gggg 4 EH EALth Apartheid Women in Society I Long standing gender role belief women are less important and less deserving ofpower than men Women in Work World i 4 H I South African Labor Market Labor Distribution orgenlza s hig hly regul c Fermai Better In cludes m ed um to large I e I Individuals 8 V lt i l Breakdown of Industries Millions Cost of Labor 0 South African skilled labor is less then most 1st W0qu acoun tries Labor Quality a 521000 skill d graduatgs each year Labor Force Issues Labor Force Call Center Industry g Industry is classified under business ser 39ces 1 mill39 es Labor Force Call Center Industry es 39between 5 to 7 Jubummuum iiiiiiimii IIIIII I I Formal Constraints Law Child Labor Law Formal Constraints continued a Minister of Labour Mdladlana said h us ren he Formal ConstraintsLaw Formal ConstraintsLaw Ordinary hours ofworkEEA g A worker must NOT work morethan Formal Constraints Pro osed Legislation Leg islat39 n propbsal39s rmin39at Jpa 4i of 1 LlllLlllLA l i mi ll quot Formal Constraints Pro osed Legislation Continued ination Illicit Underground Economy a Transshipment center for heroin h ashishf39 marijuana and cocaine n quotm th Infrastructural Oggortunities nfrastruotural Ogg ortunities of Eebruza ry 2 0Q 5 Health Related Risks to Labor 20 0 3 anestimated 53 million South Africans Were infected with HIV the cf du hg with Ehe39virUS 7 Industrial Relations Climate ll Trade Union Movement The largest and most advanced of African countries nsible for ending workplace quotctic quot 39 Labour Relations Act of 1995 a Purpose oflthe Act 0 Advance economic development 0 Achieve Social justice 0 Promote labour peace v H Industrial Relations Policy Regulation u Regylated by National Economic Development and quot qr NEDLACE i 3 Disadvantages of SouthAfrica 0 AIDS epidemic Lon gvstan dingbeliefs aboiyt women OWNPRICE VS CROSS PRICE ELASTICITY BASICS Elasticity change in quantity change in price OWNPRICE ELASTICITY On demand side percent change in quantity demanded of labor type i in response to a 1 change in wage rate for labor type i On supply side percent change in quantity of labor supplied of labor type i in response to a 1 change in wage rate for labor type i CROSSPRICE ELASTICITY On demand side change in quantity of labor demanded of labor type i in response to a 1 change in wages for labor type j or some other input into the production process7 could be capital Using doctors and nurses as an example the question is whether they are substitutes or complements in the production process from the point of View of the rm ie the demand side 0 If the cross price elasticity of demand is positive that is the quantity of nurses demanded increases when the wages of doctors increase they are substitutes 0 Logic Price of doctors has increased and rm shifts toward lower cost nurses increasing the demand for nurses substitution effect the demand for both doctors and nurses decreases because the cost of production has gone up scale effect but because they are substitutes in the production process the substitution effect dominates so the demand for nurses increases 0 If the cross price elasticity of demand is negative that is the quantity of nurses demanded decreases when the wages of doctors increase they are complements 0 Logic Price of doctors has increased and firm shifts toward lower cost nurses increasing demand for nurses substitution effect the demand for both doctors and nurses decreases because the cost of production has gone up scale effect but because they are complements in the production process the scale effect dominates so the demand for nurses decreases On the supply side a change in quantity of labor supplied of labor type i in response to a 1 change in wages for labor type j In this case we are usually looking at members of a household the trade off between goods and leisure made on a household basis Using wives and husbands as an example the question is framed in terms of both the consumption of goods and leisure and possible home production of goods 0 If cross price elasticity of supply is positive that is the hours of work supplied by a wife increases when her husband s wages increase they are complements
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