Chapter 21 Segmented labor markets

The segmented labor market (SLM) approach is typically identified with a group of economists who argue that the neoclassical apparatus provides an inadequate or incomplete description of the labor market and leaves unexplained most of the major labor market policy issues. The SLM literature ranges over a broad spectrum of viewpoints sharing a common hypothesis that labor markets are segmented and that problems of income distribution, unemployment, and discrimination are a result of that segmentation. Some models and research that carry the SLM label are clearly different from neoclassical research. A distinctive feature of SLM research is that it is primarily motivated by concern over policy issues. The chapter describes the SLM model of the internal labor market of the primary sector of the economy and the SLM model of the secondary or low wage sector of the economy. In the chapter, the secondary sector model is analyzed and the findings in the empirical literature that are relevant to the testable hypotheses of the SLM are surveyed.