Theories of the Labour Market and Employment: A Review

An ISR Economic growth & performance study

This book reviews theory, research, and methods of analyzing the labour market and employment.

Free and flexible labour markets can automatically end both labour surpluses (unemployment) and labour shortages (over-employment).

However, in practice various things may impede wage flexibility, freedom of contract, and labour mobility – and thus the balancing of supply and demand. Protectionist minimum wage tariff barriers and other obstacles to labour market entry and competition are one major general cause of unemployment. Technological and other business-economic development is a second major general cause while contraction or recession in economies is a third.

The book argues that broadly dividing unemployment into obstructional, developmental, and contractional types is more accurate and useful than distinguishing between frictional, structural, and cyclical forms (the conventional economic classification). It also argues that is inadequate to analyze labour markets or explain employment and unemployment in purely economic terms. Even in the most developed, differentiated and autonomous market capitalist economies, external socio-cultural, personality, and physical-organic environmental factors still impinge on labour markets and employment.

A general theme of the book is the importance of bringing in empirical data from the real world to support or disprove theories.

Thumbnail Theories Lab Mkt



1. Theories of the Labour Market and Employment: An Overview

Introduction and overview of the main contents* References & further reading*

2. The Labour Market and Employment in Modern Society

Introduction* The labour market in modern society* The definition of employment and unemployment* The distinctive nature of market capitalist employment* The modern corporation and management* From patriarchal and political to specialist professional business management* Capital, management, and labour: historical and comparative perspectives* The sociological analysis of the labour market and employment* References & further reading*

3. The Nature and Causes of Unemployment

Introduction and overview* Labour supply and demand* The measurement of employment and unemployment*External influences on the economy and employment*The achievement and maintenance of high employment* New technology and jobs* Changing skill and knowledge requirements* The effective integration of labour markets* The removal of inter-community discrimination and protection* Types of unemployment* Obstructional unemployment* Developmental unemployment* Contractional unemployment* References & further reading*

4. The Political and Legal Environment

Introduction and overview* Fiscal policy and employment* Monetary economic policy and employment* Wage control, inflation, and employment* Minimum wage tariff barriers to labour market entry and employment* Other official obstacles to employment* Taxation and employment* Welfare and employment* The basic legal protection of employment rights and freedoms* References & further reading*

5. Trade Unions and Wage Determination

The regulation of labour supply and demand* Factors affecting employee earnings*Payment by results*Trade unions, government, and wage determination* Historical and comparative perspectives* Trade unions and working hours* References & further reading*

6. Educational, Family, and Leisure Influences

Introduction* The economics of education* The family and women’s employment* Age and employment (1): youth* Age and employment (2): seniority* Leisure and employment* References & further reading*

7. Employment Attitudes, Motives, and Behaviour

Theories of work motivation* Inter-occupational and inter-industry variations* Cultural and personality influences* Differences between America and Europe* The effects of joblessness* References & further reading*


Print book

Second revised edition 2010. New impression 2011

ISBN 9780906321485


124 two-column pages

Price £74.95 including free postal delivery


E-book price £15.39 (British pounds 15.39)

E-book ISBN 9780906321683

Get the book kobo  Get this e-book from Kobo

Get the book Google  Get this e-book from Google

get the bok b&n  Get this e-book from Amazon

Get the book Amazon  Get this e-book from Barnes & Noble

Sample passages

In all modern industrial labour markets, workers essentially supply their services to employers on a voluntary contractual basis for pay. Persons have the right to choose their occupations, the places and organizations where they will work, and whether or not to participate in labour markets or have gainful employment at all. In seeking to explain work motives, different analysts can and often do emphasize one factor rather than another. However, total reward packages have to be satisfactory if personnel are to take up job offers, maximize effort, remain in employment, and refrain from go-slows, absenteeism, and moonlighting (etc.)… (page 12)

  Employment tends to be higher when cultural norms emphasize the importance of hard work as such – and when financial and other rewards for work are satisfactory… (page 26)

Often, supposedly temporary increases in government expenditure have remained in place long after economic recessions have ended. Higher on-going public expenditure levels kept in place for no good reason have had negative consequences for private spending and investment – and reduced the scope for repeating any such consumer and investor of last resort exercises in the future.

In all democratic societies, elected legislatures have to approve public taxation and expenditure programmes. Governments cannot alter taxes/spending quickly and unilaterally to generate employment or anything else.   Budgets have to go through proper detailed scrutiny before approval. Then there will be lengthy time elapses before any compensatory tax cuts or public expenditure increases feed through into the real economy. Often, private industry and commerce will be well into recovery before so-called expansionary public fiscal and monetary measures come into effect – in which case, the wider economic consequences of the latter are likely to be counter-productive.

In addition, politicians nowadays have to award public works contracts fairly and openly. International trade rules prohibit the awarding of large contracts exclusively to local/national firms whether for employment generation or other purposes.

Other real constraints on government actions in this area are political constitutional rules limiting the size of government borrowing and deficits; the substantive independence of national central banks; and the operations of the international financial markets and credit ratings agencies… (pages 63-64)

Liberal political economists regard price and wage controls as among the most damaging of all official curbs on economic freedom. They are fundamentally incompatible with the free and effective functioning of economic markets. In their book Free to Choose, Milton Friedman and Rose D. Friedman compare the importance of free prices to that of freedom of the press in a society. Accordingly, they argue that this freedom should have similar constitutional legal protection. They propose a new amendment to the US Constitution to protect it explicitly:

“We need here the exact counterpart of the First Amendment: Congress shall make no laws abridging the freedom of sellers of goods or labour to price their products or services.”

The case for greater basic legal protection of employment rights and freedom is much the same in Britain as it is in America. However, Britain’s membership of the European Union bloc is currently an insurmountable barrier to basic liberalizing reform in this area. The EU is the source of many of the restrictive laws that nowadays exist on British employers and employees. The bloc is an international political economic cartel that imposes standard regulatory and fiscal burdens on the member governments as a fundamental condition of membership. Common minimum state curbs on labour market and employment freedom are a basic legal requirement. Thus, there is no realistic possibility of the scrapping of many present day employment regulatory burdens while Britain remains a member of the bloc. The rest of the bloc would never allow the British government to stay inside the cartel but abrogate its obligations in this area, liberalize the UK labour market unilaterally, and thereby give UK firms and employees a substantial competitive advantage over them.

It would only be possible to introduce a new comprehensive and effective system of basic legal protection of employment rights and freedoms here after British withdrawal from the EU.

The precise nature, scope, and implications of that protection might be the subject of considerable debate. However, it would be possible to extend employment rights and freedoms greatly through a simple blanket constitutional prohibition on state restrictions on labour market entry and employment competition. A straightforward basic law saying that all persons had the right to work freely and supply their services to anyone who wanted to hire them on any mutually agreed terms and conditions would automatically rule out such things as:

· statutory wage and working time controls;

· official trade union and professional closed shops;

· compulsory long and expensive apprenticeship schemes;

· spurious protectionist academic credentials, training certificates, and official licenses designed to keep competitors out of particular trades and professions; and

· state labour conscription, direction, and limitations on switching jobs in peacetime… (page 83)

The precise point and magnitude of trade-offs between pay, work, and leisure will vary from one individual to another. Significant pay increases may increase the working hours of (say) male manual workers with young children but reduce those of middle class women whose husbands are in well-paid full-time jobs. Historically, average real wages have risen alongside reductions in the length of the average working week. The substantive national employment level – the overall ratio of labour market participants to non-participants in the society – has also risen over the years.

Trade unions often seek reductions in standard working weeks as well as increases in pay for their members. They may demand cuts in working hours from employers both during periods of high and rising employment and in times of high unemployment and falling real incomes – in order to share the available work and income out amongst more people. However, reductions in working hours are often more difficult and costly for businesses than increases in pay. Even relatively small reductions in working hours may require the extensive re-organization of individual job responsibilities, production schedules, and shift patterns. Firms may have to create entire extra shifts to keep expensive plant running and maintain production and sales volumes. As noted, in some industries the exigencies of technology, production, and the market more or less fix operating times.

Firms often cut their working weeks to save money and jobs during trade downturns.   On paper, general reductions of (say) 10% in the average working week across all industries might seem like a good idea for reducing total redundancies and sharing the limited work available with other firms and employees.However, this would not be a viable strategy for reducing national unemployment. Even if currently fully employed businesses and workers agreed to it, work sharing would not tackle the underlying causes of joblessness. Cutting hours and sharing work would not stimulate business-economic growth or remove structural obstacles to employment. Indeed, insofar as the strategy increased business costs and inconvenience, it would be likely to cause even more labour shedding… (page 97)

Overall in industry employees have tended to demand higher pay in preference to reduced working hours/increased leisure. Across Europe and America, trade unions have demanded more rather than fewer hours of work over the years.There has been little decline in work time overall. In the United States in the final quarter of the 20th century, employees worked fewer hours per year but more hours per working life than in the middle of the century. Leisure had expanded – but had tended to do so alongside work rather than at the expense of it.

In some occupations, average weekly and annual hours of work have substantially increased rather than fallen. A number of professions have changed from being leisurely ways of life into regular full-time jobs. For example, between 1800 and 1950 the average number of hours worked by French senior civil servants rose from approximately 2,500 to 3000 a year. In contrast with the historical position, professional politicians, clergymen, senior administrators, lawyers, and doctors nowadays tend to work longer than average hours. Thus, there has been something of a redistribution of work and leisure time in society: the strong positive correlation between income and leisure time at the upper end of the scale no longer exists. Annual vacations in state education and the civil service are still longer than in private industry and commerce. However, the vacation entitlements of teachers and civil servants have not increased over recent decades while those of (e.g.) blue-collar manufacturing workers have steadily risen.

Finally, there remains a major gender variable in work and leisure time. Far from declining, the hours of work of many married women have increased significantly over the years… (page 112)

Other studies have found similar significant international variations in attitudes to work.

However, it is often difficult to distinguish the effects of national economic environmental factors from culture. Employee concern over job security is likely to be higher wherever countries are experiencing economic stagnation and high and rising national unemployment.

The importance that personnel attach to particular aspects of jobs also tends to vary with their occupations. In the above-mentioned multinational firm, service personnel placed a higher value on job security than did sales or technical personnel. This difference evidently related to their differing labour market situations. Service personnel had fewer opportunities for obtaining employment outside the firm than sales or technical personnel. This was apparently also the reason why the longer-term turnover rate of service personnel was lower.

For their part, sales and technical personnel valued job autonomy more strongly. In practice, they had more on-the-job autonomy than service personnel had. Autonomy was necessary for the effective performance of their work roles – and thus it is not surprising that these employees wanted to maintain and extend it.

Overall, employees in routine manual operative and clerical jobs attached comparatively little importance to autonomy at work… (pages 120-121)