The Role of Employers in Shaping the Labour Market

The role of employers in shaping the labor market can be considered from either the demand or supply side. That employers shape labor demand is hardly contentious: 'Labor economics is often defined as the study of the pricing and allocation of labor. It is centrally concerned with how the labor market transforms the attributes of workers into the requirements of employers The role of employers in creating the labor supply is less obvious.

Labor supply is usually regarded as a product of individuals' choices and family circumstances plus government policies on the provision of education, training and social welfare. However, the role of employers must also be acknowledged. In practical terms, most of the labor supply exists within organisations and most workers are recruited from other firms rather than from the home or from educational institutions.

ABS labor mobility data shows that in February 1996, 77 percent of . This data means that at least 91 percent of the labor supply was from within employing organisations during the year to February 1996. Even workers who started a job in year-to-February 1996 were twice as likely to come from another employer than from an educational institution or unemployment  Therefore, redirecting attention away from labor market activity at the margins (such as a change in individuals' choices, participation rates, unemployment and/or skill shortages) towards activity within organisations seems warranted.

The appropriateness of emphasizing activity within organisations is further supported by the recognition that labor supply is not just a quantity of people; it is the capacity to 'labor as directed' to meet the goals of the organisation. Employers create labor supply through training and development which, in a broad sense, includes all aspects of work and learning that create a greater capacity for labor in quality and quantity terms. The capacity to labor must then be harnessed through control and cooperation strategies.

Despite this practical role for employers in creating the labor supply, most thinking within human resource management (HRM) and industrial relations presumes that the labor market is separate to employers; as though it is merely part of an employer's environment. Models drawing on contingency or systems theorizing tend to problematically posit the labor market as an input into HRM or industrial relations processes and outcomes at the firm level without the impact of organisations' policies and practices on the labor market being fed back into the environment

The emphasis of neo-classical economics on the 'invisible hand' of market forces also encourages a view that labor markets are independent and separate from the action's of employers, a position not overly challenged by the neo-institutionalist school which includes a partial consideration of activity within organisations through analysis of human capital, efficiency wages and transaction costs

 A conceptualization of the labor market that does allow a role for employers can be found within institutional labor market economics  Employers' requirement for a steady supply of trained labor, combined with the costs of recruitment, selection and investment in firm-specific skills, leads to the creation of internal labor markets (ILMs). The labor market thus becomes divided between those inside ILMs and those outside (the secondary labor market).

The variant of labor economics that places most emphasis on the role of employers in shaping the labor market is the labor process perspective,  the relationship between control strategies and labor market structures. Labor market activity outside is a product of employers' control strategies inside The division between workers' is easier to achieve if divisions between central and peripheral workers coincide with racial, sexual and geographic cleavages already existing among workers' .

 So whilst advocating that employers shape the labor market, they recommend linking labor market analysis closely to context because of the substantial constraints posed by product markets, demographics, industrial relations and the legal environment. For example, demography affects the sex of the supply of labor on one hand but on the other, gender differences at work arise from social processes and from employer practices.

 Employer practices consolidate and reproduce social divisions. The industrial relations context limits the options available to management and provides the avenues for pursuing change.

Labor market changes in the 1980s and 1990s have been closely associated with employers' labor use strategies, including the flexible firm

 As noted above, increasing flexibility of markets and workplaces as a source of productivity growth has been a focus of academic debate and policy makers in the 1980s and 1990s.  The flexible firm most clearly articulates the implications of flexibility for labor market structures. It has two dimensions: a typology of flexibility sought and a typology of workers (core and periphery). The flexible firm creates core and periphery segments by seeking different sorts of flexibility from different sorts of workers, and the skills and responsibilities demanded for certain types of work mean that different employment policies are required for different types of jobs

Following is a case study which investigates Rubery and Wilkinson's proposition that management strategies such as the flexible firm have contributed to labor market restructuring. Practices associated with flexibility are investigated at the workplace level in order to identify the link between an employer's labor use strategies and the labor market position of employees.

The case study indicates that the employer's strategies, combined with Australia's decentralization of wage determination, are leading to intensified labor market polarization. 'Polarization' is used in preference to 'labor market segmentation' because it implies that patterns of advantage and disadvantage lie along a continuum as opposed to suggesting that workers can be accurately compartmentalized into categories like 'core' and 'periphery'.

The workplace is within the metals manufacturing industry. Bramble (1989) identified the adoption of new production concepts and the beginnings of dual labor market strategies (especially casualisation) in the industry in the 1980s.

Using the flexible firm model to organised the data demonstrates some of the model's limitations. A particular weakness is that the flexible firm understates the degree to which functionally flexible core workers may act as a source of numerical flexibility (through shift work and overtime); and specialist contracted workers (a source of external functional flexibility) are conflated with casual workers

 It is too simplistic to equate functional flexibility with core workers and numerical flexibility with peripheral workers. Further, the manifestation of flexibility is not easily discernible. Some forms of flexibility are mutually exclusive; some forms are interdependent and the goal of flexibility is often intertwined with the goal of cost effectiveness or improved customer service.

 Further, the application of flexibility outside academic literature has been applied to many aspects of workplace reform and associated with any number of management theories. Nevertheless, the flexible firm model is used here as it is most explicit in terms of juxtaposing advantaged and disadvantaged workers.

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