Dual labour market

The dual labour market theory divides the economy into two parts, called the “primary” and “secondary” sectors. The distinction may also be drawn between formal/informal sectors or sectors with high/low value-added.

Dual labour market theory is an explanation of the inequality that exists in the labour market. Labour market dualism represents the division of American jobs into more or less discrete segments based on the quality of the jobs. These segments include the primary labour market (jobs that are very good) and the secondary labour market (jobs that are very bad). In addition, there are also a large number of mediocre jobs that combine qualities that are good with others that are bad. This segment is referred to as the intermediary labour market. The terms dual labour market, labour market dualism, and labour market segmentation all refer to these divisions within the labour market.

The classic description of the dual labour market comes from Doeringer & Piore (1971; see also Piore 1970; 1975; Tomaskovic-Devey 1993a; 1993b). Primary jobs are those that provide: high wages, good working conditions, employment stability, chances of advancement, equity, and due process in work rules. Jobs in the secondary market, in contrast, tend to have low wages and fringe benefits, poor working conditions, high labour turnover, little chance of advancement, and often arbitrary and capricious supervision (p. 165).

Jobs in the intermediary labour market often have better wages than jobs in the secondary labour market but often lack either heath insurance or retirement benefits or both (Hudson 2007).

Occupations play a large role in determining job quality and the ability of workers to obtain better jobs over the course of their careers. Jobs within occupations that are highly regulated and that require a great deal of specialized training or education are likely to be found in the primary labour market, while most secondary jobs are found within low-skill occupations that have few barriers to entry (Osterman 1975; Grusky & Sorensen 1998; Jacobs & Blair-Loy 2001). Union membership and collective bargaining can shift jobs from the secondary to the primary labour market by requiring employers to provide good wages and benefits to less skilled workers (Freeman & Medoff 1984; Freeman 1999; Reich 2000; 2002). Likewise, the use of temporary and contract workers can permit firms to downgrade jobs from the primary to the secondary labour market by reducing wages and by eliminating health and retirement benefits (Harrison 1997; Kalleberg et al 1997; Kalleberg, Reskin, & Hudson 2000; Kalleberg 2000; Hudson 2001; Theodore & Peck 2002).

The secondary sector is characterized by short-term employment relationships, little or no prospect of internal promotion, and the determination of wages primarily by market forces. In terms of occupations, it consists primarily of low or unskilled jobs, whether they are blue-collar (manual labour), white-collar (e.g. filing clerks), or service industry (e.g. waiters). These jobs are linked by the fact that they are characterized by “low skill levels, low earnings, easy entry, job impermanence, and low returns to education or experience.” The informal economy consists of labour that is often "pay-under-the-table". This market tends to attract the poor and a disproportionate number of minority group members.