Identifying Segments in the UK Labour Market

This study proposes the split of the UK labour market into two sectors : a 'structured' and a 'structureless'. The assumptions developed here, are the product of an attempt to bring together a variety of concepts from the writings of Fisher (1951) and Kerr (1954) as well as Piore and Doeringer (1973) and later Okun (1981) into a single coherent theoretical framework, the S&S labour market model. As a result the labour market segments identified are derived in three different but interrelated ways, using as sector demarcation criteria certain job and employer characteristics which illustrate the most essential theoretical issues emanating from the amalgamation of the above theories. The central proposition to be tested here is that there are two clearly identifiable segments in the British labour market and that each one of these segments has different wage and employment mechanisms with regards to individual educational qualifications, training or experience. More importantly, the study offers detailed information on the effects of the share of part-time, full-time and self-employment experience in relation to the individual's economically active life to date as well as an analysis on the 'scarring' effects of the share of unemployment experience. The above propositions are tested with the econometric framework of a bivariate sample selection model where the individual's sector attachment is modelled as endogenous and is subject to choice decisions. The results establish a significant degree of segmentation in the British labour market. Moreover, they were found to be compatible in all three disaggregations, which implies that the three theories brought together to create the S&S model are closely associated.