The ‘Administered Labor Market’ Reconsidered

Abstract

This article examines the continued relevance of William Dugger’s theory of the ‘Administered Labor Market’ written in the early 1980s. The white-collar ‘administered labor market’ of the ‘old economy’ continues to exist alongside the more ‘market-oriented’ labor markets of the ‘new economy’. While long-term employment relationships are somewhat less common, white-collar workers still build their careers primarily through promotions within their companies rather than by changing firms. While contingent compensation is more prevalent, wage structures are still relatively rigid particularly in larger, older firms. The changes which have occurred in ‘administered labor markets’ are more ‘matters of degree’ than ‘matters of kind’.

Keywords:

• segmented labor market
• internal labor market
• monopoly
• monopsony
• long-term employment relationship
• rigid wage structure
• promotion

Notes

¹ Dugger does not discuss the employment policies and practices of firms in the ‘competitive periphery’ of the economy.

² See Rosenberg (1989, 2003, 2007, 2010) for elaborations of this argument.

³ While not a central part of the argument, Dugger is aware that those hired into lower status entry level positions often find themselves in ‘dead end’ jobs with minimal opportunities for advancement within the firm.

⁴ Dugger feels the term ‘internal labor market is a misnomer since the promotion process operates through the nonmarket process of institutional reproduction, not via the market mechanism. However, this was the terminology in existence then and is still in existence now.

⁵ Dugger distinguishes his theory of the ‘administered labor market’ from Galbraith’s (1967) view of the technostructure.

⁶ The evidence provided on the creation of the corporate elite is from a study done by W. Lloyd Warner and James C. Abegglen in 1952. Though dated, Dugger argues that their findings are not contradicted by more recent investigations.

⁷ Dugger relies on the work of Christopher Jencks et al. (1972, 1979) but is aware that the empirical findings are not conclusive.

⁸ See Piore (1975) and Edwards (1979) for examples of labor market segmentation analyses of professional and managerial positions.

⁹ See Rosenberg (2003, p. 204) for data on United States-based firms’ declining domestic market shares and declining world market shares.

¹⁰ The Obama administration was concerned about the existence and implications of the increase in industry concentration over the past two decades and by growing monopsony power (Council of Economic Advisers, 2016a, 2016b). Autor, Dorn, Katz, Patterson, and Van Reenen (2017) also finds that industries where concentration has risen the most have the largest declines in the labor share. However, they do not attribute this to declining labor shares within most firms.

¹¹ More recently, Lazonick (2015) also argues that over the 1990s the career long employment security that people aged 40–59 had come to expect disappeared as employers replaced older, more expensive, workers with younger, less expensive workers.

¹² Data limitations with the PSID made it impossible to do a similar analysis for prime-aged women. This study includes both private sector and public sector workers.

¹³ Barth, Bryson, Davis, and Freeman (2016) also find that much of the increase in earnings inequality over the 1970–2010 time period was due to increased dispersion of earnings across establishments.

¹⁴ Dugger accurately asserts that there were no women and minority executives in large firms in the late 1970s but does not provide any supporting evidence. In 1979, of the 1708 executives working at the Fortune 1000 firms, there were only three African-Americans, two Asians, two Hispanics and eight women. By 2010, the number of women and minority executives had substantially increased though women and minorities were still underrepresented in executive positions. In 2010, of the 2682 executives at the Standard and Poor’s 1500 firms, there were 183 minority executives (32 African-Americans, 106 Asians, and 45 Hispanics) and 122 women (Guest, 2016).