Internal Labor Markets and Noncompeting Groups

The present analysis illustrates the possibilities for a socioeconomic theory of the labor market, i.e., one which emphasizes collective behavior instead of individualistic behavior and which leads to the proliferation of noncompeting groups in the labor market. Earlier research focused on efficiency considerations within internal labor markets and diverted attention from several less competitive features of such markets: 1. the potential for generating economic privileges and rents, 2. the opportunities they provide for costless asset formation, 3. the presence of bargaining power, and 4. the importance of social relations and group cohesion at the workplace. Incorporating such elements into the internal labor market model introduces the possibility of dynamic movements in labor productivity. Employees and employers do not simply take advantage of technical opportunities to capture economic rents in a basically competitive system. Rather, they try to generate rents through monopolization and through various idiosyncratic workplace practices. In the process, workers acquire bargaining power and social cohesiveness.