Equal Opportunity Law and the Construction of Internal Labor Markets

Internal labor markets have been explained with efficiency and control arguments; however, retrospective event-history data from 279 organizations suggest that federal Equal Employment Opportunity (EEO) law was the force behind the spread of formal promotion mechanisms after 1964. The findings highlight the way in which American public policy, with its broad outcome-oriented guidelines for organizations, stimulates managers to experiment with compliance mechanisms with and eye to judicial sanction. In response to EEO legislation and case law, personnel managers devised and diffused employment practices that treat all classes of workers as ambitious and achievement oriented in the process of formalizing and rationalizing promotion decisions.