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Reorganization of Firms and Labor Market Inequality

  • Lindbeck, Assar

    ()

    (Institute for International Economic Studies, Stockholm University)

  • Snower, Dennis J.

    ()

    (Department of Economics Birkbeck College)

This paper explores the implications of the ongoing reorganization of firms for inequality in the labour market. We show how recent technological advances in physical and human capital can lead to the breakdown of occupational barriers, creating demands for new combinations of skills, and thereby leading to new patterns of wage inequality. Specifically, our analysis indicates how the changes can segment the labour market into an expanding sector of restructured firms where wages are rising, a contracting sector of traditional firms where wages are relatively stagnant, and an expanding pool of the unemployed. The analysis helps explain various significant labour market phenomena, such as: the increased versatility of work; the widening dispersion of wages within occupational, educational, and job tenure groups in the United Kingdom and the United States, accompanied by a narrowing of the male-female wage differentials; the reorganization of firms from task-oriented departments to customer-oriented teams; and the breakdown of occupational barriers.

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Paper provided by Stockholm University, Institute for International Economic Studies in its series Seminar Papers with number 605.

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Length: 13 pages
Date of creation: 31 Oct 1997
Date of revision:
Handle: RePEc:hhs:iiessp:0605
Contact details of provider: Postal: Institute for International Economic Studies, Stockholm University, S-106 91 Stockholm, Sweden
Phone: +46-8-162000
Fax: +46-8-161443
Web page: http://www.iies.su.se/
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  1. Lindbeck, Assar & Snower, Dennis J., 1997. "Restructuring Production and Work," Seminar Papers 602, Stockholm University, Institute for International Economic Studies.
  2. Holmstrom, Bengt & Milgrom, Paul, 1991. "Multitask Principal-Agent Analyses: Incentive Contracts, Asset Ownership, and Job Design," Journal of Law, Economics and Organization, Oxford University Press, vol. 7(0), pages 24-52, Special I.
  3. Milgrom, Paul & Roberts, John, 1995. "The Economics of Modern Manufacturing: Reply," American Economic Review, American Economic Association, vol. 85(4), pages 997-99, September.
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