This paper distinguishes between three main types of labor markets: markets for unskilled or casual labor; internal markets, in which firms allocate jobs among workers with non-transferrable skills; and occupational labor markets, which match up jobs with workers who possess readily transferable skills. The latter are taken as the norm of conventional economic theory, which assumes competitive conditions in the long run. By contrast, the position of this book is that occupational labor markets possess a number of the characteristics of ‘public goods’; they are difficult to maintain and susceptible to breakdown in the long-run unless supported by some institutional framework. If this is true, then at any time the number of occupational markets will be limited, remaining skill requirements being met usually by internal labour markets, and firms will usually fall back on their own internal markets if occupational markets fail or are not available. Consequently the scope for competitive pressures within the labour market is greatly reduced.
