This chapter has investigated recent trends in the labour market and finds that there have been fundamental changes in the make-up of the workforce and the nature of employment in the UK over the last 20 years. These changes have been mirrored by most other industrialised nations. There is evidence of increased flexibility in the workforce in the form of higher levels of temporary and part-time employees. These changes have implications for all aspects of our lives.
A number of theoretical approaches have been considered which help to enhance our understanding of the employment relationships which exist within an organization Although traditional neo-classical economics is abstract in its approach, it does yield some useful conclusions and serves as a basis for the analysis of labour markets. Human capital theory is an extension of this. Both approaches see the characteristics of the individual as the most important defining factor in the labour market.
The segmented labour market approach takes rather a different view. It does not see individual characteristics as important but instead the (perceived) characteristics of groups. Occupational differences and wage differentials are the results of barriers which exist in labour markets which prevent members of these groups gaining access to internal labour markets in the first place and then restricting movement upwards once in the internal labour market. Thus particular groups become segregated into certain occupations and certain hierarchical levels. The case study on the position of women in the labour market (see below) uses the different theoretical approaches to try to explain why there are gender differentials in wages.
The last section of the chapter looked at the role of trade unions and the government in the labour market and the response of HRM to these changes.