THE CONCEPT OF INTERNAL LABOUR MARKETS

Fundamental for these developments is the concept of an internal labour market as developed in the early seventies, mainly on the basis of studies by Doeringer and Piore (1971) and afterwards by Edwards, Reich and Gordon (1973), and for Germany first of all taken up by Sengenberger (1978). The starting point for these studies in the confrontation with the neo-classical labour market theory was first to find proof for the hypothesis that labour market processes could not be explained by the effects of wage mechanisms alone. For certain posts members of certain population groups were not employed, even if their qualifications promised sufficient productivity and if their wage demands were lower than those of members of other groups. This resulted in the concept of labour market segmentation. According to this, the labour market is actually divided into segments of profession-specific and non profession-specific qualification demands, respectively in either stable or unstable employment. Each of these segments is open to a different kind of male or female applicants and is treated by the companies according to different criteria. Thus within the segment of demands for non-profession-specific qualifications and unstable employment offers the labour demands are usually met via the external labour market, whereas for positions with profession-specific demands and stable employment offers there exists an internal labour market within the companies. Posts for management staff, of course, quite obviously belong first of all to that segment for which there exists an internal labour market. This fact is undisputed, even though there are different approaches to explaining it. Focusing on labour market economics, it is pointed out that costs for training, adaptation and fluctuation will rise with a rising level of demand, so that once having secured qualified staff the companies will cling to it (cf. Franz 1991 p 142). On the basis of a concept of internal labour market the argument runs that whatever managers achieve for the company is better explained by the benefits of loyalty and promotion prospects than by remuneration (Buttler et al 1978c pp 189-90). In any case, for companies which strive for an international orientation human resource planning and development as well as training and cultural education for managing staff is of special importance (Bartlett, Ghoshal 1990 pp 209-38; Taggart, McDermott 1993 p 42; Kammel, Teichelmann 1994 p 108-40). Especially the concept of socialisation as a central co-ordinating mechanism should hardly be realisable without functioning internal labour markets. Windolf and Hohn (1984) have furthermore shown that already in the employment of applicants for management posts, companies place a decisive value on the ability to identify with the company and the suitability for cultural integration into the company, which of course can also be understood as the capability to adapt to the criteria of internal labour markets.