The labor market segmentation theory is the notion of a market consisting of different segments where no cross over is possible. The segmentation will result in different groups of people that would be receiving different wages. The labor market segmentation in essence creates different segments based on some defining characteristics in the population. It could be because of a set of behavioral rules. Other factors play a major role in the segmentation such as that of the governing entity, the form of contracting like permanent contracting temporary contracting etc, and also the enforcement of segmentation that is possible in the labor market (International Labour Organization ILO, 2017). Yet another form of segmentation is the one based on the type of labor, such as immigrant labor versus workers from own country. The labor market theory focuses on how the segmentations have to be worked on, how degrees of transitions can be achieved in the segments, how equity challenges have to be faced and finally the policies that help the nation benefit from the segmentation while avoiding the negative consequences of the segmentation.
Advantages: Labor market theory was introduced as an alternative to Human capital theory (Dickens, & Lang, 1993). Performance stability is assured in labor market segmentation. For instance, just dividing a labor market into two simple segments of primary and secondary segments can achieve much. Primary segments would be those with more permanent jobs and who would acquire better wages over their years of working. This creates more stable workers. On the other hand, secondary job segmentations are those where workers are temporary. They are usually filled by much minority workers such as immigrants, or youth or people looking for a temporary situation (Dickens, & Lang, 1988).
Labor market segmentation has functional reasons (Reich et al., 1973). To be specific it has social-functional purpose with respect to the capitalistic structures it serves (Kalleberg, & Sorensen, 1979). It is functional because it helps the operation of institutions by ensuring that workers are managed according to their talent, their capabilities etc.
Cons: There are some cons of labor market segmentation, especially in the way it seeks to legitimize segmentation based on race or sex. Institutional sexist behavior could increase, race based discrimination could increase in the workplace (Reich et al., 1973). Division of workers into separate segments furthermore will also create notions of inequality and equity. All the arguments, advocacy, regulations and law supporting equality and equity will suffer a setback if labor market segmentation was applied much rigorously.
As the labor market theory shows it is possible for there to be some amount of benefits in its functional usage. However, the cons show that it could setback equality, and equity advocacies, and would introduce institutional discrimination.