The labour market as presented in its conventional textbook context is often described as the process through which the various attributes of the worker are transformed into the requirements of the employer. Taken as a generalization, this focuses attention upon one of the most fundamental linkages between people that has existed in society since time immemorial; namely, the employment relationship. For employment provides far more than the means whereby the vast bulk of individuals can find the economic means of survival. It also shapes the organizational future of key elements in society such as families. For it is on the basis of available discretionary income, after all costs have been met, that the quality of life of most of a nation's population is maintained.

Any attempt to define precisely the various dimensions of labour market theory and practice is rather like trying to hit a moving target. The concept of deriving the value of a product from the labour which went into it can be found in medieval writers, while the classical and neo-classical economists define labour as one of three forces of production. The schools of thought which have emerged since have been many and varied, and while they occasionally overlap there are also significant differences. Theories of labour markets include rational expectations theory, implicit contracts, efficiency wage models, insider-outsider relationships and transaction costs theory.

The globalization of the economy and the consequent restructuring of capitalism have profound implications for labour markets and labour market theory. If, as seems true, we are moving away from the concept of the market as a coordinating mechanism, and beyond the firm as a functional agent in industrial sectors, and towards the concept of the business organization as a series of interrelated productive activities, then we are also moving towards a paradigm in which human capital will be of maximal value. One major question is whether these new organizations will be predominantly technologically determined or socially ordered. This question in turn has a strong impact on current arguments about labour market flexibility.

Alan Williams