Education and Labour Segmentation in the Active Labour Market

Abstract

By the close of the interwar period the educational system dovetailed with the dualistically segmented labour market. The school system was centralized, hierarchical, specialized and differentiated, and as a result strong signals about expected training costs, time horizons and effort capacity were effectively transmitted out of the fresh-graduate job-seeking pool to potential employers. The labour market for hired employees was also fragmented, specialized and hierarchical. Good jobs, meaning jobs paying premium wages for workers with experience and seniority, existed in the rapidly growing heavy industry sector for which implicit contracts involved long-term guarantees of employment and/or extensive training. To the extent possible, these firms drew their new hires from fresh graduates of institutions enjoying top ranking based on difficulty of admission and from the schools who trained students in the specialized areas in which particular firms had an active interest. In this way élite firms became linked to the élite schools, and particular industries became linked to particular types of schools. In the lower echelons of the labour market for fresh hires existed the plethora of light-industrial firms, small private companies in manufacturing and services, and farms.