A Model Of Dual Labor Markets When Product Demand Is Uncertain

Dual labor market theory is an attempt to understand observed variation in wages and job quality. The theory argues that market processes tend to produce "primary" jobs characterized by high wages and longjob tenure, and "contingent" (or "secondary") jobs that typically offer low wages and short tenure. The key feature distinguishing dual labor market theory from such alternative explanations as human capital theory or the theory of compensating wage differentials, is the nature of the labor market equilibrium. In dual labor market theory, equilibrium is characterized by an excess supply of qualified workers to primary jobs. Mobility between contingent and primary jobs will therefore be limited, and "good" workers may be stuck in "bad" jobs.