A Study On Internal Labor Market In Enterprises

By combining normative and empirical analyses, the author discusses the existing causes, functional characteristics and efficiency basis of Internal Labor Market, and also systematically studies the operation mechanism of ILM in firms and its application in the state-owned enterprises or private enterprises. He holds that such features in ILM of firms as commitment for long-run employment contracts, promotion and deferred compensation, are helpful to reduce high turnover cost, moral hazard, to improve the accumulation of specific human capital and to solve the problem of pricing idiosyncratic human capital.The author places much emphasis on the differences between the operation mechanism of ILM and that of ELM. After analyzing the mechanism of supply and demand, competition and cooperation, compensation determinant in firms, the author put forth the concept that internal security mechanism is the fourth mechanism in the improvement of firm efficiency. And he further points out that, in order to maintain operation efficiency, it is important to foster competitive environment in firms by making full use of competitive pressures from the external capital, product and labor market. Meanwhile, it is also important to consider the conditions in both the internal and external labor markets when devising the managerial compensation systems.In the monographic research, the author points out that, under traditional systems, the core of low efficiency in state-owned enterprises is the maladjustment of the operation mechanisms of ILM, and the dual rigidity of both employment and wage which deprived the two of the incentive function in the ILM and the resource reallocation function in the ELM. Therefore, when trying to solve the problem of low efficiency and high unemployment rate (implicit and explicit) in state-owned enterprises, we must take into account the correlations between the ILM and ELM. Furthermore, the author believes that it is the premise of further development for private enterprises to construct the incentive micro-mechanism of human capital investment, and that the operation efficiency of ILM determines a firm's developmenttrend to a certain extent.