An Analysis Of Internal Labor Market And Usage Research

The theory of internal labor market is one of the advances in west economics in recent 20 years. The theory argues that labor isn' t fully assigned through the competiting market wages. In fact, labor assignment is mainly complete in the internal labor market. It is difficult for external labor market to explain the asymmetry between wages and the marginal revenue product of labor. Internal labor market comes into being because of such factors as: (1) information is asymmetric, (2) labor contracts are imperfect, (3) some knowledge in firm is tacit, and (4) human capital is characterized by specialization. Internal labor market can efficiently overcome the shortcoming of external labor market. In internal labor market, there is a mental contract without letter between employee and employer. If employee works hard, enterprise won' t fire employee, and vice verse. Enterprises can delay payment and designs the job ladder not only to stabilize the work team, but also to encourage employee to invest in human capital. The payment which employee obtains depends on not the short-term contribution, but the long-term contribution. This paper, based on the facture existence of internal labor market in a firm, reveals the characteristics of internal labor market, considers that internal labor market is the inevitable product under the fact that physical capital employs human capital. With the development of the economy, the function of internal labor market will be taken into account. To set up internal labor market is an approach to exert the value of human capital. This article presents the ways to promote human capital operation by strengthening the construction of internal labor market.