SEGMENTED LABOR-MARKETS AND EARNINGS IN IRELAND

Segmented labour market theory rests on two central tenets. The first is that it is meaningful to distinguish between primary labour markets providing ''good'' jobs with high wages and stable employment and sec ondary labour markets providing ''bad'' jobs with low pay and unstable employment. The second is that jobs in primary labour markets are rat ioned, with substantial barriers to entry from secondary labour market s. The rationing hypothesis cannot be tested for Ireland with the data available, but here we test the hypothesis that wage determination di ffers across sectors, using data from a 1987 ESRI household survey. Tw o formulations of the segmented labour market model are tested, one di stinguishing only primary and secondary sectors and the other distingu ishing four sectors employed in recent US research by Gordon. Estimati ng standard earnings functions for both variants suggests that returns to education are lower in secondary markets, as predicted by segmenta tion theory, but contrary to the theory's predictions returns to work experience do not differ across sectors. There may be a less clear-cut divide between sectors in European countries than in the USA, partly because of the role of trade unions. The policy implications of adopti ng a segmented labour market perspective are markedly different from t hose of human capital theory on some central issues of labour market p olicy; so further investigation of that perspective appears warranted.