What are the shortcomings of the Neo-classical description of the labour market exchange, which is based on the notion of the price mechanism?

Essay by KajUniversity, Bachelor'sB, November 2005

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One of the shortcomings of the Neo-classical description is the lack of a social aspect. The labour market should be intertwined with society. Your position in society has a large influence on the level and type of job you are expected to achieve and which jobs you believe that you can do. Levels of education, especially secondary education, and the opportunities available after secondary schooling will open more or less doors for you into the labour market. Social aspects also include family and the increasing popularity of part time jobs or job sharing, especially among women.

This model also overlooks cultural aspects. Many cultures have an expected place in the labour market; this differs from country to country. For example in South Africa, the indigenous people have, over the last two hundred years, been the manual labourers for the white "invaders". The black population is expected to take the lesser-paid jobs because that is where society expects to see them.

Because of this young black people coming into the labour market will have no aspirations to become a manger or be motivated to achieve a better-paid job. In the UK especially in the clothing industry it has long been expected that Asian ladies are associated with the textiles industry, Asian families have also been associated with the convenience stores especially the idea of "corner shops". Another stereotype is that young Afro-Caribbean men are lazy and unskilled and so are typecast into unskilled low paid jobs whether or not they have skills or not.

The Neo-classical model also overlooks politics. In the last twenty years the UK has had two very different governments: Labour and Conservative. These have had very different attitudes to the labour market. Labour introduced a minimum wage very soon after coming to power and...