ABSTRACT
According to the classic view of labour markets, workers move freely from job to job and firm to firm (Bakke, 1954). From the worker’s perspective, this movement is governed by pressures to maximize the fit between worker skills and job requirements, with the objective of maximizing earnings. Historically, however, hierarchical (internal) control of labour supplanted the open labour market as a way of securing and controlling workers (Doeringer and Piore, 1971). More recently, there have been challenges to the historical perspective of internal labour markets as the primary structure of employment. Pfeffer and Baron (1988), for example, suggest that organizations increasingly are externalizing a buffer of workers against the core or permanent workforce. Externalization refers to the degree of attachment, or more appropriately, detachment of a worker to the organization. According to Pfeffer and Baron (1988) there are three dimensions of externalization:
the physical proximity between the worker and organization;
the extent of administrative control over the employee wielded by the organization; and
the duration of employment.
Thus, externalization occurs where the worker is removed from the workplace for non job-related reasons, by diminishing the duration of employment and by reducing administrative control over the employee (for example, where payment is done by another employer). Externalization is viewed by some as a necessary economic response to an environment which is becoming increasingly dynamic, competitive and uncertain (Handy, 1989; Scott-Morton, 1991 ).