Culture and the Labor Market

By Austen, Siobhan | Review of Social Economy, December 2000 | Go to article overview

Culture and the Labor Market


Austen, Siobhan, Review of Social Economy


Abstract This paper explores the relationship between culture and labor market behavior. An attempt is made to clarify, from an economic perspective, the meaning of culture; to discuss the importance of cultural studies in the economic analysis of the labor market; and to outline the major theoretical issues that are associated with adopting a cultural perspective on economic behavior in the labor market.

Keywords: Culture, labor market, labor economics, social norms

Culture is a hermeneutic system, that is, "an interpretative integration of material objects, behavior, and their meanings" (Jennings and Waller 1994: 1000). Culture encompasses language, norms, customs, morals, beliefs and conventions, and it serves to establish a shared understanding among a group of people of the external world and each individual's relationship to this world.

An understanding of culture should be an integral part of any economic analysis of the labor market. Culture determines, in large part, the value and significance that individuals attach to alternative labor market actions and outcomes. Particular aspects of culture, such as social norms, also help to define the boundaries to the pursuit by individuals of their culturally defined objectives in the labor market.

The economic analysis of Veblen and Commons embraced a cultural perspective on economic life (Jackson 1996). Veblen described individuals as the sometimes comic creations of their inherited cultures and, following in his footsteps, "old-instutiutionalists" have continued to interpret patterns of economic behavior as being the product of cultural environments that are specific to particular times and places (Mayhew 1987: 590, 596 and Woodbury 1979).

"Old-institutionalists" have also identified aspects of culture, such as customs, conventions and norms as legitimate and distinct topics of economic analysis. Rather than interpreting these aspects of culture as the products of self-interested individual action, the "old-institutionalists" have sought to describe social norms, customs, conventions and beliefs as autonomous parts of the environment in which economic action takes place (see Hillard and McIntyre 1994: 620-621 and Gimble 1991).

However, the neo-classical (and "new-institutionalist") analysis of the labor market has attacked the notion of culture as a core process (Mayhew 1987). In neo-classical analysis, human action is typically defined by objectives that are treated as independent from the culture of the individual. Rather than viewing human action as the product of culture, aspects of culture (such as language, norms and morals) are interpreted as the product of an independent set of individual interests. As Julie Nelson (1993: 292) explains, Homo economicus "springs up fully formed, with preferences fully developed, and is fully active and self-contained...The [social and economic] environment has no effect on him but rather is merely the passive material, presented as constraints, over which his rationality has play. He interacts with society without being influenced by society."

The dominance of neo-classical model in labor economics over recent decades has meant that, despite the richness of the "old-institutionalist" heritage, the important relationship between culture and labor market behavior has been a relatively neglected field. An important gap now exists in the labor economics literature.

This paper aims to help fill this gap in the literature by describing and discussing in broad terms the concept of culture as it relates to some important labor market issues. The paper also sets out to describe the theoretical controversies that are associated with adopting a cultural perspective on labor market issues and to highlight the potential scope of cultural studies of these issues.

The structure of the paper reflects these aims. Section I utilises the classification of cultural effects provided by Di Maggio (1994) to identify, in very broad terms, the nature of the relationship between culture and human action.

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