The history of the labor markets has notably evolved progressively, attributed to various economic, behavioral and anomalous shifts. Noticeably, the labor market movement is concerned with the identification of mechanisms that have facilitated the allocation of labor effort and resources in the market at different periods in time, tracing historical events by which they have responded to the shift. It also involves understanding of how these mechanisms affected the allocation and distribution of labor efforts. All things considered, the history of the operation and development of labor markets can be traced back and implied using the three points of view; how closely connected were geographically distant labor markets, how flexible were markets in the past – did wages change in response to shocks? And finally, were relationships between employees and employers short-term or long-term – why did they change and what were the implications?
Ushering in the first point of view was the effect of urbanization, fueling in great impact the rural-urban migration of people in search of job opportunities. It was during the industrialization era that the demand and supply of labor was most distinct and impactful. Industries and manufacturing companies that were most significant at the time possessed the opportunities for workers to apply their skills and in return, would get compensated for their workmanship through wages. On the face of it therefore, there was no solid connection in geographically distant markets. At least till the effects of globalization and connectivity came about over the years. In retrospect, the labor market was not considered as flexible as it is in the current state of play. Wages did change in response to shocks; for instance, farmers and blacksmiths were waged according to the output and even so, there was an aspect of uncertainty when it came to work permanency or what we now term as contractual employment.
With the effects of globalization taking effect much later after that era, industries became more assimilated and connected with each other, despite them being geographically distant. The late 1990s was the start of an era characterized by the spread of automation and digitization – it was a period that we witnessed a shift from mechanical and analogue technology to a digital era. Connectivity and modern forms of communication attributed to this possibility. There was an apparent upscale of skillset in workmanship, enabling the movement of workers from one industry to another, in search of conducive environments, exposure and better pay.
The last few decades have evidently displayed how the labor market has undergone evolution due to substantial events. The pandemic period, the effects of the Russia-Ukraine war and the somewhat full embrace of artificial intelligence have also been crucial factors that have escalated changes in the labor market to date. This has seen to the adoption of computerization of routine tasks in companies and the use of robotics in manufacturing, energy and agriculture. The inconsistency of job security also attributed by wars and health anomalies led to a massive employee turnover, affecting household incomes and the ultimate pursuit of formal employment in masses. While workers had to bear the high transaction cost of movement to their workplaces and back home in exchange of labor, irrespective of the rising cost of fuel, there has been a sort of awakening on the functionality of the labor market.
Whilst this is true and holds up, the opposite can as well be justified – the shifts in labor movement have attributed to economic fluctuations. Changes in the labor positions have ad nauseam influenced shifts in economic positions of markets, possessing ripple effects that are either detrimental or supportive of development and stability. Case in point, the November Kenya Airways pilots’ strike that saw to the derailment and frustration of about 1,200 passengers, exacerbating the already troubled airline. As the pilots downed their tools, the labor fluctuation then, albeit short term and considered insignificant in terms of longevity, tremendously influenced an economic shift with regard to the sales and receivable projections for that particular period, possibly injuring the overall financial and social health of the airline. The same can also be argued when public medical practitioners strike, leaving its citizenry at the mercy of private health institutions which are too costly for the ordinary residential bracket. The implication of this compromises the entire health sector, creating conceivable avenues for further damage to the economy.
Employees and employers are constantly aware of how much the economy depends on labor, if these recent events are anything to go by. Resulting from this is the distinct difference separating different labor markets, some experiencing a higher transactional cost than others, especially in a developing country like Kenya whereby the wage brackets in the market poorly integrated with one another – such a tall order. Going forward, the economy will be a litmus test of whether the labor system has or will find an efficient optimum balance, depending on how automation, population aging and other technical, social factors interact with each other.