Anthropologist Clifford Geertz famously described culture as a web of narratives. The way societies understand the labor market is one such narrative — and it matters, because the story we choose shapes how we regulate and manage economic life.
For much of the 20th century, a dominant narrative — rooted in Marxist thought — framed the labor market as an inherent arena of conflict. In this view, employment relationships are defined by unequal power dynamics, where employers and workers represent opposing interests. Wage labor is seen as structurally exploitative, and workers as the weaker party.
This perspective emerged from the harsh realities of early industrialization. In 19th-century Europe, rapid urbanization, limited job opportunities, and a surplus of low-skilled labor created conditions of extreme vulnerability for workers. It was in this context that Karl Marx developed his critique of capitalism, portraying the labor market as a battleground between antagonistic social classes. But today’s global economy looks very different.
Modern labor markets are more dynamic, diversified, and regulated than ever before. In many advanced and emerging economies, labor shortages — not surpluses — are a growing concern. Skilled workers often have significant bargaining power, while access to education and training has expanded dramatically. Digitalization and remote work have opened global opportunities, allowing individuals to work across borders without relocating.
At the same time, the rise of entrepreneurship, freelancing, and micro-enterprises is reshaping traditional employment relationships. Small and medium-sized businesses form the backbone of many economies, reflecting a broader shift toward value creation through innovation, collaboration, and individual initiative.
Against this backdrop, framing the labor market primarily as a space of conflict risks leading to misguided policy choices. If policymakers assume that conflict is inherent and unavoidable, regulation may become overly interventionist—focused less on enabling productivity and more on managing perceived tensions. Proposals to expand strike mechanisms or intensify collective bargaining frameworks, for instance, should be carefully assessed in terms of real economic need rather than narrative assumptions.
An alternative perspective is to view the labor market as a platform for value creation. In this framework, employers and employees are not adversaries, but participants in a shared process of generating economic value. Their interests, while not always identical, are fundamentally interconnected: sustainable wage growth depends on productivity, competitiveness, and business success.
This does not mean ignoring imbalances or abuses. Effective legal and institutional frameworks remain essential to protect workers’ rights and ensure fair conditions. However, overemphasizing conflict can undermine cooperation, discourage job creation, and ultimately harm both businesses and workers.
The key challenge for policymakers is, therefore, not simply how to regulate the labor market, but how to define it. A narrative centered on value creation is more aligned with the realities of today’s economy — and more conducive to long-term growth, innovation, and rising living standards.
Written by Dr Saulius Matulevičius – Associate Expert at the Lithuanian Free Market Institute