Labour market failure is when there is a lack of skills in the workforce or the inability of being
able to allocate labour efficiently. Occupational immobility is the inability or difficulty of
workers to switch between different jobs or industries, leading to structural unemployment
and labour market failure. This happens due to workers unable to transfer current skills to
new jobs or industries due to market changes, lack of
education or the fact that the uk is an ageing population.
For example, the tech industry has changed and
developed a lot where AI has been introduced and
people who have not learnt AI or are too old to
understand the new technology will be unable to work in
this industry as it is getting too complex. This means that
there will be an increase in structural unemployment
which if it accelerates more in multiple industries it will
cause a labour market failure because multiple industries
will shut down when an economy changes over time e.g.,
when the coal mines in the 1970s in the UK shut workers
had a lack of transferable skills between coal mining and other industries in tertiary and
quaternary sector. This leads to a lack of labour supply in the tertiary and quaternary
industry. This can be shown on a diagram, as workers are unable to have those transferable
skills, the supply of labour will shift to the left from SL to SL1. this means that as supply of
labour falls, the wages of the labour will increase from W to W1 to incentivise more people to
have the right skills and education. Therefore the barrier to entry of these jobs increases
which means the quantity of labour will fall from Q to Q1. This shows that labour immobility
creates a lack of supply of labour.
able to allocate labour efficiently. Occupational immobility is the inability or difficulty of
workers to switch between different jobs or industries, leading to structural unemployment
and labour market failure. This happens due to workers unable to transfer current skills to
new jobs or industries due to market changes, lack of
education or the fact that the uk is an ageing population.
For example, the tech industry has changed and
developed a lot where AI has been introduced and
people who have not learnt AI or are too old to
understand the new technology will be unable to work in
this industry as it is getting too complex. This means that
there will be an increase in structural unemployment
which if it accelerates more in multiple industries it will
cause a labour market failure because multiple industries
will shut down when an economy changes over time e.g.,
when the coal mines in the 1970s in the UK shut workers
had a lack of transferable skills between coal mining and other industries in tertiary and
quaternary sector. This leads to a lack of labour supply in the tertiary and quaternary
industry. This can be shown on a diagram, as workers are unable to have those transferable
skills, the supply of labour will shift to the left from SL to SL1. this means that as supply of
labour falls, the wages of the labour will increase from W to W1 to incentivise more people to
have the right skills and education. Therefore the barrier to entry of these jobs increases
which means the quantity of labour will fall from Q to Q1. This shows that labour immobility
creates a lack of supply of labour.
