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Market failure in the labour market
When labour is not being fully utilised
Geographical immobility of labour
Where workers are unable to move to different places to seek and find work
6 ways to combat geographical immobility of labour
-state provision of housing
-relocation grants for workers
-housing market reforms to encourage people to rent out empty houses
-improved transport
-move public sector jobs out of London
-encourage firms to to start up/ move to areas of high unemployment
Occupational Immobility of Labour
Workers are unable to change jobs or take up new opportunities due to a lack of skills or training
Three ways to combat occupational immobility of labour
-improving general education to improve the flexibility of workers
-directly provide specific training for workers to target skills shortages in certain industries
-subsidise training schemes done by employers themselves
Three current labour market issues and how to solve them
-retirement age- ageing population etc, - can raise the pension age, increase tax,improve health of old people by so much they are able to work
-youth employment- high supply of workers but not demand for new employees-offer training or encourage firms to take on younger employees
-skills shortage- firms need employees to do skilled jobs but there are none available eg engineering- incentivise young people to train in these areas or flexible contracts eg zero hour
Effects of immigration on labour market
-increased supply of labour decreases wage rate- goods are produced at lower cost
-less consumer spending as lower wage rate however more total people so AD would increase
-increased exports- however remittances
Impacts of minimum wage
More supply and less demand for labour- real wage unemployment, unemployment depends upon wage elasticity of demand
Impacts of maximum wages
-lower inflation
-less incentive to do high paid high stress jobs eg CEO
-Caps public spending if in public sector
-higher equality
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