Micro 26- Issues in the labour market

Question 1

What is market failure in the labour market?

Answer 1

Market failure occurs when the price mechanism leads to an inefficient allocation of resources which leads to a net welfare loss

Question 2

What is geographical immobility of labour a cause of?

Answer 2

Market failure

Question 3

What are some policies used to alleviate geographical immobility of labour?

Answer 3

• Housing market reforms - policies used to increase the supply of properties available to rent eg by increasing council tax on empty properties to encourage owners to let them out
• State provision of housing
• Transport
• Moving public sector jobs outside of London
• Encouraging private firms to start up/move to areas with high unemployment