Causes Of Labour Market Failure

Question 1

How is skills gap a form of market failure?

Answer 1

• markets often under provide skills training because of free rider problem
• leads to deficit of human capital
• holds back productivity growth
• occupational immobility = structural unemployment

Question 2

What governemnt intervention can help with skills gaps

Answer 2

• apprenticeship levy in the uk
• more funding for STEM subjects
• skills based immigration policies

Question 3

Eval for skill based intervention

Answer 3

• time lag
• quality - labour shortages in other business due to costs

Question 4

how is geographical immobility of labour a form of market failure?

Answer 4

• family ties
• housing affordable problem
• visa restrictions
• community costs
• cultural + language barriers

Question 5

what government interventions can help with geographical immobility

Answer 5

• increased spending on social housing
• relaxation of planning laws
• rent controls being considered in london
• subsides for home buyers

Question 6

what is labour market discrimination? and what can it lead to?

Answer 6

• it occurs when employers make decisions on wages and employment based on prejudices such as race, gender or religion
• it can lead to, big variations of wages for the same job and different employment rates within a population

Question 7

why is discrimination a form of market failure?

Answer 7

• often a result of asymmetric information
• leads to HR being under-utilised, slower growth rate
• lack of diversity in the workplace can hamper innovation
• male dominated financial markets may have contributed to the financial