Immobility of Factors of Production

Immobility of Factors of Production

1. OCCUPATIONAL IMMOBILITY= as patterns of demand and employment change, many workers may find it difficult to easily secure new jobs, since they may lack the necessary skills

2. GEOGRAPHICAL IMMOBILITY= where workers find it difficult to move to where employment opportunities may be, due to family ties and differences in housing costs

3. If markets are to function properly then all markets for factors of production must function properly.

4. Reasons why factor markets do not always function efficiently

   • the labour market
     • it is a key factor market as labour must be fully mobile for a market to function well
       • workers may not be able to move easily from one form of employment to another (occupational immobility)
         • as employment patterns change through changes in the structure of the economy, workers may not find it easy to transfer their skills, e.g. coal miners having to become computer technicians or financial consultants; they wouldn't possess the relevant skills for theses new jobs so would require training
           • redundant workers may get 'stuck' and be unable to get a new job as the economy changes what it produces
             • This is known as 'structural unemployment'
               • This is a form of market failure as labour is being under-utilised
     • Workers may not easily be able to move from employment in one area to employment in a different region
       • This could be because of family ties, preventing geographical movement
         • It could also be due to significant differences in house prices so it's difficult to move from a low-cost to high-cost region
           • This is geographical immobility
             • Result is when employment contracts in one area of the country and expands in another, workers are unable to move from the area where economic activity is contracting to where it;s expanding
               • Unemployment is created leading to market failure