Labour market failure
Labour market failure is where the free labour market fails to properly allocate resources.
Perfectly competitive Labour Market
- Many buyers and sellers
- Workers have no influence on wage
- Perfect information
- Employers and workers free to enter in LR
- No individual firm can influence the market
- Doesn't exist
| Labour market Failure | Solution | Drawbacks |
|---|---|---|
| Monopsony | Trade unions | Trade unions can cause wages to become too high in non-monospony markets |
| Trade Unions | Regulate | Will increase failure in labour markets. Can cause worker exploitation |
| NMW | Remove / Reduce | Increases poverty / income inequality |
| Discrimination | Increase NMW / Legislation | Hard to prove |
| Lack of information | Information provision | May be geographically immobile |
| Occupational Immobility | Retraining / Education | Expensive, opportunity cost, takes a long time |
| Geographic immobility | Improve transport infrastructure | Expensive, depends on quality |