Labour market failure

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  • Created by: Abbie
  • Created on: 18-04-13 20:31
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  • Labour market failure
    • Unemployment
      • not producing on PPP-not productively efficient.(waste of scarce resources)
      • Markets not clearing due to; cyclical (disequil.); classical (WR above equil.=surplus S of L); or NAIRU
    • Segmented labour markets
      • division of labour into segments- each segment offers something different for a worker
        • Stops workers meeting D for L in other segments
    • Immobility of labour
      • EG mining decline- high OCC. immobility as narrow skills set
    • Abuse of labour market power: monopsony/ monopoly
      • Sole buyer of labour= affects demand for L= WR lower than in PC market (not in Equil.)
    • Trade Unions
      • push WR up=less D for L and excess S of L= unemployment for non union members 9BUT DEPENDENT ON TYPE OF MARKET STRUCTURE OPERATING IN)
    • Discrimination
      • leads to  inefficient allocation of resources and inequitable wage differential
    • Skills shortages
      • D for L cant be met- More skilled labour (inelastic)=more likely to occur
        • Result=vacancy filled with less efficient, unskilled workers
    • Imperfect info.
      • leads to workers accepting WR they percieie as fair- not nec. equil. WR
      • Reslources=not efficiently allocated as wokers not aware of all job vacancies



This is a useful mind map for revising the reasons for failure of the labour market.

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