Factor Immobility

A-level Economics

How do immobile factors of production cause market failure?

Definition: Immobile factors of production are factor inputs that are not easily transferable to where we want them to be.

examples of factor immobility

Land is immobile - it can't easily be moved to another area of the economy

Capital is mobile but can also be immobile - for instance, your laptop can be moved around with a person conducting business rather easily. However, a machine at a factory can't easily be moved due to its size

Labour is can be mobile but also immobile - [read below about labour immobility ]

labour immobility

Two examples of labour immobility are occupational immobility and geographical immobility.

Occupational immobility

Sometimes you can't just transfer from one job to another. To transfer to another job it may require specialist training, education and skills to perform properly. It may even be work experience that is required.

Sometimes qualifications need to be achieved before a transfer - for example, a doctor or dentist would need certification to prove they are capable of carrying out their job duties.

Geographical immobility

Sometimes a job might look really amazing and you know that you are suited to it, but that job is almost 200 miles away in London and you live in Leeds. You have also just bought a house in Leeds. How will you work in your dream job? You will have to move because there are no viable transport links for you to get there. You'll also have to leave all of your family and friends which you don't feel too good about.

This is one example of geographical labour immobility. These are the factors that can cause it:

Insufficient transport (bad roads, too much traffic, bad public transport)
Large house prices or rent - this can make it more difficult to move
Ties to family and friends
Imperfect information about jobs in other areas

how immobile factors of production cause market failure

If factors are immobile it means that they're not being put to good use. They're either unused completely or underused. Therefore, resources are not being used in the best way possible.

[Remember, our resources are scarce (part of the Economic Problem) and our role as economists is to make the best use of scarce resources in order to maximise welfare in society]

Inefficient use of our resources is what leads to the market failure.

The government can correct some forms of immobility. For instance, above we said that labour immobility can be caused by imperfect information. Workers may not know of other work opportunities available to them. Governments could try to make information more available to workers e.g. a Jobsearch site. This would combat geographical immobility of labour.

Governments can also provide set up training schemes to increase the skills of workers. This would be combating occupational immobility of labour.

In summary, we have learned: