Labour Immobility

What has happened to unemployment in the UK?

-A few months after the start of the recession in 2008, unemployment

started to rise sharply and when the global financial crisis hit, the

unemployment rate was a little over 5% or 1.6 million.

-Towards the end of 2009, with the UK coming out of its most severe

recession since the 1950s, it was almost a million higher at 2.5 million, or

8%.

-Unemployment peaked at almost 2.7 million at the end of 2011, its highest

level for 17 years.

The causes of unemployment can be split into two main types:

1. Demand-side

2. Supply-side

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Demand and Supply side

DEMAND SIDE SUPPLY SIDE

The first cause of unemployment is simply a lack of

aggregate demand. When there isn't enough

demand, employers will not need as many workers,

and so demand-deficient unemployment is a result.

Unemployment caused by supply-side factors, result from imperfections in the labour market. A

perfect labour market will always clear and all those looking for work will be working, so supply

will equal demand. However, if the market doesn't clear properly, there may be unemployment.

This may happen because wages don't fall properly to clear the market.

Supply-side unemployment may also happen because there is occupational or geographical

immobility. It may happen because there is poor information about job opportunities. This will

lead to people taking a long time looking for jobs, increasing the level of frictional or search

unemployment.

Spread of unemployment in the UK

Structural

Workers who have specific skills are not

necessarily needed in growing industries and

this causes a mismatch between the skilled on

offer, the unemployed and those required by

employers looking for workers. This problem is

called structural unemployment. This clearly

leads to a waste of scarce resources and

represents market failure.

Structural unemployment also occurs when certain

industries decline because of long term changes in

market conditions. For example, over the last 20

years, UK motor vehicle production has declined

whilst car production in the Far East has increased,

creating structurally unemployed car workers.

Globalisation is an increasingly significant cause of

structural unemployment in many countries.

Regional and industrial

Regional

When structural unemployment affects local areas of an economy, it is called

‘regional’ unemployment. For example, unemployed coal miners in South Wales

and ship workers in the North East add to regional unemployment in these areas.

Industrial immobility

Industrial immobility occurs when workers do not move between industries, such

as moving from employment in motor industry to employment in the insurance

industry. Industrial immobility has affected the UK, and many other industrial

countries, as the growth of service industries, and the decline of manufacturing

industries, has increased the need for mobility.

Definition

Geographical immobility is the inability

of workers to take available work in

different areas or regions

Causes

Moving from an area of low

house prices to one of high

prices

Much of the UK owns homes rather than

renting which is a barrier to being

geographically mobile

It is harder for the jobless to move to areas where jobs are available as the house prices in those areas are high

Geographical Immobility

For example, in South Yorkshire when the house prices are low the demand for house are also low and supply which means there is an

excess in the market. Compare this to London where the demand for housing is high and the supply is low so the house prices in London are

high. Also in London there are more jobs available than houses so the house prices are high

Demand and Supply for Labour

London South Yorkshire

For example, in South Yorkshire when the house prices are low the demand for house are also low and supply which means there is an

excess in the market. Compare this to London where the demand for housing is high and the supply is low so the house prices in London are

high. Also in London there are more jobs available than houses so the house prices are high

Demand and supply of Houses London South Yorkshire

Occupational Immobility and Skill Shortages

OCCUPATIONAL IMMOBILITYis the inability of labour to change occupations to take available work

o Causes of occupational

immobility include:

o Workers have a lack of

appropriate training or

education

o Workers cannot take time off

work to get trained

o There is a lack of availability of

affordable training/education

http://www.huffingtonpost.co.uk/alistair-cox/uk-economy-skills-shortage_b_4023817.html

SKILLS SHORTAGES means that there is a shortage of specialised workers within a certain sector. This results in a market failure as the labour force is being used inefficiently.

Currently there is a fierce competition brewing between UK and

other international companies, as they offer a greater pool of talent.

In an article in The Huffington Post James Dyson said that there is

difficulty in recruiting engineers for UK positions compared to the

relative ease of recruitment in Asia which proves that there is a

shortage of skills in the UK. Another reason for this could be due to

the immigration laws in the UK which allows businesses to source

the talent they need, regardless of nationality.

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This could be because other companies are looking else where to find the best person for the job.

Workers in other countries are more skilled than those in the UK

This means that businesses to source the talent they need, regardless of nationality.

There is no difference between skilled and unskilled labour so it is harder to find the best person for a job role.

What is Structural Unemployment?

If there is labour immobility , then workers cannot move to its most productive use and there is unemployment as a result.

• The economy will be producing inside its Production possibility frontier (PPF), as there are unemployed resources , and therefore an inefficient

allocation of resources and market failure.

• This unemployment may be structural unemployment. This occurs when the structure of the economy changes i.e. a sector of the economy

goes into decline, such as shipbuilding of the NorthEast.

• Structural unemployment therefore requires workers to move jobs. However, if labour immobility exists then this cannot happen and they

remain structurally unemployed.

Solutions for Geographic Immobility

1. Solution: Grants

Northamptonshire Enterprise Partnership (NEP) has joined Northamptonshire

County Council in launching Locate, a new initiative devised to attract companies

to the region.

Locate is offering small and medium UK and overseas businesses grants of up to

£20,000 and a package of services and support to make the move.

Available to companies over a year old with turnover of 50m or less and fewer

than 250 employees, the scheme is seeking fast-growth businesses, particularly

in the technology sector, that are looking to expand or relocate by moving to

Northamptonshire.

The Council has provided £100,000 in backing for the pilot initiative with the aim

of funding a minimum of five businesses.

In addition to grant funding, successful applicants will receive a year’s worth of

mentoring from an NEP contact who will provide help with the property search,

information on the local area, networking opportunities and recruitment support.

2. Relocation subsidies

The Problem: Geographic immobility

•One major cause of geographical immobility is that people are unable to move to find a job in another area

because there is a lack of affordable housing.

The differences in house prices can be using demand and supply.

•There is relatively less space available

in London for building, hence a smaller supply

and a higher price

● There are higher unemployment rates

in the North compared to London, hence more

demand and higher price.

2. Relocation subsidies The solution:

What is it?

•Relocation subsidies are amounts of money provided by Government, to help reduce reduce geographic immobility

by eliminating the problems of large costs of moving and large differences in house prices and living standards. The

Government also tries to move people moving into areas where there are shortages of labour

Problems associated?

•Many of these schemes have very strict conditions for being eligible. This means that not everyone will be able to

apply, so unemployment will remain high

•It is not certain that people will find jobs after being relocated, as occupational immobility may be present, meaning

that they may not have the skills required for the jobs in the new region even if jobs are similar.

2. Solution: Relocation SubsidyExample: Key Worker living Scheme

•If you are a key public sector worker in London or the South East/East of England, meaning you work for the government, you could get help to buy or rent a house as part the Key Worker Living Programme. The programme offers 3 different kinds of help:1. Open Market HomeBuy2. New Build HomeBuy3. Intermediate rentingExamples of jobs that are defined as a key worker include:•Clinical NHS staff (with the exception of doctors and dentists)•Teachers and nursery nurses in schools and further education/sixth form colleges•Social workers, nursery nurses, educational psychologists, and therapists employed by local authorities, CAFCASS, or the NHS

Solutions for Occupational Immobility

1. Solution: Government training Schemes

Getting young people into work with the £1 billion youth contract.

Action to date• We have set up the Youth Contract, a £1 billion package to help tackle youth unemployment. Key measures include:

● Wage incentives for businesses who take on 18-24 year olds.

● An extra 250,000 work experience places over the next three years.

● Incentives for small businesses to take on apprentices.

• There is also a new '16-24 Alliance' to tackle youth unemployment. A group of Britain’s biggest companies, spearheaded by Morrison's, are signing up to the Youth Contract to get 50,000 unskilled young people into work over the next three years.

• Other measures include a focus on making sure young people have the skills they need to get into work. We have set up sector-based work academies, University Technical Colleges, and have dramatically increased the number of apprenticeships available to give young people the skills they need to get on and get ahead in the workplace.

2. Increased Funding for Job Centres to provide Support, Training & InformationThe Problem: Occupational Immobility

•One major cause of geographical immobility that people aren to find a job in another sector because of a lack

of skills or qualifications. This why many Governments’ drive towards key skills or apprenticeships.

•Skills shortages remain a worrying issue for many UK companies despite millions of people being unemployed.

Almost one-third (31%) of the 209 companies surveyed by the Alliance of Sector Skills Councils said that it is not

possible to recruit people with the required skill.

•Occupational immobility is very common, as workers are made redundant in a particular industry e.g. The steel

industry. They may find it difficult to find a new job if they become structurally unemployed.

2. Increased funding for job centres to provide support, training and informationThe Solution:

What is it?

•Job centres help to find and provide jobs for people who might be

finding it hard to find one themselves with the qualifications they have.

•Increased government investment in training schemes for the unemployed will boost their human capital to equip them

with new skills that can be transferred from one occupation to another.

Problems associated?

● There are often levels of apathy or lack of confidence in the UK, so despite extra funding for Job centres, there is not

likely to be a large increase in employment.

•Even if Job Centres can provide suitable support and training, and find you a job, problems with geographic immobility

may be present.

3.Solution: Reforming Welfare

“We are reforming welfare so that it always pays to work”.Action to date

We have passed our welfare reforms into law. Under the last Government, people found themselves trapped on

benefits because the incentives to work were poor and the system was too complicated to navigate. Our reforms

will make sure that it always pays to work, while supporting the most vulnerable. Our reforms include:

● A benefit cap of £26,000 a year

● The Universal Credit, which will roll 6 benefits and tax credits into one simple payment

● The toughest sanctions regime for benefit claimants ever seen, including sanctions of up to 3 years for JSA claimants who repeatedly fail to meet their most important requirements

● Tackling benefit fraud

● Reforming Disability Living Allowance to the Personal Independence Payment, including a more objective assessment process so that disabled people get the support that they need.

Planned actions

• The legislation for our welfare reforms has now been passed into law; these changes will now be implemented in

stages.

General unemployment: The Problem

Unemployment rates in September 2013 . Unemployment fell by 50,000 to 2.53m in the three months to

August, taking the jobless rate down to 7.9% from 8.1%.

•However there are growing numbers of people in temporary or part-time work because they could not get full-time, permanent jobs.

•As of 2013, unemployment rates in parts of the UK are still increasing. In Scotland, unemployment increased by 7,000 to 222,000. In Northern Ireland, the number out of work rose by 10,000 to 70,000

•The rise in employment is almost matched by an increase in the size of the workforce, which means the unemployment rate is unchanged at 7.8%.

.

•Having the security of state benefits, means

that a lot of people fully rely on them, and so

not look for job opportunities

•Reducing unemployment benefits will reduce

apathetic attitudes, and encourage people to find a job

● There is an opportunity cost associated with state

benefit.Reducing them, could lead to extra on training schemes.

● To ensure people attend these schemes, the government could give more unemployment benefits to those who

attend until they get a job.

Solution: Reducing State benefits and/or making conditions stricter.

ConclusionLONG TERM

We believe that there ought to be a reformation of the educational system.

School leavers and graduates will have better skills that provide them for the future, if school education focused more on a

curriculum that meets the need of employers, rather than pure accademia.

● Policy suggestions to reduce structural unemployment include providing government training programs to the

structurally unemployed, paying subsidies to firms that provide training to displaced workers, helping the

structurally unemployed to relocate to areas where jobs exist, and inducing prospective workers to continue or

resume their education.