Factor immobility as a market failure Income and wealth distribution

Market failure We have been looking at how market failure occurs in goods markets e.g. over-production of demerit goods, or a failure to produce public goods Market failure can also occur in factor markets, especially in the labour market Much of this is to do with the immobility of factors – unable to move

Geographical and occupational immobility How can occupation and geography prevent someone from remaining unemployed?

Occupational immobility When workers are prevented by artificial or natural barriers from moving between jobs Abilities such as strength, eyesight or physical fitness or the wrong skills e.g. mining to banking Artificial barriers – membership (accountancy), trade unions Discrimination on grounds of race, gender, religion or sexual orientation are also artificial factors

Geographic immobility When geography prevents workers from taking jobs Ignorance of job opportunities Family or cultural ties Costs of moving Housing market e.g. in South East

Income and wealth Equity – in this context meaning fairness “20% of the population should have 20% of the wealth of the country” Positive or normative? Do you agree with this?

Income and wealth Income – a flow of money received e.g. wages Wealth – a stock of assets that a person owns e.g. housing In the UK income is unequal, and wealth is even more unequal Unregulated markets tend to lead to highly unequal distribution of income and wealth