In
the event of a labour market imperfection, Government intervention to remove labour market failure is
very important. Governments will try to improve labour efficiency by
removing imperfections. Labour mobility has far reaching
economic consequences. There will be a trend among the labourers to leave
the lower wage occupation. This will result in a reduction in supply of
labour. Since the demand remains the same, the reduction in supply of
labour will push up the wage rate
to get more labourers, which will cause further mobility of labour to that
occupation. If there is labour immobility, the producers cannot adjust
the supply of commodities to meet the demand. When technical progress
takes place, there will be mechanisation and thereby there will be a reduction
in the demand for unskilled workers. Simultaneously, the demand for
the skilled workers like engineers will be increased.
The activities of the government to
remove the labour market imperfections (weakness) are,
(1)
Education and training [it is a
Merit good – Educated and trained workforce is beneficial to the
society.]
(2)
Providing labour market information.[Government
job centres give information to Unemployed to search and get job easily.]
(3)
Trade Union legislation. [This
will reduce the collective bargaining power so that there will be more job
opportunities]
(4)
Legislation against discrimination.
[Prevent the wage difference due to gender, ethnic, colour, etc.]
(5)
Equal pay legislation. [Women
receive equal pay to men within the firm for same nature of work.]
(6)
Minimum wage legislation.
[Government fixes a wage above the equilibrium wage rate]
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