In
a labour market in free market economy, all employers and all employees would
be Price takers. There would be perfect mobility, no discrimination
(inequity) and perfect knowledge about vacancies, wage rates and working
conditions. This does not occur in reality. There are many causes for labour market imperfection.
The
following are the Causes of labour
market imperfection.
(a)
General barriers to mobility.
[Both - geographical or occupational.] Geographical mobility refers to the
movement of labour from one geographical location to another.
Occupational mobility refers to the movement of labour from one occupation to
another.]
(b)
Lack of information: Most
workers are unaware of all the available vacancies, wage rate, promotion
changes, working conditions etc.
(c)
Discrimination: In labour
markets a group of workers receive a different wage or given different chances.
It may be on the basis of gender, colour, age, social background and a number
of grounds.
(d)
Monopoly trade unions Trade
unions push the wage rate above equilibrium which reduces the employment.
(e)
Attachment between workers and
employers. In perfect market there would be no attachment between
workers and employers so that workers would feel free to move to a higher
paid job and an employer also would feel free to dismiss existing workers
if demand fell.
Back to Home Page Click here