Labour market failure: immobility of labour

Geographical immobility

Workers cannot easily move to jobs in another area. Causes:

• Housing: high house prices or rents in areas with jobs; difficulty selling a home; social housing tied to an area.
• Family and social ties: children's schools, a partner's job, caring for relatives.
• Cost of moving and lack of information about jobs elsewhere.
• For international moves: visas, language and recognition of qualifications.

The January 2021 WEC13 Section A included a question linking house prices to geographical mobility.

Occupational immobility

Workers cannot easily move to a different type of job. Causes:

• Lack of skills or qualifications for the new job; structural change leaves workers with obsolete skills (for example, after a mine or factory closes).
• Long or costly training.
• Discrimination and barriers such as licensing rules.

Consequences

• Structural unemployment in declining regions and industries.
• Skill shortages and unfilled vacancies in growing ones, which push up wages there and raise firms' costs.
• Wage differences between regions persist.
• Lower output and productivity: the economy produces inside its production possibility frontier; more spending on benefits and less tax revenue.

Worked example

A coal mine closes, but there are vacancies for software developers in a city 300 km away. Explain why the miners may stay unemployed.

1. Occupational immobility: miners lack the programming skills, and retraining takes time.
2. Geographical immobility: city housing may be much more expensive, and families have local ties.
3. So vacancies and unemployment exist side by side.

Answer: Both occupational and geographical immobility keep the labour market from clearing.

Check yourself

1. Which is a cause of geographical immobility of labour?
   • A lack of transferable skills
   • Discrimination by employers
   • Large differences in house prices between regions
   • Long training periods for a profession
   Show answer

   Large differences in house prices between regions. High housing costs where the jobs are prevent people moving.

2. Which is a cause of occupational immobility?
   • Workers lack the skills needed in growing industries
   • High rents in cities
   • Family ties to an area
   • The cost of moving house
   Show answer

   Workers lack the skills needed in growing industries. Skills mismatch stops workers changing jobs.

3. Which is a likely consequence of labour immobility?
   • Lower wages in areas with skill shortages
   • Faster economic growth
   • Unemployment and unfilled vacancies existing at the same time
   • A fall in structural unemployment
   Show answer

   Unemployment and unfilled vacancies existing at the same time. Workers cannot get to the jobs that exist.

4. Immobility of labour is most closely linked to which type of unemployment?
   • Cyclical
   • Structural
   • Seasonal
   • Frictional only
   Show answer

   Structural. Long-term mismatch between workers' skills or locations and the jobs available.

5. Persistent skill shortages in one sector tend to
   • lower wages in that sector
   • lower demand for that labour
   • increase labour supply immediately
   • raise wages in that sector
   Show answer

   raise wages in that sector. Excess demand for scarce workers pushes up their pay.

6. Explain why high house prices in a capital city reduce the efficiency of the labour market.
   Show answer

   Workers in other regions cannot afford to move to the city where the jobs are (geographical immobility), so vacancies remain unfilled and wages and costs rise in the city while unemployment stays high elsewhere; output is lower than it could be.. Give the chain from house prices to immobility to a market outcome.

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Sources

• Pearson Edexcel International Advanced Subsidiary/Advanced Level in Economics specification (XEC11/YEC11), Unit 3 Business behaviour and Appendices 6 and 7
• Pearson Edexcel IAL Economics WEC13/01 mark scheme, January 2021

Last updated 8 November 2026. Spotted a mistake? Tell us.