Tackling Labour Immobility - Analysis and Evaluation Arguments

Here are some analysis and evaluation paragraphs addressing this question "Examine two policies that a government might use to tackle labour market immobility."

KAA Point 1:

Occupational immobility occurs when there are barriers facing people active in the labour market in moving from one job to another. Immobility is a cause of labour market failure and can cause persistent long-term structural unemployment. One intervention is the Apprenticeship Levy which applies to medium and larger-sized firms who must pay 0.5% of their payroll bill into a general fund and release staff for professional development courses. This element of compulsion can help overcome the free-rider problem when firms who have invested in the human capital of their workforce find valuable employees “pinched” by rival firms who get the benefit without contributing to the cost.

Evaluation Point 1:

In theory an apprenticeship levy can be an effective way of improving human capital and giving workers the transferable skills they need in a fast-changing labour market. But in practice the scheme is at risk of government failure. For example, in 2018, apprenticeship-levy paying firms only accessed £200m of an available £2 billion in levy funds and the number of new apprenticeships has actually declined in recent years. Some firms complain that the quality of training on offer from training providers is sub-prime. Employees themselves may feel that vocational qualifications remain under-valued in the labour market although the more rigorous T-level qualifications may help to address going forward.

KAA Point 2:

Geographical immobility of labour occurs when there are costs and hurdles facing people who need to move to find new work. This problem particularly affects families on relatively low income. Immobility is often the result of a huge regional disparity in housing costs to buy and also to rent. In London for example, average rents are now over 50 percent of median disposable incomes. One policy approach would be housing reforms involving a combination of scaling back planning regulations, new taxes on the capital value of land owned by investors who have gained planning permission and also a higher stamp duty on second homes. The aim would be to achieve a rise in new housingstartsandcompletions.

Evaluation Point 2:

The chronic shortage of housing supply needs to be addressed for geographical immobility to be tackled in the long run. However, there are risks and drawbacks with this approach. The effectiveness of the policy for example depends on what type of new housing is built – e.g. is it targeted at younger people? What percentage of new homes meets the price range for it to be affordable? Will housing developers instead focusonproperties that gentrify an area without tackling the root causes of housing need for families on below median incomes? Building more homes does not address the problems causes by the large number of second and empty homes which is allocatively inefficient.