Discuss policies businesses and government might implement to reduce labour immobility to benefit the energy sector

Edexcel A-Level Economics Paper 1 June 2018 Extract

With reference to Extract C and your own knowledge, discuss policies businesses and government might implement to reduce labour immobility to benefit the energy sector. (15 marks)

Paragraph 1

1. One policy the government could implement to reduce labour market immobility is to increase spending training schemes, such as apprenticeships that are relevant to the energy sector.
2. This would solve the problem caused by occupational immobility of labour.
3. Extract C mentions that 'a long time period is required for training and developing workers' skills'.
4. Occupational immobility means that there is low supply of labour due to a lack of relevant skills in the given labour market.
5. An improvement in training schemes makes it more attractive for people to train or re-train in the energy sector, which means more people will be willing and able to work in the energy sector at each given wage.
6. This can be shown by a right shift in supply of labour, which causes an increase in the quantity of workers from q1 to q2.
7. Extract C mentions the idea to 'recruit more skilled workers from overseas'.

Evaluation 1

1. However, there is an opportunity cost to the government spending more on training schemes.
2. The government should consider if this is a better idea than the next best alternative, such as spending more on training schemes in other areas instead and forcing firms to do more themselves to attract workers.
3. Additionally, even if the government were to go ahead with training schemes, there is a time lag to this.
4. Even if people want to take up apprenticeships, it may take a couple of years before they complete their qualifications, and that delays how quickly firms can benefit from an increase in labour supply.

Paragraph 2

1. Another policy that firms could implement to reduce labour market immobility is to impr0ve working conditions.
2. One example of this might be to offer staff the possibility to work remotely or work from home where possible.
3. This would reduce immobility in the labour market, and increase labour supply, since more workers would be willing to work at each given wage rate if working conditions were better.
4. The extract mentions that 'two-thirds of workers are aged over 50', and offering a remote/hybrid working structure, where possible, would be a great way to retain more of them and disincentivise them from taking early retirement.
5. This would prevent labour supply from falling whilst workers age, ensuring that labour market mobility improves.

Evaluation 2

1. However, this policy of offering better working conditions and increasing remote work could lead to other issues.
2. For example, it could cause a fall in productivity of workers as communication becomes more difficult.
3. This would lead to an increase in costs for firms in the energy sector at all levels of output as workers are slower to complete tasks.
4. This could mean that firms generate less profit and therefore have a reduced ability to reinvest in the re-training of their workforce as well as their services.