Structural rigidities in labour markets

Mobility can take three forms: geographical (the movement of workers from one part of a country to another); occupational (movement from one job to another); and social (movement from one class of job to another). But labour is not perfectly mobile; wage differentials and relativities can be maintained as a result of a lack of any of these types of mobility. Thus wages may be higher in one part of a country than another, but equalization is prevented by the reluctance of workers to move (because, perhaps, of different customs or languages elsewhere). A factory worker may earn more than a farm labourer, but farm labourers may be prevented from moving to the better-paid job because of difficulties in obtaining the necessary skills; and in many countries, there is considerable social immobility - so that it is much easier, for example, for the son of a university professor to become a doctor than it is for the son of a farm labourer or docker. Two forms of mobility are important from the individual's point of view: mobility between occupational and status groups and mobility between industries. A somewhat different aspect of labour mobility is mobility within organizations arising from recruitment, promotion and retirement rules, and from wastage rates.

Both European and American labour inflexibility grow out of workers' efforts to create a stable social existence in insecure and uncertain economic environments. In Europe, this has been done by directly imposing employment security through legal restrictions in businesses' ability to lay off and discharge workers. In the USA, unions sought and won the control of processes through which scarce jobs are distributed among the labour force by restricting both how jobs are allocated among workers and what a manager can ask any given worker to do.

[Developing countries] The actual flow of workers into industry in developing countries may be subject to powerful restraints arising from peculiarities of the social organization and culture pattern of the population. The modern industrial system assumes a certain degree of occupational mobility. But occupational mobility, facilitating the upward movement of workers to jobs on a higher economic level, may have little meaning in societies where production is organized on a family basis, and occupation is inseparable from the family status and kinship roles. In some societies, the immobilizing influences of a closely-knit family organization or well-integrated local community may be augmented by the checks and restraints of a wider social system. Caste systems and various forms of peonage, servitude or bondage, including indebtedness, segregation laws and colour bars are all detrimental to the manpower and mobility requirements of an expanding industrial economy. These handicaps are widespread among less developed countries, though there are significant local and regional differences in the degree to which they actually limit the size and effectiveness of the available labour force. In general, these social factors are more potent in Africa than in Latin America or Asia, where urban labour reservoirs tend to be much larger.