Addressing Factor Immobility

Idea

Factor immobility keeps labour and capital stranded in the wrong uses; the remedies are supply-side measures that restore their mobility, matched to the type of immobility being addressed.

Mechanism

Retraining workers — reskilling programmes (Singapore’s SkillsFuture) reduce the skills mismatch behind occupational labour immobility, letting workers move between jobs and reducing structural unemployment.
Improving infrastructure — better transport and housing reduce geographical labour immobility by raising connectivity, so workers are more willing and able to travel for work (new MRT lines, line extensions).
Establishing business hubs — siting employment closer to where workers live (regional hubs at Jurong, Woodlands, Bugis) cuts commuting and so eases geographical labour immobility from the demand side.
Capital-goods subsidies — subsidising firms’ acquisition of capital (the Productivity and Innovation Credit scheme) reduces functional capital immobility.
Attracting foreign direct investment — lower corporate tax, good infrastructure and a skilled workforce draw firms that relocate their physical capital, reducing geographical capital immobility.

Considerations

A neutral catalogue of the trade-offs:

Cost and budget strain. Retraining and infrastructure are expensive and can push the budget into deficit.
Time lags. Infrastructure is not a short-term fix; construction takes time before the immobility eases.
Take-up and motivation. Retraining works only if workers are willing to undergo it; reluctant workers blunt its effect.
Information on which sectors to back. Capital subsidies require knowing which industries are genuine growth industries; misdirected support can prop up declining sectors and deepen allocative inefficiency.

This market failure is examined in prose only — there is no factor-immobility diagram in the 9570 syllabus.