Final answer:
Yes, a free market can result in a tight labor market when demand for labor increases, especially if workers are highly productive which makes them more desirable to employers, shifting the market demand for labor to the right and potentially increasing wages.
Step-by-step explanation:
Can a free market result in a tight labor market? In a perfectly competitive labor market where firms face a horizontal supply curve for labor, employers can hire as much labor as they need at the market wage. An example would be secretaries in a big city where they can be hired in abundance if the going wage rate is paid. A tight labor market arises when there is a high demand for labor relative to supply, which can occur under certain conditions in a free market. Particularly, when the labor market demand increases due to economic growth or when workers become more productive, employers seek more workers which can create a tighter labor market and potentially increase wages.
However, external factors such as recession or barriers to trade can lead to an excess supply of labor, softening the market. Similarly, skills programs can affect labor markets differently, potentially decreasing inequality by affecting the supply for different skill levels differently.