Exam Essays

Assess the view that recent levels of net migration have been beneficial overall to the UK economy [25 marks]

INTRO
Define: net migration

P1
Benefits of inward migration - growth potential- OECD claim UK's half growth is from immigration - an increase in a and AS in the short term and longer run increases GDP and decreases price level 

P2

European migrants pay more tax than receive benefits - gain to public finances - government spend more without having to borrow - greater social welfare and a change in age demographics - younger people paying taxes helps with spending increase in state pension due to aging population

P3 

Job vacancies in lower paying/skilled jobs such as carers - firm struggle to fill these positions with the UK workers - 504000 inward migration due to refugees from Ukraine and Afghanistan fill these jobs - they earn wages and pay taxes helping employers

P4

However, housing supply problems - supplies in elastic and in high demand - potential for black market - decreased government revenue from the profits - policy to subsidise building puts pressure on resources such as public services or education

P5

Net inward migration can change age demographics which is well needed in the short run there may supply housing issues but in the longer GDP will increase and there will be better labour productivity - in some local economies there may be a strain and resources but challenges are more cultural economic

Free market economists argue that trade unions always produce negative impacts in the labour market. To what extent if at all do you agree with this statement? [25 marks]

Intro 

Define: trade unions  and give an example

P1

[diagram trad unions]

Static trade unions - increase wages - excess supply - unemployment - profit orientated firms - increase in costs - demand contracts - workers are redundant 
However - productivity deal - greater efficiency - increase profit - depends on union behaviour

P2

[diagram bilateral monopoly]

union vs monospony - union forces firms to pay efficient wage - reduces exploitation of workers - more workers willing to work - extension of supply

However if trade unions become greedy - contraction in demand - layoff workers - so depends on Tu bargaining

With the help of a explain how advances in modern technology are likely to lead to rising wages in some industries [9 marks] 

[labour market diagram demand shift right]

Define wages

Automation results in higher productivity of workers and an increase in efficiency as the firm has not lost workers but gained a better productivity in increasing demand. Industries with higher automated tasks have a greater increase in productivity and demand and therefore in wages.

Increase productivityincreases wages as firms have lower average costs and greater profit margins so can afford to pay workers more

Creativedestruction, low price creating derived demand for workers to produce the good

With the help of a diagram, explain how unto what extent a shortage of labour is likely to affect the wage in a competitive labour market [9 marks]

Define: Wage 
demand and supply in an industry sets the wage 

[diagram - not shifts]

At the lower wage workers do not supply their labour causing a shortage of workers. There is upward pressure on wages.

An increase in the wage incentivise workers to supply their labour to reduce labour shortages acting as a signal to workers into firms to hire workers - extension and supply however there is a contraction in demand as firms costs rise so they may choose to hire less workers

The extent which a shortage of labour increases wages depend depends on elasticity - axis demand puts upward pressure on wages as firms compete for workers

More inelastic demand and supply creates a smallest shortage however wages increased by a greater amount

Evaluate the view that trade unions improved the operation of labour markets by protecting the interest of workers [25 marks]

Intro

Define: trade unions

give example

P1

Trade unions to protect workers by negotiating for better conditions - examples - which benefit the firm as workers may work more productively. [diagram trade union with productivity deal] high wages in real terms increase living standards of workers - however creates access supply - unemployment which damages work interests as vacancies become rare and jobs are harder to find - to prevent this trade unions couldn't negotiate productivity deal - but alternatively this time MRP increases as for higher wages workers must work harder and increased productivity - only in industries which productivity can be increased - example - outcome of trade union depends on strength of union and the credible threat of strike such as in real which disrupt economic activity.

P2

Trade unions to protect workers in monopsony markets such as… [digram monopsony with TU] - wage is below efficient wage - workers are exploited and severely underpaid - job quality is diminished and conditions may be hard - trade unions can bargain for the efficient wage benefiting workers without causing any quantity change - however this depends on the strength of union as since 2015 trade union membership has fallen significantly and the growth in pay was only 2.2% which represents ineffective bargaining on behalf of unions - trade unions becoming too greedy and negotiating for excessive wage increase Wood contract demand - as assuming profit maximisation firms incur a greater cost so instead choose to stop hiring or investing capital to replace labour - however this depends on the behaviour of a firm as they may choose not to Bargain at all

Ryan in a contestable market are very small profit margins and any increase in wage would suffer great costs so they've chosen not to work with trade unions discussing pay rise.

P3

Trading unions must have high density to have influence - February 2023 London bus drivers gained 18% pay rise - good for workers however damage operation of labour market as working days are lost - firms may lose profit decreased output which reduces productivity - workers can lose multiple days of pay without any guaranteed the trades will be successful with their bargaining and strikes will have an impact - may affect job security.

There are no trade unions representing the gig economy - strikes in the gig economy do not at all protect jobs

Conc

Trade unions can improve the labour market however they are more efficient when monopoly power is counterbalanced by trade unions. However, the excessive power creates distortions and other legislation such as minimum wage may be more effective in addressing market failures. Trains are usually stronger in traditional industries so have a better chance of resolution however they may not always have an impact for working conditions in new industries.

Evaluate possible government policies to reduce the ethnic pay gap [25 marks]

1. Mandatory reporting data

   2. Why didn't minimum wage to cover the gig economy?

   3. Tax incentives to employers

   4. Raise the minimum wage

   5. Target training skills and groups

Does the gap need closing or are inequalities good as they create incentives?

Discuss the view that the NMW is beneficial for an economy (25)

Intro: Define NMW and state UK

P1: A wage is a….

(diagram) wage provides incentive for workers to seek work and may increase productivity making firms more efficient and cutting costs.
- workers gain higher income may potentially increase GDP due to higher consumption increasing AD

• This may also decrease income inequality as those previously not in work/ with lower incomes are able to access wages potentially due decreasing the gap between the top and bottom income bands.
  Despite this NMW does not at present cover the Gigi economy who are arguably a larger majority of the lower paid labour force therefore may be less impactful in terms of lowering inequality

Minimum wage creates excess supply as supply extends due to incentive to work

• contraction in demand as it creates an additional cost to firms → may result in real wage unemployment increasing

However, change in employment depends on PED of labour → if PED is elastic any increase in NMW leads to significant decrease in unemployment

• Therefore NMW can increase real GDP by shifting MRP via improved productivity helping the economy to grow however could result in unemployment

P2: correct Labour market failure

In a monopsonist market workers are underpaid below efficient wage as workers are exploited → a minimum wage would help increase wages to prevent exploitation and ensure improvement in allocative efficiency as workers are now rewarded for their hard work at the market wage

however may lead to government failure depending on labour intensity depending on the size of the minimum wage → too high reduces demand for labour whereas too low no huge change in worker conditions leading to inefficiency

P3: downside

higher NMW can increase unemployment → huge factor considering UK youth unemployment where estimated 411000 NEETs unemployed within oct-Dec2025 → prevent expansion of productive capacity as well as lower long term growth

government may have to increase capital spending on benefits diverting resources → may cause firms to invest in better capital to replace labour such as TESla…

Firms are profit maximisers so some firms may be forced to increase prices by decreasing supply to retain profits leading to layoffs → however depends on behaviour for firms as labour is valuable resources so may pay workers → Also depends on the nature of employment e.g AI

Conc:

To conclude the NMW can be beneficial in terms of increasing economic growth and reducing inequality through access to higher income. However, effectiveness depends on PED of labour and the size of the minimum wage which could limit benefits. An important factor to also consider is the non-coverage of the economy largely concentrated of lower income workers. By not also targeting them, the potential benefits are reduced. However there are possibilities of unemployment if firms are largely profit maximise undecided lay of workers unless first choose to observe the costs. This hits a smaller firms harder as they may be unable to absorb costs leading to shut down and potentially reducing competitiveness in the market. Overall, it can be beneficial if overall benefits outweigh the negatives.

19/25

→ increase in NMW must match CPI to be effective

→ increase for all workers or on a sliding scale? (age categories)

Explain the factors that determine a firms demand for labour (15)

Intro: define demand for labour

P1:

One factor that determine the demand for labour is labour productivity which is measured using the marginal revenue product of labour. This reversed to the revenue affirm gains from employing one additional worker to measure increased output if MRP is higher the demand for labour is also likely to be great to as firms can become more profitable for example this might occur as a result of better training making human more attractive such as 500,000 New apprenticeship scheme which shows work as part of the label for skin experience and skills that can increase the long run productivity giving firms incentive to raise demand. This may not apply to the public sector however as workers in industry such as healthcare cannot be measured against their MRP ask these firms are more likely to be commercially driven

P2:

Another factor that contributes to FM man labour is the market wage rate which is set by the industry. A wages cost to affirm and affect the amount of profit firm can generate. A rise in wage rate from for example the negotiations of a trade union such as the 2024 22.3% pay rise per junior doctors may reduce the quantity of labour demanded as firms cost of production increases so they may choose to substitute labour with like self checkout machines in supermarkets. As demand is an important factor would be the demand. Ultimately demand for a good like memory increased due AI usage firm such as Samsung must increase output main demand and as a result require more workers to get ahead of competitors. Conversely a drop in demand for a good may force firms to layoff workers or stop hiring depending on firms behaviour as some may be able to absorb costs.

Overall, the demand is determined by three main factors demand for good wage and productivity all of which contribute to firm decisions to hire or layoff workers

14 or 15

2017 Context 2

With the help of a diagram, explain how the difference between the marginal revenue

product of male and female workers might account for the lower average earnings of

women.(9)

Use the extracts and your knowledge of economics to evaluate the policies that

government might use to reduce the gender pay gap (25)

Full marks 4/4

ok 9 marker

Explain the determinants of supply of labour to an industry(15)

Supply of labour is the number of workers willing and able to work at a given wage rate

higher wages attract more workers to the industry

P1- pecuniary factors → wage rate + bonuses

→ higher wage creates incentive to work e.g NMW → increases supply → may decrease unemployment and increase productivity as workers work harder and pick up extra hours

→ higher skilled workers have inelastic supply so even high wages may not increase willingness to work→ e.g pilots have long training periods therefore depends on job industry

P2: Extent of labour mobility

→ occupational immobility → workers cannot easily switch jobs → restricted supply due to potentially limited access to education and training

→ geographical → shortage of labour in regions e.g London due to high rent

P3: non pecuniary factors

→ pensions, holidays, job security, flexibility

→ used to attract labour