Wage determination

Assess the view that a national minimum wage, such as the UK’s National Living Wage, contributes to an improvement in economic welfare.

Explain how the data in Extract D (Figure 2), show that, since 2015, living standards of people working in the private sector are likely to have increased compared to those working in the public sector.

Extract E (lines 9–10) states that ‘In November 2022, 13.3% of businesses reported experiencing a shortage of workers leading to upward pressure on wages’.

With the help of a diagram, explain how and to what extent a shortage of labour is likely to affect the wage in a competitive labour market.

Extract F (lines 12–13) states that ‘Collective pay bargaining, reinforced by the threat of strikes, has achieved some notable successes for workers’.

Using the data in the extracts and your knowledge of economics, evaluate the view that trade unions improve the operation of labour markets by protecting the interests of workers.

Figure 6 shows a perfectly competitive labour market. The left-hand diagram shows the supply of labour (S_LI) and demand for labour (D_LI) for the industry. The right-hand diagram shows the demand for labour (D_LF) for one firm in the industry.

All other things being equal, which one of the following is most likely to cause an increase in the wage rate paid by the firm?

Extract E (lines 19–20) states that ‘Some out-of-work benefits have not kept up with inflation, putting downward pressure on wages, contributing to the rise in in-work poverty.’

With the help of a diagram, explain how a reduction in out-of-work benefits may lead to lower wages in some labour markets.

Figure 6 shows the supply of labour (S_L) and demand for labour (D_L) in a perfectly competitive labour market.

All other things being equal, which one of the following combinations would mean that wages in this labour market are likely to increase from W₁?

Extract B (lines 16–18) states that, ‘Gig economy defenders claim that today’s flexible labour markets offer modern workers the opportunity to move freely between jobs and this gives them more choice over their working hours.’

Assess the view that government intervention in the UK labour market is necessary to protect the interests of people who are working in the gig economy.

An increase in the national minimum wage may be used to make the distribution of income more equal. Such a policy is most likely to be effective when the elasticity of demand for

Using the data in Extract D (Figure 3), calculate how much the median care worker earns for every pound earned by the median worker in the whole economy. Give your answer to the nearest penny.

Explain how the data in Extract D (Figure 4) show that there is likely to be substantial upward pressure on the wages of care workers by 2041.

After considering Extract D, and the original evidence in Extracts A, B and C, would you recommend that the government implement a further substantial increase in the National Living Wage? Justify your recommendation.

Extract E (lines 4–5) claims that workers in the 18th century saw wages rise in line with productivity.

With the help of a diagram, explain how advances in modern technology are likely to lead to rising wages in some industries.

The diagram below shows the demand and supply curves for skilled labour (D_s and S_s) and unskilled labour (D_u and S_u) and the wage differential (W_s–W_u) between the two types of labour.

All other things being equal, which one of the following is most likely to cause a decrease in the wage differential?

Extract E (lines 22–23) states that ‘The tendency for women to participate in low-productivity sectors is now a bigger factor in their low pay than discrimination’.

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.