Gov Solutions to Monopsony Power

Question 1

How does governments stop the exploitation of low wages for unskilled workers ?

Answer 1

They would introduce a national minimum wage above the equilibrium price. Firms cannot legally go below this minimum wage point

Question 2

What does national minimum wage mean ?

Answer 2

This is the lowest wage employers can hire a worker for

Question 3

What is the minimum wage for 18-20 year olds ?

Answer 3

£6.83 per hour

Question 4

What does the minimum wage create ?

Answer 4

It creates a disequilibrium and an excess supply or unemployment. It reduces quantity demanded as it is more costly and increases quantity supplied as it increases incentives

Question 5

How will a minimum wage only work ?

Answer 5

It will only work if it is above the equilibrium price

Question 6

What does a national minimum wage mean for the labour market ?

Answer 6

Workers get higher wages but unemployment can also go up as firm may not be able to afford as much workers

Question 7

What are trade unions ?

Answer 7

These are group of workers who collectively bargain to improve employee welfare

Question 8

What are examples of a trade union ? And what would they bargain for

Answer 8

The national teachers union. They may bargain for shorter worker hours and higher pay. They can go on strike to get these demands
The British medical association. They may bargain for better pay and weekends off
Better working conditions

Question 9

What is a maximum price ?

Answer 9

The highest wage employers can hire a worker for

Question 10

What would be the point in setting a maximum wage ?

Answer 10

People would do as they think employees are getting paid too much. This would lower the wages they receive. It can help reduce inequality and costs for firms

Question 11

Where would you set the maximum wage ?

Answer 11

You set the maximum wage below the equilibrium wage. this creates an excess demand/ shortage. This increase QD as workers are cheaper to hire but decreases the quantity suplied as workers are less willing to work for lower wages

Question 12

What are the two reasons for labour market failure ?

Answer 12

Occupational mobility
and
Geographical mobility

Question 13

What is occuopational immobility ?

Answer 13

This is when workers cannot move between different jobs as they lack the skills needed

Question 14

What does occupational immobility mean ?

Answer 14

This csn lead to labour market failure as resources are not allocated efficently and leads to structural unemployment

Question 15

What does structural unemployment mean ?

Answer 15

This is when workers end up unemployed because the economy has restructured. For example in the 1980s when the Uk shifted from manual labour jobs like mining to service sector jobs like accounting

Question 16

How does the goverment intervene to solve occopational immobility ?

Answer 16

They can intervene through education, training and apprentiship schemes to help workers gain skills and then receive new jobs in other sectors

Question 17

What is geographical mobility ?

Answer 17

This is when workers struggle to move between different areas

Question 18

Why would geographical immobility be a problem ?

Answer 18

People may struggle to leave their family, it may be expensive to move and also time consuming for them

Question 19

How does geographical immobility lead to market failure ?

Answer 19

It would mean people cannot move location to fill in new jobs and end up unemployed. This resources are not being uses efficiently

Question 20

How does the goverment inervene to solve goegrpahical immobility ?

Answer 20

The goverment will intervene by improving transport. For example HS2 services. The goverment can also provide relocation subsidies to people relocating for work to cover for the costs