Government intervention in the labour market part 2

Question 1

What are the 5 reasons for the government intervening the labour market?

Answer 1

1) correct market failure
2) improve quantity of human capital (participation rate)
3) improve quality of human capital(productivity)
4) improve competitiveness
5) reduce burden on state finances ie pensions/benefits

Question 2

What is a skills gap and what is poaching?

Answer 2

skills gap- firms not providing sufficient levels of basic literacy, numeracy and IT skills

poaching- when firms pay higher salaries to workers trained by other firms, as they can afford to do so because they didn’t spend money training the worker

Question 3

What is income and wealth inequality?

Answer 3

income- differences in pay between workers ie the richest and the rest

wealth- differences in the value of assets held by households, it is on the rise as being ‘born into Money’ makes it easier for someone to increase their wealth

Question 4

What is the participation rate

Answer 4

the proportion of economically active people in an economy, about 79% in the UK due to many people not seeking employment or being in full time education

Question 5

What is labour market flexibility?

Answer 5

How quickly businesses can hire workers or fire workers to keep costs down and match changes in the economy

Question 6

Pensions: what changes have the government introduced to change pensions?

Answer 6

1) raising the state pension age
2) schemes such as auto enrolment so people are already opted in to paying towards their pension wherever they work, so they rely less on state pensions in the future

Question 7

Pensions: benefits and drawbacks to pension changes

Answer 7

Benefits

• government forces households to take more responsibility should increase government spending on welfare in the future
• contributing from a young age should ensure workers are better off in the future

drawbacks- increase in business costs as small businesses have to contribute to the pension

• workers being forced to work til their older reduces motivation, efficiency and productivity
• less employment for younger people as they don’t need to replace retiring people as frequently

Question 8

Pensions: evaluative points

Answer 8

• increased participation rates
• reduces burden on state finance
• may not improve quality of the labour force, falling productivity and rising costs, leads to fall in competitiveness

Question 9

Migration: what changes have the government made to migration

Answer 9

Brexit overturned migration rules which means if GB leave the single market then workers from other EU countries have no right to work in the UK
-12 month visas for low skilled workers but incentives to attract high skilled workers where there is a skills gap

Question 10

Migration: benefits and drawbacks of migration

Answer 10

Benefits- migrants increase the size and often quality of the labour force of the UK, boost AD, close skill gaps

Drawbacks- undercutting domestic wages means they reduce average wages and lower overall standards of living

• increases population to unsustainable levels, may be more increased burden on state finances and public services
• socio-political tensions

Question 11

Migration: evaluative points

Answer 11

depends on the economy- EU countries may be restricted in their immigration policies due to single market rules
- if there is a negative output gap and there are vacancies to fill, tighter immigration wouldnt be favourable

Question 12

Education and training: government policies/ changes

Answer 12

1) children have to remain in some form of education until 18
2) subsidies and support for apprenticeships
3) more academically rigour exams
4) subsidising cost of child care

Question 13

Education and training:

benefits and drawbacks

Answer 13

Benefits- in the long term should help to promote better educated and skilled works, reducing skills gap and increasing international competitiveness
-allows parents to take jobs that they couldnt take if child care was more expensive

Drawbacks- short term it reduces the participation rate of the country, less people earning so less spending, more rigorous exams mean less people achieve qualifications, potentially increasing income inequality

Question 14

Education and training: evaluative points

Answer 14

depends on opinion, will more rigourous tests improve quality of labour force or will it put potential people off of working or education as its too hard, will it improve occupational mobility, participation rates

Question 15

UK and EU regulation changes: examples of changes

Answer 15

UK-

• shared parental leave allows you to share up to 50 weeks parental leave and 37 weeks pay with a partner
• increase in UK living wage from £6,50 to £8,20

EU- can’t work more than 48 hours a week on average, normally averaged over 17 weeks

Question 16

UK and EU regulation changes: benefits and drawbacks

Answer 16

Benefits- protects workers from exploitation and upholds standards

• more leisure time and rest may help workers be more productive and motivated when they are working
• increasing participation rates through higher minimum wages and parental leave

Drawbacks- increases business costs which may increase prices/ inflation
-less competitive as regulation decreases flexibility of the labour market

Question 17

UK and EU regulation changes: evaluative points

Answer 17

• some people may like the EU rules to limit working hours whereas some people will be against this, as it decreases flexibility of the labour market
• priorities- worker welfare and protection vs needs of the business. maybe in the long term helping to protect your workers and motivating leads to a happier more productive work force as in Germany

Question 18

Changes in tax and benefits system: examples

Answer 18

Tax- raised basic income tax threshold to help equality
-reduced the top rate of tax from 50% to 45%

Benefits- tightened up benefit eligibility to reduce number of people claiming benefits and incentivise people to work more and increase their income/wealth
-benefit cap limits amount of benefits you can get if you’re of working age

Question 19

UK and EU regulation changes: benefits and drawbacks

Answer 19

benefits- improvement in participation rates

• reduce burden on public finances
• increased incentives to work increases productivity

drawbacks- some believe it has contributed to poverty as some people are genuinely unable to work, more demand for food banks and charitable services
-benefits cap combined with reduction in top rate of tax leading to further inequality

Question 20

UK and EU regulation changes:

evaluative points

Answer 20

• depends on political persuasion
• laffer curve and rate of tax
• government failure, how well will it be enforced
• side effects, forcing low productive people back to work may decrease productivity and competitiveness