Th2.6: Policies - Reform the Labour Market

Question 1

What will happen by increasing the retirement age?

Answer 1

there will be more people working so more goods and services could be produced

Question 2

Moreover, the labour market could be more flexible in order to…

Answer 2

make it more efficient as it can respond to external changes, such as changes in demand for a product or population changes

Question 3

What is one way of making labour markets more flexible?

Answer 3

weakening of unions - trade unions push up wages which can lead to businesses laying off some workers and reducing production, limiting AS, and so therefore reducing their power will hope to prevent this

Question 4

How have businesses attempted to be more flexible?

Answer 4

changing employment contracts, for example zero-hour contracts

Question 5

What form could flexibility be in?

Answer 5

making it easier to change jobs through higher mobility of labour - improved information about vaccines, improved geographical mobility of labour e.t.c

Question 6

How is the government trying to improve geographical mobility of labour?

Answer 6

improve the affordability of housing - do this by cutting VAT and relaxing planning laws

Question 7

What will the minimum wage do if it is set above equilibrium level?

Answer 7

cause increased unemployment, so some people argue the minimum wage should be scrapped to prevent real-wage inflexibility unemployment

Question 8

What will the reduction of benefits do?

Answer 8

increase incentive to work and help reform the labour market

Question 9

On the whole, what would all these methods do?

Answer 9

reduce unemployment, which represents a waste of resources and mean more goods and services can be produced as the labour force is bigger

Question 10

However, what is the problem with reducing trade unions?

Answer 10

they are already very very weak and would therefore have little impact

Question 11

What is the problem with reducing benefits?

Answer 11

lower AD if these people are unable to get jobs, causing further unemployment - poor also have highest MPC so a reduction in their spending would impact AD greatly

Question 12

What is the problem with making the labour force more flexible?

Answer 12

lead to decreased quality of life as people are less secure in their jobs and may have to work odd hours. some may also receive very low paying, increasing inequality and lowering AD