labour market

Question 1

Define wage differential

Answer 1

The difference in pay for two workers for having the same job

Question 2

When did the UK begin moving from the manufacturing sector to financial services

Answer 2

1970s

Question 3

Explain a chain of analysis on why a rise in demand for service labour causes a wage differential in the north vs south

Answer 3

North - primarily focused on manufacturing jobs that have fallen in demand
- this would lower incomes, lower consumption, lower profits of businesses who would shred workers or shut down. leading to further fall in income as labour is a derived demand

Question 4

Why may workers from the north not be able to move to the south

Answer 4

Due to occupational and geographical immobility

Question 5

list 4 arguments for ceo price cap

Answer 5

• equity and fairness
• hard to discern pay related to performance
• bonus culture means CEO’s make ST decisions instead of LT decisions for higher annual revenue
• increase levels of poverty and inequality

Question 6

list 5 arguments against CEO pay cap

Answer 6

• prevents attraction of talented CEOs to the UK
• capital flight to countries with low tax and no cap
• firms may rewards CEO by other methods like complex share options
• may be better policies like progressive tax
  -uniform vs non-uniform cap affects different industries

Question 7

list 7 benefits of NMW

Answer 7

• fall in poverty and inequality (less exploitation) - reduces wage differentials
• increase incentive to work (fall in inactivity rates)
• fiscal surplus for government
• increase MRPL
• incentive for firms to boost human capital
• counters monopsonist employers

Question 8

list 6 cons to NMW

Answer 8

• real wage unemployment (excess supply)
• youth lose out most (unable to justify pay increase therefore LT lead to hysterisis
• Those not affected would want pay increase, they want wage differential
• cost to business (may shut down)
• regional differences (london needs higher pay)
• monopsonist employers like government over public sector increase in spending

Question 9

EV the impact of TU

Answer 9

• depends on market structure if there is presence of monopsony
• depends on trade union density
• depends on TU mark up
• real evidence to show TU power is limited (e.g closed shop TU are banned, legislation, more part time workers,)