A-level ECONOMICS Paper 2 National and International Economy. EXAM PREDICTION QUESTIONS

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Context 1 Total for this context: 40 marks Unemployment and the labour market Study Extracts A, B and C and then answer all parts of Context 1 which follow. Extract A Figure 1: Unemployment and un... deremployment rates in the UK, 2007–2018 Figure 2: Growth in average earnings and CPI inflation rate in the UK, 2008–2018 Years Unemployment rate (%) Underemployment rate (%) 2007–08 5.5 7.3 2009–10 7.8 9.6 2011–12 8.0 10.2 2013–14 6.9 10.1 2015–16 5.1 8.8 2017–18 4.2 7.8 Note: Underemployment is where people are working fewer hours than they wish, or in jobs that do not reflect their skills or training Source: ONS, 2018 Source: ONS, 2018 Extract B: Unemployment and real wages According to a recent study on wage growth, the youngest worker today would need to wait nearly 80 years to see the average real wage in the UK double from its current level. At just 4.2%, unemployment in the UK is at its lowest level in decades. It should be the best of times, but data from the Office for National Statistics (ONS) show that the percentage of people who are ‘underemployed’, often working on zero-hours contracts, is greater than it was during the financial crisis of 2007–08. Some claim this is the true cause of poor real wage growth. Supply-side reforms to labour markets are meant to boost productivity but can be damaging for some workers. Unregulated labour markets can lead to inequality and poor pay, which also reduces government tax revenue. Workers who are only temporarily employed can experience a lack of stability and firms may have little incentive to invest in human capital. Consequently, these workers may not get the opportunity to develop new skills. Firms may also face higher costs from replacing workers who leave because they feel undervalued. It can be argued that supply-side reforms have gone too far in creating a highly flexible workforce and the government needs to do more in terms of protecting the nation’s workers. There are calls for some restoration of trade union powers, more rights for workers on zero-hours contracts and measures to raise pay to ensure that workers feel the benefits of employment. 1 5 10 15 Source: News reports, 20183 IB/M/Jun20/7136/2 Turn over ► Extract C: Free market, supply-side labour market reforms Free market supply-side reforms often focus on either encouraging individuals to take up work by making it more attractive, or by making it more difficult for people to remain on unemployment-related benefits. A feature of recent government supply-side policy has been to create and maintain flexible working practices. The Confederation of British Industry (CBI) argues that “the UK’s flexible labour market is an invaluable strength of our economy which should be protected”. The UK’s employment rate is the highest since recent records began in 1971, and 97% of firms say the UK’s flexible labour market is vital to improving firms’ competitiveness. Having a flexible workforce, which can respond quickly to changes in demand, may benefit both businesses and workers. There is a growing need for workers to have more f [Show More]

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