The Labour Market (AQA A Level Economics): Exam Questions

Extract E states: ‘Until the 1990s, almost all workers in the care sector were employed by the government, which acted as a monopsonist by keeping wages low.’ With the help of a diagram, explain how a monopsonistic public sector can lead to low pay for social care work

Extract E: Problems in the social care market Social care in England involves the provision of personal care to adults with needs arising from illness, disability, old age or poverty. Social care is provided to people in their own homes or in care homes. Many people in need of care are on low incomes and cannot afford to pay for it themselves. High quality care provides private benefits and also external benefits, including lower burdens on the NHS and on working relatives. Until the 1990s, almost all workers in the care sector were employed by the government, which acted as a monopsonist by keeping wages low. Over the last 30 years the sector has been largely privatised, with 75% of England’s 15 000 care homes now run for profit. Privatisation was intended to create more choice, improve efficiency and ensure high quality, whilst enabling a quicker response to changing demand.

Since privatisation, the sector has seen further downward pressure on wages. Social care providers, bidding competitively for contracts from local authorities starved of cash, have minimised labour costs. Privatisation does not seem to have improved the quality of care either. Some elderly clients are cared for, in their own homes, by unqualified staff in 15-minute slots, with budgets too small to provide nutritious meals or basic care. Despite the actions of the industry regulator, the Care Quality Commission, there have been many scandals involving care homes in recent years. As a result, some have argued that there are moral and economic arguments for social care to be brought back into public ownership

Extract E states that ‘The tendency for women to participate in low-productivity sectors is now a bigger factor in their low pay than discrimination’

With the help of a diagram, explain how the difference between the marginal revenue product of male and female workers might account for the lower average earnings of women

Extract E: Causes of the gender pay gap

Since the Equal Pay Act 1970, it has been illegal to pay men and women differently for the same work. Despite this, the overall pay gap is 19.2%, according to the Office of National Statistics. The pay gap for full-time workers is lower, at 9.4%, and the gap for part-time workers is actually negative, at -6.5%. In the UK, 41% of female workers are part-time, compared to only 11% of males

Prior to the Equal Pay Act, it was common to find firms paying women less than men for comparable work, but since then discriminatory attitudes have lessened to the extent that some economists deny that the wage gap is a problem at all. A recent report found that women working in the same job, and at the same level, are paid just 0.8% less than their male equivalents. Certainly, the pay gap has been shrinking, partly due to demographic and social changes. In earlier times, most senior, highly paid jobs were held by men, while women of the same generation stayed at home. The Government claims that 2.2 million women who are not working want to work. They believe that increasing the female labour force participation rate could add 10% to the size of our economy by 2030, as well as benefiting women directly

Interestingly, women in their twenties currently out-earn men and it is only when they reach their thirties, and perhaps start a family, that the pay gap starts to emerge. Is this due to employers undervaluing female staff once they have had a baby, or to outdated social conventions that women should be the main childcarers? Most of the highest paid jobs in finance, engineering, science and technology are predominantly populated by men, while most of the lowest paid jobs, like caring and hospitality, are largely done by women. 80% of those working in the low paid care and leisure sector are women, compared to only 10% in the better paid skilled trades. The tendency for women to participate in low-productivity sectors is now a bigger factor in their low pay than discrimination

Source: News reports, April 2016

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After considering Extract D, and the original evidence in Extracts A, B and C, would you recommend that the government implement a further substantial increase in the National Living Wage?  Justify your recommendation.

‘Each time the Government imposes a minimum price or wage, the result is almost always excess supply. What matters is the extent to which this is a problem.’

Discuss the view that a national minimum wage is beneficial for an economy