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Edexcel IGCSE
64
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Section A: The market system
Getting Started...Wages are determined by the supply and demand for labour in a labour market. However, in some countries the government might interfere in the labour market. For example, a minimum wage may be imposed. This is the lowest possible wage rate that an employer is allowed to pay a worker. Minimum wages are generally used to raise the incomes of low paid workers. Look at the example below.
Minimum wages in China: China introduced its minimum wage system in 1996. Its aim was to protect labourers and benefi t low-income factory workers, particularly migrant workers who have left rural farming areas for the city. Minimum wages are set regionally by the authorities depending on local circumstances. Guangdong, China’s richest province, said it plans to raise minimum wages by as much as 18% in some cities in 2008. The decision followed similar actions in other areas, such as the major cities of Shanghai and Beijing. Since last year, Chinese residents have seen prices of food and other basic goods increase more than their pay. Some believe that this could lead to social unrest.
(a) How will a minimum wage affect the incomes of workers in China?
(b) Who sets the minimum wages in China?
(c) Who benefi ts most from minimum wages in China?
(d) Why do you think the authorities are raising minimum wages as a matter of urgency?
Chapter 15: Interference in the labour market
Minimum wage legislationOne way in which governments interfere in the labour market is to set a minimum wage. This involves passing legislation (such as an Act), which means no employer is allowed to pay their workers an hourly rate below the limit set. In the UK, the government relies on the Low Pay Commission to review minimum wage levels every year. Employers face a penalty if they pay wages that are lower than the national minimum wage. Also, workers will be entitled to have arrears of wages repaid at current rates.
Reasons for minimum wage legislation● To benefit disadvantaged workers. It is argued that people such as women,
ethnic minorities and low income families benefi t from minimum wages. In the USA, it was suggested that women will be the largest group to benefi t from a proposed minimum wage increase in 2008. For example, 59% of workers who will benefi t from an increase to US$7.25 by 2009 are women.
Key facts: minimum wage in the UK• The National Minimum Wage Act 1998
introduced a minimum wage for workers in the UK.
• In October 2009 the minimum wage levels set in the UK were as follows:
– workers aged 22 and over, £5.80 per hour – workers aged 18–21, £4.83 per hour – workers aged 16–17, £3.57 per hour.
Wag
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W1
W2
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Quantity of labour
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● To reduce poverty. In many countries minimum wages are often part of a broad strategy to end poverty. In the USA increasing numbers of poor families have to rely on their earnings from low-paying jobs. Therefore, a minimum wage increase will help reduce poverty. The minimum wage raises the wages of low-income workers in general, not just those below the official poverty line. Many families move in and out of poverty, and therefore near-poor families will also benefit.
● To help businesses. A minimum wage should promote greater equality and fairness among workers. As a result workers will be better motivated. This should reduce staff turnover, reduce absenteeism and raise productivity.
Effects of minimum wage legislation on wages and employmentSupply and demand analysis can be used to show the effects of a minimum wage on wages and employment in labour markets. Figure 15.1 shows a labour market and the equilibrium wage is W1. If the government imposes a minimum wage of W2, above the equilibrium wage, by law all workers will receive at least W2. Unfortunately though, economic theory suggests that the minimum wage of W2 will have an adverse effect on the level of employment. According to the diagram, at a wage of W2, the number of workers employed falls from QL1 to QL2. Therefore, theoretically, a minimum wage will result in job losses.
Do minimum wages cause job losses?Some have argued that minimum wages do not reduce the level of employment in the economy, as shown in Figure 15.1. There is some evidence to support this view. For example, since the introduction of the minimum wage in the UK in 1999, the number of people employed has actually risen by 2.4 million in the nine years to the end of 2007. Also, over the same period employment levels have reached historic highs and unemployment levels have touched historic lows. There has also been a steady growth in the numbers of people employed in low-paid sectors. The graphs in Figures 15.2 and 15.3 support these two views.
Empl
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Une
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71%72%73%74%75%76%77%78%79%80%
Proportion of working age population
70% 4%
5%
6%
7%
8%
9%
10%
11%
12%
1991
1992
1993
1994
1995
1996
1997
1998
1999
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2001
2002
2003
2004
2005
2006
2007
2008
Employment rate (LHS)Unemployment rate (RHS)
Figure 15.2 Employment and unemployment between 1991 and 2008.
Source: Office for National Statistics, Monthly data, Labour market Statistics.
Figure 15.1 The effect of a minimum wage on wages and employment in a labour market.
Did you know?One of the advantages of minimum wages is that low-paid people receive more money and the government does not have to meet the cost. The extra money low-paid workers receive comes from firms who have to pay the higher wages. This reduces the burden on the taxpayer.
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group of slides in the slide pane on the left-hand side of the screen and select a transition. This will be applied only to the slide or group of slides.
Printing slidesTo print your presentation, click the Office Button and select Print from the Print menu. The Print dialog box appears, and if you click on OK the default settings will print all your slides one to a page. If you want to give your audience copies of your slides, you can print several on one page. You can print six slides on a page by selecting the following:
● Print what: handouts
● Slides per page: 6
Exercise 8.11 Prepare a presentation about yourself:
a) Choose a slide layout, design template, colour scheme and animation scheme.
b) The first slide should introduce you to your audience.
c) Next, include one slide on each of the following:✓✓ Your likes and dislikes✓✓ Your family✓✓ Your home✓✓ Your school✓✓ Your ambitions
d) Save your work.
e) Print your work showing six slides on one page.
f) Show your presentation.
2 You need a loan from your bank manager to buy a local business. Prepare a presentation to be given to the bank manager about the business.
a) Choose a slide layout, theme, colour scheme and animation scheme.
b) The first slide should describe the business.
c) Next, include slides on each of the following:✓✓ The opening hours✓✓ How to find the business✓✓ The products sold✓✓ The staff✓✓ The monthly sales figures for the previous year displayed as a column
graph.d) Put the date, your name and the slide number on every slide.
e) Use slide transitions to stimulate your audience.
f) Save your work.
g) Print your work showing six slides on one page.
h) Show your presentation
The Office button:
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Notes pagesWhen your presentation is shown to an audience by projecting it onto a large screen, if the font size is too small your audience will not be able to read it. As a result, when you enter text on a slide this is usually in a much larger font size than you would use in a word processor. Consequently, you cannot get much detail on one slide. However, you may want to write detailed notes that underpin the bullet points made on a slide. This can be done using the Notes Page attached to each slide.
To use the notes pages, in the View tab select Notes Page (see Figure 8.5). Click to add text, and you can type in notes for the slide as you would type text into a word processor.
To return to the normal view showing only one slide, in the View tab select Normal.
Figure 8.5 A notes page
Printing notes pages
To print your presentation and notes, click on the Office Button and select Print from the Print menu. The Print dialog box appears. If you want to print a copy of each slide with its associated notes on the same page, set Print what to Notes Pages, and click on OK.
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Title ISBN Available
Edexcel IGCSE Accounting Student Book 978 0 435991 29 6 New for 2010*
Edexcel IGCSE Biology Student Book 978 0 435966 88 1 Out now*
Edexcel IGCSE Chemistry Student Book 978 0 435966 89 8 Out now*
Edexcel IGCSE Economics Student Book 978 0 435991 28 9 Out now*
Edexcel IGCSE English A & B Student Book 978 0 435991 26 5 New for 2010*
Edexcel IGCSE Further Pure Mathematics Student Book 978 0 435044 14 5 New for 2010
Edexcel IGCSE Geography Student Book 978 0 435016 95 1 New for 2010*
Edexcel IGCSE History Student Book 978 0 435044 12 1 New for 2010
Edexcel IGCSE Human Biology Student Book 978 0 435044 13 8 New for 2010
Edexcel IGCSE ICT Student Book 978 0 435044 11 4 New for 2010
Edexcel IGCSE Mathematics A Student Book 1 978 0 435966 91 1 Out now*
Edexcel IGCSE Mathematics A Student Book 2 978 0 435966 92 8 Out now*
Edexcel IGCSE Mathematics B Student Book 978 0 435044 10 7 New for 2010
Edexcel IGCSE Physics Student Book 978 0 435966 90 4 Out now*
Edexcel IGCSE Mathematics A Practice Book 1 978 0 435044 16 9 New for 2010
Edexcel IGCSE Mathematics A Practice Book 2 978 0 435044 15 2 New for 2010
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