Edexcel A-Level Economics A2 3.3.4 Labour Markets Questions

Practise labour market decisions using demand, supply and elasticity evidence, from migration and benefits to wage gaps and mobility.

Exam points

infer derived labour-demand shifts from changes in product revenue or industry subsidies
interpret labour-demand elasticity and explain substitution or labour-cost-share effects
predict labour-supply shifts from migration, welfare benefits, participation and population change
use demand-and-supply diagrams to infer equilibrium wage and employment changes
explain occupational wage gaps through skills, productivity, elasticity and job conditions
evaluate wage differentials using discrimination, regulation, trade unions and monopsony power
compare public- and private-sector pay through funding, profit, benefits and budget constraints
analyse geographical and occupational mobility policies using housing, transport, training and job information
evaluate mobility policies using funding, time lags, family ties, skill barriers and worker resistance

Covered syllabus points

3.3.4.1a - Factors that influence the demand for labour to a particular labour occupation: •3.3.4.1b - Factors that influence the elasticity of demand for labour 3.3.4.2c - Factors that influence the supply of labour to a particular labour occupation: • size 3.3.4.2d - Factors that influence the elasticity of supply of labour 3.3.4.3a - Labour market equilibrium. of wage rates in 3.3.4.3b - Causes of changes in the equilibrium wage rate and quantity of competitive and labour 3.3.4.3c - Wage setting in the public sector/state-owned enterprises 3.3.4.4a - Causes and consequences of the geographical immobility of the labour market labour 3.3.4.4b - Causes and consequences of the occupational immobility of labour

[Maximum number: 1]

Total revenue for American Airlines fell from $ 45.77 billion in 2019 to $ 17.34 billion in 2020. In response, American Airlines made 31000 staff redundant.

Which one of the following was the most likely reason for these staff redundancies?

The number of airline passengers rose

The derived demand for labour fell

Government employment subsidies to airlines increased

Taxation on airline employees decreased

[Maximum number: 1]

The elasticity of demand for agricultural workers in South Africa is estimated to be -0.3 .

Which one of the following is the most likely reason for this value of the elasticity of demand for labour?

Labour cannot be easily replaced by capital

Wage rates are relatively high in the agricultural industry

Consumer demand for the final product is price elastic

Productivity is relatively low in the agricultural industry

[Maximum number: 1]

From September 2019 to September 2021 the US labour force participation rate fell.
Which one of the following is most likely to have caused this fall in the supply of labour?

An increase in benefit payments

An increase in net migration

An increase in the wage rate

An increase in productivity

[Maximum number: 20]

In 2023 the highest-paid lawyers in Switzerland earned, on average, three times more than the lowest-paid lawyers.

Evaluate possible reasons for wage differentials in an occupation of your choice.
Illustrate your answer with an appropriate diagram(s).

Indicative content guidance

Answers must be credited by using the level descriptors (below) in line with the general marking guidance. The indicative content below exemplifies some of the points that candidates may make, but this does not imply that any of these must be included. Other relevant points must also be credited.

Quantitative skills assessed:

QS4: Construct and interpret a range of standard graphical forms.

QS9: Interpret, apply and analyse information in written, graphical, tabular and numerical forms.

- Level of skill and education, as lawyers with specialised skills, experience or higher levels of education receive higher wages because of scarcity of labour or higher productivity of the workers

- If the demand for a particular skill set is high relative to the supply, then the wage rate is likely to be higher than if demand is low relative to the supply

- Elasticity of demand for labour, the more elastic and substitutable the labour is the lower the wage rate. If labour cannot be replaced by capital the demand for labour is more inelastic and the wage rate is likely to be higher

Figure for Answer to Question 4 — Edexcel A-Level Economics A2

- If the supply of labour is inelastic e.g. if high qualifications or extensive experience is required then the wage rate is likely to be higher than if supply of labour is elastic

- Job characteristics and working conditions - if the job requires high levels of physical demands/high-risk level/ poor working conditions, the business may need to pay higher wages to encourage individuals to work in the occupation. Higher-paid lawyers may be required to work much longer hours or be under more stress than lower paid lawyers

- Labour market discrimination could be based on biases in accessing higher-paying jobs or receiving equal pay e.g. gender, race, age

- Higher living costs in certain areas such as Geneva may lead to higher wages to attract workers, while lower living costs in other areas of Switzerland may result in lower wages

- Legislation e.g. different minimum wage rates for workers of different ages

- Contractual status/Trade union membership may influence the wage paid to different groups for identical work

- Greater degree of monopsony power may allow firms to reduce pay rates in certain geographical areas compared to more competitive labour markets

- Public vs private sector wages

NB: If no diagram candidate can achieve a maximum of level 3 Maximum of level 3 if no reference to an industry

Accept other labour market diagrams if they illustrate differences in wage rates

Level

Mark

Descriptor

0

No rewardable material.

Level 1

1-3

Displays isolated, superficial or imprecise knowledge and understanding of economic terms, principles, concepts, theories and models.

Use of generic material or irrelevant information or inappropriate examples.

Descriptive approach which has no chains of reasoning.

Level 2

4-6

Displays elements of knowledge and understanding of economic terms, principles, concepts, theories and models.

Limited application of knowledge and understanding to economic problems in context.

A narrow response or superficial, only two-stage chains of reasoning in terms of cause and/or consequence.

Level 3

7-9

Demonstrates accurate knowledge and understanding of economic terms, principles, concepts, theories and models.

Ability to apply knowledge and understanding to some elements of the question. Some evidence and contextual references are evident in the answer.

Analysis is clear and coherent. Chains of reasoning in terms of cause and/or consequence are evident but they may not be developed fully or some stages are omitted.

Level 4

10-12

Demonstrates accurate and precise knowledge and understanding of economic terms, principles, concepts, theories and models.

Ability to link knowledge and understanding in context using appropriate examples which are fully integrated to address the broad elements of the question.

Analysis is clear, coherent, relevant and focused. The answer demonstrates logical and multi-stage chains of reasoning in terms of cause and/or consequence.

Evaluation (8 marks) - indicative content

- Prioritisation of reasons for wage differentials

- Anti-discrimination laws might limit the size of wage differentials in an occupation

- Paternity leave would cause men to also have gaps in their work, making the pay more equal between men and women

- Government Policies: Government regulations, such as minimum/maximum wage laws, can influence wage differentials by setting a floor/ceiling on wages or affecting the take-home pay of workers

- Trade unions may bargain for higher wages for lower-paid employees reducing the wage differential

- Significance of reasons changes over time

- Combination of reasons contribute to wage differentials

Level

Mark

Descriptor

0

No rewardable material.

Level 1

1-3

Identification of generic evaluative comments.

No supporting evidence/reference to context.

No evidence of a logical chain of reasoning.

Level 2

4-6

Evidence of evaluation of alternative approaches.

Some supporting evidence/reference to context.

Evaluation is supported by a partially-developed chain of reasoning.

Level 3

7-8

Evaluation recognises different viewpoints and/or is critical of the evidence, leading to an informed judgement.

Appropriate reference to evidence/context.

Evaluation is supported by a logical chain of reasoning.

[Maximum number: 20]

In New Zealand, in 2018, it was estimated that the average worker employed in the private sector earned 30% less than the average worker in the public sector.

Evaluate the reasons why wage differences exist.
Illustrate your answer with an appropriate diagram(s).

Figure for Answer to Question 5 — Edexcel A-Level Economics A2

- If the supply or demand for labour changes in a market, this will also change the equilibrium price of labour. Therefore, the supply or demand of labour in a market will cause the wage to differ

- The level of education/skill required for the job. Jobs which require more training and education offer higher wages because the supply of workers with this training and skills will be lower than the supply of unskilled workers

- Wages in the private sector could be lower than the public sector because public sector pay is funded from taxation and not dependent on profit

- In some parts of the private sector firms may have monopsony power and so be able to pay lower wages than firms in other sectors

- Other factors such as age, gender and ethnic background may account for wage differences

- A monopoly/trade union may be able to increase the wage rate through collective bargaining

- Workers may have non-financial benefits that account for some of the difference e.g. hours of work, holidays, security

- Workers may have financial benefits that account for some of the difference e.g. pensions, private healthcare, longer holidays

- If the demand for labour is inelastic wages would be higher than if elastic

- Wages tend to be higher in the sector that has more inelastic demand and /or inelastic supply

Restrict to a maximum of Level 3 if no appropriate diagram provided

Accept reverse argument for KAA

Level

Mark

Descriptor

0

No rewardable material.

Level 1

1-3

Displays isolated, superficial or imprecise knowledge and understanding of economic terms, principles, concepts, theories and models.

Use of generic material or irrelevant information or inappropriate examples.

Descriptive approach which has no chains of reasoning.

Level 2

4-6

Displays elements of knowledge and understanding of economic terms, principles, concepts, theories and models.

Limited application of knowledge and understanding to economic problems in context.

A narrow response or superficial, only two-stage chains of reasoning in terms of cause and/or consequence.

Level 3

7-9

Demonstrates accurate knowledge and understanding of economic terms, principles, concepts, theories and models.

Ability to apply knowledge and understanding to some elements of the question. Some evidence and contextual references are evident in the answer.

Analysis is clear and coherent. Chains of reasoning in terms of cause and/or consequence are evident but they may not be developed fully or some stages are omitted.

Level 4

10-12

Demonstrates accurate and precise knowledge and understanding of economic terms, principles, concepts, theories and models.

Ability to link knowledge and understanding in context using appropriate examples which are fully integrated to address the broad elements of the question.

Analysis is clear, coherent, relevant and focused. The answer demonstrates logical and multi-stage chains of reasoning in terms of cause and/or consequence.

Evaluation (8 marks) - indicative content

- If labour is homogenous wage differences may not be different

- If workers and employers have perfect knowledge of the labour market wages will be more similar

- High mobility of labour enables workers to move between jobs and areas keeping wages stable

- If there is no (age/gender/ethnic) discrimination in the market, everyone should be paid the same for the same job

- Relative significance of relevant reasons

- Private sector in some countries may be able to offer higher wages due to higher levels of profit

- In the public sector, the government may have monopsony in the labour market and so can drive down the price of labour as workers have a lower price setting ability

- The wage differential in NZ between workers in the public and private sectors may be temporary e.g. due to a downturn/recession

- Government may limit pay rises for public sector workers e.g. to reduce budget deficit

Level

Mark

Descriptor

0

No evaluative comments.

Level 1

1-3

Identification of generic evaluative comments.

No supporting evidence/reference to context.

No evidence of a logical chain of reasoning.

Level 2

4-6

Evidence of evaluation of alternative approaches.

Some supporting evidence/reference to context.

Evaluation is supported by a partially-developed chain of reasoning.

Level 3

7-8

Evaluation recognises different viewpoints and/or is critical of the evidence, leading to an informed judgement.

Appropriate reference to evidence/context.

Evaluation is supported by a logical chain of reasoning.

[Maximum number: 1]

A 2022 study found that the geographical mobility of labour in the USA has been decreasing for the last 30 years. Which one of the following is most likely to cause a decrease in the geographical mobility of labour?

An increase in the skills of the workforce

An increase in relocation grants provided by the government

An increase in average house prices and rents

An increase in the availability of affordable housing

[Maximum number: 1]

A survey conducted in 2021 found that 76\% of US companies with factories in China were in the process of moving operations to other countries in southeast Asia. This would cause thousands of manufacturing workers in China to lose their jobs.

Which one of the following government measures is most likely to increase the occupational mobility of labour?

An increase in unemployment benefits

An increase in relocation grants for businesses

An increase in training schemes

An increase in the national minimum wage

All question bank results loaded

Covered syllabus points

Question 1

Question 2

Question 3

Question 4

Question 5

Question 6

Question 7