IGCSE Economics 3.3. Workers Topic Practice

Read the source material carefully before answering Question 1.
Source material: How will oil change Guyana?

Guyana was the fastest growing economy in the world in 2020. Sugar, gold and timber have accounted for a relatively high proportion of the country's output and exports for some time. In 2020, the sugar industry was hit by bad weather and falling global demand. In contrast, the output of gold and timber increased.

The main reason why Guyana's real GDP increased so rapidly was the increase in oil production. Oil was discovered offshore by a foreign multinational company (MNC) in 2015 and the MNC started production in 2019. It is predicted that Guyana will become the world's largest oil producer per head by 2025 .

The Guyanese government is planning to use some of the tax revenue it will raise from oil to spend on education and improvements to the country's infrastructure. Planned projects include new railway lines and stations. A more extensive and cheaper rail service may enable more people to work further from home and may influence the market for substitutes, such as car transport. The Guyanese government is also planning to spend some of the tax revenue on improving the country's access to the internet. Table 1.1 shows GDP per head and internet access in seven countries in 2020.

Guyana has experienced a slow growth in its population size in recent years. In 2020, its birth rate was 16.5 , its death rate was 6.8 and its net migration rate was -7.7 . With increases in oil production, emigration may decline and the country may start to experience net immigration. A higher population may affect Guyana in a number of ways including changing the size of its labour force and affecting the environment.

Explain two reasons why labour mobility may increase in Guyana in the future.

What is least likely to increase the geographical mobility of labour?

What is likely to increase the occupational mobility of labour?

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Japan has a high average age of population and a varied economic performance. It has a low birth rate, low inflation rate, good healthcare, high life expectancy and low unemployment rate. Fewer Japanese people enter the labour force each year. It is predicted that Japan's labour force will fall by 10 million by 2040. Many young Japanese people emigrate to Australia, Canada and the US in search of higher wages. However, Japan now experiences net immigration although foreign workers are currently only a small proportion of Japan's labour force.

To achieve an annual economic growth rate of $1.2 \%$, it has been estimated that the number of foreign workers would have to increase to 7 million by 2040. Some foreign workers are discouraged from working in Japan due to the requirement to pass a Japanese language test. Only the most skilled are allowed to stay for more than 5 years and to bring their families with them.

Many Japanese industries are affected by labour shortages and the country's decline in population. For example, the fall in population has affected the quantity of furniture traded. It has also influenced the country's air transport industry. Air travel is the most important method of transport in Japan for foreign travel and long-distance internal travel. Japan's air passenger numbers follow a similar pattern to global air passenger numbers. Table 1.1 shows global GDP per head and global air passenger numbers between 2016 and 2022.

Demand for goods and services, including air travel, is influenced by how much people save. Japanese people save a relatively high proportion of their income. This has affected the country's inflation rate, current account balance of the balance of payments and its economic growth rate.

Japan's macroeconomic performance is also influenced by the mobility of its labour force. There are several reasons why the mobility of Japan's labour force may change in the future. These include its ageing labour force and possible changes in education and training, house prices and the quality and price of transport.

Discuss whether or not labour mobility in Japan is likely to increase in the future.

Answer any three questions.

Each question is introduced by stimulus material. In your answer you may refer to this material and/or to other examples that you have studied.

Read the source material carefully before answering Question 1.

The number of foreign nationals living in the UAE is higher than the number of citizens of the UAE. Labour mobility between the UAE and other countries is high with, for example, many daily flights landing in the UAE from India and Pakistan.

The UAE was the host of the World Expo in 2021-2022 where countries from all over the world demonstrated their economic achievements. The increased connection of people through migration, the trade of goods and services and the sharing of ideas were major features of the World Expo. Another common theme that was presented in the World Expo was the technological progress which has improved global living standards. Technological development has increased both the quality and quantity of the factors of production in the UAE.

This technological progress was supported by a huge amount of finance gained from their oil production and exports of oil. Oil is a necessity and its price inelasticity of demand has brought both advantages and disadvantages to the economy. Figure 1.1 shows the annual percentage change in the oil price and the annual percentage change in the UAE's balance on the current account of the balance of payments.

Dubai, one of the cities in the UAE, is not dependent on oil as $95 \%$ of its economy is non-oil based. Dubai is known internationally for its luxury tourism and financial services, which affect employment, tax revenues and export revenues. However, there are concerns over sustainable water use in a desert area and the level of inequality in the distribution of income.

Despite rapid changes in the economy, the value of the domestic currency, the dirham, has always been very stable as the government has maintained a fixed exchange rate system since 1980. This has helped maintain investor confidence in the economy. However, a fixed rate exchange rate affects the government's ability to deliver other macroeconomic objectives.

Explain one factor that can influence labour mobility between countries.

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Jakarta, Indonesia's capital city from 1945 to 2024, is one of the world's fastest sinking and most polluted cities. The city is expected to record a large decrease in real Gross Domestic Product (GDP) per head which could lead to a fall in living standards.

The free market can be blamed for air pollution and rising sea levels across some areas of Indonesia. Schools and other buildings have been flooded and roads have been destroyed. Floods have also led to an increase in diseases transmitted through water and mosquitoes which breed in water.

Farmland has been submerged, cutting off a vital source of income for many farmers. This has led to internal migration (people moving between regions of the same country). For example, some farmers have moved to areas where climate change has led to the production of different crops. There has been less pressure on both natural and local government resources in areas which people have left. However, these movements could lead to the collapse of entire communities and increase the inequality between workers who are more mobile and those who are less mobile.

Governments around the world have reacted to climate change by spending more on the environment. Table 1.1 shows the GDP and government spending on the environment of selected countries in 2019.

The Indonesian government has also reacted to environmental issues by relocating its capital city. The city of Nusantara will replace Jakarta as the capital city in 2024. The cost of building this new city is expected to be $\$ 32.5$ billion. This city will not only provide job opportunities but could also reduce the inequality between the different regions of Indonesia. Jakarta is located on the island of Java which is a wealthier region than Kalimantan. The new city, Nusantara, will be located in Kalimantan region. In addition, the government intends for the new capital city to be carbon-neutral. However, opponents of this project have said that the cost is too high. They also claimed that the project will only benefit a small number of wealthy and powerful people.

Discuss whether or not internal migration benefits an economy such as Indonesia.

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Oil makes up one third of Ecuador's exports. Ecuador has, however, decided to produce less oil and more of other goods and services. This decision has affected how products are made in Ecuador. For example luxury textile production, such as luxury scarves and jumpers, uses fewer capital goods than oil production. Tourism relies on natural resources including sunshine and beaches.

One reason Ecuador's government has encouraged less reliance on oil, is the large changes that often occur in the oil market. Between 2014 and 2016, demand for Ecuador's exports fell which caused a significant reduction in export revenue. This reduction, combined with a decrease in government spending, caused the country's output to decline.

Between 2016 and 2019, there was some improvement in Ecuador's economy. Incomes and household spending increased and more cars were purchased. Table 1.1 shows the GDP per head ($) and car ownership (per 1000 people) in selected countries in 2019.

Ecuador's government borrowed from China to spend on building more roads. The construction of these roads increased employment and was expected to influence transport costs in the long run.

Between 2016 and 2019, Ecuador's textile industry benefited from the improvement in the road network. Despite strong competition from foreign textile firms, Ecuador's textile firms increased the scale of their production. Wages paid in the textile industry did not rise significantly. A very small wage increase can affect trade union activity and emigration.

Some of Ecuador's workers emigrate to find jobs in other countries, particularly Italy, Spain and the US. These workers have a range of skills and they work in a variety of jobs abroad, some of which provide training. Many, but not all, workers send money home to their families.

Discuss whether or not Ecuador benefits from the emigration of some of its workers.

Answer any three questions.

Each question is introduced by stimulus material. In your answer you may refer to this material and/or to other examples you have studied.

Read the source material carefully before answering Question 1.

Source material: the challenges facing Pakistan

Pakistan faces a number of economic challenges. These include responding to a rising population, improving its trade in goods balance, controlling the country's inflation rate and increasing the country's economic growth rate. To overcome these challenges, the Pakistani government is trying to increase investment. Currently, a high proportion of the country's resources are used to produce consumer goods.

The government is subsidising entrepreneurs and charities to open low-cost schools. It wants to reduce the dropout rate from schools and to raise educational standards. Some parents do not recognise the advantages that a merit good such as education can give their children, for example better health and better job opportunities. Some of the poor need their children to work from a young age to support the family. Government reforms have not yet led to a significant rise in teachers' wages but have improved school buildings and the number of children attending. The qualifications required to teach may be increased in the future.

Improved education may affect the number of skilled workers who emigrate and may raise the quantity and quality of goods and services produced. Any resulting higher income may influence the value of imports purchased, as shown in Table 1.

Pakistan has relatively high import tariffs. Revenue from import tariffs is $45 \%$ of total tax revenue. The tariffs on vehicles, some of which have inelastic demand, are particularly high. Future Pakistani tariffs may be influenced by changes in other countries' trade policies, as well as other factors.

Answer all parts to Question 1. Refer to the source material in your answers.

Discuss whether or not the supply of teachers in Pakistan is likely to increase in the future.

Read the source material carefully before answering Question 1.

Source material: Happiness

The United Nations has published a World Happiness Index every year since 2012. This index ranks countries according to life expectancy, freedom, social support, trust, generosity and GDP per head. New Zealand was ranked 8th in the World Happiness Index in 2019. The governments of both Bhutan and New Zealand now consider a number of influences on the happiness of their populations.

While more than half of Bhutan's labour force is employed in agriculture, most people in New Zealand are employed in the tertiary sector. Working conditions, working hours, the type of work and pay vary between the primary and tertiary sectors. Productivity is higher in all sectors in New Zealand than in Bhutan. This is partly the result of higher investment in capital goods and education in New Zealand. New Zealand also has a higher GDP per head. GDP per head ($) can influence net migration (number of people) as shown for selected countries in 2017 in Fig. 1.1.

In its 2019 budget, the New Zealand government said it would measure its progress not by increases in GDP but by increases in the quality of people's lives. To achieve this, it announced increased spending on some areas including mental health, child poverty and pollution. Some economists criticised this approach. They argued that the best way the government could improve living standards is to reduce income tax rates. This reduction could change government spending and the quantity of products that people buy, including cars.

Tax revenue had increased in New Zealand in 2019, partly because of a rise in revenue from corporation tax. It was, however, difficult to predict firms' future profits. This was because of uncertainty about what would happen to its GDP and its corporation tax rates.

Answer all parts to Question 1. Refer to the source material in your answers.

Explain two reasons why someone may prefer to work in the tertiary sector rather than in the primary sector.

Read the source material carefully before answering Question 1.

Source Material: The eSports industry and Malta

eSports is now recognised as a sports competition, just like playing other competitive sports such as football and basketball. In eSports, participants compete through video games either as an individual or as part of a team. eSports also attracts large audiences who watch these online competitions. eSports is growing rapidly, both in terms of revenue generated and in the number of viewers. Demand has increased because of increases in incomes and decreases in the price of the technology needed to play or watch eSports. A change in social attitudes has also increased female participation in eSports.

The fast growth in this industry has attracted both private and public sector investment. Private sector firms sponsor various eSports teams and also advertise their products during eSports competitions. Public sector investment has come from the governments of China, Denmark, Malaysia and Malta, mainly in development and training programmes for young eSports participants. The government of Malta, a small island country, hopes to make Malta a main centre for eSports in Europe, to attract visitors for eSports events. The aim is for the eSports industry to contribute $1 \%$ to Malta's GDP, provide 3000 more jobs and improve the current account of its balance of payments.

Malta's service sector has always been important and contributes approximately $90 \%$ of its GDP. Malta is an attractive tourist destination due to its mild weather. The island is used as a location for many movies and TV series, which also attracts visitors who want to see the filming locations. However, to ensure growth is sustainable, the government sees the importance of economic diversification and does not want the economy to overspecialise.

To achieve this, the labour force has to be adaptable and the government has to invest in education and training. The government provides new scholarship schemes, organises work placements and brings in professionals from other countries to help train Maltese students. However, there are concerns that these measures may be too expensive and take too long to have a significant impact on the economy.

Female participation in the labour force is also encouraged. Table 1.1 shows the proportion of women in the labour force (\%) and GDP per head ($) of selected countries in 2019.

Explain how a change in social attitudes would lead to greater participation by women in the labour force.