• Join over 1.2 million students every month
  • Accelerate your learning by 29%
  • Unlimited access from just £6.99 per month

Discuss the view that government policies aimed at reducing wage differentials always do more harm than good. [20 marks]

Extracts from this document...

Introduction

´╗┐Discuss the view that government policies aimed at reducing wage differentials always do more harm than good. [20 marks] The government can intervene and solve the problem of wage differentials in different ways. However there are different ways of tackling this problem therefore they use different polices for the short and long term. In a market economy individuals receive different incomes based on different supply and demand conditions, rewards will vary. If employees have a rare skill set and are limited and highly demanded then their earning will be significantly higher that someone who is pursuing a career with high supply and demand. ...read more.

Middle

However it is hard to set a minimum wage as it is hard to put a price on the minimum amount one must be paid an hour. Also it raises cost for firms as they have to pay employees a certain amount, when the money could be used to expand the business. Another short term method of reducing wag differentials is by using progressive taxation. With a progressive tax, the marginal rate of tax exceeds the average rate of tax. ...read more.

Conclusion

In the long run however education training will reduce wage differentials. By investing in human capital it will increase the productivity of labour so it increases workers earning potential as their MRP increases. However a drawback of investing in education and training is there are time lags as it takes a long time for individuals to gain the skills to become for example a teacher or in extreme cases a brain surgeon. Also it is very expense there taxes may increase so you could argue that this does more harm than good as taxes rise but overall it is benefiting the labour market. ...read more.

The above preview is unformatted text

This student written piece of work is one of many that can be found in our AS and A Level Markets & Managing the Economy section.

Found what you're looking for?

  • Start learning 29% faster today
  • 150,000+ documents available
  • Just £6.99 a month

Not the one? Search for your essay title...
  • Join over 1.2 million students every month
  • Accelerate your learning by 29%
  • Unlimited access from just £6.99 per month

See related essaysSee related essays

Related AS and A Level Markets & Managing the Economy essays

  1. what is economics

    but used to be inferior products * In economies such as the UK, where living standards continue to increase, there has been a growth in markets in the service sector, such as overseas holidays, eating out and health spas. * So these types of businesses would seem to have good

  2. Is the Government to Blame for Higher Petrol Prices?

    The Government often cites the main reason for taxing petrol is to ensure the true cost to the environment in reflected in the price paid and to reduce consumption of the good. The tax imposed upon petrol (fuel duty) would try to raise the Marginal Private Cost curve towards the Marginal Social Cost curve (diagram F)

  1. At What Level (if any) Should Government Intervene to Promote the Competitiveness of Businesses?

    According to DTI (2003), there are two main routes through which government can improve innovation performance. Firstly, government provide subsidies (e.g. 'grants, tax credits', etc.) to firms to encourage innovation and knowledge transfer. Secondly, government influences innovation performance via various policies, such as regulation, competition policy, public procurement, and education and training, etc, to shape innovation systems.

  2. implementation and effects of the natioanl minimum wage in the uk

    The levels of national minimum wage are based on the recommendations of the independent low pay commission. "National minimum wage is a legal right which covers almost all workers above school leaving age". (www.dti.gov.uk). If changes are to be made to the rates, it will take effect in October.

  • Over 160,000 pieces
    of student written work
  • Annotated by
    experienced teachers
  • Ideas and feedback to
    improve your own work