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Discuss the arguments for and against the UK economy being a low wage economy or a high wage economy.

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Introduction

Discuss the arguments for and against the UK economy being a low wage economy or a high wage economy. A low wage economy can be defined as a can be defined as a economy where there are a high number of jobs that are of a low wage, within a range of employment incomes. A low wage can be defined as a wage which is on or below the social security benefit level. In comparison a high wage economy can be defined as an economy where a large proportion of the jobs pay a wage which is of a high wage, i.e. a wage which is a high level above the minimum social security level. The are good arguments for Britain to be a low paid and a high paid economy, the basis of the high paid economy is basically that extra money produces more money and this brings about a buoyant economy. A high wage economy results in high levels of personal disposable income, this disposable income and high wages is a reward for personal effects in the job. Because there is extra disposable income in the economy this results in a number of things, there is a high level of aggregate demand , as there is high demand. Because of the extra demand in the market business profits are boosted. This can be seen in the demand and supply diagram below. ...read more.

Middle

As there are high wages UK goods and services become less competitive, this results in a number of problems. The first is that the number of UK exports fall as exports fall this results in a balance of payments deficit this isn't helped because as there are high wages and goods are high cost the UK is open to cheaper imports from low wage economies . If the UK is to be a high wage economy and wishes to compete effectively at the same time with the low wage economies of the, far east, Africa and even eastern Europe it must The way that the UK must compete is through better efficiency it must embrace modern technology and increase specialisation and labour division it must look to the internet for growth and only innovation can it hope to compete with low wage economies. In Britain we currently have a mixed wage economy with both low wages and high wages in jobs. However in recent years There has been an influx in the number of low wage jobs, those are jobs that re on the same level or just above the social security benefit level. There are many advantages to a low wage economy. The main advantage has to be it is of a big benefit to whole economy as it helps to keep both demand pull inflation down and wage cost inflation under control. ...read more.

Conclusion

If individuals have less disposable income through low wages this results I a lower demand for consumer goods, if demand is really low this could result in a low amount of economic growth for the country. The final problem with a low wage market is that firms may and probably will try to increase their profits in the short term. They can do this by becoming less capital intensive and more labour intensive, this will help to increases profits in the short run but may result in a loss of profits in the long run as the businesses doesn't strive to become more efficient and invest in new technology. Britain is a mixed wage economy it is neither high wage nor low wage there are however big advantage and disadvantages of both. For its size Britain is quite amazing, it is one of the world leaders when it comes to industry and is possibly the money centre of the world. The way forward for Britain is to keep the delicate balance between low wages and high wages, it is from this delicate balance that Britain manages to extract both the advantages and disadvantages of each type of wage economy. Through the embracement of new technologies we can continue to keep efficiency high along with wages. The Internet will be a powerful tool in helping firms to communicate and improve efficiency. Whilst keeping high wage jobs we need to make sure that not all low wage jobs are wiped out as it is these that help to keep inflation under control. ...read more.

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