Improving Evaluation Skills in Economics Exams
Here is an updated version of the WEESTEPS approach to economics evaluation designed to boost the evaluation scores and exam results for AS and A2 students. Paul Bridges is the mastermind behind this superb approach to evaluation - it gives you some great pointers about the evaluative approaches that can be used. Works well for micro and macro - but particularly when you have to evaluate a specific policy intervention in a market / industry / or a macro policy discussion.
read more...»Unit 1 Micro: Revision Blogs on Markets and Intervention
Here is a selection of a recent blog resources on topics that appear on the core Unit 1 Syllabus focusing on changing market prices and examples of interventions to address perceived market failures
read more...»Unit 1 Micro: Minimum Wages and Living Wages
The campaign for a living wage has gained renewed prominence in the last year or so. Students and teachers wanting to know more about the minimum and the living wage debate might find this background blog from Channel 4 news relevant and useful. More here on the living wage from the Citizens UK web page.
Minimum beer prices, May not be the solution for binge drinking.
Teresa May has copied Nicola Sturgeon’s proposals for minimum prices of alcohol which appeared in Scotland last year. Last year’s budget had significant increases in excise duties on stronger beer, lager and cider.
This resource from the Centre For Policy Studies may help pupils and teachers to evaluate different forms of government intervention and their effectiveness.
Drink, drink, more drink
Students are often asked to weigh up policies to limit the over consumption of demerit goods like alcoholic drinks. This BBC article cited by Ben White considers some of them.
Most governments have used a combination of policies with varying levels of success. One policy option is the use of variable rates of Excise Duty. The March 2011 budget resulted in a rise in the duty on strong beers (above 7.5% alcohol) of 25%, and the duty on weak beers (below 2.8%) cut by 50%.
read more...»Unit1 Micro: Can a minimum wage create jobs?
Tim Harford has a piece in his regular column in the Financial Times which discusses some of the issues surrounding the minimum wage and whether a legal pay floor can actually create jobs. Here is the link
Unit 3 Micro: Monospony Power and Low Wages in Care Homes
An October 2011 edition of Panorama from the BBC investigates low pay and poor working conditions for thousands of people struggling to earn a decent living in the care homes sector.
read more...»NMW: Classical real-wage unemployment
As the government increased the NMW this weekend by 15p to £6.08 an hour for adults….....the minimum wage may be pricing young people out of work because employers are finding it too expensive to give them their first job, Government pay advisers have said. Good application here for discussing real-wage classical unemployment.
Read more here.
Unit 1 Micro: Teacher Update on New Regulations
The end of September has brought a raft of new or changed regulations affecting different markets. Here is a summary of some of them for students and teachers wanting to keep up to date:
read more...»UK Minimum Wage rises by 2.5% in October 2011
An update on the economics of pay floors in the labour market. The adult rate for the UK minimum wage will rise by 15p to £6.08 an hour from October. The 2.5% increase is broadly in line with pay settlements but well below consumer price inflation, which is expected to breach 5 per cent this year. So in real terms, the value of the minimum wage will drop. The rate for 18 to 20-year-olds will rise 6p, or 1.2 per cent, to £4.98, and for 16 to 17-year-olds by 4p, or 1.1 per cent, to £3.68. But the apprentices’ rate will go up by 10p, or 4 per cent, to £2.60.
read more...»Beijing City lifts their minimum wage by 21%
Minimum wages in China are decided at the provincial level and, in a move designed to soften growing social tensions among the lowest income households, the Beijing City government has announced a further steep rise in their minimum wage - a 21% rise that will take effect in the New Year. The statutory minimum monthly wage in the Chinese capital rises on New Year’s Day to $175 and it is now 40% higher than at the start of 2010.
read more...»
Using Google Docs - Minimum Wages
My AS micro group this week has been collaborating on an assignment on minimum wages using Google Docs. My stuents are becoming more adept at building arguments and editing and amending the contributions of others. We are limited in not having wireless access in the classroom - if we did students could enter, log in and work as a group in real time with the document being displayed on a screen and I could monitor their contributions and add in ideas and comments as we go.
read more...»Scotland nudges towards minimum alcohol price
Here is a good 5-minute discussion here of the 45p a unit minimum alcohol price proposed in Scotland.
It offers a good application of some of the main AS micro topics - since it is targeting consumers for whom alcohol is a problem, the highly price inelastic demand for alcohol will probably mean the 45p minimum price is not a huge disincentive.
Paradoxically, since minimum prices only work if the free market equilibrium price is currenly below the minimum price, what it may actually cause is a shift towards higher strength alcohols that are already above the 45p a unit! There’s the law of unintended consequences for you!
Greece smoking ban
A new law has come into force this week in Greece banning smoking in enclosed public spaces and tobacco advertising.
It is estimated that more than 40% of Greek adults smoke - well above the EU’s average of 29% - which is perhaps why at a time of fiscal austerity, it is surprising/impressive that the Greek government have pursued this policy. Cigarettes bring in a significant amount of tax revenue (either via indirect or corporation taxes) which will be lost. But then maybe it will save a lot more money via its health bill. (or maybe they are just hoping people will flaunt the rules and collect fines!).
Having said this, this latest attempt to stop smokers, is its 4th attempt in a decade - following a tobacco ban in public places on July 1 of this year too. The demand for habit-forming goods is too inelastic to go away overnight…
Pressure for higher minimum wages in Bangladesh
This BBC news video looks at demands for better pay among the three million or more workers (the majority of whom are women) who work in garment factories in Bangladesh. The country has over 4,000 textile factories and has become one of the world’s biggest exporters of clothing. But for many the jobs available offer long hours and very low pay of around $25 dollars a week - the trade unions are lobbying for average wages three times this figure. Will it threaten the competitive advantage of Bangladeshi producers looking to hold onto contracts from many western buyers?
The video is a good resource to use when teaching aspects of labour markets and globalisation in developing countries
Diagio opposes minimum alcohol price
This is a useful video resource to have up your sleeve when teaching minimum alcohol prices and the view taken by one of the stakeholders - the drinks manufacturers themselves.
Alcohol pricing - an end to loss leaders?
Fresh developments here in the ongoing debate about alcohol pricing and consumption in the UK.
The new coalition government has signalled an intent to ban loss-leading promotions on drinks prices. As its name suggests, with a loss-leader a product or service is sold at a loss (below unit cost) but that is intended to encourage people to buy other, profitable products or services. The corporate affairs department of Tesco has suggested that it now supporters minimum prices for a range of alcohol drinks but that until legislation is introduced, it is compelled to compete on price with the other major retailers.
There are signs too that the new government is re-thinking the 24 hour drinking licences beloved of the Labour government - whose fiscal policies of course drove many to drink heavily too!
A2 Economics Revision - Evaluation on the National Minimum Wage
This new revision presentation outlines some possible evaluation points that students could make when addressing questions on the national minimum wage:
A2 Economics Revision - Evaluation on the National Minimum Wage
Focus on the National Minimum Wage
This blog provides some updated links on the minimum wage - a government intervention in the labour market.
read more...»Scots may lead the way in setting minimum price for alcohol
The smoking ban first came in north of the border and now we find that the Scottish government has been proactive in trying to curb the economic and social costs of high alcohol consumption and binge drinking. Establishing a minimum price per unit of alcohol seems like an obvious economic approach to the issue and this report by Colin Blane looks at the plan for a minimum price of 40p per unit - making a bottle of wine at least £3.60.If it works the number of hospital admissions could be cut by many thousands per year. Will Scotland become the first country in Europe to go down this path? This short video piece would make a good starter resource for a lesson on intervention options and an evaluation of their potential impacts.
Government Failure: Thai Rice Buffer Stock
Over the last twenty to thirty years, buffer stock schemes introduced by national governments or collectives of producers have been riddled with problems. The fiscal costs of buying the storing products purchased at guaranteed minimum prices have come to haunt many governments including those in the EU who paid billions of euros for inefficient and inequitable farm support policies. Here is another example of a misguided price support scheme - the Thai rice mortgage scheme introduced a couple of years ago when global food price inflation was at its most severe.
According to this excellent piece from the BBC, “The Thai government is now sitting on a vast stockpile of rice that it bought at peak prices. As the country is such a big supplier to the world market, it cannot sell all this rice without depressing prices even further.” And the gains have been unevenly spread….“rich farmers in the central plains are in areas with irrigation, so they can grow something like three crops a year…..poor farmers in the north-east, they don’t have surplus of rice to sell, so they don’t benefit from this programme at all.”
UK Minimum Wage to Rise
The Low Pay Commission has recommended a small increase in the national minimum wage covering hundreds of thousands of Britain’s lowest paid workers and yesterday the government announced that Britain’s minimum wage will rise by 7p, or 1.2%, to £5.80 an hour. The new adult rate for workers aged 22 and over will come into effect in October. The rate for 18- to 21-year-olds will rise from £4.77 to £4.83, while for those 16 and 17, the statutory rate will go up to £3.57 an hour from £3.53. The increase means adults working a 40-hour week will receive at least £232 before taxes and other deductions.
Retail and hospitality, account for 44 per cent of all minimum wage jobs. The next largest industries, social care and cleaning, each account for 6 to 7 per cent.
In the light of current economic circumstances should the NMW have been frozen? RPI inflation has fallen into negative territory but CPI inflation remains well above the 2% target - so any NMW freeze would have meant a real wage cut for people at the bottom of the pay ladder. Indeed the rate of inflation experienced by such people is highly unlikely to be either of the two officially published inflation figures.
And decisions on the NMW have important implications for equity and efficiency in the labour market. The TUC argues that low paid workers have done nothing to cause the credit crunch and the subsequent economic crisis - so why should they pay the price with a wage cut? Supporters of a statutory pay floor would also argue that wage cuts could have a damaging effect on worker morale and productivity.
The minimum wage is not a living wage and thousands of people dependent on it have seen their hours cut as employers move to shorter-time working.
In a related story affecting restaurants and many other consumer service industries, employers will be banned from using tips to bring workers’ pay up to the minimum wage from October.
Trade-offs in the off trade
Proposals to tackle alcohol-fuelled violence and health related problems in Scotland were announced yesterday. This is government intervention to tackle the market failures that result from alcohol, which has been a regular issue discussed in England and Wales as well. Some of the statistics given in this video report spell out the reasons for the concern north of the border; there has been a 20% increase in the number of people being discharged from hospital following alcohol-related treatment, Scots drink the equivalent of two litres more pure alcohol each per year than the English, and alcohol-related liver disease has overtaken heart disease as one of the top three killers there.
read more...»Pay cuts in a recession
Pay cuts and pay freezes are being flagged up as an increasingly common option by businesses struggling to survive in the early stages of the recession. Formula 1 drivers are being asked to consider cuts in their earnings as teams look to control costs ahead of the 2009 season; staff working for the publisher Penguin who earn over £30,000 have had their salaries frozen. Premier Rugby in Britain will agree, next month, on a reduction in the salary cap from £4m to £3.5m. And a new survey from the British Chambers of Commerce covering 300 member firms has found that 43% plan to freeze wages and salaries in the coming year. Nearly one business in ten will go a step further and attempt to cut basic pay and salaries – a measure described in this article from the Sunday Times as “almost unprecedented in the experience of today’s workers.”
read more...»Cheap drinks and government intervention
This BBC clip covers an announcement in the Queen’s Speech about policy proposals contained within a new Crime and Policing Bill to curb the flood of cheap drinks promotions offered by pubs and clubs which the government believes contributes to binge drinking. The Telegraph reports that
“Retailers will not be able to sell any alcohol cheaper than the price of buying one item of it, no matter how many more a customer buys. It means there will be a ban on offers such as two for ones, three bottles of wine for £10, or discounted multipacks of beer where the overall cost is cheaper than the sum of the individual bottles or cans contained.”
A seasonal hat tip to Ben White for spotting the article and for suggesting a number of economic concepts and policy issues that the article might be used to illustrate in a group discussion:
Pricing Incentives and price discrimination
Importance of price elasticity of demand e.g. if minimum drinks prices are imposed
Market Failure - externalities from consumption, alcohol disorders and de-merit goods
Regulation and Legislation - effectiveness and costs of regulatory policies
Risks of government failure including the law of unintended consequences
Social Issues
TUC calls for minimum wage for apprentices
The Trades Union Congress (TUC) is lobbying for the UK government to extend the statutory minimum wage to cover apprentices as an intervention designed to improve incentives and combat employer exploitation of younger workers. Their submission to the Low Pay Commission can be found here. What was striking to me about their report was the low completion rates for apprenticeship schemes for those workers not covered by pay floor legislation. And also the persistent gap in apprenticeship pay between males and females. It is an area of the labour market where monopsonistic employment practices are prevalent and damaging to the long term skills base of the economy.
“The TUC believes that bringing all apprentices under the NMW enforcement regime is the most effective way of addressing low pay and tackling the minority of employers that treat apprentices as cheap labour. Recent Government data revealed that five per cent of apprentices received less than £80 a week and 12 per cent received no pay at all.”
The current minimum wage rates are £3.40 for 16-17 year olds, £4.60 for 18-21year olds and £5.52 for people aged 22+.
£7-45 an hour - a living wage in London?
The London Mayor Boris Johnson has issued a report that raises the ‘living wage’ in London to £7-45 an hour. It is an interesting example of a policy designed to create an informal pay floor for thousands of low-paid workers throughout London which is higher than the UK national minimum wage and which reflects the increased cost of living in the capital.
read more...»US minimum wage rises to $6.55
The US federal minimum wage increases today by 70 cents on Thursday, to $6.55 per hour from $5.85. The increase will raise the minimum wage in 25 states; the other 25 have minimum wages higher than $6.55 and the move will affect around two million workers. But will rising food prices simply swallow up the real income boost that the rise in the pay floor provides? And is it wise to rack up the minimum wage at a time of recession? What will happen to employment in the low skilled segments of the US labour market? Coverage here via the Associated Press and also the Charlotte Observer in North Carolina.
Another UK restaurant chain has been exposed for paying the staff less than half of the UK minimum wage of £5.73 an hour and using tips and other gratuities to make up the difference - there is a groundswell of public opinion that this is inequitable and may require further government intervention
