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Labour markets

Activity (p. 73)

Students own answers.
Reasons may include: salary, non-financial benefits, career prospects, run their own
business, satisfaction gained from employment, family business, enjoy the level of
challenge and responsibility.

Exam practice (p. 73)

1 Reference to the data: in 2012 earnings for those aged 60+ are 24715 and are
lower than those in the 5059 age which are 27744.
l After the age of 60 an individual may choose to work fewer hours or may
reduce their level of responsibility in preparation for retirement and therefore
their earnings may decrease.
l After the age of 60 workers may retire (early) and therefore the earnings of an
individual will decrease after 60 as they no longer have earnings from working.
Award 1 mark for reference to the data.
Award 1 mark for explaining why the potential earnings of an individual fall after
the age of 60.
2 According to Table 7.3 education levels increase potential earnings.
l In 20112012 earnings were $32564 for a person with less than a high
school education whereas those with a masters/professional/doctoral degree
earn on average $108532. This may be due to the higher level of skills and
qualifications and therefore such people are in higher demand by employers.
l Those with higher levels of qualifications tend to be in shorter supply and
therefore can command higher salaries.
l It also takes a long time to acquire professional qualifications and masters and
doctoral degrees so the elasticity of supply of such workers will be inelastic.
Higher earnings are also used to compensate for the opportunity cost of study
to acquire these qualifications and skills.
Award 12 marks for a brief explanation that shows some understanding of the
potential impact of education on earnings.
Award 34 marks for a detailed explanation that uses the data to explain the
connection between education levels and potential earnings.

Activity (p. 76)

1 Younger workers have less experience and may be less qualified than those over
21. Wages tend to increase with experience. Employers may hire younger workers
due to their cheaper cost. This gives younger workers valuable work experience.
Possible reasons could include:
l The cost of living in Hong Kong could be lower than in Australia.
l The NMW has only been in existence in Hong Kong for several years (it was
introduced in May 2011) and was set at a very low rate so as not to increase
l The Australian government may be more committed to redistributing income
and wealth than the Hong Kong government and therefore the NMW is higher
than that in Hong Kong.

Cambridge IGCSE and O Level Economics Hodder & Stoughton 2013 1

7 Labour markets

l NMW in Australia may need to be higher than welfare payments to encourage

people to work instead of relying on welfare benefits.
l Trade unions in Australia may be more powerful than in Hong Kong and have
forced the government to enforce a higher NMW.
2 Students own answers which will vary between countries.
The aim of the activity is for students to discuss whether the minimum wage is
a living wage and critically assess whether an adult could achieve a reasonable
standard of living on this wage.
Here is a link to the Living Wage Organisation in the UK which promotes the
importance of businesses paying a wage to their employees so that they can
maintain a reasonable standard of living:
Investigate the difference between a minimum wage and a living wage with this
living wage calculator for living in the USA:

Activity (p. 77)

Students own answers which will vary between countries.
The aim of the activity is for students to be aware of how terms and conditions of
employment may vary between countries.

Exam practice (p. 79)

1 Reasons why there is a global shortage of doctors and nurses include:
l Doctors and nurses have to train to become qualified.
l In some cases people have to fund these qualifications and this may deter
some people from undertaking such careers.
l The worlds population is increasing and therefore more doctors and nurses are
required. The skills of doctors and nurses cannot be replaced by machinery.
2 2 marks: award up to 2 marks for each clearly identified and explained reason
why there is a global shortage of doctors and nurses.
2 Reasons why nurses trained in the Philippines may relocate to take advantage of
employment opportunities include:
l There may be job opportunities in another country which do not exist in the
l There may be an oversupply of nurses in the Philippines.
l The pay in other countries may be greater than that in the Philippines and
therefore nurses may relocate for financial reasons as they can earn more
money overseas.
l Standards of living may be higher overseas than in the Philippines.

Award 12 marks for a brief answer that shows limited understanding.

Award 34 marks for analysis that shows some understanding of the reasons why
nurses in the Philippines may relocate overseas.
Award 56 marks for a detailed analysis and understanding of the reasons why
nurses in the Philippines may relocate overseas.
3 Countries may attract individuals to professions in which there is a shortage of
workers by offering:
l a package of wage and non-wage factors which may be more attractive than
that in their home country
l a package that includes flights home for the individual and their family,
housing, health care and other non-financial benefits
l challenging jobs with high levels of responsibility and good career prospects.

Cambridge IGCSE and O Level Economics Hodder & Stoughton 2013 2

7 Labour markets

The package may attract high-quality individuals but may also attract those who
are taking advantage of higher standards of living and may not be suitably skilled.
Award 12 marks for a brief answer that shows limited understanding.
Award 34 marks for a good examination of how a country may attract workers
when they have a shortage. There may be a lack of detail and/or use of relevant
Award 56 marks for a detailed examination of how a country can attract
individuals to professions in which they have a shortage of workers. There is
appropriate use of terminology and use of examples.

Activity (p. 80)

This activity is designed to promote discussion about global skill shortages and
occupational and geographical mobility.

Activity (p. 81)

The government statistics site for each country should provide data on earnings. The
aim of the exercise is for students to find real-life examples of wage differentials and
use their understanding and theories to explain these differentials.
l Skilled versus unskilled
Skilled workers should earn more than unskilled workers.
l Male versus female
In most sectors and types of employment students should find that females earn
less than males.
l Private sector versus public sector
Excellent article from The Guardian on the publicprivate sector pay debate: www.
In some countries public sector workers earn less than private sector workers but
insome countries, e.g. the UK and Hong Kong, this trend has been reversed and
some public sector workers may earn more than private sector workers. Possible
reasons include:
Some public sector workers have been employed by the public sector for many
years and are therefore senior civil servants who have protected jobs and very
good pensions.
Some public sector jobs have been contracted out to the private sector and
these tend to be lower paid jobs.
Social workers, nurses and lower ranking police are not included in the higher
paid public sector workers.
Poor economic performance in some economies has decreased private sector pay.
l Primary versus secondary versus tertiary sectors of production
These figures will vary between countries.
It must be noted that many tertiary sector workers are low paid, e.g. shop
workers, cleaners, bus drivers, taxi drivers, administrative workers, kitchen
assistants and restaurant workers.
Manufacturing jobs can be both low- and high skilled.
Agricultural workers are often low paid.
See below for links to country-specific websites about earnings and the labour
Earnings in Australia:
Earnings in USA Department of Labour:

Cambridge IGCSE and O Level Economics Hodder & Stoughton 2013 3

7 Labour markets

Earnings in Canada:

Key manpower statistics from Singapore:
Earnings in UK:

Activity (p. 85)

Students own answers.
This activity is designed to promote discussion around:
l inequality of income and wealth
l lack of regulation of the financial industry
l ability of the private sector to reward people with extremely high wages and use
such wages to attract high calibre staff
l aims and objectives of firms in the financial services sector.

Activity (p. 86)

Information about earnings can be found at
Possible reasons for any differences in the earnings:
l People are rewarded for their individual talents and because their talents are
inelastic in supply.
l Film production companies want particular film stars to act in their film to attract
viewers and therefore use high wages to attract the film stars.
l A celebritys popular status can enable them to demand higher wages.

Cambridge IGCSE and O Level Economics Hodder & Stoughton 2013 4