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Wage levels have fallen in both the public sector and the private sector in Ireland - Leaving Cert Economics - Question b - 2011
Question b
Wage levels have fallen in both the public sector and the private sector in Ireland. (i) Explain each of the underlined terms and state one example of an occupation... show full transcript
Worked Solution & Example Answer:Wage levels have fallen in both the public sector and the private sector in Ireland - Leaving Cert Economics - Question b - 2011
Step 1
Explain each of the underlined terms and state one example of an occupation in each.
Answer
Public Sector: The public sector refers to the part of the economy that is controlled and managed by government entities. It is responsible for providing services to citizens and includes organizations that are funded by tax revenues.
Example: A teacher, who is employed by a public school, is an example of a job in the public sector.
Private Sector: The private sector encompasses businesses and organizations that are not owned or operated by the government. These entities are created for profit and are driven by market forces.
Example: A shop worker, who is employed by a privately owned retail store, exemplifies a job in the private sector.
Step 2
Discuss two economic effects which falling wage levels may have on each of the following: Businesses;
Answer
- Reduced Costs: As wage levels fall, businesses experience reduced costs of production. This can improve profitability and allow businesses to maintain lower prices for consumers, potentially leading to increased sales.
- Continuity of Production: Lower wages might contribute to the business’s ability to continue operations. If labor costs decrease, businesses can allocate resources more efficiently, helping to avoid layoffs and sustain production levels.
Step 3
Discuss two economic effects which falling wage levels may have on each of the following: Government finances.
Answer
- Decreased Tax Revenue: The reduction in wages may lead to lower income tax collected by the government. As individuals earn less, the total income tax revenue decreases, potentially impacting government financing for public services.
- Increased Demand for Welfare Support: As wages fall, more workers may qualify for social welfare benefits. This can strain government resources as they must fund higher welfare outlays to support citizens who are struggling financially.
Step 4
Step 5
State two economic reasons why, in your opinion, the national minimum wage was reduced.
Answer
- Reduce Costs/Restore Competitiveness: The reduction in the national minimum wage might be aimed at lowering operational costs for businesses, which can help them remain competitive in a challenging economic environment.
- Encourage Employment: By lowering the minimum wage, the government may seek to incentivize businesses to hire more workers, thus reducing unemployment and stimulating the economy.
Step 6
Outline two possible economic effects of this wage reduction for the Irish worker.
Answer
- Lower Standard of Living: With a decrease in the minimum wage, workers’ income is likely to decline, leading to a lower standard of living and a struggle to meet basic needs.
- Reduced Work Incentives: Lower wages may discourage workers from seeking additional hours or jobs, as the financial reward for their labor might not justify the effort put in.