Around 3 million people live below the poverty line in this regional economy, representing a significant portion of the working-age population. A major driver is the shifting nature of the labor market, with casual and gig-economy work growing rapidly. Historically, unemployment benefits such as jobseeker allowance payments acted as a safety net, setting an informal wage floor.
However, a real-terms reduction in these payments has forced more people to accept lower-paid jobs, pushing down the market wage rate in low-skilled sectors, contributing to the rise in working poverty. Other factors include rising energy bills and housing costs, which squeeze household incomes further.
Extract B states that:
"A real-terms reduction in these payments has forced more people to accept lower-paid jobs, pushing down the market wage rate in low-skilled sectors..."
With the help of a diagram, explain how a reduction in out-of-work benefits may lead to lower wages in some labour markets.
64 exam-style questions on AQA A Level Economics 1.6 The labour market (A-level only), covering 1.6.1 The demand for labour, marginal productivity theory, 1.6.2 Influences upon the supply of labour to different markets, 1.6.3 The determination of relative wage rates and levels of employment in perfectly competitive labour markets, 1.6.4 The determination of relative wage rates and levels of employment in imperfectly competitive labour markets, 1.6.5 The Influence of trade unions in determining wages and levels of employment, 1.6.6 The National Minimum Wage, and 1.6.7 Discrimination in the labour market. Each one has a worked solution and a mark scheme showing where the marks go.