In a bid to boost local employment, a regional authority has scrapped the compulsory registration fee and annual training license charge for entry-level private security personnel. Previously, these regulatory costs acted as a substantial financial barrier, preventing many job-seekers from entering the security sector.
With these financial barriers removed, the industry has seen a massive influx of applicants, particularly among young school-leavers and those transitionally unemployed. While security firms welcome the abundant supply of applicants, worker representatives have voiced concerns that this regulatory shift is driving down the standard hourly rate across the sector.
Extract C states that:
"With these financial barriers removed, the industry has seen a massive influx of applicants... driving down the standard hourly rate across the sector."
With the help of a diagram, explain how the removal of entry barriers (such as licensing fees) may lead to a lower equilibrium wage rate and a higher level of employment in a perfectly competitive labour market.
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.