Category: Essentials of Economics: Ch 07
In Gordon Brown’s last budget as Chancellor he scrapped the 10p starting rate of taxation and this change came into effect for the 2008/9 tax year starting April 6th 2008. The move has been criticised by many Labour MPs and by poverty campaign groups as they argue that the scrapping of the rate will make some poor people worse off. They also argue that it will make it more difficult to meet the targets the government has set for reducing child poverty
Chancellor accused of widening poverty trap for poorer workers Times Online (14/03/08)
Benefit move to cut child poverty BBC News Online (12/03/08)
Questions
| 1. |
Explain what is meant by the poverty trap. |
| 2. |
Explain how the abolition of the 10p starting rate of tax is likely to increase inequality. |
| 3. |
Analyse two policies that are likely to reduce poverty. Then assess the extent to which these policies will also help reduce child poverty. |
Widening levels of income distribution have led to increased anger, according to a poll carried out for the Guardian by ICM. The articles linked to below look at this issue from a range of perspectives and using a series of regional case studies.
Anger at gap between rich and poor – ICM poll Guardian (20/2/08)
Diamonds for rich inside M25; hard times for the rest Guardian (21/1/08)
What the Romans did for us: introduce a North-South divide Guardian (21/1/08)
Where Burberry, Bentleys and bling prevail Guardian (21/1/08)
Dark reality hidden behind the picturesque scenery Guardian (21/1/08)
Mills and mail order: end of Empire marks another stage of decline Guardian (21/1/08)
Mind the gap Guardian (21/1/08)
Questions
| 1. |
Define the terms ‘Lorenz curve’ and Gini coefficient’. |
| 2. |
Using diagrams as appropriate show the changes that have taken place in income distribution in the UK in the past decade. |
| 3. |
Assess the principal causes of the growing North-South divide. |
| 4. |
Evaluate two policy options available to the government to reduce the widening gap in income distribution. |
The government has proposed charging a levy to people who claim non-dom (non-resident) status in the UK. This levy of £30,000 will be charged on people with non-dom status who choose to shelter their earnings in overseas tax havens. An intensive campaign against the tax has been launched by various elements of the media.
It’s hardly Bolshevism to propose taxing non-doms Guardian (9/2/08)
Treasury adviser Bob Wigley slams non-dom tax Times Online (10/2/08)
Nabbing the non-doms Times Online (10/2/08)
Jones breaks ranks to claim non-dom plan hits low-paid Guardian (9/2/08)
Non-dom crackdown could hit low-paid Guardian (8/2/08)
Questions
| 1. |
Explain the way in which the non-dom tax levy would operate. How would this levy be classified – progressive, regressive or flat-rate? |
| 2. |
Assess the arguments for and against the imposition of a levy on non-doms. |
| 3. |
Evaluate two alternative policies for the taxation of non-residents of the UK. |
The article linked to below from Evan Davis’s blog starts with the following multiple choice question:
“What effect do you think it has, if a British bus company employs a bus driver from overseas?
a) it takes away the job of a British bus driver?
b) it increases the number of bus drivers we have?
c) it undercuts the wages of British bus drivers?
d) it reduces bus fares for British passengers?”
What is your answer?
On the buses BBC News Online (5/11/07)
Questions
| 1. |
Explain what is meant by the phrase “lump of labour fallacy”. |
| 2. |
Assess the extent to which the most appropriate answer to the multiple choice question is “(e) all of the above”. |
| 3. |
Discuss the extent to which the answer to the above multiple choice question may differ in a perfectly competitive and imperfect labour market. |
The rapid growth in the use of overseas and agency staff for many lower paid jobs has been a contentious issue for many in the trade union movement. Unions have demanded the same rights for agency staff as for permanent staff, but the government is reluctant to do this, arguing that the use of agency staff encourages flexibility in the workforce.
Underpaid, easy to sack: UK’s second class workforce Guardian (24/9/07)
Questions
| 1. |
Explain the impact that the use of agency staff has on the supply curve for labour. (N.B. You should consider both the position and shape of the curve in your answer.) |
| 2. |
Discuss the government’s view that “the flexibility provided by agency workers has been a vital part of Britain’s economic success“. |
| 3. |
Discuss the impact on the UK labour market of giving agency staff the same employment rights as permanent staff. |