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Degree: Philosophy, Politics and Economics (Bachelors) - Warwick University
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Yuan (Student) October 8 2016
This depends on a multitude of factors and is tricky to answer.
One of the ways in which a higher NMW, which the latest government is implementing, would reduce inequality, is simply because it raises wages of those in lower income families. This increases their disposable income and therefore their standard of living should rise.
However, this is not always the case; for two main reasons. The first of which is that around 40% of those on the NMW are secondary earners of richer households! Therefore money is not being efficirntly transferred from high earners to low earners.
Additionally, classical economists would argue that a wage floor leads to higher unemployment levels, as the cost of labour rises so firms will cut back on labour to lower costs. Therefore this would worsen the situation.
The answer to this question also depends upon the effects on productivitysee more
Economic growth is defined as an increase in the productive potential of an economy. It is measured in percentage growth of GDP (Gross Domestic Product), year on year. India's rate of economic growth is 7.1% in 2016 Q1.
Growth can lead to higher living standards because if GDP rises, there is more money in the domestic economy. This means that business can make more profits, and therefore can pay employees higher wages, or even hire more employees. This means that GDP per capita/ household rises. Therefore the disposable income of workers rises. This means that they can purchase more goods and services with their income, leading to a rise in living standards.see more