A2 Macro: EU Context for the UK Economy

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A2 - Session 3 Europe: Economics of Labour Migration 2 2 UK CONTEXT

description

Aspects of the EU including exam style question on the economic effects of labour migration

Transcript of A2 Macro: EU Context for the UK Economy

Page 1: A2 Macro: EU Context for the UK Economy

A2 - Session 3Europe: Economics of Labour Migration

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UK CONTEXT

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Free trade area v customs union.In a free trade area member countries abolish tariffs on mutual trade, but each partner determines its owns tariff on trade with non-partner countries.

A customs union also creates intra-union free trade, but takes away member’s freedom to set their own tariffs against non-member states.

Instead, all members of the customs union impose a common external tariff on trade with non-members.

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The UK will…….

Remain outside the single currency

Remain a member of the single market (SEM) and wants a deepening/extension of it

Support further EU enlargement but push for more flexible ‘pick and choose’ Europe

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Free Trade in Goods

Free Trade in Services

Free movement of capital

Free movement of labour

Four ‘freedoms’ of the SEM22

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Exam Question: Evaluate the view that free movement of labour within the EU is beneficial for the UK economy

As of January 1st 2014, restrictions on Bulgarian and Romanian migrants ended. Opinion is divided as to the cost and benefits to the UK of this extension to the free movement of EU labour.

Write down one economic advantage of the free movement of labour to the UK economy...

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1. Competition in the labour market has:– Driven productivity

– Kept a lid on wage costs

Both of which have reduced cost push inflationary pressure and increased competitiveness.

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Advantages of free movement of labour to the UK

RULC’s… (Relative Unit Labour Costs)

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…productivity gains and downward wage pressure

Price level

Real GDP and employment

AD

Y1

P

P1

AS1

AS

Y

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2. Migration has filled hundreds of thousands of job vacancies driving economic growth

3. Fiscal dividend

Advantages of free movement of labour to the UK

Complementary or substitutes?

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1. Extra welfare burden - JSA/Housing/Child- Extra pressure on services i.e

NHS/schools

BUT….. what does this evidence say? Read the section on the bottom half of page 24.

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Disadvantages of free movement of labour to the UK

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Disadvantages of free movement of labour to the UK

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2. Much of the money earned is sent in remittances… resulting in significant ‘leakages’ from the circular flow

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Disadvantages of free movement of labour to the UK

Show critical awareness

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So…..a reasoned conclusion

That’s your call………..!! But:

1. Don’t repeat

2. Don’t sit on the fence

3. Use evidence

4. Answer the question

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So…..a reasoned conclusion, some ideas…

“On balance I believe that this policy has been effective in delivering the key advantages of PRODUCTIVITY GAINS and ECONOMIC GROWTH to the UK.

In the long run, these advantages more than outweigh any short run concerns which even if they proved to be accurate, would still be a price worth paying. However much of case against, particularly the NOTION OF WELFARE BURDEN has been discredited by empirical evidence, as I have shown above.

Moving forward however, I do believe that the government should prioritise trying to negotiate TIGHTER RULES ON JOBLESS IMMIGRATION in an attempt to bring more BENEFITS TO THE UK ECONOMY WITH FEWER OF THE COSTS”

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Anything else………………?

THE LAST THING YOU DO SHOULD BE TO DIRECTLY ANSWER THE QUESTION:

“As such, the free movement of labour within the EU has been more beneficial than harmful to the UK economy but there are challenges to overcome to ensure that it remains so”.

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07/04/2023

Twitter: @tutor2u_econ