After negotiation, the workers in an industry obtained from employers higher wage rates. The employers' spokesperson said 'the cost of the deal would have to be met through improved productivity or by reductions in other costs'.
Analyse whether this deal can be incorporated into the economic theory of wages and consider the possible outcome for employment of such a deal.

Q: What topic does this question test?

This question tests Labour Markets in A-Level Economics (syllabus code 9708). It is worth 25 marks.

Q: Which exam paper is this question from?

This question appeared in the Cambridge A-Level Economics May/June 2020 examination, Paper 4 Variant 1 (9708_s20_qp_41.pdf).

Question

After negotiation, the workers in an industry obtained from employers higher wage rates. The employers' spokesperson said 'the cost of the deal would have to be met through improved productivity or by reductions in other costs'.
Analyse whether this deal can be incorporated into the economic theory of wages and consider the possible outcome for employment of such a deal.

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