Blog
Pay freezes and macro performance
16th November 2009
The forum post I am setting my AS macro students this week focuses on the possible economic impact of wage cuts and pay freezes. I am hoping it will help to develop their evaluative skills and get them to apply some AD/SRAS concepts. As the UK economy continues to experience a recession, pay is under pressure. The average wage in Britain, including bonuses, fell by 0.4 per cent in the three months to March 2009 – knocking about £95 off annual salaries to £24,000. People working in the private sector are at highest risk of a wage freeze or actual wage cut and public sector workers are also at risk of pay freezes in the months ahead.
Suggested reading
Half of UK firms plan a pay freeze (Telegraph) Pay freeze in deal to save car plants (Independent) Osborne plans one-year public sector wage freeze (Independent) Outlook for jobs will remain grim for several years (The Times) Wage cuts might condemn the economy to more misery (Telegraph) FTSE bosses get big salary rise (BBC news)
Examine some ways in which a move towards wage cuts or pay freezes might affect the macroeconomic performance of the UK economy
The forum posting is designed to encourage students to read around the subject, develop a concise written style and build evaluation skills. The Moodle system is set up so that students can only see the postings of others once they have submitted their only entry. I will post a couple of replies later on in the week.
Geoff Riley
Geoff Riley FRSA has been teaching Economics for over thirty years. He has over twenty years experience as Head of Economics at leading schools. He writes extensively and is a contributor and presenter on CPD conferences in the UK and overseas.