Union in plea to save Poundland from administration, with 12,000 jobs at risk
Real-world example for IB, A-Level, AP and IGCSE Economics essays: Unemployment and the labour market, Firms' costs, profits and decisions, Economic growth and the business cycle
What happened
Poundland's owner Gordon Brothers has filed notice of intent to begin an administration process after rejecting a management-backed rescue bid, and the shopworkers' union Usdaw has urged it to reconsider, with up to 12,000 jobs at risk.
The economics
When a firm enters administration, stores may close or staff be cut, directly reducing labour demand and raising unemployment; this is demand-deficient unemployment because the job losses stem from business failure rather than a skills mismatch. It also shows how firms' cost pressures and failed business decisions transmit into the labour market, and how retail is exposed in a downturn of the business cycle.
Figures to quote
- 12,000 jobs at risk
Evaluation
However, jobs 'at risk' are not all lost: if a rescue bid is revived or some stores are bought, actual job losses will be below 12,000; in the short run layoffs also cut consumer spending, reinforcing a downward spiral.
Practice question
Using the case of Poundland entering administration with up to 12,000 jobs at risk, analyse how business failure affects types of unemployment and what policies a government might use in response.
Where it fits in the syllabus
- Unemployment and the labour market: People willing to work who cannot find a job; it can be cyclical, structural or frictional.
- Firms' costs, profits and decisions: How firms decide output, prices and investment from their costs, revenue and competition.
- Economic growth and the business cycle: Long-run growth in real GDP and the short-run swings between expansion and recession, when output falls below potential.
- IB Economics: Measuring Economic Activity, Aggregate Demand and Supply, Demand, Supply and Elasticity
- A-Level Economics: Macroeconomic Objectives, Aggregate Demand and Supply
- AP Macroeconomics: Economic Indicators and Business Cycle, National Income and Price Determination
- AP Microeconomics: Factor Markets and Income Distribution, Production, Cost and Perfect Competition
- IGCSE Economics: Macroeconomic Objectives, Business Economics