What the Budget offers for under 25s - and what it leaves out
Real-world example for IB, A-Level, AP and IGCSE Economics essays: Fiscal policy, Wages and income inequality, Taxes, subsidies and price controls
What happened
The chancellor set out a set of measures affecting under-25s, covering areas such as housing and the minimum wage.
The economics
The Budget is an example of fiscal policy: government tax and spending decisions aimed at a specific group. Changing the minimum wage is also government intervention in the labour market, altering firms' hiring costs and potentially the relative pay and job chances of young workers.
Evaluation
A higher minimum wage can raise some young workers' pay but may also raise firms' costs and reduce low-skill vacancies, so short-run gains must be weighed against possible longer-run job losses.
Practice question
Using this Budget, discuss the advantages and disadvantages of raising the minimum wage for the under-25 labour market.
Where it fits in the syllabus
- Fiscal policy: The government changes spending and taxation to influence aggregate demand and economic activity.
- Wages and income inequality: How labour markets set wages, and how income and wealth are shared across people.
- Taxes, subsidies and price controls: Indirect taxes, subsidies and maximum or minimum prices that governments use to change market outcomes.
- IB Economics: Fiscal and Monetary Policy, Aggregate Demand and Supply, Government Intervention and Market Failure
- A-Level Economics: Economic Policy, Government Microeconomic Intervention
- AP Macroeconomics: National Income and Price Determination, Long-Run Consequences of Stabilisation Policies
- AP Microeconomics: Factor Markets and Income Distribution, Supply, Demand and Market Equilibrium, Market Failure and the Role of Government
- IGCSE Economics: Government Macroeconomic Policy, The Allocation of Resources, Government Intervention