Economics
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Exercise 2
- Explain the principle of comparative wage justice.
Comparative wage justice is the belief that workers who have similar skills and jobs in different industries should receive the same award wages.
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List one disadvantage and one advantage of a
decentralised system of wage determination.
In a decentralised system, wages and working conditions are determined at an industry or enterprise level through direct negotiation between employers and employees. Any of the following answers are correct.Advantages
- Wages are determined by the forces of supply and
demand leading to efficient allocation of labour
resources and labour mobility.
- Increases in wages are linked to improvements in
productivity.
- Cost inflation is reduced as wage rises reflect the
capacity to pay in each industry.
- Reduces costs and improves international
competitiveness.
- Wages are determined by the forces of supply and
demand leading to efficient allocation of labour
resources and labour mobility.
Disadvantages
- Increases income inequality; the principal of
comparative wage justice.
- Increases income inequality; the principal of
comparative wage justice.
- With full employment some industries have the
ability to push for higher wage increases causing wage
based cost inflation.
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