OCR A Level Economics: Labour market issues, inequality and intervention (H460) – Practice Questions

These are original questions written for Marlbridge, for revision and practice on this content. They are not reproduced past-paper questions, and they do not replicate the exam’s exact structure, question count or mark tariffs – examination boards hold copyright in their own papers. Use these alongside the official past papers from your board or school.

These questions follow the OCR A Level Economics (H460) specification, Version 3.0 (June 2026), first assessment 2021: “Labour market issues and themes” and “Government intervention”. All data are invented. Draw each diagram on paper. Read the study guide and revision notes first if needed. See also the course hub and checklist.

Questions

1. Country C has 6.0m people under 16, 24.0m aged 16 to 64 and 8.0m aged 65 or over. Its labour force is 19.2m. A typical out-of-work household receives £7,200 a year in benefits; the same worker would take home £12,000.

(a) Calculate the dependency ratio. [2] (b) Calculate the participation rate. [1] (c) Calculate the replacement ratio and say what it suggests about incentives. [2]

2. In a market for cleaners in a town, labour demand is Ld = 240 − 10w and labour supply is Ls = −60 + 20w (thousands of hours; w in £ per hour).

(a) Find the wage and number of hours at which the market clears. [2] (b) The government sets a legal wage floor of £12. Calculate the resulting unemployment. [2] (c) Show that the total wage bill rises, and explain what this implies about labour demand. [2]

3. Using the market in question 2, a maximum wage of £8 is imposed.

(a) Calculate the shortage of labour. [2] (b) Explain two likely consequences. [2] (c) Distinguish a voluntary living wage from a legal minimum wage. [1]

4. Evaluate whether retraining schemes or relocation grants would be more effective in reducing structural unemployment in a region where factories have closed. [6]

5. A firm agrees a productivity deal: hourly pay rises 3% and output per hour rises 5%.

(a) Calculate the change in labour cost per unit of output. [2] (b) Explain one reason a firm may prefer productivity bargaining to a simple pay rise. [1] (c) Explain how collective bargaining could harm workers outside the union. [2]

6. In a fruit-picking market, labour demand is Ld = 300 − 15w and native labour supply is Ls = −30 + 15w (thousands; w in £ per hour). Migrants then add 30 workers at every wage.

(a) Calculate the original equilibrium. [2] (b) Calculate the new equilibrium wage and employment. [2] (c) State the number of native workers employed after migration. [1] (d) Evaluate one effect of migration other than on wages. [2]

7. Mean hourly pay is £18.00 for Group M and £16.20 for Group F. Differences in hours and experience explain £1.20 of the gap.

(a) Calculate the gap as a percentage of Group M’s pay. [1] (b) Calculate the unexplained part as a share of the gap. [1] (c) Explain why the unexplained part is not conclusive proof of discrimination. [1] (d) Explain one economic cost of discrimination. [1]

8. Country D has 10.0m people under 16, 40.0m aged 16 to 64 and 12.0m aged 65 or over. In 25 years these are projected at 9.0m, 38.0m and 17.0m.

(a) Calculate the dependency ratio now and in 25 years. [2] (b) Calculate workers (16 to 64) per person aged 65 or over, now and later. [1] (c) Evaluate raising the age at which the state pension is paid. [4]

9. A job pays £9,600 a year net. Out-of-work benefits are £8,400. Travel and childcare cost £700 a year when working.

(a) Calculate the replacement ratio. [2] (b) Calculate the net gain from working before and after work costs. [2] (c) Suggest one policy to improve work incentives and one drawback. [2]

10. Country E has recorded GDP of 650 (illustrative units). Informal activity is estimated at 8% of recorded GDP and the average tax rate is 28%.

(a) Calculate unrecorded output and the maximum tax lost. [2] (b) Explain why this is an upper limit. [1] (c) Explain one benefit and one cost of informal labour markets. [2]

11. (a) Distinguish income inequality from wealth inequality. [2] (b) Evaluate whether education and training policy or changes to the tax and benefit system would do more to reduce income inequality. [6]

Answers

1. (a) Dependents = 6.0 + 8.0 = 14.0m. [1] 14.0/24.0 × 100 = 58.3%. [1] (b) 19.2/24.0 × 100 = 80%. [1] (c) 7,200/12,000 × 100 = 60%. [1] Benefits are well below pay, so the incentive to work is stronger. [1] Examiner insight: choose the working-age group as the denominator and say so. Using the whole population is a common slip that changes every answer.

2. (a) 240 − 10w = −60 + 20w gives 300 = 30w. [1] w = £10, L = 140. [1] (b) At £12: demand = 120 and supply = 180. [1] Unemployment = 60. [1] (c) Bill before = 10 × 140 = 1,400; after = 12 × 120 = 1,440. [1] The bill rises because the fall in employment (14.3%) is smaller than the wage rise (20%), so demand is inelastic in this range. [1] Examiner insight: put the controlled wage into both equations, and take employment from the demand side. Candidates who read employment from supply overstate it.

3. (a) Demand at £8 = 160; supply = 100. [1] Shortage = 60. [1] (b) Employers cannot fill 60 hours, so output or service suffers. [1] Workers may be paid in cash or leave for better pay elsewhere. [1] (c) A living wage is a rate employers choose to pay, based on living costs; a legal minimum is enforced by law. [1] Examiner insight: a ceiling produces a shortage. Calling it unemployment mixes up the two controls.

4. Retraining raises occupational mobility, so unemployed workers can fit vacancies. [1] But it is slow, costly and fails if the new skills do not match local demand. [1] Relocation grants raise geographical mobility, so workers move to jobs. [1] But housing costs, family ties and loss of local population limit take-up. [1] Judgement: retraining tends to be better where the region keeps some demand for labour, relocation where no jobs will return. The mix depends on age, skills and the time available. [2] Examiner insight: answers that weigh the two policies against the region’s circumstances read as evaluation. A list of pros and cons for each, without a conclusion, tends to stay descriptive.

5. (a) 1.03/1.05 − 1 [1] = −1.9%. [1] (b) Pay rises are tied to output gains, so unit costs do not rise. [1] (c) A union wage above equilibrium cuts the quantity of labour hired. [1] Those excluded must find work in lower-paid, non-union jobs, increasing their supply and lowering wages there. [1] Examiner insight: divide the growth factors rather than subtracting the percentages. 3% minus 5% gives a different figure.

6. (a) 300 − 15w = −30 + 15w gives w = £11, L = 135. [1][1] (b) Supply becomes L = 15w. [1] 300 − 15w = 15w gives w = £10 and L = 150. [1] (c) Natives: −30 + 150 = 120. [1] (d) Migrants may fill shortages and pay tax, increasing output. [1] But extra demand for housing and services may raise costs in the short run. [1] Examiner insight: name the effect, give its direction, and say who gains or loses. A claim that migration “helps the economy” without a mechanism carries little.

7. (a) 1.80/18.00 × 100 = 10%. [1] (b) 0.60/1.80 = 33.3%. [1] (c) The unexplained part may reflect other differences that are not measured, such as job type or qualifications. [1] (d) Talented workers are under-used, so output is lower than it could be. [1] Examiner insight: the gap is a starting point. Careful answers separate the explained part from the unexplained part before drawing any conclusion.

8. (a) Now 22.0/40.0 = 55.0%. [1] Later 26.0/38.0 = 68.4%. [1] (b) 40/12 = 3.3; 38/17 = 2.2. [1] (c) A later pension age cuts state spending and keeps more people in the labour force. [1] It raises tax receipts and eases skills shortages. [1] But people in poor health or physical jobs may be unable to work, so it can worsen inequality, and older workers may find few vacancies. [1] Judgement: effectiveness depends on health, job availability and how quickly the change is phased in. [1] Examiner insight: tie the policy to the ratio you calculated. Linking a lower number of workers per pensioner to the policy gives the answer direction.

9. (a) 8,400/9,600 × 100 [1] = 87.5%. [1] (b) Gain = 9,600 − 8,400 = £1,200. [1] After work costs = 1,200 − 700 = £500. [1] (c) Lower the rate at which benefits are withdrawn as earnings rise, so more of extra pay is kept. [1] Drawback: it costs more and extends support up the income range. [1] Examiner insight: include work costs when assessing incentives, because the net gain is the figure a worker compares.

10. (a) 650 × 0.08 = 52. [1] 52 × 0.28 = 14.56. [1] (b) Much informal work would not exist if it had to be declared and taxed, so not all of it would be taxed. [1] (c) Benefit: income and flexibility for low-income households. [1] Cost: no legal protection or pension, and lost tax. [1] Examiner insight: “upper limit” needs a reason. Saying the figure is only an estimate does not explain why it is a maximum.

11. (a) Income inequality is the uneven spread of income flows over a period. [1] Wealth inequality is the uneven spread of asset holdings at a point in time. [1] (b) Education and training raise human capital and wages for lower earners. [1] But the effect is slow, depends on the quality of provision and may not reach those already out of work. [1] Tax and benefit changes act quickly: progressive taxes and transfers move income from high to low earners. [1] But high marginal rates and benefit withdrawal can reduce incentives and employment. [1] Judgement: tax and benefits give faster results, training gives longer-term and more lasting change. [1] A combination avoids relying on one lever, and the best mix depends on whether inequality arises from low skills or from low participation. [1] Examiner insight: decide which lever works more quickly and which lasts longer, then give a reason for your choice. Without a chosen answer the response reads as a list.

Where marks are usually lost

• Dividing by total population instead of the working-age group.
• Finding unemployment from the supply curve alone.
• Subtracting growth rates instead of dividing the factors.
• Confusing a shortage with unemployment.
• Naming a policy without saying how it changes mobility or incentives.
• Treating every pay gap as discrimination.
• Describing an effect of migration with no direction or mechanism.
• Ending evaluation without a conclusion.

Next steps

• Review the revision notes and the study guide.
• Check progress against the course hub and the checklist.
• Try the free 10-minute diagnostics to find your weakest area.
• Book a free trial class.

Official syllabus

OCR, A Level in Economics (H460) specification, Version 3.0 (June 2026), first assessment 2021.