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Impact of Higher Wages for Low-Paid Workers

Discuss whether or not an increase in the wages of low-paid workers will reduce poverty.


Labor Market and Income Distribution

Frequently asked question



Use examples from real-world economic events to illustrate your arguments.

➡Title: The Impact of Increasing Wages on Reducing Poverty
🍃Introduction: The issue of low wages and poverty is a significant concern in many societies. This essay explores whether increasing the wages of low-paid workers can effectively reduce poverty. By examining both perspectives, we can gain a comprehensive understanding of the potential impacts on poverty levels.
I. Reasons Increasing Wages Might Reduce Poverty
➡️1. Addressing Low Pay: Low wages are a contributing factor to poverty -. By increasing the pay of low-paid workers, their income levels can rise, potentially lifting them out of poverty and improving their living conditions -. Increased income allows for greater spending on basic necessities, reducing absolute poverty and stimulating higher output and demand -.
➡️2. Long-Term Benefits: Higher wages for low-paid workers can enable low-income families to invest in their children's education -. This investment in education can lead to improved skills and qualifications, increasing their future earning potential and breaking the cycle of poverty -.
➡️3. Motivation and Productivity: Increasing the pay of low-paid workers can enhance their motivation -, which may translate into higher levels of productivity -. Increased productivity can improve job security and provide opportunities for promotion, ultimately improving income prospects and reducing poverty -.
II. Reasons Increasing Wages Might Not Reduce Poverty
➡️1. Insignificant Increase: The increase in wages for low-paid workers may be minimal, potentially insufficient to lift them out of poverty -. If the increase is lower than the inflation rate, it can leave the poor worse off in real terms -.
➡️2. Unemployment and Joblessness: Not all individuals living in poverty have jobs -. Increasing the wages of low-paid workers may have no direct effect on those who are unemployed or face barriers to employment -. Poverty reduction requires a comprehensive approach that addresses both employment opportunities and wage levels.
➡️3. Potential Job Losses: Higher wages for low-paid workers can increase firms' costs of production -, potentially leading to job cuts and redundancies -. This scenario can offset the positive impact of wage increases by reducing overall income levels and exacerbating poverty -.
👉Conclusion: Increasing the wages of low-paid workers has the potential to reduce poverty by providing individuals with higher incomes, improving their living standards, and stimulating demand. Investing in education and enhancing motivation and productivity can contribute to long-term poverty reduction. However, the effectiveness of wage increases in reducing poverty is dependent on various factors, including the magnitude of the increase, employment opportunities, and potential job losses.
To effectively combat poverty, it is crucial to adopt a comprehensive approach that encompasses policies addressing employment, education, and social welfare. Additionally, policies should consider the unique characteristics and challenges of different groups within the low-wage workforce to ensure targeted and inclusive poverty reduction measures.


- Definition of poverty
- Importance of addressing poverty in economics
- Thesis statement: Raising the pay of low-income workers can have both positive and negative effects on poverty reduction and economic growth.

Body Paragraph ➡️1:
- Cause of poverty: low pay
- How raising the pay of the poor can reduce poverty and increase income
- The potential for increased spending and demand for basic necessities
- The potential for stimulating higher output and reducing unemployment
- The potential for investing in education and raising skills and pay in the long run

Body Paragraph ➡️2:
- Potential limitations of raising the pay of low-income workers
- The possibility of the increase being too small or less than inflation
- The potential for the increase to not affect those without jobs
- The potential for increased costs of production for firms, leading to job loss and reduced income

Body Paragraph ➡️3:
- The potential for increased motivation and productivity among low-paid workers
- The potential for increased job security and promotion opportunities
- The potential for increased economic growth through increased productivity and innovation

- Restate thesis statement
- Summarize main points
- Emphasize the importance of considering both the positive and negative effects of raising the pay of low-income workers in addressing poverty and promoting economic growth.


Up to ➡️4 marks for why it might: One cause of poverty is low pay - raising the pay of the poor can take them out of poverty/increase their income - their spending is likely to increase - enabling them to buy more basic necessities - reducing absolute poverty - stimulating higher output/demand - reducing unemployment -. Enables low-income families to spend on education of children - raising skills and pay in long-run -. Raising the pay of low-paid workers may increase their motivation - which may increase their productivity - increasing their chances of keeping their jobs/gaining promotion -.
Up to ➡️4 marks for why it might not: Increase may be very small - insufficient to take people out of poverty - Increase maybe less than inflation rate - leaves poor worse off -. Poor may not have jobs - increase in pay has no affect for them -. The rise in pay - may increase firms’ costs of production - causing them to make some workers redundant - reducing their income -.




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