Meaning that the number of people working is undetected. The downside to this is the macro economic policies are likely to be too expansionary and social policy too excessive. The second issue is these underground economy wages are escaping taxation which causes a loss in tax revenue. Lastly it shows that the citizens and the government have an unhealthy relationship. The taxpayers are not happy with the public services from the government and seek help with out having to pay taxes.
Why is Labour Productivity in the UK so low? There are a huge variety of reasons why, in comparison to other countries, our labour productivity is so low: One incredible important reason is that the government drive for full employment has been taking hold. As we can see here; our employment is faring well in comparison with other countries. However, a real problem is the government implementing policy that favours short term social benefit (like for example, mass employment, creation of needless projects simply to provide jobs), rather than long term economic benefit. There is a failure to realise that long term better economic welfare also means general higher standards of living, as people have enough money to buy everything they need and some of what they want, competition is rife so drives quality up and prices down, and the government are able to take in more taxes from firms who are much healthier financially.
LDC(least developed countries) in this group have very low income with a low GDP per capita; they have sometimes been described as ‘Fourth World’ nations to emphasise their bleak conditions and their populations lack of engagement with globalising forces. Countries such as Sudan and Afghanistan are classified in this group; these countries are frequently described as ‘failed states’ by politicians. A benefit is that it’s an average of countries income and doesn’t look at uneven distribution in the world. However a problem with grouping the countries into LEDC’s or MEDC’s is that is far too simplistic to divide the world in two, the distribution of wealth and power is more complex. Instead grouping nations into High, Middle and Low income is now considered more useful.
First, the many monopolies in the world are detrimental to the economy because the lack of competition gives company little incentive to do more than what is needed. Monopolies will often give mediocre service,
We buy more, but enjoy less. We've learned how to make a living, but not a life. We've added years to life, not life to years. Power, economic power creates political power. The problem with power is that "power corrupts and absolute power corrupts absolutely".
As a result, the social welfare of those developed nations decreases. It is thus more difficult for workers to find a job in line with their skills and qualifications; they receive a lower income and they have less time for leisure activities. Plus, this international division of work may lead to economic disequilibrium in developing countries. To get wealthier, they focus their economic activity on the trade with developed countries instead of focusing on their own economic development. This can lead to a shortage of food in third world countries and to starvation of their population, as some of those countries are exporting the major part of their production to developed countries.
On the other hand, this idea of free trade is highly disadvantageous, and even harmful, to the Global South with the Global North dictating prices. The less developed countries find it difficult to compete with the economically advanced countries and the production of primary products is poorly paid. What’s more, the fact that the price is dictated by supply and demand leads to instability regarding income. This limits the Global South’s ability to develop as investment is restricted due to economic instability; ultimately free trade has led to “the development of the underdevelopment” In keeping with minimal
1. Introduction Adam Smith (Adam Smith, 2009) insisted that the best way to improve personal and societal interests is to operate with an Invisible Hand without government intervention. However, in reality, the free market economy is hard to manage due to limitations which include natural monopoly, inadequate information, external effects, the inequality of income distribution, and the shortage of a production of public goods. Therefore, in order to solve these aforementioned problems, the government needs to play a role by establishing appropriate economic policies. However, government interventions do not always result in positive outcomes.
Sometimes it is just the opposite, sometimes it works well. Well developed economies would benefit largely from the immigrants, because there the labor market is highly-stretched upwards. There is no one to fill in the niche for low-paid service workers or those involved in physical and hard work. That is the place of the immigrants, and that is the new form of slavery in the 21st century. The raise in GDP doesn’t come mainly from taxes, because even if they are legal immigrants (which are not the case usually) they have minimal income.
In a socialist state, the government evaluates the contributions of all workers and fixes wages accordingly. This seems a fair system. Yet, the reality of the situation is that any government's ability to pay depends on the size of the gross national product. If this is inadequate, everybody's pay will be low, with the exception of the favoured few, and standards of living will also be low. It is therefore an irony that many governments are abandoning socialism in favour of the freedom of the market economy to create wealth.