Syllabus: Pearson - GCSE Economics
Module: 1.2 Business Economics
Lesson: Pearson - 1.2.5 The Labour Market

Introduction

This lesson covers section 1.2.5 of the Pearson Edexcel International GCSE in Economics syllabus, focusing on the labour market. It sits within the broader “Business Economics” strand of Paper 1: Microeconomics and Business Economics. Students explore how wages are determined, the dynamics between employers and workers, and the factors that influence labour supply and demand. The topic builds economic thinking while anchoring learning in a real-world system that students interact with—whether through part-time jobs, apprenticeships, or career ambitions.

Understanding the labour market is not just about theory. It connects directly to students’ lives and helps frame economic decision-making in terms they can relate to. For teachers, this is a valuable unit for making economics human and tangible.

Key Concepts

According to the Pearson specification, students need to understand:

• What a labour market is: A place where workers (labour) are bought and sold, much like goods and services in other markets.

• Interaction of workers and employers: How wage levels are influenced by supply and demand.

• Determination of wages: Understanding gross and net pay, deductions (like income tax and National Insurance), and how wages vary across sectors and roles.

• Factors affecting labour supply: Including qualifications, working conditions, mobility of labour, and demographic shifts.

• Factors affecting labour demand: Including changes in productivity, demand for goods/services, and technological advances.

• How government policies can affect the labour market: E.g. minimum wage legislation, trade union laws, and employment taxes.

Students are expected to apply supply and demand diagrams to labour markets and explain wage differences using both market and non-market reasoning.

Real-World Relevance

Bring this to life with relatable examples. For instance:

• NHS staffing shortages: A surge in demand for healthcare workers post-pandemic, but limited supply due to training times and burnout.

• Technology sector wage premiums: Developers or cybersecurity experts command higher salaries due to scarce skills and high demand.

• Minimum wage debates: A real point of discussion around employment levels, especially among young people working in hospitality and retail.

These examples give students the chance to explore real tensions in wage setting and employment dynamics, making economic theory feel immediately useful.

How It’s Assessed

This topic is assessed in Paper 1, where students tackle compulsory questions mixing multiple-choice, short-answer, data response, and open-ended formats. The exam:

• Is 1 hour 30 minutes long

• Has 80 marks in total

• Includes four questions worth 20 marks each

Typical question styles for this topic include:

• “Explain why wages might be higher in one industry than another.”

• “Use a supply and demand diagram to show the impact of a government-imposed minimum wage.”

• “Analyse the effect of an increase in labour productivity on wage levels.”

Key command words to prep for: explain, analyse, evaluate, and draw. Students should be confident using diagrams to justify their answers and apply theory to current events or supplied data.

Enterprise Skills Integration

Teaching this unit gives plenty of opportunities to build wider skills such as:

• Decision-making: Analysing job choices based on wages, conditions, and long-term prospects.

• Problem-solving: Considering how businesses respond to labour shortages or high turnover.

• Critical thinking: Debating whether a minimum wage helps or harms employment levels.

• Numeracy: Calculating gross and net pay, deductions, and shifts in labour supply/demand using data.

Simulation activities like “You’re the HR Manager” help students roleplay recruitment decisions, budgeting for staff, or analysing wage trends—applying theory with purpose.

Careers Links

This lesson supports Gatsby Benchmarks 4, 5, and 6 by:

• Making labour economics tangible for students considering future work paths

• Exploring wage-setting in careers such as finance, HR, healthcare, law, and engineering

• Linking to real job data: For example, students can research salary trends using sites like Prospects.ac.uk or the ONS Labour Market Overview

Great roles to reference:

• HR managers (who navigate wage structures)

• Labour economists (who advise government or business)

• Recruitment consultants

• Apprenticeship providers

You can also tie this to students’ own part-time work or ambitions—using payslips or job adverts to analyse deductions and benefits.

Teaching Notes

Tips:

• Start with real payslips or job adverts to demystify gross/net pay.

• Use labour market diagrams early and often—they’re frequently examined and can trip students up without routine exposure.

• Bring in news articles on strikes, wage disputes, or recruitment shortages to keep it current.

• Link to prior learning on supply and demand, so students see the continuity.

Common pitfalls:

• Students often confuse labour supply with total number of jobs—clarify that it’s about willingness and ability to work at a given wage.

• Diagrams are often mislabelled—get students to practise drawing from scratch, not just interpreting.

• Wage vs salary vs income: these terms get used interchangeably. Spend time on definitions.

Extension activities:

• Compare two job roles and analyse wage differences using economic reasoning.

• Hold a mini-debate on the impact of raising the national minimum wage.

• Research how wages have changed in a specific sector over time and link to supply/demand factors.