Assess whether complete nationalisation of the rail industry might protect employees

Edexcel A-Level Economics Paper 1 June 2020 Extract

Assess whether complete nationalisation of the rail industry might protect employees. (10 marks)

1. Nationalisation of the rail industry is likely to protect employees.
2. Nationalisation refers to the government taking ownership of firms in the rail industry.
3. Private firms generally aim to maximise profit so they might exploit their market share and under-provide goods and services, knowing that they can overcharge for them.
4. The extract mentions that 'the privately-owned train operators are now the subject of fierce criticism'.
5. This means that firms are likely to under-employ staff or make them redundant when suitable.
6. When these industries are nationalised, the government are more likely to aim for allocatively efficient outcomes to maximise social welfare.
7. This means they are likely to increase output closer to the point where marginal costs = average revenue.
8. At a higher output, there will be greater and consistent demand for workers, meaning that workers are more likely to be protected.

1. However, a state owned monopoly of rail might exploit their monopsony power when employing labour.
2. Monopsonies are able to exploit their buying power and underpay for factors of production.
3. Workers specialising in the railway industry would have no choice but to work for the government.
4. This means that the government have more bargaining power and are able to negotiate lower pay with workers, compared to if workers had the option to work for different firms in the private sector.

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