When a government needs to borrow, it sells bonds: promises to pay investors a fixed amount of interest each year, then repay the original sum at the end. Those bonds are then bought and sold in financial markets, and their prices move every day.

A bond's yield is the return an investor would earn by buying it at today's price and holding it until it is repaid. When a bond's price falls, its yield rises, and vice versa. So the yield tells you, in effect, what it costs a government to borrow, and how much compensation investors are demanding to lend to it.

That's why yields differ between countries. It's a simple story… at first glance… but the chart below is worth another look.

Source: LSEG DataStream, Schroders Economics Group, 7 September 2026. JP Morgan GBI Developed Markets and GBI Emerging Markets yields to redemption.

Q1: What is interesting in this chart?

Q2: What changes after 2021, and why might that be surprising?

Q3: What could explain what happened to developed-market yields? And why might emerging-market yields have behaved differently?

Q4: Are higher bond yields good news or bad news?

Q5: Developed-market government bonds are often treated as the "risk-free" asset. Do you agree?

Bonus: Could an asset be risk-free for one investor but risky for another?

P.S roll up your sleeves and explore the question… once you’ve grappled with it for a while, if you are still stuck…Graduated hints below — but challenge yourself first! (Answer comes in the next edition! Subscribe to receive it directly to your inbox!)

70%

This week’s marginal number is c.70%.

That is the share of FTSE 100 revenues earned overseas, according to ClearBridge Investments, using FactSet data as at 28 February 2026.

Source: ClearBridge Investments, “UK Equities: Global diversification hiding in plain sight”, with data from FactSet.

Why does this matter?

Because the FTSE 100 is not simply a mirror of the UK economy.

It is listed in London.

It is priced in sterling.

It is often treated as the headline index for “UK shares”.

But most of the revenue earned by FTSE 100 companies comes from outside the UK.

That changes how we should read the index.

A weak UK economy does not necessarily mean weak FTSE 100 earnings.

A falling pound can actually help many FTSE 100 companies, because overseas revenues become worth more when translated back into sterling.

Rising commodity prices can lift the index because it contains large energy and mining companies.

And a global slowdown can hurt the FTSE 100 even if the domestic UK economy is relatively stable.

So the FTSE 100 is not a clean thermometer for Britain.

It is more like a London-listed global portfolio.

The economics lesson is simple:

Where a company is listed is not the same as where it earns its money.

That distinction matters for investors, policymakers and anyone trying to read the stock market as a signal about the economy.

Last time, we looked at a small town with one large employer. Its revenue from hiring L workers (measured in hundreds) is:

R(L) = 100L − L²

and the wage it must pay to attract L workers is:

w(L) = 10 + L

The A-level diagram says a minimum wage above the market wage causes unemployment. This problem asks whether that's always true.

The supply curve slopes upwards: to attract more workers, the firm must offer a higher wage. And because it's the only large employer in town, its own hiring decision moves the wage.

Compare that with a firm in a competitive labour market. There, the firm is a wage-taker: it can hire as many workers as it wants at the going wage, because it's too small to affect it.

Here, the firm is a monopsony: a single buyer of labour. It chooses how many workers to hire, and in doing so, it chooses the wage.

Profit is revenue minus the wage bill, and the wage bill is the wage × the number of workers:

π(L) = R(L) − w(L) × L

π(L) = 100L − L² − (10 + L)L

π(L) = 90L − 2L²

Differentiate and set equal to zero:

π′(L) = 90 − 4L = 0

L = 22.5, which is 2,250 workers.

Since π″(L) = −4 is negative, this is a maximum.

It helps to split the decision into the benefit and the cost of one more worker.

The benefit is the extra revenue the worker brings in, the marginal revenue product:

MRP = R′(L) = 100 − 2L

The cost is more than the worker's wage. The wage bill is (10 + L)L = 10L + L², so the extra cost of one more worker, the marginal cost of labour, is:

MCL = 10 + 2L

That's the twist: to hire one more worker, the firm must raise the wage for everyone it already employs. So each extra worker costs their own wage plus the pay rise for everyone else.

The firm hires until benefit equals cost:

100 − 2L = 10 + 2L, so L = 22.5, exactly as before.

The firm pays the lowest wage that attracts 2,250 workers, which we read off the supply curve:

w = 10 + 22.5 = 32.5

Now compare that with what the last worker brings in:

MRP = 100 − 2(22.5) = 55

The last worker adds 55 to revenue but is paid only 32.5. Economists sometimes call this gap monopsonistic exploitation. The firm holds wages down by hiring fewer people than it otherwise would.

In a competitive labour market, workers are hired until the wage equals the marginal revenue product:

10 + L = 100 − 2L

3L = 90, so L = 30 (3,000 workers), at a wage of w = 40.

So compared with the competitive outcome, the monopsony employs 750 fewer workers and pays 7.5 less.

Yes. Here's why.

With a minimum wage of 40, the firm can no longer pay less than 40. But up to 3,000 workers are willing to work at that wage (since 10 + L = 40 gives L = 30).

So for the first 3,000 workers, hiring one more no longer forces the firm to raise everyone else's pay. Everyone already earns 40. The marginal cost of labour falls to a flat 40.

The firm now hires until:

MRP = 40

100 − 2L = 40, so L = 30.

Employment rises from 2,250 to 3,000, and the wage rises from 32.5 to 40. The minimum wage moves the town to the competitive outcome.

Who loses? The firm's profit falls, from 1,012.5 to:

R(30) − 40 × 30 = 2,100 − 1,200 = 900

But workers gain on both counts: more jobs and higher pay.

In a competitive labour market, a minimum wage above the market wage raises the cost of labour, so firms hire fewer workers and unemployment rises. That's the A-level diagram.

In a monopsonistic market, the firm was already hiring too few people, because each extra hire pushed up everyone's pay. A minimum wage removes that penalty, so the firm can hire more workers without raising existing wages. The same policy can have opposite effects, depending on the structure of the labour market.

It would be a mistake to conclude that higher minimum wages always help. Suppose the minimum wage were 60. The firm would hire only where:

100 − 2L = 60, so L = 20

That's 2,000 workers, fewer than the 2,250 the monopsony chose on its own.

In general, a minimum wage w above the competitive level leads the firm to hire L = (100 − w) ÷ 2. Employment stays above the monopsony level of 22.5 as long as:

(100 − w) ÷ 2 > 22.5, so w < 55

So in this model:

The right answer to "Can a minimum wage increase employment?" is therefore: yes, if the employer has wage-setting power, and if the minimum wage isn't set too high.

Monopsony doesn't require a town with literally one employer. Employers can have wage-setting power whenever it's costly for workers to switch jobs: few local employers in a particular field, long commutes, childcare constraints, or simply the effort of searching.

That's one reason the debate over minimum wages changed in the 1990s. David Card and Alan Krueger studied fast-food restaurants in New Jersey and neighbouring Pennsylvania after New Jersey raised its minimum wage in 1992, and found no evidence that employment fell. Their work was hotly debated, but it helped prompt a rethink, and Card shared the 2021 Nobel Prize in Economics, partly for this research. The UK introduced its National Minimum Wage in 1999, and the Low Pay Commission, which advises on its level, has consistently weighed the evidence on employment effects when recommending increases.

Marginal gains… Answer for today’s question is out in two days… Come back then or subscribe to get it direct to your inbox!

P.P.S.

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