DO WORKERS WORK MORE WITH INCREASED WAGES?

The economists told us to sell more at higher prices and less at lower prices. Is this always true?

There is a concept call the concept of supply in economics. It is a concept that addresses the quantity of goods made available for sale in the market. Recall that market does not necessarily mean a place where people gather to exchange goods and or services.

Market, in economics, could be seen as the contact between a buyer and a seller for the purposes of exchanging goods and services. This means that online purchase and or sale of goods and services today constitute a market. Why? There is the existence of contact. That is people have been brought together (brought to a contact) to exchange what they have.

Back to our interest! The quantity of goods that is made available for exchange between knowledgeable, willing buyer and seller is what is known as supply. On the part of a labour, the supply refers to the number of hours the labour is willing and ready to make available for wages. Recall that labour is that factor of production whose reward is wages.

Now, let’s look at the pricing issue. The law of supply says:

1.    At higher prices, higher quantity of goods should be supplied to get more revenue, and

2.    At lower prices, lower quantity of goods should be supplied.

With this arrangement, suppliers are expected to supply more when prices are high so that revenue can be maximized. In same manner,

1.    At higher wages, labour are expected to put in more hours of work to get more wages, and

2.    At lower wages, labour are expected to put in less hours of work while effort is reserved for any slight increase in wages.

But for some factors, there are instances where these laws are reversed. In this case, less quantity of goods are supplied at higher prices and more are supplied at lower prices. Could this be true? The answer is in the affirmative. You will notice that when the pump price of petrol is increasing, sellers (filling stations) begin to sell less and less of the product. Why? They probably believe that the price will continue to rise. So, selling more now will reduce the higher revenue they are likely to get.

In like manner, labour may want to supply less hours when wages increase. They feel that there is now need to recognize leisure time with its attendant importance. And with the continued sermon of work – life balance, labour will always work for fewer hours to enable them get time for family and other relatives. This happens when hourly and weekly rates, (and pay) are used. Thus, labour may tend to supply less hours when wages increases.