Decrease in wage rates and an increase in working hours can have varying effects on the supply of workers to a firm, depending on several factors.
Reasons why it might reduce the supply of workers:
➡️1. Influence of wage rates: Wage rates play a significant role in determining the supply of workers. A decrease in wages would reduce the financial incentive for individuals to work for a particular firm. Lower wages may make the job less attractive compared to other employment opportunities that offer higher pay, leading workers to switch to other firms or occupations where they can earn higher incomes.
➡️2. Impact of longer working hours: Increasing working hours can affect the attractiveness of a job. Longer working hours may reduce the amount of leisure time available to workers, which could make the job less appealing. If the increase in working hours is not compensated adequately through benefits or higher wages, workers may be inclined to seek alternative job options that offer a better work-life balance.
Reasons why it might not reduce the supply of workers:
➡️1. Lack of better alternatives: In certain situations, workers may not have access to better job opportunities elsewhere. If wage rates and working conditions in other firms or sectors are similar or even worse, individuals may choose to stay with their current job despite the decrease in wages or increase in working hours. This can be particularly true during periods of economic downturn, recession, or high unemployment, where job vacancies may be limited.
➡️2. Total earnings consideration: While a decrease in wage rates may reduce the base pay, workers may still earn a considerable income if other elements such as bonuses or overtime payments increase. If the overall earnings remain high despite the decrease in wage rates, some workers may decide to continue working for the firm.
➡️3. Non-monetary factors: Job satisfaction and working conditions are important factors influencing the supply of workers. If workers find their job enjoyable, have good working conditions, long holidays, opportunities for promotion, generous pension plans, and attractive fringe benefits, they may be more inclined to stay with the firm even if wage rates decrease or working hours increase.
In summary, the impact of a decrease in wage rates and an increase in working hours on the supply of workers to a firm is not universally predictable. It depends on factors such as alternative job opportunities, total earnings, job satisfaction, and non-monetary benefits. Workers' decisions are influenced by a combination of financial considerations and other factors related to job quality and personal preferences.