Below are three examples of an individual experiencing a wage change at various points in their career: i) After five years of working with their current employer, the individual received a scheduled increase in their hourly wage. ii) In celebration of the firm's 50th anniversary, the individual's employer increased the hourly wage of all employees for the month of February. iii) After a particularly profitable year, the individual's employer increased the hourly wage of all employees. Assume that each wage change generated the same sized substitution effect. Which of the three wage changes do we expect will least motivate the individual to increase their hours worked? Explain.

Below are three examples of an individual experiencing a wage change at various points in their career: i) After five years of working with their current employer, the individual received a scheduled increase in their hourly wage. ii) In celebration of the firm's 50th anniversary, the individual's employer increased the hourly wage of all employees for the month of February. iii) After a particularly profitable year, the individual's employer increased the hourly wage of all employees. Assume that each wage change generated the same sized substitution effect. Which of the three wage changes do we expect will least motivate the individual to increase their hours worked? Explain.

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter16: Labor Markets

Section: Chapter Questions

Problem 16.1P

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