Assume prices of goods and services have stayed the same. What effect would this wage decrease have on how many hours the worker would choose to work and the probability of him/her entering or leaving the workforce?
US government experienced falling wages. It would definitely have a negative impact on the working hours of workers in the economy. The prices remained unchanged. Hence, now the workers would be discouraged to work for same number of hours as were earlier. Hence, the number of hours that the workers would choose to work would definitely decrease.
Also, at the same time the workers would be willing to leave the workforce because they are not getting adequate payment for their work, as were getting earlier.
Hence, this could be concluded that with the fall in wages, the willingness of workers to work will decrease thereby causing a fall in the workforce of the economy.
Recently, various industries in the US have experienced falling wages (some government workers have chosen wage...
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