Workers fear the Social Security system will not be able to provide for their retirement as well as it does today. Explain, citing the specific non-wage determinants that change, and the effect of this change on either the demand for or the supply of labor. Fears of a reduction in retirement income will result in an increase in the market supply of labor. This increase in market supply will lower equilibrium wages. If they are different, explain why.
Wages are lower than in the original equilibrium wage, but, as a result, hiring is higher .
This decrease in wages is a result of the initial increase in market supply causing a surplus at the original wage rate. This surplus puts downward pressure on wages until, by increasing the quantity of labor demanded while reducing the quantity supplied, the surplus disappears. If it is different, explain why. The new profit-maximizing level of hiring for the firm is 30 worker days per period. It is higher than the original, because the increase in the supply of labor has lowered their wages.