Individual Decisions for How Much

Other things need to be taken into consideration as factors impacting the work vs. leisure decision. The wage rate should, to some degree, be directly proportional with the quantity of work provided. In this sense, if the wage rates increased, then the quantity of work provided should increase as well, in an attempt to maximize revenues. However, this is only true to some degree: at some level of the wage rate increase, the work provided will start to decrease, mainly because of a psychological effect this has on the individual. At the same time, an increase in income levels should increase the time provided for leisure, because some of the increased income can be used in leisure activities that would include additional spending.

In order to maximize the work supply of an individual, companies and organizations need to be able to identify the right incentive by which this can be increased. Premium pay is one such incentive. With premium pay, as compared to the straight-time wage, the individual receives an extra premium for the extra hours he puts in at work, which is a better incentive than just paying him or her a fixed annual wage, which provides him with a similar income over the same period of time.

To this, one can also add non-financial incentives that usually increase workers.


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