Question

An increase in non-wage income will, ceteris paribus:

Shift the labor demand curve to the right.

Shift the labor demand curve to the left.

Shift the labor supply curve to the left.

Shift the labor supply curve to the right.

Answer 1

Option B.

• An increase in non wage income will, ceteris paribus shift the labour demand curve to the left.
• A non wage income is also refered to as a non taxable income when a person receives income in the form of pensions, health benefits, child support payments, welfare payments etc.
• When these Increase in the market, the firms have less incentive to hire more Labour as the employer's have to pay the higher amount of taxes for giving these extra benefits to their employees.
• This will shift the labour demand curve to the left.