Some workers are paid a basi¢ rate and then paid additional commission based on
the number of products sold. In 2014, a European court ruled that a worker's
holiday pay should be based on total pay including commissions and not just on the
basic rate.
Explain, according to economic analysis, the shape of a worker's supply curve and
suggest how this court judgement might affect the number of hours worked. [12]
Figure 6.11 Ania abowr supply cue
Any individual labour supply curve would normally increase their hours as the wage
increases. Along with those points, people would see the incentive to work rather
than to have leisure. This trend will go until point X. However, beyond that point, if
wages are to increase, people would be less willing to work and might substitute the
hours to have leisure instead, Another reason would be due to the progressive
income tax rate, the higher they earn, the more they will be taxed. That
disincentive them to work longer hours despite the higher pay.
So, referring to the case study, the total number of work hours will depend on
whether the person already reached the turning point or not. In addition, the
imposition of income tax might also play a role for people trying to lower their
reported tax especially when their commission is on the higher income tier.