The income of the working class is the most important thing for workers, as they

comprise the majority of the consumers, their income is what they use to increase their
utility and achieve utmost satisfaction through consumption of goods and services
supplied in the market. But how about the number of workers in the business firms?
How would it be affected if there is a significant change in wages? The determinants for
supply of labor is actually the same with the determinants for the demand of goods and
services. If wages increased by 55.00php per hour it would decrease the supply of labor
in the labor market. The same goes with the demand for labor, an increase in wages
would aso decrease the demand for labor. Therefore, an increase in wages would
cause labor shortage in the labor market.

A significant change in wages will cause an increase to the supply of labor in the
labor market. Although higher wages will encourage people to go to work and it would
seem that it can potentially increase the supply of labor – for example, some newly
graduated students will be encouraged to work after graduation considering the higher
wages that they will receive – it will actually decrease the supply of labor. This is
because an increase in wages will cause the demand for leisure to also increase. This
is evident on how the demand is affected by an increase in household income. As seen
on the graph of the demand of wine bottles below, the demand curve shifted to the right
as income increases. Thus, proving that when income increases, the demand for leisure
also increases as the consumption of goods and services will increase significantly.
Therefore, an increase in wages will encourage people to spend more rather than to
work more. That's why the supply of labor will decrease when wages increase.

On the other hand, the demand for labor will also decrease when income
increases. This is a natural outcome for business firms when wages increase. Of
course, business firms will cut their costs to gain more profit. Thus, when the minimum
wage increases, they will decrease their demand for workers or worse, they will cut off a
number of employees. The same goes with small businesses or local stores in
communities. They will tend to hire less because it will cost them too much in the long
run.

Therefore, when the supply of labor and the demand for labor decreases
because of an increase in wages, it will cause a shortage of workers in the labor market.
As workers will choose to spend more rather than to work more and business firms will
naturally choose to employ less, there will be less people working in the community's
workforce. Thus, causing a shortage in the labor market.