The tendency of workers to supply more labor in response to a larger reward for working is called the substitution effect of a higher real wage on the quantity of labor supplied.
Explanation:
The substitution effect of increased wages implies that workers can give up their recreational time to do more hours of work, although work now has a higher reward. The impact of higher wages on earnings means workers will decrease the amount of hours they work as they can sustain a target income level with fewer hours. The example of such effect is seen in American labor history where maximum workers decided to switch their earning from farming to industrial labor work for higher wages and less responsibility with lower taxes comparatively.
