Boxes Ltd. produces corrugated paper containers at
a small plant in Sunrise Beach, Texas.
Beach is a retirement community with an aging
population, and over the past decade the size of its
working population has shrunk. In 2012, this labor
shortage hampered Boxes Ltd.'s ability to hire
enough workers to meet its growing demand and
production targets. This is despite the fact that it
pays $10 per hour—almost 30 percent more than
the local average—to its workers.
Last year, Boxes Ltd. hired a new manager who
instituted an overtime wage plan at the firm. Under
her plan, workers earn $10 per hour for the first
eight hours worked each day, and $15 per hour for
each hour worked in a day in excess of eight hours.
This plan eliminated the firm's problems, as the
firm's production levels and profits are up by 20
percent this year.
Why did the new manager institute the overtime
plan instead of simply raising the wage rate in an
attempt to attract more workers to the firm. Please explain using equilibrium curve with earnings on y axis and hours of work on the x-axis.