Suppose that the market for labor is initially in equilibrium.Suppose that workers' tastes change so that they choose to retire at age 55 rather than age 67.Then

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When workers choose to retire earlier, the supply of labor decreases at all wage levels because fewer people are available to work. As a result, the equilibrium wage will rise. However, the decrease in the quantity of labor supplied leads to a decrease in the quantity of labor demanded, which will cause the quantity of labor employed to fall. Therefore, the equilibrium wage will rise and the quantity of labor will fall.

Suppose That the Market for Labor Is Initially in Equilibrium