The supply and demand approach is based on both -- supply and demand. So we need to consider the supply as well as the demand for labor.
Any individual worker's supply of labor will depend on her or his opportunity for income from sources other than labor and on her or his preferences between leisure and earning income. When we look at the supply of labor from the point of view of the economy as a whole, this can lead to some surprises. Some economists argue that the labor supply curve could slope backward, for at least a part of its range. This is shown in figure 3, below.
Here is the idea: when people earn a higher wage per hour, they can earn more income for working the same or even fewer hours. When people can "have it all," they often choose to do just that -- have more of all the good things. Thus, when wages per hour of labor rise, people are getting better off, and eventually they decide to take some of their increased potential income in the form of leisure rather than money. That means the quantity of labor supplied -- in hours per year -- is less, and the labor supply curve slopes backward (as shown) at the higher wage levels.
When we look at the supply of labor to a particular industry, we don't need to worry about this. For example, when wages paid by the potato growing industry are low, most people will find that they can make more money in other industries, and so they don't supply labor to the potato industry. When potato grower wages rise, some of those people will find that they now can earn more in the potato industry than in their alternatives, and will switch their labor supply into the potato industry. Thus, the supply curve of labor to the potato industry will be upward sloping. Since the supply of labor to a particular industry is dominated by this switching-back-and-forth from other industries, the supply curve of labor to an individual industry will usually be upward sloping, From now on, we will show them as upward sloping.
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