Wage effect

Whether the worker will work more or less after the wage rate increase depends on the relative strengths of the substitution and income effects. If the positive income effect of a wage rate increase outweighs the negative substitution effect, the person's supply curve of labour will be backward-bending.

The market labour supply curve is horizontal summation of all individuals' supply curves. While the supply curve of an individual worker may be backward-bending, the market supply curve of labour for an industry cannot be backward-bending. Since if the industry wants to increase the quantity supplied of labour, it must pay a higher wage so as to attract workers away from other industries and from those who are currently idle. Hence, even though some workers may reduced their quantity supplied of labour, the total labour supplied in the industry will usually rise. So the market labour supply curve is upward sloping.