ABSTRACT
This study reviews the literature on labor supply behavior of the working poor. Almost all the empirical studies of this behavior report a negative sloping supply at very low wage rates. However, as the wage rate rises and the worker’s economic condition improves, at some point, this function is observed to turn around and become positive sloping. A careful examination of the economic condition of poor workers shows that very low wage rates compel them to make distress sales of labor-Increasing the supply of labor with falling wages, in an attempt to maintain their food consumption, thereby reducing the consumption of physical rest, but ending up with lower consumption of both, as physical rest is no less important than food when work hours are very long. This is evident from the observed deficiencies they suffer in their food and physical rest consumption. However, as the deficiency in food income shrinks with rising wages, they try also to make up their deficiency in physical rest by reducing their supply of labor. When the distress completely disappears at a reasonably higher wage rate, the usual positive sloping supply depicts their behavior.
