Employment is supply determined in situations of full employment. In situations of underemployment, however, employment is determined by demand related factors. In such cases the labour supply function and the determinants of employment need to be analysed separately. The labour supply curve for female workers in some villages of Bangladesh was found to be horizontal (up to a point) at a given wage rate. However, the amount of employment was negatively related to wage rates because wages influenced employers’ consideration. The elasticity of employment with respect to wage rates was less than unity and thus earnings of low wage workers were lower. Some previous studies of the situation in Bangladesh and India have interpreted this negative wage employment relationship as a supply function showing negative wage elasticity. Such an interpretation is misleading and can have undesirable policy implications because there is evidence of underemployment in those study areas and in that case the relationship between wage and employment does not depict supply considerations.