The purchasing power of the wage laborers receive depends on the price level in the economy. The higher the price level in the economy, the less the wage will purchase, so the wage looks less attractive to workers. In order to discuss wage and its effects on the supply of labor, we have to discuss nominal wage and real wage. Nominal wage wage in current dollars. The wage you see on your paycheck.
Real wage is the wage in constant dollars, adjusted for price level.
Workers and employers care more about real wage than nominal wage. The problem is that agreements are negotiated in terms of nominal wage because no one knows for sure what price level will be during the entire life of the wage agreement. The agreement is based on expected price level. Potential Output Firms and laborers begin the production cycle expecting a certain price level. They reach agreements.