That's a misunderstanding. For each unity of a good, production costs go down, as do labor time. But because the goods are cheaper, more people may want to buy them, or people may want more of them, so the total labor time goes up.

That effect become known by the name of Jevon's paradox. If you want to, wikipedia has a large and well explained article. It has been spotted on practice enough times so that one should not question its existence. It's also the reason why software development salaries have kept increasing while the tooling allows for larger and larger productivity.

That said, it only happens some of the time, when demand has the correct properties.