Dignity of labour means that all occupations, whether involving intellect or physical labour, deserve equal respect and dignity. A person should never be discriminated on the basis of his occupation. Labour is either intellectual or manual labour.
The Holy Prophet(SAW) worked for Khadija manually for years. When the Prophet’s mosque was being built in Madina, he participated fully in every aspect of the work. He carried the stones, mixed the matter and even built the walls. In journeys, the Holy Prophet insisted to share in all the works involved in camping. In short, he never considered any halal (lawful) work as beneath his dignity.
People often came to Hazrat Ali(RA) to solve their religious problems and found him working as a labourer in farms of other people. He never felt any embarrassment, because the dignity of labour was an established way of the Muslim life.
Once a man came to the Prophet(SAW) expecting some charity. The Prophet asked him what he had in his house. The man said he had a blanket big enough to cover our(himself and his family) body and spread as a carpet. He also said he had a leather bag that he uses to drink water. The Prophet told him to go home and bring them. The man went home, brought the items and the Prophet asked the people who will buy them. One man offered to buy it for one dirham. The Prophet asked again if anyone wanted to buy the items for a higher amount. Another man offered to buy it for 2 dirhams. The Prophet collected the 2 dirhams and gave it to the Ansar telling him to go and buy the food for his family with one dirham and he should buy an axe with the other. The man did as the Prophet said and the Prophet made and handle for the axe with his own hands and told the man to go cut wood with it and meet with him after 15 days. The man earned 20 dirhams from cutting wood. He then bought some clothing and provision. The Prophet then told him that any halal occupation is better than begging because begging leaves scars on the face of people on Yaumul Qiyamah( the day of Judgement)