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Economic Development With Unlimited Supplies of Labour

Here are potential responses to your questions: 1. While the Philippines continues to have a growing population and surplus of labor, its economic development has been hampered by several factors. Infrastructure and education have not kept pace with population growth, limiting opportunities for workers to be as productive as possible. Political instability and corruption have also deterred much needed private investment that could create jobs. However, the overseas employment of Filipino workers has helped fuel economic growth and development through remittances. 2. Potential barriers include inadequate education and skills training, which prevents many workers from obtaining higher-paying jobs. Poor infrastructure like transportation and internet also limit opportunities. Political issues like corruption discourage investment. Strict labor laws designed to protect workers may unintentionally

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65 views

Economic Development With Unlimited Supplies of Labour

Here are potential responses to your questions: 1. While the Philippines continues to have a growing population and surplus of labor, its economic development has been hampered by several factors. Infrastructure and education have not kept pace with population growth, limiting opportunities for workers to be as productive as possible. Political instability and corruption have also deterred much needed private investment that could create jobs. However, the overseas employment of Filipino workers has helped fuel economic growth and development through remittances. 2. Potential barriers include inadequate education and skills training, which prevents many workers from obtaining higher-paying jobs. Poor infrastructure like transportation and internet also limit opportunities. Political issues like corruption discourage investment. Strict labor laws designed to protect workers may unintentionally

Uploaded by

Fran Cis Cu
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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ECONOMIC DEVELOPMENT

WITH UNLIMITED SUPPLIES OF LABOUR

SUMMARY

W. Arthur Lewis, in his article, inspires his readers while presenting the idea that

with the unlimited supplies of labor, economy develops. The neo-classical model that

includes the Keynesian applies to the economy and noted that it gives a wrong result. It

is expressed that in many economies, an unlimited supply of labor is available at a

subsistence wage. Subsistence agriculture, casual labour, petty trade, domestic service,

wives and daughters in the house, and the increase of population are the primary

sources form which the workers come as economic development proceeds. It is revealed

that if the country is overpopulated relatively to its natural resources, the marginal

productivity of the labour is inconsiderable, zero, or even negative. This is true to most

but not all of these sectors.

A conventional view of the minimum required for subsistence is the

determination of the subsistence wage at which this surplus labour is available for

employment. This can also level to the average product per man in subsistence

agriculture, plus a margin. In such, an economy employment expands in a capitalist

sector as capital formation occurs.

Raising the share of profits in the national income in the result of the capital

formation and technical progress. It is not actually the raising of wages. It is because the

capitalist profits are low relatively to national income, the savings are low. It is the

reason of the relative poor development of the economy.


It is said that capital is formed not only out of profits but also out of credit

creation. Why? It is because the real cost of capital created by inflation is zero in this

model, and this capital is just as useful as what is created in more respectable fashion,

say for example, out of profits.

On the other hand, inflation for the purpose of getting hold of resources for war

may be cumulative, but inflation for the purpose of creating productive capital is self-

destructive. There is this movement that will occur. Prices rise as the capital is created,

and fall again as its output reaches the market.

But, if asked this can still be expanded, no capitalist sector can expand these ways

indefinitely, since capital accumulation can proceed faster than population can grow.

When the time surplus is drained, wages begin to rise above the subsistence level.

In addition, mass immigration of unskilled labour might even raise output per

head, but its effect would be to keep wages in all countries near the subsistence level of

the poorest countries. The export of capital lessens capital formation at home, and so

keeps wages down. This is an offset if the capital export cheapens the things which

workers import, or raises wage costs in competing countries. But it is aggravated if the

capital export raises the cost of imports or reduces costs in competing countries.

In addition, it is revealed in the article that the importation of foreign capital does

not raise real wages in countries which have surplus labour, unless the capital results in

increased productivity in the commodities which they produce for their own

consumption. Top reasons why tropical commercial produce is so cheap, in terms of the

standard of living it affords, is the inefficiency of tropical food production per man.

Practically all the benefit of increasing efficiency in export industries goes to the foreign
consumer; whereas raising efficiency in subsistence food production would

automatically make commercial produce dearer.

Lastly, the Law of Comparative Costs is just as valid in countries with surplus

labour as it is in others. But whereas in the latter it is valid foundation of arguments for

free trade, in the former it is an equally valid foundation of arguments for protection.

REACTION

This article somehow gives the hint that human resource is highly needed,

especially for production. If production is developing, therefore, there is a greater

chance for the economy to bloom.

I think, this is the secret of the foreign countries. Most of the progressive

countries are those that are hiring a lot of workers. Because they don’t have a lot of

hands in their country production, because population growth is very poor, they are

enticing those countries having more workers to work in their country. One concrete

example is the reason of having our overseas Filipino workers to land on different jobs

there.

It is indeed true that subsistence agriculture, casual labour, petty trade, domestic

service, wives and daughters in the house, and the increase of population are the

primary sources form which the workers come as economic development proceeds.

I hope this could also be the point of reference to the future economies, in the

Philippines, primarily, to not waste the labor force, for it is mainly the topmost key for

the economy to develop.


QUESTIONS

1. Where is the Philippines now to this vision of economic development, minding

that our population continues to grow?

2. What could be the barriers why even that we have so much of skilled laborers, our

country still suffers the slow growth of economy, and may be the reason why

many of them works abroad?

3. Could there be more efficient system to adapt in the Philippines to retrieve our

negative economic performance?

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