Question

Arthur Lewis has a model in which the surplus labor is moved out of the backward agricultural sector and productively employed in the modern industrial sector. This process is known as modern sector enlargement. Do you think that this process is capable to deal with the problems of poverty and income inequality in all developing countries? You may argue for or against the Lewis Model.

Answer 1

Introduction:-

In any developing economy, the existence of a class divide is pretty evident. Generally speaking, a class divide takes place, when people see different results from the overall development that takes place in the economy.

It is common in most developing countries that one particular sector is developed quickly while the other one still remains largely backward with lesser access to resources such as healthcare, modern nutrition etc.

The model which Arthur Lewis presented in this case in my opinion is not correct and should not be implemented. The reason for this is as explained.

Case Specifics:-

Arthur Lewis handled only the supply side of labor without looking at the developmental impact this may have and the amount of stress which migration has on the overall quality of life in bigger cities.

Bigger cities today in most developing countries are overpopulated and allowing village workers to work in these would mean that wages would be relatively lower, since usually village workers would take anything they would be offered as means of employment thus affecting overall average wages.

On the other hand, the stress which this will have on the resources in the area will be extremely big. Migration affects the economy of the city not only in terms of the employment opportunities which it generates for new people but also negatively impacts the society because of increased population.

Further, for any country to hit the growth path it is increasingly important that all sectors and areas grow and that growth is not limited to few cities.

In case of heavy migration, the labor supply in smaller villages will reduce and their chances of developing would be largely affected.

Therefore, to protect local interests and to allow equitable development of all areas in the country, in my opinion the Arthur Lewis Model of Supply of Labor should not be allowed in a developing country.

Please feel free to ask your doubts in the comments section