7/25/2019 Criticism on the Lewis Model

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Criticism on the Lewis Model:

(Proportionality between employment creation and capital accumulation:

Lewis model assumes that there exists a proportionality in the labour

transfer and employment creation in modern sector and rate of capital

accumulation in the modern sector. The faster the rate of capitalaccumulation, the higher the growth rate of the modern sector and faster

the rate of new ob creation. !ut if the capitalists rein"est their pro#ts in

the labour$sa"ing capital e%uipment rather increasing the labour

employment (what has been assumed in Lewis model& the obs will not be

created and modern sector will not expand.

Pea' har"esting and sowing season: Lewis did not pay attention to the

pattern of seasonality of labour demand in the agricultural sector. Labour

demand "aries considerably and such demand is at its pea' during the

sowing and har"esting season. Thus during some months of the year the

marginal product of labour may be abo"e$ero. )n such situation, the

positi"e opportunity costs will in"ol"e in transferring the labour fromagricultural sector. *s a result, the labour transfer will reduce agricultural

output.

+ise in urban wages: surplus labour itself may end pre$maturely because

competitors (producers& may alter wage rates and lower the share of

pro#t. Moreo"er, the wages in industrial sector were forced up directly by

unions, ci"il ser"ice wage scales, minimum wage laws and MCs (multi$

national corporations& hiring practices tend to negate the role of

competiti"e forces in the modern sector labour mar'et. *gain, the wages

in subsistence sector may go up indirectly through rise in producti"ity in

this sector.

-ull impact of growing population: Lewis model underestimates the fullimpact on the poor economy of a rapidly growing population, i.e., its

eects on agricultural surplus, the capitalist pro#t share, wage rates and

o"erall employment opportunities. /imilarly, Lewis assumed that the rate

of growth in manufacturing sector would be identical to that in agri. sector.

!ut, if industrial de"elopment in"ol"es more intensi"e use of capital than

labour, then the 0ow of labour from agricultural to industry will simply

create more unemployment.

)gnoring the balanced growth: Lewis ignored the balanced growth between

agricultural sector and industrial sector. !ut we 'now that there, exists a

lin'age between agricultural growth and industrial expansion in poor

countries. )f a part of pro#ts made by capitalists is not de"oted to agri.sector, the process of industrialiation would be eopardied (perhaps, due

to reduced supply of raw material&.

Process of migration is neither smooth nor costless: Lewis assumed that

the transfer of uns'illed labour from agricultural to industry is regarded as

almost smooth and costless. !ut, practically it is not so as industry

re%uires dierent types of labour. )f this problem is remo"ed with the help

of in"estment in education and s'ill formation, the process of migration

will become costlier and expensi"e.