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Theory of Employment

Theory of Employment

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Published by Deepak Ehn

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Published by: Deepak Ehn on May 28, 2011
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Theory of Employment
Study Note - 4
This Study Note includesLabourPopulation TheoriesUnemploymentConcept of EmploymentCapitalCapital Formation
Labour is an important ingredient of production. Without labour, the other factor inputs cannot be activated Labour helps production in two ways – As a producer and as a consumer. Thingsare produced because they are consumed. Labour is defined as “any exertion of body andmind undertaken wholly or partly with some object other than the pleasure derived from thelabour itself”. Thus labour includes both manual and intellectual, and the exertion of body ormind should be not for pleasure but for earning money.
Features of Labour –
Labour as a factor of production has some characteristics that distinguish it from other factors.Labour is a perishable factor. A day’s labour lost cannot be recovered. Hence the workers oftenare exploited because they cannot preserve their labour power for future.Secondly labour cannot be separated from labourer. Labour sells his work and he himself remains his property.Thirdly labour is a mobile factor. Apparently workers can move from one job to another orfrom one place to another. But, in reality there are many obstacles in the way of free movementof labour from job to job or from place to place.Fourthly highly skilled labour are specific factors while highly unskilled workers are nonspecificin the sense they can be used for any type of manual work.
Another feature of labour is that the supply of labour in terms of hours of work decreases whenwage rates are high. For this the individual supply curve of labour is backward bending after apoint. Thus while the supply of commodities increases when their price rises, the individuallabour supply (in terms of hours of work) decreases with an increase in the price of labour.
A. Malthusian Theory of Population Growth
In 1978, Thomas Robert Malthus expressed his views on the population growth in his “Essayon the Principle of Population”. His arguments on the pattern of population growth in aneconomy are as follows :(1)In any country, total population grows at a faster rate than the total food grainproduction. According to him, the production of foodgrains increases at anarithmetical progression (e.g., 2,3,4,5,6 etc.) while population grows in geometricalprogression (e.g., 2, 4, 8, 16, 32 etc).(2)Within a short period, the total population becomes larger than the size of thefoodgrain production i.e., foodgrain production per capita comes down to a lowlevel. At this stage, the country is said to be overpopulated.The signs of such overpopulation, according to Malthus, are as follows :(a)Large-scale poverty;(b)Large-scale starvation and malnutrition; and(c)Emergence of various diseases and epidemics.He also believes that this excess pressure of population is automatically reduceddue to some natural calamities like floods, droughts, wars etc. In this way, the naturethrough its own forces, tries to maintain a balance between the population andfoodgrains productions. These are called positive checks. Malthus also believes thatthe people should also take some preventive measures to check such growingpressure of population. (For instance, population control methods, prevention of early marriage etc.), These are called the preventive checks.
Theory of Employment
Malthus’s doctrine is illustrrated below :
Malthus Theory of PopulationCritical Evaluation :
The population theory of Malthus has been criticized from different angles.(1) Population may not grow in a geometrical progression : Many economists are of theview that population may not grow in a geometrical progression. In fact, populationof different developed countries of the world has increased at a slow pace duringthe late 19
and 20
centuries. Thus, there is an interdependence between the levelof economic development achieved and the population growth in a country.(2) Law of diminishing product may not be operative : Malthusian theory shows that theproduction of foodgrains in a country grows in an arithmetical progression. Theimplicit logic behind such argument was the operation of the law of diminishingmarginal productivity. That is to say, given the supply of cultivable land, growingpopulation pressure on land leads to an increase in production at a decreasing rate.However, this law of diminishing product may not be operative if better seeds,fertilizers, irrigation, agricultural implements, etc. are introduced in agriculture.Population increases ina GP - 1,2,4,8,16,32........Food increases inAP - 1,2,3,4,5,6,........Imbalance leads tooverpopulationCorrected byPreventive Checks - latemarriage, moral restraint etcPositive Checks - misery,war, famine, flood etc

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