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W. A. Lewis' Theory of Unlimited Supply of Labour & It's Criticism

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W. A. Lewis believed that in underdeveloped countries supply of labour is unlimited at a subsistence wage rate. Economic development takes place when this surplus labour is withdrawn from subsistence sectors and placed in the capitalist sector through capital accumulation. In other words, the transfer of labour from the labour surplus agriculture sector to the industry sector will promote the balanced development of both sectors. 

Lewis' model divided the economy into two major sectors i.e. the capitalist sector and the subsistence sector. The capitalist sector is defined as " the part of the economy which uses reproducible capital, and pays capitalists for the use thereof." In the capitalist sector, the use of capital is controlled by capitalists, who hire the service of the labour. On the other hand, the subsistence sector doesn't use reproducible capital hence total productivity is lower than the capitalist sector. 

However, industries require skilled labour, according to Lewis, skilled labour is only a quasi-bottleneck or a temporary bottleneck. Which can be removed by providing training facilities to unskilled workers. 

The key to economic development as per lewis' theory is capital formation and it is only possible by capitalism.

three components of Lewis' theory are as follows :


1. Role of Technology in Development.

2. Role of private capitalists in the development process.

3. Role of government. 

4. Role of bank credit.


Criticism of Lewis' Model of Development 

1. The theory assumes that the wage rate will remain constant till surplus labour in the capitalist market is exhausted which is unrealistic.

2. The assumption of the unlimited supply of labour in a developing country is also unrealistic.

3. It gives too much priority to the capitalistic market whereas leaving agriculture and another primary sector of the economy which are mostly interrelated. 

4. Lewis' theory assumes that marginal productivity in the agriculture/ substantial sector is almost zero which is not correct. Schultz thought that the marginal productivity of labour in an overpopulated economy would not be zero.

5. It is very difficult to find out the exact number of surplus labourers who would move from the substantial sector to the capitalist sector. 

6. Lewis assumes that the withdrawal of labour from substantial sectors will not affect productivity in the substantial market, which is not correct. 

Lewis also promulgated the concept of dualism for the post-war emerging economy where the modern, as well as traditionally backward sector, coexists. 

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