Labour vs Capital Intensive or Labour vs Skill Intensive ?

The labour intensive modes of production usually are any development economists sympathizers.  Labour intensive modes of production is one of the basic forms of production. The origins lie in the basis of business evolution of the 5000 year history of human civilization when mechanized improvisations were improbable. Thus the human muscle had to do the work and application of greater forces for greater output just meant addition of other hands into the same work. The birth of labour intensive approach to production was in fact an inescapable way for the producer in those days. Labour was abundant, cheap, unskilled (thus bequeath) and such exposure to the work has literally the potential to workhorse his mind.

The validity of labour intensive methods holds true until mechanization takes place. If technology only means the easing of work then is technology the opposite of work ? The word in most of the developing countries, to utilize the un-utilized resources ( read labour), how far is it going to be the true utilization of every labourer or maximum labour employed ?  I do not find Hegelian logic concise to economics.

Take a look at this scenario. Snowfall burying the railway lines for a 100 mile stretch. The district council usually has an infinite ways of dealing with this and if its a labour intensive country then they’d go to employ a great number of men to clear the stretch in 10 days. A capital faring decision would normally employ machines which do the same job at a cheaper cost. Human approach to this case makes us think that labour should be used to do the job as this is the surplus that is available in the country and the argument usually banks on human benevolence.

Consider the content of labour that the labour puts in to efficiently make the management derive output from his skill. Its generally less that a labourer offers of himself to the authority given the lazing/procrastinating tendency that is consistent with humans. Those great number of men employed for the job of clearing the railroad are chiefly uneducated. If 10 of them had a good degree of skills, they would be enough to make the 100 miles cleared off snow. If all the men had the same set of skills the work still will require 10 of them to complete the work. So the basic problem of the labour market is not the skill development, its about the lack of projects that will keep everyone employed. If the skilled workforce produces output than just accumulating known results, unskilled labour accumulates known skills to deliver established results.

SKILL BASED ECONOMIES

If enough work is created than that of the short sighted focus upon employment generation, here the demand is going to create its own supply as one man’s supply is another man’s demand and vice versa. Economies work only if they drive towards full employment of all the resources and for that what Keynes has spoken about keeping the “work” going forever because one man’s expenditure is another man’s income and employment generation means nothing if there is no generation of skill. The transition of economies is from labour intensive, skill intensive and later comes capital and technology oriented production. If government expenditure did not focus on bailing out failed industries but in skill generation of the common populace because that is what is going to drive this world out of deficit financing. How ? Skill based economies are export oriented as there is a faster moving towards employability of every available resource, in short the entrepreneurship is being driven high with labour reaching skilled portions of the total available labour. The Lewis model’s transition is a constant condition in any developing country. Globalisation has provided us with cheap means of counteracting price rise. Universal skill development trades the macro economic problems that come with globalized environments by keeping positive the trade deficits that is a mutual course for all the free trading nations.

You may also like:

Will the Bail-outs fail?

Government investment vs.Government Expenditure

The Budget Line

Is Innovation the way out?

Self reliance through growing your own food

Urban Farming and Healthy Living

Valuation of an asset and the Travel Cost Method

Β©The Idea Bucket, 2013-2014. Submitted by co-founder and writer, A.S. Prashanth.

If you like our content, you might consider checking out the Idea Bucket E-book AT A 50% DISCOUNT FOR THE MONTH OF JANUARY, 2014 by clicking the Amazon link here.

Advertisements

3 Comments

  1. In a very simple language any government that bails out failed enterprises or gives extra benefits to unemployed people without training them to be able to fill jobs that are in demand does a bad job. Am I right?

  2. Your snow clearing example reminded me of clearing snow last year. Mine was done so I went to help my neighbour. He is used to manual labour and half my age. Who cleared the most snow? I did. I had a snow shovel! πŸ™‚

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s