Population growth, labour absorption and income distribution
Ghai, Dharam P.
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The purpose of this paper is to explore the main qualitative relationships between population growth, employment expansion and changes in income distribution. These relationships are extremely complex with an intricate pattern of links and feedbacks not only among these variables, but between them and a host of other economic, sociological, political and institutional variables. The first part of the paper reviews the findings of the quantitative economic-demographic models with respect to the impact of differential rates of population increase on the rate and structure of economic growth. Most of these models ignore the employment and income distribution effects of differential rates of population growth. An attempt is then made to specify the ways in which variations in population growth affect the supply and demand for labour and hence net labour absorption. The usual conclusion that a faster rate of population growth exacerbates the employment problem on the supply side is qualified by considerations of participation rates and quality of labour force under different rates of population increase. On the demand side, the impact of variations in population growth is assessed on capital accumulation, composition of output , pattern of growth and changes in productivity induced by such factors as technical change, nutrition, education and training. The impact on income distribution is evaluated by assessing the effects of differential rates of population growth on the main determinants of income distribution by size. Among the factors considered are: ratio of labour to reproducible capital, distribution of assets, change in the structure of the economy, technical change and the skill composition of labour force. A theme running through the paper is that reduced fertility can create the potential for greater net labour absorption and more favourable income distribution. But this potential can only be realized by the pursuit of an appropriate strategy of development to further these objectives. In its absence, it is not at all clear that reduced fertility will make a decisive difference to income distribution and labour absorption.