CHAPTER 15
A SURPLUS OF LABOUR

TO examine the other side of the medal (a surplus of labour leading to a falling degree of mechanisation) we reimpose the special assumptions, except that we now assume that in the economy concerned the supply of labour available for employment has recently begun to increase. This situation is not exactly symmetrical with the former one, for now labour and capital are both increasing, while formerly only capital was increasing.


THE PROCESS OF TRANSITION

A Falling Real-capital Ratio .--When the story begins all labour is employed with Alpha equipment and the rate of output of the investment sector (all of Alpha capital goods) is that which, in our former story, was established at the end of the Beta-Alpha period. Now the labour force is increasing and new Alpha equipment can be manned without difficulty. If the rate at which labour is becoming available just matched the rate at which employment offered was rising, the economy would settle into a golden age at the Alpha real-capital ratio with the Beta-Alpha rate of profit. We will suppose that the increase in the labour force is somewhat greater than this, and that the real-wage rate has dropped a little below the Beta-Alpha level. Beta technique is therefore slightly preferable to Alpha. An Alpha-Beta period has just begun. An outfit of Beta equipment offers more employment than an Alpha outfit of the same value. As the output of the investment sector is gradually switched from Alpha to Beta equipment, the annual increment of employment offered rises, and the consumption sector recruits the labour newly becoming available plus a gradually increasing number released from the investment sector. As

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