Industrial development and labor absorption: a reinterpretation.

Abstract

Reviews the various theoretical positions taken on industrial labor absorption in the Third World, and presents data from Latin America that challenge the neoclassical assumption of a straightforward transfer of labour to the modern sector accompanying development. An alternative interpretation of recent trends in labour mobility and absorption in the region is proposed that views the informal sector as an instrument for dealing with variable labor demand. As such, the informal sector is not marginal but integral to formal sector activity. This interpretation poses a significant challenge to traditional theory on the transition to modern industrial society and implies that completion of the transition may not be achieved without a drastic alteration in the balance of forces between social classes and in the scope of state regulation.-Authors