Question

How has the relationship between labor and capital changed across the twentieth century?(3 paragraphs)

Answer 1

Ans ) Over the past 20 years ,the economy has been transformed by technological change.The computing revolution and rise of the internet have changed the nature of products and competition .These changes have affected the returns to different types of Labour,as well as capital .These changes helped in the capital mobility across the borders , so has international trade grown up and rise of many multinational corporations .Earlier as per the Labour and capital relationship Labour account for the 70 percent of national income and capital account for 30 percent of national income.After the globalisation there is constant decline in Labour sector contribution ,throughout the world,owners of capital are receiving a greater share of national income so growth of national income is no longer sufficient to ensures increasing workers living standards for Labour .Declining Labour share lead to income inequality ,it is also more capital income is included in the form of dividend and capital gains is highly concentrated in few hands.The relationship between capital and Labour can be understood as follows: The technological progress as a result of globalisation such as modern computer technology and reduces the amount of Labour and hence it is more capital - augmenting.For this the demand for computers increases so it will results in more capital investments and in turn rising capital share of income.The outsourching of work of the higher income countries to the lower income countries with cheap Labour reduces the wages in turn of the outsourcing reduces the Labour share and give rise to capital investment of these countries in the form of work setup in lower income countries . Thirdly the greater mobility of capital may reduce worker's bargaining power more generally as companies move abroad hence restraining wage growth.The globalisation has affected and benifited in the form of higher returns to the top capitalist in the higher income group ,the returns generated from outside the country are more lucarative the within a country which results in the decline of the Labour share