The Lewis turning point is a situation in

economic development In economics, economic development (or economic and social development) is the process by which the economic well-being and quality of life of a nation, region, local community, or an individual are improved according to targeted goals and object ...

where surplus

rural In general, a rural area or a countryside is a geographic area that is located outside towns and cities. Typical rural areas have a low population density and small settlements. Agricultural areas and areas with forestry are typically desc ...

labor is fully absorbed into the manufacturing sector. This typically causes

agricultural Agriculture encompasses crop and livestock production, aquaculture, and forestry for food and non-food products. Agriculture was a key factor in the rise of sedentary human civilization, whereby farming of domesticated species created f ...

and unskilled industrial

real wages Real wages are wages adjusted for inflation, or equivalently wages in terms of the amount of goods and services that can be bought. This term is used in contrast to nominal wages or unadjusted wages. Because it has been adjusted to account for ...

to rise. The term is named after economist W. Arthur Lewis. Shortly after the Lewis point, an economy requires balanced growth policies. Typically, reaching the Lewis turning point causes an increase in the wage bill and the functional

distribution Distribution may refer to: Mathematics *Distribution (mathematics), generalized functions used to formulate solutions of partial differential equations *Probability distribution, the probability of a particular value or value range of a varia ...

favoring labor. However, in some cases such as in Japan from 1870 to 1920, agricultural labor productivity increased significantly and produced a labor surplus, dampening the rise in real wages. According to a study by Zhang and Yang,

China China, officially the People's Republic of China (PRC), is a country in East Asia. With population of China, a population exceeding 1.4 billion, it is the list of countries by population (United Nations), second-most populous country after ...

reached the Lewis point in 2010; cheap labor in the country has rapidly decreased and real agricultural wages have substantially increased. Despite its large population, in the early 2010s China faced labor shortages, and real wages nearly doubled since 2003. Such rapid rise in wages for unskilled work is a key indicator of reaching the Lewis point. However, other journals such as the '' China Economic Review'' claim that China has not reached the Lewis point, comparing the effect of the Lewis point in China to the Japanese experience. A 2013 working paper by the

International Monetary Fund The International Monetary Fund (IMF) is a major financial agency of the United Nations, and an international financial institution funded by 191 member countries, with headquarters in Washington, D.C. It is regarded as the global lender of las ...

predicts the Lewis point in China to "emerge between 2020 and 2025".

Lewis curve and automation

In their book,

Tshilidzi Marwala Tshilidzi Marwala (born 28 July 1971) is a South African artificial intelligence engineer, a computer scientist, a mechanical engineer and a university administrator. He is currently Rector (academia), Rector of the United Nations University ...

and Evan Hurwitz used Arthur Lewis' theory to understand the transition of the economy into the Fourth Industrial Revolution, where much of the production in the economy is automated by artificially intelligent machines. In this regard, they identified an equilibrium point, i.e. Lewis turning point, where automating human labor does not result in additional economic benefit.

References

Development economics Labour economics {{labor-econ-stub