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Get the answer of: How Occupational Structure Changes with Economic Development?
The occupational structure of country refers to the distribution of its labour force in different occupations. A.G.B. Fisher was the first economist to introduce the concepts of primary, secondary and tertiary occupations in 1933. According to him, a country could be classified with respect to the proportions of their total labour force engaged in these sectors.
The primary sector includes agriculture, animal husbandry, forestry, fishery, etc. and in some versions mining. The secondary sector comprises manufacturing of every type, generally mining and as a rule construction. The tertiary sector consists of transport, communications, trade, government, banking, finance, insurance, personal and domestic services.
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Colin Clark and Simon Kuznets in their separate researches employed this distinction between primary, secondary and tertiary production. All countries start with a heavy concentration of population in primary production.
As national income increases steadily and the basic necessities of life are met, there is an occupational shift of labour and other resources into manufacturing or secondary production. As national income rises further and the market for manufactured goods becomes saturated, labour and other resources shift into the service or tertiary sector.
Colin Clark in his study Conditions of Economic Progress draws three conclusions about the relationship between economic development and occupational distribution.
In the first phase of economic development, there is considerable decline in the proportion of persons engaged in agriculture and allied occupations, although the total number engaged in them continues to increase.
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In the second phase of development, when the economy is sufficiently advanced, the absolute numbers engaged in agriculture begin to decline and shift to manufacturing.
In the third phase of economic development, the growth rate of working population engaged in tertiary occupation becomes greater than that engaged in the secondary sector but the difference in the rates of increase in the two sectors is not wide.
Kuznets in his book Modern Economic Growth explains changes in occupational structure based on the experiences of developed countries. According to him, with development, there are changes in occupational structure in the form of shift away from agriculture to non-agricultural activities and from industry to services, with a corresponding change in the occupational status of labour.
We may summarise his findings:
1. The proportion of population engaged in agricultural sector declines in the long run.
2. The share of the agricultural sector in total product (national income) declines with economic development.
3. The proportion of population engaged in the industrial sector increases in the long run.
4. The share of the industrial sector rises in the total product.
5. The shifting of labour from the agricultural to the industrial sector is accompanied by increase in efficiency or productivity of labour.
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6. As development gains momentum, the share of the services sector in the total product increases.
7. The proportion of population engaged in the services sector rises gradually and is usually less than that in the industrial sector. Even when the economy is developed, the share of the services sector in the total labour force may either remain constant or rise little.
On the basis of the studies of Clark and Kuznets, economists identity underdeveloped countries with large labour force engaged in the primary sector having low per capita income; developing countries with large proportion of labour force engaged in the industrial sector with middle per capita income; and developed countries with large percentage of labour force engaged in the services sector and also producing commodities with a high income elasticity of demand, and having high per capita income.