Capital, land and labor are the three key factors of production.

As a result, these labor intensive sectors must release a lot of labor and capital, which push into the capital intensive export sectors that are better able to cope with high wages. But, while these sectors therefore grow especially fast, their high capital intensity means that they cannot fully employ the released labor, with the result that some of the unemployed workers have nowhere to turn but the welfare state.

In the US, for example, slashing labor costs has sharply reduced the share of labor income in GDP. With credit exhausted, the effects on aggregate demand of decades of redistribution of income and wealth from labor to capital, from wages to profits, from poor to rich, and from households to corporate firms have become severe, owing to the lower marginal propensity of firms capital owners rich households to spend.

A larger capital stock would mean thicker markets, a finer division of labor, and a more productive economy. A highly productive society based on a sophisticated division of labor was how you secured the wealth of nations.

In the new global economy, which is awash with cheap labor, Western economies will not be able to compete in a race to the bottom, with firms seeking ever cheaper labor, land, and capital, and governments seeking to attract them by deregulating and shrinking social benefits.

To realize that potential, the tradable sector has to re expand at the margin as a weakening currency causes imports to fall and real unit labor costs decline as nominal wages flatten out, unemployed labor and capital flow toward external markets for goods, services, and resources.

Believers in low interest rates also emphasize shifts in income distribution in the United States away from labor and toward capital, which have greatly boosted firms' resources to finance investment internally and reduced their dependence on capital markets. They point to rapid technological progress, which has boosted output from new and old capital investments.

In fact, given an increasingly unequal distribution of income between capital and labor (as well as across the income spectrum for labor) a larger store of public assets certainly has merit, as it equalizes the distribution of capital and wealth, albeit indirectly. Not only can public assets be used to cushion shocks and counter adverse trends they can also help fund an expansion of social insurance.

The reason is not that the periphery offers an attractive labor force from which capital profits, but rather that the core especially the United States offers a form of protection for capital against unanticipated political disturbances.

Companies often lay off a whole department of scientists to shift to a new product, destroying not only human capital, but also human lives. Moreover, flexible labor markets imply adversarial labor relations, particularly when compared to northern European countries.

One key idea was to lighten the tax burden on labor . Taking into account the personal income tax and various social contributions, taxation of labor income in China is too high . To be sure, taxes are needed to finance social spending, but revenue sources other than taxes on labor income could do the job. China could usefully explore shifting part of the burden from labor toward property, capital gains, and inheritance taxes.

As the Japanese economist Ryuichiro Tachi has pointed out, Japan also benefited from a high savings rate and a low capital coefficient (the ratio of capital to output) of less than 1. Though a precise comparison is difficult, there is no doubt that China s capital coefficient is much higher, implying a larger gap between the growth rate of capital intensity (the total amount of capital needed per dollar of revenue) and that of labor productivity.

At first sight, that makes a lot of sense. Harmonized systems of rules make it easier for capital and labor to move around in search of their best use.

FI conducted a Training Workshop on UN and International Labor Organization Mechanisms on Trafficking, Bonded Labor and Forced Labor from June 5 7, 2002.

Likewise, labor market reform, improved education, and enhanced human capital could contribute an additional 4 to GDP growth in the next decade. Moreover, Italian policymakers should strive to boost the female labor force participation rate, which, at 49 , is one of the lowest in the OECD.

A similar dichotomy applies to many other critical issues, including adaptation to climate change, efforts to improve resource management, urbanization and the rise of megacities, increased labor mobility, and human capital expansion.

To bridge these divides, we must rethink the nature of employment in an increasingly automated, borderless, and mobile global economy. As capital is globalized, so basic labor standards should be global.

Many might doubt the view that China is exporting more labor intensive goods, rather than upgrading its exports on the capital and skill intensity ladder. But trade data suggest the opposite, perhaps because China s accession to the WTO led to tariff reductions that released more labor intensive production.

With the closing of the frontier and static populations, growth would depend on innovation but future innovation would require smaller inputs of capital and labor than in the past. In other words, the returns to capital were bound to fall as it became more abundant relative to population.

Pursuing its comparative advantage strengthens a country s resilience to crisis and allows for the rapid accumulation of human and physical capital. Developing countries with such characteristics are able to turn factor endowments from relatively labor or resource abundant to relatively capital abundant in the span of a generation.

The Department of Supervision of Labor Laws in the Ministry of Industry, Trade and Labor

But manufacturing today is not what it used to be. It has become much more capital and skill intensive, with greatly diminished potential to absorb large amounts of labor from the countryside.

Production will not vanish it will just be less labor intensive. All countries will eventually need to rebuild their growth models around digital technologies and the human capital that supports their deployment and expansion.

So a country where labor productivity is low will become an attractive location for foreign direct investment, and the resulting increase in the capital labor ratio will raise productivity. Wherever one looks, using Marshall s toolkit, one sees economic equilibrium pulling things back to normal, compensating for and attenuating the effects of shocks and disturbances.

Liquidity injections and low interest rates have a microeconomic effect that has received little attention they lower the cost of capital vis à vis the cost of labor, which causes a relative decline in demand for labor. This is very likely exacerbating the unemployment problem it certainly is not mitigating it.

If anything, they will spread and grow louder. The West has no choice but to strike a better balance between capital and labor, between current and future generations, and between the financial sector and the real economy.

Similarly, the integration of emerging market countries into the global economy has brought with it a flood of labor. According to standard trade theory, a global labor glut ought to imply an increased rate of return on capital, which again pushes interest rates up, not down.

Because of the capital utilization effect, the capital labor ratio would not, in fact, decline, and hence there would be no significant effect on the marginal productivity of hours worked. The theoretical effect on employment is unambiguously positive, because marginal workers will be more productive as they work longer.

First, eurozone countries must implement reforms aimed at boosting wage and price flexibility through enhanced competition and improved labor and capital mobility within and between member countries. Second, wealth transfers to peripheral countries, while controversial, are necessary.

Labor Law

Forced labor!

Forced labor.

At worst, labor market failures impose modest inefficiency costs on society, whereas capital market failures harm society greatly, with workers, rather than the perpetrators of financial disaster, suffering the most. Moreover, globalization means that the US capital market s failure spreads misery around the world.

Second, both capital and labor needed to flow to the tradable sector, where demand constraints can be relaxed as relative productivity converges. Like many other southern European countries, however, labor market and other rigidities dramatically reduced the speed and increased the costs of structural economic adjustment, resulting in lower levels of growth and employment, especially for young people and first time job seekers.

Reforms in factor markets labor, land, and finance are essential. China s leaders must improve labor market flexibility and labor mobility make land use, acquisition, and compensation more efficient and build a more market based financial system.

But China s investment rate is already too high, accounting for almost half of GDP. With capital intensity increasing significantly faster than labor productivity in China, the inefficiency of investment is clear.

The key is to reflect on six kinds of capital goods business capital, infrastructure, human capital, intellectual capital, natural capital, and social capital. All of these are productive, but each has a distinctive role.

Ever cheaper labor and ever faster machines.

Wasteful abusive and focused on labor productivity.

ARTICLE 11 LABOR, PENSIONS, AND SOCIAL PROTECTION

And all the labor he wants, too.

Gunther, labor. Smith, prostitution and so on.

The Department of Supervision of Labor Laws of the Ministry of Industry, Trade and Labor supervises the enforcement of a number of labor laws, including the Employment of Women Law.

Labor Force Estimates

Because labor productivity...