On The Employment Effects Of Industrial Upgrading

Many scholars think that from the 1990's, the industry of our country has been leading the way of capital-intensive so that the phenomenon that capital excludes labor force appeared. Moreover, the Employment elasticity is becoming lower and lower and the mode of the economy growth is more and more likely jobless growth. Whereas the phenomenon mentioned above, they suggested that the emphasis of the macro-economic policy should be changed and the development mode should be taken employment priority, but not the development priority. After the demonstration analysis, it is thought that the sticking point for the deficiency of the employment post lies in the deficiency of the effective demand. Thereby, all of these are regressed the classical proposition of Keynes that the employment is determined by the Effective demand. Effective demand includes two parts, which are investment and consumption. As for how to enlarge effective demand, Keynes put great emphasis on multiplies effect of investment, but his investment theory had to face the dynamic tight corner. With the enlargement of investment, it is offsetting the disparity between current national income and current consumption, but is also enhancing the production ability of the next period. With the law of the descending of marginal propensity to consume, it is found that the more is the next national income, the more is the difference to the next consumption. As a result, it is more difficult to offset between income and consumption by investment. With the circulation, the society is more and more affluent and the economy crisis is becoming more and more inevitable. As for this problem, Keynes set about from the aspect of improving the income and distribution, then increasing the consume propensity further. But he mostly relied on the method of non-market, such as another distribution taking advantage of tax, constituting and perfecting the social security system. This paper deems that Keynes neglected the income distribution effect of investment. What is called that the income distribution effect of investment is the theory, which the quantitative growth of the investment leads to the descending of the capital yield and all of these will make the proportion that the capital income share accounts for the national income change. The study of modern economy indicates that it is suspicious about the Cobb-Douglas production function, which is about the substitution elasticity of different factors is 1 and the share of element income accounts for the national income is invariable. So it accords more with objective practice by using the more flexible Constant Elasticity of Substitution (CES) production function instead of Cobb-Douglas production function. In the frame of the CES production function, according to the distribution law of marginal productivity, it can be proved that the influence of factors intensity to labor distribution share and consumption propensity. That is, when the substitution elasticity is less than 1, the labor share will rise if the amount of capital investment comparatively increases. When the substitution elasticity exceeds 1, it will have the opposite effect. When the substitution elasticity equals 1, the share of labor will not be changed with the amount of elements input comparatively changes. It is found by the demonstration analysis that the substitution elasticity between capital and labor is often less than 1, that is to say, the increase (K/L) of the amount of capital input relative to the amount of labor input will lead to the increase of the labor's distribution share. Commonly to say, the consumption propensity of the laborers is higher than that of the capitalists. Therefore, the increase wage share will increase the consumption propensity of the whole society. The essential of the industry upgrading is the process, which the production element compression is continuously changing and upgrading, namely, the production technology is coming through the evolvement periods from labor-intensive to capital-intensive, finally to...