What best describes the Lewis Turning Point?

• A. It is when a poor country with surplus labor shifts to manufacturing and wages rise as profits grow.
• B. It is when a country achieves full employment.
• C. It is when currency is pegged.
• D. It is when tariffs increase.

Answer: (A)

The Lewis Turning Point marks the moment when the rural surplus labor that keeps wages in the agricultural sector near a subsistence level is exhausted. As manufacturing expands and absorbs more workers, wages begin to rise and the profits that come from employing cheap labor are boosted during the expansion phase. The description here reflects that shift: a poor country with surplus labor moves into manufacturing and, as this transition unfolds, wages rise in response to the shrinking pool of cheap labor while profits increase from the growing industrial activity. After this turning point, further industrial growth would push wages upward more quickly, narrowing profit margins unless productivity also rises. This concept isn’t about full employment, currency pegging, or tariff changes.