<P> The Lewis turning point is a situation in economic development where surplus rural labor reaches a financial zero . This typically causes a labor shortage which leads to rising agricultural and unskilled industrial real wages until a labor surplus is reached again . The term is named after economist W. Arthur Lewis . Shortly after the Lewis point, an economy requires balanced growth policies . Piazza argues that a fast - growing economy that reaches the Lewis point can experience financial turmoil and a persistent decrease in growth prospects . </P> <P> Typically, reaching the Lewis turning point causes an increase in the wage bill and the functional distribution 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 . </P>

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