It appears that one of the distinctive features of an under-developed economy is the paradoxical co-existence, in some sectors of the economy, of a low wage rate (i e, wage per labourer) with a low rate of profit. These sectors have been generally described, as under-developed or 'disguised-unemployment' sectors. The income (Y) or earning (i e, output of the composite commodity after allowing for depreciation of capital and raw materials used in its production) is a function of capital (K), employment of labour (N), and the efficiency of the labourer (work units per labourer).

Efficiency of the labourer is a function of the wage rate (wage per labourer is measured in composite commodity units), there being a minimum wage rate. OA in figure I, which gives positive 'work unit' from the labourer.2 This leads to a wage rate, OW, which gives miniOW mum cost per 'work' unit'2 ( — ) .