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BW Businessworld

Distress Or Prosperity

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It is well known that the proportion of workers in villages employed in agriculture has been falling. According to the National Sample Survey, it was over four-fifths in the 1970s for male workers; by 2004-05 it had fallen to two-thirds. It may be that as population pressure increased, and the proportion of workers who could find work on farms decreased; it is also possible that as growing families divided up farms amongst sons, farms became smaller and smaller, and needed less and less to hire labour. These possibilities imply growing pressure on land and falling productivity; it should have led to rising unemployment and a fall in wages. Wages could not, of course, fall in absolute terms. Since prices go on rising in this country at anything between 5 and 10 per cent a year, money wages must have also gone up if the workers were not to starve to death; but corrected for price increases, wages should have fallen.

Of the two alternatives, it is certainly not true that unemployment went up. There was a rise in the proportion of male unemployed workers between the 1990s and a decade later; but it was so small that it cannot have been the major consequence. It has been argued that the quality of work went down; evidence is sought in the fact that the proportion of "casual" workers rose from three-tenths in the early 1980s to a third in 2004-05. This deterioration was quantified in the form of a casualisation index by Brajesh Jha. But rural workers were never office workers; they never picked up their briefcases and took a bus to work. Some were tied to particular farmers; they could be called bonded labourers, or regular workers in official parlance. Others took work on different farms as it became available. The proportion of farmers has remained more less around three-fifths throughout; the size of farms has gone down, but the proportion of regular workers in the work force has not. Whether the rest work for one farmer or many is immaterial, and has no necessary implication for their earnings. As farms shrank in size, the number of potential employers per worker would also have increased, which could have led to workers changing jobs more often. As farm size declined, the farmers may have needed less labour. If they did, however, that should have been reflected in growing unemployment, and it just did not grow. So growing poverty and distress are only in the expectations of researchers, not in the figures they should respect.

It could be argued that the poor workers could not afford to be unemployed — that they took whatever work they could get because they would starve otherwise. But if they did so, and labour supply rose faster than demand, their wages, corrected for price increase, should have fallen. Progressive economists may like to believe that the workers earned only bare subsistence and that their wages could not fall. But at the minimum, their wages should not have gone up. The evidence from the National Sample Survey shows that wages corrected for purchasing power more than doubled between 1987-88 and 2004-05. The proportion of villagers working on farms fell, not because too many of them were chasing too few jobs, but because many of them found jobs outside agriculture.

The figures which show the drastic fall of the proportion of the work force in agriculture also tell us where it found work. Roughly a third went into construction, a third into shops, restaurants and hotels, and the rest into other services. People do not build houses or go shopping and eating unless they have money. It shows that villagers got richer, built pucca houses and started buying consumer goods, whether fast moving or slow moving. Someone had to built those houses and sell those goods. That is where poorer villagers found work. And they did not take those jobs because they could not get jobs in agriculture; the average wage of an illiterate casual worker was higher in every industry than in agriculture.

The figures tell an unequivocal story — that persistent growth has diversified the economy of villages and increased demand for workers faster than the work provided by agriculture, that they have flocked to non-agricultural work which paid more, and that they have ended up decidedly better off. This is the story of the illiterate, unskilled worker at the bottom of the pyramid. Let the pundits in the Planning Commission go on about poverty and hunger. There is much less of it than at any time in the past; the poor are doing better. It is not the government's darling MGNREGA or PDS that rescued the poor; it was relentless growth powered by private enterprise.

(This story was published in Businessworld Issue Dated 05-12-2011)


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