Rural Labour Markets in India

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Rural Labour Markets in India

  1. 1. Study of spatial and temporal dynamics of labor market behavior in India A Amarender Reddy ICRISAT a.amarenderreddy@cgiar.org Anugu.amarender.reddy@gmail.com
  2. 2. Outline of the presentation  Objectives of the study  Key findings of the project on rural labour dynamics at ICRISAT  Synthesis of three paper From longitudinal data from 1975 to 2012 In depth study for the year 2010 Trends in rural wage rates across states from 1995 to 2011  Conclusions and Policy prescriptions
  3. 3. Objectives and Methods  The study used the data ofVillage Dynamic Studies in South Asia(VDSA),and National Sample Survey Organisation (NSSO) and also wage data of labour buero  The spatial and temporal structural changes in the labour force and employment structure in India and Bangladesh.  Trends in Real wage rates  Factors determining the labour productivity (Modified Mincer Equation) and workers occupational choice (Multinomial Logit Model) will be assessed.
  4. 4. Future labour markets  Structural transformation in GDP is faster, but labour markets are slow  Until early 1980s agriculture is the driving force  From 1990s non-farm sector is driving growth  Increasing real wage rates even in rural areas  Higher productivity/wage differentials: rural-urban, farm- nonfarm; men-women declining  Growing income inequality- high social costs  Education and other institutions are increasing intergenerational inequality?  Bottom 20-30% of rural population is critical, mostly agricultural labourer  Increasing productivity in farm sector  Liberalisation policies for RNF/informal sector  Framers, agricultural labourer interest groups
  5. 5. Driving forces in rural labour markets Skillskill productivity
  6. 6. 0 1 2 3 4 5 6 7 0 10 20 30 40 50 60 70 80 1973 1977 1983 1988 1993 1999 2004 2009 2012 Labourproductivity(non-agril/agril) Shareoflabour(%) MacroTrends in GDP and labour productivity share of non-agricultural labour share of agril. Labour Labour productivity gap between agril and non-agril
  7. 7. 86 86 71 58 14 14 29 42 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% 1975 1984 2004 2010 %oftotalmaleworkers Farm and non-farm employment (%) inVDSA villages farm non-farm
  8. 8. Cultivators in 1975 Shift to agriculture sector Shift to non-agriculture Year Cultivators Livestock Agricultural Labourer Attached labourer Non- farm labour Caste occupatio n Business Salaried Others Total 1975 100 100 1984 77 6 5 2 1 2 0 5 1 100 2004 59 3 10 3 1 1 5 17 3 100 2010 44 6 9 1 8 2 11 15 4 100 Casual labourer in agriculture in 1975 Shift to agriculture sector Shift to non-agriculture Cultivators Livestock Agricultural Labourer Attached labourer Non- farm labour Caste occupatio n Business Salaried Others Total 1975 0 0 100 0 0 0 0 0 0 100 1984 13 5 70 6 3 3 1 0 0 100 2004 46 8 20 2 4 0 4 12 4 100 2010 32 16 18 4 14 0 7 9 2 100 Occupational Mobility Matrix (% of male workers) for whose occupation is cultivation and agricultural labourer in 1975 (males)
  9. 9. Year 1975 Year 2010 Occupational structure OBC ST SC Others Total OBC ST SC Others Total Males Agriculture (I) 92 94 90 88 91 76 69 53 85 74 Cultivation 45 47 19 59 44 48 47 16 56 47 Livestock 14 18 7 16 14 6 9 5 5 7 Agricultural labourer 33 29 64 13 33 22 13 32 24 20 Non-agriculture (II) 8 6 10 12 9 24 31 47 15 26 Non-agricultural labourer 0 0 1 1 0 17 12 37 15 16 Salaried 2 5 5 6 3 6 3 11 0 4 Business 1 1 2 3 2 1 1 0 0 1 Others 4 0 2 2 3 1 15 0 0 6 Total (III) 100 100 100 100 100 100 100 100 100 100 Females Agriculture (I) 100 84 100 100 93 76 72 75 71 74 Cultivation 49 38 0 8 35 47 48 24 55 46 Livestock 9 0 0 0 3 2 4 3 3 3 Agricultural labourer 42 46 100 92 55 27 20 48 13 25 Non-agriculture (II) 0 16 0 0 7 24 28 25 29 26 Non-agricultural labourer 0 0 0 0 0 1 1 2 0 1 Salaried 0 0 0 0 0 8 16 12 15 11 Business 0 4 0 0 2 4 4 1 9 5 Others 0 12 0 0 5 11 6 10 5 9 Total (III) 100 100 100 100 100 100 100 100 100 100 Notes: OBC: Other Backward Caste; SC: Scheduled Caste; ST: Scheduled Tribes Major occupation of workers (% of total workers) by Social status
  10. 10. Major Occupation Agricultur al labor Attached laborer Cultivation Domestic work Livestock rearing Nonfarm laborer Other traditional Others All Forward 1975 0 0 100 0 0 0 0 0 100 1984 0 0 100 0 0 0 0 0 100 1989 8 0 84 0 0 0 8 0 100 2010 4 0 83 0 0 0 0 13 100 OBC 1975 22 3 44 6 6 0 19 0 100 1984 19 3 46 5 3 0 24 0 100 1989 17 2 62 2 9 2 6 0 100 2010 41 0 45 0 2 2 7 3 100 SC 1975 46 31 23 0 0 0 0 0 100 1984 54 31 15 0 0 0 0 0 100 1989 29 14 57 0 0 0 0 0 100 2010 72 0 13 0 0 15 0 0 100 Major occupation of workers by Social status (two villages of AP)
  11. 11. Major occupation of workers (Male in %) by education 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Illiterate readandwrite uptoprimary uptomiddle highschool diploma graduate All primary middle highschool inter diploma graduation postgraduation Total 1975 2010 all others RFS Farm labour Farming
  12. 12. Female work structure by education level 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Illiterate readandwrite uptoprimary uptomiddle highschool graduate All illiterate primary middle highschool inter diploma graduation postgraduation Total 1975 2010 Others Farming Farm labor
  13. 13. 0 50 100 150 200 250 300 illiterate primary middle high school 10+2 degree and above Illiterate Primary Middle High school 10+2 degree and above Female Male Work days (days/year) in 2010 Who is getting how many days of employment
  14. 14. Major occupation of workers (%) by Social status (1975-2010) 0 5 10 15 20 25 30 35 40 45 1975 2010 1975 2010 1975 2010 farming agricultural labourer salaried job Males BC ST/SC Others 0 5 10 15 20 25 30 35 40 1975 2010 1975 2010 1975 2010 farming agricultural labourer salaried job Female BC ST/SC Others
  15. 15. Credit delivery still land is major collateral? 0 10 20 30 40 50 60 70 80 Formal sources Informal sources Formal sources Informal sources Borrowers (%) Multiple borrowers (%) Social group Others OBC ST SC 0 10 20 30 40 50 60 70 80 Formal sources Informal sources Formal sources Informal sources Borrowers (%) Multiple borrowers (%) Land class landless small medium large
  16. 16. Work days excluding domestic work 0 50 100 150 200 250 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 2006 2008 2009 2010 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 2006 2008 2009 2010 female male Standard work days per year paid days Days in Economic Activity (including own farm)
  17. 17. Work days including domestic work 0 50 100 150 200 250 300 1975 1977 1979 1981 1983 2006 2009 1976 1978 1980 1982 1984 2008 2010 female male work days per year
  18. 18. Paid work and wage rates, 2010 0 50 100 150 200 250 Male Female Male Female Farm Non-farm Non-farm sector even lopsided educational policy is gender biased Paid work (Days) Wages rate (Rs/day)
  19. 19. 0 50 100 150 200 250 300 Un-irrigated Irrigated Un-irrigated Irrigated Female Male Self-employment days (days) and wage rates (Rs/day), 2010 self-employment Wage rates
  20. 20. 0 50 100 150 200 250 300 350 400 Illiterate Primary Middle High Inter Higheducated Illiterate Primary Middle High Inter Higheducated Female Male Education level by paid work (days) and wage rates (Rs/day) in 2010 Paid work Wage rates
  21. 21. 0 20 40 60 80 100 120 140 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1989 2005 2006 2007 2008 2009 2010 Real wages in farm sector (1986 prices) (Rs/day for male and females; Rs/pair days for bullock labour; Rs/hour of tractor work) Bullock Female Male Tractor
  22. 22. 0 5 10 15 20 25 30 35 40 2005 2006 2007 2008 2009 2010 wagerate(Rs/day) Rural non-farm sector wage rates in constant prices (Rs/day) Female Male
  23. 23. Urban migration of male population in Andhra Pradesh
  24. 24. 50 100 150 200 250 300 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Rs/day All India Real wage Rates (at constant prices of 2011) Mason Carpenter Tractor Driver Ploughing Sowing Harvesting Unskilled Labourers
  25. 25. 100 150 200 250 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 slack peak Seasonal real wage rates (Rs/day) at 2011 prices Mason Carpenter Tractor Driver Ploughing Harvesting Sowing Unskilled Labourers
  26. 26. Work type Mean 2012 (Rs/day) Annual growth rates Slack Peak 2001-07 2008-12 2001-07 2008-12 Mason(construction) 269 -1.3 4.5 -0.9 5.4 Carpenter 243 -0.9 4.5 -0.8 5.5 Well digging 231 -0.4 8.5 -0.7 10.3 Tractor Driver 194 -0.5 5.6 -0.4 5.9 Blacksmith 186 -1.7 4.9 -1.4 6.2 Ploughing 184 -1.4 6.1 -1.2 7.1 Sowing 163 -1.6 6.5 -0.7 7.4 Cane crushing 162 1.5 6.3 0.5 8.2 Harvesting 161 -0.5 7.7 0.2 8.3 Unskilled Laborers 158 -0.9 7.8 -0.5 7.6 Threshing 158 -1.3 8.8 -0.2 7.3 Transplanting 151 0.2 7.2 0.4 7.2 Winnowing 149 0.4 6.8 0.8 7.4 Picking 148 -0.3 8.1 -0.7 7.2 Weeding 145 -0.1 6.9 0.1 7.2 Cobbler 131 -1.4 3.9 -1.1 5.2 Sweeper 112 -1.9 5.7 -1.7 6.2 Herdsman 101 -2.3 8.0 -2.2 8.4 ACGR of real wage rates (%)
  27. 27. Year Mason Carpenter Tractor Driver Ploughing Sowing Harvesting Unskilled Laborers High wage rate states Tamil Nadu (P) 7.8 7.8 7.1 6.4 6.9 7.8 7.1 Tamil Nadu(S) 6.7 6.3 6.2 5.4 5.8 7.1 6.6 Andhra Pradesh(P) 5.7 5.7 6.9 9.6 9.4 8.7 8.2 Andhra Pradesh(S) 5.6 5.9 5.5 10.2 7.7 9.0 8.4 Haryana(P) 1.6 3.3 3.7 6.3 4.8 3.3 5.0 Haryana(S) 1.4 3.4 3.0 4.3 4.1 3.5 5.3 Punjab(P) 2.5 2.3 7.3 4.8 4.7 7.3 6.0 Punjab(S) 1.3 1.5 5.5 4.5 5.6 5.5 4.6 Medium wage rate states Karnataka(P) 2.5 3.2 3.4 8.2 6.9 7.8 6.2 Karnataka(S) 2.1 3.0 4.1 5.7 6.2 7.0 5.7 Maharashtra(P) 2.6 2.2 4.4 6.3 6.2 7.0 5.5 Maharashtra(S) 1.3 1.4 3.5 4.8 5.1 5.0 4.0 Rajasthan(P) 3.3 3.0 2.9 3.3 4.4 7.9 6.5 Rajasthan(S) 3.3 2.1 2.0 4.8 0.4 7.0 6.6 West Bengal(P) 1.2 0.7 1.0 1.8 4.1 4.0 4.3 West Bengal(S) 0.3 -0.3 0.8 2.5 4.0 4.1 3.9 Gujarat(P) 0.3 -1.5 -1.5 0.5 -0.4 0.8 1.4 Gujarat(S) -1.0 -2.5 -1.7 -0.3 -1.3 -0.3 0.6 Low wage rates states Uttar Pradesh(P) 2.9 1.9 3.7 4.1 4.3 4.1 5.2 Uttar Pradesh(S) 1.7 0.6 2.9 2.1 3.4 3.2 4.0 Bihar(P) 1.9 1.3 2.0 4.5 4.1 3.1 4.6 Bihar(S) 1.0 0.3 1.7 4.1 2.8 2.1 3.7 Orissa(P) 1.6 0.8 -0.9 6.8 5.3 5.8 6.8 Orissa(S) 0.7 -0.1 -1.2 6.6 7.0 6.7 6.5 MP(P) -0.6 -0.5 3.3 3.8 4.2 5.2 4.1 MP(S) -4.8 -1.0 1.8 2.2 2.2 2.5 3.6 All India(P) 2.5 2.3 3.4 4.5 4.1 5.0 5.2 All India(S) 1.8 1.6 2.7 3.8 3.4 4.0 4.7 Annual compound growth rates of real wage rates (2005-12),
  28. 28. State Period AP Punjab Haryana TN All India Unskilled P-I 3.5 5.0 0.7 2.6 3.6 P-II 7.1 7.4 5.8 5.8 5.1 Over all 2.9 4.3 1.7 2.9 2.9 Ploughing P-I 2.5 1.0 2.1 5.1 1.3 P-II 10.3 6.3 6.4 6.5 4.7 Over all 4.7 2.7 3.0 3.0 1.7 Harvesting P-I 3.0 2.0 2.4 1.3 1.0 P-II 10.3 8.1 4.1 7.2 5.1 Over all 5.2 3.1 2.6 2.5 1.8 Sowing P-I 5.1 3.1 1.8 1.7 2.1 P-II 4.2 6.8 4.9 6.9 4.3 Over all 2.2 2.8 2.7 2.3 1.9 Tractor P-I 3.2 3.9 1.9 2.5 3.7 P-II 2.5 4.0 6.6 7.5 4.5 Over all 2.2 3.4 1.9 3.0 3.0 Mason P-I 1.2 0.1 2.5 4.6 2.0 P-II 2.1 2.4 3.5 7.8 2.7 Over all 1.5 0.2 1.4 4.0 1.4 Carpenter P-I -0.5 4.3 -0.2 4.5 4.2 P-II 4.0 2.8 2.4 7.6 -1.4 Over all 0.8 1.5 0.2 3.9 0.8 ACGR of wage rates in high real wage rate states (developed states)
  29. 29. State Period Bihar Orissa MP UP Unskilled P-I 5.4 4.5 2.4 4.1 P-II 4.7 5.3 4.3 1.6 Over all 3.9 3.1 1.6 1.5 Harvesting P-I 2.6 2.2 2.1 3.5 P-II 4.4 7.2 0.7 4.7 Over all 2.2 3.2 0.9 2.3 Sowing P-I 4.2 5.7 4.7 4.4 P-II 4.5 4.0 3.5 -0.2 Over all 2.8 3.5 2.1 1.8 Tractor P-I 3.0 2.1 4.5 2.3 P-II 4.5 3.7 -0.6 3.0 Over all 2.8 2.4 1.8 1.0 ploughing P-I 5.3 4.1 3.7 4.0 P-II 4.8 7.0 3.2 3.7 Over all 4.2 3.6 2.1 2.7 Mason P-I 4.8 4.2 1.5 3.8 P-II 2.0 1.6 -0.7 1.3 Over all 2.8 2.0 0.2 1.8 Carpenter P-I 5.4 4.0 2.3 3.7 P-II 3.5 6.3 -0.2 0.8 Over all 2.5 3.2 0.6 1.7 ACGR in low real wage rate (less developed) states
  30. 30. Ratio of male to female wage rates Farm and non-farm sector 0.0 0.5 1.0 1.5 2.0 2.5 2002 2003 2004 2005 2006 2007 2008 2009 2010 Ratio farm work non-farm work Linear (farm work) Linear (non-farm work) Declining gender wage gap
  31. 31. Ratio of wage rates(non-farm to farm) 0.8 0.9 1 1.1 1.2 1.3 1.4 1.5 2002 2003 2004 2005 2006 2007 2008 2009 2010 Ratio Male Female Linear (Male) Linear (Female)
  32. 32. 0.8 1.0 1.2 1.4 1.6 1.8 2.0 2.2 2.4 2.6 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Ratio Ratio of wage rates of mason to ploughing Uttar Pradesh Gujarat Rajasthan Bihar Orissa Punjab Madhya Pradesh Maharashtra All India Haryana Karnataka Tamil Nadu Andhra Pradesh West Bengal
  33. 33. -60 -40 -20 0 20 40 60 80 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2006 2007 2008 2009 2010 2011 2012 The coefficients for the year dummies on wages ploughing harvesting unskilled sowing mason tractor carpenter
  34. 34. 0 2 4 6 8 10 12 14 16 18 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 2005 2006 2008 2009 2010 1979 1980 1981 1982 1983 1984 2005 2006 2008 2009 2010 female male Ratio:toptobottom Disparities in wage rates 9th percentile to 2nd percentile 10th percentile to 1st percentile
  35. 35. Work type /item Female Male % over female (I) Hours with economic activities 23.1 36.2 56.7 Paid work 12.3 20.8 69 Own farm 5.2 8.5 62 Own livestock 5.1 6.3 24 Other own 0.5 0.6 33 (II)Hours with non-economic activities 28.1 8.8 -68.7 Domestic duties 26.3 6.5 -75 Seriously ill 0.9 0.6 -33 Unemployed 0.9 1.7 83 Hours with economic and non-economic activities (I+II) 51.2 45.0 -12.1 Wage income ( /year) 7920 27000 241 Wage rate ( /8 hours) 99 200 102 Imputed income , if income of non-monetary work days are imputed with on-going wage rates for male and female respectively 32967 58400 77 Imputed income , if income of non-monetary work days of both men and women at the on-going wage rates of female ( 99/8 hours) 32967 42551 29.1 Average level of education 5 8 Average hours/week of female and male (2010)
  36. 36. Salient features  Structural transformation in rural economy  Raising real wage rates  Divergence in wage rates  Stagnation in labour productivity in agriculture  Shift in engines of growth  Increase in rural non-farm sector and diversity of income
  37. 37. Long run trends..  Most of the workers are spent more days in self-employment in agriculture with very few days in paid work. Both men and women have more leisure time during the 1970s compared to early 2000s. However, from 2001 onwards, there has been an increase in non-farm employment opportunities in both self-employment and also paid work mostly for rural male, but most of the rural women remained in farm sector. Results also shows that even though education improves chances of getting higher remunerative employment, still rural labour markets are segmented based on social groups to 2 some extent.The high unemployment among educated youth indicates that the skills acquired by the educational system are not meeting the needs of the rural economy. However, many parents are investing heavily in children’s education with the expectation of getting higher paid urban jobs. Over the period, gender and caste differences in wage rates decreased slightly, but are not eliminated wholly.
  38. 38. Long run trends.. Men work days are more than women work days per year, however If we take domestic work into consideration women work more days than men.Attached labourer are almost eliminated with the implementation of bonded labour abolition act and most of them shifted to different occupations including cultivation or casual agricultural labourer or took up petty businesses.There is significant increase in farm mechanisation in recent years due to scarcity of labour and higher wage rates.The results also show that the real wage rates started increasing much before the introduction of a major employment guarantee program (MGNREGA) and mostly driven by increased non- farm employment opportunities, rural-urban linkages, migration and increased agricultural productivity.
  39. 39. Conclusions  Overall, men reported 36.2 hours per week compared to only 23.1 hours per week in economic activities.  If we consider both economic and non-economic activities, participation of women increased to 51.2 hours compared to only 45.0 for men as women spent more hours in attending domestic duties.  However, men work more hours in paid work (20.8 hours) than women (12.3 hours).  The gap in income earned from monetary activities between men and women is much higher. But, if we impute the value of the domestic duties of both men and women equally, the gap in incomes between men and women drastically reduced from 241% to just 29%.  Illiterate women loaded with more hours of paid-work as well as domestic work. Labor markets are segmented based on social background to some extent (after discounting for human and physical capital) and supports segmented labor market theory.
  40. 40. Conclusions Cont..  It is interesting to see that the hours worked in economic activities increases with ownership of land and assets rather than education in rural India.  Level of education and experience have little influence on choice of occupation and quality of employment of individuals both men and women, as still rural employment in rural India is mostly confined to the technologically backward sectors even in non-farm sector and business like petty business, general stores, toddy tapping, repair shops, transport and construction works which require very little skill levels and education levels.  However, the quality of work improves significantly for only few higher educated men and women in service sector employment like teachers, nurses, record keeper, health workers; most of the educated youth remain unemployed. Especially most of the educated women engaged in domestic duties due to lack of commensurate employment opportunities in rural areas. Even though in the villages returns to education is low or non- significant, people are investing heavily in educating their children with the expectation of getting urban employment mostly as engineer or doctor or even a software engineer in America etc.  Most of the parents persuade their children to go to urban centres as soon as they completed the higher education with expectation of huge remittance money.
  41. 41. THIS CONFIRMSTHAT AT LEAST DEVELOPED STATES IN INDIA CROSSED THE LEWISTURNING POINT. THE ACCELERATION OF REAL WAGES EVEN IN SLACK SEASON INDICATESTHATTHE ERA OF LABOR SHORTAGE IS STARTED IN RURAL AREAS ESPECIALLY IN DEVELOPED STATES LIKETAMIL NADU, HARYANA, PUNJAB AND ANDHRA PRADESH,WHICH NEEDSTO BETACKLEDTHROUGH LABOR SAVING TECHNOLOGY AND WIDE SCALE FARM MECHANISATION. ONTHE OTHER HAND IT APPEARSTHAT THE UNDERDEVELOPED STATES LIKE MADHYA PRADESH, UTTAR PRADESH AND BIHAR ARE NOT REACHEDTHE LTP AND NEEDSTO DEVELOP POLICIESTO INCREASE PRODUCTIVITY OF RURAL LABOR INTHESE BACKWARD STATES. Wage rates…..
  42. 42. Rural society in India is traditionally highly segmented based on caste, gender and traditional occupations, however, they are slowly reducing their influence on labor market outcomes as they are not significant in choice of employment or hours worked, they are replaced by the ownership of land and assets and owning high productive land (like irrigated area) in influencing the labor market outcomes. Demand for some caste occupations like traditional toddy-tapping (making locally made alcohol), cleaning of cloths, etc is increasing in near-by towns which can be captured by rural men and women with middle level of education. Some of the policy prescriptions from the study are • Enhancing the ownership of assets like land, irrigated area through providing loans which will increase hours worked in economic activities •Imbibing savings habit which generally increase labor force participation rate, •Enhancing quality education in rural areas beyond the higher-secondary to take advantage of growing employment in service sector and new emerging occupations like repair of mobiles, electric motors computer centres •Imparting skill development in both caste occupations and also in modern sectors and •Balanced development of both urban and rural areas through promotion of small towns. Policy Options..

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