The document summarizes research on agricultural labor markets in India. It finds that while the share of agriculture in rural employment has declined from 78% to 68% from 1993-2010, agricultural wages have increased faster than non-agricultural wages. There are both push factors driving workers from agriculture like fewer land holdings and pull factors to non-agriculture like higher wages. Government policies aim to support agricultural laborers through legislative protections and employment schemes.

1. A STUDY OF THE AGRICULTURAL LABOUR MARKETS
IN INDIA
BY : FARNAZ SHA

2. INTRODUCTION
 MARKET
• In economics we can define a market as a place where buyers and sellers interact and
negotiate the price for commodities and services with each other.
• One striking feature of the modern day definition of a market is that the buyers and
sellers do not have to meet face to face in order to determine the price.
 FACTOR MARKET
• It refers to arrangement for buying and selling of factors of production.
• The examples of factor market is labour market.
• They have a derived demand.
• The price of factors is determined by the interaction of demand and supply of the
factors.
• The market facilitates the distribution of income to the factors of production.

3. LABOUR MARKET
• The Indian economy is undergoing a structural transformation from
traditional sectors towards the modern sectors.
• This transformation has been relatively slow in labour employment
than in output.
• This is more visible from the changes in rural wage rate than in the
employment share of various sectors.
• Between 1993-94 and 2009-10, the share of the agriculture sector in
rural employment declined from 78.43% to 67.96%, while
agricultural wage rates (for male workers) followed an increase of
2.69% per year in real terms compared to a 1.75% increase in wage
rate of non-agriculture labour in rural India.

4. STRUCTURE OF AGRICULTURAL
LABOUR MARKETS IN INDIA
• The agriculture sector is the biggest employer in rural India.
• This sector provided employment to close to 68% of the total rural
workforce based on usual status in 2009-10.
• The rural labour market in India is undergoing a significant change
away from agriculture towards non-farm sectors.
• The share of agriculture in total rural employment declined by 10.47
percentage points (11.30 percentage points for male and 6.80
percentage points for female) between 1993-94 and 2009-10.

5. • On the other hand, there has been an increase in workforce in non
agricultural sectors.
• This indicates the presence of an excess workforce in the agriculture
sector.
• Although the excess workforce in the sector is withdrawing it is
doing so at a very slow pace and only by female workers.
• The movement of excess workers from the agriculture sector can be
triggered by the “push” of technological change in agriculture (which
limits labour absorption in that sector) or by the “pull” of non-
agricultural activities.

6. • Agricultural labourer is at the lowest rung in the socio-economic set-up of the rural
society as would be seen from the following facts.
• A major part of agricultural labour households do not own any land. As per the 32nd
round of the NSS about 51.37 per cent of the agricultural labour households did not
own any land. The average size of land cultivated per agricultural labour households
was 1.33 acre only.
• Agricultural labourer remain as unemployed for a large part of the year, he finds only
seasonal employment.
• Hours of work in agriculture depends upon natural factors.

7. • The household income and consumption expenditure of an average
agricultural labour households are precariously balanced, and that too
when they find some work. Otherwise, most of them are in debt,
which they owe to the money lenders and other local sources. As per
NSS estimates, 52.32 per cent of agricultural labour households were
indebted at national level.
• The money wages of agricultural labourer are miserably low
• Finally the standard of living of agricultural labourers is degrading.

8. PULL FACTORS TOWARDS NON-
AGRICULTURAL SECTORS
• Higher wages in other jobs
• Shifting to regular job since agricultural job is seasonal
• Agricultural job is presumed to be a low esteem job
• Migration to urban areas for higher wages and better educational
status
• Migration to foreign countries

9. PUSH FACTORS
• Increase in Rural Population
• Decline of Cottage Industries and Handicrafts
• Eviction of Small Farmers and Tenants from the Land
• Uneconomic Land Holdings
• Increase in Indebtedness
• Break-up of Joint Family System

10. INSTITUTIONALCHARACTERISTICS OF
AGRICULTURALLABOUR MARKETS
• Agricultural Labour markets can contribute significantly to rural
household incomes and to the competitiveness of farms and the
agricultural sector as a whole.
• However, studies also show that, in many regions, such markets do
not work perfectly.
• it is crucial to take into account local labour market institutions,
variations in household characteristics, etc., in order to get a good
understanding of the functioning and the constraints in these
agricultural labour markets.

11. • A crucial element in studying agricultural labour markets is how to
model the supply of labour.
• The supply of labour is responsive to changes in the real wage.
• In the medium term as higher wages increase the opportunity cost of
being economically inactive and induce people to enter the labour
force, while lower wages reduce the opportunity cost and lead to
lower participation rates.

12. • Many households in rural areas allocate labour to activities on and off
the farm. Most rural economies in India are in a dynamic adjustment
process involving sectorial re-specialisation and spatial relocation of
workers between industries.
• Using the information from Union Labour Force Survey data, we
find that younger individuals are more likely to leave agricultural
activities, although the largest outflows of agricultural labour are
mainly associated with the retirement of older people. Self-employed
and family workers are generally less likely to leave agriculture and
low levels of education constrain entry into the non-farm economy

13. • Using a household model, we derive the hypothesis that the impact of
decoupling on off-farm labour supply is dependent on two competing
forces:
1. a relative wage effect
2. a wealth effect.
• The decline in the farm wage relative to the off-farm wage makes off-
farm work more attractive, thus producing the relative wage effect. At
the same time, decoupled direct payments provide a new no labour
source of income thereby generating a wealth effect, reducing labour
supply.

14. DEMAND FOR AGRICULTURAL
LABOUR
• On the diagnostic side several factors such as the impact of family
labour employment on the demand for hired labour, the relationship
between the size of farm, extent of irrigation, mechanisation of
agricultural processes, proximity to urban centres etc., have been
studied by a number of researchers.
• Another 5 per cent of the demand for agricultural labour may be
added on account of extensive use of fertilizers and improved
practices. Thus, the total demand for agricultural labour, hired and
self employed increased as much as, if not more than, the percentage
increase in the number of agricultural labourers is 13 per cent.

15. IMPLICATIONS OF CHANGING LABOUR
MARKET ONAGRICULTURE
• Labour is a crucial factor for agricultural production.
• Though employment diversification is desirable from the economic
development point of view, it leads to a decline in labour supply and
an increase in the wage rate in the agriculture sector.
• Shortage of labour during the peak agricultural season hampers farm
operations, while a persistent wage rise has the potential for cost-
push inflation in the economy.

16. GRAPH EXPLAINING WAGE RATEAND
ITS IMPACT DEMANDAND SUPPLYFOR
LABOUR

17. GROWTH OFAGRICULTURAL
LABOURERS IN INDIA
YEAR NUMBER IN MILLIONS
1991 74.7
2001 107.4
2011 144.3

18. DISTRIBUTION OFAGRICULTURAL
WORKFORCE IN INDIA,
DURING 1991- 2011
Total
Total
Total
Total
Agricultural Agricultural
Year Population Cultivators
Workers Labourers (in
(in millions) (in per cent)
(in per cent) per cent)
1991 844 67.01 39.85 27.16
2001 1027 58.40 31.71 26.69
2011 1210 54.60 24.60 30.00
Sources: Census of India 1991 to 2011.

19. GOVERNMENT MEASURES
• Legislative Measures
• Abolition of Bonded Labourers
• Providing Land to Landless Labourers
• Special Employment Schemes
• Welfare Measures

20. CONCLUSION
• During the 16 years between 1993-94 and 2009-10, the agricultural labour market has
increased mainly on account of the increase in the male labour force.
• The number of female workers did not increase at all despite a 25% increase in their
population between 1993-94 and 2009-10. This has resulted in a decline in the WPR of
females as well as total workers in rural India.
• The decline in WPR of rural women is largely explained by the withdrawal by female
labour from agriculture, presumably due to an improvement in economic conditions of
farm families. There has been a big increase in pursuit of education by rural females.
• Improved literacy and low preference for farm work requires the creation of
employment opportunities on a large scale in rural non-farm sectors to attract women
to the workforce.