Labour Migration to Farms is Bad News

Casual labour, which is the type of employment provided by agriculture, yields much lower wages -- of the order of Rs 291 per day.
Labour would not voluntarily shift to this lowest wage-rate sector unless it had no better option, observes Mahesh Vyas.

The reverse migration of labour from factories to farms that CMIE's Consumer Pyramids Household Survey has been chronicling for long is also reflected in the government's Periodic Labour Force Survey.

The latest PLFS report shows a sharp increase in employment in agriculture from 42.5 per cent of the total employment in 2018-2019 to 45.6 per cent in 2019-2020. This shift of labour to agriculture is larger than estimated by CPHS.

Such a large shift of labour in favour of agriculture cannot be voluntary. It is a sign of distress in the labour market where non-agricultural sectors are unable to provide employment and labour is forced to shift to agriculture.

The forced or at least involuntary nature of this migration is evident from the wages data provided by the PLFS.

Salaried jobs provide wages of the order of Rs.16,780 per month. Self-employment provides wages of the order of Rs.10,454 per month. These translate into wage rates of Rs 558 per day and Rs 349 per day, respectively.

In comparison casual labour, which is the type of employment provided by agriculture, yields much lower wages -- of the order of Rs 291 per day. Labour would not voluntarily shift to this lowest wage-rate sector unless it had no better option.

Agriculture provides a low wage safety net for labour during times of distress in India. In fiscal 2019-2020, real GDP growth declined to 4 per cent. This was the lowest growth rate since the global financial crisis more than a decade earlier in 2008.

PLFS estimates are for a 12-month period from July 2019 through June 2020. It therefore includes the period when India suffered the first COVID-19 wave around April-June 2020. The sharp fall in growth before the pandemic and then the pandemic induced lockdown could have squeezed labour out of non-farm jobs who then had no option but to fall back on agriculture.

Arguably, this safety net provided by agriculture reduces the political pressure that widespread loss of jobs could have created if such a large contingency destination in the farmlands were not to exist.

The biggest increase in employment in 2019-2020 was in agriculture and within agriculture the increase was largely among women. Nearly 60 per cent of all employed women were engaged in agriculture. This shows the domination of poor quality of employment that women get in India.

The PLFS estimate of 45.6 per cent of the working population being employed in agriculture is much higher than CPHS's estimate of 38 per cent in 2019-20. This is partly because the PLFS definition of employment is highly relaxed. The readily available PLFS estimates on distribution of the workforce by industry is based on the Usual Status definition which effectively considers a person to be employed during a year even if the person were to be employed only for a month during the year. Such a presentation by Current Weekly Status, which is less relaxed, is not readily available.

The definition of employment in CPHS is far more stringent. Even CPHS has recorded a steady increase in the share of agriculture in total employment -- from 35.3 per cent in 2017-2018 to 36.1 per cent in 2018-2019 and then to 38 per cent in 2019-2020.

Thus, while PLFS records a 3.1 percentage point increase in labour into agriculture, CPHS estimates a much smaller increase of 1.9 percentage points. To ensure comparability, CPHS estimates presented here also refer to the July-June year.

The rise in share of agriculture in employment raises a question on the sectors that are losing employment. According to the PLFS, the losers are manufacturing, construction and transport, storage and communication.

The share of manufacturing in total employment fell from 12.1 per cent to 11.2 per cent. Of all the specific sectors for which PLFS provides data, the manufacturing sector saw the biggest fall (0.9 percentage points). The next largest loser is construction (0.5 percentage points).

And then it is transport, storage and communication (0.3 percentage points). These three account for a little over half of the increase in the share of employment in agriculture. The rest is mostly accounted for by 'others'.

It can be conjectured from the above that large parts of employment from the relatively unorganised construction sector and the unorganised manufacturing sector moved into agriculture. We estimate that nearly 60 per cent of the employment in manufacturing industries is in the unorganised sector.

It is labour from here that migrated into agriculture.

We know anecdotally that the manufacturing sector and the construction sectors waited for the migrant workers to return to resume work. But, 2020-2021 (July to June) panned out differently. This period saw the second wave of COVID-19. India reacted differently to the second wave.

CMIE's CPHS tells us that 2020-2021 saw a continuation of the reverse migration to agriculture. The share of agriculture in total employment jumped to 39.4 per cent in the year from 38 per cent in 2019-2020.

More importantly, the share of manufacturing dropped sharply from 9.4 per cent to 7.3 per cent. But, construction has recovered. Its share in total employment which had fallen from 15.4 per cent in 2018-2019 to 13.5 per cent in 2019-2020, shot up to 15.9 per cent in 2020-2021.

Apparently, government efforts to boost manufacturing through production linked incentives or liquidity support to medium and small scale enterprises have not been effective in stemming the decline of manufacturing in India.

Mahesh Vyas is MD & CEO, CMIE P Ltd.