labour market ppt
TRANSCRIPT
Labour Market in India
LR Dagar,
Indira Gandhi Institute of
Development Research,
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Labour market size
• Consists of 430 million workers in 2004-05, growing 2% annually, with a stable worker-population ratio (40%).
• Low level of open unemployment (3.1%) – high level of disguised unemployment, mostly in rural areas and in agriculture.
• Low level of women’s participation in workforce.• Child labour’s share in workforce declining, but
in absolute numbers still quite large.
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Labour market structure
• Labour market consists of 3 sectors.• Rural workers constitute about 60% of the
workforce.• Organised sector employing 8% of
workforce, and declining – producing 40% of GDP.
• Urban informal sector – the growing sector – represents the residual.
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Employment growth
• Structural transformation – agriculture's share declining from 62% in 1993-94, to 54% in 2004-05.
• Low or negative employment elasticity.• Employment is shifting towards services,
not industry.• Between 1997-04, 1.8 million (6.4%) jobs
lost in organised sector including 1.2 million (18%) in manufacturing.
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Wages
• Agricultural Wages have ↑ since 1980s
• Yet lower than minimum wages.
• Casualisation of employment contracts in all sectors.
• Decline in self employment.
• Wages still low to overcome absolute poverty.
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What are the major concerns?
• Deteriorating employment scene, despite acceleration in output growth since 1980 – need for massive employment generation effort, especially in rural areas.
• Deceleration in agriculture since 1990 (Figure 1).
• Agrarian distress – suicides, extremism• Labour market rigidity.
– Cannot hire and fire.
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Labour legislations
• Mostly deal with the organised sector. Extent of protection and benefits increase size of firm or factory.
• Minimum wages practically ineffective; no national minimum wage; no social security.
• Job-security law in organised sector reportedly makes it “impossible” to lay-off and retrench workers.
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Rigid labour market?
• Small and declining organised sector workers with high and growing wages with job security – amid an ocean of unorganised, and competitive labour market.
• So what?Leads to labour market rigidity:– substitution of capital for labour,– reducing economic growth, – hurting labour intensive exports.
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Policy implications
• Dismantle state intervention in labour market – pay and perks to be market driven; wage bargaining to be decentralised.
• Repeal job-security laws and contract labour act.
• National minimum wage.
• Social security.
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Inflexible labour market ?
• No nominal or real wage rigidity.
• ↓ in unit labour cost (Figure 2).– True in public sector too (Figure 3).
• No evidence of adverse effects of job security law.
• Secular ↓ in union strength.
• More lockouts than strikes (Figure 4).
• ↓ in wage-rental ratio (Figure 5).
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What does the evidence tell?
• There exists functional flexibility, which the unions are prepared to negotiate.
• Job-security law does not have much bite.– 18% of organised industrial workers lost jobs.
• Does it mean everything is fine? No, I do not think so.
• Need for rationalisation of laws.
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Employment concern
• Declining employment elasticity.
• Related to it declining agricultural growth, and agrarian distress.
• Poor rural infrastructure
• Employment guarantee scheme.
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In sum
• Reformists believe lack of flexibility in industrial labour market is holding up industrial out and export growth.
• Evidence does not seem to support such a proposition.
• But it does not mean that the labour market is working fine – far from it.
• Need to move towards income security, more rational labour laws, and greater shop floor democracy.
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In sum
• Perhaps the bigger concern is agricultural deceleration, agrarian distress, and inadequate rural employment growth.
• Employment guarantee scheme hold promise, but faces political and bureaucratic resistance.
• These two alternatives perspectives hold divergent visions of India.
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Figure 1: Growth in Agriculture output, 1980-05
3.22.9
3.8
3
3.6 3.6
2.32
2.72.2 2
3.6
1.2 1.1 1.3 1.31
2
All Crops Foodgrains Non-foodgrains
Cereals Rice Wheat
Crops
Per c
ent p
er y
ear
1981-90 1991-00 1991-05
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Figure 2: Unit labour Cost in Registered Manufacturing
0
20
40
60
80
100
120
140
Year ending
Inde
x
Unit labour cost
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Figure 3: Unit labour cost in public sectorExcluding electricity
0
0.2
0.4
0.6
80 82 84 86 88 90 92 94 96
Fiscal year ending
Rat
io
Unit labour cost
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Figure 4: Mandays Lost by Disputes
0
10000
20000
30000
40000
50000
6000019
82-8
3
1984
-85
1986
-87
1988
-89
1990
-91
1992
-93
1994
-95
1996
-97
Strikes Lockout
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Figure 5: Wage-rental ratio
0
20
40
60
80
100
120
81 83 85 87 89 91 93 95 97 99
2001
Year ending
Inde
x
Wage-rental ratio