Themes > Current Issues
02.05.2003
Whatever happened to Farm Employment?
Jayati
Ghosh
It is
now almost commonplace to recognize that Indian agriculture is in a
state of crisis. There are numerous indicators of this crisis: the
stagnation of agricultural GDP and the fall in per capita GDP in
agriculture in recent years; the increased volatility of output and
greater susceptibility of Indian prices to international price
movements; the rising input costs that make it even more difficult for
Indian farmers to compete with the threat of subsidized imports.
One cited indicator of the problematic condition of Indian agriculture is the collapse in farm employment generation in the recent past. While employment in general has been a major failure of the macroeconomic policies of the past decade, the decline in agricultural employment generation has probably been the most startling.
The growth of agricultural employment by usual status (that is, the number of people reporting themselves as 'usually employed') fell from an annual rate of 2.08 per cent in the period 1987–88 to 1993–94, to only 0.8 per cent over 1993–94 to 1999–2000. In terms of daily status, the fall was even greater, from 2.47 per cent to 0.14 per cent per year.
Within this, the really sharp fall was in the number of those classified as 'self-employed' in agriculture, that is, those working on household-operated holdings. And even within this category, the most evident decline was in terms of the number of women reporting themselves as working on household plots.
What are the reasons for this reduced ability of cultivation to generate additional work? One explanation hinges on the expansion of the non-agricultural sector in rural areas. According to this, labour has been moving out of agriculture because of greater demand for labour in other sectors. But this argument is not good enough because, in fact, the increase in non-agricultural work has been much less than the decline in agricultural employment. At least some of this increase in non-agricultural employment might simply be because rural residents are desperately searching for any job that can be had.
Another explanation has to do with technological and cropping pattern changes that have reduced the demand for labour in agriculture. There is no doubt that these factors have been important. Recently, there has been an increase in mechanization of Indian agriculture which is labour-saving in nature and so reduces labour demand. Also, the general thrust of the cropping pattern shifts (especially towards horticulture and floriculture at the margin in some areas) may be said to have reduced demand for labour.
But there is one other factor to be considered-the pattern of land relations in rural India. It is now clear that this period witnessed a significant degree of concentration in terms of operated holdings, which reflects changes in both ownership and tenancy patterns. Many small and very marginal peasants have lost their land and have therefore been forced to search for work as landless labourers. Surveys also report increased leasing-in by large farmers from small landowners. There has been a very large increase in landless households as a percentage of total rural households at the all-India level, from around 35 per cent in 1987–88 to as much as 41 per cent in 1999–2000.
It is well known that, for various reasons, those occupying small holdings tend to intensively use land and labour to achieve higher per land unit productivity than larger farms. Typically, this means that they employ more household members at least in some agricultural work. If those who previously occupied some land are now effectively dispossessed and are forced to hire themselves out as wage labour, they are less likely to get similar levels of household employment.
In other words, when a particular plot of land is occupied by small and marginal peasants working on household farms, it is likely to show higher use of labour than when that same plot is taken over by a large farmer using hired labour. Not all of this may be disguised unemployment, since the fact that small/marginal cultivators also use other non-land inputs more intensively suggests that they would use this additional labour to increase per hectare productivity.
Therefore, increasing landlessness (even in terms of occupancy holdings) of the rural population may also lead to less employment generation in agriculture.
The question then remains, why has the proportion of landless population increased so substantially over these two periods? This may be because of changes in rural India that have adversely affected small farmers.
One of the more crucial changes has been the virtual collapse of formal rural credit, especially for small cultivators. The reduced availability of credit has very severe implications especially for small farmers. A number of input costs have also increased, as fertilizer subsidies have been reduced, and as water rates and other user charges have gone up.
In addition, there is some evidence that although real wage growth slowed down substantially during the 1990s, real wage rates continued to increase in most parts of the country. Since the seasonality of agricultural operations means that most cultivators, whatever the size of holding, need to hire in some labour during peak seasons, this raised costs and made hiring out labour more worthwhile than working on own operated land in peak seasons.
The process of trade liberalization has meant that domestic agricultural prices have less relation to domestic demand and supply conditions, and instead follow world prices. This means that even when the harvest is lower or there are crop failures, cultivators do not get any recompense in terms of higher prices.
There is much greater use of a range of monetized inputs, including new varieties of seed and related inputs marketed by major multinational companies. Small cultivators, who have taken on debt (often from informal credit sources at very high rates of interest) in order to pay for these cash inputs, then find themselves in real difficulty if for some reason there is crop failure or output prices remain low.
All these could be reasons why the proportion of rural households that is not operating any land at all increased so much over these periods. This in turn means that there would be less people reporting themselves as self-employed in agriculture (which is what is observed) and a general reduction in employment generation because less people would be hired than had lost employment from own cultivation.
It could be argued that there is nothing wrong with declining employment in agriculture since that after all is the eventual aim of the development and industrialization process. By this argument, we should actually desire negative employment elasticity in agriculture as workers move out to industry and services, along the classic pattern observed in the now-developed countries.
And there, of course, the crux of the problem is that non-agricultural employment has simply not grown enough to take up the slack. The fall in employment generation also has to be seen in the wider context-that is, not of a dynamic agriculture in a vibrant and growing economy but of stagnating conditions of cultivation in a rural economy in which aggregate incomes are also stagnating.
Also, it would be remiss of us to forget that when the neoliberal reforms were first introduced in the early 1990s, once of the basic claims made was that the policy package would free cultivators from the straitjacket of controls and the bias towards urban industry. It was argued then that the sectors that were seen to reflect the Indian economy's comparative advantage-that is, agriculture and labour-intensive manufacturing-would benefit the most. It was further argued that these sectors would experience significant increases in employment.
The experience of the past decade has given the lie to all those claims. The stagnation of agricultural employment, in this context, points to a very basic flaw in the very philosophy of the neoliberal reform programme. That could be one reason why official policy-makers increasingly tend to downplay the observed realities on Indian farms.
One cited indicator of the problematic condition of Indian agriculture is the collapse in farm employment generation in the recent past. While employment in general has been a major failure of the macroeconomic policies of the past decade, the decline in agricultural employment generation has probably been the most startling.
The growth of agricultural employment by usual status (that is, the number of people reporting themselves as 'usually employed') fell from an annual rate of 2.08 per cent in the period 1987–88 to 1993–94, to only 0.8 per cent over 1993–94 to 1999–2000. In terms of daily status, the fall was even greater, from 2.47 per cent to 0.14 per cent per year.
Within this, the really sharp fall was in the number of those classified as 'self-employed' in agriculture, that is, those working on household-operated holdings. And even within this category, the most evident decline was in terms of the number of women reporting themselves as working on household plots.
What are the reasons for this reduced ability of cultivation to generate additional work? One explanation hinges on the expansion of the non-agricultural sector in rural areas. According to this, labour has been moving out of agriculture because of greater demand for labour in other sectors. But this argument is not good enough because, in fact, the increase in non-agricultural work has been much less than the decline in agricultural employment. At least some of this increase in non-agricultural employment might simply be because rural residents are desperately searching for any job that can be had.
Another explanation has to do with technological and cropping pattern changes that have reduced the demand for labour in agriculture. There is no doubt that these factors have been important. Recently, there has been an increase in mechanization of Indian agriculture which is labour-saving in nature and so reduces labour demand. Also, the general thrust of the cropping pattern shifts (especially towards horticulture and floriculture at the margin in some areas) may be said to have reduced demand for labour.
But there is one other factor to be considered-the pattern of land relations in rural India. It is now clear that this period witnessed a significant degree of concentration in terms of operated holdings, which reflects changes in both ownership and tenancy patterns. Many small and very marginal peasants have lost their land and have therefore been forced to search for work as landless labourers. Surveys also report increased leasing-in by large farmers from small landowners. There has been a very large increase in landless households as a percentage of total rural households at the all-India level, from around 35 per cent in 1987–88 to as much as 41 per cent in 1999–2000.
It is well known that, for various reasons, those occupying small holdings tend to intensively use land and labour to achieve higher per land unit productivity than larger farms. Typically, this means that they employ more household members at least in some agricultural work. If those who previously occupied some land are now effectively dispossessed and are forced to hire themselves out as wage labour, they are less likely to get similar levels of household employment.
In other words, when a particular plot of land is occupied by small and marginal peasants working on household farms, it is likely to show higher use of labour than when that same plot is taken over by a large farmer using hired labour. Not all of this may be disguised unemployment, since the fact that small/marginal cultivators also use other non-land inputs more intensively suggests that they would use this additional labour to increase per hectare productivity.
Therefore, increasing landlessness (even in terms of occupancy holdings) of the rural population may also lead to less employment generation in agriculture.
The question then remains, why has the proportion of landless population increased so substantially over these two periods? This may be because of changes in rural India that have adversely affected small farmers.
One of the more crucial changes has been the virtual collapse of formal rural credit, especially for small cultivators. The reduced availability of credit has very severe implications especially for small farmers. A number of input costs have also increased, as fertilizer subsidies have been reduced, and as water rates and other user charges have gone up.
In addition, there is some evidence that although real wage growth slowed down substantially during the 1990s, real wage rates continued to increase in most parts of the country. Since the seasonality of agricultural operations means that most cultivators, whatever the size of holding, need to hire in some labour during peak seasons, this raised costs and made hiring out labour more worthwhile than working on own operated land in peak seasons.
The process of trade liberalization has meant that domestic agricultural prices have less relation to domestic demand and supply conditions, and instead follow world prices. This means that even when the harvest is lower or there are crop failures, cultivators do not get any recompense in terms of higher prices.
There is much greater use of a range of monetized inputs, including new varieties of seed and related inputs marketed by major multinational companies. Small cultivators, who have taken on debt (often from informal credit sources at very high rates of interest) in order to pay for these cash inputs, then find themselves in real difficulty if for some reason there is crop failure or output prices remain low.
All these could be reasons why the proportion of rural households that is not operating any land at all increased so much over these periods. This in turn means that there would be less people reporting themselves as self-employed in agriculture (which is what is observed) and a general reduction in employment generation because less people would be hired than had lost employment from own cultivation.
It could be argued that there is nothing wrong with declining employment in agriculture since that after all is the eventual aim of the development and industrialization process. By this argument, we should actually desire negative employment elasticity in agriculture as workers move out to industry and services, along the classic pattern observed in the now-developed countries.
And there, of course, the crux of the problem is that non-agricultural employment has simply not grown enough to take up the slack. The fall in employment generation also has to be seen in the wider context-that is, not of a dynamic agriculture in a vibrant and growing economy but of stagnating conditions of cultivation in a rural economy in which aggregate incomes are also stagnating.
Also, it would be remiss of us to forget that when the neoliberal reforms were first introduced in the early 1990s, once of the basic claims made was that the policy package would free cultivators from the straitjacket of controls and the bias towards urban industry. It was argued then that the sectors that were seen to reflect the Indian economy's comparative advantage-that is, agriculture and labour-intensive manufacturing-would benefit the most. It was further argued that these sectors would experience significant increases in employment.
The experience of the past decade has given the lie to all those claims. The stagnation of agricultural employment, in this context, points to a very basic flaw in the very philosophy of the neoliberal reform programme. That could be one reason why official policy-makers increasingly tend to downplay the observed realities on Indian farms.
© MACROSCAN 2003