Our economy is growing at a speed unthinkable a few years back. In 2006-07, the country’s Gross Domestic Product (GDP) grew at 9.4 per cent, which is the fastest in 18 years. This is not a flash in the pan. The average GDP growth rate comes to 8.7 per cent over the last four years.
The question is, how are the ordinary workers getting affected by this process of rapid growth?
The widely reported Narmada, Kalinganagar and Singur episodes represent one side of the picture. Here people are being displaced from their traditional land, occupations and way of life as part of the process of growth and industrialisation. As the growth engine is picking up speed, new jobs – specially in infrastructure projects and construction activities – are being created. Workers with varying degrees of skill are getting the benefits.
Newspaper reports suggest that labour contractors are finding it increasingly difficult to supply workers for construction activities in cities and towns. They now have to cast their net wider to far flung areas to catch workers, that too at wages rising at a fast rate. According to one report, wages have doubled in the last five years for unskilled construction workers in Andhra Pradesh where a lot of construction activity is going on in and around Hyderabad. Even low skilled workers are getting trained by the recruiting companies at company expenses to meet their needs. Many companies feel that even ITI-trained workers are not good enough to fit their job requirements. Some are recruiting school passouts and providing an intensive training at their own training institutes through tailor-made module courses running from six months to one year.
For trained workers, wages and benefits are going up at an even faster rate. Getting and then retaining the right people is proving to be a big hurdle for employers. Companies have started maintaining a reserve labour force, the so-called bench strength, to cope with the increasing attrition rate. In earlier times, this was practiced by the IT companies. The benefits coming in the form of training and higher lifetime productivity are a permanent gain for workers. Even if they have to sign a company bond for serving a minimum time period (which is not the case for all companies providing training), this is much better than government doles or getting to dig holes and cutting stones at minimum wages for 100 days in a year under the National Rural Employment Guarantee Scheme (NREGS). Some companies are even paying a holding wage between projects so that there is no labour shortage when they start on the new project. Clearly, a win-win situation for both industry and labour.
In a sense, all these show that the surest antidote to poverty is fast economic growth, even if growth is primarily driven by consumption by the affluent classes. Legislating minimum wages, collective bargaining through trade unions or running anti-poverty programmes can, at best, be short run palliates which either do not work or become counterproductive, in the absence of economic growth.
It is well known by now that government mandated minimum wages are often flouted by employers in agriculture and unorganised sectors. Workers, faced with the choice between no job and a job at less than minimum wages, would opt for the latter. Militant trade unionism has harmed workers’ interests in the long run. The lion’s share of the benefits from anti-poverty programmes are cornered by the non-poor. So, the only real solution to workers’ problems lies in a tight labour market created by high growth.
Migrant agricultural workers from Bihar, Jharkhand and Orissa are being recruited in large numbers by labour contractors to work on higher wages and benefits in construction projects. So, now these workers have a more attractive option than working temporarily as farm labour in Punjab and Haryana. As a result, agricultural wages here are going up.
Today, agriculture accounts for 20 per cent of GDP but 60 per cent of the workforce are basically engaged in low-productivity jobs. For income and productivity gains, labour has to move from agriculture to non-agricultural occupations. Even jobs in the unorganised service sectors like darwans, couriers,  salesmen, carpenters, plumbers and electricians fetch more income for the family than all members depending on a plot of land which is getting subdivided with each new generation. This movement of workers from agriculture to other occupations is good for the workers as well as the economy as a whole.
Regional sentiments and housing at affordable rates are the two big hurdles on the path of labour mobility in India. If jobs are not being created in a region due to lack of resources, infrastructure or connectivity, people have to move where the jobs are. It is important to realise that a region like north-east, for example, can not prosper by forcing other communities out of the region. At best, this may bring some job gains in the very short run for the local people at the expense of “outsiders”. But as capital, investment and jobs would move to other areas, the north east people would not be able to move out and get jobs over there. Regional backlash in some form in other areas is likely to happen. In the longer run, the people to miss out most on the opportunities being created in other parts of India would be the north-east people, despite India growing at 8 per cent plus rate. The sooner this lesson is learnt by our short sighted regional political leaders, the better for the region and the country.
(The writer is a former Professor of Economics, IIM, Kolkata.)