Abstract
The concept of growth with productive employment generation has important implications in terms of industrialisation and the technology adopted in the industrial sector. The large spread of the industrial sector and adoption of labour-intensive technology can create demand, which may absorb a large fraction of labour available to the non-agricultural sector. Even when the high-productivity organised industry cannot absorb labour directly, ancillarisation, sub-contracting and outsourcing can also create employment outside the organised industry due to the complementary relationship between the organised and unorganised (or formal and informal) sectors (Papola 1981). Though the relative size of the informal sector is almost equally high in both the situations of sluggish industrialisation and rapid industrialisation, the latter situation envisages the growth of productive activities even within the informal sector.
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Notes
- 1.
Krueger and Summers (1988) explain inter-industry wage structure in the light of the efficiency wage hypothesis.
- 2.
See the appendix for the details of the industrial codes.
- 3.
Nagaraj (1994) argued that as demand picked up in the 1980s, firms possibly used their existing stock of labour intensively before deciding to employ additional workers. This may explain the sluggish growth of workers accompanied by a positive growth of man-days per worker during the 1980s. Stretching his argument further, one may argue that the scope for better utilisation of labour which existed prior to reforms was already exhausted by the end of 1980s, and hence, man-days per worker could not increase further in the reform period forcing firms to employ additional workers.
- 4.
Andhra Pradesh (0.90), Bihar (0.24), Gujarat (0.34), Haryana (0.40), Karnataka (0.15), Kerala (0.05), Madhya Pradesh (0.204), Maharashtra (0.21), Orissa (0.49), Punjab (0.19), Rajasthan (0.245), Tamil Nadu (0.08), Uttar Pradesh (0.30), West Bengal (0.09).
- 5.
In fact, this tendency of outsourcing is also said to be the cause of decline in employment, which is evident since the later part of the 1990s until recently.
- 6.
Nagaraj (1994) and Bhalotra (1998) noted that the growth in man-days per worker was the cause of stagnation in employment in the 1980s. Goldar (2000), however, did not find this variable to be significant.
- 7.
However, Roy (2003) argues that reforms have made things worse but perhaps not as bad as one might think. Hence, he notes that flexibility in the market through the informal route softened the negative impact of the reforms as disempowerment of labour and job losses have been negatively correlated during the 1990s.
- 8.
Andhra Pradesh (0.90), Bihar (0.24), Gujarat (0.34), Haryana (0.40), Karnataka (0.15), Kerala (0.05), Madhya Pradesh (0.204), Maharashtra (0.21), Orissa (0.49), Punjab (0.19), Rajasthan (0.245), Tamil Nadu (0.08), Uttar Pradesh (0.30), West Bengal (0.09).
- 9.
In terms of changes over time, the regressions are not reported to save space.
- 10.
The World Bank report on “Doing Business” in 2005 estimated that India is ranked at 48th in terms of ‘Rigidity in Employment Index’10 compared to China’s rank of 30.
- 11.
In their study, a state is said to have flexible labour market if the state had undertaken anti-employee amendments in the Industrial Dispute Act.
- 12.
For the manufacturing sector information on employment, value added, wages and salaries and gross fixed capital formation have been compiled by UNIDO. The INDSTAT4 2007 ISIC Rev.3 database reports time series data for currently 113 countries. From this, we picked up those which fall into the South and East Asian regions, African and Latin American countries for the period starting from 1990 to 2004. The nominal variables are available both in terms of national currency and US dollars. We preferred the later as it would make international comparison easier. The time series of nominal variables reflect (a) the effect of exchange rate fluctuations, (b) price movements in respective countries and (c) the real changes. UNIDO used the average period exchange rates as given in the International Financial Statistics to convert the series in dollar terms. This way, the effect of changes in the exchange rate is neutralised. As far as the country-specific price inflations are concerned, we have taken the GDP deflators from the World Development Indicators. Since different countries have different bases, we have tried to convert the series of GDP deflators with respect to a common base for all the countries (1990) though this has not been possible for some of the countries which started the series at a later date. The GDP deflators have been used to neutralise the price effect in the series of nominal variables. The deflated wage bill has been divided by the total number of employees to work out the real wage rate. Needless to add that information on all the variables is not reported for each of the years. For some of the countries, only one or two variables and that too for only a few years, this information is available. Hence, the computation of growth rate of a particular variable does not necessarily reflect the movement from 1990 through 2004.
- 13.
India, Senegal, Vietnam, Bangladesh, Botswana, Panama, Peru, Malaysia, Ethiopia, Brazil, Mexico, Singapore, Mauritius and Uruguay.
- 14.
Japan has been included though it is not a developing country.
- 15.
Berg and Cazes (2007) point out the serious conceptual and methodological problems associated with the World Bank’s Employing Workers Index of the Doing Business indicators and risks of formulating policies on the basis of these indicators.
- 16.
The ratio of trade union members as a percentage of total paid employees has been calculated by ILO Bureau of Statistics.
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Mitra, A. (2013). Industry as the Engine of Growth. In: Insights into Inclusive Growth, Employment and Wellbeing in India. Springer, India. https://doi.org/10.1007/978-81-322-0656-9_4
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