Making a living in India

Updated on Sep 28, 2022 03:56 PM IST

What should a median worker in India do for earning a decent living and which state offers them the best chance?

A median worker in India should be heading south if they are looking for relatively well paying non-agricultural work. (Sunil Ghosh / Hindustan Times)
A median worker in India should be heading south if they are looking for relatively well paying non-agricultural work. (Sunil Ghosh / Hindustan Times)
ByRS Nilakantan

Imagine the median worker in India, a person with high school education and not much else. Which state offers them the best chance of getting a job and earning a decent living? Are they better off being in a state with a relatively high per capita income? Or should one look for other metrics that are more relevant to them?

The first question is what should they do. Agricultural labour, which still employs the most people in India, earns very little and is actually a source and symptom of poverty. So, it is reasonable for him to seek employment in manufacturing or service sector. A factory job is stable and well-paying while not demanding a college education; semi-skilled service jobs are probably the next option.

There is an easy list of states for him to avoid if you want to seek non-agricultural work. Top of that list is states which have a high contribution of agriculture in their state’s overall economic output. Having a high contribution as a sector only means there isn’t much else in terms of other economic activity going on in that state. Conversely, states that are industrialised have a low contribution of agriculture towards their GSDP; not because they don’t produce much grain but because their overall output in other sectors is so much higher in comparison

Interestingly, the states with high levels of human development and relative prosperity have the lowest contribution of agriculture towards their GSDP. For example, agriculture contributes only 3.91% to Tamil Nadu’s GSDP. That is the least in the country among large states. Kerala follows its neighbour at 4.07%. Other peninsular states, like Telangana, Maharashtra and Karnataka all have relatively low ratios as well. Among the states in southern India, it is only Andhra Pradesh that has a double digit ratio with agriculture contributing 11.5% of its GSDP.

States with low human development indices and low per capita income, meanwhile, dominate the list of states where agriculture contributes significantly to the GSDP. Punjab is the exception to India’s conundrum on agriculture. It is a relatively prosperous state with reasonable levels of human development that still has a high degree of dependence on farming as an economic activity; agriculture contributes 13.27% to Punjab’s GSDP. It is also the state with the highest yields per hectare, which makes farming a worthwhile profession in the first place unlike most other states. That is, this worker may well go to Punjab and get a job as an agricultural labourer in some cases – it pays more than agricultural labour in his own state even if it pays less than non-agricultural labour.

The states that have agriculture contributing to a large part of their GSDP, counter-intuitively, also have the lowest yields; with Punjab again being an exception. That is, not only do the poor states in India have agriculture making up a large portion of their economic output - implying a lack of industrialisation - their yields are also one of the poorest worldwide.

A useful data point to look at in this context, is, how many households in rural parts of the state are classified as agricultural households. The broad trends show that Kerala (27.1%) and Tamil Nadu (34.7%) have the least number of rural households classified as agricultural households. That is, not only is agriculture a very small part of the economy in Kerala and Tamil Nadu, significantly fewer people as a proportion of population in the villages are dependent on it. This is true in varying degrees across peninsular India as well: fewer people depend on agriculture in these states while they also produce more grain. In contrast, Madhya Pradesh, Uttar Pradesh and Rajasthan have over 70% of rural households classified as agricultural. These are also the states where yields are low, the overall production is middling and the contribution of agriculture to GSDP is high. It is reasonable, therefore, to think of agriculture as the occupation of last resort.

The states where dependence on agriculture is low are also states that are urbanised the most. That is, not only do states dependent on agriculture have a large proportion of their rural population working in the fields, they also have a large rural population. Bihar, India’s most rural large state, had only 11.29% of its population classified as urban; Uttar Pradesh - a state of 200 Million people - had just 22% of its population classified as urban. Tamil Nadu, with 48.4% of its population classified as urban in Census 2011, was the most urbanised large state; Kerala followed closely behind with 47.7%. This trend is likely to gallop even further in the 2021 Census, whenever that data comes out.

The overall contribution of manufacturing to the GSDP, on the flip side, is another useful metric to track. States that have done well on this count are likely to generate better paying manufacturing jobs and move their citizens to middle income levels. An even more important set of metrics are the total number of factories per state and actual number of people employed. A single large automated factory or an oil refinery owned by a very large company can generate a lot of value and skew the contribution to GSDP, but it probably doesn’t generate as much employment as a series of smaller factories for instance.

Gujarat tops the list of states ranked in terms of the share of manufacturing to their GSDP, at 32.59%. Tamil Nadu ranks second at 22% and has the most number of factories at 37,787; significantly more than Gujarat which has 26,586 factories. Consequently, the southern state also has the maximum number of workers employed for any state, at over 20 Lakh workers. Maharashtra and Gujarat each have roughly the same number of factories and employ approximately the same number of workers (about 14 Lakhs) each. These three relatively prosperous large states in India, it appears, got there in part by moving some of their workforce away from agriculture and into manufacturing.

Based on the number of jobs created, the median worker could pick one of Tamil Nadu, Gujarat and Maharashtra. The next thing you have to worry about is: how much will these jobs pay. A true measure of job creation, in manufacturing or in other sectors, is how that demand for labour gets reflected in the wages of general non-agricultural labour. If there is real demand for skilled and semi-skilled labor, then one could reasonably expect even the wages for unskilled labour to show a little buoyancy. Kerala has the highest wage rates for both. The Kerala Model has been a subject of much study nationally and internationally. The common consensus is that Kerala suffers from a version of ‘Dutch Disease’. Economists have theorised for long that Kerala’s economy and its spending patterns is skewed by the outsized impact of remittances which shows up as inflation in areas such as wages for unskilled and semi-skilled labour. This is possibly true as Kerala’s manufacturing output is low and the number of people it employs in manufacturing is also quite low; yet the wage rates are quite high.

The second highest wages for non-agricultural work, among large states, is found in Tamil Nadu; it doesn’t suffer from any version of Dutch Disease. It also has the highest number of factories and workers employed. It is reasonable therefore to assume that workers are benefitting from the state’s industrialisation even if they themselves aren’t directly employed in a factory.

The states where dependence on agriculture is low are also states that are urbanised the most. That is, not only do states dependent on agriculture have a large proportion of their rural population working in the fields, they also have a large rural population. Bihar, India’s most rural large state, had only 11.29% of its population classified as urban; Uttar Pradesh - a state of 200 Million people - had just 22% of its population classified as urban. Tamil Nadu, with 48.4% of its population classified as urban in Census 2011, was the most urbanised large state; Kerala followed closely behind with 47.7%. This trend is likely to gallop even further in the 2021 Census, whenever that data comes out.

The overall contribution of manufacturing to the GSDP, on the flip side, is another useful metric to track. States that have done well on this count are likely to generate better paying manufacturing jobs and move their citizens to middle income levels. An even more important set of metrics are the total number of factories per state and actual number of people employed. A single large automated factory or an oil refinery owned by a very large company can generate a lot of value and skew the contribution to GSDP, but it probably doesn’t generate as much employment as a series of smaller factories for instance.

Gujarat tops the list of states ranked in terms of the share of manufacturing to their GSDP, at 32.59%. Tamil Nadu ranks second at 22% and has the most number of factories at 37,787; significantly more than Gujarat which has 26,586 factories. Consequently, the southern state also has the maximum number of workers employed for any state, at over 20 Lakh workers. Maharashtra and Gujarat each have roughly the same number of factories and employ approximately the same number of workers (about 14 Lakhs) each. These three relatively prosperous large states in India, it appears, got there in part by moving some of their workforce away from agriculture and into manufacturing.

Based on the number of jobs created, the median worker could pick one of Tamil Nadu, Gujarat and Maharashtra. The next thing you have to worry about is: how much will these jobs pay. A true measure of job creation, in manufacturing or in other sectors, is how that demand for labour gets reflected in the wages of general non-agricultural labour. If there is real demand for skilled and semi-skilled labor, then one could reasonably expect even the wages for unskilled labour to show a little buoyancy. Kerala has the highest wage rates for both. The Kerala Model has been a subject of much study nationally and internationally. The common consensus is that Kerala suffers from a version of ‘Dutch Disease’. Economists have theorised for long that Kerala’s economy and its spending patterns is skewed by the outsized impact of remittances which shows up as inflation in areas such as wages for unskilled and semi-skilled labour. This is possibly true as Kerala’s manufacturing output is low and the number of people it employs in manufacturing is also quite low; yet the wage rates are quite high.

The second highest wages for non-agricultural work, among large states, is found in Tamil Nadu; it doesn’t suffer from any version of Dutch Disease. It also has the highest number of factories and workers employed. It is reasonable therefore to assume that workers are benefitting from the state’s industrialisation even if they themselves aren’t directly employed in a factory.

A quirk with the wage narrative however is that the average daily wage rate in Maharashtra and Gujarat, two of the most industrialised states, is among the lowest across states. A day’s worth of non-agricultural labour earns a man in rural Gujarat 233 rupees. In Maharashtra, it earns him 240 rupees. In Tamil Nadu, a comparable state in terms of being industrialised, it earns him 438 rupees; nearly twice the wage he’d have earned in Gujarat. It is possible that because the factories in these western states are relatively advanced and employ fewer people to produce a higher output, they have no real impact on the wage rates of the masses. It is also possible that some version of semi-skilled labour is in higher demand in the southern states. Perhaps it is that the higher social security net in the southern states results in a fairer and better wage for workers. Or, it is possible the classification of what’s rural is not comparable across these two sets of states. Further, Kerala and Tamil Nadu have had below replacement fertility rates for a generation, making the labour pool that much smaller. A likely explanation for the wage gap is that it is a combination of these and several other factors we haven’t even considered. Whatever the reason, the fact is the Tamil worker seems to not only have better prospects in terms of finding a job in a factory but also a higher paying one even outside a factory.

So, the moral of the story is: if you are a median worker in India looking for relatively well paying non-agricultural work, head south!

RS Nilakantan is a data scientist working for a fin-tech company. He is the author of South vs North: India’s Great Divide published by Juggernaut Books.

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