Using the estimates obtained from the unit-level data of the Employment and Unemployment Survey, 2004-05, and the Periodic Labor Force Survey, 2018-19, we examine changes in the Indian employment policy by age, gender and state. Our focus is on agriculture.
Instead of the labor force ratio from general employment, we calculate the population to employment ratio by sector. The previous advantage is that it reveals the total employment dependence on a particular sector of the economy and not just on the job or people looking for a job. We limit our analysis to 20 to 59 years, which we define as the main work-age.
Unlike older farm workers, workers in the prime-age group face trade-offs in the labor market and move to alternative employment if the cost of opportunity to work on a farm increases. Alternatively, as family incomes increase, women may opt out of farm work, which is a cultural phenomenon in India. Also, we excluded 15 to 19 year olds, which is generally considered a part of the working-age age, because, with increasing educational levels, the majority of the group is in education.
Our estimates show that there is a significant reduction in the number of major working-age Indians engaged in agriculture, with their share falling from 40% in 2004-195 to 23.3% in 2018-19. Even in rural India, only one in three leading working-age adults will be working in the sector in 2018-19. There is a further sharp decline in the share of young people (20-29 years) working in agriculture. Only 14.4% of young people are working on farms in 2018-19, up from 34% in 2004-05.
The decline of young people in agricultural work explains to some extent the shortage of agricultural labor. Furthermore, this means that the average age of agricultural workers has increased from 35 in 2004-05 to 40 in 2018-19.
Among the major Indian states, the average age of agricultural labor is the highest in Kerala and Tamil Nadu at 46.7 and 43.4 years in 2018-19 respectively. Aging agricultural labor force Indian agriculture needs to move forward rapidly, but fragmented agricultural sizes in India pose a problem.
There is widespread regional variation in dependence on agricultural employment, although there is a significant reduction in states. In 2018-19, only 8.5% of Kerala’s major working-age population worked in agriculture, down from 20.3% in 2004-05, 35.3% in Madhya Pradesh and 51.7% in 2004-05.
Notably, Punjab and Haryana have a larger share of their state economies than others, with less than 20% of adults in rural areas reported working on farms in 2018-19. In fact, since 2004-05, Haryana and Punjab, along with Karnataka and Bihar, have seen the largest decline in the share of agricultural employment. Less reliance on agricultural employment in Punjab and Haryana reflects higher agricultural productivity and income, thereby allowing women to opt out of paid agricultural work. However, a reversal in terms of guaranteed demand and food grain prices (which are already in high supply) could change this balance.
In contrast, in other non-agricultural affluent states in India such as Karnataka, Maharashtra and Gujarat, between 40% and 45% of the rural working-age population are still working in agriculture in 2018-19. Relying heavily on agricultural employment in these states is not enough for non-agricultural employment.
The decline in the proportion of lead-age population from agricultural employment in India is in line with the historical experiences of the structural transition of countries towards industry and services. What is unique about the Indian experience, however, is that this decline did not mirror an increase in the proportion of non-agricultural employment of prime-aged adults. Instead, it reflects an increase in the share of major adults leaving the labor market.
The highest growth in the major age population, mainly women, is in the three affluent states of Gujarat, Haryana and Karnataka, and is also alarming in Uttar Pradesh, the most populous and relatively poor state in India. The extent of this decline in Uttar Pradesh due to rising family incomes (e.g., through payments) needs to be further investigated, and the extent to which local jobs are not available is significant.
Furthermore, there was an increase in the share of agricultural employment among young people as well as an increase in those reported to be in education (13.4% in 2018-19). Unemployment among the educated will further increase if India’s pace of productive non-agricultural job creation does not improve as educated youth aspire to work in the non-agricultural sectors.
On the whole, going forward, some states, especially Punjab, will face the problem of stagnation if the high level of agro-growth prosperity and equality is not successfully realized by the leading-aged adults who have abandoned agricultural work through other productive sectors.
Vidya Mahambare, Soumya Dhanraj & Sankalp Sharma Professor of Economics at the Great Lakes Institute of Management, Chennai respectively; Assistant professors; And a postgraduate student at the Madras School of Economics