Tamil Nadu Chief Minister MK Stalin addressing the first anniversary celebration of DMK rule, at Attur in Salem district. , Photo credits: Lakshmi Narayanan E.
TeaHis introduction of a bill to increase working hours from eight to 12 hours a day in Tamil Nadu and its withdrawal amid protests has rekindled the discussion about industrialization strategies that do not undermine workers’ rights Are. The core ideal of the Dravidian model is the pursuit of inclusive industrialization that addresses both economic deprivation arising through the market and social deprivation emerging from caste inequality. The model is about sharing prosperity through productivity. In this sense, the introduction of the Bill to extend working hours was a deviation from its original ideal. Even though the bill is withdrawn, the Dravida Munnetra Kazhagam (DMK) government claims that the amendment will attract more investment and generate employment in the state. This understanding is deeply flawed.
Reversing Structural Change?
Tamil Nadu is one of the few states in India that has simultaneously achieved structural transformation and poverty reduction. A key indicator of this is the low share of agriculture in total employment in the state as compared to the all-India average. However, this trend is now reversing. The share of agriculture employment increased from 27% in 2018-19 to 30% in 2020-21. In absolute terms too, it rose from 8.5 million to 10.5 million. The entry of 2 million people into agriculture is driven by the crisis. The share of manufacturing declined from 20% to 16.8%. The decline in absolute terms from 6.5 million in 2011-12 to 5.8 million in 2020-21 is sharp. Of course, the period discussed here is before the current DMK government came to power. Nevertheless, we do not see the course corrections made since then as promising. For example, a recent government release stated that state investments worth ₹2,73,448 crore were secured over two years by signing 224 MoUs. While we are not sure how much investment was actually received, interestingly, 4,10,561 jobs are claimed to have been created, which is 0.01 per unit of promised capital (less than one job per crore invested). ) Is. much less than before. According to the latest Annual Survey of Industries data (2019-20), the ratio of jobs created per unit of capital investment (number of workers to gross capital formation) was 0.58 for Tamil Nadu, 0.34 for Gujarat and 0.33 for Maharashtra. Unless we stop this trend, we will end up with low wages and disappearing jobs.
Historically, Tamil Nadu’s uniqueness lies in its pursuit of growth that delicately balances the needs of capital with the necessary safeguards for workers. As a result, even though the share of wages in national income is falling worldwide due to increased capital intensity, Tamil Nadu has a higher share of wages in terms of gross value added (GVA) in the factory sector than most states. The share of average wages in GVA for 2019-20 in the state was 21%, almost double that of Gujarat (12%) or Maharashtra (14%). Worldwide, wages are declining in part because of policies that favor capital by promoting labor market flexibility. Tamil Nadu is no exception, but has been able to relatively protect its workers. The relative wage level is high because of the low level of contractuality and better bargaining power of labour. The share of directly employed workers in the state was 80% in 2015-16, compared to the all-India average of 66%. The trend is now declining rapidly (76% in 2019-20) due to the use or misuse of contract labor under the Contract Labor (Regulation and Abolition) Act, 1970. in the courts and on the ground. This is the strength of Tamil Nadu, but it is diminishing now. In fact, the DMK itself came out with a promise in its 2019 election manifesto that it would work with the central government to form a tripartite committee to address workers’ grievances at the state and national levels.
Tamil Nadu need not stoop to the bottom of this race. The dilution of labor laws or tax concessions are not the only sources of competitive advantage. The state’s advantage lies in its skilled workforce, strong infrastructure, existing institutional ecosystem that generates positive externalities through good forward and backward linkages, and its governance style that minimizes operational costs.
Skilling and the future of work
As labor-saving automation in manufacturing and new-age platform economy trends deepen, displacement from routine jobs and a shrinking share of the wage bill in GDP are inevitable in almost all countries. With the average life of a skill getting shorter and shorter, it alone cannot be the solution to the future of construction work. A transformation in the service sector towards a knowledge-based industry is inevitable. However, Tamil Nadu’s achievement in higher education with a Gross Enrollment Ratio of 51.4% compared to the all-India average of 27.1% has not helped this transition either. Poor quality of school education, lack of infrastructure in higher education and poor skills imparted in vocational education have created the problem of skill gap or employability among the youth.
Recent efforts to attract software investment in Tier-2 cities are encouraging. While Naan Mudhalvan, a skill-enhancement scheme for less privileged students, is laudable, the impact of such measures in terms of access to employment is not known.
What Tamil Nadu needs is a renewed approach to address the qualitative aspects of social policy and an industrialization strategy that ensures decent wages and dignified working conditions.
Kalairasan A. South Asia Institute, Assistant Professor at the Madras Institute of Development Studies and Research Affiliate at Harvard University.