Only anecdotal evidence has been available so far to back the assertion that there has been a sharp rise in agricultural wages. Now, field data bear out the trend. Collected by the Shimla-based Labour Bureau, these numbers show a roughly 50 per cent cumulative rise in rural labour wages in the past two years. The increase in Andhra Pradesh has been assessed at over 40 per cent in 2009, and a further 27 per cent in 2010. Even labour-surplus states like Bihar and Orissa have seen a 40 per cent and 43 per cent increase, respectively, in these two years. These wage increases have far outstripped inflation, as measured by the consumer price index for agricultural labour — 9.5 per cent in 2008-09, 15.8 per cent in 2009-10 and 9.1 per cent in 2010-11.
The result is that crop production costs have risen. Combined with the policy-driven shift in the terms of trade in favour of agriculture (through much higher procurement prices), the economy has seen resurgent rural demand — possibly contributing to the high price inflation seen for virtually all agricultural produce. Indeed, the maximum price increases have been in crops that are labour- and input-intensive, such as fruit, vegetables, cotton and sugarcane. This also testifies to a broadening pattern of food consumption.
Reports say that farm labour has turned scarce in pockets, especially during the agriculturally busy seasons, posing problems for farmers in sowing and harvesting. Particularly hard hit by labour paucity are the agriculturally progressive but labour-short states, where migratory workers from the eastern region had become virtually the mainstay of farming. Thus, the advantage of cheap labour that Indian agriculture enjoyed has partially eroded, underlining the importance of productivity growth if farming is to stay viable.
Is the rural employment guarantee programme responsible for the surge in rural wages? Perhaps it is, although the National Sample Survey says that only 477 million man-days of work were created under this scheme in 2007-08. Subsequent years may have seen larger numbers, as the coverage of the scheme spread, but even twice that number of man-days would mean an average of 100 days of work for no more than 10 million people, or 50 man-days of work for 20 million people. Those are small numbers when the population of agricultural wage-earners is about 150 million people. Still, upward wage pressure at the margin could have created a general surge in wage levels. An alternative hypothesis could be that the recent years of rapid economic growth have seen substantial wage inflation across sectors, especially in construction, with a resulting surge in wages for semi-skilled categories like carpenters, electricians, plumbers, stone-cutters and the like. In other words, the rural employment programme may be only a partial explanation for changing dynamics in the labour market.