Technology, Jobs and Inequality Evidence from India’s Manufacturing Sector
Kapoor, Radhicka | February 2016
Abstract
Faced with easier access to foreign technology and imported capital goods, firms in India's organised manufacturing sector adopted advanced techniques of production leading to increasing automation and a rise in the capital intensity of production. This has raised much concern about the ability of the manufacturing sector to create jobs for India’s rapidly rising largely low-skilled and unskilled workforce. However, what has attracted less attention in the literature is the impact of capital augmenting technological progress on the distribution of income and wage inequality. This paper attempts to fill this gap using enterprise level data from the Annual Survey of Industries. We find that with growing capital intensity of production, the role of labour vis-ŕ-vis capital has declined. The share of total emoluments paid to labour fell from 28.6% to 17.4% of gross value added (GVA) between 2000-2001 and 2011-12, while, the share of wages to workers in GVA declined from 22.2% to 14.3%. Importantly, even within the working class, inequalities have increased. The share of skilled labour (non- production workers i.e. supervisory and managerial staff) in the wage pie rose from 26.1% to 35.8%, while that of unskilled labour (production workers) fell from 57.6% to 48.8% of total wage bill. However, it is not just the growth of capital intensity but another important, though independent change in the labour market (i.e. the rising share of contract workers) that explains rising inequality. Our results also underline the existence of capital-skill complementarity: firms with higher capital intensity employed a higher share of skilled workers and the wage differential between skilled and unskilled workers was higher in these firms.
Citation
Kapoor, Radhicka. 2016. Technology, Jobs and Inequality Evidence from India’s Manufacturing Sector. © Indian Council for Research on International Economic Relations. http://hdl.handle.net/11540/6532.Keywords
Economic development
Standard of living
Trade development
Employment
Performance appraisal
Needs assessment
Input output analysis|ADB
Employment
Performance appraisal
Project failure
Project impact
Project appraisal
Career development
Vocational training
Development Challenges
Asian Development Bank
Development Management
Skills Development
Performance Evaluation
Evaluation Methods
Evaluation
Job Evaluation
Staff Development
Labor policy
Manpower policy
Promotions
Career development
Job analysis
Participative management
Grievance procedures
Supervisors
Vocational guidance
Labor policy
Rural manpower policy
Career development
Applications for positions
Affirmative action programs
Labor turnover
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