|
 India's biggest cities face a worsening shortage of migrant manual
laborers like 26-year-old Charan, who goes by only one name. While
India has long suffered from a dearth of workers with vocational
skills like plumbers and electricians, efforts to alleviate poverty
in poor, rural areas have helped stifle what was once a flood of
cheap, unskilled labor from India's poorest states.
Struggling to cope with soaring food prices, this dwindling supply
of migrant workers are demanding — and increasingly getting — rapid
increases in pay and benefits.
"After paying for food we are left with almost nothing. We need a
wage hike," said Charan, who sends a part of whatever he and his
wife, who works at the same site, manage to save to their parents
back home in Chhattisgarh state.
If their employer refuses to give them an adequate raise, they are
confident they'll find better-paying jobs at one of the hundreds of
other sites dotted around Gurgaon.
Such gains by migrants and the rural poor don't come without a cost
to the rest of the country.
More than pressuring corporate profits, these rapid blue-collar wage
increases threaten efforts to quell inflation by India's new central
bank chief, Raghuram Rajan, the former International Monetary Fund
economist who took over as governor at the Reserve Bank of India
(RBI) in September. Rajan has made price stability a policy
priority, calling it a prerequisite for reviving economic growth
that has slipped to 5 percent a year, the lowest in a decade.
Despite little evidence that interest rates can control food prices,
Rajan has raised rates twice since taking over to prevent food-price
inflation from spilling over into the wider economy. He has warned
of another hike next month if prices don't cool significantly.
"India has become a high-cost economy," said Devendra Kumar Pant,
chief economist at India Ratings & Research. "Persistently high
inflation is a recipe for disaster."
Take onions, which figure in almost every Indian meal. Prices for
onions shot up 190 percent to $1.60 a kilogram in the past year,
making them more expensive in India than in the United States, where
incomes are roughly 35 times higher. That helped push vegetable
prices up 95 percent in the past year and pushed India's headline
inflation rate in November to 7.5 percent, a 14-month high.
And while vegetable prices are expected to start easing next month
following a bumper harvest, subsidized government purchases of
grains and rising farming costs mean overall food inflation is not
likely to slow down much.
RURAL PROGRAMMES
Farming costs are also being driven higher by a government-run,
rural employment guarantee program that uses public works projects
to provide at least 100 days of guaranteed wage employment each
financial year to each rural household with adult members willing to
work on irrigation, reforestation, soil conservation and road
construction.
Since its rollout in 2006, the program has helped boost livelihoods
on poor Indian farms. In the largely rural state of Andhra Pradesh,
according to one study, the program has enabled households to boost
spending by a tenth, and raise spending on items other than food by
almost a quarter.
Rural wage increases have jumped, from 2.7 percent a year before the
program to 9.7 percent after its passage. Since 2009, nominal
agricultural wages have climbed by more than a fifth a year, with
non-farm rural wages up almost 17 percent.
Adding to wage inflation is a pickup in economic activity and job
creation in laggard states of central and eastern India, which in
the past used to be the main source of migrant labor.
Improved law and order and greater focus on development have helped
boost growth in poorer states such as northeastern Bihar, whose
economy has been growing by roughly 11 percent a year since 2006.
[to top of second column] |
While that's not enough to reverse India's broader economic
slowdown, migration of workers has dramatically slowed down.
With jobs and wages rising so fast at home, big cities offer less
of a lure to rural workers. Bihar estimates that immigration of
unskilled workers last year dropped by two-fifths. That's shutting
down an important source of workers for industries that have come to
rely on them, particularly the construction sector that accounts for
8 percent of India's GDP.
"Wages in states like Bihar are more or less comparable to those in
Delhi," said Ram Kumar, a contractor who supplies workers to
different construction projects around Gurgaon. "But the cost of
living is much cheaper than Delhi. So there's not much to gain from
coming to big cities."
ADD-ON BENEFITS
Wages for blue-collar workers, skilled and unskilled, are growing by
an estimated 15 percent a year, according to government data, faster
than the 6 percent average inflation rate, but barely above the 13
percent average annual increase in food prices. Construction workers
have managed to do better, with wages rising at an average of 18
percent annually since 2009, according to data from India's
Construction Industry Development Council, a joint
government-private sector body.
"Inflation is leading to the need to increase wages," said Kumar
Gera, Chairman at Gera Developments, a real estate developer in
western India. "When workers come and tell you they can't afford
essential food items with what they are earning, you have to raise
wages."
To retain workers, some companies provide canteens with free food,
clinics and even day-care and schools, in addition to on-site
housing.
At the residential site where Charan works, for example, Emaar MGF
Land Ltd <EMAAR.UL> — a joint venture between Dubai's Emaar
Properties PJSC <EMAR.DU> and MGF Development Ltd — IL&FS
Engineering and Construction Co Ltd <ILFE.NS> and Larsen & Toubro
Ltd <LART.NS> have all built military-style barracks for workers
next to the construction sites.
Weak demand has so far not allowed developers to pass rising labor
costs on to buyers, but that appears certain to change.
Rajan Kale, a tendering manager at port and road builder Man
Infraconstruction Ltd. <MANI.NS>, said rising wages trimmed the
company's net profit by about 2 percent last year, contributing to
an overall 34 percent drop in profit. His company plans to start
including annual wage increases of up to 15 percent into its project
budgets, he said.
That may not be enough for workers coping with India's rising
grocery bills. Last week, Kumar, the labor contractor, pulled his 15
workers from one construction project after its developer refused
their demand for a 10-15 percent pay increase.
"Workers are ready to switch employers for a hike of as little as 10
rupees," Kumar said.
Now his team is working for a different company at a different site — earning 20 percent more.
(Writing by Rajesh Kumar Singh and Frank
Jack Daniel; editing by Wayne Arnold and Ian Geoghegan)
[© 2013 Thomson Reuters. All rights
reserved.] Copyright 2013 Reuters. All rights reserved. This material may not be published,
broadcast, rewritten or redistributed. |
