19

CHAPTER II
EMPLOYMENT SCENARIO IN PUNJAB: EVIDENCE
FROM SECONDARY DATA
Employment is considered to be a key link between growth and poverty
alleviation. As the low income is an important aspect of poverty, and productive
employment is a key determinant of income, one way of defining pro-poor growth is
in terms of the employment outcome of growth. It is argued that decent and
productive employment is one of the best routes as to get out of poverty (Sau, 1978;
Parthasarthy, 1978; Islam, 2001). In the heydays of green revolution in the state, it
was argued that agricultural intensification and adoption of high yielding varieties of
grains have the ability and potential to create more than enough employment in
agriculture to absorb rural labour force. During the initial years of its launch in the
state, the HYV seeds-fertilizer-irrigation technology increased the level of on-farm
employment and its stability for agricultural labour and cultivators as well and the
state economy was said to have reached a stage of almost zero unemployment. For
productive employment of rural workers, what really needed was a strategy of
agricultural development based on labour intensive and capital-saving technology
(Sharma, 1974; Laxminarayan, 1982).
However, the rising cost of labour and other farm inputs without a
corresponding increase in procurement prices of wheat made mechanization of farm
operations and other labour saving devices increased attractive to progressive and
resourceful farmers. This resulted in a drastic cut in labour absorption in agriculture as
subsequently noted by Sheila Bhalla in a series of papers (Bhalla, 1987, 1988, 1992
and 1993). The labour absorption in agriculture in the state is, in fact, an outcome of
the two contrasting processes: (i) increase in the net sown area and/or increase in
cropping intensity and a change in cropping pattern from low labour absorption crops
towards higher labour absorption crops on the one hand; and (ii) mechanization
process on the other.
Till the mid-1980s, the combined effect of increase in cropping intensity and
change in the pattern of cropping outweighed the negative impact of mechanization
resulting in a sustained rise in labour use per hectare. Thereafter, the positive factors

20
were not sufficient enough to compensate for the negative impacts resulting in
contraction in man-days employment per hectare in almost all the crops (Bhalla,
1988; Gill, 2002; Sidhu and Singh, 2004).

On the other hand, the number of

agricultural workers in the state increased from 2.86 million in 1981 to 3.6 million in
2001 apart from a number of migrant labours increasing from 2.86 lakh in the lean
period to 5.72 lakh in peak period in 1983-84 and 3.86 lakh to 7.74 lakh respectively
in 1995-96 (Sidhu and Singh, 2004). It needs to be added here that had it not the
labour absorption in the dairy sector, which showed an increasing trend of labour
absorption, the fall in labour absorption in agriculture might have been much larger
than estimated by the researchers.
It is also noteworthy that over the years, the total holdings in the state have
shown a declining trend, with total holdings having reduced from 1375 thousands in
1971 to 997 thousands in 2000-01 (Rangi, 2007). It signifies that a number of
cultivators are leaving the profession due to its non profitability. The land operated
per cultivator and agricultural labourer taken together has declined gradually from
1.93 hectares of net area sown in 1960-61 to 1.25 hectares in 1990-91 to 1.13 in 200001. Even if someone takes the gross cropped area, the availability of it per agricultural
worker has come down over the years (Rangi and Sidhu, 2000). It has clear
implication that the available land area is just not available sufficiently for agricultural
workers in the state. Given these trends in labour absorptive capacity of state's
agriculture, the study has to look into other sectors for productively employing rural
workforce in the state.
2.1 Dimensions of employment in Punjab
According to Usual Status, Current Weekly Status (CWS) and Current Daily
Status (CDS) criteria, labour force participation rates (LFPRs) for rural as well urban
males have declined by one percentage point during the six years from 1993-94 to
1999-2000. On the other hand, LFPR for rural females has remained almost the same
over this period (4 per cent) according to usual principal status (UPS) criteria. It has
increased from about 20 per cent to 28 per cent according to Usual Principal and
Subsidiary Status (UPSS). This indicates that a higher proportion of females in rural
areas are subsidiary workers. There has been a declining trend of Worker-Population
Ratio (WPR) based on UPSS since 1983 for rural as well as urban males. For

21
instance, WPR for rural males has steadily declined from 67 per cent in 1987 to 53
per cent in 1999-2000. However, WPR for rural females, which declined from 36.5
per cent in 1983 to 22 per cent in 1993-94, has increased to 28 per cent in 1999-2000
(NSSO, 1990, 1997, 2001).
The rate of growth of the labour force has been higher (2.57 per cent) than that
of the workforce (2.55 per cent) during 1993-94 to 1999-2000. The growth of female
workforce has been comparatively higher than that of the labour force. Growth rate of
the labour force in rural areas has been higher (2.07 per cent) than that of the
workforce (1.99 per cent), whereas the growth rate of urban labour force has been
lower (3.81 per cent) than in the workforce (3.95 per cent).
2.2 Changes in status of employment
During 1999-2000, 54 per cent males and 89 per cent females in the rural
areas of the state were self employed. The corresponding proportion in urban areas
was 47 per cent for males and 49 per cent for females. The proportion of regular
employees among women (3.7 per cent) as compared to men (17.5 per cent) was
much lower in rural and higher in urban areas with 43 per cent women and 40 per cent
men being regular employees during this period. The proportion of casual labour was
relatively much higher for males than females, both in rural and urban areas of the
state. However, male casual labour in rural areas, at 28.5 per cent, was much higher
than in urban areas at 12.2 per cent (NSSO, 1990, 1997, 2001).
The changes in the status of employment over the period indicate that the
proportion of self employed rural males has decreased from 60 per cent (UPSS) in
1987-88 to 54.7 per cent in 1993-94 and further to 54 per cent in 1999-2000. The
share of rural females in self employment, which remained constant at 85 per cent
during 1987-88 to 1993-94 increased to 89 per cent during 1999-2000. It is
noteworthy that regular male employees in rural areas have increased by 4 percentage
points during 1993-94 and 1999-2000 but it was still lower than that obtained in 198788. For rural males, the share of casual workers in rural employment increased from
22 per cent in 1987-88 to 32 per cent in 1993-94. Though, it declined to 28.6 per cent
in 1999-2000, it was still higher as compared to the earlier period of 1987-88. For
rural women, it increased from 25 per cent to almost 40 per cent during 1987-88 to

22
1993-94, but then declined to 29 per cent in 1999-2000. In urban areas, too, the share
of casual employment is on the increase, for both men and women.
The casualization of workforce seems to be at the cost of self employment in
rural and urban areas. For rural workers, regular employment is showing a decreasing
trend. Though the decline in the self employment was observed mainly in the
agriculture, yet, it is the main reason for the casualization. The data do suggest the
operation of a process where regular workers are turning casual, albeit with a low
magnitude.
Casualization of workforce, as a phenomenon, is also operating at the level of
national economy as well. Over the period of time, this phenomenon is becoming
more and more prominent in agriculture too (Gill and Ghuman, 2001). Agriculture is
increasingly unable to productively absorb the growing labour force. At the same
time, there has also been a growth of non-agricultural activities in rural areas in
construction, trade and services which offer better earnings than agriculture. Most of
these employment opportunities have been temporary and casual in nature. The
increasing casualization is a cause of concern as workers in this category may not get
regular work and are more likely to be low-paid resulting in higher incidence of
poverty. Vulnerability and risks, uncertainty of work, low earnings, unfair treatment
by employers and lack of social protection measures are the normal characters of
casual workforce (Papola and Sharma, 2005).
Slow growth of employment in the organized sector has been a major factor in
the stagnancy in the proportion of regular wage and salary earners. Growth of
employment in both the public and private sectors has declined. The share of
organized sector employment in total employment was about 9 per cent in 2000. It
means that a large proportion of workforce in the state is engaged in the informal
economy. At the all-India level, organized sector's share in employment was only
about 7 per cent (Planning Commission, 2001). Data suggest that in Punjab, the
growth of employment in the organized sector has constantly declined from 2.63 per
cent in 1981-85 to 1.36 per cent in 1995-96 and further to 0.10 per cent in 1999-2000.
The decline in the growth of public sector employment has been much faster than in
the private sector (CRRID, 2002).

23
2.3 Changes in distribution of workforce
Census data from 1961 to 2001 show that there is a slow but steady change in
workforce pattern in the state of Punjab. Over the years, there is a continuous decrease
in the dependence of workers on agricultural sector and their reliance on various
secondary and tertiary sector occupations has been on the increase.
Table 2.1: Percentage distribution of workforce in Punjab by main industrial
classification
(main workers only)
Sector
1961
1971
1981
1991
2001
Cultivators
46.22
42.55
35.86
31.44
24.27
Agricultural labourers
9.64
20.11
22.16
23.83
13.55
Livestock, forestry, fishing,
1.10
0.94
1.00
0.80
7.31
plantations, orchards and allied
activities
Sub total: Primary
56.96
63.60
59.02
56.07
45.13
Mining & quarrying
0.02
0.02
0.02
0.06
Manufacturing, processing,
servicing and repairs
Household industry
8.89
3.17
2.58
1.33
3.10
Other than household industry
Construction
Sub total: Secondary
Trade & commerce
Transport, storage &
communication
Other services
Sub total: Tertiary
Grand total

6.72
2.28
17.89
6.95
2.45

8.12
1.97
13.28
8.23
2.81

10.57
2.05
15.22
9.48
3.74

10.95
2.56
14.86
10.54
3.84

12.02
5.05
20.23
11.13
4.11

15.75
25.15
100.00

12.08
23.12
100.00

12.54
25.76
100.00

14.69
29.07
100.00

19.40
34.64
100.00

Note: In 1961 census, Mining and quarrying and agricultural allied activities were clubbed together.
Source: Director, Census Operation, Punjab (1961, 1971, 1981, 1991, 2001).

It is clear from Table 2.1 that structure of employment in the state has
undergone a change. In a period of 30 years since 1971, the share of primary sector in
employment has declined from about 63.60 per cent to 45.13 per cent. The decline in
the importance of primary sector was sharpened during the 1990s when it declined by
more than 10 percentage points. The data also show that during 1961-1971, there was
a larger increase of agricultural labour. This was due to a large absorption of workers
in agriculture caused by the introduction of green revolution technology in the state in
the mid-1960s.
NSSO data also confirms the changing pattern of employment in the state.
Table 2.2 indicates the changing structure of the workforce at the broad industry level
in Punjab as compared to the country as a whole. The share of workforce engaged in

24
agriculture in Punjab has declined from about 67.90 per cent in 1983 to 53.23 per cent
in 1999-2000 as compared to about 68.45 per cent to 59.84 per cent in the country as
a whole during the same period. On the other hand, the share of the secondary sector
has increased in Punjab from about 12.75 per cent in 1983 to 17.51 per cent in 19992000 as compared to 13.76 to 16.85 per cent in the country. The workforce engaged in
the service sector in the state has increased from 19.22 per cent to 29.26 per cent over
the same period as compared to 17.21 per cent to 22.73 per cent in the country. Thus,
it is evident that Punjab has experienced a greater shift of labour force to non-farm
sectors than in the country as a whole. This can be attributed partly to the
deterioration in employment conditions in the agricultural sector in the state.
Table 2.2: Percentage share of estimated workforce at sectoral level in Punjab and India
Sector
Punjab
India
Agriculture
Mining & quarrying
Sub-total: Primary
Manufacturing
Electricity, gas, water,
etc.
Construction
Sub-total: Secondary
Trade, hotel &
restaurants
Transport, storage
communication, etc.
Finance, insurance
services
Public administration,
community services
Others
Sub-total: Tertiary
All 9 (No. in Millions)

1983

1993-94

1999-00

1983

1993-94

1999-00

67.90
0.03
67.93
9.81
0.72

56.50
0.24
56.74
10.28
1.27

53.23
53.23
10.91
0.93

68.45
0.58
69.03
11.24
0.28

64.75
0.72
65.47
11.35
0.36

59.84
0.57
60.41
12.09
0.32

2.22
12.75
6.17

4.08
15.63
10.45

5.67
17.51
13.54

2.24
13.76
6.35

3.12
14.83
7.42

4.44
16.85
9.40

3.41

3.56

5.21

2.44

2.76

3.70

0.91

1.07

1.25

0.56

0.94

1.27

7.88

12.54

9.26

7.86

9.38

8.36

0.95
19.22
7.30

27.62
7.98

29.26
9.29

17.21
302.76

20.50
374.45

22.73
397.00

Source: NSSO, (1987, 1997, 2001); Planning Commission, (2001).

2.4 Changes in distribution of rural workforce

As per Census data, 66 per cent of the population and 70 per cent of state's
workforce was residing in rural areas in 2001. Of all the main workers 45.12 per cent
were engaged in agriculture and allied occupations. Table 2.3 reveals that the share of
agriculture and allied activities in the total rural workforce in Punjab is on the decline.
Over a period of 30 years, the rural workers' dependence on primary sector has
declined from 79.51 per cent in 1971 to 64.11 per cent in 2001. During the 1990s, the

25
decline is rather sharp. It may be noted that there was quite a large jump in the
proportion of workers in 2001 dependent upon livestock and other related activities.
This was mainly due to change in definition all persons who were involved in
tendering of livestock meant even for domestic production were treated as workers.
This may explain the unusual increase in women's participation in livestock in 2001.
Their contribution which was 0.96 per cent in 1981, 0.67 per cent in 1991, suddenly
shot up to more than 10 per cent because of this definitional change. If we take
livestock and other related activities as a part of rural non-farm sector [as suggested
by Saith (1992), and Papola and Sharma (2005)], then the dependence of rural
workers on agriculture proper declined from 73.56 per cent in 1991 to 53.94 per cent
during 2001. This huge decline of 20 percentage points in mere 10 years in the
dependency of rural workers on state's agricultural sector is a matter of much debate
and discussion (Ghuman et al., 2002; Ghuman, 2005). In fact, one of the main
inspirations behind this study of rural non-farm sector in the state was this 20 per cent
exit of rural workers from the farm sector of the state.
Table 2.3: Percentage distribution of rural workforce in Punjab by main industrial divisions
1971
1981
1991
2001
Sector
53.64
47.72
42.81
35.09
Cultivators
24.79
28.52
30.75
18.85
Agricultural labourers
Livestock, forestry, fishing, plantations, orchards
1.05
0.96
0.67
10.17
and allied activities
79.51
77.2
74.23
64.11
Sub-total: Primary
0.02
0.03
0.01
0.03
Mining & quarrying.
Manufacturing, processing, servicing and repairs
3.42
2.28
1.17
2.74
Household industry
3.25
5.09
5.47
7.47
Other than household industry
Construction
1.54
1.55
1.87
4.26
8.23
8.95
8.52
14.50
Sub Total: Secondary
3.17
3.96
4.09
5.48
Trade & commerce
1.30
2.30
2.57
3.05
Transport, storage & communication
7.81
7.59
10.59
12.86
Other services
12.27
13.85
17.25
21.39
Sub-total: Tertiary
100.00 100.00 100.00 100.00
Grand total
Source: Director, Census Operation, Punjab (1971, 1981, 1991, 2001).

NSSO data also confirms the declining reliance of rural workers on

agriculture. During 1999-2000, among all usually employed workers in rural areas of
Punjab, 63.7 per cent males and 90.6 per cent females were engaged in agricultural
activities (Table 2.4). The proportion of males in the agricultural sector has gradually

26
declined from 68.8 per cent in 1983 to 681 per cent in 1993-94 and finally to 63.7 per
cent in 1999-2000. On the other hand, the proportion of females engaged in this
sector decreased only marginally from 92.2 per cent in 1983 to 90.6 per cent in 19992000. Over the years, there has been a gradual increase in the proportion of males
engaged in construction whose share more than doubled between 1983 and 19992000. Similarly, trade, hotel and restaurants; transport, storage and communication,
etc.; and public administration and community services also showed considerable
expansion in employing rural male workers.
NSSO data also show the increasing dependence of rural workers on non-farm
pursuits as is evident from Table 2.4. About 27 per cent rural workers were engaged
in non-farm pursuits in Punjab in 1999-2000, whereas 36 per cent of male rural
workers were engaged in various non-farm activities. The women workers, however,
were found to be stuck in agricultural activities a high of 90.6 per cent of them in
1999-2000 drawing their livelihood from agriculture.
Table 2.4: Percentage distribution of usually working rural persons in the UPSS by
broad industry category in Punjab
Sector

Rural males

1983
1987-88
Agriculture
77.0
68.8
Mining &
--quarrying
Manufacturing
6.2
9.7
Electricity, gas,
0.7
1.1
water etc.
Construction
2.9
4.0
Trade, hotel &
4.1
4.5
restaurants
Transport, storage
3.3
3.8
communication etc.
Finance, insurance
0.3
services
Public
7.2
administration and
5.1
community
services
Total
100.00
Source: NSSO, (1987, 1990, 1997, 2001).

Rural females

1993-94
68.1
--

1999-00
63.7
--

1983
92.2
0.1

1987-88
91.6
0.1

1993-94
92.7
--

1999-00
90.6
--

6.2
1.5

7.7
1.1

4.2
--

2.8
--

1.3
0.2

2.3
0.2

4.7
6.3

7.8
8.1

0.1
0.6

-1.1

-1.0

0.1
1.1

3.6

5.6

0.1

0.1

--

--

0.6

0.5

--

--

--

9.0

5.5

2.1

4.2

4.8

5.7

100.00

100.00

100.00

100.00

100.00

It is noteworthy that as per NSSO, the proportion of rural workers in the nonfarm sector has increased from 23.0 per cent in 1983 to 27.3 per cent in 1999-2000,
whereas the census data (2001) shows a higher share of rural workers in nonagricultural pursuits at 36 per cent. Most agricultural households in contemporary

27
Punjab have diversified their economic activities. They are increasingly becoming
pluri-active, "standing between farming and other activities whether as seasonal
labourers or small scale entrepreneurs in the local economy. Agriculture and
farming is no more an all-encompassing way of life and identity" (Lindberg, 2005
quoted in Jodhka, 2005).
Table 2.5: Sectoral distribution of usual status rural workers across major Indian states
by Sex: 1983/1999-00
State
Andhra Pradesh

Assam

Gujarat

Haryana

Kerala

Maharashtra

Punjab

Rajasthan

Tamil Nadu

West Bengal

Year
1983
1993-94
1999-00
1983
1993-94
1999-00
1983
1993-94
1999-00
1983
1993-94
1999-00
1983
1993-94
1999-00
1983
1993-94
1999-00
1983
1993-94
1999-00
1983
1993-94
1999-00
1983
1993-94
1999-00
1983
1993-94
1999-00

Agriculture
M
F
77.1
83.4
75.6
83.7
74.4
84.4
78.6
79.8
77.7
82.9
64.5
79.3
78.9
92.0
71.0
90.6
71.9
92.2
71.2
89.5
60.8
93.0
59.5
92.7
57.6
70.4
52.8
62.8
43.0
60.6
79.5
92.7
75.3
91.2
73.9
94.0
77.0
92.1
68.0
92.7
64.0
90.7
80.7
94.0
69.5
93.0
67.1
92.1
68.7
81.7
63.8
78.4
62.6
76.4
73.0
74.8
64.8
59.6
66.0
52.6

P
79.9
79.3
78.8
78.8
78.7
67.7
84.4
78.6
80.4
76.8
71.8
69.8
62.8
56.1
48.8
85.6
82.6
82.8
82.0
74.6
72.9
86.6
79.8
77.9
74.4
70.3
68.3
73.4
63.5
63.0

Manufacturing
M
F
P
8.0
7.6
7.7
7.1
7.4
7.3
6.2
6.1
6.2
3.3
9.2
4.4
4.0
10.5
5.4
4.2
10.0
5.4
7.4
3.3
5.7
12.9
4.2
9.5
10.2
2.1
6.8
7.6
3.8
6.1
6.5
1.5
4.8
10.5
2.1
7.9
12.6
17.7
14.5
10.7
19.4
13.6
11.6
20.2
14.4
6.9
2.7
5.0
7.2
3.1
5.3
7.6
2.2
5.2
7.3
4.2
6.3
7.5
1.3
5.9
10.0
3.0
7.7
5.7
2.5
4.2
6.9
1.5
4.6
6.4
2.9
4.8
12.5
9.9
10.9
14.0
13.1
13.6
14.4
14.4
14.4
9.3
16.6
11.1
12.8
30.3
17.0
11.9
38.0
17.7

Non-Agriculture
M
F
P
22.6
16.3
19.7
24.4
16.3
20.7
25.6
15.6
21.2
21.2
18.0
20.0
22.3
17.1
21.2
35.5
20.7
32.3
20.3
7.1
14.8
28.8
9.4
21.3
28.1
7.8
19.6
28.5
9.9
22.3
39.2
6.8
28.1
40.5
7.3
30.2
42.3
29.5
36.9
47.1
37.1
43.9
57.0
39.4
51.2
20.2
7.0
14.2
24.7
8.8
17.4
26.1
6.0
17.2
22.3
7.2
17.4
31.9
7.3
25.9
36.0
9.3
27.1
19.0
6.0
13.3
30.4
7.0
20.2
32.9
7.9
22.1
31.2
18.2
25.1
36.2
21.6
29.6
37.4
23.6
31.7
26.8
24.8
26.3
35.1
40.4
36.4
34.0
47.4
37.0

Note: M= Rural Male, F=Rural Female, P=Rural Persons

Source: Government of India, SARVEKSANA, Vol. XIV, No.1 & 2 Oct-Dec.1990; NSSO, various
rounds.

The data on operational land holdings and its distribution in Punjab reveals
that these decreased from 13, 75,392 in 1971 to 10,19,990 in 1981 to further 9,97,370
in 2001. The decline of almost four lakh holdings between 1971 and 2001 reflects a
move away from agriculture in the employment patterns of Punjab. The decline is
most clearly visible in the category of marginal land holdings (less than one hectare).
Their share more than halved from 37.63 per cent in 1970-71 to 26.47 per cent in
1991 and further to 12.30 per cent in 2001. Small holdings also experienced a decline

28
in their share, but not as pronounced as marginal ones. There is a corresponding rise
in the medium and large holdings. The latter category of farmers is more urbanized in
their look and behaviour. Their children generally study in urban schools.
As per NSSO data (Table 2.5), the Punjab's share of 27.4 per cent in rural nonfarm employment is lower than that of Kerala (51.7 per cent), West Bengal (36.4 per
cent), Assam (32.3 per cent), Tamil Nadu (32.1 per cent) and Haryana (31.5 per cent).
The share of non-farm employment in the country as a whole was 23.7 per cent in
1999-2000. Thus, it is observed that the share of non-farm sector has increased over
the period acres all main states including the state of Punjab. However, the pace of
shift from agriculture to non-agricultural activities, especially in rural areas needs to
be addressed at the policy level.
2.5 Sectoral growth rate of employment in Punjab
Table 2.6 shows the sectoral growth rates in employment of rural workers in
the state. The annual growth rate of employment in the manufacturing sector in rural
areas has increased from minus 0.64 per cent during 1983/1993-94 to 6.83 per cent in
1993-94/1999-2000. The household industry in rural areas has also registered
substantial rise during the 1990s. The construction sector has also recorded a high
growth of employment during this period in both rural and urban areas. Transport,
storage and communication is another sector which has witnessed a very high growth
of employment.
Table 2.6: Sectoral growth rate of rural employment (UPSS) in Punjab: 1983-2000
Sector
1983/1993-94
1993-94/1999-00
Agriculture
-0.86
1.53
Mining & quarrying
0.32
NA
Manufacturing
-0.64
6.83
Electricity, gas, water etc.
9.82
-4.17
Construction
5.75
9.57
Trade, hotel & restaurants
5.26
0.00
Transport, storage communication, etc.
1.69
8.55
Finance, insurance & real estate
8.13
0.53
Public administration, community services
7.10
-3.21
All sectors
0.10
2.00
Source: NSSO, (Various Rounds).

2.6 Unemployment rates in Punjab

The NSSO recorded the unemployment rate of Punjab at 4.2 per cent in 19992000, as against 7.3 per cent in all India. If unemployment rates of rural males are

29
observed according to UPS, CWS and CDS criterion, it emerges that there is a high
degree of intermittent unemployment in the state. This shows lack of regular
employment for many workers. Furthermore, unemployment rates for rural males on
UPS basis have increased by about one percentage point during 1993-94 to 1999-2000
and same is the case with rural females. From 1983 to 1999-2000, the unemployment
rates for rural males had declined until 1993-94, but rose significantly thereafter.
Female unemployment rates in rural areas have been on the decline on all the three
measures (Chadha and Sahu, 2002).
A survey by the Economic and Statistical Organization of Punjab (2000) of the
unemployment situation in the state indicates that the situation of unemployment is
the most serious in the age group of 18 to 35 years. According to this survey, there
were 14,71,527 unemployed persons in the state in 1998, of which 10,40,269 (70.69
per cent ) belonged to rural areas. Estimates of unemployment in the Ninth Five Year
Plan (1997-2002), by Planning Commission of India (1999), indicate that the growth
of employment during the Ninth Five Year Plan would be 0.73 per cent as compared
to that of the labour force which will be 2.27 per cent during the same period. The
projected growth rate of employment in the state is one of the lowest among major
states. Hence, it is estimated that unemployed persons during the Ninth Five Year
Plan will be the 10,65,000 persons in Punjab. When added to the backlog as estimated
by Economic Advisor, Punjab, 2000, as in 1998, the situation becomes really grim. It
is suggested that the economic growth rate in the state, should be three times higher
than the population growth rate, if unemployment is to be taken care of. The annual
economic growth rate of Punjab had been in the vicinity of 3 per cent during the
1990s while the population growth rate had been around1.8 per cent. This, along with
the investment deficiency, explains the rise in unemployment rate and deceleration in
growth over the years. It has been estimated that Punjab has suffered from an
investment gap of Rs. 94970 million per annum during the last fourteen years, i.e.,
1995-2009 (Department of Economics, 2011). Of the total estimated unemployed
persons, 8,97,860 (61.62 per cent) were educated and the rest uneducated (Economic
Advisor, 2000). The shares of educated and uneducated employed in the rural areas
were 56.17 per cent and 43.87 per cent, respectively. However, the share of educated
unemployed persons was much higher at about 73 per cent in urban areas. This

30
indicates that the education infrastructure is much better in urban areas in comparison
to rural areas where a large labour force is deprived of good education and training
opportunities.
The employment context of Punjab, in fact, changed significantly after the
mid-1970s. Agricultural migration to newly reclaimed lands in other parts of India,
which has been continuing since the closing decades of the 19th century, virtually
came to a halt. Recruitment in defense forces was regulated on the basis of the share
of the eligible population in different states in 1974 and this was to the disadvantage
of Punjab. The number of ex-servicemen, seeking re-employment, is much larger than
the new entrants to the defense forces (CRRID, 2002). Meanwhile, avenues of
emigration to other countries remain regulated.
Unemployment in Punjab is essentially of educated persons in nature as 61.6
per cent of the unemployed being matriculates or above. Nearly one-fourth of them
are technically or professionally trained being diploma holders, engineers, trained
teachers and doctors. Educated unemployment is growing faster in rural than in urban
areas. A survey of unemployment and underemployment carried out during 1979-81
brings out that nearly 80 per cent of the unemployed in rural Punjab were matriculates
and above but majority of the under employed were either illiterate or just illiterate
(Krishan, 1986). The unemployed workforce, labeled as uneducated, cannot be
absorbed in the secondary and tertiary sectors, without giving them further schooling
and raising their skill acquisition. Due to lack of appropriate training programmes for
skill formation, uneducated unemployed persons have to be content in rural areas with
disguised unemployment (Gill, 2002).
2.7 Underemployment in Punjab
Not only is there the problem of open unemployment, the quality of existing
employment is low and deteriorated into an increasing level of under employment.
Under utilization of labor time of workers in agriculture and in some lines of self
employment in non-agriculture has been noticed for the rural areas of the state
(Simmons and Supri, 1995). It has been estimated that one-third of the workforce
involved in agricultural operations can be withdrawn without any net loss to
agricultural output. Approximately, one million cultivators and 0.28 million
agricultural labourers were surplus in 1991, causing under employment for the rest of

31
the workforce (Gill, 2002). The problem of under employment is very serious among
cultivators as compared to agricultural labourers. Whereas the agricultural labourers
can afford to leave the village and seize every opportunity of employment, but the
self-employed cultivators are prevented from doing so by the very nature of the
enterprise which requires their presence even during the off-season (Dantwala, 1953).
Their problem is further aggravated because of the small size of the majority of
holdings as well as because of hiring in of agricultural labourers for certain activities
which the peasant cultivators do not undertake due to social and economic factors. At
the same time, the fast shrinking time-gap between harvesting of one crop and sowing
of another (due to intensive cultivation), force even the small and marginal holders to
hire in some agricultural labour (Sidhu, 1991; Gill, 2002).
2.8 Stagnanted employment in Punjabs organized sector
Tackling the problem of open unemployment is a difficult and more complex
process because there is a mismatch between the aspirations of the unemployed and
the policy environment in the state. Rural job seekers aspire to get government and
semi government jobs due to security of service and higher salaries as well.
Government on the other hand is not willing to hire workers. In the last 15 years or so,
the government is rather down sizing its lower bureaucracy and other jobs. The profile
of employment in the organized sector shows that it does not hold any prospect for
absorption of rural unemployed youth. In 2005, 7,73,116 workers were employed in
organized sector out of which 67.26 per cent were in public sector and 32.74 per cent
in the private sector. The share of public sector employment has decelerated since
1985, whereas the share of private sector employment has increased from 26 per cent
in 1985 to 28 per cent in 1990, to 30 per cent in 2000 and further to 32.74 per cent in
2005. The share of public sector in employment has continuously decreased in
absolute sense from 5,66,197 workers in 1990 to 5,19,976 in 2005 (Statistical
Abstract of Punjab 2008). Female employment in the organized sector in the state was
1.44 lakh (17 per cent) in 2000. The share of organized sector employment in total
employment in the state was about 9 per cent only in 2000. Obviously a very large
proportion of the workforce in the state is engaged in informal sector (CRRID, 2002).
Growth rate of employment in the organized sector has constantly declined from 2.63
per cent in 1981-82 to 1.36 per cent in 1995-96 and further to 0.10 per cent in 1999-

32
2000. The decline in the growth rate of employment in the public sector has been
much faster than in the private sector. For instance, the growth rate of employment in
the public sector declined from 1.75 per cent in 1985-90 to -0.19 per cent during
1999-2000, and in the private sector from 2.22 per cent to 0.80 per cent during the
same period.
The growth rate of Indian economy during the last two decades suggests that
high growth rate is no guarantee for employment in the organized sector. Similarly,
industrialization experience of Punjab indicates that employment generating capacity
of organized industrial sector is on the decline. Employment per unit has declined
from six in 1981 to four in 1999-2000 in the small scale industries sector and from
481 to 386 in the large and medium sector during the same period (Table 2.7).
Investment per employee and production per employee have shown an increasing
trend during the same period for both the SSI and the large and medium sectors. This
trend, seems to be inevitable in the current competitive context, has a serious impact
on employment generation (CRRID, 2002).
Table 2.7: Average employment per unit, investment and production per employee
Year
Employment per unit
Investment per
Production per
employee (Rs.)
employee (Rs.)
SSI
L&M
SSI
L&M
SSI
L&M
1980-1981
6
481
12535
66269
42226
103954
1985-1986
5
453
15898
112709
46277
191757
1990-1991
4
504
20166
213121
60549
376593
1995-1996
4
400
27622
415501
116063
791462
1999-2000
4
386
42963
625688
188117
1005121
Source: CRRID, 2002.

The average investment in plant and machinery per small scale unit in Punjab
was only Rs.1.46 lakh in 1997-98, which was much lower than Rs. 5 lakh in
Maharashtra. During the same period, the average employment per unit in Punjab was
significantly low at 4.3 persons compared to 8 persons in Maharashtra. These and
other indicators show that Punjab is far behind the other states in employment
generation in industrial sector. However the small scale sector in Punjab is still labour
intensive in character. With 20 per cent of total industrial investment, it accounts for
80 per cent of industrial employment in the state. The capacity of organized industrial
sector to absorb surplus labour in agriculture is quite limited in India. Punjab is no
exception to it. Employment elasticities across sectors have been falling over time.

33
There is no tendency for them to increase; they may rather further fall in the wake of
increasing international competition caused by opening up of the economy (Papola,
1991).
The tragedy of rural unemployed is that the urban based industrial enterprises
prefer the migrant labour for the manual work and the urban youth for the clerical,
supervisory/managerial jobs. In the Hero Cycle Factory, near Ludhiana, nearly 50 per
cent of the unskilled labour was accounted for by migrants from East Uttar Pradesh
and North Bihar (Laxminarayan, 1982).
The tertiary sector of the state also does not offer much scope for the
absorption of rural under/unemployed workforce. The lack of right kind of skills and
education and capital requirements pose mighty barriers to successful entry into many
of the organized sector tertiary lines. The activities at the lower rung like rickshaw
pulling, street vending, coolies and construction activities in urban areas and even in
large villages have been cornered by the migrant workers. Migrant workers of the
second generation (who were born and grown up in the state) are seen doing the most
of the work of plumbering, electricity fittings, carpentry, masonry, repair of home
appliances, etc. Rather in the towns most of them have moved upwards by becoming
contractor in construction and house building activities. Rural unemployed youth,
thus, is not being absorbed even in unorganized service sector. The higher end jobs in
service sector not only require higher formal education, specialized skills, but social
and political contacts also. But the presence of rural students in state's universities and
colleges is dismal (Ghuman et al., 2009). For remunerative self employment in
organized service sector sufficient capital resources including urban space is of
paramount importance. Here again, the rural job aspirants are losers (Chadha and
Sahu, 2002).
2.9 Strategy for employment generation in Punjab
The long run strategy for employment generation in the state demands that
nearly half of the cultivators and 20 per cent of the agricultural labourers and the
entire growth of their number must be shifted outside agriculture both within and
outside rural areas in next 10 to 15 years (Gill, 2002). Though more employment can
be created by diversifying agriculture away from the wheat-paddy monoculture, into
pulses, oil seeds, fruits and vegetables and so on (Johl, 2002), it has been observed

34
that rural youth considers it an inferior occupation and below its dignity to work as
wage labourers on somebody else's farm due to many socio-cultural reasons (Chand,
1999). Furthermore, to make agricultural-diversification led employment strategy a
success, the state will have to make a huge investment in research and development of
new HYV seeds of high labour intensity crops, commodity-specific marketing,
storage, processing and other related fields. Only dairy sector is one branch of
farming where rural young workers, especially belonging to the dominant caste of Jat
Sikhs can engage themselves in self employment in addition to working on their own
lands. Rural boys and girls all have a cultural affinity with production processes
involved in milk sector. Along with the attitude, they thus have the necessary skills
and know-how for dairy activities. Wage employment in out of the village located
non-farm occupations, however, is fast catching up. Many a rural workers including
that of Jat Sikh stock are seen offering themselves for wage employment in
construction and other activities in urban labour chowks. The basic attitude of rural
job seekers has to be changed from always trying for government jobs. For this, the
appropriate changes in the educational system are required to be carried out with the
emphasis on vocational education over the general education. State government also
should not downsize the lower levels of its bureaucracy without attempting the same
at the top level.
In view of the mounting evidence that urban based heavy industrialization and
service sectors are not going to solve the problem of unemployment/
underemployment in the rural areas of Punjab, one has to think about setting up small
scale, spatially dispersed, local raw material based industrial units in the small towns
of the state. In India, 53 per cent of employment in the manufacturing sector is located
in rural areas and almost all of it is in the unorganized sector. Though the village
based traditional manufacturing activities have shown a constant decline in India
(Saith, 2000), yet, there is evidence to suggest that the economies of size, technology
and market are leading to a shift of certain rural industrial activities to small rural
towns (Papola, 1987; Saith 2000). It has been observed that the smaller sized urban
settlements, towns with a population in the range of 20 to 50 thousand have registered
the fastest growth of employment (Sinha and Mehta, 1987). There seems to be
emerging a trend towards a relative shift of small manufacturing activities from the

35
large to these small towns which are mainly characterized as rural towns. It has been
argued that this shift from villages and large urban settlements to small towns is not a
mere relocation, but has significant additive component (Papola, 1991). It is these
small rural towns where many of the services of health, education and administrative
units are located. Thus, the scope and potential of productive employment in
manufacturing and service sector activities within these small towns needs to be
recognized and positively encouraged by providing adequate and suitable
infrastructural support and fiscal and financial incentives making provision that these
incentives do reach small units and are not cornered away by the larger ones as has
happened before.
In Punjab, urbanization and agricultural development are closely linked.
Although industrialization remains the main force for urbanization, many small and
medium firms specialize in trade, marketing, and processing of agricultural produce,
and provide agricultural implements and other inputs. Since agricultural development
is fairly evenly distributed over the whole state, the development of agro processing
and agro input industries also is spread widely among small and medium market
towns (Bhalla, 1995). The small agro based units located in large villages or small
rural towns would not only provide gainful employment to the rural youth but also in
many ways help arresting the process of environment degradation. The state has a
large number of widely dispersed small towns. Each of these is a notified agricultural
produce market. These small towns have all the potential to become the focal points
for synergized agricultural-non-agricultural development. This would enable the
workers to commute easily between the place of work and their rural habitats.
The examples of the town and village enterprises (TVEs) in China and rural
industrialization of Taiwan offer useful insights for such a strategy of industrialization
(Kabra, 2005). China's rural industrial sector has become the most important source of
non-agricultural output and employment growth. Similarly, rural industrialization
strategy of Taiwan in transforming its economy has many lessons for an agriculturally
developed state like Punjab. The role of state in promotion of rural non-farm
employment in China and Taiwan cannot be over emphasized. Besides carrying out
successful land reforms, the state governments in these regions invested hugely
especially in rural infrastructure (Hart, 1998). Though rural infrastructure in Punjab is

36
already fairly developed as it has already achieved 100 per cent access of its villages
through all-weather metalled roads and each and every corner of the state is
electrified, yet for the transformation of countryside a basic change in the minds of
our planners would be required. All along the line, the planners and economists had
assumed that most, if not all, of the industries should be located in urban areas (Sethi,
1991). The programme and policies to promote rural industries were never a part of
the industrial policy of the country (Papola and Mishra, 1980). The above comments
apply equally to the state of Punjab.
It has been argued that the state has all the strengths which are needed for a
vibrant and dynamic rural non-farm sector (Fisher et al., 1997; Chand, 1999). Firstly,
the rural youth possesses some advantage over their urban as well as migrant
counterparts in agro processing because of their intimate knowledge of production,
procurement and processing of raw materials into final products. Secondly, the
excellent network of metalled roads and transport and reasonably good physical
infrastructure throughout the state is more than sufficient for a spatial distribution of
industrial units, so that the workers do not have to migrate from their rural habitats.
Thirdly, the availability of agricultural raw materials in abundance makes the state a
suitable destination for the rural non-farm sector. At present, valuable raw materials
are being simply wasted away and in many cases burned away degrading the
environment hugely. For example, at present, more than five million tons of paddy
straw is destroyed by burning without using it for industrial purposes. By promoting
industrial demand for straw as it can be used to manufacture products like strawboard, paper, alcohol, mats and ropes, the industries can be set up in the middle of
farms. The diversification of crop husbandry into dairy sector is also a potential area
for the creation of employment for the rural youth. The kind of skills needed in dairy
is in abundance with rural men and women. Culturally and socially also, they have an
affinity with the processes involved in this activity (Chand, 1999; Kahlon, 2001). The
high milk production in the state (and the low availability of it at the national level)
offers good opportunities for generating employment in processing and transportation
of milk products to the urban destinations. The success of Nestle in this regard is a
live example of how milk based economic enterprise located in a rural town can
change the lives of many ruralites in the radius of 30-40 kilometers.

37
Punjab has an added advantage that almost every small town in the state is a
mandi town also. The main/principal yards for sale and purchase of agricultural
produce and offices of Agricultural Produce Markets are all located in these small
rural towns. Here, the processes of cleaning, weighing lifting, transportation and
storage involving the interactions and engagement of cultivators, market labourers,
traders, transport workers and those involved in storage and processing make these
locations as 'happening places', thus having good potential for further generation of
rural employment. In addition to this, many educational, health, and entertainment
services are located in these small towns. These invariably have shops/dealerships for
the modern agricultural inputs. Floor mills, rice shellers, etc. tend to be located in
these places due to better power supply, drinking water and other supporting services.
But undoubtedly to make these small towns real hubs of economic growth and
employment generation, investment in infrastructure (roads, water supply and
sanitation, housing, health and education) will be a prerequisite so that they have all
the necessary services in place, thus, reducing any incentives to migrate to large
towns/cities like Ludhiana, Jalandhar and Amritsar. Uninterrupted quality power
supply is also a pre-requisite for industrial development. It has been suggested that
rural cooperatives if allowed to work autonomously can play a very significant role in
rural industrialization and in filling the infrastructural gaps in larger villages (Singh,
2000). The evidence shows that the rural non-farm sector in the state is already
growing at a healthy rate (Fisher et al., 1997).
To sum up, the problem of unemployment and underemployment in Punjab in
general and in its rural areas in particular is really serious. The government sector is
closing its doors to fresh recruitment. Rather over the last 15 years or so, it is in the
process of down sizing of its manpower, especially at the lower rung. In view of the
financial mess in which the state finds itself, nothing much can be expected for direct
state employment. The urban based heavy industry and the productive jobs in the
service sector can also not solve the problem in view of the non-availability of the
right kind of skills and attitudes with the rural unemployed. Even otherwise en mass
shift of rural labour force to urban towns is neither feasible (in view of the dwindling
resources of the state needed for housing and other infrastructural requirements in the
towns) nor practical (because of the cultivators' inability to leave their lands

38
altogether). In view of these observations, there is an urgent need to raise the growth
rate of GDP and employment. It would need a favourable investment climate and a
compatible policy orientation. The development of RNF sector is sine qua non for
addressing the problem of rural unemployment in the state.