T H E E C O N O M I C W E E K L Y November 16, 1957

The Fixation of Agricultural Wages Small Farms an Obstacle

Prafulla C Sarkar

T HE question of the regulation of agricultural wages in India

embraces no less than 17.6 mill ion rural families out of a total of 58 million in her rural sector. If, how­ever, agricultural wages are defined exactly in the same manner in which we define wages in industry we are in a position to effect a sig­nificant reduction of this number. But Indian agriculture Is generous enough, as it were, to permit almost countless connivances and contri­vances now being resorted to by a vast landless labour force with a view to earning some 'wage' even though in all cases workers do not receive returns to their labour at a time or piece rate. On the one end there are the labourers who seek to employ themselves in agricultural operations purely on daily wage basis. On the other the landless agricultural labourers who do not themselves own any land but culti­vate the lands owned by others on a share-cropping basis under the close or casual supervision of the owners are in fact workers w i th no or a few bullock or buffalo drawn ploughs. Between these two cate­gories one finds an immense variety of piece-rate workers, attached workers and contract labourers. Besides these two categories of workers, there are owners of small bits of land who take up work on others' lands on a. wage or share-cropping basis.

The point is that these categories cannot be held as mutually exclu­sive. Persons who work as share­croppers or cultivate the small hold­ings of owned land supplement their income in many cases by working on wage basis in other farms as frequenty as opportunities permit. Contract labourers and attached workers who are not as free to en­gage themselves on a daily wage basis are also known to employ themselves likewise to the extent possible. The work of the contract labourers, attached workers and share-croppers Is apparently mutu­ally exclusive. But these specific occupations also are inter-change­able over a span of years. A l l these different kinds of workers should, therefore, be classed to-

gether if the purpose is to locate the class of workers who sell their ser­vices to farms owned by others no matter how different are the methods they employ to get their wage equivalents.

Inadequate Employment This vast part of our population

live in utmost poverty* partly be cause their wage rate is too low and partly because the period of employment they enjoy is inade­quate. On an average an Indian agricultural labourer is without any employment for at least three months in a year†. From his point of view immediate relief could be given to h im by providing him wi th an additional employment of three months annually. But the creation of employment opportunities on this scale can almost be ruled out in the context of our circumstances at least within a span of one full gene­ration. The other course left to improve the plight of agricultural labourers is to increase their wage-rate.

In advocating increase in wage-rates of, for example, casual work-

The Agricultural Labour Enquiry revealed that 26.4 per cent of these families can spend annually upto Rs 100 per consumption unit. Within this group of families who cannot make available to their members more than Rs 100 per consumption unit there must be a large number of families whose available funds per consumption unit are much lower than Rs 100. In any case none of 81.9 per cent of the agricultural labour families can spend for its members more than Rs 200 a year per consump­tion unit. What is more, expendi­ture even of this level is financed not solely out of their earnings. Not less than 44.5 per cent of the agricultural labour families fin­ance a part of their consumption expenditures by borrowings and the average debt, per indebted con­sumption unit was roughly Rs 30 at the time of the Enquiry.

† Based on a scrutiny of the results rather than on the actual results of the Agricultural Labour En­quiry.

ers who make up a vast majority of the agricultural labour class one assumes nonetheless tha t they wi l l be able to save a part of their earn­ings wi th a view to spending on consumption during the unemployed days. The relevant question then is: W i l l they be able to distribute their savings for expenditure among all the unemployed days? It would he quite realistic to assume, under our circumstances, that the most unfavourably placed group of the agricultural labourers may regular­ly face what may be called a cycle of just enough consumption and severe under-consumption. In such cases the possibility of keeping to a more or less stable level of consum­ption following increased earning during the employed days is bound to be limited'". Nevertheless there can be l i t t le question that increased earnings wi l l give the workers greater freedom to provide for un­employed days.

Wage-rise and Production The derisive consideration to de­

cide whether or not an increase in wage can be recommended is to foreknow the repercussions in agri­cultural production as well as in the farm-investment incornesf of the agricultural producers. It is a peculiarity of agriculture that it is not possible to distinguish between low-wage paying units and high-wage paying units, or between 'able' unit.s and 'unable' units w i th the result that selective regulation of wages is not capable of being en­forced. Regulation of wages in agri­culture, therefore, has to be aimed at raising the wage rate in general.

One likely effect of the increase in the general wage rate will be

* There is a view that the uneven distribution of income over differ­ent parts of the year is a source of some amount of permanent frustration among agricultural workers and consequently respon­sible for avoidable expenses on drink and intoxicants etc during the better earning period,

† The assumption is that at the pre­sent level of the initiative of the rural investors non-farm invest­ment is not thought over.

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that the farm-investment income of small farms which is already very small w i l l be smaller in the wake of a rise in the wages of labour. One silver l ining in the matter is that the percentage of hired labour to the total labour employed In these farms is very small. Hence a slightly upward revision of the wages wi l l only nominally reduce the already small farm-investment Income of those farms. Moreover, a part of the family labour or these farms also earn as workers in other farms and is likely to benefit by an increased wage income, At any rate it is of first importance to know on a very reliable basis the extent of farm-investment income of farms of different sizes and es­pecially of the smaller ones. Be­cause if at least the sum of the farm-investment income and the total labour income of our small farm-owning families does not ex­ceed by a sufficient margin what the same amount of labour earns as purely labour income and if an up­ward revision of the wage-rate fur­ther aggravates the income situa­tion of these farm families there is asolutely no justification to speak of an upward revision of the agri­cultural wages.

Farm Management Studies The precariousness of our farm­

ing conditions becomes glaringly evident by some facts revealed in a number of farm management studies conducted in different parts of the country in 1954-55. In a l l these regions an overwhelmingly large number of farms are incur­r ing losses! In Amri tsar and Feroze-pur in the Punjab the average loss per acre in crop production is found to be Ra 8; losses are absent only in the largest holding group (i e, 50 acres and above). In Hooghly and 24 Parganas in West Bengal nearly 60 per cent of the farms are losing concerns, the average loss of these farms being Rs 154. Profit on the remaining 40 per cent of the farms comes to an average of Rs 205 per farm. The results of the Meerut and Muzaffarnagar survey in U p tell us that about one in every three of the holdings was farming at a loss, while the study in Coimbatore and Salem in Madras discloses an even worse condition

* See Bulletin of the Agro-Economic and Farm Management Research, Vo l 1, No 1, July 1957 (Issued for restricted circulation only).

- as many as 71 per cent of the farms are unable to cover the com­plete costs of production.

The concept of cost used for the above studies included the following items :

1) human labour, hired as well as imputed values of family labour;

2) owned and hired bullock labour;

3) seed (both produced and pur­chased) ;

4) manures (farm produced and purchased);

5) interest paid on loans for crop and also on owned fixed capital;

,: 6) land revenue and other taxes; 7) depreciation of implements

and other implement charges;

8) rent paid on land taken on lease and rental value of own­ed land; and

9) miscellaneous expenditure.

Clearly, this is a very exhaustive list. But even when we narrow down the concept of cost so as to cover only the following items, viz, hired human labour, owned and hired bullock laboour, seed (both farm produced and purchased), manures (both farm produced and purchased), Interest actually paid, depreciation of implements and other implement charges, land reve­nue and other taxes and miscella­neous expenditure, (i e, if we do not include rent paid on land taken on lease, rental value of the owned land, interest on owned fixed capital and imputed value of family labour) not less than 41 per cent of Salem and Coimbatore farms failed to meet the costs of production in 1954-55. It is quite possible that non-sampling errors from, one or the other source entered relatively heavily into the final figures in case of these two districts or t ha t the weather in the said crop year was particularly unfavourable for agri­culture there or tha t some very spe­cial circumstances prevail in these two districts.

During the same year, we are told that, in spite of the presence of more or less overall losses in entire agriculture in Amri tsar and Ferozepore in Punjab, some farm-investment income was left in these districts for all the size groups as can be seen from the following table.

Small Farmers and Wage Rise

Although full reports of these studies giving the detailed tables of the cost components by the size groups and the net area covered as well as the extent of the non-sam­pling errors contained in them are not yet available the picture reveal­ed so far does one thing very rele­vant for our purpose, it restricts the enthusiasm to search for prin­

c i p l e s for the fixation of agricul­tura l wages for the simple reason that, even if wage fixation is desir­able from the point of view of labourers, much cannot be extract­ed from our small farms through an incease in wage-rate. It is evi­dent that the fixation of wages in agriculture could not be based on the principle of covering adequately the cost of l iving of the workers because a good part of the lower size farms are unable to offer wages at a level which la considered ade­quate to meet the workers' cost of l iving. Pending further development of our economy, which might make the small farms more remunerative by themselves or in joint working, if there takes place a movement to­wards cooperative farming, the ap­propriate guiding principle for the fixation of wages in agriculture should, therefore, be to ensure that the sum of the farm-investment in­come and the imputed and the actual labour income of the farm family of smaller group remains on the whole higher than what the family is free to earn as labour in­come for the time now being given to farming and labour,

This principle is obviously differ­ent from the one that can possibly be recommended In the field of indus­tries. Because In the sphere of in­dustries when labour becomes dear-or inefficient firms wi l l either endea­vour to remove the causes of their inefficiency or else disappear from the field of production, and when they disappear the loss to produc­tion is recouped by a. corresponding increase in production by the effi­cient firms. The reason why such

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a possibility does not exist In our agriculture is simple. Due to the ever-Increasing pressure of popula­tion in the rural sector and the ex­treme lack of commensurate deve­lopment of our industries and the shattered condition of the non-agri­cultural rural industries, a piece of land is regarded as the only source of l iving to the rural Indian. Under such a situation it is only reason­

able to expect that in the face of a rise in the cost of labour input the smaller sized farms will further reduce the employment of wage-labour in their bid to squeeze out some earnings from the land, with the result that agricultural produc­tion may fal l .

Conclusion It has been emphasized above

that the main obstacle for an up­

ward revision of the agricultural wages in this country lies at pre­sent in the inefficiency of our lower-size farms. The efficiency of these small farms run possibly be raised by the right type of re-organization, But it is only when these small farms are put on a sound footing that the question of giving a better deal to agricultural workers wi l l acquire a real meaning.

A Short Note on the Ambar Charkha A Comment

D Shenoy THOUGH Shri A K Sen has not

furnished any new information on the economics of Ambar Char­k h a , he has done well in putting for th all available information about the subject in a meaningful terminology. Conclusions, of course, emerge; but they follow not so much from the manner in which the data are presented as Shri Sen thinks as from the assumptions which are implict in his analysis. The pur­pose of this note is first to see what these assumptions are and then to examine in the l ight of these assumptions whether the definitive-ness of his conclusions st i l l remains.

His conclusion is that the recur­r ing cost of producing yarn on Ambar Charkha exceeds the value of net output added. The Ambar Charkha, thus, would not create any-surplus which may be available for re-investment, and, in fact, its con­tribution to capital accumulation would be definitely negative. From the manner in which Shri Sen has derived the deficit to prove his case, it is obvious that he is taking the wage (i e, 9 annas in his case) of employing a worker on Ambar Charkha as reflecting an additional real cost to the community. This may or may not be the case, de­pending upon so many other fac­tors, when labour is drawn from the pool of the previously disguised unemployed who consumed without producing. Actually there can be three possible cases as follows :-

(a) The additional consumption of a labourer employed on Ambar Charkha may be equal to the wage rate. This is

*"A Short Note on the Ambar Char kha", by Amartya Kumar Sen. Economic Weekly, October 10, 1957.

conceivable, particularly when there is a joint family system. In these conditions, whatever the labourer would earn in new employment created by Ambar Charkha would help his family to raise its consum­ption by an equivalent amount.

(b) Rise in consumption that is made possible by new emp­loyment may he equal to the difference between his old consumption and a new wage rate. Though in this case the amount of additional con­sumption would be less, it may yet be higher than the net value added.

(c) Additional consumption may be less than or equal to the marginal increment in out­put, even though the new wage rate is higher than the net value added.

It is obvious (hat it Is the first case that Shri Hen is dealing with. The second case is also similar to the first but the recurring deficit would be of a smaller order than in the first case Both these cases would require subsidisation. But even here the conclusion of Shri Sen may not remain valid, as it is possible to meet the cost of subsidy by taxing the meretricious consum­ption of other classes of the society. His conclusion has acquired defini-tiveness only because he has impli­ci t ly assumed that additional con­sumption of the workers employed in Ambar Charkha would be a draft on the savings of the community. This may or may not be, depending upon whether the subsidy is finan­ced by taxing consumption or sav­ings of the other sections of the community.

Mere comparison between the re­curring cost and the flow of output wil l be misleading in the th i rd case because the wage rate offered there Will not represent the real cost to the society involved in using Ambar Charkha and in fact it would be much less. In these conditions, therefore, the excess of wage costs as reflected in the money wages paid in Ambar Charkha production over net value added wi l l not be injurious to the process of capital accumulation.

Shri Sen further compares the negative surplus in the production of Ambar Charkha with the posi­tive surplus in factory production. This comparison also is not really called for. The use of Ambar Char­kha in production of yarn is an ad­mittedly inferior technique as com­pared to the factory techniques but it is not necessarily, an absurd pro­position. Ambar Charkha produc­tion does not involve any diversion of capital from factory production. In fact, Ambar Charkha itself can be produced by labour without, any use of capital.

Besides in an economy where capital is a very scarce factor and labour is in glut, it is sound eco­nomic policy to put idle labour on the Job to produce something or the other instead of allowing it to be sterile. This being so, is it not advisable for labour to produce something, even though it may meat! an increase in his consumption, more than in proportion to his contribution to the flow of output?

There would be, in this case, a real conflict between the maximisa­tion of income and employment and the maximisation of the rate of growth. By employing an inferior technique, one may aim at higher

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