Recent employment trends

in India and China:

An unfortunate convergence

C. P. Chandrasekhar
and
Jayati Ghosh
Asian century?
Both China and India have large populations covering
substantial and diverse geographical areas, large
economies with even larger potential size.

Current success stories of globalisation: two
economies that have apparently benefited.

Success defined by the high and sustained rates of
growth of aggregate and per capita national income; the
absence of major financial crises; and substantial
reduction in income poverty.
Not similar economies
These economies are often treated as
broadly similar in terms of growth potential
and other features.

But there are crucial differences between
the two economies which render such
similarities very superficial .
Institutional conditions
India was a mixed economy with large private
sector, so essentially capitalist market economy
with the associated tendency to involuntary
unemployment.

China was mostly a command economy, which
until recently had a very small private sector;
there is still substantial state control over
macroeconomic processes in forms that have
differed from more conventional capitalist
macroeconomic policy.
The financial sector
India: financial sector was typical of the mixed
economy without comprehensive government control
over the financial system; financial liberalisation since
early 1990s meant further loss of control over financial
allocations by the state.

China: financial system still under the control of the
state, despite recent liberalisation. Four public sector
banks handle the bulk of the transactions in the
economy, and can regulate the volume of credit to
manage the economic cycle, and direct credit to priority
sectors.
Rates of GDP growth
The Chinese economy has grown at an average
annual rate of 9.8 per cent for two and a half
decades, showing volatility around high trend.

Indias economy has grown at around 5-6 per
cent per year over the same period, breaking
from Hindu rate of 3 per cent. But very recently
the average growth rate for the last four years is
just above 8 per cent.
Rates of investment
The investment rate in China (investment as a share of
GDP) has fluctuated between 35 - 44 per cent over the
past 25 years, compared to 20 - 26 per cent in India.

Aggregate ICORs (incremental capital-output ratios)
have been around the same in both economies.

Infrastructure investment from the early 1990s has
averaged 19 per cent of GDP in China, compared to 2
per cent in India.
Structural change over four decades
China: classic pattern, moving from primary to
manufacturing sector, which has doubled its share of
workforce and tripled its share of output.

India: Move has been mainly from agriculture to services
in share of output, with no substantial increase in
manufacturing, and the structure of employment has not
changed much. Share of the primary sector in GDP fell
from 60 per cent to 25 per cent in four decades, but
share in employment still more than 60 per cent.
Trade patterns
China: Rapid export growth involving aggressive
increases on world market shares, based on
relocative capital attracted by cheap labour and
heavily subsidised infrastructure.

India: Lower rate of export growth, with cheap
labour due to low absolute wages rather than
public provision and poor infrastructure
development. So exports have not yet become
engine of growth, except in services.
Poverty reduction
China: Officially 4 per cent of the population now lives
under the poverty line, unofficially around 12 per cent.
(Reflects earlier asset redistribution and basic needs
provision in China under communism, plus larger mass
market and recent role of agricultural prices.)


India: Official poverty ratio much higher and persistent,
currently 28 per cent. Food deprivation is much higher.
Human development
China: earlier extensive public provision of health and
education: universal education until Class X, and public
services to ensure nutrition, health and sanitation. (In the
1990s, higher fees and some privatisation of such
services led to reduced access and worsening
indicators; since 2002 revival of public spending in these
areas.)

India: the public provision of all of these has been
extremely inadequate throughout this period and has
deteriorated in per capita terms since the early 1990s.
Very recently slight increase in education spending but
still well below China; government health spending still
very low.
Inequalities
In both economies the recent pattern of growth
has been inequalising.

China: spatial inequalities across regions
have been the sharpest. More recently, vertical
inequalities, especially for migrant population
vis--vis others.

India: vertical inequalities and the rural-urban
divide have become much more marked.
Sustainability of current patterns
China: high export-high accumulation model which
requires constantly increasing shares of world markets
and very high investment rates. Already signs of reduced
unit values of exports and stagnation/decline of
manufacturing employment.

India: IT-enabled services experiencing current boom,
but competitive threat from other countries, plus question
about whether it will be enough to transform Indias huge
labour force into higher productivity activities.
India: Employment growth
Annual rates of employment growth
for usual status workers (per cent)
1.36
2.77
2.03
3.39
0.66
2.27
1.97
3.22
0
0.5
1
1.5
2
2.5
3
3.5
4
Rural Urban
1983 to 1987-88 1987-88 to 1993-94 1993-94 to 1999-2000 1999-2000 to 2004-05
India: Growing role of self-employment
Share of self-employment in usual status employment
35
40
45
50
55
60
65
1983 1987-88 1993-94 1999-2000 2004-05
Rural males Rural females Urban males Urban females
India: Growth rates of employment
(Annual compound rates per cent)

1993-94 to
1999-2000
1999-2000 to
2004-05
Agricultural self employment -0.53 2.89
Agricultural wage employment 1.06 -3.18
Total agricultural employment 0.03 0.83

Rural non-agri self employment 2.34 5.72
Rural non-agri wage employment 2.68 3.79
Rural total non-agri employment 2.26 5.27

Urban non-agri employment 3.13 4.08
Secondary employment 2.91 4.64
Tertiary employment 2.27 4.67

Total non-agricultural
employment 2.53 4.66

India: Real wages of regular workers
Average real wages per day of regular workers
(at constant 1993-94 prices)
20.00
30.00
40.00
50.00
60.00
70.00
80.00
90.00
100.00
110.00
1993-94 1999-2000 2004-05
Rural males Rural females Urban males Urban females
India: Real wages of casual labour
Average real daily wages of casual labour
(at constant 1993-94 prices)
10.00
15.00
20.00
25.00
30.00
35.00
40.00
45.00
1993-94 1999-2000 2004-05
Rural males Rural females Urban males Urban females
India: Organised sector employment
Employment in the organised sector
0
10
20
30
40
50
60
70
80
1
9
8
1
1
9
8
4
1
9
8
5
1
9
8
6
1
9
8
7
1
9
8
8
1
9
8
9
1
9
9
0
1
9
9
1
1
9
9
2
1
9
9
3
1
9
9
4
1
9
9
5
1
9
9
6
1
9
9
7
1
9
9
8
1
9
9
9
2
0
0
0
2
0
0
1
2
0
0
2
2
0
0
3
Public Sector Private Sector Total
India: Labour productivity in organised manufacturing
Net value added per worker (in constant prices)
0.5
0.7
0.9
1.1
1.3
1.5
1.7
1.9
2.1
2.3
1
9
8
1
1
9
8
4
1
9
8
5
1
9
8
6
1
9
8
7
1
9
8
8
1
9
8
9
1
9
9
0
1
9
9
1
1
9
9
2
1
9
9
3
1
9
9
4
1
9
9
5
1
9
9
6
1
9
9
7
1
9
9
8
1
9
9
9
2
0
0
0
2
0
0
1
2
0
0
2
2
0
0
3
India: Wage share of value added
in organised manufacturing
Share of wages in value added
0.10
0.15
0.20
0.25
0.30
0.35
1
9
8
1
-
8
2
1
9
8
2
-
8
3
1
9
8
3
-
8
4
1
9
8
4
-
8
5
1
9
8
5
-
8
6
1
9
8
6
-
8
7
1
9
8
7
-
8
8
1
9
8
8
-
8
9
1
9
8
9
-
9
0
1
9
9
0
-
9
1
1
9
9
1
-
9
2
1
9
9
2
-
9
3
1
9
9
3
-
9
4
1
9
9
4
-
9
5
1
9
9
5
-
9
6
1
9
9
6
-
9
7
1
9
9
7
-
9
8
1
9
9
8
-
9
9
1
9
9
9
-
2
0
0
0
2
0
0
0
-
2
0
0
1
2
0
0
1
-
2
0
0
2
2
0
0
2
-
2
0
0
3
2
0
0
3
-
0
4
India: Real wages in
organised manufacturing
Average real wages in organised manufacturing
8000
8500
9000
9500
10000
10500
11000
11500
12000
1992-
93
1993-
94
1994-
95
1995-
96
1996-
97
1997-
98
1998-
99
1999-
2000
2000-
2001
2001-
2002
2002-
2003
2003-
04
India: Remuneration in self-employment
Per cent finding this amount of Rs. per month
remunerative

Per cent
finding their
self-
employed
activity
remunerative
0-
1000
1001-
1500
1501-
2000
2001-
2500
2501-
3000
>
3000
Rural males 51.1 12.9 17.5 16.5 11.4 12.9 27.3
Rural females 51.4 34.2 23.5 15.4 8.9 7.2 9.9
Rural persons 51.2 21.2 19.7 16 10.5 10.7 20.5
Urban males 60.9 4.9 8.2 9.9 7.2 12.2 56.5
Urban females 50.9 32.8 20.2 12.6 7.7 8.1 18.3
Urban persons 58.6 10.4 10.6 10.4 7.4 11.5 48.9

Chart 4: Per cent of self-employed workers who consider their own
income remunerative, by income-range considered remunerative
20
30
40
50
60
70
80
<
1
0
0
0
1
0
0
0
-
1
5
0
0
1
5
0
0
-
2
0
0
0
2
0
0
0
-
2
5
0
0
2
5
0
0
-
3
0
0
0
>
3
0
0
0
Rural Males Urban Males Rural Females Urban Females
India: Unemployment rates
Rural India

Urban India
15-19 20-24 All 15+ 15-19 20-24 All 15+
Males
1993-94 3.3 4.9 2.0 11.9 12.6 5.4
1999-00 5.5 5.2 2.1 14.2 12.8 4.8
Usual
Status
2004-05 7.9 6.2 2.1 14 12.5 4.4
1993-94 9.0 10.3 5.6 16.2 17.0 6.7
1999-00 13.1 11.7 7.2 19 17.1 7.3
Current
Daily
Status
2004-05 15 12.9 8.0 18.4 15.8 7.3
Females
1993-94 1.9 2.8 1.3 12.8 21.7 8.3
1999-00 3.2 4.9 1.5 13.2 19.4 7.1
Usual
Status
2004-05 6.7 9.3 3.1 15.6 25.8 9.1
1993-94 8.3 8.2 5.6 18.6 28.5 10.4
1999-00 12.8 12.1 7 18 25.9 9.4
Current
Daily
Status
2004-05 12.6 14.9 8.7 16.4 27.3 11.6

China: Work force distribution
Primary Secondary Tertiary
1952 83.5 7.4 9.1
1965 81.6 8.4 10.0
1975 77.2 13.5 9.3
1985 62.4 20.8 16.8
1995 52.2 23.0 24.8
2005 44.8 23.8 31.4

China: Output and employment growth

1980-
90
1990-
2000
Primary sector
Annual employment growth 2.8 -0.8
Annual Value Added growth 6.2 3.8
Employment elasticity 0.45 -0.21
Secondary sector
Annual employment growth 5.9 1.6
Annual Value Added growth 9.5 13.5
Employment elasticity 0.62 0.12
Tertiary Sector
Annual employment growth 7.9 5.1
Annual Value Added growth 12.2 9.1
Employment elasticity 0.65 0.56
All sectors
Annual employment growth 4.1 1.1
Annual Value Added growth 9.3 10.1
Employment elasticity 0.44 0.11

China's exports
0
100
200
300
400
500
600
700
800
1981 1982 1983 1985 1986 1989 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005
0
10
20
30
40
50
60
Total exports, $ bn Per cent processed in total exports
US clothing imports from Mainland China
0
5
10
15
20
25
30
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005
0
1
2
3
4
5
6
Volume-based market share Unit value
China - Employment in manufacturing
4000
5000
6000
7000
8000
9000
10000
11000
1
9
7
8
1
9
8
0
1
9
8
5
1
9
8
9
1
9
9
0
1
9
9
1
1
9
9
2
1
9
9
3
1
9
9
4
1
9
9
5
1
9
9
6
1
9
9
7
1
9
9
8
1
9
9
9
2
0
0
0
2
0
0
1
2
0
0
2
China: Urban employment
Share of urban employment by type of employer
0.0
10.0
20.0
30.0
40.0
50.0
60.0
70.0
80.0
90.0
1
9
7
8
1
9
8
0
1
9
8
5
1
9
8
9
1
9
9
0
1
9
9
1
1
9
9
2
1
9
9
3
1
9
9
4
1
9
9
5
1
9
9
6
1
9
9
7
1
9
9
8
1
9
9
9
2
0
0
0
2
0
0
1
2
0
0
2
2
0
0
3
2
0
0
4
2
0
0
5
State owned units Collectives & coops Other private units Self-employed
China: Rural non-agricultural employment
Share of rural employment
0.0
5.0
10.0
15.0
20.0
25.0
30.0
35.0
1
9
7
8
1
9
8
0
1
9
8
5
1
9
8
9
1
9
9
0
1
9
9
1
1
9
9
2
1
9
9
3
1
9
9
4
1
9
9
5
1
9
9
6
1
9
9
7
1
9
9
8
1
9
9
9
2
0
0
0
2
0
0
1
2
0
0
2
2
0
0
3
2
0
0
4
2
0
0
5
TVEs Private enterprises Self-employed
China: Annual change in real wages

Average
of all
units
State-
owned
units
Urban
collective
units
Units of
other
ownership
type
1978 6.0 6.2 5.1
1980 6.1 6.0 6.9
1985 5.3 4.8 6.6 22.5
1989 -4.8 -4.6 -6.1 -2.3
1990 9.2 9.7 6.6 8.9
1991 4.0 3.2 5.6 10.5
1992 6.7 7.0 4.1 5.3
1993 7.1 5.7 5.9 7.9
1994 7.7 8.7 0.2 1.5
1995 3.8 0.4 3.7 1.4
1996 3.8 2.6 0.6 1.7
1997 1.1 4.2 1.7 3.2
1998 7.2 6.7 3.1 -1.7
1999 13.1 12.9 9.7 11.0
2000 11.4 10.9 7.6 10.9
2001 15.2 16.2 8.9 9.7
2002 15.5 16.3 12.7 9.9
2003 12.0 12.3 12.2 9.3
2004 10.5 11.1 9.5 8.0
2005 12.8 13.6 13.2 10.4

Unorganised and migrant workers in China
These real wage data leave out the increasing proportion
of unorganised workers, most particularly the rural
migrants.

Rural-urban migrants currently estimated by CASS to be
around 150 -180 million (half the urban work force).

Recent CASS survey shows that in 2005 a majority of
migrant workers were in informal activities and typically
faced long hours of work for all days of the week, for less
than minimum wages and with poor residential
conditions.
China - Investment and consumption rates
30.0
32.0
34.0
36.0
38.0
40.0
42.0
44.0
1
9
7
8
1
9
7
9
1
9
8
0
1
9
8
1
1
9
8
2
1
9
8
3
1
9
8
4
1
9
8
5
1
9
8
6
1
9
8
7
1
9
8
8
1
9
8
9
1
9
9
0
1
9
9
1
1
9
9
2
1
9
9
3
1
9
9
4
1
9
9
5
1
9
9
6
1
9
9
7
1
9
9
8
1
9
9
9
2
0
0
0
2
0
0
1
2
0
0
2
2
0
0
3
2
0
0
4
2
0
0
5
50.0
52.0
54.0
56.0
58.0
60.0
62.0
64.0
66.0
68.0
Investment rate Consumption rate
Current issues similar
Most important problems in both economies
are currently the same:
Agrarian crisis
Inadequate generation of employment in
terms of decent work
Public neglect of social sectors
Growing inequalities.
Lessons
For more inclusive growth, the generation of good quality
productive employment is the most critical variable.

Need growth strategy that allows and encourages labour
productivity increases overall while significantly
expanding expenditure and therefore income and
employment opportunities in social sectors.

Major role for state intervention, through direct public
investment and through fiscal, monetary and market-
based measures that alter the structure of incentives for
private agents.