Labour & Employment
Who Gets Ahead? How Trade and Technology are Reshaping India’s Manufacturing Jobs
Imagine walking through an Indian manufacturing plant in the 1990s, then fast-forwarding to the 2000s. You’d notice dramatic changes – not just in the machinery and technology, but in who’s working there. The faces would be different: more women in some sectors, fewer unskilled workers in others, and more temporary contract workers throughout. What drove these changes? That’s the fascinating story revealed by research from Jaya Prakash Pradhan, examining how India’s economic reforms transformed manufacturing employment.
The Revolution on the Factory Floor
India’s manufacturing sector was experiencing a paradox: while output was growing, job creation was slowing down. Between 1983-94 and 1994-2000, employment growth in manufacturing actually declined from 2.14% to 2.05%. Behind these numbers lay profound shifts in who got hired and who got left behind.
Three Groups, Three Different Stories
The research tracked how three vulnerable groups fared as India opened its economy:
- Women workers competing with men
- Contract workers versus permanent employees
- Unskilled workers compared to skilled workers
Each group’s story reveals something different about how global forces reshape local labor markets.
Winners and Losers in the New Economy
The Trade Effect: A Surprising Boost Contrary to fears that trade liberalization would hurt vulnerable workers, the research found that:
- Exports actually created more opportunities for women workers
- Import competition led companies to hire more unskilled workers, likely because of their lower wages
- Trade had little impact on the balance between contract and permanent workers
Technology: A Mixed Blessing
- Automation (capital intensity) reduced opportunities for women workers
- R&D activities favored permanent workers over contract workers
- Foreign technology imports particularly hurt unskilled workers’ prospects
Foreign Investment: The Skills Premium When foreign companies entered Indian manufacturing, they brought clear preferences:
- They hired fewer contract workers, preferring permanent employees
- They favored skilled workers over unskilled ones
- Their impact on women’s employment was neutral
Beyond the Factory Gates: Broader Patterns
The research revealed some fascinating industrial patterns:
- Women’s employment was highly concentrated in a few sectors (food products, tobacco, and apparel)
- Contract workers dominated in specific industries like tobacco products
- Despite being the majority of the workforce, unskilled workers saw their positions gradually eroding
Practical Implications
For Workers:
- Skill development is crucial, especially in sectors with high foreign investment
- Women might find more opportunities in export-oriented industries
- Contract workers should focus on sectors with less foreign investment and R&D intensity
For Policymakers:
- Promote indigenous R&D over imported technology to protect vulnerable workers
- Create targeted training programs for contract and unskilled workers in sectors with high foreign investment
- Support export-oriented industries to boost women’s employment
Looking Ahead
The research suggests that globalization’s impact on manufacturing jobs isn’t simply good or bad – it’s nuanced and varies across different groups. While trade has often helped vulnerable workers, technological change and foreign investment have created new challenges. The key to inclusive growth lies in understanding and actively managing these forces rather than simply accepting their outcomes.
Academic Abstract:
This paper investigates into the impact of trade, foreign investment, and technology on three different employment patterns in India’s organized manufacturing sector. These employment patterns cover three disadvantage categories of workers viz., women vis-à-vis men workers, contract vis-à-vis regular workers and unskilled vis-à-vis skilled workers. A conceptual and empirical framework has been developed linking these employment patterns to trade, foreign investment, and technology, and tested for a sample of Indian industries. The research suggests that trade has been employment promoting for women and unskilled workers while it has remained neutral between contract and regular workers. The impact of foreign investment has been observed to be negative for contract and unskilled workers. The overall impact of technology encompassing in-house R&D, foreign technology imports, and capital-intensity has been mostly negative for women and unskilled workers but positive for contract workers.
Learn More:
Full citation: Pradhan, Jaya Prakash (2006), ‘How Does Trade, Foreign Investment, and Technology Affect Employment Patterns in Organized Indian Manufacturing?’, Indian Journal of Labour Economics, 49(2), pp. 249–272, Publisher: Indian Society of Labour Economics.
Learn More: