Much of the decolonised countries depended on migration models that encouraged industrialization in the metropolis by rapidly absorbing labour from the ‘unproductive’ agricultural sector. The higher wages in the metropolis (Lewis model) or even higher expected wages in urban areas (Todaro’s model) caused workers to migrate till it was not profitable for them to migrate anymore. India followed a similar migration trajectory in which the surplus labour would be productively employed in the growing capitalist sector in urban areas with urbanisation completing the process of industrialization.
However, the unsustainability of our migration model could not be far from exposed during the covid crisis when migrants return to the rural sector which is already in shambles. It points to the fact that structural transformation/urbanisation of the surplus labour in rural areas is not complete. Migration in India is in the nature of distress migration and rarely ever takes place for lucrative job opportunities or higher standard of living in urban areas. Most of the migration from the areas of Chhattisgarh, Bihar, Jharkhand take place due to unviability of the agricultural sector in the form of lack of agricultural investments, irrigation, land management practices etc which keep income from this sector low. Therefore, the money earned by the migrant population becomes nothing but a basis for negotiating rural wages in a highly monetised rural economy. Impoverishment of the villages triggers migration whereas crises in urban sectors (mainly linked to production cycles) cause reverse migration.
Major reasons for the recurrent outbreak in urban crises are two-fold. Firstly, the dominance of finance capital gearing the development of developing countries causing an inevitable fallout between fiscal and human rights. Secondly, the structural nature of urbanisation that has produced ineffective governance structures and insufficient social security for its population. The two are inter-linked and in no way mutually exclusive of each other.
According to Breman, unrestrained capitalism and increasing informalisation of the workforce (in capital’s attempt to cheapen labour for larger profits) under global capitalist expansion present conditions where ‘a huge reserve army waiting to be incorporated in the labour process becomes stigmatized as a redundant mass, an excessive burden that cannot be included, now or in future, in economy or in society’. Hence, informalization of labour has been the solution to solving the issue of poverty as flexibility in the wage market increases employment opportunities under the neoclassical paradigm. This flexibility in wages is followed by weakening of any collective strength labour might have causing dehumanising and degrading working conditions with lack of social safety nets.
Cycles of production are caused due to upswing and downswing in economic activities in the metropolis that provides employment opportunities (or causes seasonal unemployment) among the surplus labour force. The employment of the surplus-labour is not only informal but footloose, migrating one sector to the other, almost never a part of the formalised, industrialised workforce. This happens because the terms under which Finance undertakes investment demands quick and cheap labour with minimum social security protection. This is evident in a gargantuan chunk of the informalized labour in India forming about 93% of the workforce. Hence, there is a strong case for State to not just regulate and direct policies towards a more secure labour force by imposing reasonable conditions on finance but also to offer fiscal stimulus by undertaking these activities themselves during downswings. Why are they, unable to do so? Because ‘macroeconomic fundamentals’ and fiscal discipline become important incentives to retain finance, the absence of which undermines confidence of investors. During times of crisis when even the most advanced nations are ditching austerity for a larger stimulus to tide over the crisis, developing countries are faced with a dilemma. In this case, the role of state in defying procyclical policies and pumping in a large stimulus can cause a demand-led recovery by boosting consumption and setting in motion the government expenditure multiplier.
The Foundation Relation (human rights-fiscal policy) argues for human rights principles to be the driving force behind implementation and designing of fiscal policy and not the other way round. Neoclassical economists defend fiscal policies for human rights for efficiency reason (example right to healthcare for an efficient workforce and not as a fundamental right). In the presence of limited economic resources for public allocation, human rights should be a policy imperative for the organization of economic system itself. It then becomes contingent on the State, as a guarantor of constitutional rights to provide for their rightful exercise. Budget making exercise is the legitimate function of state to carry out its distributive role in the realization of rights and not merely putting a ceiling to their expenditure. The conflict around budgeting exercise is shown to be those of capital investment versus ‘unproductive’ fiscal expenditure on social security in securing for these rights but very intelligently hides the allocation of public resources in large corporate tax cuts even when the economy is going through a demand crisis (In the Indian case it is evident in the falling private consumption expenditure, especially the rural consumption figures from the Consumption data survey).
The problem of expenditure rationing brings us to the second factor in triggering reverse migration. The ‘sedentary bias’ in policymaking that makes it compulsory for every city dweller to prove his domicile status to be eligible for availing a range of public services. This manifests in lack of safe shelter spaces leading to urban sprawl, low sanitation levels, lack of access to public distribution system etc. The bias around absorption of migrants into the urban process has been evident right from Zachariah’s survey of Bombay migrant settlers (1966). It says the rural migrants are likely to have greater representation in low skill, low education sectors in industries and tend towards marginalization. Moreover, there is a greater tendency among migrants to be driven towards marginal sectors than non-migrants of similar education standing. Contractualization ensures that the survival of migrants within city spaces is dependent on contractors who involve them in petty jobs at exploitative rates.
This rural-urban dichotomy is not unique to India and is the regular course of industrialization among developing economies. China for example after economic reforms allowed migration of workers from rural to urban areas which has been instrumental in sustaining the growth spurt and establishment of the metropolis. There is stratification among the city dwellers based on educational qualifications, status etc. There is a marked difference between resident city dwellers and migrants who are thrown into the margins of urban life despite being its building blocks. Fear of eviction from neighbourhoods, lack of health and education access for their family constitutes the usual worries for Chinese migrant workers with reflection found in their Indian counterparts.
Federal Governance structures in the Indian context, much like the Chinese counterparts remain highly flawed. The crisis posits an opportunity where states develop their own economic hotspots and harness their own comparative advantage to become dynamic centres of growth with inclusion. The states , however, given too many responsibilities, have too little revenue-generating capacity. Delayed payments of GST dues to the states is a further drag on their finances. A highly centralised system will have its own imbalances with resource paucity a major constraint. Decentralisation of economic power can help in building self-sustaining models of economic development. Urban investments may then become an important complement to rural investments in poverty reduction strategies. (Cali and Menon).
Rights are as if not more important than regeneration of economic activities and a post covid India should focus on its guarantee and improve the conditions of labour if it wants to avoid going through this disastrous process of reverse migration compounding any crisis again. An established system of social welfare goes a long way in minimising the effects of the crisis (Kerala model).
The ILO has predicted that with subsequent lockdown and crisis, nearly 400 million workers will fall deep into poverty with most of them returning to rural areas. The rural sector is already in distress with plummeting agricultural growth. The faultlines in our structural imbalance remain exposed. The cities will be starved of workers causing a dampening of economic activities in these areas whereas the low productivity rural sector will experience surplus workers waiting to be absorbed in low productivity sectors. Did we just visit reverse structural transformation under Lewis?
Lewis model: Development model whereby excess labour from the subsistence sector (agriculture) moves into manufacturing due to higher wages offered by the sector. The movement of labour causes industrialization of the economy as more and more excess labour gets absorbed into the urban sector. This also eases the pressure off the subsistence sector and ends with the entire chunk of surplus labour being a part of the urban workforce.
Todaro model: Migration of people from rural to urban sector depends not on the actual but expected level of wages and as long as people perceive urban wages to be higher and urban opportunities to be better, the migrate, till productivity equals out in both sectors.
David Grazielle, Rossi Pedro, Chaparro Sergio: Human Rights and Fiscal Policy, a necessary link
Cali Massimiliano, Menon Carlo: Does urbanisation affect rural poverty? Evidence from districts
Koo Hagen: Rural-urban migration and social mobility in third world metropolises.
Anand PK: Migrant workers remain invisible in India China
Breman Jan: ‘On Labour Bondage, Old and New’, The Indian Journal Of Labour Economics, Volume 51, No.1
Nishat is Masters in Economics at JNU with a keen interest in the development and Political economy. She has done her graduation in BSc. Economics from St. Xavier's, Calcutta. She is interested in Policy Research and likes to blog on economic issues especially on Heterodox school of economics.