The Myth of Employment Creation through Large Scale Factories

Jharkhand Alternative Development Forum


Jharkhand is constantly being bombarded with the notion that people here are foolish in opposing establishment of large scale units, not realizing that they are spurning lucrative offers of large employment opportunities. The land acquisition in Jharkhand for large manufacturing and mining units as well as for mega power plants is proceeding at a very slow pace due to severe opposition by rural farmers and general tribal population and this is viewed by those in power as a step towards future darkness for the Jharkhand State. It would not be surprising if force is used to acquire land, if all other steps fail, without going through a public debate on the benefits of employment through large undertakings which are established on farm lands and produce massive displacement.

No one is against development or industrialization. The debate is on what kind of development. If large manufacturing, mining and mega power units can absorb the teeming millions of unemployed, no one would grudge establishment of the Arcelor-Mittal or Tata plants. What is required to save the future is a fair evaluation of the gains and losses due to this developmental process.

We are therefore surprised to find promises of employment of Jharkhand population being bandied about in the media when the various MOU's are implemented without the study of pros and cons of the process. Let us examine the facts.

We all have been taught in the economics and engineering colleges that any large scale unit to be successful must aim for the highest levels of productivity and profitability. This implies by its very nature of productivity and efficiency that the units have to be heavily capital-intensive with least employment of manpower. The lesser the manpower also means less future labor trouble. The ratio of labor to capital cost is therefore kept minimal resulting in low employment generation.

The 'Nano' Project of the Tatas at Singur is a classic example of minimal creation of jobs with massive displacement and consequent unemployment. As per a study carried out by the Perspectives Team of Delhi and published in their book entitled 'Abandoned', employment in the proposed factory could never be more than 1,000, whereas more than 47,000 people (cultivators and their dependents) will lose their livelihood as a result of the Tata Project. These also include agricultural laborers, trolley drivers, coolies, fertilizer and pesticide sellers. Even if we take into account all the potential employment in the various ancillaries that will be set up, the total figure will nowhere reach 47,000. Further the employment opportunities for the displaced and local unemployed will be limited to security guards, peons, and other limited unskilled jobs. The owner farmer becomes a beggar and daily wage earner and restarts his life from the bottom of the pyramid.

False Hopes of Job-creation 

Jharkhand has been promised, since its creation and even before when it was part of Bihar, employment, prosperity and happiness through the establishment of a number of large projects on its soil. Since the advent of globalization, the promises have accelerated. 
From 1991 till date, globalization and free trade has been given the credit for the extraordinary growth of our economy. Captains of industry constantly remind us how India is becoming an acknowledged superpower. The U.S. Nuclear Agreement is today cited as an example of this great status accorded to us. 

Whereas, the facts speak otherwise. During this entire globalization period of 17 years, employment in organized private sector has remained static at 4.5 million people (employing merely 1% of total work-force of 460 millions). Rapid economic growth has not produced employment whereas we are adding every year an additional unemployed labor force of 10 millions. This 170 millions added during the globalization period is roaming our streets looking for jobs and we are proud of boasting that India has the second largest number of billionaires in the world. We are not a nuclear force due to the U.S. Nuclear Agreement; we are instead sitting on an explosive time-bomb of unemployed youth which will explode any day and destroy our dreams of false growth bandied about. This growth is not promoting employment and the emphasis should be on instruments of employment that will promote growth. Promoting growth without employment is a classic example of putting the cart before the horse. Employment will automatically increase purchasing power and consequent growth. 

The IT Sector and SEZ's are another method of promoting employment that is being advertised. Indian IT sector's total employment is 1.3 millions (a mere 0.3% of total work-force). In SEZ's (since February 2006, when the SEZ rules were passed), India has invested Rs. 81,000 crores and created 2,15,000 jobs, an expenditure of Rs. 37 lakhs per job created. A simple scheme like NREGA will guarantee 100 days of work per year for 370 people with the same Rs. 37 lakhs. 

Edward Luce of London's Financial Times reported in 2006 that Tata Steel in Jharkhand had a workforce of 85,000 when it was producing 1 million tons of steel in 1991. In 2005, Tatas produced 5 million tons with 44,000 workers. The production was 5 times with half the labor. 

Stephen Roach, Chief Economist, Morgan Stanley likewise reported in 2004 that Bajaj motorcycle factory in Pune in the mid-1990's needed a workforce of some 24,000 to produce 1,000,000 vehicles. In 2004, the factory turned out 2,400,000 two-wheel vehicles annually with approximately 10,500 workers. The production was 2.5 times with half the labor force.

Since we all look admiringly at Microsoft and Wal-Mart, giants in their own field of activity, and ponder over the possibility of having such giant corporations in India to solve our unemployment problems, it would be interesting to examine the following figures. If we have two giants like Microsoft and Wal-Mart in our country with their Head Office and all worldwide branches located in India, total employment offered will be 2.1 million people against our potential labour force of 460 millions.


Undoubtedly the most pressing problem facing the poor, rural and tribal population in Jharkhand is the constant threat of their displacement from their ancestral habitat. This displacement is being justified by the politicians, bureaucrats and the urbanites, (totaling only 23% of the population of Jharkhand), as necessary for the progress(?) and development(?) of this State. The progress and development is for whom and for whose benefit is a matter that is often left unsaid.

The figures for displacement resulting in misery for the majority of Jharkhandis are quite revealing - a population of about 17,00,000 in total displaced so far, out of which almost 85% are tribals and locals and only about 25% have been halfway and half-heartedly rehabilitated.


The conclusions are obvious. Large and mega industries, IT sector, SEZ's, etc. are not the keys to solving India's number one problem ' unemployment. The Constitution guarantees all of us right to work and if the increased number of hungry mouths are not employed meaningfully, we are heading towards unmitigated disaster and unstoppable violence in our society. Naxalism, communalism, terrorism are mere off-shoots of this. It is time to think of another model that will promote employment for the masses. 


More by :  Prem Verma

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