Most rural farm workers entrenched in unproductive, informal urban jobs over 25 years: study

Visakhapatnam : Andhra Pradesh : 04/10/2026 : Farm laborers are back in full swing at Gurla in Vizianagram district, thanks to the recent heavy rains. Photo: V RAJ / THE HINDU | Photo credit: IN PARADISE

Published in the Journal of Development Economics and co-authored by economists Rajeer Jat and Bharat Ramaswamy, a study on the productivity gap in the farm and non-farm sectors found that farm sector workers who moved to cities were pushed into non-productive sectors such as transport and restaurants, without any major changes in the economy or their lives. He reported that 63% to 75% of non-agricultural workers work in informal employment-dominated industries that are no more productive than agriculture.

The authors suggest policy reforms, including expansion of education and health facilities, to help those who have migrated from the agricultural and rural economic sectors find employment in productive sectors around the cities. The study is based on data obtained from Reserve Bank of India’s KLEMS (Capital, Labour, Energy, Materials and Services) data from 1999 to 2024.

Small gap in productivity

The study pointed out that the productivity gap between agriculture and the informal non-agricultural sector is small or negligible when differences in the share of labour, human capital and hours worked are taken into account. “In fact, 63-75% of non-agricultural workers are in sectors whose productivity is statistically indistinguishable from agricultural productivity. In contrast, the formal non-agricultural sector is substantially more productive: even after adjustments, its value added per worker is two to three times higher than that of agriculture,” the study found, adding that the large gap in aggregate agricultural productivity (APG) is therefore driven primarily by a low but formally dominant economic economy.

The paper added that the real “structural dualism” in the Indian economy is between the high-productivity formal sector and the low-productivity informal sector (including agriculture), not just between “farm” and “non-farm”.

Labor mobility between agriculture and the informal sector, the study noted, appeared to be relatively unrestricted as workers were free to move between them. “Much of the uncorrected productivity gap between them arises due to longer working hours in the informal sector. Therefore, even if the corrected productivity gap is low, the seasonality of agricultural activity is a reason for migration,” it said.

Standard of living

In an interview with The Hindu, Mr. Jat said that typically the non-agricultural sector is more productive and labor is withdrawn from agriculture and given to non-agriculture, so if they work in a highly productive environment, the overall standard of living of the country rises. “That has been the development stories in many countries,” he said, but added that the country should strengthen its workforce to move to more productive sectors such as information technology or financial sectors.

“We should move people more into these sectors instead of into the restaurant sector or construction or any other non-agricultural activities that are not productive,” Mr Jat said, adding that the barriers to labor entering the formal sectors are a lack of formal education, which is a university degree, and a lack of English education, which take them to more productive sectors such as IT and financial services.

Published – 5 Oct 2026 22:12 IST