Agricultural Labor and Human productivity

Why are farmers and agricultural laborers poor ?

A bank clerk earned a salary of Rs 750 per month 30 years ago. The same clerk assuming no promotions etc. easily fetched Rs 30000 today. That is approximately 40 times more. The same clerk however continues to work for 8 hours a day 6 days a week. (Ignoring Saturday special cases).

A lot of people do not realize why the exact same amount of work invites more money today than 30 years ago. It is not that inflation increased over period and hence bank increased the pay to ensure its employees are able to survive. There is more than what meets the eye.

30 years ago, banks were few, branches were even fewer. They maintained accounts in paper registers which had to be meticulously verified every now and than. Every-time a person wanted to withdraw money he had to walk into a local branch, the clerks had to look at his account and carefully do the math.

Each clerk could handle 30-40 transactions at max a day. Today with computerized systems, a clerk is just a human face to the computer screen. Transactions like withdrawal happen through ATMs. Overall it is reasonable to say that a bank like SBI probably does 10,000 transactions per clerk per day.

Technology has enabled clerks to be around 250 times more productive than 30 years ago and hence banks too have managed to survive despite increasing the salaries of the clerks by 40 times.

Imagine a scenario where there were no computers, yet the banking needs had scaled to what they are today. In such cases banks would have required to hire a huge number of clerks to meet the daily transaction demands. If they had to pay Rs 30, 000 to each of those, the per transaction cost would have hit the roof and banking would have been un-viable for consumers and banks. Imagine you withdrawing Rs 1000 and paying Rs 250 as transaction fee.

Computer systems helped clerks improve their productivity by 250x and salaries by 40x. But there is a key thing about productivity. Why salaries did not increase by 250x ? That is a valid question to ask.

The moment computer started doing most of the work, the need to have an intelligent clerk also diminished. There was no need for the bank to hire First Class M.Com. graduate. They could simply do with second class B.Com. graduate. Clearly these people were willing to work for a lesser salary.

If we somehow manage to invent even better computer systems Banks could even do with a 10th standard pass person. ATMs are already manned by semi literate watchmen in India.

What happened to M.Com. graduates ? They probably did MBA, got into higher positions and probably earned even more money than what they would have earned as clerks.

The key lesson here is that as technology advances, the same job can be done by less smarter individuals. (Smartness == skill level).

So why agricultural laborers are poor ?

With technology human beings are achieving more things with little intelligence. Which basically means average “smartness” of a person in a certain skill is going down. For example, average smartness of bank clerks has gone down, average smartness of school teacher, bus driver, electrician has gone down because technology has helped less smart people achieve same results as a smart person. Smart people on the other hand moved to better professions.

When everyone is climbing the ladder, there is always a vacuum that will get created at the bottom. Agriculture happens to be at the bottom. Agriculture labor is the least productive occupation. One literally burns his bodily calories to produce something of higher calorific value.

The only people left into menial labor are those who could not find any other better occupation.

In a state like Goa which has got very good literacy levels, better economic opportunities and faster adoption of technology people will continue to move up the social ladder faster and faster creating a serious crunch of human labor in least productive occupations.

Note: I am taking an online Economics 101 course. This is a blog was inspired from the first lecture.

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