| Introduction: Contextual introduction. Body: Explain some factors behind the shift of manufacturing activity and employment from bigger cities to smaller towns. Conclusion: Write a way forward. |
The rural segment is a significant contributor to the manufacturing sector’s output. While 42% of factories are in rural areas, 62% of fixed capital is in the rural side. In terms of output and value addition, rural factories contributed to exactly half of the total sector. In terms of employment, it accounted for 44%.
There are following factors behind the shift of manufacturing activity and employment from bigger cities to smaller towns:
- Factory floor space supply constraints: When locations get more urbanised and congested, the greater these space constraints are. The continuing displacement of labour by machinery forces the continuous capital investments in new production technologies. Thus, increased capital intensity of production is one reason for this trend.
- Production cost differentials: Many firms experience substantially higher operating costs in cities than in rural areas, with inevitable consequences for the firm’s profitability and competitiveness.
- Possibility of capital restructuring: There is a tendency for growing capital accumulation and centralisation by large multi-plant corporations. Big firms deliberately shift production from cities to take advantage of the availability of less skilled, less unionised and less costly rural labour.
- Higher urban-rural cost ratios caused this shift.
- Rural areas have generally been more attractive to manufacturing firms because wages, property, and land costs are all lower than in most metropolitan areas.
A more educated and skilled rural workforce will establish rural areas’ comparative advantage of low wages, higher reliability and productivity and hasten the process of the movement out of agriculture to higher-earning livelihoods.
