Which state created most manufacturing jobs? Goldman has the answer

Here’s an interesting chart.

It’s from a Goldman Sachs Asia Economics Analyst report titled “Adding 110 million jobs” dated March 28, and it highlights the states that have generated the maximum employment from manufacturing in urban areas.

According the report, Gujarat tops the list, with an average employment of a little more than 350 per 1,000 people employed in manufacturing, between financial year 2004-05 and financial year 2011-2012 (April-May).

Tamil Nadu and Haryana are other leading manufacturing job creating states, according to the chart. On the lower end of the job creation scale are Chattisgarh, Bihar and Jharkhand.

So what accounts for the differences in the job creation ability of states?

[caption id=“attachment_80586” align=“aligncenter” width=“600”]  Which state created maximum manufacturing jobs?[/caption]

Well, one reason could be how pro-worker or pro-employer a state is. According to Goldman Sachs, states that implemented pro-worker amendments to the Industrial Disputes Act (labour legislation) faced a decline in output, employment and productivity, while thosethat implemented pro-employer changes to the Act experienced increases in employment and output.

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“Estimates using plant-level data suggest that firms in labor-intensive industries with flexible labor laws have 14 percent higher TFP than in states with morestringent labor laws,” the Goldman Sachs report stated.TFP refers to total factor productivity.

In addition, the financial firm believesyoung people tend to prefer flexible job markets, where it is easy to find a job - and lose one.

Now, here’s an explosive statement: “We estimate that if states were to increase their share of labor in manufacturing to the level of Gujarat currently, some 40 million jobs could be added in manufacturing over the next decade.”

So basically, Gujarat is the role model the rest of India should follow if it wants to increase jobs in the manufacturing sector.

Manufacturing has been a hot topic of debate in recent months, with the government and opposition parties claiming they will make it their focus for growth and job creation if they come to power.

One thing’s for sure, this Goldman Sachs report will certainly make the BJP very happy.

Wonder how the UPA feels about that.