Higher urban wages attract rural poor, leading to migration, unemployment, emergence of squatter settlements etc.
Higher wages or the ‘expected higher wages’ in the urban sector drive the immigrants.
Of course migration cannot be stanched. Two pronged policies:
- Cities should expand to keep pace with immigrant population. Policies to integrate informal into mainstream economy, Govt provision of adequate physical infrastructure.
- Productivity in rural areas can be enhanced (for example through imposition of minimum wages).
In India, rural labour market seems to have settled at a low productivity equilibrium encouraging migration.
Productivity in Agriculture sector has not progressed over past few years:
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