This paper examines the association between labour and industrialisation in Kerala. Labour
absorption by modern industries has been low in Kerala; this has a bearing on the features that
emerged in Kerala’s labour market after 1950 including low rates of work participation, and high
levels of educated unemployment and underemployment. Kerala has had strong worker
organisations, and high degree of labour disputes. Worker organisation has made significant
improvements in wage rates and living conditions of informal sector workers in Kerala. A few
traditional industries like cashew processing migrated out of Kerala to take advantage of lower
wage rates in neighbouring States. However, in the factory sector of Kerala, econometric
evidence finds that labour disputes and growth performance have been exogenous to each other,
wage increases have been commensurate with productivity growth, and wage increases have had
little association with labour disputes. All these dispel the general notion that Kerala’s industrial
backwardness is caused by labour problems.