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Resource centre on India's rural distress
 
 

The workforce misses the boat

-Live Mint

Recent reports of the employment and unemployment surveys of National Sample Survey Organisation (NSSO) have confirmed the fear of jobless growth during 2004-2010. This data has led to much debate, but the overwhelming consensus remains that the recent period of high gross domestic product (GDP) growth has not benefited the majority of workers.

Although the debate is yet to settle, there have been arguments for looking at the data closely. In particular, it has been argued that what matters is not the quantity of jobs created, but the quality. That is, what matters is not how many jobs have been created, but in which sectors and their quality. The preliminary evidence from the NSSO surveys suggests the bulk of employment created has been in the construction sector and an overwhelmingly large proportion of workers have been employed as casual labourers.

Nonetheless, the issue of quality of jobs does require detailed scrutiny, in particular the role played by the organized sector, which has much better quality of employment. Aggregate employment in the organized sector is available from the Directorate General of Employment and Training (DGET). Total employment in the organized sector was 28.2 million in 1998, it declined to 26.44 million in 2004 and increased marginally to 27.5 million by 2008. However, detailed characteristics of the enterprises or of the workers are not available with DGET.

There is some additional information available from the Annual Survey of Industries (ASI), which covers the organized sector of the manufacturing enterprises. These surveys show that output in the factory sector increased by 13.4% per annum during 2000-09. The data also suggests that much of this growth in output was accounted for by increase in labour productivity that has doubled in the last six years. The question is: did the workers benefit from this development?

Workers’ wages increased, but much slower than the growth of labour productivity. On the other hand, wages of managerial staff increased much faster. Wages of managerial staff were roughly twice that of workers until the 1990s, but increased thereafter at a faster rate to reach 4.3 times that of workers’ wages by 2008. While the inequality between workers’ wages and managerial wages is one aspect of why the workers did not benefit, the other part was the overall squeeze in the share of wages in net value added. Wages as a share of net value added were close to 30% in the 1980s, declined to around 20% in the 1990s, but had gone down to a historical low by 2008-09 when their share in net value added touched the 10% mark. In contrast, the share of profits in net value added was lower than share of wages throughout the 1980s at around 20%. After liberalization in the 1990s, it went above the wage share and remained at around 30% for most of the 1990s. Since 2001, it began rising and profit share doubled to reach 60% by 2008.

These trends of wage and profit share from ASI—which relate to manufacturing sector alone—are also supported by the break-up of wage and profits from the national accounts. These estimates, which also include the services sector, also show profit share increasing from 30% in the 1990s to reach more than 50% after 2004-05. On the other hand, share of wages declined from more than 70% in the 1980s to less than 50% by 2009.

But the squeeze of wages share in net value added is only one part of the story. Employers also resorted to other means to deprive workers of the various benefits including social security. The ASI data confirms the upturn in employment in the organized sector in recent years. But it also shows that of the incremental workforce in the organized manufacturing sector between 1999-00 and 2008-09, almost 63% were contract workers. So much so that the share of contract workers in the total workforce in the factory sector increased from 20% in 1999-00 to 32% by 2008-09. These contract workers were not only deprived of security of tenure, but were also deprived of social security benefits.

These estimates for the organized sector as a whole are clear evidence that not only did the high growth after 2003 fail to create enough jobs, but the jobs created were of lower quality as well. The fact that this happened by increasing profit share and substitution of permanent regular workers by contract workers despite massive increases in labour productivity was also due to the declining bargaining power of the workers vis-à-vis employers. Interestingly, not only did absenteeism rate among workers declined from 10% in 2000-01 to 8% by 2007-08, but more man-days were lost due to aggressive “lockouts” by the employers than by striking workers.

But if this is the condition of workers in the organized sector which is protected, unionized, enjoys social security and is paid well, the condition of the informal workers in the unorganized sector can only be imagined. Importantly, this was achieved despite the existence of the so-called rigid labour laws.

Clearly, existence of archaic labour laws is neither an obstacle to restructuring employment in the manufacturing sector nor for increasing profits.