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Resource centre on India's rural distress
 
 

The World Bank’s misdiagnosis-Himanshu
-Live Mint

Flexible labour laws in India cannot solve the problem of weak job growth and the poor quality of employment 

The theme of the World Bank’s World Development Report this year is, appropriately enough, jobs. The report recognizes that creating jobs is the surest way of reducing inequality and poverty, particularly in the developing world. But the cliché it offers as a solution is disappointing: relax labour laws. The bank has failed to take a holistic view of the problem.

While job creation is a central issue, the report has overlooked the quality of employment on the one hand and the political economy of the production structure on the other. For it is a fact that a large majority of our workers are toiling in inhumane conditions and are unable to earn a decent living. Yet this inhuman aspect is hardly talked about. Similarly, it is also evident that the unprecedented momentum in growth seen in most economies in the last decade and more has not necessarily been employment-friendly.

This is especially true for the Indian economy. Barely a million jobs were created in the entire five-year period from 2004-05 to 2009-10, coinciding with the first avatar of the United Progressive Alliance government. What, however, is not said is the fact that this period also saw the quality of employment deteriorating and most jobs being created in the low-paid construction sector.

Consequently, not only did the share of the informal sector increase in the overall workforce, it now accounts for two in three workers in the organized sector. It is the latter sector that is generally considered to be a better employer in terms of facilities and work environment. The growing casualization of the workforce and its increasing contractual nature in the organized sector has been established through multiple data sources. Contract workers accounted for less than 20% of all workers in the manufacturing sector in 1999-2000 but increased to almost 32% in 2008-09, according to the Annual Survey of Industries, coincidentally the best growth years of the Indian economy in recent memory. This is also confirmed by the latest report on employment and unemployment of the National Sample Survey Office.

So, not only is sufficient employment not being generated, but its quality too is suspect. At the same time, this period has seen a sharp increase in productivity, resulting in larger profit accumulation. However, increases in productivity have not led to any betterment in the working conditions of employees. This is not unique to India; it has happened globally with multinational corporations using the loopholes in labour laws in collusion with compliant national governments to take advantage of cheap labour in developing countries—a phenomenon described in standard economic textbooks as crony capitalism.
 
As a result, a large part of our population is poor, not just because they do not have jobs but also because the kind of jobs they land into do not provide enough earnings to ensure a decent standard of living. Irrespective of the justification of the poverty line, already pegged at a very low level, the fact remains that a large majority of the workforce in the country earns less than that. This number is estimated to be little less than one-third of the population—working yet poor. Hence, India’s unemployment rates, though among the lowest in the world at less than 3-4% of the population, don’t mean anything. This is especially so when they are compared with an average unemployment rate of around 8-10% in most European countries. In some of them, unemployment rates among the youth have shot up dramatically. In Spain, it has crossed 50%.

The bank’s overlooking of these fundamental issues is particularly distressing since these contradictions are now getting articulated violently. Mercifully, this disturbing phenomenon is still sporadic and not an epidemic. The recent incident where a section of workers at Maruti Suzuki’s plant in Manesar clashed with the management—resulting in the death of a manager—is an isolated event, but a grim harbinger of things to come. Once again, such incidents are not limited to India but have also occurred in the US, China and South Africa. In the last six months, workers at a Foxconn factory (which makes the Apple iPhone) in China resorted to industrial action against poor working conditions, leading to the death of 10 workers; employees of Wal-Mart protested working conditions at their facilities in the US and 12,000 protesting mining workers in South Africa were fired at by the armed security of these companies, killing 34 miners.
 
While the World Bank has done well in flagging an endemic problem, it is remiss in not delving deeper into the issue. As a multilateral institution, it carries considerable weight and, hence, is in a strong position to influence the discourse in what is otherwise a hugely important and vexing problem. It is something that could trigger social chaos and derail the best laid plans, a situation that developing countries such as India can’t afford.

Himanshu is assistant professor at Jawaharlal Nehru University and visiting fellow at Centre de Sciences Humaines, New Delhi.