BOOK REVIEW: LABOUR IN THE INDIAN ECONOMY
Jayan Jose Thomas
Labour and Development: Essays in Honour of Professor T S Papola edited by K P Kannan, Rajendra P Mamgain and Preet Rustagi, New Delhi: Academic Foundation, 2017; pp 722, ? 1,495 (hardcover).
To anyone who has ever been associated with the annual conferences of the Indian Society of Labour Economics, this volume under review brings memories of two elegant persons who used to lighten up these gatherings with their wit, energy and wisdom. They are T S Papola and Preet Rustagi, whose brilliant careers had been cut short with their untimely deaths in 2015 and 2017 respectively. The volume under review is a collection of essays on labour in the Indian economy, compiled in honour of T S Papola, and Preet Rustagi is one of its three editors.
This collection of essays is indeed a tour de force, a good reference material for any scholar interested in labour issues in India. Running into 722 pages, there are 21 essays in this volume, in addition to an introductory article written by the editors, and three short pieces remembering the life and work of Papola.
An overriding theme of essays in this volume is that institutions matter more than market forces in determining how labour markets behave in a developing country like India. This implies that rural wages, for instance, are determined not merely by the interaction between supply of and demand for labour, as neoclassical economics would suggest. More important are a range of social, economic, and political factors, which we may collectively refer to as institutions. Institutions may have taken shape through social relations such as of caste and gender, state policies (minimum wage regulations, for example), or through workers’ organisations. The importance of such institutions in influencing labour market outcomes had featured prominently in the vast body of research carried out by Papola starting from the 1960s.
In India, labour markets are deeply segmented along caste and gender lines. As Sukhadeo Thorat explains in one of the chapters in this volume, members of the Scheduled Castes (SCs) or other oppressed groups are sometimes denied entry into certain occupations. There are frequent instances in which workers belonging to oppressed castes are discriminated against, being paid lower wages or made to work for long hours. Thus age-old social institutions continue to have a grip on the labour market despite the relatively fast growth of the Indian economy and modernisation of many of its segments. Therefore, as Gerry Rodgers rightly concludes, the country’s labour market is characterised by both continuity and change.
Globally, economic changes that have occurred during the recent decades, set in motion by globalisation and neo-liberal economic policies, have favoured capital over labour. This was in contrast to the period between the 1950s and 1970s during which the Keynesian policies of stimulating domestic demand through increased government expenditures had helped the “golden age of capitalism” to thrive. The working classes had made real gains during that phase. On the other hand, from the 1980s onwards, the neo-liberal policy prescription of cutting government expenditures to a minimum has hurt the interests of the working poor. A chapter written by Rizwanul Islam for this volume shows how governments in developing countries, including India, have been unable to increase government expenditures to stimulate demand, even in the face of the 2008 global financial crisis. At the same time, Satyaki Roy’s contribution to this volume points to the inability of present-day capitalism to absorb labour without dispossessing workers of their rights. This, he argues, is the reason for the continuing expansion of the informal sector in developing countries.
In the Indian context, the chapter written by Ajit Ghose highlights some of the key features of economic growth after 1991: a decline in employment elasticity of economic growth and a fall in the quality of new jobs created. At the same time, Ghose points out that the decade of the 2000s (which ended in 2011–12) was one in which there had been a distinct improvement in the growth of employment opportunities as well as of labour productivity in the Indian economy.
Understanding of Informal Work
A striking feature of India’s labour market is the domineering share of the informal sector as a source of employment. Papola was one of the early contributors towards an understanding of the concept of
informal work in a developing country context. According to estimates cited in the chapter by K P Kannan, more than 82% of employment in the Indian economy was in the informal sector, that is, in enterprises that employed less than 10 workers (as per data from Economic Census of 2005). A growing important phenomenon in India’s labour market has been the rise in the numbers of informal workers—that is, workers who do not enjoy employment or social security—within the formal sector. In one of the chapters in this volume, Ravi Srivastava and Ajaya Kumar Naik document the above-referred process, using data from the National Sample Survey Office (NSSO) on employment and unemployment, and focusing on workers without a written job contract or social security.
Emergence of strong linkages between the formal and informal sectors can benefit the economy as a whole, with informal sector enterprises growing as ancillaries to or in subcontracting relations with the formal sector. However, the relation between the formal and informal sectors has been rather weak in India, especially in the manufacturing sector, as shown in the chapter by Arup Mitra and Aviral Pandey.
Within the factory sector or organised manufacturing sector in India, there has been a rising share of contract workers or other informal workers, especially from the 2000s onwards. The chapter by Bishwanath Goldar and Suresh R, which analysed the Annual Survey of Industries (ASI) data for 2010–11, shows that the increasing employment of contract workers in place of regular workers reduce plant productivity and tend to depress the wages and bargaining strength of directly employed workers.
While agriculture still accounts for close to 50% of the total employment in the country, there has also been a definite shift of the workforce away from agriculture, as shown by the NSS surveys held in 2009–10 and 2011–12. However, it is doubtful if the above-referred shift has been part of a progressive structural transformation of the economy (along the lines envisaged by Arthur Lewis). Almost half of all non-agricultural jobs generated in India during the period from 2004–05 to 2011–12 had been in construction, a relatively low wage sector. In his contribution to this volume, Ajit Kumar Singh shows how non-agricultural employment opportunities that emerged for rural workers in Uttar Pradesh was driven more by distress-related or “push” factors (as per a study conducted in 2012). Most of the workers were engaged in low-paid jobs in regions within or close to the village itself. A majority of rural non-agricultural workers were young, less-educated males, owning very little to no land. Biswajit Chatterjee and Aparajita Dhara write about the barriers faced by less-educated persons in finding regular employment in the context of West Bengal.
Labour Market
A number of essays in this volume highlight the fact that a majority of workers in India earn very little for their work. A contribution by Partha Pratim Sahu points out that 50% of the self-employed in India form part of the working poor. The chapter by A V Jose analysed the growth of real agricultural wages across Indian states for the period from 1970–71 to 2010–11. Throughout the period of analysis, Haryana, Kerala, Himachal Pradesh and Punjab were relatively high-wage states, while Madhya Pradesh, Maharashtra, Odisha and Chhattisgarh were relatively low-wage states. Jose finds that the growth of agricultural wages across states had been associated with improvement in labour productivity and the spread of expansion of commercial agriculture.
The analysis by Rajendra P Mamgain using NSSO data finds evidence for caste- and gender-based segregation in occupations in India. Women and marginalised social groups, which include the SCs, Scheduled Tribes (STs) and Muslims, find themselves in low-paid jobs—as agricultural or informal sector workers—in disproportionately large numbers. At the same time, Thorat explains how caste-based segmentation of the labour market amounts to a violation of the principle of individual choice and also creates inefficiencies in the allocation of resources. S Madheswaran writes about the need to implement legal safeguards to prevent discrimination against oppressed groups and to extend policies for affirmative action to the private sector.
The low rate of female labour force participation in India (and some other South Asian countries) has been the subject of much scholarly analysis. The contribution by Sher Verick and Ruchika Chaudhary to this volume highlights the importance of policy interventions both at the supply and demand side to tackle this challenge. The supply-side interventions include creating institutions for improving women’s education and providing facilities such as childcare to ease the burden of domestic work. The chapters by Jayati Ghosh and Preet Rustagi in this volume highlight how society and the economy undervalue the work performed by women within their own households. Jayati Ghosh shows that if the official statistical agencies recognise cooking, childcare, and other activities performed by women within their own households as “work,” then work participation rate of women in India will be significantly higher than that of men. At the same time, there is no doubt that creating more employment opportunities in the economy will be crucial to boosting demand for women’s work.
Neo-liberal economic policies have substantially weakened the associational power of labour, posing challenges to traditional forms of trade union movement, according to Praveen Jha, Swayamsiddha Panda and Satadru Sikdar.
These authors point to the importance of broadening the scope of workers’ organisations by bringing in informal workers, the self-employed, domestic workers, and persons seeking employment into their fold. K R Shyam Sundar’s contribution is on the question of how trade unions can measure up to the emerging challenges posed by a highly competitive economy. He argues that trade unions will appreciate steps taken by employers to increase productivity as long as workers are provided some degree of security.
Investment in Labour
There is no doubt that the increase in the size of the working-age population offers a huge potential for India’s future economic growth. However, as the chapter by Sheila Bhalla, Arun Kumar and Manoj Jatav show, realising the so-called “demographic dividend” requires investments in education and human development. These authors cite the work of Simon Kuznets in 1960, which pointed out that a large population could form the basis for a large market and a sizeable production base. In addition, an educated population can help in the creation of new knowledge. Clearly, India’s policymakers need to invest more in its people.
It is clear that in a country like India studies on labour will remain central to any attempt to understand the economy. This volume contains some reminiscences by Yoginder K Alagh of his association with Papola from the 1960s onwards, and of their successful initiatives in setting up a few premier research institutions devoted to the study of labour. All in all, the volume under review is an excellent addition to the literature on the Indian economy. One only hopes that this collection of essays inspires a young generation of economists to take up research on questions of labour and employment growth in the Indian context.
Jayan Jose Thomas (jayanjthomas@gmail.com) teaches economics at the Indian Institute of Technology, Delhi.
https://www.epw.in/journal/2019/25/book-reviews/labour-indian-economy.html
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