Dynamics of Labour in Neoliberal Times
K R Shyam Sundar
analysis of labour regulation usually considers the 1976 amendment of the Industrial Disputes Act, 1947 as the starting point of regulation. It may be noted in passing that no research has been done so far as to what compelled the policymakers, especially the government led by Indira
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Main Arguments
The arguments of the book are based on the premise that the new economic forces led by globalisation have hurt the interests of the workers in the formal manufacturing sector exposed as they have been to the risks emanating from labour flexibility enhancing policies and programmes of the state and employers. The neoliberal policies such as labour flexibility, privatisation and so on have shifted the responsibility of managing workers’ welfare from the state to the market (i e, the employer) and the family. The marketisation drive which lies at the heart of these programmes has resulted in commodification of labour. Thus, workers are regulated by the caprices of the capitalists (read market forces) and are “unfree” not only at the workplace but beyond also. This is a modern form of servitude peculiar to capitalism which ceaselessly seeks to undermine the place of labour by introducing new labour processes. All these obviously cause “stress” to the workers and their families. This perspective flies in the face of the ruling neoclassical perspective. This theory premising on the utility maximising assumption argues that workers are free agents who are able to take their marketing and
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Unfreedom and Wage Work: Labour in India’s Manufacturing Industry by Sunanda Sen and Byasdeb Dasgupta; Sage, pp 223, Rs 695.
non-marketing decisions. The authors start their critique of the neoclassical theory attacking this basic proposition and its component theories in their introductory chapter, which is well argued. The labour flexibility argument is based on twin notions of the presence of labour market rigidities in the form of protective legislation and trade union militancy and downward rigidity of real wages or rising product wages (these arguments were used to explain the decline in formal manufacturing employment especially in the 1980s). The authors use simple economic theoretic and empirical and institutional observations and notions to demolish these propositions. For example, it is well known that the incidence of employer militancy (in the form of lockouts, among others) is higher than labour militancy and implicit and back-door labour reforms are resorted to though on paper the laws are tough. The authors question the arguments relating to the product wage by asking (a) whether the price adjustment theory is the sole determinant of employment (why not fall in aggregate demand?), (b) is not the rise in real wage due to a rise in the intensity of labour use (as demonstrated by K Nagaraj in the mid-1990s), and (c) is the assumption of downward (real) wage rigidity an empirical reality.
What is of more interest is their empirical work to follow up the critique of the mainstream labour market analyses in four chapters. Their empirical work uses both secondary and primary data sources. They use the Annual Survey of Industries (ASI) data at the three-digit level for the period 1980-81 to 2002-03. The empirical
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Gandhi, which showed little concern for labour rights, to introduce stiff labour regulatory measures, once in 1976 and later in 1982. The 1976 amendment was made during the internal Emergency regime, which was known more for suppression of human and labour rights than for the 1976 amendment of the Industrial Disputes Act (ID Act). The then Congress government crushed the Bangalore public enterprise workers’ strike in 1980-81 and introduced the Essential Services Maintenance Ordinance to curb industrial actions allegedly in order to suppress inflationary tendencies and, at the same time it introduced the amendment of the ID Act in 1982. What are the reasons for tightening labour regulation in 1982? How could the contradictions in the labour policies of the Congress government be explained? Given these, it is a little disappointing that the authors chose to start their analyses of the ASI data from 1980-81 onwards (though the industrial classification remained the same for earlier years also).
Some of the main and interesting results may be pointed out here, which support their perspective. They reiterate the now well-known fact that employment growth rates lagged behind output growth rates during the post-reform years though they were prevalent earlier as well. (Incidentally, Table 2.1.A refers to 1999-2003 as “post-reform years” while Table 2.2 mentions 1991-2003 as post-reform years.) The authors look at the patterns of growth in output and employment to explain this. Output volatility was found to be matched by volatility in employment. They chart the volatility of growth rates of output and employment, which is notable in both high and low growth rate industries. The authors take this to reflect a “use and throw” approach to labour by employers. Labour bears the risk of fluctuations and an uncertain market. Further, the contribution of high growth industries in
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employment was less than that in low growth industries. However, capital output ratios increased, which played a significant role in raising labour productivity, though curbing employment growth. Thus, rises in fixed investment (embodying techno logical change) and labour productivity contributed to output growth in high rise industries. The argument of the rigidity theorists is that rising labour costs and labour militancy prompted employment of labour displacing technologies, which, in turn, led to employment attrition or poor growth. This argument is not tackled in this book. Further, the ease with which employers intensified capital or changed technologies also speaks of flexibility. This is as much a flexibility strategy as the contractualisation of labour. Further, the spoils of output growth have not accrued to labour. Thus, it is a double whammy for labour. The major finding of the quantitative exercise is that prosperity (read high output growth rates) did not get translated into gains for labour. Prosperity does not seem to assure security to workers (as detailed in the next chapter), which is a disturbing but an important fact of the growth dynamics in the neoliberal economic environment.
Manufacturing Sector
The more interesting chapters to me are the field surveys conducted in the manufacturing sector (including units in special economic zones, SEZs) in selected centres (such as West Bengal, Delhi, Haryana, Gujarat and Maharashtra) in the country which offer convincing support to the “labour under stress and strain” thesis of the book.
The authors have interviewed a little over 600 workers in these centres during 2004-06. The inclusion of SEZs in their field survey is important to drive home their argument that sops given too readily by the government to establishments in SEZs in the name of growth and trade orientation do not mean anything to the workers therein.
Chapters 4 and 5 detail the workers’ profiles (though relating largely to male workers) which are interesting to read and investigate the conditions of work under different economic conditions such as deindustrialisation, trade orientation and
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so on. Predictably, skilled and regular workers perform a shade better than their vulnerable counterparts. Globalisation and its allied forces should have contributed to some kind of convergence as they enhance opportunities for the less endowed such as unskilled/casual labourers. But there are some tales in their enquiries that show the divide between the better endowed (regular or skilled) and less endowed (see for example profiles of workers in Kalyani district in p 128). However, this is not universal as they show that conditions of work did not differ significantly between the permanent and non-permanent in the Falta SEZ (see p 109). While the employers, especially in SEZs, painted a rosy picture of labour conditions in their units, the workers conveyed a different story. It would have been more helpful if they had probed the differences between the two stories a little more, rather than merely noting their existence. For example, the absence or presence of mobility or social security of workers in SEZs (see pp 99, 103) could have been dealt with in some detail.
Employers have capitalised on the econo mic liberalisation measures and organised their production activities to their advantage – employers avail subsidies (locational or credit) and relocate when they are exhausted – often leaving workers in distress. Employers obviously cash in on the absence of any modicum of labour regulation and voice mechanisms in SEZs and the workers in them are worse off. The authors are lucky to have been able to penetrate the SEZs to the extent they did, notwithstanding entry problems for them. Their stories reinforce the fact that employers in India have in pursuit of flexibility adopted “low road” strategies such as cost cutting. While the portrayals are interesting, some sweeping statements are made. For example “In SEZs, labour laws as well as taxation norms of the land are not applicable” (p 87). While labour laws are indeed applicable in SEZs, their implementation may be lax. Similarly, “Firing of casual labour is easy as no labour law of the land is applicable inside SEZs” (p 99).
Security Index
The authors construct a Composite Labour Security Index (CLSI) which is a simple arithmetic average of values of eight
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components, viz, income security, employment security, workplace security, voice security, security in terms of family and community support, job security, skill reproductive security, and financial security (savings, safety nets, etc).
The security index exercise is modelled after Guy Standing’s well-known macro level security study, though suitably modified to take into account field reali ties. Since the authors’ survey was restricted to formal sector, they could lar gely model after Guy Standing’s work unlike in the case of work done by Kantor, Uma Rani and Jeemol Unni.
The limitations of the binary scoring exercise is that following an either or model it does not accommodate “in between” categories, for example, the relationship with the supervisor (a component of job security index) cannot often be seen either good or bad; a worker could say “it is alright, neither good nor bad and binarisation of this will present a problem here. Second, the index scores which may range from 0 to 1.00 are classified into four categories, viz, very high (0.75 to 1.00), just above average (0.50 to 0.75), critical (0.25 to 0.50), and worst (up to 0.25)”. The authors’ jump from the “very high category” to “just above average” is too long a jump without an intermediate category. There is one rosy category and the rest are bad ones. I am inclined to think that the categorisation on the whole is prejudiced to reflect insecurity. In these adverse times, a value such as 0.70 could well reflect high security rather than just above average.
As expected, security levels in SEZ regions were worse than those in non-SEZ regions. But their finding that skill and income securities are poorly correlated is going to raise eyebrows of the human capital theorists. But their finding that general skills do not pay as much as the firm specific skills (as measured by special training) is another issue of interest to labour market theorists. It may not be a good idea to treat skill as an undifferentiated category and make education and training policies. Regions in West Bengal have higher levels of security than those in others. The readers will find some such interesting findings in their exercise.
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The study brings out through macro and field studies the facts that in the new economic environment industrial growth did not aid employment generation and that precariousness of jobs (as manifested in different forms of insecurities) has intensified. Thus, the study finds enough ammunition to fire at the neoliberal or neoclassical theorists supporting labour
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market flexibility. Their stories are well crafted with empirical evidence to support. The strength of the book lies in the micro level studies. The major lesson of the book is that labour market policies pursued by employers (explicitly or implicitly supported or even encouraged by the State) have been disastrous considering the resulting poor employment growth and rising incidence
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-of poor quality jobs. The book is an important one for readers trying to understand the dynamics of labour market policies pursued in the new economic environment.
K R Shyam Sundar (krshyams@gmail.com) is with the Department of Economics, Guru Nanak College of Arts, Science and Commerce, Mumbai University.
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december 12, 2009 vol xliv no 50
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