Labour, Globalization and the State (Routledge Contemporary South Asia)

Labour, Globalization and the State

This book explores the impact of neoliberal globalization on labour markets and the state in the developed and developing world. It focuses especially on the United States and the economies of Asia – in particular, India. Liberalized trade and investment are thought by neoliberals to be the best levers for raising labour standards, provided labour market flexibility and capital market restructuring accompany them. Labour market flexibility and capital market restructuring, at a first glance, appear to be complementary and symmetric policies. In practice, however, they often have very asymmetric consequences. This book addresses these issues, and it presents a comprehensive analysis of the key questions including: •

• • • •

How far is globalization a ‘real’ threat to the conventional systems of wage fixation, employment pattern and basic rights at work in both developed and underdeveloped countries? Are casualization and informalization of the workforce direct outcomes of deregulation? How do labour organizations cope with the volatility of the labour market? Are the existing labour market conditions and forms of labour organizations misfits in the globalized business world? Is it at all feasible to choose a high road that combines some degree of labour market flexibility with better labour standards?

This book will be of interest to students and academics studying International Development, Development Economics, Political Economy, Comparative Labour Studies and Asian Studies. Debdas Banerjee is Professor of Economics at the Institute of Development Studies Kolkata, and former Fulbright Senior Scholar at the MIT, Cambridge. He has authored books on globalization, labour, industrial restructuring and dependence. Michael Goldfield is Professor of Industrial Relations and Human Resources, Department of Political Science, Wayne State University. He has authored numerous books and articles on labour, industrial relations, race relations and globalization.

Routledge contemporary South Asia series

1

Pakistan Social and cultural transformations in a Muslim nation Mohammad A. Qadeer

2

Labor, Democratization and Development in India and Pakistan Workers and unions Christopher Candland

3

China–India Relations Contemporary dynamics Amardeep Athwal

4

Madrasas in South Asia Teaching terror? Jamal Malik

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Labour, Globalization and the State Workers, women and migrants confront neoliberalism Edited by Debdas Banerjee and Michael Goldfield

Labour, Globalization and the State Workers, women and migrants confront neoliberalism

Edited by Debdas Banerjee and Michael Goldfield

First published 2007 by Routledge 2 Park Square, Milton Park, Abingdon, Oxon OX14 4RN Simultaneously published in the USA and Canada by Routledge 270 Madison Ave, New York, NY 10016 Routledge is an imprint of the Taylor & Francis Group, an informa business This edition published in the Taylor & Francis e-Library, 2007. “To purchase your own copy of this or any of Taylor & Francis or Routledge’s collection of thousands of eBooks please go to www.eBookstore.tandf.co.uk.”

© 2007 Editorial selection and matter; Debdas Banerjee and Michael Goldfield; individual chapters, the contributors All rights reserved. No part of this book may be reprinted or reproduced or utilized in any form or by any electronic, mechanical, or other means, now known or hereafter invented, including photocopying and recording, or in any information storage or retrieval system, without permission in writing from the publishers. British Library Cataloguing in Publication Data A catalogue record for this book is available from the British Library Library of Congress Cataloging in Publication Data A catalog record for this book has been requested ISBN 0-203-93334-6 Master e-book ISBN

ISBN10: 0-415-44923-5 (hbk) ISBN10: 0-203-93334-6 (ebk) ISBN13: 978-0-415-44923-6 (hbk) ISBN13: 978-0-203-93334-3 (ebk)

To all those who are fighting for their survival with dignity

Contents

List of figures List of tables List of contributors Preface

1 Neoliberal globalization, labour and the state

ix x xii xiii

1

DEBDAS BANERJEE AND MICHAEL GOLDFIELD

2 Liberalized trade, foreign investments and labour standards: can or should they converge in a new international division of labour?

19

DEBDAS BANERJEE

3 State, market and the household: social reproduction of Third World labour in an era of globalization

47

RAKHI SEHGAL

4 Overseas migration, outsourcing and economic growth in South Asia

73

S. M. NASEEM

5 Informalization, migration and women: recent trends in Asia

97

JAYATI GHOSH

6 The impact of globalization and neoliberalism on the decline of organized labour in the United States MICHAEL GOLDFIELD

121

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Contents

7 Global pressure and minimum wages

160

HOWARD GUILLE

8 Into the fold: the legacy of labour’s subordination in post-colonial India

185

VIVEK CHIBBER

9 Right to strike: is it a legitimate countervailing power in the globalized era? A case study of India

198

KETAN MUKHIJA AND ROHAN SHAH

10 Unorganized manufacturing, flexible labour and the ‘low road’: lessons from contemporary India

218

SATYAKI ROY

11 Revisiting gendered home-based work in the context of reforms

237

MEENA GOPAL

Appendix: selected statistics on Indian workers

248

Index

257

Figures

2.1 2.2 2.3 5.1 5.2 6.1 6.2 6.3 6.4 6.5 7.1 7.2 7.3 7.4 7.5 7.6

R&D costs, and the length of product life cycle: defining the North–South divide Trend in real wage in Indian factories and rupee–dollar exchange rates Indian organized manufacturing: trend in annual (real) wage and (real) productivity Growth rates of real GDP Trade in goods as per cent of GDP Number of jobs shifted out of US, January–March 2004 Total number of jobs lost from production shifts out of the US by industry, January–March 2004 Shifts in white collar work by industry, all countries, January–March 2004 Shifts in white collar work by type of service, all countries, January–March 2004 Unionization rates for companies shifting production out of the US, by destination country, January–March 2004 Real urban wage in 1997 kina Changes in employment (1982–99) Index of rural employment and value of rural exports (1992–99) Volume of rural production and employment Income shares (in GDP) Private capital flows and real wages (1984–99)

23 28 29 102 103 147 148 149 149 150 168 169 171 172 174 176

Tables

2.1

Indicators related to the international competitiveness of exporters of manufactured goods in selected developing economies 4.1 World demographic imbalances: 1980, 2001, 2010 4.2 Remittances to developing countries, 1900–2004 4.3 Estimates of migrant workers by regions, 2000 4.4 Employment-based immigration and H-1Bs, 1992–2003 5.1 Open unemployment rates 5.2 Employment elasticities of GDP growth, 1990–2000 5.3 Net capital flows into developing Asia 5.4 Labour force participation rates 5.5 Trends in manufacturing employment and share of women workers before the East Asian crisis 5.6 Migration status of Asian countries 5.7 Self-employed women as per cent of all employed women 6.1 US national union membership as a proportion of the labour force, selected years during 1930–2006 6.2 National Labour Relation Board election results, 1936–2005 6.3 Employer opposition to unions as reflected in Unfair Labour Practice cases, 1938–2005 6.4 Number of union members and number of employees in selected countries, 1960–2000 6.5 Raw steel production, 1860–2002 6.6 US trade in goods, 1982–2004 census basis 6.7 Manufacturing employment in the US, 1980–2006 6.8 Distribution of production shifts out of the US by industry and destination country, January–March 2004 6.9 Production shifts out of the US, announced or reported, January–March 2004 6.10 Production shifts to China from other countries, announced or reported, January–March 2004 6.11 Union affiliations of employed wage and salary workers by industry

27 76 79 87 90 99 100 104 105 108 111 114 123 124 125 128–31 134–5 136–7 139 142 144–5 146 154–5

Tables xi 7.1 7.2 7.3 7.4 7.5 7.6 7.a.1 10.1a 10.1b 10.1c 10.2 10.3a 10.3b A.1 A.2 A.3 A.4 A.5 A.6 A.7 A.8 A.9

Structural adjustment programme objectives and strategies, 1995–96 Value of agriculture and forestry exports Volume of rural exports 1980–99 Correlation coefficients What the wage share would have had to be in 1998 to maintain the level in 1991 Share of gross domestic expenditure Some comparative data on Papua New Guinea Average monthly income of workers at Howrah Average wages and earnings of owners and workers in Baruipur Average wages and earnings of workers in Kolkata Minimum monthly wages of unskilled workers in different scheduled employments under the Minimum Wage Act Comparable ratios in different area and size category of enterprises Comparable ratios in different area and size category of enterprises India: factories, workers and trend in distribution of income, 1981–2004 India: principal characteristics by type of organization in the factory sector, 2003–04 India: principal characteristics of the factories and the workers employed there, by rural–urban break-up in 2003–04 India: principal characteristics of factories, by major industry group in 2003–04 India: casualization of workforce in factories, trend of, 1993–2003 India: employment in public and organized private sectors, 1980–2004 India: trend of industrial relations, 1980–2005 India: estimates of workers in formal and informal employment India: employment as categorized into ‘formal’ and ‘informal’, 1999–2000

167 170 172 173 174 175 180 221 221 222 222 227 227 248 249 249 250 251 252 253–4 255 256

Contributors

Debdas Banerjee, Institute of Development Studies Kolkata (Kolkata). Vivek Chibber, New York University (New York). Jayati Ghosh, Jawaharlal Nehru University (New Delhi). Michael Goldfield, Wayne State University (Detroit). Meena Gopal, SNDT Women’s University (Mumbai). Howard Guille, Queensland University of Technology (Brisbane). Ketan Mukhija, National Academy of Legal Studies and Research, University of Law (Hyderabad). S. M. Naseem, (former) Chief, Development Planning Division, UN-ESCAP, Bangkok, and (formerly) Quaid-i-Azam University (Islamabad). Satyaki Roy, Institute for Studies in Industrial Development (New Delhi). Rakhi Sehgal, American University (Washington DC). Rohan Shah, National Academy of Legal Studies and Research, University of Law (Hyderabad).

Preface

Since the early 1970s, the world has seen an explosion of global exchange – consumer goods, investment, culture and new patterns of migration. Nations are urged – most often successfully – to lower and eliminate traditional barriers, as firms and nations compete on the global battlefield. To enhance the competitiveness of each nation, the mantra is that reduced wages, reduced social protections and greater flexibility of production are needed. In the end, we are told that labour standards, living standards and quality of life will all rise. Yet, as Keynes suggested, in the long run we are all dead. At present one sees worsening conditions for the world’s poor and many others, growing social inequality, with unheard of amounts of wealth for the very richest.1 What are the truths about these new activities and where will it all end? A conference was organized by the Institute of Development Studies Kolkata (IDSK), Calcutta University Alipore Campus, Kolkata (India), from 2–4 December 2004 on these contemporary debates. The conference contributors addressed issues, including: (a) How far is globalization a ‘real’ threat to the conventional systems of wage fixation, employment patterns and basic rights at work? (b) Are casualization and informalization of the workforce direct outcomes of the opening to trade and investment? (c) How do labour organizations cope with the volatility of the labour market? Are the existing labour market conditions and forms of labour organizations misfits in the globalized business world? (d) Is it at all feasible to choose a ‘high road’ that combines some degree of labour market flexibility with better labour standards? What are the policy requirements for making such a choice a realistic option? The present volume is the outcome. We are very thankful to the participants in the conference and also to the commentators. Perhaps many of the questions raised by them remained unanswered in this volume. Yet the authors have done their best to address these issues following discussions at the conference and later the valuable comments by two anonymous reviewers. We are also indebted to the Indian Council of Social Science Research (ICSSR), the All-India Reserve Bank Employees Association, and to Professor Amiya Kumar Bagchi, the director of IDSK, for cooperation in various ways in organizing the conference. Dr Bidhan Kanti Das (Research Coordinator), Ms Madhusri Ghosh (Librarian) and Shri Debojyoti Das (Computer System

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Preface

Assistant) of the IDSK have provided valuable support in compiling the volume. We are very thankful to them.

Note 1 The New York Times reported on 23 May 2007, that the record price for the most expensive apartment in Manhattan was about to be broken (the previous record of $45 million was about to be eclipsed by an over $70 million sale).

1

Neoliberal globalization, labour and the state Debdas Banerjee and Michael Goldfield

For the last three decades, the world has allegedly become far more global. Yet, there are vast differences of opinion about the meaning of this term. We are told that the world economy is far more integrated; it is clear that the number of people tied to the money economy has grown immensely, virtually all people today sharing in the global market of exchange of consumer commodities for cash. Yet, the market for consumer goods is only one market under capitalism. There is also a market for capital goods, and there are financial markets, both of which have been extended greatly in the current period of ‘globalization’, but from which large segments of the world’s population, including those in much of sub-Saharan Africa, have been excluded. And, finally, there is a world labour market, which is far more restricted than these other markets, but whose migrants exhibit new, widening patterns of dispersion. This integration of the world’s peoples also takes place at the level of culture, which (to the dismay of many and the cheers of some) has been dominated by the United States. There is, the consumer culture of McDonald’s and Starbucks, along with music that includes rap and rock, all being played on mobile phones and iPods, as well as video games, including World of Warcraft, drawing – mostly young – participants from the far corners of the earth (see New York Times, 5 September 2006, ‘Online Game, Made in U.S., Seizes the Globe’). Then there is the prominent role of US television, including fantasy series of the super rich, like Dynasty and Dallas, from which many citizens of the world get highly distorted views of life in the United States. Hollywood films also dominate the global market in theatres and on television, although one must note the expanded reach of India’s Bollywood films, which have extended way beyond their initial confines in the Indian subcontinent, easily available even in US video rental stores. In sports, there is not only the globalization of football (soccer to Americans), but also of US sports icons, including Michael Jordan and now Tiger Woods; this phenomenon started in the late 1960s and early 1970s, with heavyweight champion and anti-Vietnam war critic Mohammed Ali, who fought around the world (including in Africa – ‘the rumble in the jungle’ – and in the Philippines – ‘the thrillah in Manila’) and projected a populist global image. News itself has become global with CNN and BBC available internationally, and Al Jezeera, playing an expanding regional role in the Middle East, and in other areas with large Muslim populations.

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Then there is the popularization of ‘social Darwinism’ through a few USbased television channels, which regularly shows details of the ‘jungle’ life of predator and prey. ‘Survival of the fittest’, as the rule of the free market, gets legitimized; ‘liberty without justice’ is grafted into the minds of the individual agents of the market. Historically, and presently, capitalists and their intellectual defenders have tied capitalism and its spread with the extension of freedom and democracy, yet there is scant empirical evidence for these claims. The small amount of truth behind these assertions is as follows: as Hegel brilliantly showed (and Marx expanded), the development of a functioning product market (based on ‘civil society’ or buergerliche Gesellshaft) required people to be ‘recognized’ as abstract individuals – regardless of their status, their ethnicity, gender, religion, caste or other so-called personal characteristics – whose ‘worth’ was determined by what they had to buy or sell in the market, the well-known ‘cash nexus’. The market thus turns everyone into equals. While there is some element of truth here, as well as perhaps a long-term universalizing trend, the more poignant reality is that labour markets and exploitation have always been based on extensive coercion. In addition, there has also been a continuous historic importance of slavery and human trafficking under capitalism, not to mention perhaps the most terrifyingly brutal regime in modern history, the capitalist-based Nazi dictatorship. In other words, extensive forms of human bondage and carnage have always accompanied capitalist development. The capture of world markets, especially for raw materials, be they oil, gold, diamonds or other goods, has always been marked by coercion if not outright conquest (see e.g. Bagchi 2006).1 And, this remains the case by and large today, although finance currently partners with military means to accomplish this. Despite the many sound bites of ‘global village’ and ‘global citizenship’, world military expenditure has increased at a stupendous rate, since 1998, reaching US$1,118 billion (at current prices) in 2005, which corresponds to 2.5 per cent of world GDP, or an average spending of US$173 per capita. US military expenditure alone accounts for almost half of the world total (Stalenheim et al. 2006).2 The implication is: trade follows ‘gunpowder’ (and, perhaps not the comparative advantage). Despite tall claims of a ‘flattened world’, the inter-country tensions in some corners of the world are brewing, resulting in military build-ups.

Globalization as neoliberalism Yet, it is not just globalization that one must illuminate. That is a fallacy. Globalization under neoliberalism is really what has been happening to the world economy. So, we need to understand globalization’s neoliberal characteristics.3 Neoliberalism has several tenets, which it trumpets, promotes and pushes with near religious fervour. First is the mantra of free trade. There must be an openness of all markets, investments, banks; even state-controlled enterprises, be they industry, oil, transportation, even public utilities, are supposedly inefficient when controlled by the state. They must all be sold off, privatized, in order

Neoliberal globalization

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to ensure optimal functioning. (For fuller discussions of these themes, see the chapters by Banerjee, Goldfield and by Naseem in this volume.) The state must also allegedly withdraw from the business of regulating industries, including utilities, airlines or trucking. In addition, the state should diminish the social support it gives to its citizens in the form of minimum wages, workplace safety regulations and rights, health care, disability benefits, unemployment insurance, pensions and other forms of social welfare. All these latter types of programmes keep the market from functioning at its best, undermining the development of a work ethic and personal responsibility among citizens. The state should likewise diminish its role in environmental protection and as the guarantor of labour rights, although traditional property rights and intellectual property rights (e.g. patents and copyrights) are essential for the markets to function properly.4

Results of neoliberalist globalization While there are still great inequalities between nations, the greatest growth of inequality has been within nations. In all countries, one finds individuals with extraordinary amounts of wealth, including in Russia, China and Mexico, as well as in most of the economically developed countries (EDCs). At the same time, there is a declining share of national wealth held by those in the middle, working and poorer classes. This phenomenon seems to be taking place across the board in both EDCs and less developed countries (LDCs). Meanwhile for the very poorest residents, the number of people in conditions of extreme poverty has vastly increased, creating in Mike Davis’s language, a ‘Planet of Slums’.5 Resistance to neoliberalism Neoliberal globalization is not only breeding wealth for the few and declining living standards for the many. It is also breeding discontent and protest. Bangladesh, a poor developing country in South Asia, became integrated into world value chains as early as the 1980s by ardently soliciting garment manufacturing. The country has over 2,500 garment factories, which earn for Bangladesh more than three-quarters of its foreign exchange, and employ nearly two million people, the great majority women, most impoverished rural migrants. However, during May 2006, the garment workers, noted for their ‘docility’, rose up against factory conditions. In the largest industrial violence in Bangladeshi history, at least 100 people were injured in clashes between police and angry textile workers demanding better wages, as many factories and vehicles were torched by protestors on the second day of their demonstrations (media reports said nine factories were torched; Statesman, 24 May 2006, p. 3). Are these Luddites, the early nineteenth century English radicals? Is it that ‘new’ capital is eating up their wages? Yes, the minimum wage that was set in 1994 at an abysmally low level has not been revised since then, despite a high inflation rate in the country and the prolongation of the working hours in the day. The employers also have

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not ensured industrial safety at all. More than 350 workers have been killed at work since 1990, and 2,500 injured. In Savar, just outside Dhaka, a factory building collapsed last year, killing 64 people. Suicide among workers has become a routine affair. Poor women who are subjected to a host of local ‘pressures of feudalism’ are now showing that they are no longer passive victims of globalization, rather globalized individuals sharing their democratic voice with the rest of the world. In the developed North, the relative tranquillity of the Parisians broke during March–April 2006, when thousands to begin with, then snowballing into about a million marchers of mostly workers and students, stormed the streets of Paris and other parts of France, including university campuses, in protest against the state’s attempt – going against French tradition – to ‘reform’ labour market conditions. The protests at the Seattle meeting of the World Trade Organization (WTO) in 1999 were perhaps the first widely noted growing disenchantment with the international banking and transnational corporations’ coordinating organizations. Virtually every major meeting of the International Monetary Fund (IMF), the World Bank, the WTO and the G8 Summit is now the scene of pitched battles between democratic protesters and heavily armed police forces in Europe and North America or in other parts of the globe. This is, in a sense, the ‘globalization of individuals’; individuals across developing and developed countries are increasingly becoming united on a common platform because they share the trauma and marginalization caused by neoliberal trade and investment. So, can we then say that the commercial phase of globalization is concluded? This is unlike the situation that the world experienced during the heyday of capitalist penetration throughout the world in the last quarter of the nineteenth century and in the years prior to the First World War. At issue, is how to view the current protests across the globe. A unique conference held in 2005 provides us with one of the instruments for reading the essence of the protests against globalization. Industrial restructuring does not necessarily mean firing workers or abruptly closing down the mills. In Caracas (Venezuela), from 27–29 October 2005, more than 400 people – who had been forced to take over their factories in order to save their livelihoods – from 235 worker occupied factories and 20 different national trade union centres, participated in the ‘First Latin American Gathering of Worker Recovered Factories’. It was not so much aimed at aggressive capitals as against the old bureaucratic trade union models that failed to spearhead workers’ interests against the onslaught of capital. As President Hugo Chavez explains: ‘unions which ended up negotiating behind the workers’ backs, of leaders like those in Venezuela who ended up enriching themselves while negotiating about workers’ lives with the bosses’ are being routed out of the trade union movement.6 One of the delegates, Ricardo Moreira of PIT-CNT (the federation of labour unions), Uruguay, declared, ‘we have shown how the workers can run the companies, and this means we can run society as well’.7 There was debate, as is expected from responsible citizens, on the forms of property that the worker-recovered

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companies should take. The resolution was nationalization but under workers’ control in order to prevent a new bureaucracy from emerging. At a time when the world of private capital is buzzing with deregulation and privatization, in a little corner, the successes of worker-recovered factories tend to invert the neoliberal ‘logic’ of privatization, flexibilization and globalization. So the waves of institutional reforms under globalization have not been finalized yet. New experiments are bringing forth altogether different experiences of the relationship between the state and workers in individual countries as well as across borders. As part of the conference, representatives from different worker-managed companies gathered to discuss and reach mutually beneficial agreements. They insisted however that these were not merely commercial agreements, but rather that they were based on different principles of mutual cooperation, transfer of technology, etc. Among the agreements signed was that between Venezuela and the Cipla–Interfibra–Flasko–Flaskepet group of worker-managed companies in Brazil. On the one hand, the Venezuelan state-owned petrochemical company Pequiven will sell raw materials to Cipla at preferential prices and, on the other hand, state-owned PDVSA (Petróleos de Venezuela, S.A.) would buy finished pipes from Cipla. But at the same time, the workers at Cipla-Interfibra will provide the technology and the know-how for Venezuela to set up a number of factories making PVC frames for windows, doors and other construction items. All this will allow Venezuela to bypass the domination of the market for these types of plastic products whose sale is controlled by a handful of US multinationals. The importance of this is that in reality the Venezuelan government is giving direct assistance to a group of factories in Brazil that have been occupied and managed by workers and that have been threatened on a number of occasions with eviction and jail by the Brazilian judiciary. This cannot but serve as encouragement to workers in Venezuela and throughout Latin America to take over their own factories as soon as management attempts a premature death.8 These events are all happening within the capitalist system, and should not be overly romanticized, yet they are suggestive of developing trends and imperatives.

Globalization, neoliberalism and the state And, here we come up against the role of the state. The literature on ‘the race to the bottom’ (see, e.g. Brecher and Costello 1994)9 often suggests that nation states have been overwhelmed or even made superfluous by non-accountable transnational corporations (TNCs) and unelected supra-national organizations like the WTO, the IMF and the World Bank. While there is some degree of truth in these assertions, the reality is far more complex. First, many governments have willingly gone along with neoliberal policies without any coercion; this includes the first neoliberal regimes in the US and the UK under President Ronald Reagan and Prime Minister Margaret Thatcher, respectively. Second, however, there are numerous governments that have not

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always complied with neoliberal principles. In the EDCs (including much of Western Europe, Japan, Eurasia and North America), most countries are not so indebted as to be forced to comply when they do not wish to do so. The Scandinavian countries, for example, have refused to lower, no less eliminate, the degree of their vast social welfare programmes, and seem to be doing quite well economically, nevertheless. The United States, on the other hand, is heavily indebted, but as the proverbial 800-pound gorilla, it sits wherever it wants. The calling in of debts of the United States would most likely diminish the world’s largest consumer market, and push the world economy into severe crisis. So there is really no one who wants to apply this type of pressure.10 Third, and this is important to note, there are certain developing countries who have marched to their own drummers, most notably South Korea and China, going against neoliberal scripture at important junctures, and doing very well indeed. Still, the pressure to accommodate the ‘globalization of capital’ is often intense. Yet, the institutional reforms to accommodate the globalization of capital that undermined the sovereignty of independent nations are now in some cases backfiring. At a time when many of the sovereign states are hesitating to go the whole hog, given their earlier pronouncements of formal democracy, and their obligations to their citizens as regards democratic rights, the supra-national organizations such as the World Bank have assumed the activist’s role in undermining the liberal tradition of democracy. They are forcing the sub-national governments, local bodies or civil society members to enact anti-worker reforms, abandoning even the pretence of commitment to democracy, on which many of the pro-capitalist ideologues wish to hang their hats. Take for example the case of the late industrializing state of Andhra Pradesh in India. In the first half of the 1990s, Andhra Pradesh – and Hyderabad, its largest city and commercial hub – became a global centre for information technology and information technology enabled services; following which came the world’s richest person, Bill Gates, to the state. The floodgates opened and MNCs began to troop in. The World Bank found the soft target. Its report (World Bank 2003)11 found a ‘constrained and inflexible industrial labour market’ as one of the ‘major barriers’ inhibiting growth in the state, which ‘has kept potential investors away and the growth of employment opportunities in the organized sector has been significantly curtailed’ (p. 5). (See the chapters by Chibber, and by Mukhija and Shah, both of which cast grave doubts on these claims.) So, the report suggests a more ‘flexible labour market would provide the existing firms with opportunities to upgrade their current outmoded and energyintensive technologies (especially in cement, steel, and textile) to more recent and energy efficient ones and thereby raise their productivity and competitiveness’ (p. 51). Noting loopholes in the Indian Constitution with respect to labour rights, US corporations have attempted to lure the government of Andhra Pradesh into abolishing even the minimal labour standards that exist there. The government, however, has faced the wrath of the people; the people’s electoral verdict went against the government in the assembly election of Andhra Pradesh

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in 2005, despite there being higher growth rates in both the secondary and tertiary sectors in the state. The lesson is clear: if growth is exclusionary the backlash is inevitable.

The neoliberal attack on labour standards Steps taken by one of the states in India to deregulate the labour market have induced other states to follow suit so as to make themselves ‘competitive locations’ for foreign investors. This is not that dissimilar to the self-cannibalization by US states, each giving greater subsidies and tax breaks to companies that will set up business in their localities. A number of economists following the lead of the IMF and the World Bank have written articles in learned professional journals saying that labour laws are the major cause of underdevelopment. To summarize: (a) labour regulations deter formal registration, encouraging firms to remain in the informal sector; (b) had there been no labour regulations, industrial growth rates would have been higher; (c) labour regulation that increases worker bargaining power is likely to decrease capital formation; (d) regulation lowers the firm’s optimal output level since it raises the marginal cost of production; and (e) regulations hinder employment growth (see, e.g. Besley and Burgess 2004).12 While a large part of these discourses are counterfactual, not amenable to rigorous statistical or analytical tests, it is being overlooked, deliberate or otherwise, that without labour laws, labour standards would have been still poorer,13 and that the laws actually pushed up capital accumulation during the last half century of post-colonial industrialization in India. There are strong labour laws intending to improve the labour standards in all of the industrialized countries in Europe and North America. This is not just coincidence, rather the hard economics of better labour standards leading to higher labour productivity, a phenomenon that neoliberals are deliberately misrepresenting. The alternatives are either to ‘supply’ better technology, and get the outcome in the form of higher productivity, or to increase the ‘speed’ of the assembly line so that workers would be forced, if they had lost their rights at work, to adjust to the ‘speed’. (For a fuller discussion of this theme, see the chapter in this volume by Banerjee.)

Neoliberalism as the increased domination of capital and the subordination of labour How does this historical shift in emphasis in capitalist development compare to the developments that took place during the ‘golden age’, that period of dramatic economic expansion in the North, in the decades following the Second World War? During the golden age, not only did per capita incomes increase dramatically, but both poverty and social inequality declined as well. How then should one interpret the definite shift in the capital–labour balance in the decade since around the beginning of the 1980s? The explanation obviously is not that productivity is lagging behind wages. On the contrary, during the last two

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decades, the manufacturing wage as a proportion of labour productivity gradually declined and consequently the share of profit to the value added increased. A new distribution of income has replaced the ‘older’ one. The distributive changes that have surfaced are within the working class, as well as between classes; thus, the relative incomes of the skilled, semi-skilled and unskilled workers have changed significantly, resulting in some serious problems in maintaining the type of solidarity that existed under the ‘older’ model of trade unionism. (See the chapters by Guille, Roy, and Gopal on the impact of neoliberal policies on wages.)

The emergence of female workers in the new economy With the ‘rise’ of the service sector and global production chains, there has been growing numbers of women workers in jobs that are less skilled, more hazardous and also in positions where the corporations want to ensure – and the state allows them a free hand to do so – a smooth ‘assembly line’, like in the garment production factories in Bangladesh. The increased role and the large numbers of women, as production and service workers, in their own countries and as migrants, is a defining feature of the contemporary period. The new role of women has contradictory results. On the one hand, the employment and migratory opportunities for Asian women have tended to give them both more self-confidence and a more independent role within their traditional families. On the other hand, their situation has left them more vulnerable to exploitation in the global economy, and to be subjected to all the horrors of sexual exploitation and trafficking. The remittances that Asian women send back to their countries of origin are a major component of revenue for these countries, but hardly acknowledged officially. These issues are explored in greater detail in the chapter by Ghosh. Yet, the expanded role of women’s employment sometimes takes place in the most primitive of circumstances. Gopal’s chapter shows graphically, how – contrary to the predictions by neoliberal advocates – large industrial concerns often outsource work, that is, distributed to Indian women in the most exploitative, home-based, sweatshop conditions, leaving most women socially isolated from their co-workers, with whom they are unable to join in struggles for improvement. And, it is often the patriarchal ideology and practices of their own cultures that demean women’s work, belittling their contributions to society, and that help to disempower them. Sehgal argues that this devaluing of women begins with the devaluing of women’s labour at home, where their important contribution to the social production of labour is largely unrecognized. This devaluation, not only affects their exploitation on the job, but increases their burdens at home. Multinational employers of LDC labour no longer have to pay a ‘family wage’, i.e. enough to allow a labourer, not only to survive, but to support family members, including children, who will be the next generation of workers. Rather, global capital parasitically only pays enough to support the worker her/himself, relying on

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traditions of communal support to help the rest of the family support network to survive. Relying on a labour market where there are massive, desperate numbers of unemployed workers, global capital not only fails to pay enough to replenish the supply of future labour, but also pays barely enough for the individual labourer to survive at an impoverished level. This situation, as Sehgal argues, puts increasing pressure on women, both as workers, and as homemakers.

The suppression of wages in general Globalization in fact has locked itself up with what Bukharin once called the ‘economic theory of the leisure class’.14 Half of the world – nearly three billion people – is struggling with poverty on less than $2 a day. They are deprived of some of life’s basic needs, such as food, shelter, clothing, basic education, primary health care and security. Perhaps the only theory of poverty eradication that has credibility to the ‘globophiles’ is the ‘trickle-down’ effect of economic growth measured as the growth in per capita income. But what remains unanswered is that, besides those who are already excluded from the globalizationled ‘prosperity’, more people from the core of the capitalist production system are just counting their days when they will join the growing pauperization. This situation can in good part be traced to the growing weakness of labour organizations in the EDCs, impacted by neoliberal globalization, although as Goldfield argues in Chapter 6, the underlying causes are more longterm. There has been productivity growth in the North as well as in the South during the last 25 years. Yet, everywhere one finds real wage stagnation giving rise to economic rent. There have been more undocumented migrants than visa holders from the developing to the developed countries; from Latin America to the US and from Korea to Japan, from the central European states to Western Europe, from South Asia to the Middle East. They are employed at wages much lower than the marginal value product of their labour. In this way the migrants from the South become instrumental in depressing the wages in the North, giving rise to huge economic rents for capital. Scholars often miss the point that the capitalist system, in this way, is generating more rentiers than Schumpeterian entrepreneurs, and thus slipping back to the society and economy that used to characterize the system two centuries ago, often described as stagnant and parasitic by many economists. The work conditions, work–leisure balance, basic rights of workers at work, are all jeopardized. The international rentier finds a weapon in neoliberalism to undermine the potentially menacing workers’ struggle. International migration plays a role in weakening workers’ leverage in the labour market. When they arrive in a new land, migrants often lack the social support necessary to give them greater bargaining power, as well as the language skills to adapt and find their way quickly. Once they are out of their ‘own’ familiar environment they are supposed to behave like any other commodity in the market, i.e. compete with each other and accept the market-clearing wage without it affecting their productivity, at least in the short run. Thus one

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witnesses the massive increase in both intra- and inter-country migration of job seekers.

Patterns of labour migration There are two basic directions of personpower flows from the South to the North and within the South. First is the skilled workers from the South entering the labour market in the North; very few of them are undocumented. Huge public resources, depriving other fellow countrymen, have been spent on the development of this human capital in the South. And, now, the North is ‘shopping’ the bodies cheaply. This is a ‘drain’ of national incomes from the poor developing countries who are rather subsidizing the North’s costs of raising human capital at home. Moreover, with these cheaper sources of personpower in hand the employers in the North are threatening the wages and other conditions of work at home. What does the South gain out of these skilled out-migrants? Earlier, almost nothing, as they used to settle down in the North; now, as job insecurity is growing especially after 9/11, and consequently the changing visa conditions, these migrants are sending remittances (in hard currency) back home. Naturally, the developing countries have grown more interested in this kind of migration. Remittances from Indians working abroad have continued to surge, maintaining India’s position as the leading recipient of remittances in the world. The increase in net invisible surplus is more than offsetting the sharp increase in trade deficits of India, a large part of which is with the North. This has generated sharp interest by many countries, and gets reflected in the politics of negotiation with the ‘mobile’ capital from the North. (See the lengthy, nuanced discussion by Naseem in Chapter 4 of this volume.) However, there is a second dimension to the international migration from the South, that of unskilled workers to countries in the South. The dominantly labour sending countries in all of Asia include Bangladesh, Cambodia, China, Indonesia, Myanmar, Nepal, the Philippines, Sri Lanka and Vietnam. The host countries include all of those in the Middle East, Hong Kong, South Korea, Singapore and Taiwan China. Some countries are both sending and receiving international migrants: India, Malaysia, Pakistan and Thailand (Tullao and Cortez 2003).15 The labour route within Asia does not usually encounter a movement of capital from the opposite side. Hence, the miserable conditions of these migrant workers hardly draw the attention of the developmental states in the South. They do not even ‘appear’ in international negotiations. So long as wages in the North do not face depression, the transnational migration might actually indicate an excess demand situation. In a stark indication of the mounting attack on the social conditions of American workers, the average real wage in the US began to decline steeply for the first time in over a decade. The decline in wages is a product of increased inflation, combined with a persistently poor job market that has made it hard for workers to negotiate real improvements in living standards. Nominal yearly growth in compensation and wages for all workers has been decelerating since 2000, and it has levelled off in

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recent months at around 2.5 per cent, well below the historical average for this series.16 Productivity growth remains much above the nominal growth in worker compensation, which for about the last seven years has increased at a decreasing rate, well below the inflation rate, and has meant that American corporations, on average, have been getting more out of their workers for less. Wage decline in the US would have a cascading effect on the rest of the world, since US imports alone constitute 9 per cent of the rest of the world’s total merchandise exports – i.e. lower wages would greatly curtail exported consumer goods to the US. Although wage rates in the developing countries lag behind those in the US, in the globalized trade regime the rates in the former are pegged to the latter. Every country having strong trade connections with the US would try to maintain the current relative wage as far as possible without disturbing the currency exchange rate, thus depressing the purchasing power of the world’s workers even further. Unlike the situation where skilled labour from the developing countries is migrating to the traded sector in the US, in the main the South–South labour migration is predominantly in the non-traded sectors (e.g. construction, domestic work), which together is much larger than the traded sector. Yet, wage depression in this sector would not affect international trade, and as such would not have a contagious effect. Still, it has its own dynamics. Like the black-car drivers or the supermarket delivery workers in New York City,17 in the growing cities in the Middle East after years of working in obscurity in the unregulated economy, transnational workers have at last begun striking against the tyranny of their employers – who sometimes do not even pay their overdue wages for months; against these medieval conditions of work, which include 14–16 hours of work a day and primitive shelter, they have recently been initiating a new labour movement. This signals the emergence of an international civil society, beyond the domain of nation states, raising voices for an international organization to monitor the international movement of labour with acceptable-to-all codes of law. The development of underdevelopment within the world capitalist system in this way reconfirms Marx’s ‘law of impoverishment’ resulting from capitalist accumulation on a world scale over the last three decades of globalization. However, leaving it there would merely provide a partial description. Had the developing countries improved labour standards in their own territories, the unskilled migration in the first place would not have been so large. Second, the ‘race to the bottom’, so far as wages are concerned, would not have set in. The IMF–World Bank ideology, however, rules the roost. The ‘globophiles’ who think that globalization is the source of wealth and welfare argue that economic globalization has changed the nature of competition. Nowadays nations are in competition with each other, the argument goes. Therefore in order to enhance the competitiveness of nations, there is a need for reduced wage costs and greater flexibility in production. As nations are competing with national teams of employers and employees, the industrial relations system has no role to play. The nation’s primary agenda should be to assemble

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the workers around the employers to produce more profit. If the employers demand concessions from the workers, this ought to be endorsed. So the workers must bear the brunt! Labour market flexibility and capital market restructuring appear at first glance as symmetric policies, from the point of justice and equality. But, they have very asymmetric consequences, and both serve to enhance the welfare of capital at the expense of workers. However, as development is more than just the accumulation of capital and the enhanced efficiency of resources allocation, the role of government in the labour market assumes even greater importance in the face of the challenges posed by globalization, both economic and cultural. Development with democracy requires the government to play at least the minimum role of ensuring collective bargaining and enforcing labour standards. The argument that the Indian factory sector does not have the capacity to improve labour standards under globalization, however, turns out to be baseless after careful scrutiny. Unless the standards are improved in the factory sector, the overall labour standards in the economy will continue to falter and India will remain trapped in ‘low-road’ development within the periphery of the ‘new’ international division of labour (see Chapter 2 by Banerjee in this volume). The poor labour standards, cash standards to be specific, i.e. wages in many of the developing countries, however, are threatening the relatively high wage levels in the developed North. Of course, advanced technology, thereby higher productivity, in the North acts as a deterrent to the ‘passive attack’ from the South. However, the increased trade liberalization makes the deterrence weaker. So there is an increasing demand to introduce a ‘social clause’ in international trade. Many of the developing countries that have not so far paid heed to their workers’ demands for improved labour standards now somehow manage to stage political mobilizations – the ‘logic’ of economic patriotism, in the main – against the ‘social clause’. The International Labour Organization (ILO), which so far has championed the cause, has been sidelined because it has ‘no teeth’. The anti-WTO activism may force certain industries to improve their standards in the export sectors in those ‘offending’ countries in the South. But the net effect is likely to be that the export sector would shrink, and capital and labour from that sector would move to non-traded sectors where there is unlimited scope for exploitation of the workers. Ultimately, the overall standards would fall. The issue of labour standards needs to be viewed from the angle of development of human capabilities. But how can capital be forced to adopt improved production practices? Marx pointed out in Das Kapital, that the factory acts in England encouraged capitalists to be more efficient and productive. A good part of the impetus for the passage of these laws, however, came from workers and their mass organizations, the trade unions. Although these acts ultimately benefited employers, as well as their obvious benefits for workers, more than a century later many capitalists now find such regulations unacceptable, thus pushing the state either to amend the historically emerged rules and regulations of factory operation, or simply abolish those rules that restrict the operation of a ‘free’ labour market. The working class, which has historically resisted any such

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anti-worker measures, in close cooperation with the welfare state, has become relatively helpless as the state under international pressure increasingly adopts a ‘minimalist’ role. What then of the working class organizations that have historically resisted the onslaught of capital against living and working standards? Can’t the trade unions jointly put up resistance? This remains to be seen, but in the present period unions have so far been unable to respond. In virtually every country in the world (with only a few quite unusual exceptions), trade union strength by a large variety of measures (including union membership and strikes) has declined a good deal since the early 1980s.18 While each country often has its specific story to tell about the weakness of its unions, the impact of global neoliberalism has a role to play in virtually every country (see Chapter 6 by Goldfield in this volume for further analysis and data). In India the possibilities for trade union resistance are eroding. The divisive role played by the post-colonial state so far is yielding results. The trade unions are divided along the lines of their parent political parties. In the case of India, the political party or the conglomeration of political parties that rule the subnational states can easily dissuade their trade union wings from launching a united front against anti-working class measures (see Chibber’s analysis in Chapter 8 of this volume). Second, the trade unions represent only a small fraction, that of factory workers, which together constitute not more than 7 per cent of the manufacturing workers in the country. This is an inherent weakness of the working class movement in India. Although the Industrial Disputes Act (IDA), 1947, does not prevent the non-factory workers from organizing resistance against capital, the Indian trade union movement has hardly bothered mobilizing the vast numbers of non-factory workers. Third, like in many Third World countries, the labour laws, more specifically the IDA, clearly state what the workers are not entitled to do. The Act does not even say explicitly whether the workers have the right to strike or not. The Act dictates what rules and regulations workers are to follow in collective bargaining. It does not even guarantee that the employer must honour a negotiated agreement (see the analysis by Mukhija and Shah in Chapter 9 of this volume). This is quite in contrast to, say, the Scandinavian labour laws, where first of all it is not ‘collective bargaining’ rather ‘collective agreement’. Further, the civil codes are there to oversee compliance by either side, unlike in India. The main problem in India is that the people have de jure social rights, political rights and economic rights but all of them are compartmentalized. As a result, if the employer does not pay the wages to the workers, s/he cannot be put on trial as a penal offender under the Criminal Procedure Code of the country. These are the fundamental problems of jurisprudence in most of the post-colonial countries in Asia and Latin America. So long as these gaps are not plugged, radical departure from the orthodoxy in economic governance in these countries remains difficult no matter whether people have voted for the left-of-centre, or the right-of-centre politics. Thus, in the wake of deregulation in the Indian economy the intensity of lockouts and closures by the employers has far exceeded that of strikes by

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workers, not only in terms of frequency but also in terms of the number of person-days lost. There have been isolated instances where the workers took control of the factories and tried to run them, forming workers’ cooperatives. But, on the whole, the experience of this ‘alternative’ is that of failure. Some, of course, believe that the developing state can exercise its autonomy to plan a national economic policy. Under the current phase of globalization when neoliberalism predominates ideologically, and finance capital or ‘hot money’ is ever more powerful and can create balance of payments crises and plunge the domestic economies into total disarray like those experienced by a host of countries in East and Southeast Asia in the 1990s, the autonomous space of sovereignty is limited, unless the reigns of the developing states were seized by domestic class forces. While such actions do not appear on the immediate horizon, there are suggestive beginnings including those taking place in some of the Latin American countries in recent times. In many parts of the world one sees incipient struggles, be they numerous protests by workers in China, or successful organization in the informal sector in parts of India.19 When, collectively, the world’s workers will decide they have had enough, and are able to organize in sufficient strength to beat back the neoliberal assault by world capital, remains to be seen. We remain confident, however, that such a day will eventually come. The current volume, however, has a more modest goal. The chapters attempt to assess the impact of globalization and neoliberalism on labour and the state, with a focus on the United States, Asia and on India in particular. In general, the analysis presented here is offered as a broad and contextual framework for deepening our collective understanding of the world in which we live. The chapters proceed as follows. As against the growing scepticism of the possibility of improving labour standards in globalization, Debdas Banerjee takes the debate to a different plane. The world trade patterns show that the North and the South, in fact, are competing in distinctly different markets in the world. Hence, poor labour standards as concealed in the traded commodities from many of the developing countries are less likely to pull down the standards in the North. The crucial economic factor explaining the changing international division of labour is the research and development (R&D) costs and the corresponding length of product life cycle. The trade-centric argument in favour of or against labour standards thus really undermines the core understanding of the issue. Labour standards need to be separated from trade and commerce and seen as an instrument of building human capabilities. Rakhi Sehgal highlights the survival strategies adopted by households as the burden of bearing the costs of globalization are exacerbated for women, and how this translates into additional burdens and responsibilities for women. The domestic labour debate throws up questions on the meaning of ‘work’ and the relationship between ‘work’, ‘labour’ and ‘employment’, underlining the social construction of these categories and the power struggle that goes with it in different societies. Her chapter, then, is an attempt to reframe the debate on global-

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ization through a focus on social reproduction in the processes of privatizing of welfare and socializing of private family activities. S. M. Naseem analyses the role international migration has played in shaping the industrial policies of both developed and developing countries in recent years and the impact it has had on their domestic policies. The immigration regimes of the developed countries became more restrictive with the rise in unemployment rates and the migration of some of the sunset and polluting industries to developing countries. However, the developed countries’ need for importing labour, especially highly skilled labour, keeps on rising as a consequence of their demographic and technological evolution especially in the field of information and communication technology. The latter development in the North has opened up possibilities of exporting ‘jobs’ to the South through the mechanism now known as ‘outsourcing’. The phenomenon sits at the crossroads of the international division of labour and overseas migration policies. Jayati Ghosh analyses why employment elasticity of export production in the high-exporting economies in East and Southeast Asia and the Pacific have been falling, and have affected women’s employment. The dramatic economic boom in East and Southeast Asia over the 1980s and the first half of the 1990s, based on rapid export expansion, was itself based on the growing use of women as wageworkers. Indeed, it is now widely appreciated that the Asian export boom was driven by the productive contributions of Asian women; in the form of paid labour in export-related activities and in services, through the remittances made by migrant women workers, and through the vast amounts of unpaid labour of women as liberalization and government fiscal contraction transferred many former areas of public provision of goods and services to households (and thereby to women within households). This trend towards feminization of employment in Asian countries resulted from employers’ need for cheaper and more ‘flexible’ sources of labour, and was also strongly associated with the moves towards casualization of labour, shifts to part-time work or piece-rate contracts, insistence on greater freedom for hiring and firing over the economic cycle and accompanied by increased Asian female migration. Despite the growing significance of female migration in the region, there is little recognition by officialdom in the relevant Asian governments of this process, in terms of ensuring decent working conditions and remuneration for migrants. Michael Goldfield analyses the historical decline of organized labour in strength and mobilization in the United States. The decline of union membership and union density among US workers in the past 50 years is only partly explained by globalization. The major cause of US union weakness and decline is twofold: first, is the capitalist offensive against unions and labour standards by US corporations that have been going on for decades. Neoliberal policies, including privatization and deregulation have greatly added to the woes of workers and their unions. Second, it has been the failure of unions to put sufficient resources into new organization, to develop strategies to confront the employer offensive and to build sufficiently broad and solidaristic coalitions and alliances, both nationally and internationally. It is also important to recognize

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that the unorganized migrant workers – documented or otherwise – are strengthening the opposition to capital, in most cases without the basic support of the trade unions. Howard Guille analyses the outcomes of the deliberate cutting of minimum wages in Papua New Guinea, which is classified by the United Nations Development Programme (UNDP), in Human Development Index, among the medium developed countries but is the lowest of the Pacific countries. However, the deregulation of wages and the substantial reduction in the minimum wage do not appear to have met the objective of its advocates. The IMF maintains that one of the causes of increasing crime is the lack of job opportunities; a clear admission of its failure to induce growth and development in the country with the Structural Adjustment Programme (SAP). However, as it stands, better weekly income prospects are luring people away from the labour market to the ‘criminal market’. Is this what the SAP had in mind as its objective? As Vivek Chibber argues convincingly, the structural weakness of Indian trade unions was consciously implemented by the Indian National Congress (INC or Congress) after Independence. In order to reach a rapprochement with Indian capitalists in the post-colonial era, the INC purposely split the militant workers’ movement, forming a separate Congress-led federation that was to do the INC’s bidding, including limiting the right to strike. This new labour federation, the Indian National Trade Union Congress was to be an arm of the INC, gaining benefits for its members, not by mass mobilization, but by its clientist relation to the state. So, when the state moved in a neoliberal direction, unions were left high and dry. Ketan Mukhija and Rohan Shah analyse workers’ right to strike. This is the irony of the current situation in India. If this ‘right’ is available to the employers, equity suggests it must be made available to workers. ‘Liberty of market’, ‘liberty of contract’ and the ‘liberty of individuals’ are championed by globalization and deregulation, but without its very essence of equality and equity. Mukhija and Shah argue, with distinctive court cases, that to avoid strikes is everyone’s legal responsibility. But to assert that strikes under any circumstances are illegal, immoral, inequitable and unjustified is contrary to Indian law and industrial jurisprudence. Strikes are internationally accepted as a part of the right of collective bargaining, and it is not a separate right as such. Collective bargaining includes negotiations, talks, mediations, state intervention, arbitration and referring of disputes to tribunals and, if all fail, then the option is to strike. Therefore, strikes are the culmination of the right to collective bargaining of the working class. The authors provide the rationale for strikes, which are currently so restricted in Indian society. Satyaki Roy, based on field studies of unorganized/informal/non-factory units in and around the city of Kolkata (West Bengal), contests the dominant view of positing labour market flexibility as the central method to attain higher productivity and growth; he argues that with a fully flexible labour market even in a skilled sector, market imperfections and institutional failures may lead to a downward spiral of low productivity, lower earnings and erosion of skills. The

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mode of response of economic agents varies according to existing institutions in which the market is embedded. Meena Gopal raises and answers two questions: (a) even as women’s employment opportunities are increasing, are the terms of employment and the working conditions better? And, (b) do they prove that women’s participation in paid employment contributes to their overall empowerment and control over their lives? Based on the survey of the beedi – an indigenous cigarette in which tobacco is rolled in a tendu leaf – industry in south Tamil Nadu (India) she argues that as the workplace enters the homes, where each woman is literally on her own managing the work of her household as well as her beedi work, a situation is created where women are isolated in their struggle for survival. These chapters, in sum, provide a unique window for understanding the actual results of neoliberal policies in today’s world.

Notes 1 A. K. Bagchi (2006) Perilous Passage: Mankind and the Perilous Global Ascendancy of Capital, New Delhi: Oxford University Press. 2 P. Stalenheim, D. Fruchart, W. Omitoogun and C. Perdomo (2006) ‘Military expenditure’, in SIPRI Yearbook 2006, Oxford: Oxford University Press, pp. 295–324. 3 G. Duménil and D. Lévy (2004) in their Capital Resurgent, Roots of the Neoliberal Revolution (Harvard University Press), argue compellingly that the whole agenda of neoliberalism is designed to re-establish the greater control of the world economy by capital, particularly banking capital. 4 Rich descriptive material may be found in D. Harvey’s (2005) A Brief History of Neoliberalism (New York: Oxford University Press). 5 M. Davis (2006) Planet of Slums, London: Verso. 6 As quoted in J. Martin, ‘First Latin American Gathering of Worker-Recovered Factories’, ZNet Activism, 3 November 2005. Online, available at: www.zmag.org (accessed 3 June 2006). 7 Ibid. 8 Ibid. Online, available at: www.zmag.org/content/print_article.cfm?itemID=9037& sectionID=1 (accessed 3 June 2006). 9 J. Brecher and T. Costello (1994) Global Village or Global Pillage: Economic Reconstruction from the Bottom Up, Cambridge, MA: South End Press. 10 Or, as Keynes prophetically observed, if one owes a bank, 1,000 pounds, and defaults, one is in trouble. Yet, if one owes a bank a million pounds and cannot repay it, the bank is in trouble. 11 World Bank (2003) Unlocking Andhra Pradesh’s Growth Potential: An Agenda to Achieve the Vision 2020 Growth Targets, New Delhi: Poverty Reduction and Economic Management Sector Unit, South Asia Region. 12 T. Besley and R. Burgess (2004) ‘Can Labor Regulation Hinder Economic Performance? Evidence from India’, Quarterly Journal of Economics, 119(1): 91–134. 13 See, e.g. D. Banerjee (2006) ‘Labour Regulations and Industrial Development: A Case Study of West Bengal’, Report prepared for the EU sponsored project on ‘Labor Laws and Industrial Growth: Experiences of some EU Countries and India’. 14 N. Bukharin (1927) Economic Theory of the Leisure Class, London: Martin Lawrence Limited (originally published in Russian in 1914). 15 T. S. Tullao Jr, and M. A. A. Cortez (2003) ‘Movement of Natural Persons and its Human Development Implications in Asia’, Mimeo, Vietnam: UNDP Asia Trade Initiative.

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16 Economic Policy Institute, ‘GDP Picture’, 28 April 2006, Washington, DC Online, available at: www.epi.org/ (accessed 13 June 2006). 17 See I. Ness (2005) Immigrants, Unions, and the New US Labor Market, Philadelphia, PA: Temple University Press. 18 For comparative figures ranging over almost 100 countries, see J. T. Addison and C. Schnabel (2003) International Handbook of Trade Unions, Northampton, MA: Edward Elgar Publishing. 19 See, for example, the fascinating article by R. Deshpande (1999) on the successful organization of head carriers, loaders and dalit ragpickers in Pune (‘Organizing the Unorganized: The case of Hamal Panchayat’, Economic and Political Weekly, 34(39): L19–26.

2

Liberalized trade, foreign investments and labour standards Can or should they converge in a new international division of labour? Debdas Banerjee

The perspective Not long ago the issue of labour standards in economic development was fairly straightforward: employers and right-of-centre social scientists, especially mainstream economists, tended to be against them; labour and its left-of-centre allies tended to be for them. The neoclassical mainstream economists used to suggest that government should leave the setting of labour standards to the free labour market; otherwise the standards would add to production costs by raising the level of wages above the market clearing rate, impede efficiency and restrict flexibility for adjustment, lead to suboptimal allocation of labour, waste resources through rent seeking, stifle competition, deter investments and constrain economic growth, and impair or slow down urgently required market adjustments to external shocks. As the twentieth century drew to a close the labour standards issue became murkier. Conservative views have taken two different lines, one for the domestic economy and another for the trading partner(s) – i.e. government ‘indifference’ in the home, and government ‘activism’ in the foreign labour market. Low wages and minimalist labour standards in late industrializing countries are regarded in the developed North as significant factors behind the deterioration of northern labour standards and the real wage growth. Therefore, a more militant posture towards late industrializing countries’ labour standards has emerged, and has automatically generated its counter-politics: the developing South considers the North’s posture a thin veil for protectionism. The line of reasoning that seems to have gripped many in the developing countries who are opposing improved labour standards starts from the assumption that these standards are something that we can afford only as far as economic strength and economic results allow. Although it is very difficult to identify the direction of causality, historically the two have moved together. Bypassing the fundamental problem, the developing countries (with poor labour standards) are demanding increased access to the labour markets in the North, in exchange for the South’s increased opening up to northern capital. The South ignores the fact that workers in the North too are victims of the neoliberal globalization because they are at the receiving end of the veiled threat of ‘capital

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flight’. ‘Either allow wage concessions or else witness exports of production sites abroad.’ In such a situation if the South lures capital by offering liberal exploitation of poor labour standards in their country, and exports cheaper labour – be it in the form of merchandise or otherwise – to the North without ever improving the labour standards in their home countries, it would ultimately depress the living conditions of the working class throughout the world. Wages in general would be depressed and capitals would ultimately reap the benefit of economic rent arising out of the wage–productivity gaps. In brief, globalization and economic nationalism are face-to-face in the new era centring on the issue of labour standards. Globalization enthusiasts believe that trade and investment are the best levers to raising labour standards in the developing countries, provided labour market flexibility and capital market restructuring accompany them. Factor price equalization has a natural tendency to happen under the liberalized market conditions. But, there is a ‘contradiction’. Those who think globalization is the source of wealth and welfare argue that economic globalization has changed the nature of competition. Nowadays nations are in competition with each other, the argument goes. Therefore, in order to enhance the competitiveness of nations, there is a need for reduced wage costs and greater flexibility in production. As nations are competing with national teams of employers and employees, the industrial relations system has no role to play. Moreover, globalization demands a high level of fiscal management, so the prescription is to reduce social expenditures. There is not much room left for policy-induced standards improvement. Neither, as it seems from the neoliberal paradigm, is there any possibility of improved standards as long as the ‘economic war of nations’ continues. The world capitalist system in fact has been consolidating a global cheap-labour economy. What needs to be emphasized is, first, that labour standards may or may not impede employment creation, but their absence can impede employment quality and, ultimately, employment creation.1 Second, tail-end job creation would actually be fatal. The poor quality of employment would have an adverse impact on long-term productivity, and also on the longevity of the workforce. There is increasing international political pressure for labour standards or a ‘social clause’ to accompany international trade in goods and services. And, the WTO is presumed to be the best ‘choice’ as the monitoring agency. Yet, I will argue that the trade-centric argument actually bypasses the main issue and would ultimately encourage ‘human trafficking’. Global inequality has been rising very fast. The income gap between the poorest and the richest countries that were 1:54 in 1960–61 widened to 1:121, 40 years later in 2000–01. A mere 22 countries with less than 15 per cent of the world’s population dominate more than half of global industrial trade and foreign direct investments (FDIs). Productivity differences might explain the growing inter-country inequality yet poor labour standards in the South seem to play a greater role. Not only do poor labour standards discourage improved techniques of production, but they also reinforce ‘unequal exchange’,2 and growing inter-country inequality.3 The anti-‘wage-led growth’ protagonists do not see

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that quite often the problem of industries in developing countries is not wages, but that they cannot meet industrial standards of quality and reliability. Indian think tanks, like those in many other developing countries, urge us to keep wages low because they presume wage increase, in particular, and improved labour standards, in general, would be detrimental to India’s competitiveness in the global market. Conservative policies in favour of a ‘low wage’ policy directed at propelling economic expansion led by profit, private investment and trade surplus are allegedly more likely to succeed (Bhaduri and Marglin 1990). The interactive effects between wages and economic growth and, more specifically, between real wage gains and the improvement of productivity, have been grossly ignored in Indian factories, as if economic progress has an exclusive identity different from the social progress. The choice is put forward in a binary mode: either meet the needs of subsistence, or enforce decent working conditions and ‘sink’. As the conjecture goes, if the value of the marginal product of labour exceeded its cost, there would be an incentive for business to increase the number of their employees. Over time, all workers, or at least certain categories of workers, would become increasingly scarce, eventually forcing wages to rise and bringing the cost of labour in line with its actual value. Thus, the argument goes, strong labour standards are not a necessary condition for improving wages in the developing countries (with ‘unlimited’ supply of labour). Wages rise at the same pace as productivity, whether or not these advances are accompanied by improvements in labour standards (Raynauld and Vidal 1998: 47). However, what we often overlook is that economic growth in countries where substantive democracy is weak (either in the firm or family, the two main foundations of modern capitalism) is unlikely to lead to any autonomous improvement of labour standards. In countries with high inequality in the distribution of wealth and income, the trickle-down effect from growth to improving labour standards is most likely to be weak. Moreover, productivity improvement is not achieved just by increased investments in improved technology, as the ‘engineering’ branch of economics discipline tells us. It requires improved quality of labour, with a higher premium, and motivation to adopt the technology. Neoliberalism grossly overlooks the distribution aspect of globalization and development. Open economies are built upon the possibilities of relocating labour use patterns globally. However, unless the unevenness in wages and other components of labour standards are reduced globally, the international division of labour would simply act as the mechanism of income transfers giving rise to higher inter-country inequality. The outsourcing success has shown how the North can take advantage of the South’s cheap personpower. Businesses in the North have cut down the costs of production drastically by taking the bulk of the relatively low research and development (R&D) and low technology intensive production processes away from the domestic workers and given them to the extremely low-wage developing countries like India, Vietnam or Bangladesh. Since most of the value additions are done at the retail or wholesale end of the

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value chains, an accelerated process of accumulation in the North is in motion. While the welfare gains of the common consumers in the North are ambiguous – because there is no solid evidence to suggest gains to the consumers in the North in terms of lower prices – there certainly has been no long-term gain for the developing countries, except the temporary addition to employment in the outsourced sectors. This phenomenon lay the ‘trap’ of low R&D and low technology in the South, leading to a vicious circle of low wages and thereby increasing international inequality. To come out of the ‘trap’ the necessary condition is the improvement of labour standards; investments at a higher rate certainly is one of the sufficient conditions. The next part of the chapter deals with the questions raised as to the feasibility of improving labour standards in the developed as well as the developing countries at a time when trade liberalization has unified the erstwhile autarchic markets into a global one, whose institutional characteristics presumably make ‘competitiveness’ the key to survival. The chapter goes on to explain why tradecentric arguments take the international institutions of development to a blind alley in so far as labour standards improvement is concerned. The chapter then argues that the developing countries should consider labour standards as part of the production system that would ultimately bring them closer to the North. It is also important to recognize that the issues of ‘efficiency’ cannot be solved by dissociating them from the issues of labour standards; this is the subject discussed in the penultimate part of the chapter. Final remarks are made in the conclusion.

Globalization and conflicts on standards The ‘popular’ perception in the North is that low-cost production sites in the South cause ‘capital flight’ from the North, reducing the job prospects for the northern workers. Factories are in fact not transplanted abroad by owners simply in search of lower labour costs. Productive investments, unlike ‘hot money’, look for gains in the long run. Transnational corporation (TNC) capitals would not usually be exported to many of the low-wage African countries for the bare minimum fact of a shortage of labour with the required skills and ability to adapt to ‘new’ technologies. Let us consider the directions of FDI flows. From 1986–90, developed countries shared 82.4 per cent of the total while the developing countries in Africa, Latin America, the Caribbean, Asia and the Pacific together accounted for only 17.5 per cent. Ironically, after more than a decade of liberalization and structural reforms in most of the developing South, the FDI distribution pattern remained almost unchanged, with the South attracting only 17.9 per cent, a mere 0.4 percentage point gain (UNCTAD, World Investment Report, various issues). If China is excluded, the picture for the rest of the South is still gloomier. The least developed countries known for the cheapest labour in the world had a share of 0.4 per cent in the total FDI inflows from 1986–90. Global capital has not moved much to these countries since, so the share remained the same as before –

A new international division of labour?

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0.4 per cent even in 1999–2000.4 Among the developed countries’ share of 80 per cent in 1999–2000, Western Europe alone accounted for 51.9 per cent and the US for 22.6 per cent. The United States and the high-wage Western Europe are by far the biggest recipients of FDI. Further, although the world’s population is dominated by a few hundred huge TNCs, their output outside high-wage domestic frontiers accounts for roughly 15 per cent of total industrial production (Singer 1999), no matter how low the wage in the South is. The offshoring of R&D by European TNCs to developing countries is still in a nascent stage (Cantwell and Janne 2000). On the whole, the share of R&D by foreign affiliates in different countries varies considerably. In 2003, foreign affiliates accounted for more than half of all business R&D in Ireland, Hungary and Singapore and about 40 per cent in Australia, Brazil, the Czech Republic, Sweden and the UK. Conversely, it remained under 10 per cent in Chile, Greece, India, Japan and the Republic of Korea (UNCTAD 2005a). The implications are far-reaching. The crucial economic factor explaining the changing international division of labour is the R&D intensity and the corresponding length of product life cycle. The higher the R&D-to-sales ratio, the shorter is found to be the length of product life cycle and vice versa, like in information processing, aerospace, pharmaceutical and automobile, in that order. Wood, tobacco, food, metal and mines, pulp and paper are on the other end of the product horizon with low R&D-to-sales ratio and longer product life (Figure 2.1). The former group of products are concentrated primarily in the North following the logic of ‘core competence’, while the South has gained competitive advantage in the latter under the globalized trade regime – the ‘outliers’ are those countries which managed greater share of R&D outsourcing by TNCs. 30 25

16 R&D to sales ratio (%)

14

Product life cycle (year)

10 8

15 10

NORTH

Year

Percentage

12 20

6

SOUTH

4 5

2 0

Pu lp

an d

m

pa pe r

in es

ge s an d ls et a M

d

co an

d

be ve ra

To ba c Fo od

W oo

In pr form oc a es tio si n Ae ng ro sp ac Ph e ar m ac eu tic al Au to m ob ile

0

Figure 2.1 R&D costs, and the length of product life cycle: defining the North–South divide.

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The net result is that the North and the South compete in different segments of the global market.5 Boeing and Airbus Industries are competing with each other in markets where the South is not a competitor. France exports Renaults to Italy and buys Fiats from there. Bangladesh and Vietnam garment manufacturers are in competition with each other in markets where producers from the North are virtually absent. In capital-intensive as well as R&D-intensive production lines there is a clear advantage to the North as against the South. In the industries in which the North has comparative advantages, the unit wage costs do not usually exceed 5 per cent, whereas in industries where the South has comparative advantage it is higher. No matter what advantage the South (say, India) has in terms of wage costs in, say, pharmaceuticals, she is no competitor of the North. Drug discovery and development is a multi-billion dollar global industry and India’s stake in it is in decimal points. What is happening in India is just peripheral research where the industry is developing new formulations of existing drugs or new routes of drug delivery and getting patents for those. If the United States had lost its domestic market of labour-intensive garments manufacturing to the South, the latter has been closing up shops in capitalintensive and R&D-intensive lines of production at home. Therefore, there is no point at which the low-wage South has been killing jobs in the North in aggregate ‘net’ terms. If production of television sets shifted to the South, TV serial production remained in the North, for export to the South as well. If computer assembly has gone to the South, software designing has remained in the effective control of the North. While the North has specialized in developing software packages, the South emerged significantly in software services. It is hardly a situation where two different labour standards are confronting each other in the international market. Large Indian exports of ‘software services’ apparently seem to be exceptional. What are missing however from the basket of software exports are software products or packages. This is in sharp contrast to Ireland or Israel’s software export profile (D’Costa and Sridharan 2004). Indian industry has the weakness of having a narrow specialization of customized software service exports. In IT ‘consulting’ services (where the US wage rate per hour is $80–120), ‘managed services’ ($60–120), or ‘system integration’ (applications, tools and operating system) ($40), India’s global market share is less than 1 per cent. In ‘application development’ where the US wage rate per hour is about $25, i.e. in the tail-end jobs, India’s share in the global market is more than 16 per cent. The North–South dichotomy is further evident in the fact that the largest profit-making enterprise in the world (until 2005), i.e. Wal-Mart – with sales over $300 billion a year, and having revenues larger than those of Switzerland – has set up more than 3,000 sweatshops in China, which are powerless price takers, rather than partners, deal makers or oligopolistic price administrators (Lichtenstein 2006). ‘Outsourcing’, especially the offshore outsourcing has of late become a bone of contention between the conservatives and the left. Although there are various

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ways to define ‘outsourcing’, purchasing a significant percentage of intermediate components or services from outside suppliers is central. Alternatively, outsourcing is the process of subcontracting network operations and support to an organization outside one’s own company. In manufacturing, offshore subcontracting from the North has assumed growing significance since the early 1970s. Imports of ‘other semi-manufactures’ into the country largely account for outsourcing in manufacturing; these imports have been on the rise in global trade since about the mid-1970s. The United States is far behind the European Union (15 countries) or Western Europe as a whole in terms of the values of these imports (WTO, International Trade Statistics, various issues). Moreover, outsourcing operations in the European Union are mostly confined within the member countries; they seldom go out to high-wage North America, or to lowwage Asia. In the case of the United States, outsourcing to North America and Western Europe (the high-wage regions) put together far exceeded outsourcing to Asia. Within Asia, China alone constituted more than 90 per cent of the values of ‘outsourced’ jobs. Low-wage Africa has no role to play in the subcontracting network operations and, Latin America is far less important than North America, Western Europe or even Asia in the network. Of course, the steadily growing negative trade balance of the United States has been a serious concern of the US citizens. However, until the year 2003 the Organization for Economic Cooperation and Development (OECD) countries together, known for high labour standards, accounted for more than half of the US aggregate trade deficits. The US trade deficit in manufactured goods (SITC code 6) with the OECD, which was about 63 per cent of the manufactured total in 1996, gradually declined to about 41.6 per cent in 2005 despite there being a faster increase in US imports of manufactured goods from the OECD than the exports to the OECD during 2003–05.6 It was the phenomenal growth of the US–China trade mainly through the value chains of Wal-Mart and others that shifted the US trade balance away from the OECD countries. In the recent past other kinds of outsourcing have also figured as part of globalization. First, there is information technology outsourcing (ITO), which involves a third party contracted to manage a particular application, including all related servers, networks and software upgrades. Second is Business Process Outsourcing (BPO), which features a third party that manages the entire business process, such as accounting, procurement or human resources. The outsourcing in these areas has presumably (since there is no hard data available) increased significantly. However, these jobs that were once outsourced – during the period of recession – are now increasingly returning back to home countries in the North since they are experiencing a boom, and also because of considerations of supervision costs as well as quality control. In the South, on the other hand, the ‘popularity’ of the arguments against improving standards, based on ‘competitiveness’, seems to be gaining ground as the direction of global trade is changing. Earlier, if the standards were improved in, say, India, and living wages had increased as a result, that was not going to

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wipe out the trade advantages that India enjoyed. The developing countries in general have the advantage of very low currency exchange rates vis-à-vis developed countries leaving a large ‘space’ for them to accommodate better standards. India’s direction of trade has been changing ever since the early 1960s. OECD countries used to consume 66 per cent of India’s exports in 1960–61. By 1990–91, the share had declined to 53 per cent. The waves of greater trade openness were thought to take India closer to the North. Instead, it was the South–South growth that summarized India’s trade pattern during the post-1991 reforms period. The less developed countries (LDCs) in Africa, Asia, Latin America and the Caribbean constituted 15 per cent of India’s exports in 1960–61. Over three decades this increased by only two percentage points to 17 in 1990–91. However, in the following decade the trend took a new turn. There was a substantial increase in the importance of South countries in India’s exports, to 27 per cent in 2000–01. In 2000–01, if the Organization of the Petroleum Exporting Countries (OPEC) were included, the share of the South (excluding Eastern Europe) in India’s exports was 38 per cent, as compared to OECD’s 53 per cent (GoI 2003–04: Table 7.4). The growing importance of South–South trade apparently makes the wage costs-based competitiveness argument stronger for India. However, analysis of the competitiveness of manufacturing exports, as measured by a few indicators, reveals that India has certain competitive advantages (RBI 2002–03: Section 4.52). With respect to some key indicators – real exchange rate,7 labour productivity and unit labour cost – many of the developing economies such as Argentina, Brazil, Mexico, Turkey, South Korea, Malaysia and the Philippines have disadvantages vis-à-vis India (Table 2.1). In the period 1980–2000, the unit labour cost declined by almost 50 per cent in India, while in countries like Taiwan it in fact increased by 21 per cent and in Thailand by 41 per cent. The decline in unit labour cost in India was fastest among the selected developing countries, except in the case of Egypt. In other words, even though the competitiveness argument goes against immediate improvements in labour standards, there is still scope for the latter to improve in Indian manufacturing without fear of losing export markets to other major trading countries in the South. A comparison of the wages and labour productivity in the Indian factory sector, and the trend behaviour of the rupee–dollar exchange rate would elucidate how Indian labour over time has not only become cheaper in the global value chains, but has dipped below the international poverty line. The real wage (per person-day worked) in US dollar terms tended to converge over time with the level considered as the ‘extreme’ poverty line in international comparison: one US dollar. Until 1990–91, the real wage remained at a much higher level than the ‘one-dollar-a-day’ line. Thereafter, the real wage was marginally above the international poverty line, and ultimately fell drastically below it by 1998–99, when the real daily wage rate became much less than a dollar (Figure 2.2). This was despite there being growth in labour productivity at a rate much faster than the rate of wage increases in India. Labour productivity in the Indian

47.7 50.9 183.7 NA 92.4 215.8 331.3 187.5 78.2 188.7 120.6 129.1 86.7 108.5 139.3 113.8

Real US$ exchange rate based on consumer price indexa 240.5 152.2 168.3 NA 146.1 141.3 114.7 241.1 213.4 NA 263.2 533.5 550.7 141.6 161.7 175.4

Nominal wages per worker (US$) 50.5 114.8 180.4 142.3 158.8 279.9 228.2 255.2 113.0 177.1 202.6 459.5 205.9 98.6 197.0 146.6

Labour productivityc

101.9 96.3 82.1 NA 42.5 52.8 81.7 84.9 90.2 95.2 80.5 72.1 121.0 140.9 54.5 68.0

Unit labour costd

73.5 137.4 148.0 NA 69.3 145.9 188.0 216.5 100.7 181.4 163.0 329.8 248.6 105.9 107.8 98.5

Real wagese

Notes a Index of bilateral exchange rate with the US$ multiplied by the ratio of index of US consumer prices to the index of domestic consumer prices; and, index number higher than 100 indicates a real depreciation of the total currency. b Based on relative consumer prices. c Real value added per worker calculated by deflating value added (in US$) per worker by the GDP deflator. d Ratio of nominal wages in manufacturing (deflated by CPI) to value added in manufacturing (deflated by GDP deflator). An index number higher than 100 indicates an increase in the share of labour in the functional distribution of income. e Nominal wage per worker deflated by the consumer price index.

66.7 43.3 155.8 343.2 NA 215.6 332.2 151.8 73.9 180.7 118.9 129.0 91.4 171.3 108.8 92.0

Real effective exchange rateb

Index numbers for 2000 with 1980 = 100, unless otherwise indicated

Source: UNCTAD, Trade and Development Report (2003).

Argentina (1984–96) Brazil (1985–95) Chile China (1980–99) Egypt (1980–97) India Indonesia (1980–99) Malaysia Mexico (1984–2000) Pakistan (1980–96) Philippines (1980–97) South Korea Taiwan (1980–96) Thailand (1982–94) Turkey Uruguay (1980–99)

Country

Table 2.1 Indicators related to the international competitiveness of exporters of manufactured goods in selected developing economies

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D. Banerjee 45 40 Real wage per person-day (worker) 35

Rupees

30 25 20 ‘One-dollar-a-day’ line 15 10

Rs per unit of US$

5

19

81 – 19 82 82 – 19 83 83 – 19 84 84 – 19 85 85 – 19 86 86 – 19 87 87 – 19 88 88 – 19 89 89 – 19 90 90 – 19 91 91 – 19 92 92 – 19 93 93 – 19 94 94 – 19 95 95 – 19 96 96 – 19 97 97 – 19 98 98 –9 9

0

Figure 2.2 Trend in real wage in Indian factories and rupee–dollar exchange rates. Notes Real wage (per person-day, worker) computed from CSO, ASI Factory Sector, using consumer price index for industrial workers (Base: 1982 = 100); and, the exchange rates are from Reserve Bank of India. For the year 1997–98, ASI does not mention ‘Number of man-days, workers’ hence the discontinuity in the trend line of real wage per person-day (worker).

factory sector – measured in terms of value added per worker (in real terms) – increased by about three times during the last two decades of the twentieth century (Figure 2.3).

Can WTO resolve conflicts? As the trade-centric argument of labour standards goes, the international externality that drives the race-to-the-bottom is a pecuniary externality and gets transmitted via market access channels. That is, a weakened labour standard in, say, India can affect the economic well-being of US citizens if – and only if – it has the effect of altering market access in India, in the United States or in a third-country market where both the United States and India trade or invest. Weak labour standards (say, low wage) in the domestic import-competing industries in India would in effect reduce the accessibility of the market to the US or other trading partners. Thus, low standards in India, both in the export- and import-competing sectors, would have a two-pronged impact on its trading part-

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80,000 70,000

Wage (real) per worker NVA (real) per worker

Labour productivity

60,000

Rupees

50,000 40,000 30,000 20,000 Wage 10,000

19

80 19 –8 81 1 19 –8 82 2 19 –8 83 3 19 –8 84 4 19 –8 85 5 19 –8 86 6 19 –8 87 7 19 –8 88 8 19 –8 89 9 19 –9 90 0 19 –9 91 1 19 –9 92 2 19 –9 93 3 19 –9 94 4 19 –9 95 5 19 –9 96 6 19 –9 97 7 19 –9 98 8 19 –9 99 9 –0 0

0

Figure 2.3 Indian organised manufacturing: trend in annual (real) wage and (real) productivity (source: Computed from GoI, Annual Society Survey of Industries, Factory Sector, using wholesale price indices for manufactured articles (Base: 1981–82 = 100), and consumer price index for industry workers (Base: 1982 = 100)).

ners (with better labour standards) – low priced exports from India would reduce demand for domestic products in those countries, and at the same time deter imports from those countries. The central purpose of the International Labour Organization (ILO) negotiations and agreements is to improve labour standards, and to improve the working and living conditions of workers everywhere. The ILO is primarily a standard-setting organization. It has considerable expertise in addressing the details of national labour laws. But the problem is that ILO has no ‘teeth’ – it is not endowed with independent legislative authority to determine the labour laws of its member countries. On the other hand, the central purpose of World Trade Organization (WTO) negotiations and agreements is to reduce trade barriers or, at their core, to increase market access. It is argued that one country’s choice of labour standards can alter the economic well-being of the citizens of another country if, and only if, it alters market access. As a consequence, if the United States is concerned about India’s choice of labour standards because of the implications of this choice for the economic well-being of US citizens, then the United States is raising an issue that is, fundamentally, a market access issue. Market access is interpreted in the WTO to reflect the competitive relationship between imported and domestic

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products.8 So presumably the WTO is well designed and also well equipped to address problems that arise as a result of inter-national externalities that are transmitted via market access (see e.g. Staiger 2003). The arguments in favour of disrupting market access channels or trade sanctions against the low standards countries, by those who prefer the WTO to the ILO to mitigate the problem, often state that the citizens of developed countries have agreed, as expressed in their countries’ legislation, that certain production technologies are domestically unacceptable, because workers’ rights or employment conditions associated with those technologies are unacceptable. Importing goods from countries with low standards is equivalent to importing foreign workers and allowing them to work under unacceptable conditions (Rodrik 1996). However, there are many objections to making the WTO play a role in determining the labour standards of its member governments, or introducing the revived Keynesian idea of a ‘social clause’ in international trade as part of WTO rules (see, in particular, Mavroidis 2003; Winters 2003). It is legally possible that the WTO provides the forum for an agreement on labour standards. However, the existing remedies in the WTO contract do not guarantee that an eventual trade and labour agreement will always be respected, especially if cases are brought against the relatively ‘big’ players. Actually, the effectiveness of the WTO legal system has probably been exaggerated. A particular problem of using trade sanctions (which in the WTO means permitting the imposition of restrictions on imports of specific goods) is that, even if it works, it will focus labour standards improvements in developing countries only on the traded sectors. Eventually, this will tend to worsen standards elsewhere in the economy as labour demand is reduced in the controlled sectors and labour flows out into the uncontrolled sectors. And since the non-traded sectors are much larger in size, further ‘crowding’ and less ‘institutional watch’ at home are likely to accentuate overall poverty and hardship. A study based on cases involving unilateral US sanctions imposed during the last three decades, shows the purpose, be it political, economic or social, was achieved only in about 15 per cent of the cases of sanctions. It concludes that ‘trade sanctions are not the deux ex machina in the enforcement of labour standards. Trade sanctions succeed in some situations and not in others’ (Elliott and Freeman 2003: 80). If the perceived cost of complying with the demands of the power placing the sanction is greater than the costs of sanctions, the effectiveness of the policy becomes zero. The policy can also encourage trade re-routing via other countries, which would make the product expensive in the ultimate market without any gains accruing to the actual producers. It is important to recognize that the long years of trade sanctions against ‘racist South Africa’ did not achieve their purpose until the international community joined the forces of domestic resistance on the political platform. One can make a list of many other ‘undue advantages’ apart from poor labour standards that have implications for comparative costs in North–South trade. There is a wide range of government regulations that affect the cost of produc-

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tion and the welfare of citizens in the producing country. Environmental regulations, building codes, zoning laws differ across countries. Are goods produced in an Indian factory that does not meet the US building codes, so to say, to be deemed unacceptable for import on the ground that the exporting country has got undue advantage in terms of cost of production, because cheaper building materials have been used or the factory buildings are not of specified heights as per the US standard? The answer is ambiguous. In sum, economic theory and empirical evidence confirm that the case for linking trade with observance of labour standards is far from persuasive (Srinivasan 1998). The demands for a ‘social clause’ in the WTO were raised only after the Uruguay Round negotiations were completed (Pahre 1998). As a result, these demands could potentially hold the entire agreement hostage. This was presumably the purpose in raising them. These demands are also selective in a suspect way, focusing on those standards that are low in developing countries but high in developed countries. As this suggests, these demands often entail substantial hypocrisy, in that many labour rights are not fully observed in the North. While the ILO has produced a huge body of conventions and recommendations, the United States, unlike many other countries, has hardly ratified any of them.9 For example, there is no law in the United States to allow workers a toilet break when needed (Standing 2001). This is rarely on any list of ‘bad practices’. If the argument for linking trade with standards was tenable, most of the developing countries where trade unions are comparatively stronger could legitimately demand sanctions against foreign goods and investments from those developed countries where the workers’ right to organize and freedom of association are subjected to anti-union discrimination and employer interference, and where workers thus live in fear of being subjected to measures of reprisal because of their trade union membership or affiliation. By most international standards, American employers are still confronted with fewer direct regulations of employment conditions than employers in other countries (Osterman et al. 2001). Also, there are an estimated 200,000 undocumented in-migrations each year into the United States alone (Migration Policy Institute, Washington, DC). These migrant workers – often victims of human trafficking – easily become captive labour in a less visible form of ‘slavery’ in the apple orchards in Florida, or in the New York apparel sweatshops, in El Paso, Los Angeles, and Seattle sweatshops. There is also very large human trafficking from Latin America to Japan or from countries like Poland to Britain. Altogether these migrant workers from the South to the North – products of the growing global as well as regional inequality – remain trapped as subhuman wage workers despite economic good times. They remain undetected by courts of law; thereby remain outside the purview of the labour standards debate between the North and the South. Besides, under the WTO regime, the goods and services from the North get additional protection for capital and for intellectual property, which the labourintensive products from the South often could not avail due to the transaction costs involved in getting similar protection from international development agencies. An apparel design, for example, from India may be copied and

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reproduced by, say, a Mexican garments maker and exported to the same markets where Indian garments compete. The costs of registering and monitoring designs of apparel are too high for small and competitive capitals to support, unlike the status of the global ‘giants’ in international trade. This aspect of the North–South trade, the ‘relative deprivation’ of the South, is not generally addressed in the WTO framework. The trade-centric argument in favour of, or against, labour standards thus really undermines the core understanding of the issue. Much of the popular and political debate rather drifted towards protectionism. Labour standards instead need to be viewed and analysed primarily from the feeling of great human pain in working class life – the pain that is generating violence, loneliness, family breakdown, mental illness, racism and the spoiling human relationships. Decent work with decent remuneration is a goal in its own right. It can also have a positive effect on productivity through better motivation and increased efforts, and economic growth. Thus, the issue of labour standards needs to be seen as an instrument of building human capabilities – the realization of the ways in which people are actually able to function, in a variety of areas.10 In other words, improved labour standards constitute what is known as ‘sustainable development’. The term sustainable has greater implications than is usually conceived of in terms of developing human capabilities along with economic development. So long as the South fails to improve capabilities through improved labour standards, the ‘gulf’ with the North would continue to widen through the mechanism of unequal terms of trade, decelerating in turn the growth and development in the South.

Beyond current trade: labour standards as modernization Quite often the problem of industries in the developing countries is that they cannot meet industrial standards of quality and reliability. They are therefore forced to compensate for their defects by reducing prices. Since the markets in the industrialized world set the standards, the best way of meeting them is perhaps to adopt the production practices of the industrialized world. The labour standards of the industrialized world are consistent with those production practices because they were developed simultaneously (Piore 2000). Often, assimilation in the South of technology from the North has come across problems that are clearly associated with the labour standards in question – the technology and labour standards ‘mismatch’, in other words. Indeed, where the production practices could not be modified to meet those labour standards, the standards are adjusted to the production practices, leaving much greater room for ‘low road’ development and ‘new’ international division of labour. It is time that we examine historically the causal relation between labour standards and economic growth. The earliest factory legislation was perhaps in Russia in 1719 applying to the serf labour in state factories (Brooke 1898). Thereafter, in Austria in 1787 factory legislation was made to forbid children under nine from working in factories. Beginning with the English Factory Act of

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1802, which restricted the daily hours of work of apprentices to 12, forbade night work and included provisions regarding education, the European nations had by the turn of the nineteenth century quite a number of legislations pertaining to improvement of working conditions. Standards were first applied to children and women, with very few provisions regarding hours and wages applied to adult males until the twentieth century (Engerman 2003). Cotton textile was the largest industry at the time in Britain, the leading export industry of the country, also with the largest numbers and proportions of women and children. It was also the first industry that came within the comprehensive purview of standards in Britain (Keeling 1914). Mining too was singled out early, often leading to restrictions that meant female and child labourers were not permitted to work in mines, particularly underground. There were two major causes behind the adoption of labour standards through legislation in several European nations in the nineteenth century. First, workers and unions advocated further reforms as their bargaining strength improved. Second, factory owners – who might otherwise benefit from having lower standards themselves – often sought legislation regulating standards to improve the labour supply conditions to their factories as compared to others, in tight labour markets. While the relationship between the legislation, and changes in wages, hours and labour force participation may be uncertain, it seems clear that in the period after the introduction of labour standards there has been a reduction in hours worked in affected sectors, increases in wages, reductions in child labour along with substantial increases in education and child literacy, and increases in female labour force participation. Factories became cleaner and safer, and the rate of industrial accidents declined (Engerman 2003). As a matter of fact, the ILO global estimates on occupational accidents provide some indicators – like the frequency and nature of industrial accidents – to measuring labour standards. In 2001, per 100,000 employees in India, 7,609, on average, had to remain absent for more than three days due to industrial accidents. The figure for high-growth China was even greater, i.e. 9,392 persons. Compared to that, the numbers in the developed North were less than one-third, i.e. 3,070.11 In 1860, the government of India passed the Employers’ and Workmen’s (Disputes) Act. This Act was an enabling measure and was designed to secure settlement of wage disputes by magistrates summarily. It also provided for penal sanctions for breaches of contract by workers. The Report of the Indigo Commission (1860) had led to the enactment of the Transport of Native Labourers Act (1863). This was further amended in 1870 and 1872. The first Factory Act was passed in 1881, as labour protests over wage rates, in particular, were brewing in textiles mills, beginning with the protests in the Empress Mills in Nagpur (Buchanan 1934). The Factory Act (1881) was amended in 1891. The first Act had only been applicable to factories employing more than 100 workers, while the Act of 1891 extended its coverage to factories employing more than 50 persons. It introduced a compulsory rest period of half an hour during the day, provided for a weekly holiday, prohibited the employment of

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children under nine years, fixed a maximum of 11 hours of work for the day and prohibited night work for women between 8:00 p.m. and 5:00 a.m. There were no efforts at labour legislation between 1891 and 1911. No trade unions had come into being by this time. Two Commissions appointed in 1906–07 endorsed complaints that employers were consistently evading factory legislation. Unanimously they recommended amendments essential in the public interest, which led to a new factory act enactment in 1911. The Act regulated for the first time the working hours of adult male labour in Indian factories to 12 hours per day. The primary pressure behind passing the Indian Factories Act in 1911, under the colonial rule, came from Lancashire and other English manufacturing areas and enterprises, which pressed for Indian legislation because they were concerned about the cheap competition from unregulated Indian manufacturing enterprises (Myers and Kannappan 1958). No less important however was the role of the Bombay Mill Owners’ Association (BMOA); that is, pressure from within was also there. Mills that worked during the usual daylight hours found in some cases that their best workers were leaving in order to take advantage of the longer working days in other mills. So the mills began to lengthen their working day with the introduction of electric lighting; the darkness inside the mills began to fade. BMOA attempted to restrict its members to a 12-hour day, and control the chaos (BMOA 1891: 172). BMOA however remained powerless to enforce its resolution. Wage competition resulted in chaos, strikes and even widespread riots (Chandavarkar 1994; Pant 1970) resulting in production disruption. Similar was the situation in jute textiles in Bengal (see Ghose 2000). It is important to recognize that because the Act of 1911 aimed to redress the problem of the instability of the workforce, which was seriously impeding discipline within mills and thereby productivity, the compliance rate (to better standards) was high, though the mills were still fiercely competing with each other on labour supply and wage costs. This is a case in point where legislation aimed at improving labour standards in fact acted as an external economy to the firms; and, not much state monitoring was needed to implement the legislation. The period from 1918 to 1928 is, in fact, a landmark in the history of the Indian trade union movement. The Workmen’s Compensation Act was passed in 1923 and subsequently the Assembly passed the Trade Unions Act in 1926 (Mathur and Mathur 1957). By that time, in 1922, India became a permanent member of the Governing Body of the ILO (formed in 1919 as a part of the League of Nations). This helped formulate legislation protecting the basic rights at work in India. Meanwhile, legislation for the settlement of industrial disputes, including the setting up of wage boards, was the subject of investigation by the governments of Bengal and Bombay in 1921 and 1922; the government of India prepared a Bill on such disputes in 1924. The Industrial Disputes Act of 1929 provided for setting up of Courts of Inquiry and Boards of Conciliation for the settlement of industrial disputes. In 1929 the colonial government appointed the first Royal Commission on Labour, which found the Act of 1891 ineffective. The government therefore, repealed the Act in 1932. These developments made

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significant contributions towards the evolution of a policy aimed at protecting wages. The first concrete step in this regard was taken in 1936, when the Payment of Wages Act was passed. There may be important complementarities between legislation and bargaining power, and between economic policies and bargaining power for the achievement of labour standards (Moene and Wallerstein 2003). The history of labour standards is in fact difficult to separate from the history of other social reforms and policy developments. For instance, today Scandinavia must be ranked high on the scale of realized labour standards by any measure. Most other countries have elementary standards such as minimum wages set by law; however, the Scandinavian countries of Denmark, Sweden and Norway do not. One way to view this is that minimum wages regulated by law are simply redundant in societies with strong and encompassing unions (ibid.). Labour standards in Scandinavia were also raised by policies designed for other purposes. The active labour market policy, for example, keeps open unemployment down by sending the unemployed back to school for vocational training. The other part of the social democratic employment strategy was the use of macroeconomic policies to maintain full employment. By contrast, in India, there is much legislation aimed at protecting the wages of the labour force. Yet, there are gross abuses and violations of the laws. The Indian Constitution accepts the responsibility of the state to create an economic order in which every citizen finds employment and receives a fair wage. One of the earliest decisions taken by the government of independent India was to set up a committee (in 1948) to define a fair wage, and suggest the economic and legal means for ensuring that wage to every employed citizen. Ever since then, there have been many attempts to define the concepts of a fair wage, a minimum wage, a floor wage and a living wage. They can also be traced to the Fundamental Rights and Directive Principles specified in the Indian Constitution and the international conventions that India has accepted or ratified. There have been several attempts to identify how far the capacity to pay can be allowed to determine the minimum wage, and at what point the capacity to pay should be taken into account and should be regarded as the main determinant. The roundabout progress that India has made in this respect is however reflected in the reports of committees, conferences, commissions and judgments of the apex Court over the last five decades.

Industrial efficiency: the basics The annals of development amply demonstrate that hijacking has often been a pre-emptive mode of capitalist operation whenever production relations came into direct conflict with the forces of productivity growth. There is strong evidence of producers seeking to gain a competitive advantage by embracing standards that would disadvantage rivals who were using a more vulnerable technology. The passage of Lord Althorp’s Factory Act of 1833 to regulate the employment of children in the textile factories of Great Britain was a landmark event

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both in British social history and in the development of modern industrial organization. The Act placed controls on the employment of children in England’s burgeoning textile industry, banning employment of those less than 9 years of age and restricting hours and conditions of work for those less than 18 years of age. This intervention into the market system was to be policed with an innovative administrative technique: a system of factory inspectors reporting to and controlled by the Home Office. Many scholars consider the Act a great turning point in the history of social policy (see e.g. Fraser 1973). They think that it acknowledged the right of the state to intervene when there was an overwhelming need to protect exploited sections of the community. While most commentators on the Act have assumed that it was designed to protect powerless young labourers from the rapacity of textile entrepreneurs, qualitative political evidence drawn from the conditions surrounding the Bill’s passage and quantitative evidence concerning its implementation both support the view that the legislation was designed to further the interests of a class of important textile manufacturers (Marvel 1977). The Act drew criticism both from the operatives and a substantial segment of the textile entrepreneurs. Even if the effective cost of using young persons and children had risen equally for all mills, by far the greatest burden would have fallen on the water-powered mills. Children and young persons (under 18) constituted about 39 per cent of the labour force in Manchester, an almost exclusively steam-powered parish; 46 per cent in the rest of Lancashire, where water power was of somewhat greater importance; and in the West Riding of Yorkshire, an area considerably more dependent on water power, this fraction rose to 51 per cent (ibid.). Not only were the firms in water-power-dominated districts the most likely to be charged with Factory Act offences, but those offences also consisted, on average, of more separate violations and were subject to stiffer penalties than the cases brought against mills in steam-powered districts. Given the smaller average size of the water-powered mills, the costs per unit of output they faced must have been higher than those faced by the steam-powered mills. While this in itself would not have served to cause the watermills to reduce output (except to the extent that some of the mills might have ceased operations), the larger penalties suggest that compliance with the Act’s provisions was relatively expensive for the watermills. Thus the Act had a selective impact. Those cotton magnates who had made the transition to steam, because it was considered likely to disadvantage their competitors who remained dependent on water power with its naturally discontinuous flow allegedly supported early British legislation on the length of the working day (ibid.). Similarly coal owners whose seams were thick and who had mechanized underground transport supported the Mines Regulation Act of 1842, which banned women and children under the age of nine from underground work. Many such owners had dispensed with underground child transport workers. In contrast, the Act put the owners of thin seam pits, who needed to use small child workers to move the coal underground, at a competitive disadvantage (Humphries 1981).

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Emerging labour institutions in India in the early twentieth century however did not have a similar impact on production organization. The Act of 1911 along with other such legislations prohibited employment of women and children (9–14 years) in certain dangerous processes, and prohibited their employment in the night shift (between 7:00 p.m. and 5:30 a.m.). This was not the first time that the exploitation of child labour faced challenges from the law. The Factories Act of 1881 defined child as any person between the ages of seven and 12 years, fixed their work at nine hours a day with a rest interval of one hour, provided for four holidays a month, and prohibited employment of children in cleaning machinery in motion. Children were also prohibited from working in two factories on the same day, which was rampant in the cotton mills in those days. However, these legal provisions and their enforcement were inadequate to control exploitation of child labour. The Factories Act of 1891 raised the lower age limit from seven to nine years and the upper age limit from 12 to 14 years. Employment of children at night was prohibited and the hours of work were reduced from nine to seven hours a day. The provisions of the Act were largely ignored and exploitation of child labour in fact increased (Pant 1970). Average daily employment of men, women and children in Bombay cotton textile mills (all shifts taken together) increased steadily from the mid-1880s. In 1915, of the total 113,495 persons employed, 86,099 were men (adults), 22,296 women (adults) and 5,100 children (persons aged 9–13 years) (Morris 1965: Appendix Table II). The number of child labourers was actually much more than the official data reveal. Following the passing of factory legislation, there was a widespread falsification of age to enable children below nine years to work as half-timers and those under 14 to work full-time. In Bombay, 14 per cent of half-timers in 1908 were estimated to be below nine years old, although they had been passed as being older by the certifying surgeon (GoI 1908: 16). Frequently, half-timers were employed with the intention of making labour available throughout the day (Chandavarkar 1994). The employment of child labour however started declining after 1916. By 1928, there were only four children working in the Bombay mills. There had been no significant changes in the technology of production, yet, as the trade unions developed, child labour no longer remained cheap. Therefore the mills opted for physically more capable and productive adult workers. The ‘bottom up’ pressure of improved standards on industrial efficiency is further explicated by the recent development experiences in some of the developing countries in Asia and Latin America. Beside fears that foreign firms would not sell them advanced technology, the earliest incentives that provoked South Korea and Taiwan to start building institutions and raising finance for R&D were rapidly rising domestic wages. The sharp differences between wage behaviour in Korea and Taiwan on the one hand and Argentina and Mexico, for example, on the other are striking. Wages (real) in the former countries rose to the extent of 8 per cent per annum between 1969 and 1990, while those in the latter fell by 0.1 per cent in Argentina, and 0.8 per cent in Mexico. The response to rapid real wage increases in Korea and Taiwan – first on the part of the government and then on the part of

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private firms – was to increase domestic R&D activity and to globalize production. Argentina and Mexico did not have wage pressure to force them to increase R&D investments; in fact, declining wages contributed to maintaining the status quo (Amsden 2001). Further, the decline of shares of Argentina and Mexico to total manufacturing value added by the developing countries became immediately noticeable during the following years. The ‘late’ industrialized East Asia thus pulled ahead of Latin America towards the end of the twentieth century. In 1975, manufacturing value added in Latin America – mostly in Argentina, Mexico and Brazil – had accounted for 55 per cent of total manufacturing value added by the developing countries. By 1994, Latin America’s share had fallen to 35.9 per cent. On the other hand, the share of South and East Asia increased from 26.4 per cent in 1975 to 47.9 per cent in 1994 (ibid.).

Conclusion The effect of economizing on labour standards by externalizing labour costs or risks – by casualizing workforce, or outsourcing jobs – may at first seem an appealing course of action to survive competition. But the short-term benefits of such a strategy may be greatly outweighed by longer-term costs, since the firm that seeks to benefit from a low labour cost strategy may in so doing limit its future strategic options, biasing these toward servicing the lower, less profitable range of the market. Thus one would have short-term labour cost savings with longer-term costs in lost revenue potential (Campbell and Sengenberger 1994). Of course, Wal-Mart – America’s largest employer, and the largest worldwide retailer – pays wages that deny a fair number of employees the ability to live with dignity and autonomy. So, this seeming exception warrants explanation. The firm that prefers to save money by underinvesting in labour standards – the firm that lays off workers, pays low wages, economizes on safety and health measures, or neglects in-job training of the workers – obtains savings at others’ expense, be they the state, firms or individuals. Ultimately, the state has to undertake the responsibilities of closed and sick firms’ employees, raise taxes to provide health services to the workers in the private sector, provide skill education. It is no surprise that taxpayers annually subsidize Wal-Mart to the tune of US$2,103 per employee in the form of food stamps, school lunches, Medicaid for uninsured workers, housing assistance, low-income energy assistance, etc. that amounts to a total taxpayer subsidy for Wal-Mart of nearly US$3 billion a year (Hoopes 2006). Without high labour standards India would continue to have a low-cost advantage but would remain trapped in low value-added products at the tail end of the global value chains, limiting the ‘material’ wealth of the nation. The most important instrument in switching over to high value-added products is having a skilled and innovative workforce with high labour standards. However, achieving higher labour standards needs as a precondition the recogni-

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tion of ‘work and occupation’. Someone with a sense of occupation intuitively understands the craft ethic. The recent trends of capitalism, overemphasizing the homogeneity in labour markets, i.e. flattening the dichotomies of ‘insiders and outsiders’, ‘skill and unskilled’, ‘job and employment’, ‘regular and casual’, ‘work and leisure’ and similar others, are in a state of upheaval. Contrary to the assumptions made in neoclassical economics, there has always been a tension between the primary motivations for labour and the motivations for work. While the former is well recognized as material needs and money, the latter is a product of honour, satisfaction, dignity and recognition. Indian organized manufacturing is moving on to more ‘jobs’ rather than more ‘employment’. ‘Jobs’ are not compatible with the positive idea of work. A job has long been known as a limited and limiting set of activities, of limited duration, and with limited development of application of technical skills. ‘Jobbing’ has connotations of casual labour, and ‘job work’ is another term for ‘piece work’. Concomitantly the concept of ‘family wage’ for the male workers, mainly, of the bygone days is increasingly being replaced by the job-wage rate. Ever since the economic reforms brought the liberalized Indian economy closer to the global market, the proportion of casual/contract workers to the total factory workers started increasing and has become almost 30 per cent even though the existing labour laws in the country do not permit this casualization. Thus, the factory ‘insiders’ have no special edge over the ‘outsiders’. The ‘insiders’ i.e. the human capital lose significance because India has embraced the ‘new’ international division of labour: she would produce only low R&D intensive products that have longer product life cycles. The challenges – both fiscal and social – before the state, have been on the rise ever since the economy started integrating into the global value chains and world trade, undermining the conventional wisdom of interlocking high labour standards with technological modernization of the production processes. Often the challenge against improving the labour standards comes from the global value chains, more so if there was an oligopoly firm at the upper end of the chain. To keep the value chains in action and in order to transfer a larger share of value added from the production base to the consuming countries in the North, the most important factor has been to eliminate all sorts of rules and regulations protecting wage, employment and work hours. By championing the latter, the neoliberals have rejected the idea that economics could best be politically governed. ‘Flexible labour markets’ have been highlighted in numerous IMF, World Bank and OECD reports, and have generally meant policies designed to decentralize labour relations and cut protective and pro-collective bargaining regulations. The shift of emphasis from ‘work and occupation’ to ‘job’ has accompanied the revival and recent growth of interest in the economics of labour law. There came a distinct preference for private ordering over public regulation and for common law over statute law as a system for the ordering of private affairs. Common law is characterized by the importance of decision making by juries,

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independent judges and the emphasis on judicial discretion as opposed to codes. Civil law on the other hand is characterized by less independent judiciaries, the relative unimportance of juries and a greater role of both substantive and procedural codes as opposed to judicial discretion. Unlike in the developing South, the issue of labour market flexibility in the EU is rather more centred on public governance or fiscal management than firmlevel economics. ‘Labour market reform’ has gradually infiltrated the EU discourse with the decreasing proportion of working-age population. So there is an urge on the part of the state to reduce non-wage labour costs as well as the ‘reservation wage’, which is high because of unemployment and other benefits. The expansion of the European welfare state in the 1970s has led to the latter kinds of benefits, which not only grant high net replacement rates, but are also of long duration. The feeling is that such generosity makes the decision to work less attractive, and in fact the unemployed are ‘trapped’ in unemployment. So, according to the OECD (1994: 213): ‘in the long term, if unemployment is to be kept low, it is vital to limit entitlements to benefit and refuse benefit to people who are not available for work’. This is, however, not the case in India; there is neither comprehensive employment protection nor comprehensive social benefits. Moreover, the tradition of common law in India never allowed, in contrast to the views trumpeted by many business analysts, much ‘rigidities’ in the labour market. For a more historical discussion of this question, see Chapter 8 by Chibber in this volume. Those who argue for a free labour market often cite the workers’ right to strike – which they think the Industrial Disputes Act 1947, Chapter V, has empowered the workers with – as anti-growth as well as anti-private property rights. The Act of 1947 has remained the basis for negotiation, conciliation, settlement and adjudication in India. However, the question that still remains unresolved is: ‘is there a constitutional or legal right to strike in India?’ The matter came up time and again in the apex courts in respective states as well as in the Supreme Court over the last five decades, but the issue of ‘right’ is still ambiguous (see Dhavan 2006). The autonomous space for decision making by the judges and the scope of judicial discretion, as opposed to codes, intrinsic to common law are most revealing as one finds courts’ decisions varying across similar cases and over time. See the more detailed discussion of this question in Chapter 9 of this volume by Mukhija and Shah. Common law countries tend to rely more on markets and contracts, while civil law countries on regulation. In fact, as compared to civil law, common law countries have better legal protection of shareholders and creditors (La Porta et al. 1998). India having the tradition of common law preserves the freedom of contract to a great extent and has a less generous social security system compared to most of the EU countries. What makes the Indian situation still worse is – as a direct outcome of common law practice – the multiplicity of political power and authority so far as the administration of the labour regulations is concerned. Contrary to neoliberal claims, the missing vertical12 as well as

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horizontal13 integration are really the weaknesses of the labour laws to lay any effective hindrance to private capital accumulation in India. Unlike in the EU countries, the reservation wage in India is also very low. The prospect of further decrease of the latter without having negative impact on labour productivity is yet to be probed. The major instrument for containing the low-wage labour market and improving the cash labour standards is to enforce the minimum wage. This necessitates strengthening of workers’ unions in situations when enforcing other social reforms seems to be ‘costlier’ and far-fetched. Countries like Denmark, Sweden and Norway did not require a regulated minimum wage to ensure better labour standards, solely because they undertook other social reforms beforehand. A minimum wage is an effective instrument to combat ‘sweating’, i.e. limiting pressure to work excessively long hours in order to earn a bare subsistence income. Thus, such a measure would boost efficiency and capability (Standing 1999: 296). The minimum wage is also an instrument to bring productivity back to the fore via the wage and effort mechanism.14 Capability and effort would join together to boost productivity, and in turn induce technological change, the example being South Korea among late developing countries. The national minimum wage is also a deterrent to child labour employment. If the firm had to pay the stipulated minimum wage it would have employed higher-productive adult workers rather than children.15 Can we not learn a lesson from the historical development of the labour market under mature capitalism? In the United States, for example, the federal minimum wage legislation was first introduced in 1938 to contain the low-wage labour market. Initially, agriculture, most of the services sector, public employment and small-scale enterprises were exempted. Gradually these exemptions were eliminated in the post-war period. Of course, the American labour movement, which aimed at upgrading the working conditions and living standards of the ‘unskilled’ or ‘semi-skilled’ production workers in the manufacturing sector, made the most important contribution to gradual elimination of exemptions. That so many autoworkers, steel workers and other workers moved their families into the middle class was ‘no accident of market forces’ (Osterman et al. 2001: 188). As is evident from cases like Wal-Mart’s supply chain in China as well as the global distribution of FDI, most of the TNCs are de facto acting against the improvement of labour standards in the developing South. In spite of corporate rhetoric about social responsibility, the fact is that the workers in the TNC supply chains continue to be harassed and even sacked for joining trade unions, or exercising their basic rights at work. However, the North should realize that its trade deficits with the South are largely explained by the fact that the consumers in the South do not have adequate purchasing power to buy many of the products from the North. Can we then ignore the necessity of reversing the pattern of global income distribution, for the sake of ‘stability’ of world capitalism? Reworking exchange

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rates could be an instrument to redressing the North–South income disparity. However, to translate the macro-gains into gains at the micro-level there is no alternative than to adopt higher labour standards at the firm level.

Notes 1 Suppose the standard working day constitutes eight hours, and instead 14–15 hours of work by a worker is being practised as a norm by a firm, it amounts to ‘killing’ one extra full-time job for each of the workers in this firm. 2 Exports of countries with poor labour standards hold more labour inputs than that of equal valued imports from the developed country. 3 When a dozen shirts were exported from a Bangladesh garment factory to the USA, the cost structure in US dollars was found in 1992 to be as follows: materials and accessories (imported) $27; depreciation on equipment $3; wages $5; net industrial profit $3; factory price (one dozen shirts) $38; gross mark-up $228; retail price (per dozen) in the West, before tax $266; retail price including sales tax (10 per cent) was $292.60 (Chossudovsky 2003: 83). That is, Bangladesh’s labour share to the final consumer price in the West is a mere 1.7 per cent, whereas domestic wage share was more than 13 per cent in the ex-factory value. There is a wide gulf between the two. An earnings accruing to Bangladesh is 2.7 per cent of sale price, and the rest, i.e. 97.3 per cent, accruing to the developed country. 4 Global FDI inflows continued to fall thereafter until 2003 (UNCTAD, World Investment Report 2005). However, the United States was the largest recipient in 2004, ahead of the UK and China as well as Luxemburg, the top FDI recipients in 2003. 5 Based on data in the WTO, International Trade Statistics, various issues; UNCTAD, Trade and Development Report, various issues; and UNCTAD (online Archives) ‘Trade Statistics’. Online, available at: www.unctad.org/Templates/Page.asp? intltemID=2774&lang=1 (accessed 21 June 2005). 6 Source: US International Trade Commission website 2006. Online, available at: www.usitc.gov/ (accessed 16 January 2006). 7 This measures the rate at which home goods exchange for foreign goods rather than the rate at which currencies themselves are traded. Representing the relative purchasing power of domestic output, it is essentially a measure of international competitiveness. Real Exchange Rate = Effective Exchange Rate (P*/P); where, Effective Exchange Rate (ERR) is a weighted average of bilateral rates expressed as an index number relative to a base year, the weights being the share of the respective countries in the aggregate trade of the country for which the ERR is calculated; P* is the foreign price of the foreign (imported) good, and P the home currency price of the home (exported) good. 8 For example, all else equal, when the US government agrees to lower an import tariff on a particular product, it alters the competitive relationship between imported and domestic units of the product in favour of imported units, and it thereby provides greater market access to foreign producers. 9 There are 184 conventions developed by ILO (till 2002), of which the US has ratified 14 conventions (12 of which remain in force). Only two are core conventions – the abolition of forced labour, and elimination of child labour. Half the conventions ratified relate to maritime issues, which are regulated by the federal government, and the others are fairly narrow or technical (see Elliott and Freeman 2003). 10 Different approaches to ‘human capabilities’ are thoroughly debated and discussed in Nussbaum and Sen (1993). 11 Calculated from ILO (2005).

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12 For example, several High Courts invalidated 25M and 25N of the Industrial Disputes Act, 1947. The Supreme Court eventually upheld the original Sections 25M and 25N, in 1992 and 1994 respectively. 13 The states in India can amend the labour laws independently. Many of the states even used Government Orders (G.O.) to replace various clauses of the labour laws in favour of the employers. 14 For the paradigm of wage and effort, see Akerlof and Yellen (1986). 15 On the supply side, in the case of silk-yarn reeling it is found that whenever wage in the local labour market is high there is low or no incidence of child labour. Actually, the adult worker is indifferent at a low wage rate (Banerjee 2000).

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Marvel, H. P. (1977) ‘Factory regulation: A reinterpretation of early English experience’, Journal of Law & Economics, 20(2): 379–402. Mathur, A. S. and J. S. Mathur (1957) Trade Union Movement in India, Allahabad: Chaitanya Publishing House. Mavroidis, P. C. (2003) ‘The need to micro-manage regulatory diversity’, in K. Basu, H. Horn, L. Román and J. Shapiro (eds) (2003) International Labour Standards: History, Theory and Policy Options, Oxford: Blackwell Publishing, pp. 314–25. Moene, K. and M. Wallerstein (2003) ‘Legislation versus bargaining power: The evolution of Scandinavian labour standards’, in K. Basu, H. Horn, L. Román and J. Shapiro (eds) (2003) International Labour Standards: History, Theory and Policy Options, Oxford: Blackwell Publishing, pp. 99–104. Morris, M. D. (1965) The Emergence of an Industrial Labour Force in India: A Study of the Bombay Cotton Mills, 1854–1947, California: University of California Press. Myers, C. A. and S. Kannappan (1958) Industrial Relations in India, New York: Asia Publishing House. Nadvi, K. (2003) ‘Globalization, value chains and labour standards: Emerging evidence from the garment industry in Bangladesh and Vietnam’, Mimeo, Massachusetts Institute of Technology, SPURS, Cambridge, (Fall). Nussbaum, M. and A. Sen (eds) (1993) The Quality of Life, Oxford: Clarendon Press. OECD (Organization for Economic Cooperation and Development) (1994) The OECD Jobs Study: Evidence and Explanations. Part II: The Adjustment Potential of the Labour Market, Paris: OECD. —— (2000) OECD Employment Outlook, June, Paris. Osterman, P., T. A. Kochan, R. Locke and M. J. Piore (2001) Working in America: A Blueprint for the New Labour Market, Cambridge, MA: The MIT Press. Pahre, R. (1998) ‘Comments on conference version of paper: Labour standards, trade sanctions, and the hijacking hypothesis, comments on chapter 12’, in A. V. Deardorff and R. S. Stern (eds) Constituent Interest and US Trade Policies, Ann Arbor: University of Michigan Press, pp. 255–62. Pant, S. C. (1970) Indian Labour Problems, Allahabad: Chaitanya Publishing House. Piore, M. J. (2000) ‘Rethinking international labour standards’, Mimeo, Massachusetts Institute of Technology, Cambridge. Raynauld, A. and J.-P. Vidal (1998) Labour Standards and International Competitiveness: A Comparative Analysis of Developing and Industrialized Countries, Northampton, MA: Edward Elgar. RBI (Reserve Bank of India) (2002–03) Report on Currency and Finance, Mumbai. —— (2004–05) Handbook of Statistics on the Indian Economy, Mumbai. Rodrik, D. (1996) ‘Labour standards in international trade: Do they matter and what do we do about them?’, in R. Lawrence, D. Rodrik and J. Whalley (eds) Emerging Agenda for Global Trade: High Stakes for Developing Countries, Washington, DC: Overseas Development Council. Sengenberger, W. and D. Campbell (eds) (1994) Creating Economic Opportunities: The Role of Labour Standards in Industrial Restructuring, Geneva: International Institute for Labour Studies. Singer, D. (1999) Whose Millennium? Theirs or Ours? New York: Monthly Review Press. Srinivasan, T. N. (1998) ‘Trade and human rights’, in Alan V. Deardorff and R. M. Stern (eds) Constituent Interests and US Trade Policies, Ann Arbor: University of Michigan Press, pp. 225–53.

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Staiger, R. W. (2003) ‘A role for the WTO’, in K. Basu, H. Horn, L. Román and J. Shapiro (eds) (2003) International Labour Standards: History, Theory and Policy Options, Oxford: Blackwell Publishing. (eds), pp. 273–308. Standing, G. (1999) Global Labour Flexibility: Seeking Distributive Justice, London: Macmillan; and New York: St Martin’s Press. —— (2001) ‘Human development: a response to “realising labour standards”’, Boston Review, February/March. Online, available at: bostonreview.net/BR26.1/standing.html (accessed 12 May 2003). UNCTAD (United Nations Conference on Trade and Development) (2005a) Globalization of R&D and Developing Countries, Proceedings of the Export Meeting, Geneva. —— (various issues) Trade and Development Report, Geneva: United Nations. —— (various issues) Handbook of International Trade and Development Statistics, Geneva: United Nations. —— (various issues) World Investment Report, New York and Geneva: United Nations. Winters, L. A. (2003) ‘Trade and labour standards: To link or not to link?’, in K. Basu, H. Horn, L. Román and J. Shapiro (eds) (2003) International Labour Standards: History, Theory and Policy Options, Oxford: Blackwell Publishing, pp. 309–13. WTO (World Trade Organization) (2003) International Trade Statistics, annual report, Geneva. Zohir, S. C. and P. Paul-Majumder (1996) Garment Workers in Bangladesh: Economic, Social and Health Condition, Research Monograph 18, Dhaka: Bangladesh Institute of Development Studies.

3

State, market and the household Social reproduction of Third World labour in an era of globalization Rakhi Sehgal

Introduction In recent decades the capital–labour relationship has undergone dramatic changes. Much has been written about this restructuring – worsening conditions of work, increase of flexible work regimes and casual jobs, loss of hard won rights (such as the right to strike, job security, social welfare programmes), lack of employment opportunities in times of jobless growth, flight of capital to low wage locations or the threat of flight as a means of winning labour compliance. Some writers have suggested that in a dramatic shift workers are being used as disposable commodities, without regard to their survival.1 State institutions that played a role in distributing a social wage, in the form of social security, health benefits and unemployment benefits, have also come under attack and there has been a worldwide rollback of social welfare programmes. While there seems to be a general consensus about the restructuring of the capital–labour relationship, there has been little said on the implications of this contemporary restructuring on the reproduction strategies of the labour force. Even Marxist political economy only discusses the reproduction of labour at the level of the reproduction of the economic system as a whole because of the tendency to view the reproduction of labour power as external to the economy. Ursel writes that Marxism ‘relegates reproduction to some indeterminate location’ and sees the ‘real dynamic of society’ as stemming from production.2 This is all the more surprising since Marxism recognizes labour as the source of value. This issue has figured in discussions peripherally due to the intervention of feminists, but by and large the disciplinary terrain was yielded to sociology under the guise of family studies dealing with extra-economic institutions and processes, or to cultural studies under the influence of works of Horkheimer, Adorno and Wilhelm Reich and their analysis of family and state. However, neither conventional sociology nor cultural studies deal with the relationship between the family and the economy, and feminist interventions fail to bring this issue into conventional economics as a priority area of analysis, even though they point out the family’s, particularly the women’s, contribution in reproduction of labour power and hence the capitalist system. However, the thrust of feminist arguments are different, dealing more with the ‘women’s question’

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rather than with the interlinked relation between state, economy and family and its implications for the reproduction of labour power. In fact, Ursel emphasizes the co-determinative character of production and reproduction, calling for a ‘detailed theorizing of reproduction’ but also ‘a serious reconsideration of the dynamics of production, which, within Marxist orthodoxy, is seen as selfcontained’.3 In the changed circumstances since the 1970s, it has become apparent that the capitalist system is unable to provide for the reproduction of its own labour force. Scholars like Katz argue that social reproduction is increasingly becoming unhinged from capitalist production and the organic link between the two has been broken.4 Katz demonstrates that the contemporary restructuring of production on a global scale, predicated on the search for cheap labour, facilitated by technological innovations, particularly in the realm of information technology, involves a transfer of resources from ‘Third Worlds’ to ‘First Worlds’ based primarily on the reorganization of social reproduction. She contends that in the case of migrant workers, social reproduction is carried on in the migrants’ countries of origin, but when they are employed elsewhere it represents a transfer of wealth, generally from poorer to richer countries. The missing link in these debates, Katz argues, is the cost of social reproduction. Extending Quijano’s perspective on the so-called ‘informal sector’ we discern a deliberate strategy on the part of employers to increase worker vulnerability by making conditions of employment insecure and precarious.5 Scholars and activists note that the same workers who are forced out of secure permanent employment are rehired as casual and contract workers, but with significantly lower wages and without security and benefits such as health insurance, housing allowance, dearness allowance, pension, training and paid leave that fully or partially (depending on the benefits package) covered the reproduction costs of the workforce. However, even this price of labour, as many feminists have shown, is based on an undervaluation of the value of labour power since it ignores the role of domestic labour and the household that (re)produce labour power. In industrialized countries in the post-Second World War era with the emergence of the welfare state, labour struggles and objective conditions resulted in legislation that distributed the costs of reproduction between the household, capital and the state. Analyses of the welfare state have pointed out the crucial role played by state policy in shaping the maintenance and reproduction choices of labour through social welfare programmes, income distribution policies and substitute wage programmes. However, in developing countries where most of the labour falls outside the purview of most state mandated programmes, the crucial role of the family and the household in maintaining and reproducing labour becomes evident in stark manner. Moreover, although the welfare state has played an important role in facilitating labour reproduction, it is important to remind ourselves that the present day welfare state is only one, among many, historically and culturally specific forms of collective provisioning. In many societies where the Western type of welfare state never took root, and certainly not in the all-encompassing manner that

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exists in the United States and in Europe, traditional forms of collective provisioning continue to prevail, with state welfare playing at best a supporting role. In addition, there exists what one author has called ‘popular welfare’ even in the advanced industrialized nations. Popular welfare, or non-state, non-market types of welfare, plays an especially critical role in the lives of the working classes. Popular welfare offers ‘a radical alternative to what the state has to offer’. It ‘offers a vision of how the world might be different, of how welfare might be organized and what it could mean’.6 Focusing on the actual processes of the social reproduction of labour, and the strategies of survival that engage them can yield a more nuanced understanding of the multiple dimensions of insecurity faced by contemporary labour in different historical contexts and the various strategies of protection they devise. Examining the substantive support provided by non-market, non-waged, nonregulated labour to the fully proletarianized labour will expand our understanding both of ‘protections’ that support labour and the relationship between capitalist production and reproduction of labour. It is conceivable that the devaluation of formal protective safeguards that contemporary processes of globalization favour, encourages capital to seek out precisely those pools of labour that are the least proletarianized and to a large degree remain assimilated in communities predicated on customary social bonds. In other words, I am suggesting that capital may be attracted to communities that are based primarily on the logic of reciprocity and therefore most likely to assume the burdens of social reproduction of the labour force as part of their cultural practice. This is perhaps the real savings that capital reaps when seeking out ‘cheap labour’. A focus on the diverse cultural forms of social reproduction of labour under capitalism might further illuminate ‘how capitalism’s inequalities operate on the global level’.7 Not only is there increasing privatization of social production, with a transfer of responsibility from capital, state and community to individuals and individual families, there is also an inequitable transfer of resources between ‘Third’ and ‘First Worlds’ that must be addressed. These issues make the examination of social reproduction an imperative and urgent task. The next part of the chapter delineates the various meanings of social reproduction, as it remains an under-theorized concept. This is followed by a discussion of the structure of reproduction in a capitalist society, demarcating the roles played by state, market and household in facilitating social reproduction as well as the interlinkages between these analytically separate spheres. We then examine the restructuring of production and social reproduction in the contemporary era of globalization followed by a discussion of the gendered aspect of social reproduction. We will briefly highlight some survival strategies adopted by households and how this translates into additional burdens and responsibility for women. We will also revisit the debate on domestic labour that took place primarily among Marxist feminists during the late 1960s and 1970s in order to draw out some important questions that remain unresolved but are relevant to the contemporary period. This chapter, then, is an attempt to reframe the debate on globalization through a focus on social reproduction.

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The concept of social reproduction Social reproduction refers to all those activities and processes by which human beings are directly and indirectly sustained materially and psychologically. These practices are embedded in historically specific social structures and take place through various organizations such as the state, community and family. Most analyses focus on production and leave out social reproduction since it is assumed to have no bearing on the processes of production. However, production and social reproduction are intrinsically interlinked. Meillassoux suggests that this relationship is perhaps easier to see in traditional societies where production is for purposes of reproduction.8 He argues that reproduction includes reproduction of the productive process, reproduction of the means of production, including labour power, and reproduction of social ties/social structure, i.e. the relations of production. Similarly, Seccombe suggests that social reproduction includes production of the means of production, production of subsistence and production of labour.9 Furthermore, Engels has also described production as a twofold process, entailing the production of things (e.g. means of production and subsistence) and the production of life itself.10 Thus, social reproduction does not refer to the mere biological reproduction of life nor the simple provisioning of basic needs. It refers to the reproduction of a cohesive social structure. The reproduction of an individual now depends on the reproduction of the social unit, reproduction of the social collectivity, reproduction of the productive process, reproduction of the means of production and reproduction of social ties/social structure, or the reproduction of relations of production. This is the reason that before the rise of a market system the individual was ‘not threatened by starvation unless the community as a whole is in a like predicament’.11 It is only with the reorientation of values that began in the sixteenth and seventeenth centuries, that individuals were held responsible for sustaining themselves and self-reliance became a cherished value. Prior to this, ‘the principle of freedom from want was equally acknowledged under almost every . . . type of social organization’.12 The system of social reproduction then, is historically and culturally specific, and the capitalist system of social reproduction is, therefore, only one among many ways of organizing the social reproduction of a society.

The structure of reproduction in capitalist society13 Under capitalism, social reproduction refers to the reproduction of the capital–wage labour relationship. This entails the social construction of the factors of production as commodities, even ‘fictitious commodities’ such as land and labour.14 This construction of labour power as a commodity and the fundamental contradictions that this ‘fiction’ entails is of crucial importance for our analysis. Dickinson and Russell point out three peculiarities of labour power. First, the commodity, labour power, is inseparable from its vessel, the human

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being. Following Marx’s analysis, labour power is the capacity of a living person to labour. Therefore, the seller (labourer) must follow the buyer (capitalist) into the workplace to be set to work. Moreover, in order to harness labour power, the capitalist must discipline and control the labourer. In other words, the commodity labour power can never be fully alienated from its seller and, because of this, productive consumption is always of central concern to the labourer. Hence, unlike inanimate commodities . . . labour power must actively resist its own consumption.15 The second peculiarity of labour power is the social and cultural basis of determining its value. In his analysis of the socially necessary time according to which value of labour power is determined, Marx reminded us that this value would vary according to the social standards of living prevailing in the society in which labour is situated. Thus, there can be no absolute value of labour power. It will always be socially, culturally and historically contingent. The third, and most important peculiarity of labour, is the fact that of all the factors of input, of all the commodities produced in a capitalist society, labour power is the only commodity that ‘can not itself be produced capitalistically, i.e. on the basis of wage labour and the extraction of surplus value’.16 Labour power is produced outside the capitalist circuit, within the realm of the family and the household. This is the radical break upon which the capitalist system turns. The (re)production of labour power is separated from the capitalist production of commodities, even though production of labour power depends crucially on the consumption of commodities. As Marx has pointed out so eloquently, the act of consumption is also an act of destruction of the ‘necessaries of life’ and while this destruction is essential to maintain and reproduce the labourer, it also forces the labourer to go back to the market in order to sell his/her labour power to procure yet again the necessaries of life in order to fuel the cycle of reproduction. Highlighting the irony of this condition, Marx noted that it is precisely because the sphere of individual consumption lies outside production that the capitalist does not worry about the reproduction of labour power and leaves it to the workers’ ‘instinct for self-preservation and of procreation.’17 At the individual level then, reproduction of labour power occurs outside the sphere of capitalist production, within the non-capitalistically organized institution of the family through ‘procreation, childrearing, socialization and everyday renewal of labouring capacity of existing workers through consumption of means of subsistence’.18 However, the family is penetrated by state and market influences, and the process of reproduction of labour power is crucially influenced by state policies and market exigencies, especially because at the ‘collective or class level, the reproduction of labour power is usually the responsibility of the state’.19

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State and reproduction of labour There are four points of interface between the state and the process of the reproduction of labour. These are through industrial policies, labour market regulation, social policies and redistribution programmes. Industrial policies such as factory legislation that govern the hours of work, conditions of work, industrial safety and health issues at the workplace, or policies that restrict the employment of women and children under certain conditions, all influence how labour power is consumed in the capitalist production process. Labour market legislation including the establishment of minimum wages, education and training policies, retirement policies, regulation of benefits such as pensions, maternity leave, sick leave, vacation, as well as immigration policies that influence labour supply, are all means of influencing the structure of the labour force and directly and indirectly impinge upon the reproduction of labour by creating conducive or harsh conditions for the use, maintenance and reproduction of labour power. The most direct manner in which the state influences the reproduction of labour is in its regulation of families and households through defining the position of women and children in society, laws governing abortion, contraception and family planning policies, and laws regulating marriage, child welfare, inheritance and property transfers. The state also shapes family and household strategies through its policies on substitute wages, transfer payments and redistribution of wealth effected via employment programmes, welfare programmes and various subsidies such as child allowances, old age allowances, social security, disability allowances, unemployment allowances and subsidized food e.g. through food stamp programmes (namely, the US) or the public distribution system (namely, India). Several authors have pointed out that state intervention in the household and state takeover of private provisioning occurred during a specific phase of capitalism when it appeared necessary to stabilize the workforce to serve the needs of the emerging form of production, namely factory production. Harris argues that, The type of economy emerging in the late nineteenth century required a much more stable workforce if the unprecedented levels of productivity now feasible within tightly organized but gigantic factory organizations were to be attained. In particular, some measure of protection from insecurity – whether at work, in old age or in terms of housing – came to be seen as a necessity for a significant part of the labour force.20 Beito points out that before the advent of ‘welfare states’ it was the mutual aid societies and fraternal societies that provided social welfare services such as orphanages, hospitals, employment exchanges, scholarships, business training and homes for the elderly.21 All these forms of collective social welfare were made obsolete with the rise of the welfare state.22 Private provisioning was increasingly removed from the realm of the family

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and the household. It was socialized and vested in the government. Arguing that ‘the welfare state is a logical extension of the nation-state itself’, Zaretsky traces its origins to the sixteenth and seventeenth century when charity lost its religious moorings and attitudes towards the indigent, the unemployed and the disabled began to undergo radical transformation. These changes, he argues, were the precursors to the state laws and agencies that would eventually transform charity into a social welfare system aimed at reducing begging and encouraging selfreliance. Zaretsky also argues that such critiques of traditional charity also indexed a shift away from traditional reciprocal ties towards market-based contractual ties. Moreover, with the rise of the nuclear family and individualist ideals, professional associations and state agencies began to ‘perform a host of socially necessary tasks once performed by the family’. Zaretsky writes in agreement that the new sense of individual responsibility was rooted in the structure of a market society whose advance, in the nineteenth century, destroyed old forms of paternalistic and community responsibility, as well as establishing the distinction between the normal (i.e. private, self-supporting) and abnormal.23 Marx’s analyses laid bare the illusion of self-reliance in a market-based society where the reproduction of the individual was even more fundamentally dependent upon society, but this fact was hidden behind the veil of impersonal contractual relationships. Agreeing with Marx, but arguing against the view that the modern state ‘takes over’ welfare functions from the family, Zaretsky writes that the modern nation state and the modern (private) family are necessary complements and this can only become clear when we understand the role of the market economy.

Economy and reproduction of labour The family wage was supposed to provide for one working male, a dependent wife and two dependent children. However, this idea fixed the woman’s position in the home because the family wage assumes that the primary breadwinner is the man of the house, and the woman’s employment is at best marginal or supplementary and, in very rare cases, a sign of distress.24 The construction of the sexual division of labour, as Ursel reminds us, is a ‘conscious structuring of production relations in the interest of the social organization of production’.25 It is in this context that heterosexuality has to be institutionalized to enable procreation, and female subordination becomes an essential condition of the system. In a capitalist society, households are dependent on the economy to generate adequate wages to fulfil their needs. However, often families face shortfalls in income due to unemployment, or inadequate wages that do not cover the costs of consumption especially during certain phases of the household cycle such as when there is a greater ratio of dependent children to earning members or

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dependent elders to earning members. Financial shortfalls can also emerge because a worker occupies a marginal position in the labour market. Therefore, social welfare emerges as a means of bridging the deficit between wages and costs of reproduction. Wages serve dual but contradictory purposes, as Wayne eloquently points out. Wages are both variable capital paid to the worker in exchange for labour power (wage as price), and a fund for consumption used by the labourer (and the working class household) to purchase commodities for subsistence (wage as a living). In volume I of Capital, Marx writes, Variable capital is therefore only a particular historical form of the fund for providing the necessaries of life, or the labour-fund which the labourer requires for the maintenance of himself and family, and which, whatever be the system of social reproduction, he must himself produce and reproduce.26 Re-examining our earlier discussion of the family wage and the socially necessary labour time that measures the value of labour power, we realize that since this value is paid to labourers in the form of wages that are exchanged for commodities, therefore, labour time is represented by the commodities consumed by the worker and by the working class family that is preparing the next generation of workers. Therefore, labour time comprises payments for non-waged members of society as well. Non-waged but productive labour since this labour provides for the maintenance and reproduction of labour power. This is a point on which feminists have made significant interventions pointing out that even consumption commodities purchased with wages require domestic labour to convert these commodities into forms that can be used by the worker and his family to fulfil their needs. A simple example is the fact that food bought with wages needs to be cooked before it can be consumed. The feminist debate on domestic labour tried to calculate the value of this domestic labour and whether this value is recovered in the wages received by the worker but the debate ran into theoretical and conceptual difficulties and was abandoned. As is true in the case of most commodities, there are times when there is a divergence between market price and value. Value itself is an indeterminate magnitude, depending as it does both on the physical needs as well as socially established standards of living. However, in the case of labour this divergence between price and value induces a temporary shortfall or a prolonged crisis if alternative avenues of procuring subsistence are not established or forthcoming. As is starkly evident in developing countries, this divergence manifests itself in very low consumption, inadequate diets, frail bodies racked by ill health, sharing of overcrowded and substandard housing or doing without housing altogether and surviving in the bare elements, and inadequate clothing. In other words, the non-provision of the bare essentials of maintaining life even at the physical extreme. A very fragile and precarious existence indeed!

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The relation between state, market and household under capitalism Wayne argues persuasively that the modern state, the private family and the market economy are part of the same capitalist system and each institution reinforces the other. It was believed that the market could provide for all needs. Moreover, there were attempts to control the impulse to give and to help fellow human beings by devaluing dependence and valuing self-reliance in the form of wage dependence. Charity was depersonalized and aid was given on the basis of impersonal, rational decision making by government agencies. However, Wayne argues, most analyses fail to grapple with the ‘social privation – the continued destruction of group ties – bred by economic individualism’.27 One must, however, exercise caution in celebrating community ties based on the ‘political rhetoric of support for self help’ that often cites earlier studies on the survival strategies of the poor. These arguments are now often being used to ‘legitimize the Rightist policies of the retreat of the State in Europe’ and ‘offered a pseudo development “solution” which ignores the causes of inequitable distribution’.28 Similarly, Broad points out that the growth of self-help groups and social networks ‘founded in part on a network of altruistic and balanced reciprocity’ have been ‘used as an excuse for off-loading and cutting back state-welfare service’.29 Reciprocity and self-reliance are equated by a deft sleight of hand. Today, conservative groups and governments have hijacked the space for thinking about reciprocity and alternative, non-state, non-market provision of needs. However, there is merit in examining other logics of collective provisioning that are not based on market rationality, i.e. exchange and contract.

Role of – and spaces for – alternative provisioning systems30 What Jones and Novak call popular welfare, offers ‘a radical alternative to what the state has to offer’. It ‘offers a vision of how the world might be different, of how welfare might be organized and what it could mean’.31 These alternative forms of welfare provisioning exist within specific historical and cultural formations. They might include reliance on extended family, caste, kinship or tribal networks, or practices of reciprocal aid amongst migrants in an alien city. Collective provisioning can also exist in the form of transactional support rooted in more personal relations, such as patronage of owners, earlier migrants and senior workers in the workplace, or of the contractor or intermediary who recruits migrant labour and also exerts control by providing them with small loans, help with locating shelter and vouching for their credibility to local shopkeepers who would then provide them with credit during the week in anticipation of getting paid at the week’s end when wages are distributed. Transactional supports may even take the form of coercive support from local gangs. While reciprocity and gratitude presupposes equality,32 in The Gift, Mauss warned that modern welfare programmes might take the individual and not groups, as the ‘social cell’ and thereby undermine reciprocity, the social basis of

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individuality itself.33 Further, Meillassoux argues that each society must maintain a balance between productive and unproductive members.34 And most social relations and societies based on non-market, non-state, non-contractual relations realize this and took care of the ‘unproductive members’ within the family or community. However, in capitalist societies and transitional societies where traditional practices are being undermined by the logic of capitalism, there is a severe social crisis, exacerbated by a severe economic crisis engendered by the restructuring processes introduced under the label of globalization.

Social reproduction and globalization Restructuring of production There is a broad consensus that labour is at present increasingly under assault from capital, and the state has become ineffectual in protecting the rights of workers and is perhaps even a willing partner in such restructuring. Whether perceived as necessary or avoidable, the radical change in the status of labour now appears to be a fact. Broad holds that through class struggle led by trade unions and political parties, labour had won important concessions from capital, which allowed it to secure substantial power in the economic and political realms. In order to regain control over labour, Broad argues, capital has initiated a number of strategies, such as ‘globalization of production, technological changes, degradation of labour, (re)casualization of labour, feminization of labour, informalization of production, and promotion of neoliberal state policies designed to weaken the labour movement’.35 By using the term ‘(re)casualization’ Broad is clearly indicating the historical aspect of the ‘protections’ and concessions won by labour after ‘a century of working class struggles’ in advanced industrialized economies that had resulted ‘in a sort of decasualization of labour’. Since the 1970s, with capital going on the offensive to reconfigure the balance of power vis-à-vis labour, these advantages are being eroded and a ‘(re)casualization’ of labour is taking place. Significantly, it is not one segment of the labour force that is being subjected to such disciplining, but a large part of the labour force. This is evident even in the upper echelons of the work hierarchy, where highly paid, skilled in-house ‘employees’ are being transformed into well-paid ‘independent contractors’ without benefits, pensions or any other form of job security. The well-paid flexible worker is now celebrated as a footloose ‘consultant’ with no ties or company loyalties. While at the other end of the spectrum, the flexible worker is the lowly paid service worker, an on-call worker or a temporary help agency worker who engages in involuntary part-time work, often holding multiple such ‘flexible’ jobs in order to survive.36 Dominant neoliberal social forces present this development as inevitable and, indeed, as necessary to revitalize the global economy, arguing that the rigidities of labour markets and welfare entitlements of the erstwhile era have constrained economic growth. Critics of the neoliberal globalization thesis have emphasized

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the severe impact of these developments on labour. Broad indexes the growing immiserization of people by pointing to the growth of ‘homelessness, food banks and soup kitchens’. Yates argues that the ‘lean production’ model of the new economy, compels workers to work at their peak intensity for as long as possible in order to extract the maximum ‘labour from human labour power’.37 Menzies describes the new part-time jobs as ‘McJobs’ stressing the deskilled nature of these jobs whereby the worker ‘functions more or less as an extension of the system’.38 McMichael reports that contemporary capital privileges gaining access to the global labour force over the reproduction of its wage-labour forces.39 Others point out that the life of casual workers, especially those falling into the much celebrated self-employed category, is in fact a disguised form of wage slavery, given the intensity of self-exploitation that the worker feels necessary to endure. A common theme that emerges in all these analyses of the unprotected worker is that the condition of ‘informality’ is characterized, indeed defined, by the absence of all formal protections bestowed either by the state or by organized labour unions. These developments have led scholars to re-examine the assumption that a ‘standard’ job comprises full-time waged employment with benefits and ‘normal’ working hours. We are witnessing an increasing fragmentation of the labour force even as it has become polarized between a core and periphery with income disparities and status of job security and benefits most simply indexing the divide; while at the same time sharing some elements of flexibility in employment arrangements as discussed earlier. What complicates this segmentation even further is the fact that ‘standard’ and ‘non-standard’ workers are found working alongside each other ‘not only in the same industry, firm and occupation, but actually doing the same job’.40 Delving deeper into this problem and re-examining the notions of part-time, contingent and temporary work, Christopherson points to deeper structural changes in the economy and how this is increasing the precariousness of labour.41 Until recently, the existing definition of part-time work was that of ‘a completely equivalent substitute for the full-time worker’ where part-time workers ‘back-up’ full-time workers during periods of intense workload. However, in the contemporary economy part-time workers are no longer used as substitutes or fill-in labour. Many authors point out that the risk calculus has increasingly shifted from business to individual workers who are now expected to bear the risks of normal and abnormal economic fortunes. Christopherson writes that risks of uncertain product markets are passed on via outsourcing, subcontracting, just-in-time inventory systems, network of subsidiary firms and contingent labour strategies, where labour can be purchased on the market on an as-needed basis. Hence, the need for a contingent labour force. In addition, employers now require labour to enter the labour market with a minimal set of generalized skills, which labour is increasingly acquiring via temporary help agency training programmes or vocational schools. This reduces employers’ investment in labour skills and therefore reduces the employers’ interest in

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holding onto employees. And this is also where the role of subcontractors becomes enhanced, as a way of supplying labour pools to businesses on an asneeded basis. Whereas, earlier part-time work was a business strategy to address labour shortage or extended production times, today part-time work is a strategy to subordinate and control labour, extract maximum surplus value, weaken organized labour movements and avoid sharing with labour gains acquired through increases in productivity. Risk is thus transmitted downward from large firms, through subcontractors to individual workers who are now expected to bear the risks of normal and abnormal economic fortunes and, equally significantly, diversify that risk privately, via community or family-based support networks; in other words, institutions organized along non-capitalistic logic. Portes and Walton point out that the existence of the informal sector in underdeveloped countries helps to lower the reproduction costs of the formal industrial workers in these countries as compared to those in industrialized countries. The coexistence of formal incomes with greater access to informal consumption or to forms of self-consumption reduces the costs of reproduction of a labour force that is as productive as that of the industrialized countries.42 Several studies on the informal sector and street vendors have pointed out the high reliance of the working poor, immigrants and the middle classes in cities on these lower cost goods and services to maintain their standard of living thereby reducing their costs of living and hence the cost of their labour. In fact Mingione points out that apart from the poor, this stratum relying on the informal sector also includes the new middle classes, ‘independent workers with privileged access to informal activities who, by evading payment of taxes and Social Security contributions and by working very intensively, obtain incomes which are high in comparison with their relatively low monetary consumption’.43 However, he cautions against over-extrapolation, stating that the mere existence of an informal sector does not automatically lower the cost of formal work even though it affects the standard of living both of the stable formal workers and of the middle classes.44 Instead, it is essential in providing low cost goods to a lowpaid workforce and thereby maintaining the difference between core and peripheral wages. Crisis of social reproduction of labour The rollback of the welfare state has led to increasing privatization of public goods and services such that reproduction now depends on individual consumer preference and individual household income. In an environment where the nature of employment is increasingly precarious (due to casualization and flexibilization) and wages are stagnating or declining, people depend on more ‘public’ goods and services to ensure reproduction. The increasing transfer of such goods and services to the private sector increases the burden on the working class household and the household of the working poor. Candeias posits

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that ‘precarisation of life’ is not just a problem for the poor but ‘a contradictory generalizing social phenomenon, including the so-called high potentials in the IT – and other sectors’.45 He contends that such restructuring turns citizens with social rights into mere customers, and removes ‘essential areas of social production and reproduction from political control and democratic influence by politicians and parliaments’.46 Mingione suggests that the interconnection between the complex structure of demand for labour and the patterns of social reproduction ‘will result in a wage/income structure and in a specific capacity of monetary expenditure on subsistence goods and services produced and sold on the market (patterns of monetary consumption/commodification)’.47 Businesses are now avoiding sharing productivity gains with the workers, with detrimental consequences for the quality of living in working class households Mingione argues that while it is clear that differentiated levels of labour cost, productivity and income are important for industrial development, contemporary processes result in ‘social fragmentation, in which the reproduction of diversified social sectors are incompatible, mutually antagonistic and give rise to new and irrevocable contradictions’.48 It is now common knowledge that there is a trend towards the creation of increasing numbers of semi-proletariats who simultaneously rely on both the wage market and their cultural security networks for survival. Quijano argues that ‘for wide segments . . . solidarity and reciprocity are the only possible ways to survive’ and even as reciprocity and unwaged labour steps in to shore up the waged segment of labour, these very institutions are deeply dependent on external financial or institutional support.49 He stresses that these activities are not new but ‘What is new is the dimension of these activities . . .?’ This contradictory process of encouraging labour to seek alternative sources of support while cannibalizing these support systems is best described by Quijano who argues that ‘informality within capitalism inaugurates a strictly market relationship with labour’ and therefore forces labour to rely on ‘nonmarket’ sources of support. But this also allows capital to increase its penetration and domination since ‘the informal economy once seen as poor people’s most important strategy for survival, has been “colonized” as one of the most profitable spaces of savage capitalism ascendant in the peripheral zones of the world-economy’.50 What are the implications of these developments on the labour at the margins? How are they to meet this pernicious challenge to their very survival?

(Re)producing labour at the margins It is important to distinguish between the production of life and production of labour since they are not equivalent processes. The processes of increasing penetration by global capital are transforming ‘workers’ into ‘labourers’, i.e. integrating them – partially or fully – into a capitalist production structure. However, the historic role of the state in mediating this relationship between capital and

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labour is undergoing a concomitant transformation, such that the conditions of reproduction of labour are coming under severe strain. Whereas social reproduction links the household to the economy, household practices empirically map changing cultural patterns of incorporation of households in the economy.51 ‘Due to differences in size, composition, stage in the domestic cycle and other factors, households are equipped differently to cope with deteriorating conditions and crises.’ Redclift correctly points out that the differing paths of transition to capitalism have given rise to diverse forms of relationship between the family and the productive system. Moreover, these relationships are shaped by the configuration of the local labour market and its incorporation in the national and international economy.52 González de la Rocha correctly distinguishes between reproduction strategies and survival or coping strategies. While the former aims at ‘ensuring longterm reproduction and well-being of the household and its members’, the latter ‘is typically a short-term response to shock and stress’.53 However, the lines between the two are not always clear especially if a short-term economic crisis becomes a long-term crisis induced by fundamental economic restructuring and the short-term coping mechanisms are transformed into a way of life. Redclift and Mingione suggest that the impact of the economic crisis ‘may be partially concealed by a class-based tradition of self-help, a domestic orientation and, for the new middle classes, by a certain pre-existing stake in the consumer market’.54 Whereas the middle classes and stable working classes may be able to benefit from the shift from state services to the private (and increasingly informal) sector, the working poor and the unemployed are likely to be worse off and increasingly opt for self-service provisioning that entails more and more of their time being devoted to this non-monetary form of provisioning. In the face of declining incomes, many households allot more time to work for selfconsumption but this reduces their capacity for accumulation and for aggregate demand leading to a ‘circular transmission of the crisis from the productive to the reproductive system . . . and back to the productive system’.55 Just as there are ‘class-limits’ to the access of resources and domestic structures that allow households to maximize total income, similarly, there may be social and cultural limits to access to resources as in the case of Dalits and women, for example, that condition their coping strategies. Many studies have shown that such groups bear a disproportionate share of the burden of readjustment and survival. Furthermore, one’s access to resources and capacity to cope depends on the level of past and present accumulation. Here, even remittances can play an important role, and may even contribute to the internal stratification within a class, as is evident in Kerala and Punjab, two Indian states where the role of remittances from foreign-based kin have played a large role in restructuring the economy and class structure.

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Social reproduction and gender Feminization of survival 56 Ghosh remarks that ‘several studies have indicated how SAPs [structural adjustment programmes] tend to be “gender-blind” in terms of increasing the unpaid labour of women, and increasing the “double-burden” of paid and unpaid work’.57 Fiscal crisis, government debt and associated austerity and adjustment programmes recommended by international agencies have resulted in rising unemployment and precarious jobs and cutbacks in social spending making survival a difficult proposition for most households. In such circumstances, the pressures of ensuring household survival have fallen disproportionately on women. Further, rising unemployment (mostly for males) coupled with employment opportunities (mostly for women) in unorganized labour markets for export sectors like garments and electronics, with low pay and bad working conditions or the increasing illegal trafficking of women (and children) and prostitution, recourse to subsistence food production and informal work, have combined to result not just in the feminization of the labour force but also the ‘feminization of survival’. Withdrawal of state spending from crucial sectors like infrastructure, primary health and education have increased the time spent by women in fetching water or fuel, preparing meals from scratch, looking for cheap bargains when shopping for essentials, neglecting their own health but spending more time in caring for sick family members who cannot avail of paid medical care or hospitals. In Sen’s words, ‘Women have been forced to “adjust to adjustment”, by deploying their own labour power to cushion their families from the impacts of these moves’.58 She documents some of the strategies used by working class women in a Delhi basti. These women cook once a day instead of twice a day to save on fuel. They collect cow dung and wood to supplement their quota of kerosene and cooking gas and they buy wheat instead of flour, which they grind at home to make rotis. Store-bought biscuits and breads are no longer part of their diet. They mend old clothes instead of buying new ones and take on home-based work such as hemming or sewing button holes for local tailors, in addition to other jobs as maids or factory workers. Sen also cites Nirmala Banerjee’s study of a handloom weaving community in West Bengal, in which Banerjee found that men were shifting from the handloom sector to wage work in powerloom factories but in the process additional burdens were passed onto women who had to keep the family handloom going at minimum levels of production in order to maintain their membership in the weaver’s cooperative in addition to earning money by taking on piecework at the powerloom factories. These women also continued to perform unpaid household labour to keep their families going.59 While there is extensive literature documenting these developments, what is missing is the analytical contextualization of the contemporary preference for women’s labour that is characterized as cheap and efficient. Why is it that during certain phases of capitalism, marginalized labour such as that of women and

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children is mobilized (initial period of industrialization in England for example) and during other phases this same labour is restricted from participation (passing of labour legislation banning women and children from night work and leading eventually to total withdrawal of children from factory work and imposition of severe restrictions on women’s participation in later years of England’s industrialization)? These were some of the questions addressed by the domestic labour debate that took place during the late 1960s and 1970s among Marxists, socialists and feminists. Domestic labour debate60 Until the late 1960s housework and domestic work had been ignored by most, if not all, social scientists. Feminists brought attention to this domain in the late 1960s and 1970s in what came to be known as the domestic labour debate.61 Domestic labour was a concept that was used by feminists and social scientists to refer to unpaid work done by and for members of households. It was a move by feminists to incorporate women’s domestic labour into the economic analysis and analyse it as a form of economic activity, i.e. work comparable to paid work. The immediate concerns sparking the debate were the lack of disappearance of unpaid domestic work in industrial societies and continuing dominance of women in such work; the increasing presence of women in the labour force despite rising wages and standards of living (conventional economic analyses had predicted the withdrawal of women based on the view of women’s work as supplemental or residual); and the connection between capitalism and patriarchy. Most arguments traced women’s subordination in society and in paid work to their domestic labour within the household. This debate was conducted mainly within Marxism and scholars attempted to fit domestic work within Marx’s labour theory of value. Although there were many internal contradictions and the debate reached a dead end during the 1970s when the focus of feminist movements shifted to ‘analysis of women’s position in the wage labour force, segmented labour markets, occupational segregation and patriarchy in the workplace’.62 However, this debate had a significant impact on the analysis of work, labour and employment. The social constructedness of these categories was recognized and scholars realized that ‘the definition of work could vary and change over time in popular consciousness and the social sciences’.63 In economics, labour has been equated with ‘paid’ employment and categorized as productive or unproductive labour in Marxian analysis, contingent on the value producing capacity of labour. Of course, value can only be assessed via exchange relations and since domestic work does not enter the circuit of exchange, it can not be said to produce value, even though there is ambivalence since it is recognized as being ‘productive’ work and crucial to the (re)production of labour power, both daily and across generations. The same domestic work, however, is categorized as employment and paid productive labour when it is commodified and purchased on the market, in the form of ready-to-eat foods, household cleaning services and childcare services to name a few examples.

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The domestic labour debate of the 1960s and 1970s ran into the intellectual roadblock of the ‘market’ in evaluating the ‘value’ of domestic work. Without any mechanism for assigning exchange value or price, domestic work continued to be relegated to ‘economic marginalia’.64 However, recently, feminist economists have been charting an exciting path to take this analysis further by challenging the hegemony of the ‘market’ and ‘price’ mechanism in economics. Amongst the most fruitful contributions exploring the link between waged and unwaged work and the role it plays in ‘development’ is the work of postcolonial feminists and post-colonial feminist economists.

Post-colonial readings of unpaid labour and development65 Paying attention to difference and the operation of power and history behind the process of privileging and making marginal, this body of work allows us to examine the interests served by marginalizing unpaid labour and shed light on the hidden mechanisms of production of value and the different forms of extraction of surplus in the contemporary era of globalization given the ‘multifaceted nature of domination and difference’.66 Limiting the domain of economics to market exchanges not only excludes the sphere of non-waged, unpaid work and thereby perpetuates the subordination of women and other marginalized groups, but also misunderstands the dynamics of social reproduction of labour and the interpenetration of market/non-market activities and the role of the state, market and household in creating diverse systems of social reproduction. It even misrecognizes the structure of reproduction in capitalist society. Katz correctly points out that from a political point of view, a focus on social reproduction can ‘better expose both the real costs of globalization and the connections between vastly different sites of production’ and allow for a redressal of ‘the losses suffered in the realm of social reproduction as a result of globalized capitalist production’.67 There is urgent need for in-depth comparative studies of working class households and families that will enable us to understand the mechanisms and consequences of such misrecognition and erasure of non-waged, non-market labour from dominant discourse of economics and globalization. However, an encouraging development that gives hope that these issues will receive the attention they deserve and revive working class unity and militancy, is the increasing discourse and practice of new unionism that attempts to join the working class, trade unions and labour movement with broader fights for social, political and economic justice thereby providing a much needed corrective by incorporating class dimension in these struggles as well as helping the labour movement break out of its moribund state and contemporary crisis.

New trade union initiatives68 After nearly two decades of struggle against the global onslaught of capital, it has become clear to trade unions and social activists alike that old forms and

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practices of unionization, social protest and resistance are no longer adequate. The impact of the new offensive is not limited to the workplace, nor to particular sections of society; the ideological and organizational power of capital requires new forms of organization and alliances. The lessons are there to be learnt, particularly in those countries where unions have historically played a broad role in national politics. In India, for example, where trade unions emerged in the crucible of the national independence movement and played an historic role in liberating India from colonial rule, and in South Africa, where the struggle of independent trade unions was central in the fight against apartheid, history provides some guidance. Contemporary struggles by trade unions and workers against privatization, for example, find a larger echo in society precisely because it is a fight against transfer of public goods and services to the private sector, a transfer which would place additional burden not just on working class households but also across gender, caste, region and age. Similarly, in political struggles against the erosion of democratic processes and reassertion of citizenship rights to counter the attempt to convert rights-bearing citizens into money-bearing consumers, there is a lot at stake for workers as citizens and ordinary people who do not identify themselves with workers or the labour movement but who feel the impact of such erosion of accountability and democracy in their daily lives. The need to create broad and deep alliances to counter the globalization offensive has meant that trade unions have to find ways of incorporating the concerns and struggles of workers across different categories/forms of employment and livelihood (e.g. contract workers, home-based workers, agricultural workers, sex workers, subsistence producers) and social groups (e.g. women, Dalits, Adivasis) while issue-based social movements also have to become more inclusive. Kim Moody rightly points out that, ‘Perceptions of what is possible change as new forces come into the struggle and the power of the class, long denied and hidden, becomes visible. Yesterday’s competing ethnic or gender group is today’s ally’.69 This vision transcends yesteryear’s vision of temporary or issue-based coalitions and actively seeks to create organic linkages between diverse social groups. Thus, some organized labour groups are realizing the need to support the more vulnerable unorganized labour groups and lead the fight for equal employment rights for them or use their leverage to create spaces for the working poor who have restricted room for manoeuvre and fragile powers of resistance The goal is to reverse social fragmentation and reduce the burden on the most marginalized in society. Thus, this is a labour movement that actively seeks to go beyond the factory gates and into communities and neighbourhoods to address larger social, political and economic concerns and reassert control over emerging economic trends, social policies and commitment to democratic principles, recovering democratic spaces for differences of opinion, dissent and respect for multiple political tendencies. The latest phase of capitalist assault in the form of neoliberal policies and globalization has created enormous challenges for trade unions and social movements alike. Yet after nearly two

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decades of struggle, historic opportunities are emerging for forming new alliances and organizational forms to redefine political, economic and social strategies for a larger democratic transformation of society.

Notes 1 2 3 4 5 6 7 8

9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24

25 26 27 28 29 30 31 32 33

Hudson 2001; Bagchi 2002: 243; Magdoff and Magdoff 2004. Ursel 1986: 151. See also Seccombe 1986: 29. Ursel 1986: 152. Katz 2001. Quijano 2000. Jones and Novak 2000: 35, 36. Lilley 2004. Meillassoux 1972. Gita Sen (1994) also points out that prior to the emergence of the capitalist system, entitlement to resources for subsistence was based on ascriptive identities such as membership in a tribe, caste, parish, village or some such social group. With the rise of capitalism and the system of private property provisioning for subsistence became contingent and unreliable even as a different system of ascription was instituted, namely, citizenship. Thus on this basis non-citizens and ‘illegal aliens’ were excluded from entitlements such as health care, education and social security. Seccombe 1986. Engels 1986. Polanyi 1944. Ibid. Title borrowed from the introductory chapter by Dickinson and Russell 1986. Polanyi 1944. Dickinson and Russell 1986: 7. Ibid. Marx (n.d.): 51; cited in Wayne 1986: 63. Mann 1986: 225. Ibid. Harris 1995: 168. Beito 2000. See also Zaretsky 1986: 93. Ibid.: 94. Of course, scholars often consider this as something of a myth, especially during early industrialization. So, for example, in Britain after the advent of the power mule, the overwhelming majority of textile workers were female. The same was true in the US and many other countries (India was an exception in that the Mumbai textile workers were mostly men); it was only later that this image was met for a while in the developed capitalist countries. However, I am referring to this construct in the specific context of the ‘family wage’. Ursel 1986: 152. Marx (n.d.): 533; cited in Wayne 1986: 59. Wayne 1986. Redclift and Mingione 1985: 4. Broad 2000: 45. Due to constraints of space, in this chapter I can only point towards what these alternatives might entail. The topic itself is the subject of a larger project of which this chapter is a part. Jones and Novak 2000: 35, 36. Zaretsky 1986. Mauss 1967.

66 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 55 56 57 58 59 60 61 62 63 64 65 66 67 68

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R. Sehgal Meillassoux 1972. Broad 1995: 68. Ross 2001; Yates 2001, 2002; Hudson 2001. Yates 2001. Menzies 1997. McMichael 1999. Hudson 2001: 49. Christopherson 1987. Portes and Walton 1981: 67–106, cited in Mingione 1985: 34–5. Mingione 1985: 36. Ibid.: 50. Candeias 2005: 1. Ibid. Mingione 1985: 36. Mingione 1985. Quijano 2000: 164. Ibid.: 134. Redclift and Mingione 1985: 6. Redclift 1985: 110. González de la Rocha 2000. Redclift and Mingione 1985: 5. Mingione 1985: 29. I’ve borrowed this title from Sassen 2002. Ghosh 2005: 50. Sen 2005. Banerjee 2004, cited in Sen 2005. This debate was initially conducted primarily on the pages of the journal New Left Review (1974–75) with the publication of Seccombe’s article on domestic labour in 1974. I thank the editors for bringing it to my attention that in the US this debate had taken place earlier within the communist party in the 1940s. Some of these debates can be found in the party paper ‘The Daily Worker’. Gardiner 1997: 5. Ibid.: 6. Wood 2003. Borrowed from the subtitle of Wood’s chapter 2003. Zein-Elabdin 2003: 321. Katz 2001: 708. The title of this section also directly refers to the New Trade Union Initiative (NTUI), a recently founded federation of independent trade unions in the organized and unorganized sectors in India that encapsulates this understanding of the broader role of trade unions in leading the struggle for transformation of society and state by overcoming working class fragmentation, building social alliances and organic linkages with workers’ lives beyond their workplaces, in the communities in which workers are embedded. Online, available at: www.ntui.org.in (accessed July 2005). Moody 1997: 7.

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Meiksins Wood, E. (1997) ‘Labour, the state, and class struggle’, Monthly Review, 49(3): 1–17. Meillassoux, C. (1972) ‘From reproduction to production: A Marxist approach to economic anthropology’, Economy and Society, February: 93–105. —— (1973) Abstract from ‘On the mode of production of the hunting band’, in W. P. Alexandre (ed.) French Perspectives in African Studies: A Collection of Translated Essays, London: International African Institute/Oxford University Press. Online, available at: instruct.uwo.ca/anthro/301/hgmei.htm (accessed July 2005). Menzies, H. (1997) ‘Telework, shadow work: The privatization of work in the new digital economy’, Studies in Political Economy, 53: 103–23. Mingione, E. (1983) ‘Informalization, restructuring and the survival strategies of the working class’, International Journal of Urban and Regional Research, 7(3): 311–39. —— (1985) ‘Social reproduction of the surplus labour force: The case of southern Italy’ in N. Redclift and E. Mingione (eds) Beyond Employment: Household, Gender and Subsistence, Oxford and New York: Basil Blackwell, pp. 14–54. Moody, K. (1997) ‘Towards an international social-movement unionism’, New Left Review, I, 225, September–October, 52–72. Online, available at: newleftreview.org/ ?getpdf=NLR22103, an extract from Kim Moody, Workers in a Lean World: Unions in the International Economy, Verso, London 1997. Nigam, A. (1997) ‘Rethinking the unorganised sector’, Social Action, 47(2): 125–34. Pahl, R. E. and C. Wallace (1985) ‘Household work strategies in economic recession’, in N. Redclift and E. Mingione (eds) Beyond Employment: Household, Gender and Subsistence, Oxford and New York: Basil Blackwell, pp. 189–227. Pais, J. (2002) ‘Casualisation of urban labour force: Analysis of recent trends in manufacturing’, Economic and Political Weekly, 37(7): 631–52. Patterson, T. C. (1998) ‘Flexible accumulation, flexible labour and their consequences’, Critique of Anthropology, 18(3): 317–19. Polanyi, K. (1944) The Great Transformation, Boston: Beacon Press. Polivka, Anne E. (1996a) ‘Contingent and alternative work arrangements defined’, Monthly Labour Review, October: 3–9. —— (1996b) ‘A profile of contingent workers’, Monthly Labour Review, October: 10–21. Portes, A. (1978) ‘Migration and underdevelopment,’ Politics and Society, 8(1): 1–48. Portes, A. and J. Walton (1981) Labour, Class, and the International System. New York: Academic Press. Portes, A., M. Castells and L. Benton (1989) The Informal Economy: Studies in Advanced and Less Developed Countries, Baltimore: Johns Hopkins University Press. Power, M., E. Mutari and D. M. Figart (2003) ‘Beyond markets: Wage setting and the methodology of feminist political economy’, in D. K. Barker and E. Kuiper (eds) Toward a Feminist Philosophy of Economics, London and New York: Routledge, pp. 70–85. Quijano, A. (2000) ‘The growing significance of reciprocity from below: Marginality and informality under debate’, in F. Tabak and M. A. Crichlow (eds) Informalization: Process and Structure, Baltimore and London: Johns Hopkins University Press, pp. 133–65. Quijano, O. A. (1974) ‘The marginal pole of the economy and the marginalised labour force’, Economy & Society, 3(4): 393–428. Redclift, N. (1985) ‘Introduction: Economic restructuring and family practices’ in N. Redclift and E. Mingione (eds) Beyond Employment: Household, Gender and Subsis-

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tence, Oxford and New York: Basil Blackwell, pp. 1–13. Redclift, N. and E. Mingione (1985) (eds) Beyond Employment: Household, Gender and Subsistence, Oxford and New York: Basil Blackwell. Ross, A. (2001) ‘No-collar labour in America’s “New Economy”’, in L. Panitch and C. Leys with G. Albo and D. Coates (eds) Socialist Register 2001, New York: Monthly Review Press, pp. 77–87. Ross, G. (2000) ‘Labour versus globalization’, Annals of the American Academy of Political and Social Science, 570, July: 78–91. Sassen, S. (2000) ‘The demise of pax americana and the emergence of informalization as a systemic trend’, in Tabak and Crichlow (eds), 91–115. —— (2002) ‘Counter-geographies of globalization: Feminization of Survival’, in K. Saunders (ed.) Feminist Post-Development Thought: Rethinking Modernity, Postcolonialism and Representation, London and New York: Zed Books, pp. 89–104. Sassen-Koob, S. (1989) ‘New York City’s informal economy’, in A. Portes, M. Castells and L. Benton (eds) The Informal Economy: Studies in Advanced and Less Developed Countries, Baltimore: Johns Hopkins University Press, pp. 60–77. Seccombe, W. (1974) ‘The housewife and her labour under capitalism’, New Left Review, 83, January–February: 3–24. —— (1986) ‘Marxism and demography: Household forms and fertility regimes in the western European transition’, in J. Dickinson and B. Russell (eds) Family, Economy and State: The Social Reproduction Process Under Capitalism, London and Sydney: Croom Helm, pp. 23–55. —— (1975) ‘Domestic labour: Reply to critics’, New Left Review, 89, January–February: 85–96. Sen, G. (1994) ‘Reproduction: The feminist challenge to social policy’ in Power and Decision: The Social Control of Reproduction. Cambridge, MA: Harvard School of Public Health, 1–17. Online, available at: www.hsph.harvard.edu/rt21/globalism/SENFeminist_Challenge.html (accessed July 2005). Sen, Kalyani Menon (2005) ‘Never done, never done away with’ – Women’s unpaid work and globalization’, Paper presented at a seminar on ‘Globalization and the Women’s Movement in India’ organized by the Centre for Women’s Development Studies (CWDS), New Delhi, 20–22 January. Sengupta, C. (2001) ‘Conceptualising globalisation: issues and implications’, Economic and Political Weekly, 36(15): 3137–43. Silver, B. J. and A. Giovanni (2000) ‘Workers North and South’, in L. Panitch and C. Leys with G. Albo and D. Coates (eds) Socialist Register 2001, New York: Monthly Review Press, pp. 53–76. Tabak, F. and M. A. Crichlow (eds) (2000a) Informalization: Process and Structure, Baltimore and London: The Johns Hopkins University Press. Tabak, F. (2000b) ‘Introduction: Informalization and the long term’, in F. Tabak and M. A. Crichlow (eds) Informalization: Process and Structure, Baltimore and London: Johns Hopkins University Press, pp. 1–19. —— (2000c) ‘The rise and demise of pax Americana and the changing geography and structure of production’, in F. Tabak and M. A. Crichlow (eds) Informalization: Process and Structure, Baltimore and London: Johns Hopkins University Press, pp. 71–90. Unni, J. (2001) ‘Gender and informality in labour market in South Asia’, Economic and Political Weekly, 36(26): 2360–2377. Ursel, J. (1986) ‘The State and the maintenance of patriarchy: A case study of family, labour and welfare legislation in Canada’, in J. Dickinson and B. Russell (eds) Family,

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Economy and State: The Social Reproduction Process Under Capitalism, London and Sydney: Croom Helm, pp. 150–191. Vanamala, M. (2001) ‘Informalisation and feminisation of a formal sector industry: A case study’, Economic and Political Weekly, 36(26): 2378–89. Veltemeyer, H. and J. Sacouman (1998) ‘Political economy of part-time work’, Studies in Political Economy, 56: 115–43. Wallerstein, I. (1995/1983) Historical Capitalism with Capitalist Civilization, London and New York: Verso. Wayne, J. (1986) ‘The function of social welfare in a capitalist economy’, in J. Dickinson and B. Russell (eds) Family, Economy and State: The Social Reproduction Process Under Capitalism, London and Sydney: Croom Helm, pp. 56–84. Wood, C. A. (2003) ‘Economic marginalia: Postcolonial readings of unpaid domestic labour and development’, in D. K. Barker and E. Kuiper (eds) Toward a Feminist Philosophy of Economics, London and New York: Routledge, pp. 304–20. Yates, M. D. (2001) ‘The “new” economy and the labour movement’, Monthly Review, 52(11): 28–42. —— (2002) ‘Economic crisis and US labour’, Monthly Review, 53(11): 47–55. Zaretsky, E. (1986) ‘Rethinking the welfare state: Dependence, economic individualism and the family’, in J. Dickinson and B. Russell (eds) Family, Economy and State: The Social Reproduction Process Under Capitalism, London and Sydney: Croom Helm, pp. 85–110. Zein-Elabdin, E. (2003) ‘The difficulty of a feminist economics’, in D. K. Barker and E. Kuiper (eds) Toward a Feminist Philosophy of Economics, London and New York: Routledge, pp. 321–38.

4

Overseas migration, outsourcing and economic growth in South Asia S. M. Naseem1

Introduction The purpose of this chapter is to examine the ways in which the international economy has provided – and has the potential to provide in future – employment opportunities to people living in developing countries (particularly in Asia, where there is endemic unemployment and poverty). The phenomenon of overseas migration has played a dynamic role in the development of both developed and developing countries for centuries, but in recent times it has become a much more potent instrument of development policy for the latter. Unlike in the past, overseas migration is now based much more on individual and household decision making; still, the political environment, economic imperatives and immigration laws of labour-importing countries, are still an important determinant of the extent, pattern and duration of international labour migration. This chapter analyses the role international migration has played in shaping the industrial policies of both the developed and developing world in recent years and the impact it has on their domestic policies. The chapter also discusses the impact that recent technological innovations in information technology and telecommunications have had in broadening the scope of available employment opportunities. In particular, it analyses the phenomenon of outsourcing in which India has found a unique niche, partly by accident and partly by design, and looks at the possibility of replicating that experience in other South Asian countries. Another aspect of overseas migration discussed in the chapter is the role of financial and human resources that result in the process of overseas migration. While remittances often constitute the bottom line of developing countries’ migration strategy, the less well understood resource of the diaspora and the human resource and technology acquisitions gained in the process of migration play no less an important role and are given explicit attention in the chapter. The chapter puts the migration issues in the context of development strategies adopted by Asian developing countries in recent years to cope with and take advantage of the challenges of globalization in the context of their primary objective of poverty alleviation. In particular, the chapter discusses migration policies – both of labour from and of jobs to the developing countries – as

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complementary instruments in a strategy of reducing poverty and enhancing the growth rate in a developing economy. Since the 1970s many poorer Asian developing countries, including Bangladesh, India, Pakistan, the Philippines and Thailand, have relied to a considerable extent on the migration of their labour force, primarily to the oil-rich Persian Gulf region, as an avenue for reducing both unemployment and poverty (many of the migrants were from rural areas and were unskilled or semi-skilled, i.e. the segments of population where poverty incidence was more pronounced). Along with the large spurt of migration to the Gulf region since the 1970s, the Asian developing countries have also experienced a steady, if declining, flow of migrants to the developed (mainly US and European) and to some less labour-surplus Asian economies (e.g. Japan and Malaysia). Labour migration provided a useful avenue for earning foreign exchange through the remittances of the migrant workers to supplement the incomes of the poorer members of their households. The immigration regimes of the developed countries became more restrictive with the rise in the unemployment rates and the migration of some of the sunset and polluting industries to developing countries. However, the developed countries’ need for importing labour, especially highly skilled labour, kept rising as a consequence of their demographic and technological evolution and could not prevent the flow of immigrants despite tighter immigration controls. At the same time, while the overall immigration controls became more stringent, the developed countries relaxed their restrictions on the visas for skilled personnel, especially in information technology (IT) and related fields. The booming technology sector and the emergence of the New Economy, which grew at a faster pace than the Old Economy, even though its share in the overall economy remained small, accentuated this trend. The nexus between technology and migration brought forth a new wrinkle in the benign globalization syndrome in the form of ‘outsourcing’ of non-core industrial activities to be performed in developing countries through the use of high-speed telecommunications and information technologies in developing countries. One of the prime beneficiaries of this new development was India, which gained both from its past policies of industrial and human resource development and its ongoing policies of economic liberalization, making it an ideal destination for large international corporations in developed countries to outsource labour- and knowledge-intensive jobs that could be done at a fraction of the cost than in the US and Europe. The success of outsourcing in India, although its contribution to accelerating growth rate remains modest, has raised hopes not only for India of a more significant impact on the growth rate and on the reduction in its poverty, but also for many other Asian countries that are hoping to replicate it. More interestingly it has also raised the possibility of a paradigmatic shift of substituting the migration of ‘natural persons’ by the ‘virtual’ migration of jobs to where they can be undertaken at the cheapest cost. Thus the ‘outsourcing’ phenomenon sits at the crossroads of the international division of labour and overseas migration policies.

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Events since the 9/11 attack on the US, leading to stricter security procedures, have further reduced the prospects of the migration of natural persons, including highly skilled personnel and aspiring students and professional workers in the universities, for extended periods of residence in the developed countries. Simultaneously, working and living conditions, including professional salaries and educational and research facilities, have greatly improved and have bridged the wide gulf that existed in these matters, between developed and developing countries, especially in parts of India and East Asia. In fact, there seems to be a significant, if not yet substantial, movement of return migration or ‘reverse brain drain’ in some Asian developing countries. A major object of this chapter is to situate the current debate on ‘outsourcing’ in the context of the changing international division of labour, based on the experience of South Asian countries, especially India and Pakistan, contrasting it with the contemporary experience of East Asia, particularly China. The chapter is structured as follows. After this brief discussion of the central theme of the chapter, the next part discusses the nexus between trade and migration. The chapter goes on to discuss the modalities of overseas migration and their evolution over time, before moving on to discuss the migration of skilled and IT personnel from developing countries to developed countries, focusing largely on the case of India for the former and of the US for the latter. The next part of the chapter discusses the problems and prospects of replicating outsourcing as a development strategy in other developing countries, such as Pakistan, before highlighting the role of the diaspora in catalysing the home countries’ development through remittances, networking, technology transfer and investments. The experiences of China, India and Pakistan in tapping this valuable resource are contrasted in this section. The conclusion summarizes the findings of the chapter.

The basic trade-theoretic argument The rules of the game of international trade have been changing in recent years and, barring a few exceptions, developing countries, which have had very little say in making these rules or in the global governance issues in general, have often felt disadvantaged by them. A major lacuna in the present rules of the game is the asymmetric treatment between international migration of capital and labour, which, by according more restricted freedom of movement to labour than capital, has resulted in a considerable limitation to the possibilities of development in many labour surplus developing economies. One of the major grievances of developing countries against the current trend towards globalization is their perception of the reluctance of the developed countries to permit the movement of labour across national frontiers, the factor that most developing countries are abundant in, with the same facility and freedom they insist for the movement of capital on which they hold effective control by virtue of their ownership of large financial conglomerates. Compounding this is the perception that the regime of international technology

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transfers has become more restrictive, hindering the rapid development of lagging late industrializing nations. These factors, it is argued, have contributed to making international trade more iniquitous and in accentuating these disparities in incomes between developed and developing countries.2 While there has been an upsurge in bilateral and global agreements on trade in goods, through the Tokyo and Uruguay Rounds, as well as through bilateral and unilateral tariff reductions, the global community has shied away from addressing the liberalization of services and labour markets in the world economy. Although an authoritative study3 showed two decades ago that the liberalization of world labour markets could double world income and imply proportionately even larger gains for the developing countries, the world has become less, rather than more, open to migration, including temporary labour flows.4 The real ‘iron curtain’, which divides the world in economic, rather than in ideological terms, has yet to fall, though it continues to be breached by millions of desperate people who are unable to find a decent living in their own countries. The continuing dualism of the world economy between the developed rich and the developing poor and the lack of convergence in their per capita incomes is, in a large part, attributable to the restrictions on the mobility of labour. This has created a gulf between the free flowing ideas and knowledge and the immobility of people trapped in their time-impervious economic and social circumstances. The imbalance in the demographic and the labour market profiles of developing and developed countries has resulted in some adjustments in the past both through limited labour migration into developed economies, legal as well as surreptitious, and through some relocation of labour-intensive (and polluting or environmentally hazardous) industries from developed to developing countries. A strong argument in favour of increased labour mobility, along with trade liberalization, derives from the fact that cross-border trade alone is unlikely to lead to the idealized situation of factor price equalization (FPE) envisaged by trade theorists. If FPE were realized, trade in goods and factor movements Table 4.1 World demographic imbalances: 1980, 2001, 2010 Population, Labor force age 15–64 (million) years (million)

Average annual growth rate

■

1980 World 2,600 Developing countries 2,071 PTK – 4% PTK – 2% High income countries 529 PTK – 20% Source: World Bank (2003), p. 44.

2001

■

1980

2001

3,882 2,036 2,983 3,240 1,662 2,517 66 101 33 50 642 373 467 75 93

2010

1980–2001 2001–10

3,377 1.8 2,894 2.0 116 58 483 1.1 97

1.4 1.6 0.4

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would be substitutes and the world would move to a higher level of welfare. As trade was freed, the incentives for labour migration and capital movements would decrease, if not totally disappear.5 Intuitively, one can think of goods as embodiments of their factors of production, as envisaged by Marx. Trade in goods and factors of production, with proper institutional mechanisms in place to avoid exploitation, could lead to the achievement of this higher level of welfare. However, given the protective stance of developed countries in selective markets of goods and factors, which favour their resource endowments, this is unlikely to be achieved in the foreseeable future. While the developed countries act as strong protagonists of free trade and of globalization, in general, they have often been found wanting in practising the gospel they preach, when their interests are at stake. The current controversy, about outsourcing certain categories of IT services from the United States and other developed countries to India and some other offshore destinations, which some have called ‘virtual migration’, is a case in point. The controversy became a major issue in the 2004 US presidential election, where both parties, especially the Democrats, campaigned against the exports of jobs to low wage overseas destinations of IT processing, such as India. The issue became a hot potato in view of the halting and jobless recovery in the United States, where high rates of unemployment have generated a strong protectionist backlash. Although some Administration spokesmen, such as the chief Presidential Economic Adviser, Mr Mankiw, regard outsourcing as a ‘good thing’ for the US economy, their voice was drowned in the congressional din against it.6 Outsourcing also fits into some recent initiatives to link emigration management to development. As early as in July 1991, the G-7 nations called for international organizations to explore ways to accelerate ‘stay-at-home development’: to encourage would-be emigrants to stay home. Along this line, some European countries have proposed the notion of ‘co-development’. For instance, France’s Inter-ministerial Mission on Co-development and International Migration held a conference in July 2000 that defined co-development as combining immigration control efforts with efforts to bolster ‘stay-at-home development’ in migrants’ countries of origin. Some co-development programmes grant migrant communities abroad an official role in helping to build up their home country’s economy.7 Outsourcing minimizes the need for crossborder migration and can help to overcome the frictions between labour importing and labour exporting countries.

Changing modalities of international migration International migration has been a catalyst for development, both of sending and receiving countries. However, its character, composition and dimension have changed over the centuries. It seems that the phenomenon is poised for a significant change as a result of the confluence of a number of major developments in the global economy. These include, among others, demographic transitions, technological changes, economic growth, human resource development

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and migrants’ perceptions about the relative quality of life in host countries. The immigration regimes in host countries have become even more restrictive as a result of security concerns in the wake of 9/11 and because of the slower growth of jobs relative to economic growth consequent upon productivity gains from rapid technical changes. One of the more benign and virtuous aspects of globalization in the past three decades or so has been the increase in the migration of people from the poorer, labour-surplus economies of the South to the richer, labour-scarce economies of the North, as well as to some resource-rich, labour-scarce economies within the South itself. A major, though by no means the only, benefit of labour migration to the developing countries, is the large volume of remittances received by them, whose growth has often exceeded that of exports and foreign assistance received by them. Despite some recent setbacks, especially since 9/11, overseas migration continues to provide considerable support, especially to the migrants from South Asia. These expatriates who have been forced into temporary or permanent selfexile for the sake of gaining employment not available to them in their home country are becoming an important part of their emerging diaspora. While the current scale of emigration from developing countries often raises alarm bells in developed countries, it needs to be realized that it is negligible compared to emigration from Europe in its industrializing phase: i.e. between 1846 and 1924, during which Britain exported nearly half of its demographic growth and about 41 per cent of its entire population of the year 1900.8 The current emigration rates for India and China are also much lower than those during the period from 1850 to the First World War.9 Some observers view emigration as a time-bound phenomenon similar to the Kuznets’ curve relationship between income inequality and development. According to these observers, emigration would increase as a result of economic and social development but would decrease subsequently when national income reached a higher level.10 Others have postulated a ‘migration band’ which refers to the group of countries that are experiencing a migration hump, roughly those with per capita GDP in purchasing power parity terms of US$1,500–8,000 (in which a majority of South Asian countries and China fall)11 ‘emigration transition’. Some have even postulated a ‘graduation’ from being an ‘emigration’ country to ‘immigration’ country.12 According to a recent study, South Korea went through this graduation process three times faster than Europe.13 The new wave of migration in Asia In the last few decades, international migration in Asia has grown significantly in size, diversity and complexity. In the past, it consisted largely of migration for permanent settlement to the West, particularly to the traditional immigration countries such as Australia, Canada and the United States of America. While Asians still continue to be the major source of permanent immigrants to those countries, the cross-border movements of people within Asia have risen with

17.5

5.7

23.2

8.1

Lower mid. income

Upper mid. income

Middle income

Low income

Source: World Bank (2005).

31.3

Developing countries

1990

13.3

43.4

8.6

34.8

56.7

1995

21.7

54.1

13.1

41.0

76.8

2000

23.8

60.9

16.8

44.1

84.6

2001

31.2

58.8

18.7

40.1

99.0

2002

Table 4.2 Remittances to developing countries, 1990–2004 (US$ billions)

36.7

79.2

24.4

54.8

116.0

2003

43.4

82.4

28.8

55.6

125.8

2004

13.6 (168)

30.9 (133)

7.4 (130)

23.5 (134)

45.5 (145)

1990–2000 change (%)

19.6 (82)

21.5 (82)

12.0 (71)

11.5 (26)

41.2 (49)

2001–04 (change (%)

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startling rapidity in recent years and the direction and nature of the movements have undergone some important shifts, especially towards the Persian Gulf and West Asian region in response to its strong economic growth, propelled by the increase in the production and prices of crude oil, especially since the 1970s. As the conditions in many Asian developing countries deteriorated in regard to employment and social and economic opportunities, especially for the poorer sections of the population, the push factors also began to reinforce the initial rise in out-migration and increasingly high levels of immigration in developed countries. As a result, there was both a tightening of immigration legislation in developed countries and an increase in the trend towards illegal immigration. The second and third generations of many of those unskilled workers who migrated in the 1950s and 1960s and settled down are now far removed from and have a more tenuous emotional bond with their home country. The wave of emigration to the Gulf countries, spawned by the construction boom in the wake of the 1970 oil price hike, was, however, of a different genre. It consisted, initially, largely of unskilled or semi-skilled, temporary, predominantly male labour force for the rapid construction of large infrastructure projects, including the discovery, modernization and expansion of new oilfields and refineries, triggered by the investment of rapidly rising oil revenues as a result of the first oil shock of the 1970s. Another interesting change in the pattern of Gulf migration from Asian countries is the increasing feminization of labour force, making heavy inroads into the previously exclusive male dominance. Although females in the Gulf oilproducing countries still account for only a small segment of the total foreign workforce, women are drawn into the region in increasing numbers for service jobs, especially jobs as domestic workers and nurses, as well as entertainers and production and sales workers. The pre-eminence of the Gulf region as a destination of Asian migrant workers has somewhat declined since 1980 partly by the emergence of other temporary migration centres, especially in Southeast and East Asia. By the early 1990s, labour migration within Eastern and Southeastern Asia had embraced nearly all countries in the region as either origin or destination, and some countries as both. Among the countries attracting temporary migrant workers are Brunei Darussalam, Hong Kong, Japan, Malaysia, the Republic of Korea, Singapore, Taiwan Province of China and Thailand. The sustained growth of their economies, coupled with a limited additional supply of national workers resulting from low fertility, increasingly led these countries to seek the manpower available from neighbouring low-income and labour-surplus countries. The East Asian financial crisis in 1997, adversely affected some laboursending countries to experience a renewed interest in overseas labour migration, while the impact of the economic downturn on labour importation in labourreceiving countries was temporary, given the persistent demands for migrant workers in certain sectors. The adverse impact was assuaged to some extent with the emergence of new supplies of contract workers in the region. In addition to the Philippines and Thailand, which have a history of deploying their nationals

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for overseas employment in large numbers, countries such as Indonesia, China and Myanmar have steadily increased their placement of migrant workers. The governments of labour-sending countries often favour contract labour migration as an integral part of development policy. Chinks in the migration Iron Curtain The United States, alone among the industrialized countries, still receives a substantial inflow of unskilled migrants from developing countries, mainly from Mexico and other Latin American countries. The bulk of unskilled labour migrants are absorbed in the Gulf region, Southern Europe and East Asian countries. Recently, however, the temporary movement of workers has moved back onto the agenda. It was recognized as one of four modes of delivering services abroad by the Uruguay Round’s General Agreement on Trade in Services (GATS), where it became known as ‘Mode 4’ liberalization – the Temporary Movement of Natural Persons (TMNP).14 A small number of liberalizations were recorded in the Uruguay Round and subsequently during negotiations for the accession to the World Trade Organization (WTO) by new members. These, however, mainly aimed to establish the right of intra-corporate transferees and business visitors from developed countries to move temporarily to developing countries to pursue their careers and business opportunities. Even more recently, however, developed economies have begun to realize that they suffer from shortages of both skilled and unskilled labour, and have started, de facto or de jure, to relax their entry restrictions on foreign labour. In the USA, illegal immigrants from Mexico are an important source of unskilled labour and have slowed the decline in the supply of unskilled labour in the USA considerably.15 The services sectors, facing severe shortages of specific skills, have been urging reforms that would allow more temporary workers to enter the country. Developing countries, as the largest potential suppliers of temporary labour, are intensely interested in the effects of such reforms on their own welfare. Of course, agreements concluded under Mode 4 of the GATS relate only to the service sector, where restrictions on the movement of persons are seen as a barrier to exports, rather than an issue of migration per se. Moreover, all the developments refer explicitly to temporary movement to provide specific services rather than to permanent migration and entry into the labour market. These are important distinctions when it comes to framing policy proposals: where permanent migration raises fears about social assimilation, cultural identity and burdens on the public purse, and, for sending countries, the loss of talent in a brain drain, TMNP is largely free of such difficulties. The distinction between permanent and temporary mobility is less significant, however, in the analysis of the effects of mobility on purely economic variables such as income, output and employment. TMNP shifts workers from one country to another, and thus to a first approximation may be viewed as inducing

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changes in labour endowments accompanied by some income transfers. Moreover, given that agreements under the GATS will be bound, the jobs created will be permanent even if the incumbents are not – what we might call ‘revolving door’ mobility.

The IT revolution and emergence of outsourcing In contrast to the immigration of unskilled labour, there are much less severe restrictions on the South to North flow of skilled workers; this flow is substantial and has very probably been rising. One recent study shows,16 for example, that 56 per cent of the migrants from developing countries in the United States had a secondary education and another 36 per cent had tertiary education; the percentages are similar for the migrant population in Western Europe, Canada and Australia. In the OECD countries, it is estimated that from 1995–2000, the foreign labour force grew by 3–4 per cent per year. However, the highly educated migrant workforce grew much faster – at an average of 35 per cent annually in the United Kingdom and at 14 per cent per year in the United States.17 The developed countries have used their immigration policy as an important instrument for achieving their policy objectives. Their differentiated approach towards immigration of skilled and unskilled labour illustrates their use of immigration policy to serve both as instruments of industrial and fiscal policy. Immigration policy is rapidly emerging as a tool of industrial policy in advanced industrial economies as countries compete with each other to fill a severe lack of skilled workers and attract the cream of global human capital. This trend is exemplified by the success of the IT sector in the United States driven by talented nationals from around the world. The liberal use of H-1B visas in the USA (discussed in detail later) to fill this skill gap and to maintain the country’s industrial competitiveness is a case in point. In the case of unskilled labour, the developed countries favour admitting immigrants for a limited time with obligations or encouragement to return home. This helps ameliorate social security problems in the short- to medium-term which could aggravate if such labour is allowed to immigrate permanently. In recent years, rapidly declining costs of travel and telecommunication have, in addition to significantly reducing the costs of physical migration, brought into existence a new kind of mobility – mobility of skills – that does not involve physical migration. Professional skills can now be made available through consultancy services, periodic short visits of experts, electronic mail, video conferences, etc.; none of this requires the experts to reside in a particular country. Flow of skills of this type can in principle be either North–South or South–North precisely because permanent migration is not involved. The existence of such flows, however, plays a facilitating role in the transfer of technology and to some extent validates the trade-theoretic assumption that all trading economies have access to similar technologies.18 Analytically, these flows are quite distinct from actual migration of skilled workers and are defining the discourse on the emerging international division of labour between developed and developing countries.

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The imbalance in the demographic and the labour-skill profiles of developing and developed countries has resulted in some market-induced adjustments in the past, apart from a limited amount of labour migration into developed economies, through both legal and surreptitious means. They have included some relocation of labour-intensive (and polluting or environmentally hazardous) industries from developed to developing countries. These adjustments, by no means painless, resulted from tight labour market conditions in developed market economies and the attraction of lower wages in developing countries and led to healthier bottom lines in their balance sheets and profit rates, while opening up some opportunities, however limited, to the unemployed and underemployed populations of developing countries. The new phase in the evolving trade and development paradigm was the introduction of transfers of non-core activities from the centre to the periphery and is presently being characterized as ‘outsourcing’. A more familiar antecedent of the same phenomenon (in the old economy context) was ‘subcontracting’. The tendency to outsource and subcontract non-core operations and concentrate on core business functions is not new and has always been a characteristic of large firms. Initially, this resulted in the hiving off of certain operations to be undertaken by specialized, local vendors, especially in the automobile sector, of the developed countries themselves. With the focus shifting to offshore destinations, the phenomenon is now termed as ‘off-sourcing’. As a result of the IT revolution and the increasing availability of cheap and better or larger network technology, communications infrastructure and bandwidth, many of the services which in the past had to be managed and provided at the centre can now be dispersed to and delivered from remote locations. This has given an added impetus to the relocation of a certain genre of services requiring a limited acquisition of skills, including computer and language proficiency, which requires an educated, preferably female, workforce. These services, typically at the lower end of the IT ladder, consist of business process outsourcing (BPO) and IT-enabled services (ITes), facilitated by information technology. India’s well-publicized success in riding the wave of this particular opportunity of globalization and garnering large increases in revenues, employment and foreign exchange earnings has enamoured it to other developing countries as a possible new strategy that would help them leapfrog into a higher stage of development. Many experts and international agencies have commended this strategy as the options for development have significantly narrowed for developing countries. It is argued that so long as a cheap workforce with the requisite language abilities and skills can be found or created, this is an opportunity waiting to be exploited by developing countries. The Indian educational system has evolved over a period of five decades from the government’s painstaking efforts to produce a well-trained labour force that fortuitously answers the needs of outsourcing. Indeed, it is broad-based enough to respond to a variety of challenges that many other developing countries are incapable of rising up to. The sheer size of the Indian higher education system is staggering. By 25 November 2002 it was catering to the needs of

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8.8 million students being taught by 426,817 teachers in around 13,150 colleges and 294 universities all over the country. It witnessed a 13-fold increase in the number of universities, 25-fold increase in the number of colleges and 30-fold increase in the enrolment of students since Independence. India’s most prized resource in today’s knowledge economy is its readily available technical workforce. India has the second largest number of Englishspeaking scientific professionals in the world, second only to the US It is estimated that India has over four million technical workers, over 1,832 educational institutions and polytechnics, which train more than 67,785 computer software professionals every year. The government of India is stepping up the number and quality of training facilities in the country to capitalize on this extraordinary human resource. India’s sheer size and its continuing investment in the expansion of its educational system, gives its labour markets the elasticity to fill rapidly the demand for new IT workers. Having four of the top ten biggest universities in the world gives it the infrastructure to expand rapidly the number of computer science and knowledge workers, as it is now doing with an investment fund of $1 billion. Problems of replication and scaling up of the IT strategy The Indian experience does have an interesting lesson for industrial policy in developing countries. Success in a new technological area has strong cognitive externalities, in terms of confidence both within the country and outside it as well, and can set forth a virtuous cycle that gradually infects other parts of the economy. Although it is too early to say just much and to what degree India’s IT success will have positive effects on other sectors, it has certainly helped to erase the country’s image as a technological backwater. While the country continues to suffer from the image of being home to the largest population of the world’s poor, it also hosts some of the world’s most prominent players in the field of information technology who are keenly eying India as a source of expanding the market share for global sales of their products and services. It is inconceivable that this would have been possible without India’s success in IT and related fields. In contrast, new entrants, such as Pakistan, face more formidable problems about the prospects of replicating the outsourcing strategy of India, which reportedly accounts for 80 per cent of the world’s outsourcing market, especially since the market is unlikely to expand at the same rate as in the past. India has certain inherent, historical advantages. Besides the English language abilities India has a large pool of educated and, in many cases, professionally trained manpower; and, above all, a thriving and well-developed software services industry base. Pakistan’s ability to partake in the current outsourcing boom is limited by the inadequacy and the narrow base of its educational system. Its past neglect of the social sector in general and education sector in particular, as well as the low social and economic esteem enjoyed by its academics stands in the way of pro-

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ducing on a large scale the kind of labour force required. What needs to be realized is that India, as well as China – which also made grave mistakes in its educational policies during the cultural revolution in 1960s – developed its educational system under a long-term strategy, rather than under sporadic crash programmes, as Pakistan has been prone to do. Limitations and downsides of the new paradigm The potential of IT and outsourcing strategy in achieving the major goals of development strategy in poverty-ridden countries also seems limited, especially in view of the exclusion of its access to the poor. It has enamoured mainly the educated urban middle classes who share the dreams of yesterday’s dot.com millionaires by physically or digitally migrating into the fantasy land of a richer world. Its emergence has often been uncharitably characterized as a postcolonial development enclave. In an illuminating article on the IT as a means of empowering the black community, Alice Amsden douses the euphoria by pointing out the multiple disadvantages faced by the black community in entering this supposedly barrier free, low cost industry, which is supposedly the flagship of the ‘third industrial revolution’.19 Some of the major findings, based on Amsden’s survey are: (a) a very large portion of successful software entrepreneurs are white, male, and extremely well educated, (b) entry barriers into the software industry may be low in terms of physical capital but are high in terms of human capital, which is generally a key difference between the second and third industrial revolutions, (c) a prerequisite of the success of the IT strategy to alleviate poverty is to address the imbalances in the state of education in general, computer education in particular, job training and job availability. Drawing upon her invaluable insights about the economies of East Asia, Amsden points out that initially in South Korea and Taiwan, their high investments in education resulted not in rapid domestic economic growth but in a ‘brain drain’ – the educated migrated abroad to high-wage countries and only returned home once endogenous growth had begun – by a variety of complex and controversial means, although none of these means involved the exploitation of high technology. The industries in which South Korea and Taiwan (and Japan before it) prospered involved first low- and then mid-technology such as steel, industrial chemicals and later automobiles.20 In the case of the outsourcing of IT and other professional jobs to India, there may be lessons to learn also from the example of Ireland. US companies set up IT and other operations in Ireland in the late 1980s and early 1990s to take advantage of the English-speaking lower cost pool of educated labour. But now there are regular reports of some of these Irish operations closing down, partly as a result of a cyclical bust, following the 1990s boom, and partly due to the rising cost of labour in Ireland.21 In contrast to East Asian countries, South Asian countries have given more

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emphasis on scientific research than on technological accomplishment, with the possible exception, in the cases of India and Pakistan, in the nuclear field, which is motivated in order to achieve military rather than industrial or economic objectives. Thus while both countries, especially India, have produced high calibre scientists and even Nobel laureates, they have not succeeded in significantly improving the educational and skill levels of their labour force. Their educational system has remained elitist and has generally excluded the poor who form a higher proportion of the population than in East Asia. The proportion of college-age youth receiving higher education is less than 5 per cent, compared to over 60 per cent in East Asia. Pakistan’s predicament is far more serious than India’s, as it has failed to pay attention to the basic fundamentals of growth in the past five decades and has only sporadically responded to the challenges facing it. Its greater dependence on external flows has greatly diminished its domestic capacity to deal with its domestic problems. Its obsession with faster growth and leapfrogging has ironically resulted in its recent lacklustre performance. It needs a sustained period of attention and diversion of resources to sectors that have been neglected in the past and a greater effort to tax those who have benefited from the rent-seeking policies of the past. It also needs to pay heed to the unfinished agenda of development, especially land reforms and mobilization of domestic savings, as well as the nagging and unresolved issue of civilian supremacy over defence and security issues.

Benefits of migration and the role of diasporas That increased emigration is beneficial for developing countries and the world as a whole is a widely shared perception that has been confirmed by a number of studies by international agencies. The UNDP Human Development Report (1992) claimed that opening up migration access to the North from the developing world would increase income for the latter by US$200 billion per year.22 A study by the International Labour Organization (ILO) for five Asian labourexporting countries estimated that labour migration contributed an equivalent of US$55 billion in capital inflows.23 A World Bank study showed GDP per capita growth is considerably higher in developing countries with higher emigration rates.24 However, national and micro studies show that migration is far from being an unmixed blessing and causes a number of tensions and distortions in the sending economy. Most developing countries have pursued passive policies of benign neglect, rather than proactive policies of maximizing the benefits and mitigating the undesirable effects of overseas migration. Despite its generally beneficent effects, overseas migration outcomes have to be weighed and harnessed carefully. The welfare effects of migration of people depend on the patterns and magnitude of migration and the structure of domestic labour markets. While migration increases overall global output, it also increases inter-country inequality. In so far as the human capital is financed by public funds (which it normally

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is in most less developed countries, although this is declining), and the beneficiaries are in the upper decile/quintile of the country’s income distribution, the overall impact is regressive both in terms of intra- and inter-country inequality. Two primary effects of overseas labour migration have often received most attention in the policy discourse, namely, the gain derived from migrants’ remittances and the loss of human capital (often called the ‘brain drain’). The former affects mainly the poorer segments of the population and poorer countries, while the latter involves the educated elites of both poor and rich countries – among the worst affected being some of the African countries, which export a high proportion of their highly skilled labour force. In general, households with some asset base or borrowing power have benefited from overseas migration, which involves both high initial investment and considerable risks, much more than the poorer sections of the population who do not have access to such enabling resources. Remittances are particularly important for low and lower middle income countries. The total volume of remittances in 1998 was $52.4 billion, about the same as net Official Development Assistance (ODA) in that year ($52 billion). Remittances have important economic implications for a locality. Financial remittances are greater (especially as a fraction of income) for lower skilled workers who are more likely to be temporary migrants. These remittances finance consumption, liquidity for small enterprises (in the absence of wellfunctioning credit markets), housing and philanthropy; they are an important source of social insurance in lower income countries; and they also finance capital investments – in equipment, land, wells and irrigation works and education – with longer-term implications for economic development. It is difficult to track what percentage of remittances goes into consumption, working capital or long-term investment The main policy interest of Asian governments in overseas migration, especially of unskilled labour, has been as a source of generation of foreign exchange, through workers’ remittances. An increasing number of developing countries have been using their emigrant labour as a resource for development of Table 4.3 Estimates of migrant workers by regions, 2000 (provisional) Region

Africa Asia Europe Latin America and Caribbean North America Oceania Total Source: ILO (2002).

Migrants (incl. refugees) millions 16.39 49.93 56.13 5.93 40.82 5.83 174.9

Migrant workers Migrant workers (excl. refugees) (incl. refugees) millions millions 5.47 22.13 27.53 2.53 20.53 2.94

7.18 25.03 28.23 2.53 20.52 2.93

80.9

86.3

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their domestic economies. Since the size of these emigrant populations relative to the domestic population has now assumed a considerably high proportion, many developing countries have realized that they can no longer treat their diasporas as a passive resource but have to give due consideration to the latter’s concerns so that they continue to have a link with the mother country and do not get permanently estranged from it. The role of diasporas Diasporas, the accumulated stock of migrants (and their offspring) still having links with the home country, seem to have played an important part in both facilitating the migration of other compatriots, but also, more importantly, as conduits for resource transfers. The broader spillover effects of diasporas may be occurring through several mechanisms. There is anecdotal evidence that ‘social remittances’ may be playing an important role in reshaping individual and social preferences as well as social norms and expectations in the country of origin with attendant political and economic consequences.25 The role of diasporas in contemporary economic life can be better understood if markets are seen not just as price-making mechanisms but in the broader Coasian sense of markets as social institutions that facilitate exchange.26 Networks embedded in social institutions mimic market structures through signalling and informational exchange among participants. Networks affect the flow of information in fundamental ways shaping content, access and credibility of information. Their role in employment and labour markets is well documented as well as in immigration and immigrant entrepreneurship. Once in place networks create self-sustaining migratory flows that gradually transcend the conditions that generated immigration in the first place. The reason why ethnic groups with very small numbers in the overall population concentrate spatially and in occupations/trades is related to the ‘chain migration’ often observed in several countries.27 Employers have strong reasons to hire individuals with a credible imprimatur and referral by existing employees is an important mechanism. Hiring new employees or contractors from networks that have delivered reliability in the past reduces search costs. In addition to employment, these networks provide access to resources, either informational or financial. The patterns of endearment in which diasporas interact with home countries, however, differ widely. While the Chinese diaspora is famously known for undertaking massive direct foreign investment in China since the opening up of the economy in 1979,28 the South Asian diaspora, particularly in India, has benefited the home country through the development of technology networks and being a catalyst for foreign direct investment, particularly in the IT and outsourcing sectors.29 The South Asian diaspora has also been active in taking NGO-propelled initiatives in the areas of poverty alleviation, education, health, housing and microfinance, among others. The role of the Chinese diasporic networks (the ‘bamboo network’) in chan-

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nelling investment into China (in particular in the southeastern provinces of Guangdong and Fujian) has been well documented.30 The Chinese Business Sphere (CBS) – consisting of business populations in the Peoples’ Republic of China, Taiwan, Hong Kong, Macao, ASEAN countries and Indochina, where Chinese are doing business using contact networks – has become a major international player and one of the world’s economic power blocs. The South Asian diaspora is, however, very diverse. The temporary migrant worker in the Gulf can hardly compare his lifestyle with that of the South Asian professionals and businessmen in the US and UK or even in the Gulf, for that matter. Many of the permanently settled Pakistanis in North America and Europe, for instance, now hardly send any remittances on a regular basis, the bulk of which still comes from the Gulf. Indeed most of the non-Gulf emigrants facilitate capital flight from Pakistan by helping their relatives and friends to emigrate to foreign lands by acting as intermediaries in the transfer of the sale proceeds of their assets or through help in obtaining jobs. However, there are many instances in which the South Asian diaspora has played a positive role by undertaking investment and transfer of technical know-how to assist the development of their home countries. Many professionals of Pakistani origin, especially doctors, have helped create medical and educational facilities in Pakistan, through their collective efforts. The Pakistani diaspora has until recently tended to see itself more as a part of the larger Muslim community and has engaged in religious and charitable work in solidarity with the Muslim umma (community) rather than on the basis of patriotism. Religious, cultural and sectarian divisions have also tended to prevent the emergence of a national identity, which is far more articulate and assertive in the case of other South Asian nations, especially India. The degree of national and cultural cohesion, which is perhaps most evident among the Chinese, explains to a large extent the degree of a diaspora’s commitment to the home country. The South Asian governments have directed most of their efforts to attract remittances and portfolio investments from their diaspora and have offered them considerable facilities, such as dual nationality status, travel facilities, import of personal baggage, preferential housing, health and educational schemes, as well as investment incentives. These efforts have been successful mostly in mobilizing remittances, but much less so in the area of direct investment. Just as East Asian countries began their technological ascent in labour-intensive manufacturing (such as garments, textiles and leather products), many of India’s IT firms were largely in the ‘body-shopping’ business in the initial years of the technology boom. Indian professionals did not shy away from becoming the foot soldiers of the US technology boom. In the process of learning-by-doing both the firms that hired them as well as the ‘bodies’ that were hired earned the confidence for doing technologically more sophisticated work. H1-B permits are now the main gateway for moving professionals into the United States. While the current congressional quota for H1-B permits is 65,000, numbers expanded enormously in the late 1990s, peaking to 195,000 in 2001 in the wake of the technology boom. However, the atmosphere has changed radic-

2000 140,000 107,024 194,074 115,000 355,605

1999 140,000 56,817 142,299 115,000 302,326

Note The data are based on INS Statistical Yearbooks.

Source: Martin (2006).

140,000 147,012 161,207 65,000 92,795

140,000 116,198 140,000 65,000 110,223

Employment based ceiling Employment based immigration Employment waiting list H1B Visa ceiling H-1B admissions (double count)

1993

1992

Item

Table 4.4 Employment-based immigration and H-1Bs, 1992–2003

140,000 179,195 142,632 195,000 384,191

2001

140,000 123,291 143,213 65,000 105,899

1994

140,000 82,137 195,000

195,000

2003

140,000 117,499 140,000 65,000 114,458

1996

140,000 174,968

2002

140,000 85,336 146,503 65,000 117,574

1995

140,000 90,607 140,000 65,000 200,000

1997

140,000 77,517 160,898 65,000 240,947

1998

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ally in the last few years. In 2003, for instance, free trade agreements with Singapore and Chile that granted these countries a certain quota within the unchanged overall ceiling of 65,000 H1-B permits generated a plethora of protests both within Congress and from outside groups (mainly unions), arguing that trade should not affect migration policy. The continuing weakness of job growth in the US economic recovery, accompanied by the outsourcing of jobs by US companies, along with the security concerns raised by 9/11 has created a climate that is hardly conducive to the opening of new doors for temporary entry of foreign workers in the near future, for instance by creating a GATS visa. Despite stiff competition from other low-cost destinations, India continues to have an edge in outsourcing largely because of the growing influence and expertise of the Indian diaspora, based in the US and the UK. According to a report by Evalueserve and World Bank Institute, many Indian engineers who had started moving to the US in the 1960s and 1970s, as a result of the liberalization of the US visas, had by the 1990s acquired considerable influence in the IT industry. Many of them had become entrepreneurs, venture capitalists or senior executives in large and medium-size companies and some had started their own companies in India, while others were instrumental in the hiring of Indian IT professionals abroad. By 1999, the peak of tech boom in the US, the Indian IT talent pool had surged to 24 per cent of the IT professional population of Silicon Valley, according to the report. The Evalueserve–World Bank Institute study estimates that the combined annual personal earnings of more than 20 million persons of Indian origin (PIOs) is about $364 billion; the gross domestic product of India (with a population of over one billion) is $550 billion. India finally discovered the value of the overseas Indian in 1991 – when the economy went bankrupt and when it discovered it had only sufficient foreign reserves to fund one month’s worth of imports. The Indian diaspora, makes up about 1.7 per cent of the country’s total population, much of that number is poor. Out of the 20 million Indian expatriates only an estimated 3.5 million are settled in life or can be called rich. The Indian diaspora is now actively involved in the social and political life of host countries. In 2000, the diaspora had four elected members of Parliament in the UK and 11 members in the House of Lords. Indian offshore vendors and various captive centres of global corporations are already moving up the value chain and performing more complex and valueadded activities for their clients. Apart from providing the required capital, the Indian diaspora can play an important role in the development of India’s highend IT sector. India’s success in IT and outsourcing demonstrates how international migration with the active and dynamic role of its diaspora can become a long-term asset instead of being the ‘brain drain’ it was once feared to be.

Conclusion The mobility of capital has been the principal driving force in the previous half century of globalization and has led to an unbalanced factor combination, with

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the developing world still weighed down by its large labour surpluses and mired by poverty and unemployment, while the developed world experiences chronic shortages of labour and the need to export its capital surpluses. To redress this imbalance, there is an urgent need for liberalization of labour flows from developing to developed countries. The growing importance of international migration (both real and virtual) will be driven by structural factors, both demographic and technological, in both developing and developed countries. The population of current EU member states is expected to decline by about 12 per cent by 2050, creating strong negative effects on living standards and government budgets. OECD estimates suggest that the cumulative effects of demographic changes in industrialized countries could be to reduce living standards in the US, EU and Japan by 10, 18 and 23 per cent respectively.31 Without an influx of new workers, European pension systems will become unsustainable. A growing body of opinion holds that aging European populations might be rejuvenated by inflows of migrants who would work, pay taxes and hence finance pensions, helping to avert a future pensions crunch.32 A UN report calculated that in the case of the EU, in the absence of any other measures or changes, the net number of immigrants required over the next 50 years to maintain the size of the total population would be about a million annually; to maintain the size of the working-age population about 1.5 million annually; and to maintain the old-age dependency ratio (the ratio of working age to over-65 population) about 13 million annually – about 15 times current net migration rates.33 The foreseeable future will witness a much greater movement of people across borders. Under the GATS, adopted as part of the Uruguay Round trade accords, there are new opportunities for expansion of trade in services and liberalizing such trade-related temporary movement of persons. Policy measures that can better manage international migration such as a harmonized special visa regime to facilitate and monitor trade-related temporary movements would enable skilled personnel from developing countries to raise their earnings and skills through increased participation in trade in services.34 Potentially this could reduce pressures to migrate on a longer-term or permanent basis. A harmonized international tax regime for human capital flows would considerably compensate LDCs in the short term for the loss of their scarcest resource: human talent. But long-term benefits will not materialize unless LDCs themselves create the political and economic environment that will allow them to tap into overseas networks of their nationals so as to ensure that the ‘brain drain’ turns into ‘brain gain’ for these countries. Overseas migration, especially of highly skilled personnel and the recent upsurge in outsourcing activities based on IT personnel, is not likely to have an immediately discernible effect, since it involves only a very small fraction of the labour force and economic activity. However, the dynamic effects of migration and outsourcing could be very significant indeed and are worth pursuing by Asian developing countries with large populations and high unemployment and poverty incidence rates. In order to be effective such strategies need consider-

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able deliberation to maximize the benefits and to ensure their access to the poor and the underprivileged. It is also necessary to take advantage of externalities that overseas migration generates through the networking activities of the diaspora in the fields of technology acquisition, dispersion and direct investment in the home country.

Notes 1 The author would like to thank his son, Dr Anwar Naseem of Rutgers University, USA, for help and comments in preparation of this chapter, without blaming him for its many inadequacies. He is grateful to Professor Michael Goldfield of Wayne State University for his incisive and insightful comments on the contents and organization of the chapter. 2 These perceptions though hard to substantiate and conclusively demonstrate, are widely shared and articulated. Apart from Stiglitz’s book (2002), there is a large literature pointing out the inequities of the current global architecture of trade and other flows, including labour and capital movements. For a contrarian, but by no means uncritical view of globalization, see Baghwati 2004: 320. For a more balanced view of the issues involved, see Nayyar 2002. 3 Hamilton and Whalley 1984. 4 Since the gains from trade are usually reflected by the price differentials in commodity prices in the two trading partners, the gains in movement of labour are likely to be much greater since the wage differentials between developed and developing countries are several times larger than the commodity price differentials. Thus the estimates derived from complete general equilibrium (CGE) models of gains from relaxation on restrictions on labour mobility dwarf those from gains from liberalization of trade. 5 See Walmsley and Winters 2003. 6 The controversy has spilled over into academic debate, with the intervention of Paul Samuelson and a riposte by the troika of Indian-born protagonists of free trade, Bhagwati, Srinivasan and Panagariya in the Journal of Economic Perspectives, 2004. 7 European Union High Level Working Group on Asylum and Migration 1999. 8 Massey 2003. 9 Estimates of international migrants – persons who take up residence or who remain for an extended stay in a foreign country both voluntarily or are forced to – total more than 150 million worldwide (IOM 2000). Although in the last 40 years the number of international migrants has grown steadily, fewer than 3 per cent of the world’s population has lived outside their home countries for a year or longer. An interesting new trend is the increasing feminization of international migration with women making up 47.5 per cent of all international migrants. 10 Martin and Taylor 1996. 11 Olesen 1995. 12 Hatton and Williamson 1998. 13 Massey et al. 1994. 14 The discussion in this section draws heavily on Mattoo and Subramaniam 2003. 15 Borjas et al. 1996. 16 Carrington and Detragiache 1998. 17 ILO 2003. 18 See Wood 1997 for an elaboration of the point. 19 Amsden and Clark 1999. 20 Hikino and Amsden 1994. 21 Chithelen 2004.

94 22 23 24 25 26 27 28 29 30 31 32 33 34

S. M. Naseem UNDP 1992. The study by Abella is cited in Olesen 2002. World Bank 2001. Levitt 1998. Coase 1988. For example, the Mirpuris (from Pakistani part of Kashmir) in UK or Patels (Gujratis from India) in the motel business in USA. Bolt 1996. For an insightful comparison of the roles of diaspora in Chinese and Indian development, see Kapur (2001) from which much of the information in this section has been drawn. Weidenbaum and Hughes 1996. OECD 2000: 197. OECD 1998; UN 2000. UN 2000. Ghosh 1997.

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Report of the High Level Working Group on Asylum and Migration, 18 October, Online: available at: ecre.org/statements/hlwg.doc (accessed 11 October 1999). Ghosh, B. (1997) Gains from Global Linkages: Trade in Services, New York: St Martin’s Press, and London: Macmillan Press. Ghosh, J. (2004) ‘Neo-liberal Reforms’, South Asian Journal, April/June (4). Guruswamy, Mohan, Abhishek Kaul and Vishal Handa (2004) ‘Is India Really Shining?’, Hindu, 3 December. Hamilton, C. and J. Whalley (1984) ‘Efficiency and Distributional Implications of Global Restrictions on Labour Mobility: Calculations and Policy Implications’, Journal of Development Economics, 14(1–2): 61–75. Hatton, T. J. and J. G. Williamson (1998) The Age of Mass Migration: Causes and Impact, Cambridge, MA: Oxford University Press. Hikino, T. and A. H. Amsden (1994) ‘Staying Behind, Stumbling Back, Sneaking Up, Soaring Ahead: Late Industrialization in Historical Perspective’, in W. J. Baumol, R. R. Nelson and E. N. Wolff (eds) Convergence of Productivity: Cross-National Studies and Historical Evidence, New York: Oxford University Press, pp. 285–315. ILO (International Labour Organization) (2002) Labour Migration In a Globalizing World, Geneva: ILO. ILO (International Labour Organization) (2003) Towards a Fair Deal for the Migrant Workers in the Global Economy, Geneva: ILO. IOM (2000) World Migration Report 2000, Geneva: IOM. Kapur, D. (2001) ‘Diaporas and Technology Transfer’, Journal of Human Development, 2(2): 265–86. Levitt, P. (1998) ‘The Ties that Change: Transnational Practices Across the Lifecycle’, Paper presented at the ‘Transnationalism and the Second Generation’ Conference, Harvard University, April. Martin, P. (2006) ‘Competing for Global Talent: The US Experience’, in C. Kuptsch and E. Fong Pang (eds) Competing for Global Talent, Geneva: ILO. Online, available at: ilo.org/public/english/bureau/inst/publ/books.htm (accessed 20 September 2007). Martin, P. and E. Taylor (1996) ‘The Anatomy of a Migration Hump’, in E. Taylor (ed.) Development Strategy, Employment, and Migration: Insights from Models, Paris: OECD, pp. 43–62. Massey, D. (2003) ‘Patterns and Processes of International Migration in the 21st Century’, Paper presented at the Conference on African Migration in Comparative Perspective, Johannesburg, South Africa, 4–7 June. Massey, D., L. Goldring and J. Durand (1994) ‘Continuities in Transnational Migration: An Analysis of 19 Mexican Communities’, American Journal of Sociology, 99(6): 1492–33. Mattoo, A. and A. Subramaniam (2003) ‘What Would A Development-Friendly WTO Architecture Look Like?’, IMF Working Paper, WP/03/153, IMF, Washington, DC. Nayyar, D. (ed.) (2002) Governing Globalization: Issues and Institutions, New Delhi: Oxford University Press. OECD (1998) Ageing Populations. The Social Policy Implications, Paris: OECD. OECD (1998) Trends in International Migration: Annual Report 1998, Paris: OECD. OECD (2000) Reforms for an Ageing Society, Paris: OECD. Olesen, H. (1995) ‘Population Movements within Europe: Migration, Visa and Asylum Policies’, Speech delivered at the Wilton Park Conference. Olesen, H. (2002) ‘Migration, Return, and Development: An Institutional Perspective’, International Migration, 40(5): 125–38.

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Samuelson, P. (2004) ‘Where Ricardo and Mill Rebut and Confirm Arguments of Mainstream Economists Supporting Globalization’, Journal of Economic Perspectives, 18(3): 135–46. Saxenian, A. (2004) ‘The Bangalore Boom’, in K. Keniston and D. Kumar (eds) IT Experience in India, New Delhi: Sage Publications. Skeldon, R. (1997) Migration and Development: A Global Perspective, Harlow, UK: Addison Wesley. Stiglitz, J. E. (2002) Globalization and Its Discontents, New York: W. W. Norton and Company. UN (2000) ‘Replacement Migration: Is it a Solution to the Declining and Ageing Populations?’ Population Division, Department of Economic and Social Affairs, New York. UN (2002) ‘International Migration Report 2002’, Department of Economic and Social Affairs, New York. UNDP (United Nations Development Programme) (1992) Human Development Report, New York: Oxford University Press. Usdansky, M. L. and T. J. Espenshade (2000) ‘The H-1B Visa Debate in Historical Perspective: The Evolution of U.S. Policy Toward Foreign-Born Workers’, Center for Comparative Immigration Studies, Working Paper No. 11, University of California, San Diego. Virmani, A. (2004a) ‘India’s Economic Growth: From Socialist Rate of Growth to Bharatiya Rate of Growth’, ICRIER Working Paper No. 122, New Delhi. Virmani, A. (2004b) ‘Sources of India’s Economic Growth: Trends in Total Factor. Productivity,’ ICRIER Working Paper 131, New Delhi. Walmsley, T. L. and L. A. Winters (2003) ‘Relaxing the Restrictions on the Temporary Movements of Natural Persons: A Simulation Analysis’ CEPR Discussion Paper No. 3719 World Bank, Washington, D.C. Weidenbaum, M. and S. Hughes (1996) The Bamboo Network: How Expatriate Chinese Entrepreneurs Are Creating a New Economic Superpower in Asia, New York: Free Press. Weinstein, E. (1997) ‘Issues of Legislation and Merit in Scientific Labour Markets’, Invited Address to Sloan Conference on Migration of Scientists and Engineers, Boston University/Institute for Economic Development, Boston, MA, 21 May. William J. C. and E. Detragiache (1998) ‘How Big Is the Brain Drain?’ IMF Working Paper 98/102, International Monetary Fund Washington, DC. Williamson, J. G. (1998) ‘Globalization, Labour Markets and Policy Backlash in the Past’, Journal of Economic Perspectives, 12(4): 51–72. Wood, A. (1997) ‘Openness and Wage Inequality in Developing Countries: The Latin American challenge to East Asian Conventional Wisdom’, World Bank Economic Review, 11(1): 33–57. World Bank (2001) Globalization, Growth and Poverty, Washington, DC: Oxford University Press. World Bank (2003) World Development Indicators, Washington, DC: World Bank, p. 44. World Bank (2005) ‘Workers’ Remittances to Developing Countries’, Table 1A.1, in Global Development Finance, Washington, DC: World Bank. Online, available at: siteresources.worldbank.org/INTGDF2005/Resources/gdf05complete.pdf (accessed 20 September 2007). Zlotnik, H. (1998) ‘International Migration: An Overview’, Population and Development Review, 24(3): 429–68.

5

Informalization, migration and women Recent trends in Asia Jayati Ghosh

Introduction The most significant change that has occurred for women throughout the developing Asian region since the early 1980s has been the large increase in labour force participation rates, which has only recently been followed by a smaller decline in the early years of this century. This parallels the worldwide pattern of increasing work participation of women, but the Asian experience has been somewhat different, in that (unlike, say, Latin America) the increasing work participation of women was part of – and even led – the general employment boom created by export-led economic expansion. It has been suggested (Horton 1995) that over a longer period the pattern of labour force participation among women in various Asian countries shows a U-shaped curve, first decreasing with urbanization (as women stop working on family farms and on other household production activities) and then rising again once the demographic transition is completed. Clearly, however, what happened in many countries of Asia was a sharper and more decisive process than this more gradual long-term tendency. It is frequently argued that women are found to be over-represented in the informal sector because the flexibilities of work involved in such activities, especially in home-based work, are advantageous to women workers given their other needs and the other demands upon their time in the form of unpaid labour. This is certainly the case to a significant extent, because much employment in the formal sector is based on the ‘male breadwinner’ model that does not give adequate space or freedom to women who are also faced with substantial domestic responsibilities given the gender construction of societies and the division of labour within households. However, these constraints upon women’s time and freedom to choose – which are imposed by society rather than selfcreated – are exploited by employers to ensure much more work for less pay is being performed by women. Thus, home-based work or work in very small enterprises can be for long hours and very demanding in other ways, and with conditions of remuneration (such as piece-rate wages) that effectively ensure the maximum tendency for self-exploitation. In addition, other basic responsibilities of employers, such as minimum safety conditions at work, basic health care and

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pension provision, are entirely missing, which constitutes a massive reduction of the effective wage for employers and a substantial loss for workers. The recent tendencies towards greater informalization of women’s work must be viewed in this context. In general, these represent retrograde moves from the perspective of women’s empowerment in both economic and social terms, and reflect the worsened bargaining power of labour in general in recent years across Asia. This argument is developed in this chapter. One of the major problems with studying informal sector employment of both men and women is the sheer difficulty of defining, identifying and quantifying it. Because the sector is effectively defined as a residual, it becomes very difficult to piece together any estimates of aggregate employment, and much of the information is necessarily based on micro-level studies but can yield valuable qualitative data even if not much in terms of aggregate analysis. In the case of women workers, as noted above, the problem is further complicated by the fact that so much of their informal work is unrecognized and unpaid, and therefore does not enter many standard labour force and employment indicators (see, for example, the analysis by Sehgal in Chapter 3).

Recent changes in the patterns of women’s work in Asia There are at least six recent processes in the international economy that have a direct bearing upon labour markets and work conditions in countries across the world. The first, and possibly the most important, is the fact that the world economy is operating substantially below capacity. Global unemployment is getting worse, because of the deflationary impulse imparted by the domination of finance capital and the inadequate role played by the US as ‘leader’ of the world economy. Second, corporate globalization has been marked by greatly increased disparities, both within countries and between countries. While there is – inevitably – a debate over this, most careful studies find increased inequality within and across regions1 as well as a stubborn persistence of poverty, and a marked absence of the ‘convergence’ predicted by apologists. In addition, the bulk of the people across the world find themselves in more fragile and vulnerable economic circumstances, in which many of the earlier welfare state provisions have been reduced or removed, public services have been privatized or made more expensive and therefore less accessible. Such inequalities are only likely to be intensified by the third process exemplified by recent patterns of international capital flows. For the last four years, there has been a net transfer of resources from the less developed countries to the developed North, and particularly to the United States. The fourth feature is the growing concentration of ownership and control in the international production and distribution of goods and services, and also among the agents of international finance. These changes in the international economy have affected national and international labour markets. The most significant change is the increase in open

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unemployment rates across the world. By the turn of the century, unemployment rates in most industrial countries were higher than they had been at any time since the Great Depression of the 1930s. But even more significantly, open unemployment was very high in developing countries, and has continued to grow thereafter, as Table 5.1 indicates. This marks a change, because developing countries typically have had lower open unemployment rates simply because of the lack of social security and unemployment benefits in most such societies, which usually ensures that people undertake some activity, how ever low paying, and usually in the form of self-employment. Therefore disguised unemployment or underemployment has generally been the more prevalent phenomenon in developing societies. The recent emergence of high open unemployment rates therefore suggests that the problem of finding jobs has become so acute that it is now captured even in such data, and may also herald substantial social changes in the developing world. The Asian region typically has the lowest rates of open unemployment in the world, but even here, as can be seen from Table 5.1, these rates have been historically high and rising, especially in Southeast Asia. Furthermore, in most Asian countries, youth unemployment is particularly high. Another very significant change in the recent past is the decline in formal sector employment. Once again, this is a trend that is spread across the globe and covers both developed and developing countries. In developing countries, this substantial reduction in the share of organized sector employment has been associated not only with increased open unemployment, but also the proliferation of workers crowded into the informal sector, and typically more in the lowwage low-productivity occupations that are characteristic of ‘refuge sectors’ in labour markets. While there are also some high value-added jobs increasingly in the informal sector (including, for example, computer professionals and some high-end IT-enabled services), these are relatively small in number and certainly too few to make much of a dent in the overall trend, especially in countries where the vast bulk of the labour forces is unskilled or relatively less skilled. Table 5.1 Open unemployment rates (as percentage of labour force) Country

2000

2001

2002

Industrial countries Latin America and the Caribbean Middle East and North Africa Sub-Saharan Africa Transition economies Asia and the Pacific Of which: East Asia Southeast Asia South Asia

6.1 9.7 17.9 13.7 13.5 3.8

6.4 9.6 18.9 14.0 12.6 4.1

6.9 9.9 18.0 14.4 13.5 4.2

3.2 6.0 3.4

3.6 6.8 3.5

4.0 6.5 3.4

Source: ILO (2003a).

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The decline in employment elasticities of production is a tendency that is especially marked in developing countries. To some extent this reflects the impact of international concentration of production and export orientation, as the necessity of making products that will be acceptable on world markets requires the use of new technologies developed in the North and inherently labour saving in nature. But what is interesting is the extent to which declining employment elasticities in developing Asia have marked all the major productive sectors, including agriculture. This is evident from Table 5.2, which describes the employment elasticity of GDP growth in the major productive sectors over 1990–2000 in the major economies of Southeast and South Asia. Agriculture is clearly no longer a refuge sector for those unable to find employment elsewhere – reflecting a combination of labour-saving technological changes such as greater use of threshers and harvesters, and changes in landholding patterns resulting in lower levels of the traditional small peasant farming. The service sector, by contrast, seems to have emerged as the refuge sector in this region, except possibly in countries like Sri Lanka and India. The emergence of global production chains is another very important feature of the recent past. These are not entirely new, and even the current chains can be dated from at least the 1980s. However, two major sets of changes have dramatically increased the relocation possibilities in international production. The first set includes technological changes, which have allowed for different parts of the production process to be split and locationally separated, as well as creating different types of requirements for labour involving a few highly skilled professional workers and a vast bulk of semi-skilled workers for whom burnout is more widely prevalent than learning by doing. The second set includes organizational changes that are associated with concentration of ownership and control but also with greater dispersion and more layers of outsourcing and subcontracting of particular activities and parts of the production process. Therefore, we now have the emergence of international suppliers of goods who rely less and less on direct production within a specific location and more Table 5.2 Employment elasticities of GDP growth, 1990–2000 Country

Agriculture

Industry

Services

Indonesia Malaysia Philippines Singapore Thailand Vietnam Bangladesh India Pakistan Sri Lanka

–0.43 –2.51 0.04 – –1.25 0.33 0.21 0.02 0.36 –0.94

0.76 0.54 0.57 0 0.65 0.3 –0.5 0.29 0.22 0.16

1.23 0.54 0.9 0.5 1.35 1.12 1.94 0.76 1.08 0.22

Source: ILO (2003a).

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on subcontracting a greater part of their production activities. Thus, the recent period has seen the emergence and market domination of ‘manufacturers without factories’, as multinational firms such as Nike and Adidas effectively rely on a complex system of outsourced and subcontracted production based on centrally determined design and quality control. This has been strongly associated with the increase in export-oriented production in manufacturing in a range of developing countries, especially in textiles and garments, computer hardware, consumer electronics and related sectors. Much of the outsourcing activity is based in Asia, although Latin America is also emerging as an important location once again. Such subcontracted producers in turn vary in size and manufacturing capacity, from medium-sized factories to pure middlemen collecting the output of home-based workers. The crucial role of women workers in such international production activity is now increasingly recognized, whether as wage labour in small factories and workshops run by subcontracting firms, or as piece-rate payment based home workers who deal with middlemen in a complex production chain. Finally, there is the very significant effect of international migration, in determining changes in both national labour markets and macroeconomic processes within home and host countries. In Latin America, migration is a response to the lack of productive employment opportunities within the country – at least 15 per cent of the labour force of most Central American countries (in particular El Salvador, Guatemala and Honduras) is estimated to be working in the United States, mostly in underpaid, oppressive and precarious jobs. Migration flows are especially marked for Asia over the past two decades. South Asian migrant workers in the Gulf and West Asia have contributed large remittances that have stabilized the current accounts in India and Bangladesh. Within Southeast Asia, Thailand is host to approximately 890,000 migrant workers, while Malaysia is estimated to have more than 900,000. In Singapore, fully one-quarter of the workforce is comprised of migrants. Typically of course, such migrants are used for the 3-D jobs (‘difficult, dirty and dangerous’) as well as in mainly unskilled sectors. In Malaysia, for example, 70 per cent of the unskilled construction workers come from Indonesia. What is noteworthy about Asian migration is the significant role played by women migrants, especially from the Philippines but also from other parts of the continent. It should be noted, of course, that the line between voluntary migration and trafficking is often quite thin. Integration through trade, capital and labour flows, and women’s work in Asia The Asian region as a whole is seen as the part of the world that has benefited the most from the process of globalization. In terms of growth rates of aggregate GDP, as Figure 5.1 indicates, this region – and especially East Asia – far outperformed the rest of the world. High rates of growth in East Asia are of course dominated by the performance of China; however, in several countries of Southeast Asia such as Malaysia and South Korea, the relatively rapid recovery from

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9

Growth rates of real GDP

8

1981–1990 1991–2000

7.7 6.9

7

7.0

7.3

5.9

6

5.2

5 4 3

3.3

3.1

3.0 2.6

2.4

2.6

2 1

As ia h ut So

an Eas d tA Pa s ci ia fic

As ia

D ev co elo un pin tr i g es

In co dus un tr tri ial es

W or

ld

0

Figure 5.1 Growth rates of real GDP (source: World Bank 2003).

the crisis of 1997–98 has added to the general perception of inherent economic dynamism in the region as a whole. For the whole of East and Southeast Asia and the Pacific, trade amounted to more than 60 per cent of GDP in the 1990s (Figure 5.2), which is historically unprecedented. Of course, Singapore and Hong Kong China have always had high trade: GDP ratios in excess of 200 per cent because of their status as entrepôt nations, but even countries like Malaysia, Thailand and Vietnam have shown ratios greater than or approaching 100 per cent. Even the giant economy of the region, China, had a trade to GDP ratio of 44 per cent in 2001, and it is estimated to have increased further since then. This very substantial degree of trade integration has several important macroeconomic implications. First, since these economies are heavily dependent upon exports as the engine of growth, they must rely either on rapid rates of growth of world trade, which have not been forthcoming in the recent past, or increasing their shares of world markets. In the last decade the second feature has been more pronounced, but of course such a process has inevitable limits (Ghosh and Chandrasekhar 2003). These limits can be set either by rising protectionist tendencies in the importing countries, or by the competitive pressures from other exporting countries that give rise to the fallacy of composition argument. It has been noted (UNCTAD 2003) that such tendencies remain strong and have adversely affected terms of trade of high-exporting developing countries over the past decade, indicating that rapid increases in the volume of exports have not been matched by commensurate increases in the value of exports. This in turn means that the search for newer or increased forms of cost-cutting or labour productivity increase is still very potent. This is one reason why employment elas-

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70

Percent of GDP

60

1990 2001

61.0

48.9

50

47.0

40.0

40 32.5

33.8

30 23.4

20

16.5

10

As ia h ut So

an Eas d tA Pa s ci ia fic

D ev co elo un pin tr i g es

W or

ld

0

Figure 5.2 Trade in goods as per cent of GDP (source: World Bank 2003).

ticities of export production have been falling throughout the region, and have also affected women’s employment in these sectors. Second, the high rates of growth are matched or exceeded by very high import growth in almost all the economies of the region, barring China and Taiwan China, which are still generating substantial trade surpluses. The net effect on manufacturing employment is typically negative. This is obvious if the economy has a manufacturing trade deficit, but it is also the case even with trade balance or with small manufacturing trade surpluses, if the export production is less employment intensive than the local production that has been displaced by imports. This is why, barring China and Malaysia, all the economies in the region have experienced deceleration or even absolute declines in manufacturing employment despite the much-hyped perception of the North ‘exporting’ jobs to the South.2 It should be noted that China, which accounted for more than 90 per cent of the total increase in manufacturing employment in the region, could show such a trend because imports were still relatively controlled until 2001, and because state-owned enterprises continued to play a significant role in total manufacturing employment. This region also experienced the most capital flows in the developing world from the mid-1980s until 1997. Thereafter, as Table 5.3 indicates, the Southeast Asian financial crises put a sharp brake on such inflows, other than foreign direct investment (FDI). It is well known that the rapid inflows of relocative FDI into Southeast Asia, especially from Japan, were crucially associated with the export boom in those countries. But from the mid-1990s, the FDI inflow reduced quite sharply in most countries of the region other than China. China, of course, remains the most significant developing country recipient of FDI inflows and in

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2002 achieved first position in the world in this regard, passing the US. The other capital flows have been even more volatile and less reliable for Asia in the recent past. As Table 5.3 shows, net flows into the region have been negative or close to negative for the past 4 years. The huge build-up of foreign exchange reserves by the central banks of the Asian region over the first 9 months of 2003 (much of which is being held as securities or in safe deposits in the developed world, especially the US) suggests that net outflows in the current year are likely to be particularly large. So the East and Southeast Asian regions have experienced very sharp and large swings in capital flows over the past decade, which have also been associated with relatively large swings in real economies (Ghosh and Chandrasekhar 2003). What this means, is that economies in the region are generally operating below the full macroeconomic potential, which in turn affects employment conditions, especially for women workers. In many countries of the region, as evident from Table 5.4, there has been a decline in female labour force participation rates since 1995. In some countries, such as Cambodia and Thailand, the decline has been quite drastic. Very few economies reported an increase (Philippines, Singapore, Hong Kong China), and these were relatively small in magnitude. It is likely that reduced opportunities for productive employment have been responsible for the tendency for fewer women to report themselves as being part of the labour force, what is known in the developed countries as the ‘discouraged worker’ effect. Further, the defeminization of export-oriented production at the margin, a process which began even earlier than the Asian financial crisis, has continued. Table 5.4 points to some interesting variations across major Asian economies. Cambodia, Thailand and Sri Lanka show continuous and very sharp declines in female labour force participation rates since 1990, while male rates also declined, albeit less dramatically. In South Korea, Indonesia and Malaysia, Table 5.3 Net capital flows into developing Asia IIE estimates*

1998 1999 2000 2001 2002

Total ($bn)

% of total for all DCs

0.2 29.8 66.9 44.4 53.1

0.1 20.8 39.6 38.6 36.8

IMF estimates** ■ Net FDI Net ($bn) portfolio investment ($bn)

Source: UNCTAD (2002). Notes * Institute for International Economics. ** International Monetary Fund.

59.9 51.9 46.8 43.7 –3.1

–15.3 13.8 3.7 –4.7 41.7

Other net flows ($bn)

Total ($bn)

–89.4 –74.4 –66.4 –46.0 3.8

–53.4 –7.6 –12.2 1.4 –50.1

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Table 5.4 Labour force participation rates Men

Bangladesh China Hong Kong China Cambodia India Indonesia Malaysia Pakistan Philippines Singapore South Korea Sri Lanka Thailand Vietnam

1990

1995

Latest year1,2

88.0 85.0 78.9 84.3 51.5 82.7 81.9 84.9 81.8 79.2 74.0 77.9 87.7 85.2

87.0 85.6 76.6 87.1

88.8

82.3 83.2 82.3 82.1 78.4 76.5 74.8 86.4 83.5

75.5 81.2 51.9 84.6 82.8 82.4 81.8 77.5 74.4 77.5 80.3

■

Women 1990

1995

Latest year1,2

65.4 73.0 46.6 82.0 22.3 44.6 45.2 11.3 47.5 50.3 47.0 45.3 76.3 75.9

65.9 73.7 47.6 82.6

55.9

52.8 48.9 12.7 49.0 50.0 48.3 35.8 73.5 74.6

48.5 73.5 25.7 51.5 44.7 15.2 50.0 51.3 47.4 37.6 64.2

Source: ILO (2003b) (except for India, for which, see GOI (1991 and 2001)). Notes 1 The latest year varies according to country, from 1998 to 2001. 2 The data relate to population aged 15 years and above.

female labour force participation rates increased until 1995 and have declined thereafter. In East Asia, only China and the Philippines – the two economies whose manufacturing exports remained buoyant over the 1990s and subsequently – show rising rates of female labour force participation. In South Asia, the picture is more mixed. While women labour force participation appears to have been rising in India, this is mainly due to the increase in ‘marginal work’ (defined in the Census as less than 183 days per year), while in Pakistan such rates have been increasing over a very low base. In addition to these changes in labour force participation, evidence suggests that in general the paid work performed by women has become less permanent and more casual or part-time in nature. In South Korea, one of the few countries for which such data are available, the proportion of employed women with casual contracts nearly doubled between 1990 and 1999; over the 1990s, around 60 per cent of all casual jobs were held by women workers. Unpaid home work also tended to involve longer hours as the post-crisis adjustment process led to cuts in the provision of and access to public services. Only in China did paid employment for women workers, including in manufacturing, continue to grow – but even in China, services employment dominated in total employment for women at more than 35 per cent. Gender wage gaps have narrowed slightly in most countries in the region, but they remain very high compared to other regions of the world. Thus, in South Korea, the average female wage in manufacturing as a ratio of the male wage increased from 0.51

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in 1985 to 0.58 in 1993 to 0.63 in 2002, but this is still below the ratio even in most other developing Asian countries. In other countries of the region, this ratio currently varies from 0.7 to 0.85.3

Trade liberalization, export employment and women’s work Already by the mid-1990s, women’s share of manufacturing employment had peaked in most economies of the region, and in some countries it even declined in absolute numbers.4 Some of these reflected the fact that such export-oriented employment through relocative foreign investment simply moved to cheaper locations: from Malaysia to Indonesia and Vietnam; from Thailand to Cambodia and Myanmar, and so on. But even in the newer locations, the recent problems of the garment industry worldwide have meant that jobs (especially for women workers) were created and then lost within a space of a few years. From the early 1980s onwards, the increasing importance of export-oriented manufacturing activities in many developed countries had been associated with a much greater reliance on women’s paid labour. This process was most marked over the period 1980 to 1995 in the high-exporting economies of East and Southeast Asia, where the share of female employment in total employment in the Export Processing Zones (EPZs) and export-oriented manufacturing industries typically exceeded 70 per cent. It was also observed in a number of other developing countries, for example in Latin America in certain types of export manufacturing. Indeed, it is now widely appreciated that the Asian export boom was driven by the productive contributions of Asian women – in the form of paid labour in export-related activities and in services, through the remittances made by migrant women workers, and through the vast amounts of unpaid labour of women as liberalization and government fiscal contraction transferred many areas of public provision of goods and services to households (and thereby to women within households). This trend towards feminization of employment in Asian countries resulted from employers’ needs for cheaper and more ‘flexible’ sources of labour, and was also strongly associated with the moves towards casualization of labour, shift to part-time work or piece-rate contracts and insistence on greater freedom for hiring and firing over the economic cycle. Feminization was also encouraged by the widespread conviction among employers in East and Southeast Asia that female employees are more tractable and subservient to managerial authority, less prone to organize into unions, more willing to accept lower wages because of their own lower reservation and aspiration wages, and easier to dismiss because of marriage and childbirth. This was made more relevant because of technological changes that encouraged replacement of labour at periodic intervals. There were three main macroeconomic factors which were widely seen as creating or contributing to these changes in work relations including the tendency towards feminization:

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•

•

107

The liberalization of trade necessarily required more flexibility in the labour market as well; the more flexible contracts and lower wages of women workers rendered them especially attractive. Technological changes that allowed for a stratification of the workforce into a small group of highly skilled and highly paid workers, and a large pool of low-to-medium skilled workers whose chances of upward mobility were low and whose possibilities for on-the-job training and learning by doing were far more restricted than before. This meant that there was less need for long-term implicit contracts between employer and employee. Organizational changes in production, which were closely related to the above two features. There was a very substantial increase in subcontracting, in the growth of ancillary small-scale units and in home-based manufacturing production, which is effectively at the bottom of a complex production chain.

This was the received wisdom – at least until the crash of mid-1997 – which dramatically altered both the potential for continued economic activity at the same rate, as well the conditions of employment in the region. Indeed, the very features that had made women workers more attractive to employers – the flexibility of hiring and firing and the more casual, non-unionized nature of labour contracts – are precisely those that are likely to render them to be the first to lose their jobs in any recessionary phase. The feminization of such activities had both positive and negative effects for the women concerned. On the one hand, it definitely meant greater recognition and remuneration of women’s work, and typically improved the relative status and bargaining power of women within households, as well as their own selfworth, thereby leading to empowerment. On the other hand, it is also true that most women are rarely if ever ‘unemployed’ in their lives, in that they are almost continuously involved in various forms of productive or reproductive activities, even if they are not recognized as ‘working’ or paid for such activities. (For a fuller analysis, see Sehgal, Chapter 3.) Given these features, it has been fairly clear for some time now that the feminization of work need not be a cause for unqualified celebration on the part of those interested in improving women’s material status. However, it has recently become evident that the process of feminization of labour in export-oriented industries may have been even more dependent upon the relative inferiority of remuneration and working conditions, than was generally supposed. This becomes very clear from a consideration of the pattern of female involvement in paid labour markets in East and Southeast Asia, and more specifically in the export industries, over the entire 1990s. What the evidence suggests is that the process of feminization of export employment really peaked sometime in the early 1990s (if not earlier in some countries) and that thereafter the process was not only less marked, but may even have begun to peter out. The reversal of the process of feminization of work has already been observed in other parts of the developing world, notably in Latin America. Quite

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Table 5.5 Trends in manufacturing employment and share of women workers before the East Asian crisis Country and year

Total manufacturing employment (’000s)

Women employed in manufacturing (’000s)

Share of women workers (%)

South Korea, 1992 South Korea, 1997 Malaysia, 1992 Malaysia, 1997 Indonesia, 1990 Indonesia, 1996 Thailand, 1990 Thailand, 1996 Singapore, 1991 Singapore, 1997 Hong Kong SAR, 1990 Hong Kong SAR, 1997

4,828 4,474 1,637 2,003 7,693 10,773 3,133 4,334 423 414 751 444

1,931 1,594 767 807 3,483 4,895 1,564 2,065 189 166 314 160

40 35 47 40 45 45 50 48 44 40 42 36

Source: Ghosh (2003) based on ILO, Yearbook of Labour Statistics, various issues.

often, such declines in the female share of employment were associated with either one of two conditions: an overall decline in employment opportunities because of recession or structural adjustment measures, or a shift in the nature of the new employment generation towards more skilled or lucrative activities. There could be another factor. As women became an established part of the paid workforce, and even the dominant part in certain sectors (as indeed they did become in the textiles, ready-made garments and consumer electronics sectors of East Asia) it became more difficult to exercise the traditional type of gender discrimination at work. Not only was there an upward pressure on their wages, but there were other pressures for legislation that would improve their overall conditions of work. Social action and legislation designed to improve the conditions of women workers, tended to reduce the relative attractiveness of women workers for those employers who had earlier been relying on the inferior conditions of women’s work to enhance their export profitability. The rise in wages also tended to have the same effect. Thus, as the relative effective remuneration of women improved (in terms of the total package of wage and work and contract conditions), their attractiveness to employers decreased. The earlier common assessment of the feminization of work in East Asia had been based on what was perhaps an over-optimistic expectation of expansion in female employment.5 Thus, while female employment in manufacturing was important, the trend over the 1990s, even before the 1997–98 crisis, was not necessarily upward. In most of the countries mentioned, there is a definite tendency towards a decline in the share of women workers in total manufacturing employment over the latter part of the 1990s. In Hong Kong and South Korea, the decline in female employment in manufacturing was even sharper than that in aggregate employment. Similarly, even in the countries in which aggregate

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manufacturing employment increases over the period 1990–97, the female share had a tendency to stabilize or even fall. Thus, in Indonesia the share of women workers in all manufacturing sector workers increased from an admittedly high 45 per cent to as much as 47 per cent by 1993, and then fell to 44 per cent by 1997. In Malaysia the decline in female share was even sharper than in South Korea: from 47 per cent in 1992 to only 40 per cent in 1997. A slight decline was evident even in Thailand (Ghosh 1999b). This fall in women’s share of employment is evident not just for total manufacturing but even for export-oriented manufacturing, and is corroborated by evidence from other sources. Thus Joekes (1999) shows that the share of women employed in EPZs declined even between 1980 and 1990 in Malaysia, South Korea and the Philippines, with the decline being as sharp as more than 20 percentage points (from 75 per cent to only 54 per cent) in the case of Malaysia. The evidence suggests that the process of feminization of export employment really peaked somewhere in the early 1990s (if not earlier in some countries) and that thereafter the process was not only less marked, but may even have begun to peter out. In the subsequent period, manufacturing has tended to occupy a much less significant position in total employment of women. In Malaysia the share of women workers in manufacturing to all employed women fell from its peak of 31 per cent in 1992 to 26 per cent in 1999; in the Philippines from 13.3 per cent in 1991 to less than 12 per cent in 1999; in South Korea from its peak of 28 per cent in 1990 to 17 per cent in 2000; and in Hong Kong China from 32 per cent in 1990 to 10 per cent in 1999.6 In any case, the nature of such work has also changed in recent years. Most such work was already based on short-term contracts rather than permanent employment for women; now there is much greater reliance on women workers in very small units or even in home-based production, at the bottom of a complex subcontracting chain. Already this was a prevalent tendency in the region. In Southeast Asia, women have made up a significant proportion of the informal manufacturing industry workforce, in garment workshops, shoe factories and craft industries. Many women also carry out informal activities as temporary workers in farming or in the building industry. Home-based workers, working for their own account or on a subcontracting basis, have been found to make products ranging from clothing and footwear to artificial flowers, carpets, electronics and teleservices (Carr and Chen 1999; Lund and Srinivas 2000). This is of course part of a wider international tendency of somewhat longer duration: the emergence of international suppliers of goods who rely less and less on direct production within a specific location and more on subcontracting a greater part of their production activities. The crucial role of women workers in such international production activity is now increasingly recognized, whether as wage labour in small factories and workshops run by subcontracting firms, or as piece-rate payment based home-workers who deal with middlemen in a complex production chain.

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A substantial proportion of such subcontracting in fact extends down to home-based work. Thus, in the garments industry alone, the percentage of homeworkers to total workers was estimated at 38 per cent in Thailand, between 25 and 29 per cent in the Philippines, 30 per cent in one region of Mexico, between 30 and 60 per cent in Chile and 45 per cent in Venezuela (Chen et al. 1999). Home-based work provides substantial opportunity for self-exploitation by workers, especially when payment is on a piece-rate basis; also these are areas typically left unprotected by labour laws and social welfare. A study of women working in the garments industry in Sri Lanka brings this out very clearly (TIE-Asia 2003). This sector is typically presented as the most dynamic export activity in Sri Lanka today, accounting for nearly 70 per cent of non-agricultural exports, and becoming the second largest source of foreign exchange after remittances from Sri Lankan workers abroad (again mainly women). The garments industry in Sri Lanka, like those in many other Asian countries, is involved in producing for international subcontracting chains organized and marketed by major multinational brand names. Of the women surveyed for this study, 24 per cent of those who worked in factories defined themselves as ‘self-employed’, since they had been instructed to do so by their employers, in order to avoid legal obligations of paying the Employees’ Provident Fund (EPF) and other employers’ responsibilities. The research team however found it very hard to find actual home-based workers for a number of reasons. These included the absence of such workers from official data; the atmosphere of anxiety and fear of management that made workers anxious to avoid identification and possible retribution; and the disinclination of subcontracting agencies such as factories and smaller agents to disclose the extent of dependence upon such work. Nevertheless, it appeared that more than half of the women workers involved in this sector were engaged in what is known as the ‘informal sector’, either through home-based work or in very small factories. Very recent work by Mazumdar (2004a) indicates that even such home-based work may be experiencing some sort of crisis, as the textile and garments exports from developing countries face increasing difficulties in world markets and the pressure of competition forces exporters to seek further avenues of costcutting. The extreme volatility of employment that characterizes factory-based export-oriented production has also become a feature of home-based work for export production

Migration for work by Asian women Asian migration is not a new phenomenon, but the role of women in such migration is new. Within the Asian region, there is a complex and changing mix of countries of origin, destination and those that are both. The dominantly laboursending countries in all of Asia include Bangladesh, Cambodia, China, Indonesia, Myanmar, Nepal, Philippines, Sri Lanka and Vietnam. The countries that are mainly destinations of host countries for migrant labour include all of those in the Middle East, Hong Kong, South Korea, Singapore and Taiwan China. Some

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countries are both sending and receiving international migrants: India, Malaysia, Pakistan and Thailand (Tullao and Cortez 2003). (For more detailed analysis and data on Asian migration, see Naseem, Chapter 4.) There are several ways in which the domestic economic and social conditions affect patterns of migration. The labour surplus economies of Asia tend to have an abundance of less skilled workers, but patterns of education vary substantially across the region, and where there is a sufficiently large pool of educated workers, there are also similar migration trajectories. One example is that of India, whose migrants can be classified into unskilled, semi-skilled and knowledge-based professional workers. For women migrants, the nature of movement and the nature of the work in the destination country can often reflect the extent of patriarchy or gender discrimination in the home country; conversely, more equality at home in terms of access to education and opportunities can help in making women migrants get better benefits. Table 5.6 describes the current migration status of Asian countries. It should be noted that at one level all of these countries send labour (of the highly skilled professional variety) to developed countries. But these are often relatively few in number, although they have been growing in significance in recent years. The table refers largely to the much larger flows of less skilled workers who constitute the bulk of the economic migrant population. It also does not include the cross-border shifts of neighbouring populations as part of seasonal movements, which are an old feature of Asian economies. Much of the migration within the Asian region has been relatively short term and focused on filling particular labour shortages. While this may have implications in terms of human rights and social justice, the economic advantages of such short-term migration for the sending country are significant. Short-term migrants are far more likely to send regular remittances back home, and when they return, they typically bring with them not only their accumulated savings but also additional skills and work experience that can be usefully deployed in the country of origin. By contrast, long-term migrants, especially those professional workers who migrate to developed countries, are far less likely to send money home, and even when they do, it is typically in the form of far more expensive and debt-creating capital flows such as non-resident financial investment (see Naseem, Chapter 4 in this volume). Cross-border migration in Asia is highly gendered, with women migrants Table 5.6 Migration status of Asian countries Labour sending

Bangladesh, Cambodia, China, Indonesia, Lao PDR, Myanmar, Nepal, Philippines, Sri Lanka, Vietnam

Labour sending and receiving

India, Malaysia, Pakistan, Thailand

Labour receiving

Brunei Darussalam, Hong Kong SAR, Japan, Middle East, Republic of Korea, Singapore, Taiwan China

Source: Wickramasekara (2002) (with additions).

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largely found in the service sector, especially in the domestic and care sectors, as well as in entertainment work (Malapit 2001; Meng 1998; Rayanakorn 2002). Male migration by contrast tends to be more in response to the requirements of industrialization, in construction and manufacturing, as well as in semi-skilled services. Remittance incomes from migrant workers have shored up the balance of payments over the past decade in India and Philippines, to name just two countries. It is worth noting that female migrant workers are less affected by business cycle phenomena in the host countries, because of the different nature of activities in which they tend to be employed (dominantly domestic work and care-giving activities). Therefore, both female migration and remittances from such migration have in general been more stable than the male versions in the recent period. However, despite the growing significance of female migration in the region, there is little recognition by officialdom in the relevant Asian governments of this process, in terms of ensuring decent working conditions and remuneration for migrants. Over the past decades, women migrants have come dominantly from three countries in Asia: the Philippines, Indonesia and Sri Lanka. In the Philippines, women migrants have outnumbered their male counterparts since 1992, and in all these countries women are between 60 and 80 per cent of all legal migrants for work. The majority are in services (typically low-paid domestic service) or in entertainment work. While Filipino women tend to travel all over the world, women from the other two countries go dominantly to the Middle East and Gulf countries in search of employment. Around 56 per cent of the migrant workers from Sri Lanka are women employed as housemaids, who go to work dominantly in Saudi Arabia, Kuwait and the United Arab Emirates. Elsewhere in the region, restrictive regulations have reduced legal female emigration, but may have increased illegal migration, or trafficking. Migrants typically tend to fill unskilled, labour-intensive and low-paid jobs, and are generally unprotected by labour laws. While male migrants in the region are usually (but not exclusively) in the 3-D occupations (difficult, dirty, dangerous), women migrant workers tend to be concentrated in the low-paid sectors of the service industry, in semi-skilled or low-skilled activities ranging from nursing to domestic service, or in the entertainment, tourism and sex industies where they are highly vulnerable and subject to exploitation (Asis 2003). They rarely have access to education and other social services, have poor and inadequate housing and living conditions. When they are illegal or quasi-legal and dependent upon contractors, they also find it difficult to avail of existing facilities such as proper medical care and are almost never found to organize a struggle for better conditions. In general, host governments are less than sympathetic to the concerns of migrant workers, including women, despite the crucial role they may play in the host economy. Host country governments tend to view migrants as threats to political and social stability, additional burdens on constrained public budgets for social services and infrastructure, and potential eroders of local culture.

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There is often a fine line between voluntary migration and trafficking in women (and girl children). A substantial amount of trafficking of both women and children occurs not only for commercial sex work, but also for use as what is effectively slave labour in factories and other economic activities such as domestic or informal service sector work. It is true, of course, that the worst and most abusive forms of trafficking are those that relate to commercial sexual exploitation and child labour in economic activities. Nor is it the case that trafficking occurs mainly through coercion or deception: there is significant evidence to indicate voluntary movement by the women themselves, especially when home conditions are already oppressive or abusive, or at least voluntary sending by the households of such individuals, given the poverty and absence of economic opportunities in the home region (ADB 2002). Traffickers throughout Asia lure their victims by means of attractive promises such as high paying jobs, glamorous employment options, prosperity and fraudulent marriages. When there is employment, however badly paid, precarious and in terrible conditions, it may still be preferred to very adverse home circumstances. This in turn means that those who are employed through trafficking may not always desire to return home, if the adverse economic and social conditions persist. Also, the possibilities of return to home communities with safety and dignity are often limited, given the possibilities of being stigmatized and not easily reintegrated into the home society. All this makes the problem of dealing with trafficking much more complex than is generally appreciated. Obviously, across the region there is need for more proactive policies regarding migration. Very easy immigration policies can create routes for easier trafficking; but conversely, tough immigration policies can drive such activities underground and therefore make them even more exploitative of the women and children involved. Across the region, there is hardly any host country legislation specifically designed to protect migrant workers, and little official recognition of the problems faced by women migrants in particular. The same is true for the sending countries, which accept the remittances sent by such migrants, but without much fanfare or gratitude. Cross-border migration is only one of the important forms of economic migration: there is also migration within countries, across regions, from villages to urban areas and across urban areas. However, the available secondary evidence suggests that when women move in such fashion, it is more likely to be part of the overall household movement than is the case with cross-border migration. In addition, of course, there is the effect of post-marriage residence patterns in determining migration. In India, for example, virilocal residence patterns have accounted for more than 90 per cent of the recorded migration of women within the country. Usually this is within the same region or linguistic area. Where there is economic migration, much of it is permanent, from rural to urban areas, and as part of the household move. Typically, women migrants tend to be married and move with their husbands or families; single women migrants were found to be either divorced or widowed in the study. Such a pattern is very evident across South Asia, and

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unlike the evident pattern of cross-border migration, whereby both single and married women move alone in search of wage income to supplement household earnings. In Southeast Asia, especially in Thailand, the Philippines and now increasingly in Cambodia and Vietnam, as well as in China, the pattern is different, as in the past two decades especially, young women have moved from villages to cities and towns in search of employment in the export-oriented factories as well as in entertainment and ‘sex’ industries. Data on such internal migration is typically not available from aggregate official statistics, but micro studies indicate that this trend was especially marked over the late 1980s and much of the 1990s, and has tended to taper off as such job opportunities for young women in the urban areas of these countries has become more limited over the past 5 years. Service sector employment of women It is only recently that women’s involvement in paid services has increased across Asia. While there has been some increase in women’s share of paid employment in the formal sector (especially in public employment) in general, women workers tend to be concentrated into the lower paid and more informal types of service activity. Within national economies, the paid employment of women in services has been most marked not only in these, but also in petty trading activities. Such work comes dominantly in the form of self-employment, and because most of it is conducted in the informal sector, it is extremely difficult to get reliable estimates of the extent of such employment or its remuneration. Table 5.7 provides such data as exist on the share of self-employment in all recognized work by women; note, however, that this refers to all sectors, not only services. Across Asia, two types of work appear to dominate in the service sector employment of women: petty trade, as mentioned above typically as selfemployment on the part of the individual woman or the household; and personal services, especially in what can be broadly described as the ‘care’ industry, Table 5.7 Self-employed women as per cent of all employed women Country

1990

Bangladesh Indonesia Malaysia Pakistan Philippines Singapore South Korea Sri Lanka Thailand

94.8 76.0 35.3 77.4 58.8 7.6 36.9 57.3 99.4

Source: ILO (2002a).

1995

Latest year

66.9

66.9

8.5 39.2

8.5 39.2

98.8

98.8

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ranging from domestic service to skilled and unskilled activities in health care and related areas, as well as in the ‘entertainment’ industries, which can be seen as a catch-all for a very wide range of legal and illegal activities. Except for East Asia (China, Taiwan, South Korea) formal sector service employment of women remains quite limited. One new area of service activity that is currently widely discussed relates to the new IT-enabled services, which have become quite important especially for educated workers in a number of Asian countries, especially India, China and the Philippines. It is possible that some of the optimism surrounding this new source of employment generation may be exaggerated, especially as far as women workers are concerned. Consider recent trends in India, where the buoyancy of IT-enabled services has already received much international attention. The micro evidence suggests that women workers are reasonably involved in this sector, and in particular activities their share of employment is much higher than that for the formal sector as a whole. A survey of 141 sample establishments in activities such as internet/email bureaus, data entry and processing services, software customization and content development services, in Delhi, NOIDA (part of greater Delhi, a recently developed suburb with an export processing zone attached) and Hyderabad, also examined the gender aspect of employment (Kumar 2001). It was found that 72 per cent of the establishments did not employ any women workers, but customization services had a relatively large proportion of women, ranging from a quarter to half of the workforce. In the software industry as a whole the share of women workers is estimated to be 27 per cent. It is interesting that customization services are the relatively more skill intensive of the activities covered in the survey, but Kumar notes that since back office work, voice mail etc., had been excluded from the survey, some of the activities in which women workers are more significant may have been excluded. Further, the nature of the work involved in BPO activities can be compared to export-oriented employment, with the difference that a greater degree of education and skill is required of the workers. Recent studies of call centres in Delhi and NOIDA (Mazumdar 2004b; Babu and Neetha 2004) point to the lack of opportunities for development and promotion in such activities, as well as the high degree of burnout, suggesting the absence of a ‘career track’ in such work. It has been found that since the ‘productivity’ of call centre workers is determined by the number of calls handled while maintaining appropriate ‘quality levels’, there is constant monitoring and supervision as well as a high premium placed in increasing productivity through intensification of the labour process. Even in a few years, there is evidence of a downward trend in wages in such activities, even though the wages in these call centres remain higher than the average wages of private sector clerks, teachers and nurses. On average, female call centre workers are young and do not last in this activity beyond a few years because of the sheer pressure of the work. So even in this emerging sector, women’s work tends to be concentrated in the low end, repetitive activities with little chance of upward mobility,

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recreating the pattern already observed in export-oriented manufacturing production. And there are also possibilities of the future reversal of the process of feminization of such work, in this case because changes in technology may require less of such work to be outsourced to developing countries in the first place. Such technological changes are likely to be accentuated by the protectionist pressures that are already being felt in the developed countries.

Issues of public policy Recent reversals in the feminization of employment also point to the possibility of regression in terms of social effects as well. Already, we have seen the rise of revivalist and fundamentalist movements across the Asian region, which seek to put constraints upon the freedom of women to participate actively in public life. This process is not new to capitalism: in the United States, women were actively encouraged to fill in for labour shortages created by the Second World War, only to be thrust back into unpaid household work once the war was over. However, the speed and extent of the equivalent processes in Asia still have the capacity for creating major social changes that can have destabilizing effects on gender relations and on the possibilities for the empowerment of women generally. At the same time, advances in communication technology and the creation of the ‘global village’ provide both threats and opportunities. They encourage adverse tendencies such as the commodification of women along the lines of the hegemonic culture portrayed in international mass media controlled by giant USbased corporations, and the reaction to that in the form of restrictive traditionalist tendencies. In this context, there are important measures that governments in the region can – and must – take in order to ensure that work processes do not add to the complex pattern of oppression of women that continues in Asian societies today. More stable and less exploitative conditions for work by women cannot be ensured without a revival of the role played by governments in terms of macroeconomic management for employment generation and provision of adequate labour protection for all workers. Changes in labour market regulation alone do little to change the broad context of employment generation and conditions of work, if the aggregate market conditions themselves are not conducive to such change. More direct employment generation through increased public investment and provision of public services is useful; in addition, indirect employment generation through encouraging the expansion of activities that use female labour in stable and remunerative ways should be encouraged through fiscal incentives and other means. Given that across the region, external competitive pressures are creating tendencies for more exploitative and volatile use of all labour including women’s labour, this has to be counteracted with proactive counter-cyclical government spending policies. In addition, the regulatory framework remains important essentially as a basic premise that can affect the bargaining position of workers. It is seen as a necessary condition (but not a sufficient one) for improving wages and conditions of

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work. That is why it is both important and necessary to ensure that there are laws and provisions guaranteeing workers’ protection and safety, even if they are not enforced. These should be seen not as welfare measures granted by a benevolent state, but rather as government’s recognition of the basic socioeconomic rights of workers as accepted under the Universal Declaration of Human Rights. While the existence of such laws does not ensure compliance, and indeed compliance or implementation is impossible to ensure for the whole population in the current circumstances in most Asian countries, it does provide a basis for workers themselves to bargain and combine collectively to try and ensure their enforcement. The regulation should also be such as to prevent employers from being vindictive or punitive towards workers who do organize and mobilize for better conditions of work and wages. At the same time, of course, it is clear that such laws cannot be so rigid as to make it difficult for employers to respond effectively to what are much more fluid and volatile conditions of production and competition. In essence this means that the laws should be such as to allow for closures and job loss where these cannot be avoided. But these should always be with adequate compensation and with encouragement and assistance for mobility of workers across activities and even if possible across regions. There should also be a greater attempt to make such laws applicable across all sectors of productive employment, including in agriculture, and to encourage the mobilization and association of rural workers as well as urban. In sum, the need is to ensure that legislation continues to ensure workers their basic rights and especially allows them the power to associate and bargain collectively in order to ensure that they do actually have what are recognized to be their socioeconomic rights. But even more important than this, is the recognition from governments that a focus on macroeconomic policies for employment generation should dominate the overall economic strategy and determine specific policies as well.

Notes 1 A more extensive survey of the literature on globalisation and inequality is online, available at: www.networkideas.org. 2 This question has been considered in detail in Ghosh (2003a), which examines patterns of manufacturing employment in the most ‘dynamic’ developing country exporters over the 1990s. 3 ILO Labour Statistics database online, available at: www.laboursta.org. 4 The discussion that follows is based on a more detailed consideration in Ghosh (2003b). 5 Such optimism was implicit or explicit in discussions such as those of Joekes and Weston 1994; Horton 1995; Heyzer 1998; Kibria 1995; Lim 1993, 1996; and even to some extent Wee 1998. 6 Data from ILO 2002a.

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ILO (2002b) Decent Work in the Informal Economy, Report VI, International Labour Conference 90th Session, Geneva: ILO. ILO (2003a) Global Labour Trends, Geneva: ILO. ILO (2003b) Key Indicators of the Labour Market, 3rd edn, Geneva: ILO. ILO (2004) Report of the World Commission on the Social Dimensions of Globalisation, Geneva. ILO (various issues) Yearbook of Labour Statistics, Geneva: ILO. Joekes, S. (1999) ‘A gender-analytical perspective on trade and sustainable development’, in Trade, Gender and Sustainable Development, UNCTAD, Geneva. Joekes, S. and A. Weston (1994) Women and the New Trade Agenda, New York: UNIFEM. Kibria, N. (1995) ‘Culture, social class and income control in the lives of Bangladeshi women garment workers’, Gender and Society, Vol. 9, No. 3: 289–309. Kumar, N. (2001) ‘Small information technology services, employment and entrepreneurship development: Some explorations into Indian experience’ in A. Kundu and A. N. Sharma (eds) Informal Sector in India: Problems and Policies, New Delhi: Institute for Human Development. Lalitha, N. (1999) ‘Women in the unorganised manufacturing sector: A sectoral analysis’, Indian Journal of Labour Economics, Vol. 42, No. 4: 641–50. Lee, H. (2001) ‘Evaluation and promotion of social safety nets for women affected by the Asian economic crisis’, Expert Group Meeting on ‘Social Safety Nets for Women’, Bangkok: UNESCAP. Lim, L. L. (1993) ‘The structural determinants of female migration’, in UN Department for Advancement of Women, ‘Internal migration of women in developing countries’, New York: UN. Lim, L. L. (1996) More and Better Jobs for Women: An Action Guide, Geneva: ILO. Lund, F. and S. Srinivas (2000) Learning from Experience: A Gendered Approach to Social Protection for Workers in the Informal Economy, Geneva: ILO and WIEGO. Malapit, H. J. (2001) ‘A review of literature on gender and trade in Asia’, Asian Gender and Trade Network, Online, available at: www.genderandtrade.org. Mazumdar, I. (2004a) ‘Impact of Globalisation on Women Workers in Garment Exports: The Indian Experience’, Mimeo, New Delhi: Centre for Women’s Development Studies. Mazumdar, I. (2004b) ‘Neither Mental nor Manual Labour: The Service Factories of the “New Economy”’, Mimeo, New Delhi: Centre for Women’s Development Studies. Mazumdar, I. (2000) ‘Workers of the NOIDA Export Processing Zone’, Mimeo, New Delhi: Centre for Women’s Development Studies. Meng, Xin (1998) ‘The Economic Position of Women in Asia’, CLARA Working Paper No. 4, Amsterdam. Neetha, N. (2004) ‘Women Migrants in Informal Work in NOIDA’, Paper presented at the National Seminar on Globalisation and Women’s Work, V. V. Giri National Labour Institute, NOIDA, India, 25–26 March. Neneria, L. and M. Roldan (1987) The Crossroads of Class and Gender, Chicago: University of Chicago Press. Pabico, A. P. (1999) ‘“Invisible” women workers fail to escape crisis’, Philippine Centre for Investigative Journalism. Online, available at: www.pcij.org Rayanakorn, K. (2002) ‘Gender inequity’, Mimeo, Online, available at: www.rockmekong.org/pubs/Year2003/social/07_kobkun.PDF. Rowbotham, S. and S. Mitter (eds) (1994) Dignity and Daily Bread: New Forms of Eco-

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nomic Organising Among Poor Women in the Third World and the First, London: Routledge. Sethuraman, S. V. (2000) Gender, Poverty and the Informal Sector, WIEGO. Online, available at: www.wiego.org. Shah, N. and N. Gandhi (1992) Shadow Workers: Women in Home-based Production, Mumbai: Vikas. Shah, N. and N. Gandhi (1998) ‘Industrial restructuring: workers in plastic processing industry’, Economic and Political Weekly, Vol. 34, No. 22: L12–L29. TIE-Asia and Working Women Worldwide (2003) ‘Women working in the informal sector in Sri Lanka’, Colombo: TIE-Asia. Tullao, T. and M. A. Cortez (2003) ‘Movement of Natural Persons and its Human Development Implications in Asia’, Mimeo, New York: UNDP. UNCTAD (2002) Trade and Development Report, Geneva: UNCTAD. UNCTAD (2003) Trade and Development Report, Geneva: UNCTAD. Varma, U. K. and N. Neetha (2003) ‘Labour, Employment and Gender Issues in EPZs: The Case of NOIDA Export Processing Zone’, Research Report, V. V. Giri National Labour Institute, NOIDA, India. Vijaybhaskar et al. (2000) ‘What Happens to Formal Employment in the Indian Software Industry’, Paper presented at 42nd Annual Conference of Indian Society of Labour Economics, Conference Issue of Indian Journal of Labour Economics. Wee, V. (ed.) (1998) Trade Liberalisation: Challenges and Opportunities for Women in Southeast Asia, New York and Singapore: UNIFEM and ENGENDER. Wickramasekara, P. (2002) ‘Asian labour migration: Issues and challenges in an era of globalization’, International Migration Papers 57, Geneva: ILO. World Bank (2003) ‘World Development Indicators’, World Development Report, Washington, DC: World Bank.

6

The impact of globalization and neoliberalism on the decline of organized labour in the United States Michael Goldfield1

Labour movements in the economically developed capitalist countries are weaker today than they have been in decades. And, by a large variety of key quantitative and qualitative indicators US unions are undoubtedly the weakest of the lot, unable to defend the interests of American workers in the most basic of ways. Parallel to these developments are the accelerated pace of what is commonly referred to as ‘globalization’, the greater economic integration of large parts of the world, the more rapid movement of goods (trade), capital (investment) and sometimes labour (migration), both among the more economically developed countries (EDCs) and between these latter entities and the economically lesser developed countries (LDCs). Some have argued that globalization is an inaccurate term, since its defining characteristic is its neoliberal character. Some have also argued that this globalization is largely responsible for the weakening of labour movements in the so-called northern countries, especially the United States. This chapter will attempt to explore these questions, especially with respect to the United States. First, however, one must understand the contours of each phenomenon in greater detail, i.e. in their specificity.

The decline of US organized labour During the 1930s and 1940s, the US labour movement was as dynamic and militant as any in the world. In pitched battles against employers and the state, leaving hundreds, if not thousands, of working class martyrs, the unions organized millions of previously unorganized workers in basic industries (including auto, farm and construction equipment, steel, electrical, rubber, lumber, furniture, paper making, tobacco, clothing and apparel, shipping and longshore, trucking, coal and metal mining, oil production and refining, public transportation and a host of others). Along with other social movements during this period, they helped marginalize conservative politicians, making pro-business rhetoric by politicians’ political suicide. Perhaps indicative of this climate are the words of the then future president of the US Harry Truman (1945–52) in his first major Senate speech after his 1934 Senate election victory. Truman, it should be

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recalled was a moderate to conservative Democrat from Missouri, a southern border state, hardly the centre of home- grown US radicalism at the time: No one ever considered Carnegie libraries steeped in the blood of the Homestead steel workers, but they are. We do not remember that the Rockefeller Foundation is founded on the dead miners of the Colorado Fuel and Iron Co. And a dozen other similar performances. It is a pity that Wall Street, with its ability to control all the wealth of nations . . . has not produced some financial statesmen, some men who see the danger of bigness and the concentration of wealth . . . they are still employing the best brains to serve greed and selfish interest. People can only stand so much, and one of these days there will be a settlement. (Goldfield 1997: 176) Finally, and perhaps most important, the labour movement of the 1930s, often led by Communists, united black and white workers, as well as large numbers of other ethnic minorities and non-whites into a militantly interracial movement, at times even spearheading important struggles for the civil rights of non-whites (see Goldfield 1993, 1994, 1997). The success of the labour movement of this period is partly told in the data. From just over 11 per cent of the labour force organized into unions in 1933, with less than 2.7 million workers, unions grew by the time of the US entry into the Second World War in 1941 to over ten million workers, almost 28 per cent of the workforce. In 1937 workers seized thousands of workplaces, the most famous of which was the 1936–37 Flint, Michigan, sit-down strike, in the very heart of the General Motors empire, at that time the world’s largest corporation. By 1945, at the end of the Second World War, 35.7 per cent of the labour force was in unions – 14 million workers in all – and although growth slowed, another peak was reached in 1952 with 16 million workers, 36.2 per cent of the labour force in unions (see Table 6.1). Private sector union membership at this time was almost 45 per cent. Throughout this period, unions were winning 70–85 per cent of the votes of workers in National Labour Relations Board union certification elections and a similar percentage of the elections themselves. Employer opposition to union organizing virtually collapsed, as many employers readily agreed to certification elections or even to recognize unions without even holding an election when evidence was presented to them of majority support from their employees. Discharges during union organizing campaigns were rare (see Tables 6.2 and 6.3, and Goldfield 1987). The post-Second World War 1946 strike wave was the largest in US history, involving millions of workers in virtually every major industry in the country. Workers won significant wage increases and few employers attempted to break the strikes or to hire replacement workers, and when they did, they were often met by local general strikes (see, for example, the accounts in Lipsitz 1994: 120–54).

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Table 6.1 US national union membership as a proportion of the labour force, selected years 1930–2006 Year

Number eligible (in thousands)

Number organized (in thousands)

Percentage organized

1930 1934 1935 1936 1937 1939 1940 1941 1942 1943 1944 1945 1946 1947 1948 1950 1952 1954 1960 1970 1975 1977 1980 1983 1985 1988 1990 1992 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006

29,424 25,953 27,053 29,082 31,026 30,618 32,376 36,554 40,125 42,452 41,883 40,125 42,452 41,883 40,394 41,674 43,881 49,022 54,234 70,920 76,945 81,334 87,480 88,290 94,500 101,407 103,905 103,688 107,989 110,038 111,960 114,533 116,730 118,963 120,786 122,482 122,007 121,826 123,554 125,889 128,237

3,401 3,088 3,584 3,989 7,001 8,763 8,717 10,201 10,380 13,213 14,146 14,322 14,398 14,787 14,319 14,267 15,892 17,022 17,049 19,381 19,600 19,335 20,095 17,717 17,000 16,960 16,704 16,390 16,748 16,360 16,269 16,110 16,211 16,477 16,258 16,387 16,107 16,145 15,472 15,685 15,359

11.6 11.9 13.2 13.7 22.6 28.6 26.9 27.9 25.9 31.1 33.8 35.7 33.9 35.3 35.4 34.2 36.2 34.7 31.4 27.3 25.5 23.8 23.0 20.1 18.0 16.7 16.1 15.8 15.5 14.9 14.5 14.1 13.9 13.9 13.5 13.4 13.2 13.3 12.5 12.5 12.0

Sources: BLS (various years).

Number covered (in thousands)

Percentage covered

21,535 22,493 20,532 19,400 19,240 19,058 18,540 18,850 18,346 18,158 17,923 17,918 18,182 17,944 18,114 17,771 17,695 17,087 17,223 16,860

26.5 25.7 23.3 20.5 19.0 18.3 17.9 17.5 16.7 16.2 15.6 15.3 15.3 14.9 14.8 14.6 14.5 13.8 13.7 13.1

31 265 1,152 746 1,192 2,568 4,212 4,153 4,712 4,919 5,589 6,920 3,222 5,514 5,619 4,215 5,428 6,871 7,543 7,729 8,308 7,021 4,030 3,241 3,545 3,536 3,399 3,377 3,109 2,538 2,435 2,262 2,215

1936 1937 1938 1939 1940 1941 1942 1943 1944 1945 1946 1947 1948 1949 1950 1955 1959 1963 1971 1975 1977 1980 1982 1983 1985 1990 1995 2000 2001 2002 2003 2004 2005

9,512 181,424 394,558 207,597 595,075 n. a. 1,296,567 1,402,040 1,322,225 1,087,177 846,431 934,553 384,565 588,761 890,374 515,995 430,023 489,265 546,632 533,576 519,102 471,651 244,318 164,907 211,161 229,015 215,137 262,120 236,388 170,964 164,291 161,073 148,831

Number of voters eligible

Source: Annual reports of the NLRB.

Number of elections

Year

7,734 164,207 343,587 177,215 532,355 729,915 1,067,037 1,126,501 1,072,594 893,758 698,812 805,474 333,900 516,248 781,382 453,442 385,794 441,969 480,119 471,933 460,300 415,048 210,510 142,343 187,186 201,238 188,951 225,584 198,591 144,475 139,669 133,259 123,546

Number valid

4,569 113,488 282,470 138,032 435,842 589,921 895,254 923,169 828,583 706,569 529,847 621,732 256,935 377,360 649,432 335,393 247,867 264,727 268,489 234,159 222,979 197,264 96,611 73,321 75,999 83,379 88,311 110,601 95,643 74,325 73,225 71,190 64,785

Number of union vote

Table 6.2 National Labour Relation Board election results, 1936–2005

59.08 69.11 82.21 77.89 81.87 80.82 83.90 81.95 77.25 79.06 75.82 77.19 76.95 73.10 83.11 73.97 64.25 59.90 55.92 49.62 48.44 47.53 45.89 51.51 40.60 41.43 46.74 49.03 48.16 51.44 52.43 53.42 52.44

Percentage of votes won

18 214 945 574 921 2,127 3,636 3,580 3,983 4,078 4,446 5,194 2,337 3,889 4,186 2,849 3,410 4,052 4,157 3,900 4,056 3,441 1,808 1,616 1,702 1,773 1,611 1,682 1,605 1,458 1,406 1,289 1,354

Number of elections won

58.06 80.75 82.03 76.94 77.27 82.83 86.32 86.20 84.53 82.90 79.55 75.06 72.53 70.53 74.50 67.59 62.82 58.97 55.11 50.46 48.82 49.01 44.86 49.86 48.01 50.14 47.40 49.81 51.62 57.45 57.74 57.0 61.1

Percentage of elections won

53,440 54,000 54,950 55,230 55,640 55,910 56,410 55,540 54,630 53,860 57,520 60,168 60,621 61,286 62,208 35,023 68,369 71,833 84,382 93,775 99,009 106,940 110,204 111,550 115,461 124,787 132,304 142,583 143,734 144,863 146,510 147,401

No. of civilians in labour force (in thousands)

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Table 6.3 Employer opposition to unions as reflected in unfair labour practice cases, 1938–2005 Year

Section 8(a)(1)

Section 8(a)(3)

Reinstates

No. of backpay cases

Backpay amount (in thousands)

1939 1940 1941 1942 1950 1952 1955 1956 1957 1958 1959 1960 1963 1964 1965 1966 1967 1972 1973 1974 1978 1979 1980 1981 1985 1986 1990 1995 2000 2001 2002 2003 2004 2005

4,618 3,934 4,817 4,967 4,472 4,306 4,362 3,522 3,655 6,068 8,266 7,723 9,550 10,695 10,931 10,902 11,259 17,733 17,361 17,978 27,056 29,026 31,281 31,273 22,545 24,084 24,075 26,244 22,095 21,512 23,036 21,765 19,946 18,304

3,012 2,671 2,995 3,221 3,213 2,972 3,089 2,661 2,789 4,679 6,775 6,044 6,840 7,654 7,367 7,203 7,463 11,164 10,979 11,620 17,125 17,220 18,317 17,571 11,824 12,714 11,886 13,298 10,456 10,059 10,969 10,132 9,294 8,047

31,000 31,000 23,475 8,251 2,111 1,801 1,275 1,841 922 1,067 4,278 1,885 3,478 4,044 1,875 6,187 4,274 5,407 3,555 4,778 5,533 5,837 10,033 6,463 10,905 3,196 4,026 6,603 4,549 4,138 1,689 2,393 3,496 2,008

6,213 4,800 5,181 5,925 2,259 2,734 1,836 1,955 1,457 1,368 1,521 3,110 6,965 5,142 3,110 15,466 13,936 6,741 6,800 7,405 8,623 14,627 15,566 2,529 18,434 18,090 16,413 26,197 30,590 27,582 15,925 23,320 30,784

NA $650 $924 $1,226 $1,078 $1,345 $785 $1,322 $515 $679 $793 $1,041 $2,749 $3,000 $2,699 $8,911 $3,286 $6,570 $5,989 $9,158 $13,439 $16,538 $32,136 $37,617 $39,120 $35,086 $44,444 $61,530 $107,963 $208,900 $51,560 $90,413 $205,352 $83,800

Source: Annual reports of the NLRB (various years). Notes Sec 8(a): It shall be unfair labour practice for an employer 1 to interfere with, restrain, or coerce employees in the exercise of the rights guaranteed in section 7 3 by discrimination in regard to hire or tenure of employment to encourage or discourage membership in any labour organization.

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Yet, this period was to be the highpoint for US labour, its echoes today a long distant memory. Since the early 1950s up to the present day, over 50 years, US union strength has continuously eroded. By 1962, union density (the percentage of the labour forced organized) was under 30 per cent and by 1984 it was under 20 per cent. Today, recent figures (2006) show union density barely 12 per cent, with the absolute number of union members as low as that of 1952, when the labour force was one-third its present size. The US labour movement is not only weaker than that in any other developed country, it is the only country where union density has continuously declined over the past 50 years (see Table 6.4; also Goldfield 1987). In fact, the situation is even worse than these already dismal figures suggest. That is because the dramatic rise in public sector union membership during the 1960s and 1970s, partially masks (in the aggregate figures) the even steeper decline in private sector union membership (now approximately 7.8 per cent organized). Governmental employees went from being barely 5 per cent organized to almost 40 per cent organized during this period, where they remain today. Finally, although the United States is a large, economically and culturally diverse country, with many examples of union successes and victories, the larger story is told by a string of dramatic defeats, and the destruction of union strength in industries that were previously union strongholds, including coal mining, trucking, meat processing and construction. The defeats include the 1981 crushing of the Professional Air Traffic Controller’s Organization and the discharge by then President Ronald Reagan of all 11,000 strikers, and the breaking of the auto workers’ union stronghold at Caterpillar, the highly profitable multinational construction equipment manufacturer, during the 1980s. The consequences of union weakness and decline may be found in increased rates of accidents, longer hours of work, greater work intensity, very little increases in real wages since the 1970s and the looming loss of pensions and medical benefits, hardly protected at all by federal and state legislation. The story of union defeats, weakness and its long decline in the United States has been told in detail elsewhere and will not be rehearsed further here (see Goldfield 1987, and more recent material).

Globalization, free trade and neoliberalism Much has been written and discussed about the impact of so-called globalization and neoliberal free trade policies on the LDCs, and of the suffering to their peoples, exacerbated by, if not caused in part by, policies of the IMF (International Monetary Fund), the World Bank, WTO (World Trade Organization), powerful multinational corporations and the hegemonic governments in the more economically developed countries, especially the government of the United States. Let us begin with the theories that extol these policies.

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127

The Washington consensus International trade theory, in its current neoclassical incarnation, claims that completely free markets benefit all countries and many people in them (at least in the long run). A division of labour is established where each country produces what it can produce most cheaply and efficiently, playing to its own ‘comparative advantage’, providing cheaper goods for consumers the world over (based in part on the Hecksher–Ohlin–Samuelson–Stolper theorem of equalization of relative factor prices). While industries and whole groups in individual countries may suffer, the countries as a whole all supposedly benefit. Free markets allegedly provide capital and markets for the goods produced in less developed countries. Labour intensive (often low wage) industries (textile is the classic example, running shoes and televisions are contemporary additions) leave developed countries like the US, providing less developed countries with their initial industries that allow for ‘takeoff’ of industrial development. Meanwhile, the low-wage jobs lost in the developed countries are replaced by higher-paying, more highly skilled jobs. This theory, put forward by the World Bank, the IMF and a host of governments and mainstream economists, has been dubbed by economist John Williamson as the ‘Washington Consensus’. Its principles include the following: 1 2

Trade liberalization, which includes ending all tariffs and complete access by the world’s corporations to all domestic markets. Openness to outside investment of all capital markets. This includes a b

3 4 5

the privatization of all formerly government-run facilities, deregulation of industries (as has happened in the US with trucking, air travel, telephones and telecommunications, but not urban transit, among others).

Protection of the property rights of foreign investors. Protection of intellectual property rights, but not labour, environmental safety standards. Currency stabilization through the IMF and the World Bank.2

Globalization in the LDC The neoclassical trade theory, of course, has many problems for developing countries, some of which were predicted by earlier critics. Some agricultural lands, for example, have been reduced to monocultures, where the welfare of their peoples fluctuate with the vagaries of the world market in food stuffs and raw materials. And here, I do not even mention the hypocritical unwillingness of many developed countries to eliminate subsidies for their domestic agricultural production, and their resistance to removing the barriers for the importation of agricultural goods from the LDCs. In other countries, brutal sweatshops have been created, including in Mexico and East Asia, while some countries (including Haiti and a number of African countries) have been completely bypassed.

1960 1970 1980 1990 1996 1997 1998

1,447 2,211 3,487 4,068 4,074 –11,421 –11,715

5,026 7,037 9,584 11,241 11,293

28.79 31.42 36.38 36.19 36.08

751 760 853 820 772 753 751

Members

% age

Members

Employees

Switzerland

1,370 1,355 1,444 1,375 1,311 1,270

Canada

50.18 44.14 49.64 45.90 35.10 34.68

Year

3,354 4,651 5,270 6,651 6,951 7,064

1,683 2,053 2,616 3,053 2,440 2,450

Members

% age

Members

Employees

Austria

Australia

1960 1970 1980 1990 1995 1996

Year

2,146 2,541 3,214 3,482 3,333 3,303 3,347

Employees

, – 2,485 2,920 3,077 3,222 3,165

Employees

35.00 29.91 26.54 23.55 23.16 22.80 22.44

% age

. – 54.53 49.45 44.69 40.69 40.13

% age

, – , – , – , – 8,827 8,538 8,327

Members

Germany

1,056 1,231 1,628 1,528 1,611 –3,034

Members

Belgium

– – – – 31,850 31,701 31,893

Employees

–

2,525 2,925 3,050 3,051 3,017

Employees

Table 6.4 Number of union members (in thousands) and number of employees (in thousands) in selected countries, 1960–2000

. – . – . – . – 27.71 26.93 26.11

% age

41.82 42.09 53.38 50.08 53.40 . –

% age

1970 1980 1990 1995 1999

, – –1,668 ,664 ,430 , –

– – 1,947 2,060 –

– – 34.10 20.87 –

,424 ,545 ,491 ,518 , –

Members

% age

Members

Employees

Ireland

6,948 6,966 8,154 8,014 –24,654 –24,347 , –

Greece

19.65 21.69 18.49 10.27 10.05 – –

Year

12,886 15,941 17,752 19,154 19,353 – –

2,532 3,458 3,282 1,968 1,945 –19,450 –19,611

1960 1970 1980 1990 1995 1996 1997

% age

Employees

717 859 838 990 –

Employees

– 21,747 23,366 24,962 – – –

Members

Employees

Members

Employees – – – 9,234 9,249 9,673 – –

West Germany

–7,080 –7,960 –7,986 1,119 1,646 1,686 –10,114 –10,792

France

– 59.99 76.02 73.00 75.12 – – –

Year

– 1,837 2,085 2,330 2,416 – – –

, – 1,102 1,585 1,701 1,815 1,812 1,816 1,807

Members

% age

Members

Employees

Spain

Denmark

1960 1970 1980 1990 1996 1997 1998 1999

Year

59.14 63.45 58.59 52.32 –

% age

– 32.03 34.90 32.10 – – –

% age

– – – 12.12 17.80 17.43 – –

% age

, – , – ,–107 ,104 ,114

Members

Iceland

9,835 11,187 12,947 9,947 8,089 7,930 7,795

Members

UK

,424 ,828 1,332 1,521 1,413 1,436 1,444 –1,966

Members

Finland

– – – 115 126

Employees

22,321 22,898 23,419 23,353 22,414 22,728 23,305

Employees

1,340 1,627 1,925 2,105 1,794 1,839 1,896 –

Employees

continued

– – – 90.43 90.48

% age

44.06 48.86 55.28 42.59 36.09 34.89 33.45

% age

31.64 50.89 69.19 72.26 78.76 78.09 76.16 –

% age

1962 1970 1980 1990 1995 1996 1998

,–97 , 52 ,–136 ,–171 , 85 ,–203 ,–220

– 112 – – 198 – –

– 46.43 – – 42.93 – –

–3,705 1,451 1,539 1,410 1,541 1,549 1,577

Members

% age

Members

Employees

Netherlands

7,662 9,357 11,605 12,369 12,265 12,093 11,825

Luxembourg

– – 36.97 49.58 39.75 39.20 –

Year

– – 12,811 14,499 15,133 14,549 –

2,886 3,294 4,736 7,189 6,016 5,703 –14,823

Members

% age

Members

Employees

Japan

Italy

1960 1963 1970 1980 1990 1998 1999

Year

Table 6.4 continued

, – 4,478 4,945 5,563 5,883 6,013 6,363

Employees

23,700 26,720 33,060 39,710 48,350 53,680 53,310

Employees

– 32.40 31.12 25.35 26.19 25.76 24.78

% age

32.33 35.02 35.10 31.15 25.37 22.53 22.18

% age

641 683 938 1,034 1,061 1,081 –2,030

Members

Norway

– 224 473 948 1,887 1,402 1,481

Members

Korea

1,177 1,302 1,607 1,766 1,851 1,920 –

Employees

– 2383 3746 6464 10,950 12,191 12,522

Employees

54.46 52.46 58.37 58.55 57.32 56.30 –

% age

– 9.40 12.63 14.67 17.23 11.50 11.83

% age

, – , – ,973 1,800 1,493

Source: OECD 2003.

1960 1970 1975 1980 1989

– – 5,387 6,162 6,942

– – 18.06 29.21 21.51

17,049 19,381 19,611 19,843 , –

Members

% age

Members

Employees

USA

–2,561 –2,663 1,000 ,800 –3,259 , –

Turkey

52.43 59.75 51.27 27.06 23.36 22.26

Year

1,009 1,195 1,184 1,338 1,404 1,379

,529 ,714 ,607 ,362 ,328 ,307

Members

% age

Members

Employees

Portugal

New Zealand

1970 1980 1990 1995 1997 1998

Year

55,180 70,645 77,551 89,950 , –

Employees

, – , – 3,289 3,186 , – , –

Employees

30.90 27.43 25.29 22.06 –

% age

– – 30.40 25.11 – –

% age 2,325 3,115 3,388 3,168 3,067 –3,558

Members

Sweden

3,433 3,895 4,035 3,541 3,499 –

Employees

67.73 79.97 83.97 89.47 87.65 –

% age

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Many so-called globalizers have put forth India and China as examples of countries that have grown and reduced poverty as a result of globalization. The World Bank originally claimed that the East Asian ‘miracle’ economies, Hong Kong, Singapore, South Korean and Taiwan, had followed their prescriptions. More careful researchers, however, deny that any of these countries were as open as globalization enthusiasts claim (see Elliott and Freeman 2003: 14–16 for a brief summary of this debate).3 The debt crisis and collapse of the Argentinian economy during 2001–02, once the poster child for global openness, was the situation that has most shaken the Washington Consensus (Elliot and Freeman 2003: 15–16; for a detailed analysis see Rock 2002). Finally, the theory makes a travesty of the historical circumstances under which countries have actually become economically developed, particularly those that have been late arrivals on the historical scene. The trajectory of the US iron and steel industry provides a dose of reality to this theory. Before the US Civil War (1861–65), most domestically used iron, including that used for rails was imported from the United Kingdom. In 1850, production in the US was one-fifth that of the United Kingdom; three-quarters of the iron rails used in this country during the 1850s were supplied by British rail manufacturers (Temin 1964: 21).4 The rise of the Republicans and the inauguration of President Abraham Lincoln and the Republican-dominated Congress in 1861 led to the enactment of the Morrill Tariff, the first of many restrictive tariffs, which helped protect the nascent iron and steel industry, allowing domestic producers to gain control of the domestic market for themselves (see, e.g. Temin 1964: 209). By 1895, US iron and steel production had already surpassed that of the UK worldwide. In 1900, the tremendous efficiencies of US steel producers, their easy access to raw materials and the US’ unmatched national transportation system, led the leaders of the industry to consider the tariffs no longer necessary (Temin 1964: 213). By 1906, US Steel production was four times as great as that of the UK. At its peak in 1945, 62 per cent of the world’s steel was produced in the US, and, of course, US steel makers were among the leading proponents of ‘free trade’. By 1968, the figure was down to 22 per cent and in 1971, the former USSR surpassed the US in production (Warren 1973: 10–11), the first time a foreign producer had out-produced the US since the United Kingdom in the late nineteenth century. The demise of the steel industry in the 1980s and 1990s is traced in a wide and varied literature, although as Table 6.5 suggests, contrary to popular legends, US steel production has hardly disappeared. Still, by the 1980s, steel producers and steel workers’ unions were among the leading proponents of protectionism, the virtues of free trade having suddenly been forgotten. Thus, the desire of EDCs for LDCs to keep their markets for goods and investments completely open should not be taken at face value.

Globalization in the EDC and the US But, what of the impact of globalization on the workers in more economically developed countries, especially the US? First, it is true that certain labourintensive industries have migrated from more developed countries to the less

Globalization and labour in the US

133

developed ones, providing at least some of the basis for economic development. Textile is, of course, the classic case. It was one of the earliest to display global tendencies of competition, dramatically decreasing exports from the early producers in more developed countries like the UK and the US. Mumbai (Bombay), India, for example, had a mechanized textile mill in 1856, while Japan, China and Brazil, along with Tsarist Russia, were soon to follow.5 On the continent, Germany too developed a large-scale textile industry. By the 1920s, the number of textile workers in the lesser developed countries numbered in the many hundreds of thousands. Textile workers in these lands, like those in countries like the UK and the US organized and were among the most militant segments of the labour force. After the Second World War, beginning in the 1950s, Japanese textiles and garments were regarded as the epitome of inexpensively produced goods, especially in the US. By the 1970s, South Korea, then Hong Kong assumed this honour, while currently it is China, Indonesia and Thailand. Today, however, textile and apparel products are less likely to be financed by indigenous capitalists. Rather, they are more often the result of investments by large EDC multinationals and their agents. Thus, it remains to be seen whether the sweatshops in Indonesia and Thailand will lead to their economic development. The disappearance of large numbers of jobs from labour-intensive industries in the US and other developed countries has been dramatic. According to the Congressional Budget Office (CBO), apparel employment in the US went from 900,000 in 1990 to less than 300,000 in 2004 (CBO 2004: 3), jobs that will not return. In fact, many textile and apparel jobs are already leaving more affluent LDCs for China, and the numbers in this current wave will undoubtedly increase substantially. Textile was at one time the largest industry and the largest industrial employer of workers in the United States. This remained the case after the beginning of the twentieth century, as textile production abandoned the northern states for the low-wage South. But, by the 1930s, although textile production still remained the largest employer of industrial labour, it was no longer a growing industry in the US, already priced out of the world market. Other low-wage, labour-intensive industries have followed the route of textiles. By the 1960s and 1970s, these included shoes, consumer electronics and televisions. By the 1970s and 1980s, many high-paying, capital-intensive industrial jobs were disappearing from the US, including steel, shipbuilding and automobiles. The last year that manufacturing goods showed a positive net balance of trade was 1982, although the figure (3.6 billion dollars) is relatively small. Beginning in 1983, negative balances of trade in manufacturing goods have steadily increased, accelerating further in landslide proportions, beginning in 1998 (where there was a negative balance of 194.2 billion to 464.4 billion in 2004).6 Trade imbalances in mineral fuels, while not nearly as large as in manufacturing, have also increased greatly since 2000. The much publicized positive net exports in grains and raw logs – hardly the penultimate products of capitalintensive, futuristic technology – have barely made a dent in the overall balance (see Table 6.6 for details). The turnover and outsourcing of newly created industrial jobs also seems to

Per cent of capability utilization

88.8 86.1 93.3 74.7 84.7 79.5 63.8 48.4 78.3 72.8 87.8 86.8 – – – – – 66.8* 93.0 100.9 95.5 97.3 39.6 72.5

Year

2002 2000 1995 1991 1990 1987 1986 1982 1981 1980 1979 1978 1974 1973 1970 1969 1965 1960 1955 1951 1944 1941 1938 1937

Annual (net tons)

100,958,000 112,242,000 104,930,000 87,896,000 98,906,000 89,151,000 81,606,000 74,577,000 120,828,000 111,835,000 136,341,000 137,031,000 145,719,874 150,798,927 131,513,805 141,261,662 131,461,601 99,281,601 117,036,085 105,199,848 89,641,600 82,839,259 31,751,990 56,636,945

Total

Table 6.5 Raw steel production, 1860–2002

– – – 1,408,000 3,496,000 2,666,000 3,330,000 6,110,000 13,452,000 13,054,000 19,158,000 21,310,000 35,498,877 39,779,812 48,022,031 60,894,041 94,193,225 86,367,506 105,359,417 93,166,518 80,363,953 74,389,619 29,080,016 51,824,979

Open hearth

– – – – – – – – – – – – – – – – 585,965 1,189,196 3,319,517 4,890,946 5,039,923 5,578,071 2,106,340 3,863,918

Bessemer

50,114,000 59,485,000 62,523,000 52,714,000 58,471,000 52,496,000 47,885,000 45,309,000 73,231,000 67,615,000 83,256,000 83,484,000 81,552,403 83,259,650 63,330,424 60,235,671 22,878,605 3,346,156 307,279 – – – – –

Basic oxygen process

– – – – – – – – – – – – – – – – – – – – 25 2,313 7 1,046

Crucible

50,844,000 52,757,000 42,407,000 33,774,000 36,939,000 33,989,000 30,390,000 23,158,000 34,145,000 31,166,000 33,927,000 32,237,000 28,668,594 27,759,465 20,161,350 20,131,950 13,803,806 8,378,743 8,049,872 7,142,384 4,237,699 2,869,256 565,627 947,002

Electric

19.5 62.5 88.5 74.2 34.5 84.6 – – – – – – – – – – – – –

15,123,477 44,590,808 61,741,962 49,704,893 21,638,719 49,010,095 34,087,177 28,329,748 21,879,593 11,227,229 6,784,734 4,779,005 1,917,350 1,397,015 436,575 77,000 15,262 9,044 13,259

13,242,665 38,586,765 53,152,445 41,804,317 17,065,498 38,065,348 23,340,369 17,671,882 9,536,613 3,637,732 1,218,841 565,714 149,381 112,953 9,050 1,500 – – –

1,712,248 5,623,388 7,945,496 7,473,607 4,460,759 10,335,270 10,603,934 10,477,992 12,231,062 7,480,775 5,493,500 4,131,486 1,701,762 1,203,173 375,517 42,000 – – –

– – – – – – – – – – – – – – – – – – –

270 1,750 6,453 20,484 7,975 127,796 116,588 121,588 111,918 108,722 72,393 81,805 66,207 80,889 52,008 33,500 15,262 9,044 13,259

168,294 378,905 637,568 406,485 104,487 481,681 26,286 58,286 – – – – – – – – – – –

Notes All other processes included with Crucible in 1908 and prior years. Production by foundries that normally produce steel only for castings are not included in 1887 and subsequent years. + Included with Open Hearth. * Per cent of capacity.

Source: American Iron And Steel Institute, Washington, DC (unpublished data).

1932 1930 1929 1925 1921 1918 1913 1910 1905 1900 1895 1890 1885 1880 1875 1870 1865 1863 1860

1982 1983 (6) 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004

Year

216.4 205.6 205.6 224.0 218.8 227.2 254.1 322.4 363.8 393.6 421.7 448.2 465.1 512.6 584.7 625.1 689.2 682.1 695.8 781.9 729.1 693.1 724.8 818.8

Exports

Total goods1

244.0 258.0 258.0 330.7 336.5 365.4 406.2 441.0 473.2 495.3 488.5 532.7 580.7 663.3 743.4 795.3 870.7 911.9 1,024.6 1,218.0 1,141.0 1,164.7 1,257.1 1,469.7

Imports –27.5 –52.4 –52.4 –106.7 –117.7 –138.3 –152.1 –118.5 –109.4 –101.7 –66.7 –84.5 –115.6 –150.6 –158.7 –170.2 –181.5 –229.8 –328.8 –436.1 –411.9 –471.6 –532.4 –650.9

Balance

■ 155.3 148.5 148.7 164.1 168.0 179.8 199.9 255.6 287.0 315.4 345.1 368.5 388.7 431.1 486.7 524.7 592.5 596.6 611.6 691.5 640.2 606.3 627.1 710.3

Exports 151.7 171.2 170.9 230.9 257.5 296.7 324.4 361.4 379.4 388.8 392.4 434.3 479.9 557.3 629.7 658.8 728.9 790.8 882.7 1,012.9 950.7 974.6 1,027.4 1,174.8

Imports

Manufactured goods2,3

3.6 –22.7 –22.2 –66.8 –89.5 –116.8 –124.6 –105.7 –92.4 –73.5 –47.3 –65.9 –91.2 –126.3 –143.0 –134.1 –136.4 –194.2 –271.1 –321.3 –310.4 –368.3 –400.3 –464.4

Balance

■ 37.0 36.5 36.1 37.9 29.3 26.3 28.7 37.1 41.6 39.6 39.4 43.1 42.8 45.9 56.0 60.6 57.1 52.0 48.2 53.0 55.2 54.8 61.4 63.4

Exports 15.7 16.5 16.0 19.3 19.5 20.9 20.3 20.7 21.1 22.3 22.1 23.4 23.6 26.0 29.3 32.6 35.2 35.7 36.7 39.2 39.5 42.0 47.5 54.2

Imports

Agricultural products3,4

Table 6.6 US trade in goods, 1982–2004 census basis (domestic and foreign exports, f.a.s.; general imports, customs; $ billions)

21.3 19.9 20.2 18.6 9.8 5.4 8.4 16.4 20.5 17.2 17.2 19.8 19.2 20.0 26.8 28.1 21.9 16.3 11.5 13.8 15.7 12.8 13.9 9.2

Balance

Notes 1 Includes non-monetary gold, military grant aid, special category shipments, trade between the US Virgin Islands and foreign countries, and undocumented exports to Canada. Adjustments were also made for carryover. Import values are based on transaction prices whenever possible (‘f.a.s.’ for 1974–79 and Customs value thereafter). Pre-1974 import data do not exist on a transaction price valuation basis. 2 Manufactured goods include commodity sections 5–9 under Schedules A and E for 1970–82 and SITC Rev. 3 for 1983 forward. Manufactures include undocumented exports to Canada, non-monetary gold (excluding gold ore, scrap and base bullion) and special category shipments. 3 Census data concordances link the 1980–92 data into the best possible time series. Data for 1970–79 are not linked and are from published sources. Import values are f.a.s. for 1974–79 and Customs value thereafter; these values are based on transaction prices while maintaining a data series as consistent as possible over time. Pre-1974 import data do not exist on a transaction price valuation basis. Imports for 1991 include revisions for passenger cars, trucks, petroleum and petroleum products not included elsewhere. 4 Agricultural products for 1983 onwards use the latest census definition that excludes goods previously classified as manufactured agricultural products.

Sources: Compiled from Bureau of Census official statistics. Data reflect revisions through 6 October 2005. Data for 1983–88 are estimated, based on the HS. Pre1983 data are on a Schedule A/E basis and adjusted to match the latest trade definitions as closely as possible. Online available at: www.ita.doc.gov/td/industry/otea/usfth/aggregate/H04T03.html.

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be accelerating. The growth of the computer industry created an upsurge in high-tech production in the United States, from the 1970s through the 1990s. Yet, by the late 1980s these jobs were beginning to leave and in the 1990s, it was something of a tidal wave. Since 2001, high-tech manufacturing jobs have been among the largest net losers in the US. Much publicity has recently been given to the movement of high-tech and IT jobs out of the US to Mexico, India and other LDCs. Then there are the service jobs, widely reported; initially in the late 1980s, the processing of insurance claims in lower wage Ireland was a big story. Call centres, once a booming industry with increasing employment in the US have been shipped in large numbers to India (estimates are in the hundreds of thousands). In fact, India has been the beneficiary of almost all the English-speaking jobs for such call centres from the US and the UK, while Latin America, primarily Mexico, has been the recipient of Spanish-speaking call centre jobs from the US. Finally, there is the claim that the movement of many of these jobs, and sometimes whole companies and industries abroad has been the main culprit in undermining the strength of US unions. The loss of manufacturing jobs, initially low-wage (including textile, apparel, shoes and electronics) has been an issue in American politics for decades. Since the 1992 presidential election, however, the loss – not only of these jobs but those in higher paying manufacturing industries (including steel, auto and shipbuilding) – has reached something of a fever pitch, despite the fact that US manufacturing made a major recovery during the latter half of the 1990s. In 1992, the third party presidential candidate Ross Perot (who received almost 20 per cent of the popular vote) made his mark by describing the affect of NAFTA (the North American Free Trade Agreement, which took effect in 1994) as a ‘great sucking sound’, as jobs in this country allegedly went down the drain to Mexico. More recently, the loss of white collar service jobs, as well as high-tech IT employment – once thought to be sacrosanct – has garnered a great deal of publicity. The data describe a dramatic acceleration of all these trends since the late 1990s. The Congressional Budget Office, CBO (2004: 1) cites a decline of three million manufacturing jobs (down to 14.3 million based on payroll figures) from July 2000 to January 2004. There are various ways to measure the amount of manufacturing work. I suggest three ways, each with their biases. Payroll figures from companies tend to be a bit conservative, therefore the numbers are somewhat lower. Household surveys (made monthly, quarterly in more detail and yearly in still more detail) by the Current Population Survey of the Bureau of Labour Statistics (BLS) tend to be more robust, although not as precise as payroll data, since they are the result of telephone interviews with households, rather than ‘harder’ data. Finally, in the US, manufacturing is sometimes increased, not by hiring more workers, but by working current employees longer overtime hours. Thus, hours of work give us information that is more precise in certain ways than the other two measures. Data from the CPS is presented in Table 6.7 (data from the other two measures are available from the author by

20,892 19,472 19,140 18,549 18,662 18,503 18,291 16,947 16,447 14,290 14,268 14,227

1980 1985 1990 1995 1999 2000 2001 2002 2003 2004 2005 2006

20,834 19,420 19,254 18,552 18,631 18,496 18,197 16,880 16,389 14,280 14,276 14,217(p)

February

20,833 19,393 19,238 18,555 18,605 18,508 18,100 16,822 16,346(p) 14,288 14,268 14,212(p)

March 20,573 19,328 19,220 18,568 18,580 18,506 18,000 16,800 16,251(p) 14,317 14,256

April 20,258 19,285 19,181 18,541 18,571 18,496 17,867 16,771 – 14,340 14,251

May 20,003 19,246 19,159 18,531 18,524 18,527 17,748 16,757 14,493 14,332 14,233

June 19,777 19,200 19,118 18,505 18,546 18,542 17,657 16,742 14,407 14,332 14,224

July 19,929 19,186 19,067 18,521 18,525 18,504 17,526 16,690 14,368 14,348 14,213

August 19,959 19,124 19,016 18,514 18,509 18,437 17,430 16,640 14,344 14,329 14,187

September 20,048 19,124 18,955 18,491 18,500 18,418 17,302 16,592 14,328 14,320 14,196

October

20,146 19,108 18,797 18,477 18,506 18,409 17,158 16,537 14,315 14,308 14,214

November

Note p Preliminary.

Source: SIC Code: 20–39. NAICS (2002) replaces SIC beginning June 2003. Online, available at: www.bls.gov/ces/cesnaics.htm for details.

January

Year

Table 6.7 Manufacturing employment in the US, 1980–2006

20,199 19,110 18,754 18,502 18,499 18,372 17,062 16,454 14,296 14,294 14,222

December

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request). All three measures document the substantial drop in manufacturing since the late 1990s and 2000 up to the present. The Congressional Budget Office (2004) goes to some length to put a pretty face on these figures, which have caused alarm for many US citizens. They have argued that – although the last few years are the first ‘recovery’ in which manufacturing has not increased employment – the figures are something of an ‘artifact’. First, the CBO claims that the data do not reflect the degree of outsourcing that has taken place, including both contract and temporary labour, which are probably not reflected in the manufacturing employment figures. This, of course, is mere speculation, since they give no data to substantiate this claim. Second, they suggest that the decline is not a result of loss of manufacturing to foreign trade, but a decline in the percentage of goods versus services that US consumers have been buying. Bivens (2004), on the other hand, shows conclusively, that there has actually been an increase in purchases of consumer goods, much of it imports, that the only way the CBO report can make this claim is by making simple logical errors (including not even looking at the product mix of imports that have been purchased in the past few years!). Finally, the CBO argues that one of the reasons that manufacturing employment has been slow to increase is that productivity in US manufacturing has increased dramatically over the last several years; they suggest that this is due to technological advances. Brenner (2004) argues compellingly, however, that with no new investments in manufacturing by US corporations, the productivity gains during this period could have only come from the much-reported increased intensity of work by US workers, a trend that cannot continue because of the limits of the human organism. Thus, the large decline in manufacturing employment is most certainly, to a large degree, due to trade imbalances. Bivens suggests the figure is close to 60 per cent.

Some caveats The issues of why certain types of jobs, particularly in manufacturing, disappear is complex and must be carefully analysed. In some industries demand simply decreases. Steel, for example, which once accounted for a large percentage of the parts in the automobile industry, has seen its share diminish greatly as other materials have been substituted, particularly lighter weight plastics and other synthetic materials. Consumer goods also obviously show changing patterns of demand. In other industries, changes in technology may influence the number of workers needed to make particular goods. While worldwide automobile production has steadily risen in recent decades, certain parts of the production process have become highly automated, including welding, paint shops and tyre manufacturing.7 Further, one must not confuse the decline of particular domestic producers with the fate of the industry as a whole. The US auto industry, especially

Globalization and labour in the US

141

General Motors and Ford, has lost market share to foreign producers, especially Toyota and Honda. Auto employment by domestic producers has declined greatly. Yet employment by foreign transplants has increased significantly, making the number of US autoworkers relatively constant over the last three decades. While there are clearly issues of benefits (including the payment of health care and pensions to the larger percentage and numbers of retirees of domestic producers), it would be wrong to conclude that the domestic auto jobs themselves are dwindling. Trade balances are also sometimes a result of currency exchange rates. That, of course, is a claim about large US imbalances with China. In the late 1990s, however, manufacturing jobs remained stable, exports increased and profits soared, in part a result of favourable currency exchange rates for US producers. Finally, as Robert Brenner shows in a highly nuanced analysis, global overproduction in manufacturing is a recurrent feature of the world economy – often leading to major cutbacks and shifts in production on the part of industrial manufacturers.

Production shifts – what types of jobs have moved and where have they gone? With these caveats, let us look at what types of jobs have been lost in the US economy. Figures in Table 6.8 suggest that the biggest recent job losses have come in computers and related equipment, transportation equipment (including both motor vehicles and aerospace), lumber and wood products (including furniture), primary metal industries (i.e. mostly steel) as well as textile and apparel. Lumber and wood products are, of course, raw materials, while textile and apparel are labour-intensive industries, whose job losses represent the acceleration of long-term trends. Motor vehicle production, however, is a capitalintensive industry, whose worldwide production and greater movement to Mexico and China is also a continuing trend. Yet, aerospace and computers would seem to be precisely the types of industries that international trade theory suggests would grow in the EDCs. There is no detailed government data on the loss of US jobs because of trade, the movement of jobs from the US to other countries and the destination of those jobs. The most detailed careful attempt to answer these questions comes from a series of studies by Kate Bronfenbrenner and her colleagues (Bronfenbrenner 2000a, Luce and Bronfenbrenner 2004). They have used an innovative media tracking survey to compile media reports of production shifts by US companies to facilities abroad. In compiling this data they have specified both the types of industries and jobs, as well as the destination countries. Their results for the first quarter of 2004 are highly informative, although still suggestive, both because of the soft character of the data and because we do not have information on sectors in which jobs have increased; thus, we are unable to even speculate about total flows.8 They distinguish between near-shore and offshore production shifts. Offshore production sites may be anywhere in the world. Near-shore sites are those that

China

33 38 33 8 29 3 40 0 0 31 26 25 17 100 10 33

Output

Aerospace Apparel and footwear Appliances Auto parts Chemicals and petroleum Communications/information technology Electronics/electrical equipment Finance, insurance and real estate Food processing Household goods Industrial equipment and machinery Metal fabrication and production Plastics, glass and rubber Sporting goods and toys Textiles Wood and paper products

0 0 0 16 14 32 4 100 0 0 0 0 0 0 0 0

India

67 0 11 0 14 27 27 0 20 15 5 13 0 0 0 0

Other Asian countries 0 38 56 68 14 0 18 0 40 23 53 44 58 0 20 50

Mexico

0 13 0 4 14 32 0 0 0 15 0 13 0 0 70 17

Other Latin American countries

Table 6.8 Distribution of production shifts out of the US by industry and destination country, January–March 2004 (per cent)

0 13 0 4 7 0 4 0 0 0 5 0 0 0 0 0

Eastern Europe

0 0 0 0 7 5 7 0 40 15 11 6 25 0 0 0

Other

Globalization and labour in the US

143

must be near the home market or other domestic production facilities. They have found that there was an enormous increase in shifts from the US to both nearshore and offshore locations between 2001 and 2004. Thus, the greatest number of total production shifts, also involving the largest number of employees has been to Mexico, a near-shore site for the US. Second highest was China, an offshore site. For European countries, Eastern Europe represented the near-shore location of preference, while China was again the most likely recipient of offshore production jobs for both the US and the EU. They also find that there is a much broader range of industrial goods whose production has shifted to China in 2004, compared to 2001, when the shifts were concentrated in only a few industries (Luce and Bronfenbrenner 2004: ii). The other big change between 2001 and 2004 was the tremendous increase in the shift of call centres and banking services, from the US, primarily to India, a number that is sometimes estimated to be almost three-quarters of a million. A key market analyst predicts that as many as 3.4 million such jobs will move offshore by 2015 (Hilsenrath 2004; Luce and Bronfenbrenner 2004: 5). Table 6.9 shows the number of shifts by destination country, with Mexico having the highest number, followed closely by China, with India third. Although the number of production shifts from the US to Mexico is only slightly more than the number to China, Figure 6.1 shows that the number of jobs moved to Mexico is many times greater. Table 6.10 suggests the degree to which this movement of production facilities to China is not just a US, but a worldwide phenomenon. Figure 6.2 gives a sense of the type of industries and the relative number of jobs that have moved from the US in the first quarter of 2004. While food processing, auto parts, electronics and electrical equipment, and appliances are among the largest job losers, it is indicative that communications and information technology is the largest category by far. Figure 6.2 shows the destination by country of the jobs from the leading industries. Finally, of interest are the shifts in white collar jobs by industry. Figure 6.3 shows, not surprisingly, that the overwhelming majority of these shifts (70 per cent) have been in communications and information technology. As of 2004, however, the majority of these job transfers (60 per cent) have been to call centres, although R&D and IT represent 25 per cent (see Figure 6.4). It is also noteworthy that, according to Luce and Bronfenbrenner’s sample, 100 per cent of the US jobs that moved abroad in the first quarter of 2004, in finance, insurance and real estate, have gone to India (see Table 6.8). English-speaking call centre employment (from the UK as well as the US) has also been overwhelmingly to India, while Spanish-speaking call centre employment (an important and increasing percentage of the US market) has been to Mexico and other Latin American countries.

Impact of these job losses on unions At first glance, so-called globalization can be seen as a factor in the erosion of union strength in the US. There is some justification for this view. First, some

Number of announced/reported production shifts 58 31 39 1 2 6 6 14 5 2 3 69 35 7 1 6 3 6 5 5 2 6 2 1 2 1

Country

China India Other Asian countries Indonesia Japan Korea Malaysia Philippines Singapore Taiwan Thailand Mexico Other Latin American and Caribbean countries Brazil Colombia Costa Rica Dominican Republic El Salvador Honduras Jamaica Trinidad Eastern Europe Cross Eastern Europe Czech Republic Hungary Poland

23 12 15 0 1 2 2 6 2 1 1 27 14 3 0 2 1 2 2 2 1 2 1 0 1 0

Percentage of all production shifts from the US

Table 6.9 Production shifts out of the US, announced or reported, January–March 2004

62 58 77 100 50 67 67 93 80 100 33 65 77 71 100 100 67 100 40 100 0 33 100 0 0 0

Percentage production shifts confirmed 43 42 64 100 50 67 67 64 60 100 33 48 63 71 100 67 33 67 40 100 0 0 0 0 0 0

Percentage shifted January–March

255 121

Total US facilities with shifts US facilities with multiple destination countries Total number of destinations

100 48 475

7 0 3 0 1 0 0 0 1 66 68 –

65 0 75 0 50 0 100 100 100 49 54 –

41 0 50 0 50 0 100 0 50

–

Notes 1 Because for phase one of this study we were only asked by the Commission to focus on production shifts into Asia and Latin America, only Asian and Latin American countries were included in our search string as destination countries for shifts out of the US. Thus any cases we found for other countries were found as a byproduct of searches for shifts into Asia or Latin America. Thus these results are not representative of the actual number or percentage of production shifts out of the US to these other countries. ‘(Luce and Bronfenbrenner 2004).

Source: Luce and Bronfenbrenner (2004).

17 1 8 1 2 1 1 1 2

Other countries1 Belgium Canada France Ireland Israel New Zealand Sweden United Kingdom

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M. Goldfield

Table 6.10 Production shifts to China from other countries, announced or reported, January–March 2004 Country

Number of announced/ reported production shifts to China

Percentage of all production shifts to China

Percentage production shifts confirmed

Percentage shifted January– March

Asia Japan Korea Malaysia Philippines Singapore Taiwan

33 17 2 2 4 3 5

34 18 2 2 4 3 5

21 12 0 100 25 33 20

15 0 0 100 25 33 20

Europe Austria Belgium Czech Republic Denmark Finland France Germany Ireland Italy Luxembourg Netherlands Norway Spain Sweden Switzerland United Kingdom Cross Europe Latin America Mexico Other countries Australia Canada Total foreign shifts to China Shifts into China with multiple destination countries

55 1 2 1 1 1 3 7 5 3 1 2 1 3 1 1 18 4 3 3 5 1 4

57 1 2 1 1 1 3 7 5 3 1 2 1 3 1 1 19 4 3 3 5 1 4

39 0 50 0 0 100 67 14 60 0 0 50 100 33 0 0 44 75 33 33 60 0 75

16 0 50 0 0 100 0 14 20 0 0 0 0 0 0 0 28 0 33 33 60 0 75

96

100

34

19

33

34

39

21

Total number of destinations for companies shifting to China

136

Globalization and labour in the US

Average number of jobs lost Total number of jobs lost

China

India

Other Asian countries

Mexico

Other Latin American countries

148

139

119

354

162

8,283

3,895

4,419

23,396

5,511

147

Figure 6.1 Number of jobs shifted out of US, January–March 2004 (source: This figure is reproduced with permission from Luce and Bronfenbrenner (2004), p. 26).

parts of the manufacturing sector have been strongholds of unions. Large-scale job losses in these industries might severely undermine union strength there. Luce and Bronfenbrenner’s figures for the first quarter of 2004 suggest that a disproportionate number of job shifts have been from unionized production facilities. As of 2003, only 13.5 per cent of all manufacturing jobs in the US were unionized. Yet, 53 per cent of the jobs that were moved to Mexico and 34 per cent of the jobs moved to China were unionized jobs (see Figure 6.5). Since the overwhelming majority of job shifts were to these two countries (and most of these were in manufacturing), these figures show an overwhelmingly disproportionate loss in unionized manufacturing jobs from the US. Whether this is a result of economic considerations or anti-union strategies of employers is not particularly material to the end result. Prior to 2000, most econometric studies have, unsurprisingly, viewed the effects of trade on unionization as minimal, consistent with the Washington Consensus view that increased global trade has almost universally positive effects (see Baldwin 2003, for example). The figures for 2004, however, suggest that the loss of union jobs in the US economy has become a much more important phenomenon. Aside from the numerical losses, other more far-reaching effects exist, most of which are more difficult to capture in econometric models.

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M. Goldfield

Aerospace 40 Apparel and footwear

1,086

Appliances

5,351

Auto parts

6,490

Chemicals and petroleum

2,245

Communications/ information technology

7,756

Electronics/ electrical equipment

6,871

Finance, insurance and real estate

280

Food processing

6,265

Household goods

2,956

Industrial equipment and machinery

3,508

Metal fabrication and production

2,836

Plastics, glass and rubbber

1,633

Sporting goods and toys

534

Textiles

836

Wood and paper products

660 0

1,000 2,000 3,000 4,000 5,000 6,000 7,000 8,000 9,000 Total jobs lost from US

Figure 6.2 Total number of jobs lost from production shifts out of the US by industry, January–March 2004 (source: This figure is reproduced with permission from Luce and Bronfenbrenner (2004), p. 27).

First, the threat of production shifts (an even larger phenomenon than the actual production shifts, which are to some degree merely a subset of the latter) reduces the bargaining leverage of unions. Although there are no figures for this phenomenon, there are, to be sure, large amounts of anecdotal evidence. Second, there is the threat of plant movement in the face of new organizing, the ‘runaway shop’ syndrome, that has been part of the US landscape since the 1970s. Its current dimensions are merely larger in scope (encompassing a greater

Per cent of white collar shirts

Globalization and labour in the US

149

70

70 60 50 40 30 20

16

14

10 0

Manufacturing

Communications and information technology

Finance, insurance and real estate

Per cent of white collar shirt

Figure 6.3 Shifts in white collar work by industry, all countries, January–March 2004 (source: This figure is reproduced with permission from Luce and Bronfenbrenner (2004), p. 72).

70 61

60 50 40 30

25

20 10 0

7 Back office

7

6 Call centres

Financial services

R&D and IT

Other

Figure 6.4 Shifts in white collar work by type of service, all countries, January–March 2004 (source: This figure is reproduced with permission from Luce and Bronfenbrenner (2004), p. 73).

number and variety of industries) and different in destination. Where previously the US South or Mexico were destinations, with textile headed to East Asia, the whole world is now the oyster for capitalist relocators. Finally, job market insecurity, involving the threat of production shifts seems to be a factor affecting larger numbers of workers.

Major reasons for US union decline While these factors are an important part of the landscape that unions in certain industries must face (and therefore should not be belittled), the largest problems

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M. Goldfield

60

Per cent union

50 40 30 20 10 0

China

India

Other Asian

Mexico

Other Latin All countries American

Figure 6.5 Unionization rates for companies shifting production out of the US, by destination country, January–March 2004 (source: This figure is reproduced with permission from Luce and Bronfenbrenner (2004), p. 36).

faced by unions – and the main reason for the continuing erosion of strength in union density and general influence – are to be found in factors not directly associated with globalization and neoliberalism, but certainly facilitated by it. The following rough categories of cases give some indication of the scope of the problem. Neoliberalism as deregulation Unions in two formerly regulated industries have been devastated by deregulation, as have many of the companies in the industries. Trucking: Trucking and warehousing are industries that were largely organized in the 1930s, 1940s and 1950s. Exact figures are hard to come by and to some degree the problems are inherent in the data. The reason for this is that a large percentage of shipping and warehousing employees work for non-trucking employers (e.g. industries including supermarket chains, auto companies or furniture suppliers); if these workers belong to a union, it is often the one that is the dominant union in their industry. Nevertheless, it is clear that deregulation of the trucking industry, beginning in 1980 has had a devastating effect on employers, employees and the unions, while greatly benefiting industrial shippers who now pay much lower rates. Deregulation has allowed the emergence of small (and not so small) low-wage, non-union shippers, who compete with and often drive out of business, unionized shippers. This has been especially true in the long haul, full truck load, market. As Michael Belzer notes in his now classic Sweatshops on Wheels (2000), many truckers have gone from well-paid union

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employees to minimum wage workers, often working 80–90 hours a week in unsafe conditions. After deregulation, union membership plummeted, and was only 25 per cent in 1990. By 1998, it had declined to 18 per cent (Belzer 2002: 330), and it continues to drop further today. As Belzer remarks, ‘It is reasonable to believe that at some point union contracts will be untenable in trucking. Without a very imaginative and aggressive effort, unionization may disappear entirely from the industry.’ (ibid.: 331). Employment in trucking continues to increase with almost three million directly employed in the industry, and has so far been largely unaffected directly by global competition, although the promise of NAFTA (North American Free Trade Agreement) to allow low-wage Mexican truckers greater access to US trucking routes could pose problems in the future. Airlines: Deregulation in the airline industry has driven most of the traditional major airlines either out of business or into bankruptcy. They have faced competition from low-cost and relatively low-wage carriers. Largest among these is Southwest Air, once a small regional carrier, now the largest US airline. The bankruptcies and attempts to stay solvent have forced the companies to make their unionized employees take substantial cuts in pay (sometimes as much as 30–40 per cent), losses of benefits (including huge losses in their pensions) and concessions in union and workplace rights. While fares for some (between major market cities) have become cheaper, fares to smaller areas (once guaranteed under airline regulation) have risen sharply or in many cases the routes have disappeared. Once an almost fully unionized industry, with only one major carrier non-union, the increasingly low-wage airlines are by and large non-union. Neoliberalism as privatization and outsourcing Previously unionized employees working for large firms have had their jobs outsourced to low-wage, non-union employers. In the private sector, janitorial services and cafeterias are among those that have been subcontracted. In government, this has meant outsourcing of often unionized, reasonably paying jobs to private, low-wage employers. At the local level, garbage collection is one service that some communities have privatized. The urge to privatize in the Bush administration has been taken to such extremes that many jobs in Iraq traditionally done by the armed forces, including food preparation, security and even interrogating prisoners have been outsourced, although in these cases, the amounts paid to the subcontractors in Iraq have often vastly exceeded the traditional costs. Auto parts is another industry in which traditionally union work, done by major auto companies, has been subcontracted to lower wage, non-union employees. Although there were initial failures of the UAW (United Auto Workers union) to organize these parts makers, currently both union and nonunion workplaces have been whipsawed by the shipping of much of the work overseas. Unionization among domestic auto parts employees has dropped from over 70 per cent to less than 15 per cent in recent decades.

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Intense employer offensives, a major cause of long-term US union decline Employer offensives have been a component of union difficulties in virtually all industries across the board. Construction: Construction is an area where employment has steadily been increasing for many years. Even from 1998 to 2003 it gained over one million jobs. It is estimated that in the 1960s a majority of construction workers were organized, and virtually totally organized in most of the US’s major cities. By 1977, union density had fallen to 37.9 per cent. In 1980, the US’s almost five million construction workers were 31.6 per cent organized. Construction is now an industry whose eight million employees are barely 13 per cent organized (see Table 6.11). The reasons for this are quite clear. The nation’s largest private construction users (the nation’s largest corporations) spearheaded a drive to break the nation’s construction unions. In 1969, America’s largest corporations organized the Business Roundtable whose goals of getting rid of construction unions and lowering wages have been largely successful. Construction unions were unprepared for the aggressiveness of this corporate onslaught and unable to mount successfully a counter-offensive (see Goldfield 1987: 191–2, 122 for a summary and additional data). Print media: In the US, as with most other countries the print media (especially newspapers and magazines) have been taken over by large multinational conglomerates. This has given them great ability and deep pockets in confronting union demands and strikes in any one particular locale. Local unions have characteristically taken on these conglomerates by themselves, without broad national and international alliances. Not surprisingly, they have been defeated badly in most cases, even in highly unionized urban areas like Detroit and Chicago. Changing technology and geography Mining: Mining is another industry whose workers were at one point almost completely organized. Changing technologies, involving both the elimination of many jobs, as well as the development of new machinery, have changed the nature of the work of miners, and involved the reconfiguration of the industry. Exhaustion of supplies in some areas (particularly in coal) have eliminated union strongholds, while unions have failed to organize successfully in newer geographical areas. In some parts of the mining industry, large multinationals have held out against miners and successfully destroyed their unions; in the 1980s such defeats occurred in the Phelps-Dodge copper strike Arizona and the lengthy salt miners’ strike against the Cargill Corporation in Lansing, New York.

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Missed opportunities and failures to organize Another major cause of union weakness is the lack of union dynamism, specifically a lack of willingness to place money, personnel and energies into the all important task of organizing new members into unions. These problems are especially striking in the so-called ‘landlocked’ industries, those which have hardly been impacted directly by global competition. Health care: Among the largest industries in the country and among the fastest growing are health care services. This industry, while affected by costcutting and mega insurance companies is hardly affected directly by globalization. Yet, despite areas of success (including hospitals in highly unionized cities, like New York, Detroit and Chicago) and recent successes in organizing nursing home employees by the Service Employees International Union (SEIU) and other unions, this sector, involving almost 14 million workers was just 7.1 per cent organized as of 2005 (see Table 6.11). Government employment: Like most EDCs, public sector employment in the US is immense, especially at the local level, which includes school teachers, police and firemen, sanitation workers and others. As of 2006, there were over 20 million public employees in the US. Although they are highly unionized in comparison to other sectors in the US (almost 40 per cent overall), their rate of unionization dwarfs that of other EDCs. Since there is not strong resistance by government to unionization in much of the United States and most governmental employees are quite pro-union, it is essentially a lack of organizing that keeps this sector from being more highly organized. Some successes There have, of course, been a number of dramatic successes in union organizing over the past few years. Organizing among hotel, resort and entertainment workers has at times been highly successful. One jewel in this regard for labour unions is Las Vegas, now almost a 100 per cent union town, with over 50,000 workers there organized into militant unions. Los Angeles, not long ago an antiunion area, is now highly unionized, in part a result of the militant, rapidly increasing Latino and immigrant workforce, tipping the balance of political influence in the state heavily in favour of unions. California itself, became majority non-white in the late 1990s, and is no longer considered fertile ground for Republican candidates at the national level. It is one of the few states whose union density has increased over the last decade (see Milkman and Voss 2004).9

Conclusions Globalization under neoliberalism has made and is making large changes in the world economy and the labour forces of virtually all countries, the US being no exception. The decline of union membership and union density among US workers in the past 50 years has to some extent been affected by global trade,

Private sector Agriculture and related industries Non-agricultural industries Mining Construction Manufacturing Durable goods Non-durable goods Wholesale and retail trade Wholesale trade Retail trade Transportation and utilities Transportation and warehousing Utilities Information3 Publishing, except internet Motion pictures and sound recording Broadcasting, except internet Telecommunications Financial activities Finance and insurance Finance Insurance

Occupation and industry

8,255 28 8,227 48 1,057 2,017 1,310 707 1,021 236 785 1,252 1,024 228 398 68 42 46 234 195 102 59 44

105,508

1,021 104,487 600 8,053 15,518 9,845 5,673 18,989 4,017 14,973 5,212

4,379 833 2,934 765

277 534 1,096 8,619 6,304 4,114 2,190

Total

15.0 8.6 21.4 2.3 1.6 1.4 2.0

23.4 27.4 13.6 8.8

2.7 7.9 8.0 13.1 13.0 13.3 12.5 5.4 5.9 5.2 24.0

7.8

43 48 248 238 132 77 54

1,071 239 422 74

30 8,931 57 1,111 2,127 1,382 746 1,122 259 864 1,309

8,962

% of Total employed

15.5 9.0 22.6 2.8 2.1 1.9 2.5

24.4 28.6 14.4 9.7

3.0 8.5 9.5 13.8 13.7 14.0 13.1 5.9 6.4 5.8 25.1

8.5

% of employed

296 522 1,183 8,841 6,503 4,308 2,195

4,459 840 3,105 833

1,059 106,786 632 8,444 15,643 10,072 5,571 19,245 4,100 15,145 5,299

107,846

Total employed

Total Members employed of unions1

Represented by unions2

2006

2005

Table 6.11 Union affiliations of employed wage and salary workers by industry (000)

30 31 245 168 92 52 40

991 237 372 58

25 7,957 48 1,097 1,827 1,190 637 957 201 756 1,227

7,981

Total

Members of unions1

10.3 5.9 20.7 1.9 1.4 1.2 1.8

22.2 28.2 12.0 7.0

2.3 7.5 7.5 13.0 11.7 11.8 11.4 5.0 4.9 5.0 23.2

7.4

32 40 261 206 123 73 50

1,042 245 404 63

27 8,660 56 1,146 1,949 1,263 686 1,023 215 808 1,287

8,688

% of Total employed

10.6 7.6 22.1 2.3 1.9 1.7 2.3

23.4 29.1 13.0 7.5

2.6 8.1 8.8 13.6 12.5 12.5 12.3 5.3 5.2 5.3 24.3

8.1

% of employed

Represented by unions2

92 292 98 194 1,434 435 999 333 118 215 122 93 181 175 7,430 954 1,838 4,638

2,315

10,951

6,468

4,483 17,357 3,312

14,045 10,658

1,869

8,790 1,459

7,331 5,596

4,799 20,381 3,427 5,874 11,080

3.7 36.5 27.8 31.3 41.9

1.3 3.2

2.4 8.3

6.3

7.1 3.1

4.3 8.3 13.1

1.5

2.7

4.0

188 8,262 1,134 2,056 5,071

113 194

243 130

134

1,121 377

221 1,632 511

120

341

107

3.9 40.5 33.1 35.0 45.8

1.5 3.5

2.8 8.9

7.2

8.0 3.5

4.9 9.4 15.4

1.9

3.1

4.6

4,873 20,392 3,381 6,102 10,908

7,436 5,689

8,857 1,422

1,781

14,313 10,638

4,798 17,853 3,540

6,601

11,398

2,338

172 7,378 960 1,843 4,575

83 177

214 131

112

1,005 326

184 1,483 478

90

274

77

3.5 36.2 28.4 30.2 41.9

1.1 3.1

2.4 9.2

6.3

7.0 3.1

3.8 8.3 13.5

1.4

2.4

3.3

191 8,172 1,139 2,049 4,984

103 198

244 141

126

1,132 370

213 1,694 562

116

329

82

3.9 40.1 33.7 33.6 45.7

1.4 3.5

2.8 9.9

7.1

7.9 3.5

4.4 9.5 15.9

1.8

2.9

3.5

Notes 1 Data refer to members of a labour union or an employee association similar to a union. 2 Data refer to members of a labour union or an employee association similar to a union as well as workers who report no union affiliation but whose jobs are covered by a union or an employee association contract. 3 Includes other industries, not shown separately. Beginning in January 2006, data reflect revised population controls used in the household survey. Data refer to the sole or principle job of full and part-time workers. Excluded are all self-employed workers regardless of whether or not their businesses are incorporated.

Source: BLS (2007).

Real estate and rental and leasing Professional and business service Professional and technical services Management, administrative and waste services Education and health services Educational services Health care and social assistance Leisure and hospitality Arts, entertainment and recreation Accommodation and food services Accommodation Food services and drinking places Other services3 Other services, except private households Public sector Federal government State government Local government

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especially the loss of three million manufacturing jobs between 2000 and 2003, many of them previously unionized. Globalization, however, is not the major cause of US union weakness and decline. Rather, it is a combination of two factors. First, is the capitalist offensive against unions and labour standards by US corporations that has been going on for decades. The tactics used, catalogued and described in Goldfield (1987), continue to develop and expand in scope and method to this day. Neoliberal policies, including privatization and deregulation have greatly added to the woes of workers and their unions. Second, it has been the failure of unions to put sufficient resources into new organizing, to develop strategies to confront the employer offensive and neoliberal policies, and to build sufficiently broad and solidaristic coalitions and alliances, both nationally and internationally, that has placed the US labour movement in the situation it finds itself today.

Notes 1 I wish to thank Debdas Banerjee, Robert Brenner, Kate Bronfenbrenner, Vivek Chibber and Richard Freeman both for help in locating data and for intellectual advice, and Sudheer Bonala and Matthew Cross for research assistance. 2 For the hard core version of the Washington Consensus see Bhagwati and Srinivasan 1984; Bhagwati 2002, 2004; for a more nuanced version see Williamson 1998, 2002a, 2002b, 2003, 2004a, 2004b; for a social democratic critique, see Bhaduri and Nayyar 1996. 3 To put it more strongly, the idea that the East Asian economies developed because of free trade policies is ludicrous, since they were generally able to develop precisely because they did not allow free trade or investment. For a penetrating comparison of the development models in India and South Korea, see Chibber 2003. 4 The growth of iron and steel production can be seen from Table 6.5. 5 By the late nineteenth century Bombay had become not only the centre for Indian textile manufacture, but had expanded its production and employment immensely. 6 Preliminary estimates for 2005 gave the figure at $800 billion. Krugman suggests the real figure was probably closer to $900 billion (Krugman 2006). 7 In 1950, worldwide vehicle production was 10.577 million units with 79.4 per cent produced in the US and Canada. By 1980, world production was 38.525 million units, with US and Canadian production rising, but then only 31.3 per cent of worldwide production. US and Canadian production continued rising until 1994, from which point it has remained relatively stable numerically. World production, however, has continued to grow rapidly, reaching 63.693 units in 2004, with US and Canadian percentages down to 22.9 per cent (Ward’s Database Opers.) 8 Certain of the key tables and figures from the Luce and Bronfenbrenner report are reproduced here (with permission). Although their media tracking methodology – as they readily acknowledge – greatly underestimates the numbers involved, in the absence of more comprehensive government data, it is the only careful study that sheds light on the critical trends about which others merely speculate. In particular, the relative numbers of jobs and shifts, the types of industries and the countries of destination given by their data, are most likely a fairly accurate sample, giving us the only real picture of what is going on here. 9 Milkman and Rooks (2003: 4) note the increase in union density in California from 16.1 per cent of wage and salary workers in 1998 to 17.8 per cent in 2002, going counter to national trends and the tendencies in most other highly unionized states. On recent successes among Mexican immigrants in California, see Milkman (2005).

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Bibliography Anderson, P. (2002) ‘Force and Consent’. New Left Review, 17 Sep./Oct.: 5–30. Baldwin, R. E. (2003) The Decline of US Labour Unions and the Role of Trade. Washington, DC: Institute for International Economics. Belzer, M. H. (2000) Sweatshops on Wheels: Winners and Losers in Trucking Deregulation. Oxford: New York. —— (2002) ‘Trucking: Collective Bargaining Takes a Rocky Road’, in P. F. Clark, J. T. Delaney and P. C. Frost (eds) Collective Bargaining in the Private Sector. Champign. IL: Industrial Relations Research Association. Bhaduri, A. and D. Nayyar (1996) The Intelligent Person’s Guide to Liberalization. New Delhi: Penguin Books. Bhagwati, J. N. (2002) ‘Coping with Anti-Globalization’. Foreign Affairs, 19(1) Jan./Feb. —— (2004) In Defense of Globalization. Oxford: Oxford University Press. Bhagwati, J. N. and T. N. Srinivasan (1984) Lectures on International Trade. Cambridge, MA: MIT Press. Bivens, J. (2004) ‘Shifting Blame for Manufacturing Job Loss: Effect of Rising Trade Deficit Shouldn’t Be Ignored’. Economic Policy Institute, EPI Briefing Paper No. 149, 8 April. BLS (Bureau of Labor Statistics) (various years) Department of Labor, Washington, DC. Brauer, D. (2004) ‘What Accounts for the Decline in Manufacturing Employment?’ Report by the Congressional Budget Office, Washington, DC, 18 February. Brenner, R. (1998) ‘The Economics of Global Turbulence: A Special Report on the World Economy, 1950–98’. New Left Review, (229) (May/June): 1–264. —— (2002) The Boom and the Bubble: The U.S. in the World Economy. London: New York. —— (2004) ‘New Boom or New Bubble: The Trajectory of the US Economy’. New Left Review, 25 Jan./Feb.: 57–100. —— (2006) The Economics of Global Turbulence: The Advanced Capitalist Economies from Long Boom to Long Downturn, 1945–2005. London: Verso. Bronfenbrenner, K. (2000a) ‘Uneasy Terrain: The Impact of Capital Mobility on Workers, Wages, and Union Organizing’. US Trade Deficit Review Commission, Washington, DC. —— (2000b) ‘Uneasy Terrain: The Impact of Capital Mobility on Workers, Wages, and Union Organizing. Part II: First Contract Supplement.’ US Trade Deficit Review Commission, Washington, DC. Bronfenbrenner, K. and R. Hickey (2003) ‘Blueprint for Change: A National Assessment of Winning Union Organizing Strategies’. Office of Labour Education Research, Washington, DC. CBO (Congressional Budget Office) (2004) ‘What Accounts for the Decline in Manufacturing Employment?’ CBO Brief, 14 February. Online, available at: www.cbo.gov. Chibber, V. ‘From Class Compromise To Class Accommodation: Labour’s Incorporation Into The Indian Economy’. (Draft in author’s possession.) —— (2003) Locked in Place: State-Building and Late Industrialization in India. New Jersey: Princeton University Press Clark, P. F., J. T. Delaney and A. C. Frost (eds) (2002) Collective Bargaining in the Private Sector. Champign. IL: Industrial Relations Research Association. Dumenil, G. and D. Levy ‘The Economics of U.S. Imperialism at the Turn of the 21st Century’ (Draft in author’s possession.)

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—— (2004) Capital Resurgent: Roots of the Neo-liberal Revolution. Cambridge, MA: Harvard University Press. Elliott, K. A. and R. B. Freeman (2003) Can Labour Standards Improve Under Globalization? Washington, DC: Institute for International Economics. Freeman, R. B. (2003) ‘Trade Wars: The Exaggerated Impact of Trade in Economic Debate’. Nottingham: Leverhulme Center for Research on Globalisation Economic Policy University of Nottingham, UK – also published in World Economy, 27(1) (2004). Goldfield, M. (1987) The Decline of Organized Labour in the United States. Chicago: University of Chicago Press. —— (1993) ‘Race and the CIO: The Possibilities for Racial Egalitarianism During the 1930s and 1940s’. International Labour and Working-Class History, 44 Fall: 1–32. —— (1994) ‘Race and the CIO: Reply to Critics’. International Labour and Working Class History, 46 Fall: 142–60. —— (1997) The Color of Politics: Race and the Mainsprings of American Politics. New York: New Press. Hilsenrath, Jon E. (2004) ‘Forrester Revises Loss Estimates to Overseas Jobs’, Wall Street Journal, 17 May: A8. Juravich, T. and K. Bronfenbrenner (2003) ‘Out of Ashes: The Steelworkers’ Global Campaign at Bridgestone/Firestone’ in W. N. Cooke (ed.) Multinational Companies and Global Human Resource Strategies. Westport, CT: Quorum Books, Ch. 12. Kletzer, L. G. (2001) Job Loss from Imports: Measuring the Costs. Washington, DC: Institute for International Economics. Krugman, P. (2006) ‘CSI: Trade Deficit’, New York Times, 24 April: A23. —— (2002) Imports, Exports, and Jobs: What Does Trade Mean for Employment and Job Loss? Kalamazoo, MI: W.E. Upjohn Institute for Employment Research. Lipsitz, G. (1994) Rainbow at Midnight: Labour and Culture in the 1940s. Chicago: University of Illinois Press. Luce, S. and Bronfenbrenner, K. (2004) ‘The Changing Nature of Corporate Global Restructuring: The Impact of Production Shifts on Jobs in the US, China, and Around the Globe’. Submitted to US–China Economic and Security Review Commission. Online, available at: www.news.cornell.edu/releases/Oct04/jobs.outsourcing.rpt. 04.pdf. Milkman, R. (2005) ‘Labour Organizing among Mexican-born Workers in the U.S.: Recent Trends and Future Prospects’. Unpublished manuscript. Milkman, R. and D. Rooks (2003) ‘California Union Membership: A Turn-of-theCentury Portrait’, The State of California Labour, Berkeley: University of California Press. Online, available at: www.iir.ucla.edu/scl/pdf03/scl2003ch1.pdf. Milkman, R. and K. Voss (2004) Rebuilding Labour: Organizing and Organizers in the New Union Movement. Ithaca, NY: Cornell University Press. NLRB (various years) Annual Reports of the National Labor Relations Board, Washington, DC. OECD (2003) Unpublished data. Paris: Organization for Economic Cooperation and Development. Rocha, G. M. (2002) ‘Neo-Dependency in Brazil’, New Left Review, 16 July/Aug.: 5–34. Rock, D. (2002) ‘Racking Argentina’. New Left Review, 17 Sep./Oct.: 55–86. Rosen, E. I. (2002) Making Sweatshops: The Globalization of the U.S. Apparel Industry. Berkeley: University of California Press. Silver, B. J. (2003) Forces of Labour: Workers’ Movements and Globalization Since 1870. Cambridge: Cambridge University Press.

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Stiglitz. J. E. (2003) Globalization and its Discontents. New York: Norton. Temin, P. (1964) Iron and Steel in Nineteenth-Century America, An Economic Inquiry. Cambridge, MA: MIT Press. Warren, K. (1973) The American Steel Industry, 1850–1970: A Geographical Interpretation. Oxford: Clarendon Press. Williamson, J. (1998) ‘Globalization: The Concept, Causes and Consequences’. Keynote Address to the Congress of the Sri Lankan Association for the Advancement of Science, 15 December. Online, available at: www.iie.com/publications/papers/ williamson1298–2.htm. —— (2002a) ‘Review of Globalization and its Discontents’, by J. E. Stiglitz, June. Online, available at: www.iie.com/publications/papers/williamson0602.htm. —— (2002b) ‘Did the Washington Consensus Fail?’ Outline of remarks at the Center for Strategic and International Studies, 6 November. Online: available at: www.iie.com/ publications/papers/williamson1102.htm. —— (2003) ‘The Poor Need a Stake in Developing Countries’. Op-ed from Financial Times, 7 April. —— (2004a) ‘The Washington Consensus as Policy Prescription for Development’. Lecture for the series ‘Practitioners of Development’, World Bank, 13 January. Online, available at: www.iie.com/publications/papers/williamson0204.pdf. —— (2004b) ‘A Short History of the Washington Consensus’, Washington Consensus Towards a New Global Governance, World Bank, 24–25 September. Online, available at: www.iie.com/publications/papers/williamson0904–2.pdf.

7

Global pressure and minimum wages Howard Guille

The neoliberal project – as ideas, rationale and politics – was the distinctive feature of globalization in the fourth quarter of the twentieth century. In a way neoliberalism denied any place for politics in economic matters and extended US President Reagan’s statement that ‘government is not the solution to our problem; government is the problem’.1 Two central notions are that free and competitive markets should be supreme over governments, and that individuals are superior to collectives. Even so, neoliberal ideas, in their fullest form, extend beyond marketization and have informed a far-reaching policy agenda including liberalization of trade and capital investment, deregulation of labour and product markets, privatization of public utilities backed by market exchange rates and monetary stability. In the affluent countries of what was then the First World, the politicians who adopted neoliberal policies euthanized various forms of ‘social liberalism’ and government political responsibilities for full employment, social welfare and a modicum of equality. In the poorer countries of the Third World, the turn to the neoliberal market meant a conscious abandonment of ideas of what remained of national development, self-reliance and national control of a national economy. In all countries, the acceptance of market rules meant that the pursuit of economic growth through efficiency was put before the pursuit of equality. Neoliberal globalization transformed rather than displaced what was expected of national governments and states. Countries and workforces were brought into what Gregory Albo terms as ‘competitive austerity’2 scrambling for investment and employment opportunities and being forced to accept the discipline of global finance. The task of national governments has come to force such arrangements upon their economies and peoples. In countries of the First World, the burden of competitive austerity and adjustment to financial discipline falls on labour, while in the Third World the burden is shared with rural producers and those in the informal economy. The power of global markets was stated quite starkly in 1997 by Michael Camdessus then Director of the International Monetary Fund (IMF); ‘Good policies are rewarded with greater access to international capital markets, higher investment, more jobs and stronger growth. . . . Poor policies, on the other hand, risk financial crisis or marginalization, with all their negative consequences.’3 Of course for the IMF, ‘good policies’ are market policies. Moreover, the IMF took the lead in imposing neoliberal policies

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through the structural adjustment programmes ostensibly ‘negotiated’ with client governments. In many places, the task was shared with the World Bank, which imposed conditions upon receipt of assistance for longer-term structural assistance and poverty alleviation. ‘Labour market flexibility’ is and has been heavily promoted by neoliberals and frequently forms part of structural adjustment and poverty reduction programmes.4 Put plainly such flexibility means making it easier for employers to dismiss workers and making it more difficult for workers to form unions and improve pay and conditions. A central element is the removal of industry and economy-wide standards of pay and conditions and especially the removal or substantial reduction in minimum standards. This is most usually justified in terms of linking pay to productivity and of ‘not pricing workers out of jobs’. According to Stiglitz, ‘a lot of theory treated labour like any other commodity without recognizing some of the critical ways in which labour is different’.5 The World Bank continues to advocate reducing labour regulation and a heavily promoted part of the World Bank’s website is a section called ‘Doing Business’, which provides information on what are termed ‘objective measures of business regulation’. One of the topics is ‘employing workers’ or the ‘flexibility of labour regulations’ that covers the difficulty of hiring a new worker, rigidity of rules on expanding or contracting working hours, the non-salary costs of hiring a worker and the difficulties and costs involved in dismissing a redundant worker.6 While the World Bank claims the information is ‘neutral’, the International Confederation of Free Trade Unions (ICFTU) has documented how ‘Doing Business’ has been used by the World Bank and IMF to ‘force countries to do away with various kinds of workers’ protection’.7 The ICTFU documents the pressures put directly upon Colombia, Nepal, Romania and South Africa. Similarly, the Bretton Woods Project reports that the IMF has recently given strong advice on labour deregulation to ‘Japan, the Latin American region, emerging Asian economies and to France, Korea, Serbia and Poland’.8 Since the late 1980s, Papua New Guinea (PNG) and its people have been subject to the full liberal market orthodoxy of structural reform, tariff reduction, public service reform, deregulation, introduction of a value-added tax and privatization. Individually and severally, the changes have been justified as the way to ensure employment, economic goodness, efficiency, growth and competitiveness. The strongest advocates of the policies have been advisers, consultants and academics from outside PNG including the World Bank and the IMF. The institutional arrangements for industrial regulation and the level of wages and conditions were particular targets for the advocates of liberal economic policies. This is especially instructive because the industrial relations arrangements were among the best developed of Asia–Pacific countries including a constitutional guarantee of freedom of association, ratification of 26 International Labour Organization (ILO) Conventions and comprehensive legislation on employment and industrial relations.9 This chapter will document and analyse some outcomes of the deliberate cutting of minimum wages in PNG including changes in the returns to capital

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and labour, in employment and in movement of capital. The chapter draws on research undertaken for the PNG Trade Union Congress presented to the 2000 National Minimum Wage Board.10 It also has a wider application as a direct test of the economic and social justice consequences of the global pressure for the market-led arrangements of the neoliberal project.

Some background PNG occupies the eastern half of the Island of New Guinea, which is the second largest island in the world after mainland Australia. PNG gained independence from Australian Trusteeship in 1975 and is a unicameral parliamentary democracy. It has a population of 5.4 million (2002), nominal GDP (2002) of US$2.8 billion and GDP per capita (2002) US$514.11 PNG has a dual economy with the majority of the population in subsistence agriculture but with enclave production of minerals including gold, copper and petroleum for export. Various agricultural commodities are produced for export including coffee, cocoa and palm oil and there has been increasing exploitation of tropical timbers. The latter has been the subject of considerable concern within PNG and among environmental and international organizations. The closure of the Panguna Mine in 1989 and the conflict over ownership rights and Bougainville autonomy reversed the rate of material economic development. In its last full year of operation, the Panguna Mine provided 35 per cent of export revenue, 8 per cent of GDP and 16 per cent of government revenue.12 According to Curtin, the closure of Panguna forced the government to apply for balance of payments and budget support loans from the IMF and the World Bank.13 More generally, there is a widespread judgment that, on conventional measures, economic performance in PNG has been less than adequate; Muwali states that ‘overall economic performance judged in terms of GDP growth or formal employment growth has been crisis prone and chronically poor’.14 The Asian Development Bank (ADB) links this to the dual structure of the economy stating that PNG enjoys substantial revenue from resource extraction, but it has been largely unable to translate national income into human development.15 Despite significant wealth generated from mineral exploitation over the last 20 years, the sector has provided few jobs. The result is significant wealth coexisting with widespread and often severe poverty.16 Human and social development in PNG has lagged economic development as is demonstrated by comparing economic and human development indicators. PNG is classified by the United Nations Development Programme (UNDP) among the medium developed countries but is placed the lowest of the Oceanic Pacific countries. The low Human Development Index (HDI) is because of lower levels of literacy, school enrolment and life expectancy. Comparative data between PNG, Fiji, Vanuatu, Solomon Islands, Indonesia and Philippines is provided in Table 7.a.1B in the Appendix to this chapter. There is poverty in PNG. Its increase was even acknowledged in 1999 by the then Prime Minister Sir Mekere Morauta:

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The poverty level in Papua New Guinea is considerably higher than neighbouring Pacific countries, with 35 per cent of the population falling below the poverty line, while 93.5 per cent of the poor are rural based. Papua New Guinea had 0.5 million people living in poverty in 1985 and by 1996 this figure has risen to 1.0 million. In terms of a head-count index, 15.7 per cent were afflicted by poverty in 1985 and this had risen to 21.7 per cent in 1996.17 There is also considerable income inequality. Both the Gini Coefficient and the ratio of the income of top 20 per cent to the bottom 20 per cent are shown in Table 7.a.1. Inequality is relatively high in PNG on both measures; the Gini Coefficient is 50.9 compared to 34.3 in Indonesia and the ratio of top to low incomes is 12.6 times compared with 5.2.

The minimum wage in the 1990s Under the Industrial Relations Act, the Industrial Registrar, empowered by a specific Ordinance of the Minister of Labour, may commission a Minimum Wages Board to review the level and application of the minimum wage,18 whose recommendation is binding on all employers. The first minimum wage was established in 1977; this had separate rural and urban rates. From 1979, the minimum wage was indexed according to consumer price increases and with periodic Wages Board review of the basic amount. In 1992, the minimum wage was cut from K61.60 per week to K22.9619 and automatic indexation according to price increases was abolished. Wages above the minimum were deregulated so that these were to be predominantly set by negotiation and not arbitration and linked to performance and productivity. In 1994, in response to a rapidly increasing budget deficit, a range of economic measures were taken including devaluation and floating of the kina, higher interest rates and cuts to government expenditure and reduction in public sector employment.20 The World Bank provided loan assistance of US$50 million; this loan was conditional on the ‘achievement of a satisfactory macroeconomic stabilization program with the IMF’.21 Writing at the time of the stabilization programme, the Assistant Head of the Australian Aid Bureau argued that its essential elements were civil service reform, privatization and reducing real wage rates. Of the latter, he wrote, ‘A significant deterrent to a supply and employment response to economic adjustment in Papua New Guinea is the country’s very high nominal and reservation wage rates and low labour productivity.’22 Furthermore and with seeming approval, he estimated that the rising inflation, arising substantially from significant exchange rate depreciation, and nominal wage rises in 1995 and 1996 of far less than inflation, imply a real wage reduction yield of around 18 per cent.23 In case this was not enough, Muwali lists ‘abolish statutory minimum wage: repeal legislation and leave to market forces’ as the sixth of 27 elements of the structural adjustment programme required by the World Bank and IMF.24

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Throughout the 1990s to the present, the structural adjustment programme met serious resistance from unions, women’s groups and students. Much of this was against privatization proposals but also in 1997 became embroiled in the Sandline issue and the attempt to use mercenaries to suppress Bougainville. As Barcham writes, ‘increased public dissatisfaction was made most evident when a number of women’s groups, representatives of NGOs and members of the general public joined forces with the trade unionists in a march on Parliament in November 1998’.25 As part of the settlement of the industrial action and demonstrations, the Skate government agreed to review the minimum wage. After various delays, the case was heard in mid-2000. By this date, the composition of the government had changed with Sir Mekere Morauta as Prime Minister. The Minimum Wages Board issued a recommendation in December 2000 to increase the minimum wage from the date of gazettal to K62.40 a week. This was an increase of 2.7 times. The rates were also to be increased by K6 per week in each of the second and third years after gazettal. In March 2001, the government overruled the decision of the Industrial Registrar to gazette the increased minimum wage. It did so on the grounds of its macroeconomic and employment consequences.26 The government made an immediate small adjustment of K2 per week in the minimum wage and proposed discussions between peak employer and union organizations. An increase of K24.68 to K37.20 a week was agreed in November 2003.

A sustained campaign against wage regulation The attack on minimum wages and wage regulation was part of more general pressure on PNG to adopt liberal market policies and an export-led model of development. In the 1980s, the first targets were the level of wages, wage indexation and the ‘hard kina’ policy, which the liberalizers linked together.27 Much of the criticism came from economists at Australian National University including Professor Helen Hughes who from the 1970s to the 1990s was a major adviser to the Australian government’s policy on trade and development.28 The criticism continues with Hughes writing in 2002 about wages in PNG in the 1970s and 1980s that, The public service trade union benefited from egregiously high wages that were totally inappropriate to Papua New Guinea’s level of development. These had famously been negotiated by Bob Hawke. This was a new approach to de-colonization. Instead of working up the ladder of productivity to higher wages, Papua New Guinea was to start at the top for the privileged few with jobs in the formal sector.29 The attack on minimum wages and collective regulation of wages was intense. The tenor is clear from the following comments made by Hughes in 2000 about PNG:

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Industrial relations are another big problem for the economy, as its institutional structure was copied from Australia. The award structure includes long service leave that is unique to Australia, New Zealand and PNG. Wages and on costs are so high that formal employment has not risen in PNG for twenty years.30 The last sentence of the quotation is the kernel of the neoclassical argument that too high wages are the cause of unemployment and the so-called ‘failure of markets to clear’. The argument was advocated strongly in the 1980s and 1990s in Australia, New Zealand and PNG. It informed the deregulation and cuts to the minimum wage in PNG in 1992, the abolition of the arbitration system in New Zealand in 1994 and the Workplace Relations Act in Australia in 1996. Unsurprisingly, papers by Hughes were part of the 500 pages of economics articles given to the members of the 1988 and 1992 Minimum Wage Boards in PNG.

The decision of the 1992 Minimum Wages Board The 1992 Board succumbed to the advocates of market economics and made a number of recommendations that were adopted by the government. These were: • •

• • •

discontinue the practice of separate urban and rural wage rates with the urban rate twice the rural one; set a single national minimum wage of K22.96 by applying the rural wage to all places; this rate was to apply to people taking new jobs in urban centres; set a national youth rate at 75 per cent of the national minimum to apply to new entrants; abolish regular and automatic indexation of the minimum wage according to the change in the cost of living; restrict the determination to the minimum level of general labourer and deregulate wage levels for semi-skilled workers and tradespeople.31

The decision was a massive change since it halved the minimum urban wage and abolished indexation arrangements that had ensured the maintenance of the minimum wage in real terms. The minimum wage was the actual wage for most people who were in formal employment in the private or market sector, especially plantations, retail and wholesale workers, security, transport, PTV and taxi operators. The Board explicitly recognized that the decision meant ‘deregulation’ of the wage system and a turn to the market and stated ‘in a deregulated wage system, wages are determined by market forces’.32 Moreover, the Board accepted arguments that flexibility and deregulation would promote employment and economic growth and endorsed the theories of market economics that wages should respond to supply and demand. The Board endorsed the government’s advice,

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first presented in 1989, that the ‘benefits of deregulation are assessed to be considerable’. In particular, There are clear theoretical arguments supporting the view that a more flexible wages system will raise total employment by substituting labour for capital and by lowering production costs, improving competitiveness and the capacity for reinvestment. It also lessens incentive effects for rural to urban migration.33 This quote includes some central themes of the neoclassical approach including the notion that the existence of unemployment and underemployment indicates that wages are too high; once wages fall, rational employers will hire more labour instead of using capital. In turn, as production costs fall, profits will increase and this will promote the expansion of production. The 1992 Board accepted, without criticism, a range of ‘expert’ and ‘independent’ evidence from market economists and international organizations presented by the government. For example, the studies by Hughes (1988), World Bank Reports (1988 and 1991) and the ADB (1988) made reference to high wages and the centralized wage system in PNG being major factors constraining private investment, production and employment growth.34 In summary, the Board accepted the arguments of market theorists and recommended that the minimum wage for urban workers should be cut in half in the name of expanding employment, exports and investment. The same reasoning and belief in the logic of liberal market economics still permits AusAid to be able to claim that ‘Since 1992, following the deregulation of wages and the float of the kina, the economy has been significantly transformed.’35 Labour market deregulation was only one element in applying the market to PNG. The government of PNG made its first application for assistance from the World Bank and the IMF in 1989–90, and subsequent applications were made in 1995–96 and 2000–02. All required the governments of PNG to sign conditionality agreements with the IMF, committing to the implementation of liberal market economics including both privatization of public assets and deregulation of state administrative controls. Muwali lists one of the conditions in the 1995–96 programme agreed with the IMF and the World Bank as ‘abolish the statutory minimum wage; repeal legislation and leave [wages] to market forces’.36 The World Bank took this position more generally; Bargh writes that: In a Regional Economic Report the World Bank recommends that, ‘Governments . . . need to ensure that labour markets are flexible and that firms have the ability to hire and dismiss or reallocate workers easily and that pay is determined by market forces’.37 A World Bank summary of the 1995–96 commitments accepted by the PNG government is set out in Table 7.1.

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The policies listed in Table 7.1 are those that referred to as the Washington Consensus38 and which characterized World Bank and IMF orthodox advice from the mid-1980s.

Whither wages The 1992 Minimum Wages Board Decision cut the urban minimum wage in half to K22.96 per week. This was less in cash terms than the first minimum wage set in 1977 of K28.10 per week. However, a more instructive comparison is the real value of the minimum wage that is taking account over time of the impact of changes in the cost of living on the purchasing power of the wage. Figure 7.1 shows the level of the real urban minimum wage from 1977 to March 2000. Figure 7.1 demonstrates that the minimum wage was maintained in real terms from 1979 to 1992; shown by the more or less horizontal line of the graph. The minimum wage rate was automatically indexed for changes in the cost of living during this period. The wage cut in 1992 is shown by the steep descent of the line and there is then a steady fall in the real value as shown by the graph falling to the right. This is the result of the cessation of indexation as part of the 1992 Minimum Wages Board Decision. The lack of indexation meant that by 1999, the minimum wage was worth half of the 1992 figure. Put another way, the real cost of employing someone on the minimum wage in 1999 was one-quarter of what it was in the period 1979–92.

Table 7.1 Structural adjustment programme objectives and strategies, 1995–96 1995

1996

• Restoring fiscal discipline by reducing the fiscal deficit, freezing wages and imposing restrictive monetary policy and a flexible exchange rate.

• Maintaining financial stability through continued tight fiscal policy – particularly controls on firm spending, moderation of wage increases, a cautious monetary stance and strengthening of monetary instruments. • Promoting private sector activity through increased infrastructure investment and better service delivery, expansion in private sector credit, liberalization of trade and progress toward comprehensive tax reform and privatization.

• Implementing structural reforms, including reallocating government spending to infrastructure and social programmes, civil service restructuring and better systems for monetary control and exchange rate determination, partially decontrolling prices, and enhancing private sector activity.

Source: World Bank Report No. 19388–PNG, ‘Papua New Guinea Improving Governance and Performance’, 22 October 1999: Box 2.2 p. 51 online, available at: lnweb18.worldbank.org/eap/ eap.nsf/Attachments/PNG+CEM+-+Cover+and+TOC/$File/Cover+and+TOC.pdf. (accessed 21 March 2007).

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50 45

Kina per week

40 35 30 25 20 15 10 5

19

7 19 7 7 19 8 7 19 9 8 19 0 8 19 1 8 19 2 8 19 3 8 19 4 8 19 5 8 19 6 8 19 7 8 19 8 8 19 9 9 19 0 9 19 1 9 19 2 9 19 3 9 19 4 9 19 5 9 19 6 9 19 7 98 19 99

0

Figure 7.1 Real urban wage in 1997 kina (source: Calculated using data from National Statistical Office of Papua New Guinea Economic Indicators (various years)).

Whither the economy The following is a composite statement of what the Board thought the 1992 Decision would achieve: assist in generating economic activity and employment in PNG (p. 17) and sustain the agricultural sector while at the same time generate employment (p. 21) and, wage policy must be flexible enough to induce better employment opportunities throughout the economy. 39 The 1992 Minimum Wages Board was persuaded that employment would be stimulated by flexible wages. Figure 7.2 shows the change in total employment and rural employment from 1982 to 1999. The term rural employment is used to cover agriculture, forestry and fisheries. Figure 7.2 shows the changes that have occurred in the formal labour force, which is defined to include working for wages, self-employed or running a business.40 Total employment grew between 1982 and 1990, since then it has fluctuated but has never been more than six percentage points above the level when the minimum wage was changed in 1992. As such, employment has not kept pace with growth in the population and potential labour force. Rural employment grew consistently in the years between 1982 and 1992; the total increase over the period was 20 percentage points. Rural employment was one-quarter higher in 1992 than in 1982. However, in the period since the change in the minimum wage, rural employment has fallen (with the exception of 1994). In 1999, the level of rural employment was almost the same as that in 1982. Data presented in the IMF Country Study confirm this view showing virtually static

Employment index (1992  100)

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110 100 90 80 70

Total employment Rural employment

19

82 19 83 19 84 19 85 19 86 19 87 19 88 19 89 19 90 19 91 19 92 19 93 19 94 19 95 19 96 19 97 19 98 19 99

60

Figure 7.2 Changes in employment, 1982–1999 (June 1992 = 100) (source: Calculated from Bank of Papua New Guinea, Quarterly Economic Bulletin (various years). Figures for 1999 are geometric mean for three quarters).

total employment in the period after the Minimum Wage Case and a considerable fall in agriculture, fisheries and forestry.41 On this evidence, it is difficult to conclude that the 1992 Minimum Wages Determination has been successful in stimulating employment. Scott (1997) suggests: Thus, despite quite rapid economic growth during the 1990s – notwithstanding the crisis in 1994–95 – employment structure has not followed the path of other rapidly growing countries in the Asia-Pacific region. In general, neither manufacturing nor service sectors offered substantial new employment opportunities, either for new job seekers or for those who might be seeking to shift out of low productivity jobs. Nor have successive devaluations in 1990 and 1994 provided the expected stimulus to wage employment.42 The Scott report (1997) is a substantial review of employment and training matters and, as shown above, concludes that there have been few new employment opportunities in PNG in the 1990s. The report also discusses the changes to the minimum wage and states that ‘The impact on employment has been muted . . . although it is probably too early to assess the full impact of the policy’.43 By 2000, the government of PNG also appeared to be moving to accept that cutting wages had not led to increased employment and was considering other factors than wage levels. The Economic and Development Policy Statement made as part of the 2000 Budget recognizes that there has been ‘slow growth in formal employment’ and attributes this ‘in large part to low human capital and corresponding low labour productivity and negative effective rates of protection in the renewable resource industries of agriculture and fisheries’.44

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This represents a considerable shift from the definitive arguments presented to Minimum Wage Boards in 1988 and 1992 that wage cuts and market flexibility would create employment.

Agricultural production, wages, employment A second objective of the 1992 Minimum Wages Board Decision was to sustain agricultural production. The term rural will be used to cover agricultural production (including cocoa, coffee, copra, palm oil and tea) and forestry (logs, wood chip and timber products). The value of exports of agricultural commodities fluctuated in the 1980s reaching a peak of K331.9 in 1986 before declining to K204.6 in 1990. In the 1990s the value of exports increased in all years. Overall, agricultural commodity exports in 1999 were five times the value of those in 1990. The value of forestry exports increased in the 1980s but the most substantial increases occurred in the 1993–97 period with exports around ten times the value of 1980. Exports were lower in 1998 and 1999; this is generally accepted to be a consequence of the Asian financial crisis. Increases in the value of agriculture and forestry exports have occurred despite the static levels of rural employment that were shown in Table 7.1. Table 7.2 Value of agriculture and forestry exports Year

1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999

Agriculture

■■■■

Forestry

Actual kina (m)

Index

Actual kina (m)

Index

238.1 174.8 174.4 231.5 380.6 330.2 331.9 268.9 255.2 270.1 204.6 204.6 223.6 270.1 374.6 502.4 578.6 777.2 1,020.2 1,165.0

100.0 73.4 73.2 97.2 159.8 138.7 139.4 112.9 107.2 113.4 85.9 85.9 93.9 113.4 157.3 211.0 243.0 326.4 428.5 489.3

45.8 43.9 61.7 54.7 81.7 67.3 74.7 110.9 97.5 96.2 79.6 90.2 148.2 410.4 494.4 449.7 480.3 433.6 173.2 265.9

100.0 95.9 134.7 119.4 178.4 146.9 163.1 242.1 212.9 210.0 173.8 196.9 323.6 896.1 1,079.5 981.9 1,048.7 946.7 378.2 580.6

Source: Calculated from Bank of Papua New Guinea, Quarterly Economic Bulletin (various issues). Note Index is 1980 = 100.

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The most important pattern is that the combined value of rural exports increased by six times between 1982 and 1999 but formal employment in agriculture and forestry was static. Significantly, the largest increase in exports occurred in the 1990s, after the minimum wage case. Yet, as previously discussed, formal employment fell in this period. The relationship between the value of agricultural exports and rural employment is demonstrated in Figure 7.3. This compares the index changes over the period 1980 to 1999. As can be seen the level of employment has been virtually static and, especially since 1992, there is no relationship with the increasing value of exports. Arguably there could be a more direct link between employment and the volume rather than the value of rural exports. This is examined in Figure 7.4 that compares the index in rural employment with the index of changes in the volume of rural exports from coffee, forestry and palm oil.45 Data on export volumes and a weighted index of annual changes are shown in Table 7.3. The changes in the volume of rural exports are quite similar to the changes in value. Volumes increased, with some fluctuations, to be one-third higher in 1992 than 1982. The volume increased sharply in the 1990s to be almost two-and-ahalf times higher by the mid-1990s. There was some reduction in the late 1990s but the quantity exported in 1999 was still twice that in 1982. Figure 7.4 compares the changes in the volume of rural exports with the index change in rural employment. As can be seen, both the volume of exports and the level of employment increased over the 1980s with the level of agricultural employment in 1992 being a quarter higher than in 1982. However, the level of employment started to decline in 1995 and by 1999 was at the 1982 level. Very major questions are raised about who benefited from 700 Index rural employment Index value rural exports

600

Index 1982  100

500 400 300 200 100

19

82 19 83 19 84 19 85 19 86 19 87 19 88 19 89 19 90 19 91 19 92 19 93 19 94 19 95 19 96 19 97 19 98 19 99

0

Figure 7.3 Index of rural employment and value of rural exports (1992–99).

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Table 7.3 Volume of rural exports 1980–99 (export volume 1980 = 100) Year

Palm oil (weight = 0.15)

Logs (0.30)

Coffee (0.55)

Weighted index

1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999

100.0 132.0 230.1 233.7 389.4 371.1 366.8 291.8 316.2 396.7 429.2 465.7 550.3 729.3 692.1 542.3 800.6 824.5 638.7 761.1

100.0 121.2 171.0 162.3 206.8 187.4 206.5 234.6 195.5 218.4 160.2 171.8 259.0 384.3 476.3 406.5 413.2 393.4 177.8 218.7

100.0 92.3 80.6 103.0 96.9 79.7 104.4 127.0 88.1 167.3 124.1 82.5 100.2 117.9 126.9 108.1 122.3 116.1 163.8 155.3

100.0 106.9 130.1 140.4 173.7 155.7 174.4 184.0 154.5 217.0 180.7 166.8 215.4 289.5 316.5 262.8 311.3 305.6 239.2 265.2

Source: Calculated from Bank of Papua New Guinea, Quarterly Economic Review (various issues).

300

Index 1982  100

250

Index rural employment Index weighted export volumes

200 150 100 50

19 82 19 83 19 84 19 85 19 86 19 87 19 88 19 89 19 90 19 91 19 92 19 93 19 94 19 95 19 96 19 97 19 98 19 99

0

Figure 7.4 Volume of rural production and employment.

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the expansion of rural exports. There was a sixfold increase in the value of exports and no or next to no increase in formal employment. There is a very strong argument that the benefits have been weighted to production and marketing companies, not farmers and landholders.

Wages, employment and production No increase in employment was recorded and it appears that rural employment and the real value of the minimum wage have both fallen. Table 7.4 shows some simple statistical tests of the relationship between the volume of rural exports, employment and the actual rural minimum wage. The first set of calculations show that for the whole period, 1982–99, there was a very weak positive relationship between changes in the minimum wage and changes in the level of employment. In the period up to 1992, the correlation coefficient is found to be –0.39. This relationship, while of moderate statistical strength, is in the direction predicted by market economics. In the period 1992–99, there is a strong positive correlation between wages and employment indicating that as the minimum wage fell so too did employment. The relationship between the minimum wage and rural exports also offers little support to the advocates for wage cuts. There is strong correlation coefficient of +0.80 between changes in the minimum wage and in rural exports. During 1992–99, there is an inverse relationship (–0.47) that associates reduction in the minimum wage with increases in exports. But, since employment fell over the period, the statistical association does not seem to herald a causal one.

Shares in national income One of the measures of wage policy is the share in national income. Figure 7.5 shows the shares of the GDP of PNG going to wages and operating surplus or profits.46 The share of GDP going to wages and profits have diverged in the 1990s. They were roughly equal at 40 per cent of GDP in 1989–90. By 1998 the profit share had increased to 62.1 per cent and the wage share fallen to 22.3 per cent. Table 7.4 Correlation coefficients Factors

Years

Coefficient

Minimum wage and employment

1982–99 1982–92 1992–99 1982–99 1982–92 1992–99

0.22 –0.39 0.89 0.80 0.73 –0.47

Minimum wage and exports

Source: Calculated from Bank of Papua New Guinea, Quarterly Economic Bulletin (various issues).

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80

Per cent of GDP (current prices)

Wages share Profit share 60

40

20

19

80 19 81 19 82 19 83 19 84 19 85 19 86 19 87 19 88 19 89 19 90 19 91 19 92 19 93 19 94 19 95 19 96 19 97 19 98

0

Figure 7.5 Income shares (in GDP).

This is a massive redistribution of national income from labour to the owners of business capital. Such redistribution can only be explained by fewer workers, wage cuts, or by wages failing to keep up with both inflation and productivity. In the case of PNG, the key factor seems to have been the reduction of the minimum wage and the abolition of indexation. Significantly, the fall in the share of labour in national income shows that unions have been unable to negotiate wages sufficient to match price increases and growth in national productivity. Figure 7.5 suggests that the fall in the wage share of GDP needs to be treated as a medium-to long-term trend, rather than a ‘one-off’. Calculating what the actual wage share would have had to be in 1998 in order to maintain the level in 1991 can show the extent of the change. The calculations are shown in Table 7.5. The second and fourth columns of Table 7.5 show, respectively, the total compensation paid to employees and the total gross operating surplus in 1991 and 1998. The final column shows what these two items would have been in

Table 7.5 What the wage share would have had to be in 1998 to maintain the level in 1991 Variable

Wage share Profit share GDP

1991

1998

At 1991

K million

Per cent

K million

Per cent

K million

1,349 1,456 3,606

37.4 40.4 100.0

1,752 4,880 7,863

22.3 62.1 100.0

2,941 3,177

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1998 if the respective shares in GDP had remained at the 1991 level. Thus, total compensation to employees would have been K2,941 million (K2.9 billion) instead of K1,752 million. That is an increase of some two-thirds. Total gross operating surplus would have been just over a third or K1,703 million less. This indicates that compared with 1991, there was a K1,189 million shift away from workers in 1998. In turn, there was an effective redistribution of K1,703 million towards capital. The redistribution to capital was higher than the redistribution away from labour because the share of GDP taken up by the depreciation of fixed capital also fell from 11.6 per cent in 1991 to 6.9 per cent in 1998. This suggests a reduction in the rate of investment within PNG over the 1991–98 period, which is a matter examined below.

Changes in capital expenditure Changes in patterns of aggregate expenditure occurred over much the same period as the reduction in the share of GDP going to wages. Up to 1990, private and government consumption and capital expenditure were more or less constant proportions of total national expenditure. In the early 1990s, increases in the proportion of government and capital expenditure occurred at the expense of private consumption. However, in the rest of the 1990s, private consumption increased at the expense of both capital and government expenditure. Table 7.6 shows the average share of gross domestic expenditure going, respectively, to private consumption, government and capital expenditure. These are averaged over 4 year periods in order to smooth out fluctuations. Private consumption increased from 54.3 per cent of gross domestic expenditure in the 4 years to 1992, to 60.8 per cent in the 3 years to 1998 (Table 7.6). In turn, capital expenditure fell from 23.5 per cent to 15 per cent of total expenditure. It seems that the increase in the profit share of national income did not flow into capital expenditure within PNG. Moreover the increase in share of national income going to profits and private consumption appears to have been associated with an increased outflow of private capital from PNG. Figure 7.6 compares the net flow of private capital with real wage changes from 1984 to 1998.47 The net flow of private capital is measured on the left-hand vertical axis and the minimum wage expressed in 1983 prices measured on the right-hand vertical axis. Table 7.6 Share of gross domestic expenditure (four year geometric means) Consumption

1980–84

1985–88

1989–92

1993–96

1996–98

Private Government Capital

53.8 21.5 24.1

59.0 21.1 20.8

54.3 22.6 23.5

51.5 23.5 21.9

60.8 19.1 15.0

Source: Calculated from Bank of Papua New Guinea, Quarterly Economic Indicators (various issues).

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Private capital flow Kmillion

200 100

100 0

80

100 200

60

300 40

400 500

20 Private capital flow Real minimum wage

600 700

19

84 19 85 19 86 19 87 19 88 19 89 19 90 19 91 19 92 19 93 19 94 19 95 19 96 19 97 19 98 19 99

0

Change in % in real minimul wage (1984  100)

300

Figure 7.6 Private capital flows and real wages, 1984–99.

The first matter to note is the change in the flow of private capital. In all the years up to 1991 there was a net inflow of private capital into the country. In 1992 this reversed and there were net outflows of private capital from PNG in all but one of the years after 1991. The net outflow peaked at over K600 million in 1993. The level of outflow decreased and there was small inflow in 1997 before a turn around to further net outflows of private capital in 1998 and 1999. The comparison with changes in the real minimum wage is instructive. The largest net outflow of private capital coincided with the large reduction in the minimum wage, which occurred in 1992. Indeed, more private capital was being brought to PNG than was being taken out in the 1980s when the minimum wage was higher in real terms and being maintained in value. The circumstances were exactly opposite in the 1990s; more capital was taken out than was being brought in yet the real minimum wage was falling. Those advocating cuts to the minimum wage in 1989 and 1992 claimed that such cuts would make PNG more attractive to investors. The evidence presented here does not seem to confirm that position. Rather the experience of the 1980s and 1990s indicates that the relationship between lower wages and higher private investment was tenuous.

Summary of economic outcomes The problematic of this chapter is whether or not the economic outcomes of deregulation and structural reform benefited the people of PNG. The statistical conclusions are a ‘first-cut’ at answering this; they are summarized below.

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The urban minimum wage in 2000 was one-quarter of the real value in the 1980s. Formal employment in 1999 was at the same level as before the cuts to the minimum wage. No correlation can be shown between the reductions in the minimum wage and either the value or volume of agricultural and logging exports. The share of wages in national income had been reduced from 40 per cent, prior to the cuts to the minimum wage, to 20 per cent. The share of profits in national income had increased from 40 per cent, prior to the cuts to the minimum wage, to 60 per cent. Capital investment became a lower proportion of national expenditure after the cuts in the minimum wage. There were net capital flows to PNG before the cuts to the minimum wage and net capital outflows after the cuts.

To be plain, a massive reduction in real urban wages occurred. Yet the statistical evidence shows that this did not produce the outcomes that the proponents of the deregulation and market economics foreshadowed. However, this does not mean that the advocates of liberal market policies are inclined to change their advice; they continue to argue that matters would have been even worse without the deregulation that occurred in 1992. Thus, for example, the World Bank cautioned against a new review of the minimum wage suggesting that ‘given the current high inflationary environment and the risk of locking in an inflation spiral, consideration of minimum wage levels should be weighed carefully’.48 And, as a warning to any laxity in either fiscal or labour discipline, ‘If wage rate growth can be suppressed over 1999–2000, this should see a major boost to the competitiveness of the traded goods sector which should benefit rural areas.’49 And, rather than acknowledging poor outcomes, the World Bank continues to demand more reform – seeking for example measures for ‘Improving the financial, political, and economic environment, making it more conducive to investment and capital inflows.’50 To which, perhaps, there is only one question: how much is enough? Yet it is also clear that the government of PNG, and by derivation its people, are prevented from deciding how much is enough. This is diplomatically but clearly stated in the most recent memorandum of agreement between the government of PNG and the IMF: The Government’s policies continue to be guided by the macroeconomic adjustment and structural reform program described in the March 2000 Memorandum of Economic and Financial Policies and the October 2000 and April 2001 supplements. The Government’s economic program continues to be developed in consultation with multilateral and bilateral donors.51 In other words, considerable loss of autonomy accepted by, or suffered by, the PNG government over the conduct of economic policy. In 2004, the IMF was

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still maintaining its position and indeed arguing that it was essential to accelerate the structural reform process and, the formidable structural impediments to private sector growth had to be urgently addressed in order to generate investment. In urban areas, the lack of job opportunities is widely seen as contributing to high crime rates and poor social conditions.52 Or, and perhaps tendentiously, enough structural reform is never enough especially for those who are providing the advice.

Some brief lessons The information presented here suggests that the ‘liberal market route’ has not addressed the issues of poverty, inequality, public health or crime in rural and urban areas of PNG. The IMF maintains that one of the causes of crime is the lack of job opportunities. McMurray, in a study for the ILO argues that employers did not take full opportunity of the lower minimum wage and thus, wages stayed above the rate at which employment would have grown.53 Paradoxically, it might well have been crime that propped up the wage rate; Kavanamur, quoting Levantis, estimates that in 1995, the average weekly cash earnings of criminals in Port Moresby were K37.70. The estimated number of raskols was 32,243, most were part-time or short term, but it is still an extraordinarily high figure. The average income of criminals is far above the official minimum wage of K22.96 per week, applied in urban centres after 1992.54 If this were the case, it would be tragic. But so too is the outcome of the entire Structural Adjustment Programme; Barcham writes that: In spite of four years of reform PNG’s political economy in 1999 was in many respects in a worse state than it had been in 1995. The 1995 SAP did little to improve the living standards of PNG’s poor. The majority of the country’s population is still illiterate and has limited access to safe drinking water, health facilities or public transportation.55 Essentially, Barcham’s argument seems to be that the Structural Adjustment Programme did not ‘work’ either because it was thwarted or because of political ineptitude. His conclusion is more optimistic than mine; I am drawn more to Curtin who states: In the absence of interventions by the donor community, the present decline of public services in Papua New Guinea will continue until the country finally joins the select group of countries including Sierra Leone, Liberia and Somalia, enjoying all the benefits of ‘zero government’-chronic civil war and nil social services.

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And yet there were, and may still be, alternatives. Curtin documents how the reduction in teachers, police and the public service has contributed not only to crime but also to an inability to provide basic education and health and the development of a skilled workforce.56 One effect is that the number of expatriate skilled and professional workers in PNG has increased. Likewise, MacWilliam is convincing in arguing that cuts to the public sector have also reduced the effectiveness of agricultural commodity stabilization funds and so eroded how the maintenance of prices for smallholders’ payment acted to reduce pressure for paid employment in the formal sector.57 I draw two final conclusions – both of which are really pointers to alternative policies for unions. The first is stark and is that wages and employment need to be considered in the widest political and economic framework. This also means that advocacy about improving wages and employment needs to be at the local, the national and the global level. And, moreover, it requires a willingness to contest both the local ideas that reinforce global ones and the global ideas that reinforce the local ones. The second conclusion is about the appropriateness of Western institutions (in this case Australian ones) in developing countries. Much is made by the neoliberals about the inappropriateness of the system of unions and industrial regulation that Australia introduced into PNG. However, in criticizing one Australian institutional system, the neoliberal critics are seeking to replace it with unfettered markets that are just another Western institution. Indeed, the values of fairness and collectivism that are embedded in industrial institutions may be closer to the values of PNG than are the values of individualism and competition that are the tenets of the market. So, too, are those of the ILO, which states in its Fundamental Principles that ‘economic growth is essential but not sufficient to ensure equity, social progress and the eradication of poverty’.58 In part, the distinction is captured in the words of a union submission to the Minimum Wages Board. The Amalgamated Workers’ Union advised the Board to help to put to rest ‘the so-called invisible hand, the white man’s theory of leaving the economy to revive itself’.

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Appendix Table 7.a.1 Some comparative data on Papua New Guinea A. Papua New Guinea: some economic and social indicators Variable

1970–75

1980–85

1995–2002 East–Asia and Pacific

Low Income

Total population (million) Population growth (% p.a.) Urban population (%) GNI/capita (US$ current) Life expectancy (yrs) Public expenditure Health (% GDP) Education (% GDP)

2.7 2.4 11.9 560 49

3.5 2.6 14.0 700 53

5.4 2.5 17.9 530 57

1.0 38.2 960 69

1.9 30.6 430 59

3.9 2.3

1.9 3.2

1.1 3.1

Source: International Monetary Fund, Papua New Guinea, Selected Issues and Statistical Appendix, IMF Country Report No. 04/356, November 2004.

B. Human development indicators Variable

PNG Solomons Vanuatu Fiji

HDI Rank 133 124 GDP/capita ($US PPP) 2,270 1,590 GDP rank minus HDI rank –8 21 Life expectancy at birth 57.6 69.0 Adult literacy (%) 64.6 76.6 Primary school enrolment 77 83 Gini coefficient 50.9 Ratio top 20%/bottom 20% 12.6

139 2,890 –13 68.6 34.0 93

Indonesia Philippines

81 111 5,440 3,230 7 2 69.6 66.6 92.9 87.9 93 92 34.3 5.2

83 4,170 22 69.8 92.6 93 46.1 9.7

Source: United Nations Development Programme, Human Development Report 2003. Online: available at: hdr.undp.org/reports/global/2003/ (accessed 16 September 2005).

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Notes 1 President Ronald Reagan, Inaugural Address 20 January 1981. Online, available at: www.reaganfoundation.org/reagan/speeches/first.asp (accessed 22 March 2007). 2 G. Albo, ‘A World Market of Opportunities? Capitalist Obstacles and Left Economic Policy’, Socialist Register, 1997, Vol. 33, 5–47, in particular: Trade liberalisation, especially in a climate of uncertainty and unemployment, tends to reproduce the same effects as protection; everybody attempts to export unemployment but now through competitive austerity which limits domestic demand for imports and improves the price of exports. (p. 10) 3 Michael Camdessus, Managing Director, IMF, ‘Making Globalisation Work for Workers’, IMF Conference Papers 1997. 4 See for example Multinational Monitor, ‘Bearing the Burden of IMF and World Bank Policies’, September 2001, Vol. 22, No. 9, which quotes IMF/World Bank documents for 25 countries. 5 Multinational Monitor, ‘Unravelling the Washington Consensus: An Interview with Joseph Stiglitz’, April 2000, Vol. 21, No. 4. 6 Online, available at: www.doingbusiness.org/ExploreTopics/EmployingWorkers/ (accessed 23 January 2007). 7 Peter Bakvis, ‘How the World Bank and IMF use the Doing Business Report to promote labour market deregulation in Developing Countries’, ICFTU/Global Unions. Online, available at: www.icftu.org/www/PDF/doingbusinessicftuanalysis0606.pdf (accessed October 2006). See also Bretton Woods Project, ‘Bank, Fund Sidestep Labour Standards: Promote Violation of Workers’ Rights’, www.brettonwoodsproject.org/art.shtml?x=545877, (accessed 23 November 2006). 8 Ibid. In its 2005 Article IV consultations, the IMF also ‘supported’ the industrial relations changes in Australia that are designed to favour individual arrangements over collective ones and remove industry and economy industrial awards. See, ‘IMF Executive Board Concludes 2005 Article IV Consultation with Australia’, Public Information Notice 123, September 2005. Online, available at: www.imf.org/external/np/ sec/pn/2005/pn05123.htm (accessed January 2007). 9 See Industrial Relations Act of 1962 and Employment Act 1978 Legislation and Case Law of PNG, Thomson Legal & Regulatory Ltd, Australia, pp. 41–103. 10 The author was asked and funded by the Australian Council of Trade Unions to act as researcher and advocate for the Papua New Guinea Trade Union Congress in the PNG Minimum Wage Case in 2000. The Australian Council of Trade Unions (ACTU), the PNG Trade Union Congress (PNG-TUC) and the National Tertiary Education Industry Union (NTEU) funded this. This chapter is presented with due acknowledgment to these three organizations but with the caveat that the views presented here are entirely my responsibility and are not positions of the ACTU, PNGTUC or NTEU. 11 IMF, ‘Papua New Guinea: 2004 Article IV Consultation – Staff Report’, November 2004. www.imf.org/external/pubs/cat/longres.cfm?sk=17832.0 (accessed 16 September 2005). 12 Agogo Muwali, 1997, Macroeconomic Crisis and Structural Reforms in Papua New Guinea, National Centre for Development Studies, ANU, South Pacific Working Paper 97/1, p. 9. 13 T. Curtin, ‘Public Sector Reform in Papua New Guinea and the 1999 Budget’, Labour and Management in Development 2000, Vol. 1, No. 4, pp. 1–26. 14 Ibid., p. 6. 15 Asia Development Bank, Country Operational Strategy; Papua New Guinea 1999, Asian Development Bank, Manila, p.1.

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16 Asian Development Bank, 1999, Country Operational Strategy and Programme Update Study Papua New Guinea 2002–04, p.2 Online, available at: www.adb.org/Documents/CSPs/PNG/2001/CSP_PNG_2001.pdf (accessed 16 September 2005). 17 Sir Mekere Morauta, Economic and Development Policies, 2000 Budget, Volume 1, p. 4. The source is footnoted as World Bank Report, Papua New Guinea, Improving Governance and Performance, 30 June 1999. 18 The Board has eight members – a chair usually the President of the Arbitration Tribunal, two employer and two employee representatives, a public service nominee, a church and a women’s representative. Papua New Guinea has ratified one of the two International Labour Organization Conventions on Minimum Wages. 19 Using exchange rates as of November 2004, this is A$24.88 to A$9.27 or US$19.59 to US$7.27. 20 See Muwali op. cit. pp. 12–13, for details. 21 Murray Proctor, ‘Structural Adjustment in Papua New Guinea’, Pacific Economic Bulletin, 1996, Vol. 11, No. 2. Online, available at: peb.anu.edu.au/pdf/PEB112proctor.pdf (accessed 7 September 2007). 22 Ibid. 23 Ibid. 24 Muwali op. cit. p. 19, Schedule 1. 25 Manuhuia Barcham, ‘The Politics Of Economic Reform: The Failure Of PNG’s 1995 Structural Adjustment Programme’, Revue juridique polynésienne Hors série 2002. 26 I am informed and have sighted documents that show that advice to Cabinet was obtained from the same advisers who had been involved in preparing the orthodox economic case for the 1992 Minimum Wage Case and who supported the Structural Adjustment Programme. These advisers did not give evidence to the Board. 27 For example Muwali, who writes: ‘The hard kina policy was intended to dampen inflation and was justified by the wage policy, which indexed, wage levels to price levels’, op. cit. p. 19. 28 The Centre for Development Studies and the Economics Department at ANU were very prominent in advancing neoclassical and free trade arguments. 29 Helen Hughes, ‘PNG in need for much more than money’, The Australian Financial Review, 14 August 2002, archived at the Centre for Independent Studies Website as Executive Highlights 103. Online, available at: www.cis.org.au/exechigh/Eh2002/ EH10301.htm (accessed 23 October 2002). Bob Hawke was President of the Australian Council of Trade Unions prior to becoming Australian Prime Minister from 1983–1991. 30 ‘The Dynamics of Development, Greg Lindsay talks to Helen Hughes’, Policy, 2000, Vol. 16, Winter, pp. 23–29 at p. 28. The quote is incorrect in stating that there is longservice leave in New Zealand. 31 Papua New Guinea Minimum Wages Board, Minimum Wages Determination 1992; Reasons for Determination, Port Moresby, August 1992, pp. 1–5. 32 Ibid., p. 60. 33 The Government of Papua New Guinea’s Submission to the 1989 Minimum Wages Board, Port Moresby, March 1989 at p. 87. 34 Ibid., p. 36; with the exception of the 1991 World Bank Report these had also been presented to the 1989 Minimum Wages Board. H. Hughes, 1988, Industrialization, Growth and Development in Papua New Guinea, Port Moresby: Institute of National Affairs; World Bank, 1988, Papua New Guinea – Policies and Prospects for Sustained and Broad-based Growth, Report 7121, Washington, DC; World Bank, 1991, Papua New Guinea: Structural Adjustment, Growth and Human Resource Development, Bangkok: Asia Regional Office; Asian Development Bank, 1988, Economic Review and Bank Operations – Papua New Guinea, Manila: ADP. 35 ‘The Economy of Papua New Guinea. Macroeconomic Policies: Implications for

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36 37

38 39 40 41 42 43 44 45 46

47 48

49 50 51

52 53 54

183

Growth and Development in the Informal Sector – 1999 Report’, AusAid, Canberra Online, available at: www.ausaid.gov.au/publications/pdf/PNG_1999_economic_ report.pdf (accessed 17 September 2005). Agogo Muwali, op. cit. Appendix 1 World Band–IMF structural adjustment programme for PNG. Maria Bargh, ‘Romance and resistance in the Pacific: Neoliberalism and Indigenous Resistance in the Pacific’, Revue juridique polynésienne Hors série 2001 quoting World Bank, 1998. Pacific Islands Regional Economic Report, East Asia and Pacific Division, Manila. For more detailed discussion of the Washington Consensus, see Michael Goldfield’s Chapter 6 in this volume. Papua New Guinea Minimum Wages Board, Minimum Wages Determination 1992; Reasons for Determination, Port Moresby, August 1992, p. 32. Office of National Development, ‘Papua New Guinea Human Development Report’, Government of Papua New Guinea/United Nations Development Programme, 1999, p. 114. Table 3 in Papua New Guinea: Recent Economic Developments’, IMF Staff Country Report No 00/137 October 2000. W. D. Scott, 1997, Labour, Employment and Skills Development Policy Agenda Project, Asia Development Bank TA 2703-PNG, Final report, W. D. Scott, North Sydney, December, p. 32. Ibid., p. 34, para 3.31. Sir Mekere Morauta op. cit. p. 6. The ADP Report referred to is the one by W. D. Scott. A weighted index was calculated using the weights set out in the Bank of Papua New Guinea, Quarterly Economic Indicators, Table 9.13, March 2000. The adjusted weights are coffee 55.6, palm oil 14.6 and logs 29.8. The GDP data are from AusAid, Papua New Guinea: Coping with Shocks and Achieving Broad-Based Economic Development, International Development Issues No. 52, Department of Foreign Affairs and Trade, Canberra, 1988. AusAid source the figures to annual statements of Economic and Development Policies, which form part of the Annual Budget. The data on private capital flows are from the Balance of Payments Statistics, UNDP Human Development Report 2003. Online, available at: hdr.undp.org/rreports/global/ 2003/ (accessed 16 September 2005). World Bank Report No. 19388 – PNG Papua New Guinea Improving Governance and Performance 22 October, 1999 at para 1.23, National Statistical Office of Papua New Guinea, National Income, Expenditure and Product, Cat. No. 2101. 00, various years. Ibid., para 1.25. Ibid., para 1.59. Papua New Guinea – Letter of Intent to the IMF, 31 August 2001, Supplementary Memorandum of Economic and Financial Policies Fourth Review Under the StandBy Arrangement, World Bank, Papua New Guinea Improving Governance and Performance, Poverty Reduction and Economic Management Sector Unit, East Asia and Pacific Region, Report No. 19388-PNG, October 1999. Papua New Guinea: 2004 Article IV Consultation – Staff Report; pp. 1, 10–11. Christine McMurray, Employment Opportunities for Papua New Guinea Youth, ILO 2002. Online, available at: www-ilo-mirror.cornell.edu/public/english/region/asro/ bangkok/conf/youth/con_stu/png.pdf (accessed 19 September 2004). T. Levantis, 2000, Papua New Guinea: Employment, Wages and Economic Development, Asia Pacific Press, Canberra quoted by David Kavanamur, ‘The Interplay Between Politics And Business In Papua New Guinea’, State, Society and Governance in Melanesia Project, Working Paper 01/6, University of Western Sydney.

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55 Barcham op. cit. p. 209. 56 Curtin op. cit. 57 Scott MacWilliam, ‘Unemployment, Order and Commodity Stabilisation Funds’, Pacific Economic Bulletin, 1995, Vol. 10, No. 1. 58 ILO Declaration on Fundamental Principles and Rights at Work 1998. Online, available at: www.ilo.org/dyn/declaris/DECLARATIONWEB.INDEXPAGE (accessed 21 September 2004). 59 Amalgamated Workers’ Union of Papua New Guinea, ‘Submission to the Minimum Wages Board’, Port Moresby, June, p. 14.

8

Into the fold The legacy of labour’s subordination in post-colonial India Vivek Chibber

Introduction Reading the Indian business press today, or listening to many economists, one might get the impression that trade unions have a stranglehold on the political economy. They strike on a whim, their jobs are protected by Palaeolithic labour legislation, their wages are unconnected to productivity and they are protected by a judiciary committed to outmoded notions of social justice, which are implemented through the system of mandatory arbitration – or so the story goes. Perhaps this is why, across the country in recent years, their very right to strike has come under attack by legislatures and even by the ostensibly doting judiciary. Labour is increasingly presented by elite circles as a sectional interest, holding the national economy hostage to its narrow agenda. But as Debdas Banerjee amply demonstrates in his recent study, this is very far from the truth. Over the course of the 1990s, labour has steadily lost ground in its economic welfare, across sectors and space.1 This finding has been buttressed by a host of other studies, which find that the mythologized story about labour’s vaunted strengths is quite far from the truth. Collective bargaining plays a marginal role in determining the terms and conditions of employment; minimum wage legislation is often a dead letter;2 employment protection, while a prominent feature of industrial relations law, seems to have little impact on hiring and firing;3 strike activity has been vastly overshadowed by lockouts in industrial conflicts4 – all of which indicate a working class that has been unable to protect its basic interests, despite its highly publicized attempts to find some respite in lean times. The most important element contributing to labour’s weakness is probably the basic structural fact common to all developing countries, namely, the ubiquitous and massive army of the underemployed and semi-employed. This ocean of labour is most commonly employed in the informal sector, often working in wretched conditions and with little or no protection. But it is also regularly drawn upon by employers in the formal sector, as a means of holding down demands by unionized workers, or as a means of circumventing labour legislation. In all developing countries, the bargaining position of unions is considerably weakened by this aspect of the labour market, and India is no exception.

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But a second source of weakness, which serves to amplify the structural phenomenon just mentioned, is more properly institutional in nature: the historic splintering of the labour movement into rival unions, their dependence on the state for protection of their basic conditions of work and the consequent ties of clientelism with political parties. These factors conspire to create an environment in which labour’s power in the industrial relations system flows from the top down – from the state, to parties and then to union officials. The result is that, as political directions change, or as parties veer in their programmatic commitments – much as they have since the late 1980s – unions can do little to resist change. In India, as liberalization has been more or less accepted across much of the political spectrum, unions have found themselves scrambling to put up some kind of resistance; but they have been hampered by a decades-old political culture in which patronage by powerful actors, and not rank-and-file organizing, has been the most common means of political gain. Not surprisingly, as the erstwhile patrons have turned more resolutely hostile, labour has found itself highly vulnerable and politically weak. It is not uncommon to find arguments to the effect that, in a globalizing world, strong unions and labour-friendly legislation are outdated. Under relentless pressure to reduce costs, firms and national economies cannot but see unions – and their demands – as a luxury they cannot afford. It is not only predictable, then, that Indian labour has seen its position weaken over the past decades, as market forces are taken to have brought wage levels and sundry other benefits down to a level commensurate with economic rationality. But this advice ought to be viewed with some scepticism. While changing economic conditions since the 1980s have exerted great pressure on firms across the world, the mechanisms through which they have met these pressures have been highly variable. It has not been the case that the only rational response to liberalization has been a race to the bottom. In a large number of cases, states have been surprisingly successful in sustaining not only their commitment to social welfare, but unions have managed to survive and continue in their role as protectors of labour’s conditions of employment.5 Which of the two paths has been taken – the ‘high’ road of social partnership, or the ‘low’ road of market despotism – has depended on the kind of industrial relations regime in place. In countries where labour has maintained its strength and institutions have been in place to allow for a negotiated settlement between labour and capital, there has been a surprising ability both to protect labour’s interests while also maintaining economic vitality; where labour has been weak, however, it has opened the door to a deepening attack on what few amenities it has had available. All of this is just to say that the slide in labour’s fortunes since the 1980s was not inevitable. That it turned out this way was, at least in part, because the institutions governing industrial relations served to amplify labour’s structural weakness instead of mitigating it. To be sure, there are plenty of structural causes of weakness, even if we ignore the institutional integument. But this does not alter the fact that institutions ‘matter’ – to revert to a hackneyed phrase. Under a different industrial relations regime – one with more unity, stronger internal demo-

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cracy and less reliance on the state – it is reasonable to assume that the working class would have stood a better chance to defend or even promote its interests.

A different world was possible Two aspects of the political economy that continue to weaken organized labour are its weak organizational base – itself a product of the weak support for collective bargaining – and its splintering into rival factions tied to political parties. Together, these have functioned to tether trade unions to the state, weaken their capacity for collective action, and hence leave them vulnerable as policy has swung decisively in favor of employers in the current period. The roots of this incorporation into the state apparatus can be traced to the years immediately following independence, when the foundational institutions of the labour relations regime were put into place. As we will see below, not only did the Congress consciously implement policy designed to reduce unions’ capacity for independence action, but the labour movement itself relinquished some of its power – partly out of a sense of its dependence on the Congress for support, but partly out of its own ideological commitments. The result was that other possibilities and other proposals, some quite ambitious, which could very well have bolstered the union movement’s organizational power, were quickly buried. The Indian National Congress (INC) and the onset of independence The subordination of the union movement to the modernizing state was neither inevitable nor easily achieved. In fact, in the years leading up to Independence and immediately after, the labour movement was largely independent of Congress control. It comprised two labour federations, the All-India Trade Union Congress (AITUC), and the Indian Federation of Labour (IFL).6 AITUC had, since its founding in 1920, maintained close relations with the Congress, but it never established a formal institutional link with the organization. Indeed, but for a brief interlude in the mid-1930s when some kind of formalization of the two bodies’ relationship was broached by the Congress Left, the party’s leadership never overcame a basic antipathy toward the trade unions.7 The closest thing to a labour union that the INC controlled was Gandhi’s Hind Mazdoor Sevak Sangh (HMSS), which was not a trade union, but a combination of a volunteer society and training centre for unionists. Hence, the AITUC was the umbrella organization for the organized labour movement and remained so till 1941, when unions linked with M. N. Roy broke away as a protest against the Congress stance on the war, to found the IFL. Meanwhile, as the bulk of the Congress leadership was thrown into jail in 1942, AITUC witnessed the ascendance of the Communist Party, whose own base in mass movements was growing rapidly. Hence, as the Second World War wound down and it became clear that it would soon be followed by some kind of selfgovernment in India, the labour movement had attained substantial autonomy from the INC.

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What made this worrisome was two things. First, the labour movement was not only under autonomous leadership, it was also entering a period of deep radicalization in the waning years of colonial rule. In common with much of the capitalist world, the war witnessed a general deterioration of working conditions for labour, with real wages declining under inflationary pressures.8 Industrial conflict was manageable through the war years, but conditions failed to improve even in 1946 and 1947. Under these circumstances, the union federations took to the streets, leading to an explosion in strike activity – from 4 million man-days lost in 1945, to 12.7 million in 1946 and 16.6 million in 1947.9 The second problem was that INC’s own vision of the post-colonial political economy was moving in a direction that had little room for an autonomous labour movement. During the late 1930s, when Congress-led governments came to power in the provinces for a brief spell, they made it clear that the INC had every intention of forging its primary links with Indian business, not labour.10 This was made clearer in 1938, when the INC established a body called the National Planning Committee, which was handed the responsibility of setting the lineaments of a post-Independence structure for economic planning. The body was thoroughly dominated by the leading lights of Indian business, both in membership, and in the design of policy recommendations.11 Between 1935 and 1947, the INC made every effort not only to court the business community, but also to bring them into the fold of governmental design. The post-war labour upsurge thus presented a deep political problem. The new militant mood within the Indian working class was of course dangerous in itself, but more so because it was being harnessed by political grouping that the Congress neither controlled nor trusted. Further, employers were up in arms, demanding some kind of solution to the seemingly endless work stoppages.12 For a party – and now government – committed to capitalist development, this state of affairs had to be ameliorated in the quickest possible fashion. Two visions The weight of history has served to obscure this point, but at that moment in history, on the morrow of Independence, there were two competing visions of a solution to the industrial stand-off. One, emanating from sections of the labour movement, proposed the establishment of an industrial relations regime based on some kind of compromise between labour and capital. The elements of this vision were not entirely worked out within the trade unions, in part, as I shall describe below, because they were pre-empted by the INC. But their contours were easy enough to discern. The principle underlying them was that industrial production, and national development more broadly, was an enterprise jointly undertaken by labour and capital and, hence, ought to be the subject of an ongoing negotiated settlement – with respect to remuneration, working conditions and managerial decisions. For this, unions would have to be sufficiently empowered, with appropriate institutional support, and enabling legislation. The vision was parallel to the kinds of industrial relations regimes witnessed in

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Nordic countries and Western Europe, though there were also direct influences from the New Deal in the United States. This initiative was not merely talk. Given the massive upsurge in working class activity during the post-war years, it acquired real political force, and in December 1947, the unions were able to force through a call for an Industrial Truce Conference between representatives of labour, employers and the state.13 The four-day Conference actually called for the institutionalization of a class compromise between labour and capital, with the provision of profit sharing, works committees, peak bargaining and statutory regulation of the provisions by local and regional labour boards.14 It enjoined the government to initiate development planning in tandem with these institutions, so that industrial strategy would at its very heart take into account not just the interests of labour, but elicit its participation and cooperation in plan design. It should be noted that there is no evidence for the recommendations being seen as a first step toward the abolition of private property – they were, instead, perhaps the most advanced expression ever seen in the developing world for a social democratic ‘developmental state’. Whether they would have worked, we do not know, for they were never put into place. They were overshadowed by a competing set of proposals, one pushed by the more conservative Congress leadership, though with the acquiescence of a large portion of the ‘Left’ – including Nehru – and the state bureaucracy. This was a paternalistic vision, nominally committed to protecting labour’s interests, but not to its independence. The design here was consistent with the etatism of Turkey, Brazil, Mexico and other late developers, which took the initiative and power out of the unions’ hands and placed it firmly with the state and the bureaucracy.15 This strategy was also motivated by visions of a compromise, but one quite different from the one driving the labour movement: it was a commitment to a compromise between the state and domestic business, with labour being included as a ward of the state. The problem for the INC was that the demand for a class compromise was not just arid talk, but was riding on the back of a quite militant working class movement, led by trade unions that were largely out of its control. The first step, then, was to take the political initiative away from this force, and place it back in Congress’ hands. Once this was achieved, some kind of settlement could be proposed, which, while recognizing the legitimate interests of labour, would however not rely on labour’s own judgments. These objectives were achieved in two steps. First, the Congress passed legislation that placed much of the prerogative for industrial welfare, not with unions or collective bargaining, but with the state. Then, to ensure that this set-up would not be undermined by the unions, it split the labour movement by setting up its own union federation, firmly under conservative leadership and programmatically committed to industrial peace. Clipping labour’s wings The centrepiece of the new labour legislation was the Industrial Disputes Act of 1947, which has remained the core of the Indian labour management regime

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since Independence. And at the heart of this Act was its provision for the management of labour-management conflict. First, all strikes or lockouts were to be resorted to only after providing a notification of at least 14 days. But, more importantly, in the case of public utilities, government was given the power to compel the parties to resort to an arbitrator if it saw fit. This immediately foisted compulsory arbitration on to workers in the postal service, the railroads and power industry. But the Act also gave state governments the power to declare any industry a public utility for a period of 6 months; this meant that compulsory arbitration could now be extended to virtually all sectors of industry. The combined effect of these two aspects of labour law was this: when faced with an intransigent management, labour was forced to contemplate a strike only if it provided a 2-week notice to the appropriate government. But the moment it got whiff of any such impending action, the government could simply intervene and refer the dispute to an arbitrator – labour thus had the right to strike, but very little ability to do so. Without such ability, and without the amendments in the Trade Union Act, which protected unions against unfair labour practices, labour had little ability to compel employers to bargain in good faith. With unions largely without the power to insist that employers bargain in good faith, the prospects for genuine collective bargaining rapidly receded. If the likely outcome of an industrial dispute was its referral to an arbitrator, employers would automatically have the upper hand if they could drag out the proceedings interminably. And such power they did indeed have.16 While the law provided for compulsory arbitration, it did nothing to ensure rapid delivery of a verdict. Management was left with the ability to drag out the proceedings for months, even years.17 This meant that under the new dispensation, collective bargaining held little value to employers, as their recalcitrance was only likely to deliver the parties to a conciliator or arbitrator and, in such a case, the whole matter would turn on which of the parties would give in first. And with immeasurably greater resources at its command, the odds, of course, always favoured management. In so curtailing the scope and power of unions, the INC did not leave the fortunes of Indian workers entirely to the winds. Instead, those matters that are normally the objects of deliberation between labour and capital – conditions of employment, promotion, wage scales, safety, leave and holidays, discipline, etc. – were now covered by a new legislation, most prominently the Industrial Employment (Standing Orders) Act and the Factories Act. Together, these defined the conditions of employment to which employers with establishments above a minimal size now had to adhere. Nominally, these orders and conditions were to be drafted through consultation with unions, to insert a semblance of mutuality into what would otherwise seem a blatantly authoritarian series of measures; but the authority rested firmly with the state. Leaders of AITUC and the IFL loudly objected to the measures restricting the scope of the strike weapon and collective bargaining.18 To the INC, these objections only made ever more pressing the need to bring labour to heel. Already, union leaders close to the INC High Command refused to join in the chorus of criticism. To the contrary, both within the Assembly and without, the proposed

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labour legislation was championed by Gulzarilal Nanda, Labour Minister Jagjivan Ram, N. V. Gadgil, Hariharnath Shastri, Mohanlal Saksena and others. The only Congress labour leader who did not openly support compulsory arbitration and the curb on strikes was V. V. Giri, who was later to struggle vainly against it. The objections coming from some sections of labour only heightened the pressure on the INC to move toward a deeper solution. In May 1947, three months after the Industrial Disputes Act was passed, Congress labour leaders affiliated with the HMSS called a conference to launch a new national labour federation, one that was explicitly committed to the party’s labour policy. In his letter of invitation to the meeting, Gulzarilal Nanda made it plain: The stand taken by [AITUC] in reference to the principle and procedure of arbitration . . . has been strongly disapproved [sic] by many prominent trade unionists. It is felt that it will militate against the best and most vital interests of the country . . . if at this stage a central organization of labour is not formed in harmony with the ideas and resolutions of the Indian National Congress.19 The prospect of having a union federation directly under the control of the INC, and committed to favouring arbitration over collective bargaining, was supported by the labour leaders across the political divisions within the party. Conservatives like Patel were, of course, delighted with it, but even a prominent Socialist like Hariharnath Shastri threw his weight behind it. The new federation was called the Indian National Trade Union Congress (INTUC), and was fashioned to be the arm of the party. At the heart of the new organization’s mission statement was a programmatic commitment to incorporation into the state apparatus. INTUC explicitly swore to ‘submit to arbitration every industrial dispute in which a settlement is not reached by negotiation’, and to not strike ‘unless avenues of a settlement have been exhausted, and a majority of its members vote by ballot in favor of strike’.20 The Congress High Command thus set about creating a new union, but not just to exercise greater control. It was engineering a labour federation that would relinquish its independence to the new state, trusting in the wisdom of the political leadership. A year later, the AITUC was further weakened as the Socialists split from the federation and formed the Hind Mazdoor Sabha (HMS), which now took its place as the third major labour federation. Within one year, the labour movement found itself split among three major federations, with INTUC soon growing in leaps and bounds through state sponsorship, and imposing a strict discipline among its members to deliver industrial peace.

The marginalization of labour There were two outcomes of this settlement to which we can point, an immediate one, and a more long-term one. In the short term, unions found that not only was the call for a democratic class compromise undermined, but even the

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hopes for fair adjudication by the newly emergent state were overly optimistic. Over the longer span, a weakened and institutionally subordinated labour movement found it rational to hitch its wagon ever more firmly to the state and political bosses, since official patronage was now the most effective means of advancing workers’ interests. By late 1949, it was clear that the vision behind the Industrial Truce Conference was effectively dead. Schemes for profit sharing were quietly abandoned by the new government under strong pressure from employers, who waged an unrelenting campaign against it – despite having agreed to it at the Conference.21 Similarly, the drive to install works committees, which labour regarded as the first step towards some kind of co-determination, also came to naught. Works committees could hardly be expected to function in a setting where employers were dead set against them, and unions were in the process of losing much of their power. Not only did the creation of INTUC split the labour movement, but it fostered a bitter rivalry between union federations. The weakening effect of this rivalry was exacerbated by the corresponding unity of Indian business on all matters related to labour. But worst of all, the Congress consciously walked away from any efforts to offer judicial protection to unions from employer malfeasance at the workplace, where unions were trying to implement the Truce resolutions. Labour law made unions legal, but contained no sanctions against employer coercion – except in the case of criminal conspiracy. Labour leaders tried to propose legislation that would provide protection against unfair labour practices – in a manner not unlike the original Wagner Act in the US – but the Cabinet knocked it down.22 Unions were left to fend for themselves, and works committees remained alive only on paper.23 With collective bargaining becoming marginal to industrial relations, union influence at the workplace institutionally blocked, employers’ power left largely unchecked and statutory backing of profit-sharing abandoned, the fortunes of labour in the organized sector were left to the goodwill of the state. The most important issue now pending was the establishment of a minimum wage, and the setting up of wage boards and regional tribunals – to fill in for what collective bargaining would have accomplished. The main agent pushing for a speedy institutionalization of these steps was the Labour Ministry, which naturally enjoyed the closest relations in the new state to the unions. In early 1947 it drew up an ambitious 5-year agenda for labour legislation, and through the next 2 years pressed hard for the INC to forge ahead.24 It did experience some measure of success: in 1948 the government passed the Minimum Wage Act, which signalled that the state was moving forward with its commitment to protect workers’ interests. But just as the unions had been undermined by the INC’s orientation to the business community, so did the elements of the new state who tried to substitute for the former. Throughout the years following the war, employers continued to hammer away against the idea of mandated minimum wages, insisting that wages should be pegged according to industry’s ability to pay, and that industry was in no such position.25 Policy makers in the Labour Ministry now found that

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the state’s initial enthusiasm for labour policy had subsided considerably. Already, the new government was placing matters of economic policy under the authority of the newly formed Planning Commission, and this included the delicate issue of labour policy. Planners, for their part, took it as their first priority to bring employers into the fold, by assuring them that the new state would not ignore the centrality of their economic interests to any new initiative. The Planning Commission made it plain that, as a part of the national community, workers would have to subordinate their interests to fostering the growth of the domestic economy – which meant, of course, fostering private profits.26 Hence, as the year wore on, the Labour Ministry even found itself excluded from the inter-ministerial discussions on industrial and labour policy.27 Observers could see already that the Planning Commission was adroitly sidelining the Labour Ministry officials, whose efforts on such matters as wage legislation, employee insurance and broader welfare issues were rebuffed, as their ‘added cost to the employer would be burdensome and would discourage industrial expansion and production’.28 Labour policy thus became folded into broader national planning, and national planning itself was single-mindedly committed to getting industrial investment underway. Since employers had made it clear that they regarded a minimum wage policy an unacceptable encumbrance, planners pushed it to the bottom of the policy agenda. The concrete result was a ten-year delay in the setting up of the wage boards that were to administer minimum wage legislation. Despite the fact that the law was passed in 1948, it was not until the late 1950s that the wage boards were in fact set up.29 During this time, wage policy came to be driven by the tribunals and courts set up by the arbitration system.30 Thus this last vestige of the Industrial Truce, while not jettisoned altogether, was put into cold storage for over a decade. The long-term dynamic By 1951, the contours of the post-colonial settlement were in place. Starting from a juncture in which organized labour had raised the real possibility of a class compromise with employers, and where labour was relatively powerful in the political economy as an independent actor, political dynamics had led to an outcome in which unions found themselves in a distinctly subordinate position. The INC, which had grown into a massive movement-based organization by the end of the war, had quickly moved to hem in labour’s independence, cripple its organizational effectiveness and make it centrally dependent on the state’s goodwill for the protection of its interests. The settlement could not but have a longer-term effect on the structure and politics of unions themselves. Since the industrial relations system placed greater power in compulsory arbitration than it did in collective bargaining, it weakened incentives for union leaders to build a strong base within union rank and file or to make unions organizationally cohesive. Union political structures therefore tended in a more top-heavy direction, as is common in any system where legal mechanisms dominate over consultative ones. Over time, this made

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for a union leadership that had little incentive to build a solid commitment to gauging and assessing members’ interests and views – intensifying the everpresent problem of ‘interest aggregation’.31 Perhaps more importantly it made for unions with a weak organizational base and thin internal solidarity. Unions therefore were not only discouraged from engaging in direct action, but typically failed to sustain even the capacity to do so. The rational response was to seek more leverage in that part of the industrial relations system where it would do more good – within the state and political parties. The attachment to parties is a phenomenon of the Indian labour regime that has been much criticized, with parties taking much of the blame for manipulating unions.32 But it is important to recognize that the rules of the game had created a powerful set of incentives for unions to seek such patronage, since the marginal returns of efforts in this direction are often more promising than the arduous work of effective collective action. It is not, therefore, entirely surprising that, in the instances where government commissions of inquiry have recommended reforming the industrial relations system toward a greater role for collective bargaining, unions’ reactions have not been consistently supportive.33 Now, if the state were truly neutral as an agent, this state of affairs would be regrettable, but not necessarily disastrous. Unions and employers would simply take their case to the relevant courts, or seek patronage from (neutral) political parties and governments, and would win or lose depending on the merits of their arguments. But in any capitalist setting, states have a strong set of structural and institutional pressures to prioritize systematically the interests of employers over employees.34 This is amplified even further in ‘developmental states’, like the Indian one, where growth is given the highest priority in policy circles. Whatever the mythology of ‘Nehruvian socialism’ might be, labour in the decades preceding liberalization was a consistently marginal player in national policy circles. The only chance it would have had for pressing its interests on economic policy was through mass mobilization – the very instrument that it willingly weakened in the immediate post-Independence years. Given labour’s dependence on the state, it was especially vulnerable to attack should political winds turn more decisively in favour of employers – which is exactly what happened after 1991. The findings cited in the introduction to this chapter – of declining shares of total income, the preponderance of lockouts over strikes, the decreasing relevance of employment protection, the neutralization of minimum wage laws – are all symptoms not only of more assertive tactics by employers, but a decreasing willingness by state actors to protect labour. The critical element in this outcome, it needs to be stressed, is not that the state has become pro-capitalist, for it was always that. The point is that the state has switched from one set of policies that favoured capital, to another. And the vulnerability of labour in this new dispensation is in no small measure an outcome of its failure to appreciate adequately the intrinsic class bias of the previous regime.35

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Conclusion Throughout the period when the Indian state espoused a commitment to Nehruvian socialism, it never lacked its critics from the Left. Progressive intellectuals consistently pointed out that the ‘Left’ within the Congress was not socialist in any recognizable sense, but simply a proponent of a larger state sector. The basic fault line in the political elite was thus between more liberal capitalists and state capitalists. The common thread running through this spectrum was a conception of the political economy in which labour was to be the passive recipient of the state’s patronage – whether of a Nehruvian sort or the more anaemic designs proposed by his critics. Labour’s role was to contribute to the design of policy, but not as a core or hegemonic actor. That role was reserved for state managers and capital. In this respect, there has been a significant element of continuity between the era of dirigisme and the current shift toward a liberalized economy. In both eras, the state and dominant parties have considered an active and mobilized working class as a threat to economic vitality and have created political institutions to either contain, or to simply impede, independent action. It is even important not to exaggerate the extent to which the institutional protections of the previous years were effective at all. The few studies that were carried out in the 1970s and later, found a significant gap between protective legislation on paper, and the incidence of its implementation. In major industrial centres, employers rarely found themselves handcuffed by the putative constraints on shedding labour, or on working conditions. The non-implementation of labour legislation was itself an effect of the institutional set-up. Since the entire industrial relations system of the Nehru years was designed to prevent independent action by the working class, it is no surprise that labour has had little success in defending its interests as the state has turned more resolutely hostile to labour after 1991. The organizational resources that go into creating class capacity had either atrophied in most part of the country, or had been actively discarded by union leaders. The onset of liberalization has therefore made evident what was always implicit in the post-colonial regime – that in an economy where investment rests in private hands, states will have compelling structural pressures to privilege the interests of capital over labour, official rhetoric notwithstanding. The roots of labour’s weakness lie not so much in this bias on the part of the state, but in labour’s inability, or unwillingness, to build this fact into its strategy. In the current era, any illusion that labour may be able to rely on the state’s goodwill is not likely to take hold. But the legacy of the previous five decades will not be easily shed. Unions will have to resuscitate the mobilizational abilities that characterized their strategy at mid-century; they will have to free themselves of the culture of patronage and clientelism that has become so central to their approach; and they will have to strive for more unified action, breaking away from the party affiliations that are currently their strongest organizational ties. This is not by any

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means impossible. The experience of the Workers Party in Brazil – despite its more recent troubles and turn to a kind of Third Way neoliberalism – holds important lessons for managing a transition to a more powerful and militant labour movement.

Notes 1 D. Banerjee (2005) Globalization, Industrial Restructuring, and Labour Standards, New Delhi: Sage Publications. 2 L. Deshpande, S. Deshpande and G. Standing (1998) Labour Flexibility in a Third World Metropolis, New Delhi: Commonwealth Publishers. 3 L. K. Deshpande, A. N. Sharma, A. K. Karen and S. Sarkar. (2004) ‘Liberalization and Labour: Labour Flexibility in Manufacturing’, Institute for Human Development, New Delhi. 4 K. R. Shyam Sundar (2004) ‘Lockouts in India, 1961–2001’, Economic and Political Weekly, 25 September, pp. 4377–85. 5 See A. Glyn (2006) Capitalism Unleashed: Finance, Globalization, and Welfare, Oxford: Oxford University Press; J. Pontusson (2005) Inequality and Prosperity: Social Europe vs. Liberal America, Ithaca: Cornell University Press; L. Kenworthy (2004) Egalitarian Capitalism: Jobs, Incomes, and Growth in Affluent Countries, New York: Russell Sage. 6 For a serviceable history, see H. Crouch (1966) Trade Unions and Politics in India, Bombay: Manaktalas and Sons. 7 See D. A. Low (1996) ‘Congress and “mass contacts”, 1936–37’, in his Rearguard Action: Selected Essays on Late Colonial Indian History, New Delhi: Sterling Publishers. 8 See S. Palekar (1962) Real Wages in India, 1939–1950, Delhi: Asia Publishing House, p. 174. 9 Indian Labour Gazette, Vol. VIII, September 1950. 10 See C. Markovits (1985) Indian Business and Nationalist Politics, 1931–1939, Cambridge: Cambridge University Press. 11 See R. Chattopadhyay (1985) The Idea of Planning in India, 1930–1950, upublished PhD. Dissertation, Australian National University. 12 For instances of business dissatisfaction, see V. Chibber (2003) Locked in Place: State-Building and Late Industrialization in India, Princeton: Princeton University Press, Chapters 4 and 5. 13 For an analysis of the Conference and its aftermath, see V. Chibber (2005) ‘From class compromise to class accommodation: Labor’s incorporation into the Indian political economy’, in R. Ray and M. F. Katzenstein (eds) Social Movements in India: Poverty, Power, and Politics, New York: Rowman and Littlefield, pp. 32–61. 14 Conference on Industrial Development in India (Delhi: 1947). 15 For a sweeping analysis of labour incorporation in Latin America, see D. Collier and R. B. Collier (1991) Shaping the Political Arena: Critical Junctures, the Labor Movement, and Regime Dynamics in Latin America, Princeton: Princeton University Press. 16 See the discussion in ‘Memorandum on present labour policy and conciliation– arbitration machinery of the U.P. Government’, submitted by AITUC to the U.P Labour Inquiry Committee, 1947, AITUC Papers, File 190, Nehru Memorial Museum and Library (NMML). 17 See the discussion in E. A. Ramaswamy (1984) Power and Justice: The State in Industrial Relations, Delhi: Oxford University Press, pp. 44–8. 18 See ‘Memorandum of B.T. Ranadive on the Government Proposals Regarding Trade Disputes’ and ‘Draft Views of Com. N.M. Joshi on the Government Proposals Regarding Trade Disputes’, both in File 278, AITUC Papers; ‘Views on the Industrial Disputes Bill’, File 286, AITUC Papers, NMML.

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19 Quoted in Crouch 1966: 83. 20 Quoted in ‘Postwar Developments in the Indian Labor Movement’, Report No. 5 by Office of Intelligence Research, US Department of State. 21 See Ardishir Dalal’s comments in ‘Proceedings of the Ninth Session of the Indian Labour Conference, held in New Delhi from the 19th to 21st April, 1948’, File 291, AITUC Papers; testimony of K. D. Jalan and M. P. Birla in ‘Minutes to the evidence tendered by representatives of the Federation of Indian Chambers of Commerce and Industry to the expert committee on the Determination of a fair return to capital and profit-sharing, Monday, June 28th, 1948’, File 1236, IMC Papers; The Federation of Indian Chambers of Commerce and Industry, memorandum submitted to Mookerji, 27 May 1948, File 1236, IMC Papers; memorandum submitted by the Federation of Indian Chambers of Commerce and Industry to the expert committee on fair return to capital and profit-sharing on 28 June contained in File 1236, IMC Papers, all in NMML. 22 Crouch 1966: 45. 23 K. N. Subramanian (1967) Labour–Management Relations in India, Bombay: Asia Publishing House, p. 343. 24 The 5-year agenda for labour relations can be found in ‘Program of Work During the Next Five Years’, File 278, AITUC Papers, NMML. 25 A good source for business views on this issue is the weekly Capital, which not only editorialized freely, but also published speeches and addresses by prominent businessmen. On wages, see for example the speech by S. S. H. Sitwell to the Indian Engineering Association, 4 April 1946; speech by J. Latimer, President of the Indian Mining Association, in the 3 April 1947 issue; speech by G. D. Birla at the annual meeting of the United Commercial Bank, in the 24 April 1947 issue; the editorial, p. 993, in the 11 June 1947 issue; and the editorial, pp. 1095–96, in the 26 June 1947 issue. 26 For the general shift toward business interests, see my (2003) Locked in Place: Statebuilding and late Industrialization in India, Princeton University Press, Chapters Five and Six. 27 Steere to Secretary of State, 24 May 1951, 891.06/5–2451, RG 59, DSR. 28 Steere to Secretary of State, 10 May 1951, 891.06/5–1051, RG 59, DSR. 29 In 1950, only three wage boards were in existence – in cotton textiles, sugar and cement. See the ILO (1960) ‘Report to the Government of India on Labour–Management Relations and Some Aspects of Wage Policy’, Geneva: 160, p. 33. 30 Subramanian 1967: 413–14. 31 For a classic theoretical presentation of this problem, see C. Offe and H. Wisenthal (1985) ‘The Two Logics of Collective Action’, in C. Offe (ed.), Disorganized Capitalism, Cambridge, MA: The MIT Press. 32 E. A. Ramaswamy 1984. 33 E. A. Ramaswamy (2000) Managing Human Resources: A Contemporary Text, Delhi: Oxford University Press. 34 This is the basic argument advanced by not only Marxist theorists of the state, but also by mainstream analysts like Charles Lindblom and Robert Dahl. For the Marxist argument, see M. Carnoy (1985) The State and Political Theory, Princeton: Princeton University Press; C. Barrow (1993) Critical Theories of the State, Madison: University of Wisconsin Press; see also C. Lindblom (1977) Politics and Markets: The World’s Political Economic Systems, New York: Basic Books. For how this structural pressure was brought to bear on the Indian state after Independence, see my Locked in Place (2003). 35 For an analysis of a similar dynamic, in which labour’s subordination in a statis regime left it vulnerable to the onset of neoliberalism, see N. C. Pratt (1998) ‘The Legacy of the Corporatist State: Explaining Worker’s Response to Economic Liberalization in Egypt’, University of Durham, Centre for Middle Eastern and Islamic Studies, November.

9

Right to strike Is it a legitimate countervailing power in the globalized era? A case study of India Ketan Mukhija and Rohan Shah

Introduction It is a matter of deep concern that, in its verdict on 21 July 2004 and thereafter, a division bench of the Supreme (Apex) Court of India upheld the arbitrary dismissal of about 200,000 state government employees and teachers who took part in the statewide strike in Tamil Nadu (India). Nevertheless, the Court fully justified the most autocratic and repressive measures of the state government. The Court termed the strike as ‘illegal’ and stated that ‘the Jayalalitha government has sent a tough message that mal-administration cannot be caused in this way’. This message of the Supreme Court will only embolden the central and state governments and all managements to deal ruthlessly with any strike and other protest actions by employees who are reeling under the economic offensive of neoliberal globalization in the form of drastic cuts in their economic benefits. This decision represents the undoing and abrogation of those rights and liberties, which were clearly recognized even under colonial legislation.1 As provided for by Clause (q) of Section 2 of the Industrial Disputes (henceforth, ID) Act (1947), the strike is a recognized weapon of the workmen to be resorted by them, for asserting their bargaining power, and for affirmation of their collective demands, upon an unwilling employer. It is to be used as a last resort when all other avenues for settlement of industrial disputes, as provided in the statutory machinery, have proved futile. Strikes are not banned even in the case of public utility services.2 In this chapter, an attempt has been made to explore the various decisions of the Apex Court on the issue of the right to strike, thereby arriving at the various interpretations of such right. Then we make a critical appraisal of the decisions, and finally its relationship to the right to equality is discussed.3

‘Strike’: a critical conceptualization The term ‘strike’ is a flexible one, which has not been defined objectively in concrete terms; hence the differentiation between ‘legal’ and ‘illegal’ strikes is flawed.

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In the case of B.R.Singh. v. Union of India and Ors.,4 the contention, that since the strike was illegal, the workers were not entitled to any form of relief, was struck down. It was held that, The right to form associations or unions is a fundamental right under Article 19(1)(c) of the Constitution. Strike in a given situation is only a form of demonstration. There are different forms of demonstrations, e.g. Go-slow, sit-in, work to rule, absenteeism, etc. and strike is one such mode of demonstration by workers for their rights. The right to demonstrate and therefore the right to strike is an important weapon in the armoury of workers. This right has been recognized by almost all the democratic nations. Though not raised to a high pedestal of a fundamental right, it is recognized as mode of redress for resolving the grievances of workers.5 Hence, the classification between ‘legal’ and ‘illegal’ strikes has been blurred, owing to the lack of parameters to judge the essentiality of a service. The Portugal perspective In Portugal, it was necessary to resolve the latent conflict between the right to strike and safeguarding the legitimate interests of the community at large. Article 8 of the Act, which makes the unions and the employees responsible for maintaining the minimum level of services essential to meet the indispensable needs of society, addresses the problem. This represents a limitation of the right to strike and is a solution whereby the continuity of essential public services may be guaranteed without prejudice to recognition of the right to strike. Although no definition was given of what should be understood by ‘indispensable needs of society’, the legislators added a list of sectors which, by way of example, are regarded as engaging in activities intended to meet these needs: (a) postal services and telecommunications; (b) medical, hospital and pharmacy services; (c) public health, including funeral services; (d) energy and mining services, including fuel supplies; (e) water supply; (f) fire fighting services; and (g) passenger transport and the transport of livestock and perishable foodstuffs and goods essential to the national economy. In practice, the major strikes involving problems of maintaining minimum services have been in the public transport sector and in the production and distribution of energy (gas and electricity) and water.6 In recent years, a series of problems have arisen in connection with the application of Article 8. The points at issue are: who is authorized to define the services that must continue to be provided during a strike; who should select the particular employees needed to perform these services; and what legal rules govern the performance of work in providing minimum services. Starting with the last-mentioned problem, current legal opinion sees the employer as possessing the authority to direct the work and as being under an obligation to pay the employees who perform the minimum services. As regards defining the services

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that must be performed, and selecting the employees to perform them, the position adopted by the legislators in the most recent revision of the Strike Act in 1992 (taking the Italian legislation as their point of reference) consisted of the following provisions. Minimum services may, in the first instance, be defined by collective agreement or by agreement with the employee representatives. If no such agreement exists before advance notice of a strike is issued, the Ministry of Employment and Social Security convenes the employees’ and employers’ representatives with a view to negotiating an agreement on the measures necessary to ensure these services. If this is not achieved by the fifth day following advance notice of a proposed strike, the relevant ministers decide the definition of the services and the measures to ensure them. It is also stipulated that the employee representatives must select the particular employees at least 48 hours before the start of the strike; should they fail to do so, the employer makes this selection. It frequently happens that the unions refuse to cooperate in the provision of these essential services. When this is the case the strike is unlawful, or at least the participation in the strike of those employees who have been assigned to perform the services in question is regarded as unlawful and they become subject to the legal rules governing unlawful strikes. As regards the Indian context, if the strike is illegal the party guilty may be liable to be punished under Section 26 of The ID Act, 1947. Even if the strike is illegal, there is a distinction between: (a) an illegal but justified strike; and (b) an illegal but unjustified strike. The strike may be technically illegal because it is in contravention of the provisions of the ID Act but the demands made may be legal. A strike may have been illegal but it might have taken recourse to for good reasons and carried on in an orderly and peaceful manner. For this reason strikes are classified into justified and unjustified also. In the case of Bata Shoe Company (private) Ltd v. D.N. Ganguly,7 the Supreme Court has held that ‘participation in an illegal strike may not be necessarily be punished with dismissal’.8 To quote the Attorney General – Soli Sorabjee – ‘The right to collective bargaining and the ancillary right to strike was an invaluable right of government employees. It has been secured after years of toil’.9

The case of Rangarajan: an appraisal Pioneering the assault on the ‘right to strike’, the government of Tamil Nadu, in 2002, enacted the Tamil Nadu Essential Services Maintenance Act (TESMA), arming the executive with arbitrary and illegal powers to declare any service to be an ‘essential service’ at its whim by merely issuing an executive notification, hence subduing any form of protest by the employees. Further, the Tamil Nadu government promulgated an Ordinance introducing an amendment to the scheme of TESMA. This incorporated provisions empowering the government to effect an en masse disciplinary action against the employees for violations. Apart from this, there already existed a Rule No. 22 in the Tamil Nadu Govern-

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ment Servants’ Conduct Rules (1973) providing a blanket ban not only on strikes, but any form of demonstration also. Thus, an entire regime of laws in the form of enactments, ordinances, notifications was erected in advance to counter any possible action of protest on the part of its defiant employees. The trade union movement and the democratic minded people of the country are deeply shocked at the way the state government launched its repression on the 1.2 million state employees and teachers of Tamil Nadu. The latter had to go on an indefinite strike to demand restoration of the pension benefits, which were drastically cut by the government. Thus, the strike was prompted by the peremptory action of the Tamil Nadu government to alter pension payments – among other grievances. The government decided to tackle the workers instead of their grievances. By April 2003, 27 entities were brought under the TESMA. The ‘protest’ strike was intended for July. From around 30 June, the arrests and harassment of workers began. On 3 July, various government circulars declared that the strikers could not return to work. The workers estimated the total number of ‘mass-dismissed’ employees at around 300,000.

Strike: contextualizing its roots in the constitution of India Banning the strike in such a wholesale fashion is violative of the government servant’s fundamental rights to freedom and association, as envisaged by Article 19(1)(a) and (c). The right to form associations or unions is a fundamental right under Article 19(1)(c) of the constitution. Section 8 of the Trade Unions Act provides for the registration of a trade union if all the requirements are satisfied.10 It seems that calling a strike is a spontaneous expression of protest against exploitation by the employers. The employees’ right to seek legitimate demands cannot be ignored and the strike is a weapon to protest and increase their bargaining power. It is a democratic right, which cannot be taken away by unconstitutional legislations.11 The right to strike is not ex facie illegal, and does not come under the ambit of the ‘reasonable restrictions’ as envisaged under Article 19(2) to (6) of the constitution of India. It is to be noted that if all negotiations have failed, and the last resort is taken to strike, and that too a peaceful one, the same cannot be declared to be mala fide, and hence treated as an offence. The main ground for challenge to the judgment is that it is violative of the fundamental rights guaranteed under Article 19(1)(a) and (c) of the constitution. The restriction imposed to the act of strike is not a reasonable restriction within the meaning of Article 19 of the constitution. Hence, the right to strike cannot be taken away by the government in an arbitrary and unfettered manner. The phrase ‘reasonable restrictions’ connotes that the limitation imposed on a person in enjoyment of the right should not be arbitrary or of an excessive nature, beyond what is required in the interest of the public. The word ‘reasonable’ implies intelligent care and deliberation, that is, the choice of a court, which reasons dictate. Legislation, which arbitrarily or excessively invades the right, cannot be

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said to contain the quality of reasonableness and unless it strikes a proper balance between the freedoms guaranteed in Article 19(1) and the social control permitted by Clause (6) of Act 19, it must be held to be wanting in that quality. Therefore, it is strongly argued that the right to strike by organized workers, labourers and employees to protest collectively should be made available, subject to normal constitutional limitations and reasonable restrictions under law.12 The restrictions placed on the freedoms of the employees, thereby curtailing them to a large extent, fail completely on the touchstone of the doctrine of ‘proportionality’. Administrative action in affecting fundamental freedoms must always be based on the ‘proportionality’ principle. This was the observation in a case reported in the case of Om Kumar v. Union of India.13 By ‘proportionality’, it is meant that the question of whether – while regulating exercise of fundamental rights – the appropriate or least-restrictive choice of measures has been made by the legislature or the administrator, so as to achieve the object of the legislation or the purpose of the administrative order. Under the principle, the court will see that the legislature and the administrative authority maintain a proper balance between the adverse effects that the legislation or the administrative order may have on the rights, liberties or interests of persons while keeping in mind the purpose that they were intended to serve. The legislature and the administrative authority are, however, given discretion or a range of choice; but as to whether the choice made infringes the rights excessively or not is for the court to decide. Ever since 1950, the principle of ‘proportionality’ has indeed been applied vigorously to legislative (and administrative) action. While dealing with the validity or legislation infringing on fundamental freedoms enumerated in Article 19(1) of the constitution of India, such as freedom of speech and expression, freedom to assemble peacefully, freedom to form associations and unions, freedom to move freely throughout the territory of India and freedom to reside and settle in any part of India, the Supreme Court has considered whether the restrictions imposed by legislation were disproportionate to the situation, and were the least restrictive choices. The burden of proof to show that the restriction was reasonable lay on the state. ‘Reasonable restrictions’ under Articles 19(2) to 19(6) could be imposed on these freedoms only by legislation, and courts had occasions throughout to consider the proportionality of the restrictions. In cases where such legislation is made and the restrictions are reasonable, if the statute concerned permitted the administrative authorities to exercise power or discretion while imposing restrictions in individual situations, a question frequently arises as to whether a wrong choice is made by the administrator for imposing restrictions; or whether the administrator has not properly balanced the fundamental right and the need for the restriction or whether s/he has imposed the least of the restrictions or the reasonable quantum of restriction, etc.

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Tracing the backdrop The history of labour legislation in India is interwoven with the history of British colonialism. Considerations of British political economy were paramount in shaping some of these early laws. In the beginning, it was not possible to get enough Indian workers to run British establishments and hence the laws for indenturing the workers were deemed necessary.14 This necessitated appropriate labour legislations in order to protect the interests of the British workers. Then came the Factories Act. Indian textile goods offered stiff competition to British textiles in the export market, and hence in order to make Indian labour more expensive, the Factories Act was introduced in 1883 because of the pressure brought on the British Parliament by the textile magnates of Manchester and Lancashire. Thus, India gradually received the stipulation of 8 hours of work, the abolition of child labour, restriction of women in night employment and introduction of overtime wages for beyond 8 hours, long before these measures were introduced in some advanced countries. While the impact of these measures resulted in an improvement of working conditions, there is little doubt that the real motive behind such measures was protectionist. Yet the Indian trade union movement, which was an integral part of the freedom struggle, also played an important role in the introduction of such labour legislation. Subsequent to Independence, India has taken a number of steps towards amelioration of the working conditions of organized labour. Of the ILO’s Eight Fundamental Conventions, India has ratified four, which are as follows: Forced Labour 1930; Abolition of Child Labour 1957; Equal Remuneration 1951; and Non-Discrimination 1958.

Trends in judicial attitude: an overview Ordinarily it is open to a trade union to go on strike or withhold labour. However in the constitution of India there is fundamental right15 to form trade unions and any undue restriction on the right of the employees to form unions is unconstitutional. In All India Bank Employees’ Association v. Industrial Tribunal,16 it was contended that the right to ‘form an union’ carries with it as a concomitant right a guarantee that such unions shall achieve the objects for which they are formed. If these concomitant rights were not conceded, the right guaranteed to form unions would be an idle right, an empty shadow lacking all substance. The Supreme Court did not support this argument and observed: On the construction of the Article, we have reached the conclusion that even a very liberal interpretation of sub-clause (e) of clause (1) of Article 19 cannot lead to the conclusion that the trade unions have a guaranteed right to an effective collective bargaining or to strike, either as part of collective bargaining or otherwise. The right to strike or right to declare lock-out may be controlled or restricted by appropriate industrial legislation and the validity of such legislation would have to be tested not with reference to the criteria laid down in clause (4) of Article 19 but by totally different considerations.

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Likewise, the High Court of Bombay17 held that the right to go on a strike is of a different character. It is not joint or collective expression of views but is joint or collective action. By its very nature it is fraught with possibilities of leading to violence. Our (Indian) constitution is an elabourate one. If the constitution makers had intended to confer a fundamental right on the citizens to go on strike, they would have expressly said so. In these circumstances the right to go on a strike is not included in Article 19(l)(c). The law, which seeks to obtain industrial peace by prohibiting strikes and lockouts cannot be said to be an unreasonable restriction on the right to go on strike even if such right was guaranteed by the constitution. What the legislature had rendered illegal is to go on a strike during a limited period and without first availing of the machinery of conciliation and arbitration. This is not an abridgment of the fundamental rights. Thus there is a guaranteed fundamental right to form association or labour unions. But the activities of such associations to achieve their objects may be subjected to reasonable restrictions. Therefore under our constitution the right to strike is not a fundamental right of the trade unions. Sections 22 and 23 of the ID Act (1947) forbid strikes in public utility or other undertakings as well as in the event of a reference of the dispute to adjudication under section 10 of the ID Act; the strikes are also prohibited and such restrictions have been conceded as reasonable ones on the right guaranteed by sub-clause (c) of clause (1) of Article 19. In other words the right to strike is a relative right, which can be exercised with due regard to the rights of the others. So neither statutory law, nor common law nor constitution confers an absolute right to strike. Permissibility of strikes As long as the ID Act (1947) stands, a strike by itself is not illegal or unlawful. It becomes illegal only if it is in contravention of sections 22, 23 and 24 of the Act. The right to strike in India, therefore, is subjected to procedural requirements of notice or pendency of conciliation or adjudication proceedings. A strike is permissible provided it is exercised judiciously, peacefully, reasonably and as a last resort within the framework of statutory industrial laws. Such a right to strike does not authorize workers to indulge in acts of vandalism, sabotage, intimidation, obstruction, violence or destruction of life and property.18 Right to picketing As the constitutional guarantee of the freedom of association does not carry with it the right to strike it may equally be stated that the right to strike in its turn does not legalize picketing and other incidental acts of omission and commission during strike. Unlike in the US, peaceful picketing is not a legitimate weapon of workers in India and may come in conflict with the rights enumerated in Article 19(1) of the constitution. The right to picketing, therefore, is subject to the right of persons who are subjected to picketing to carry on their trade or business without obstruction or hindrance. In Damodar Ganesh v. State of

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Bombay,19 restrictions on peaceful picketing were construed as reasonable in the interest of the general public, as it sought to interfere with the freedom of movement of other citizens. The freedom of speech under the constitution, which includes freedom of press, publication, communication and discussion, is not absolute and a law may impose reasonable restrictions. So picketing at the place of employment during a strike, which is legal to publicize the grievances of the employees, may obstruct the employers and other non-striking employees in the performance of their duties and may tend to disturb the public as a result of conflict between the picketers and non-picketers. Therefore, the state can restrict even peaceful picketing by workers if it encroaches upon the fundamental right of the employers to pursue their trade or business or their right of movement due to physical obstruction caused by picketing. In case of an illegal strike the justification of picketing is out of the question both in the US and India. In other words where the law seeks to prohibit strikes for a limited period in the interests of industrial peace and harmony, the prohibition of such strikes cannot be said to be an unreasonable restriction on the right to go on strike if such a right were guaranteed. Therefore there has been no abridgment of the right of freedom of expression, including picketing. Strikes interdicted Section 22 of the ID Act (1947) sets out the circumstances when a strike is deemed to be illegal. In other words certain conditions have to be fulfilled before resorting to a strike (or lockout) in a public utility undertaking. These conditions are: (a) notice of the strike to the employer within 6 weeks before striking, or (b) no strike within 14 days of giving such notice, or (c) no strike before the expiry of the date specified in the notice, or (d) no strike during pendency of any conciliation proceedings before a conciliation officer and 7 days after the conclusion of such proceedings. No notice, however, is necessary for a strike if it is already in existence. A strike, therefore, shall be illegal if it is commenced or declared in contravention of the aforesaid conditions. The avowed object of section 32 is to interdict strikes in the interest of the general public. The employee or worker is not restrained from going on strike by the section but it is required of her/him to fulfil certain conditions as enumerated in four different clauses. In other words, there is no strike ban but only certain procedural mandatory requirements are laid down which the employees are to abide by for the compliance of statutory conditions. Strikes in public utility service: breach of contract? It is clear that employees in a public utility service cannot go on a strike in breach of contract, without complying with certain formalities. The question arises as to whether such a strike results in a breach of contract between the employer and the employee. It is generally agreed that industrial matters are not entirely governed by ordinary law of contract of master and servant. The

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expression ‘breach of contract’ does not mean breach of a condition of service, and it is not incumbent on the prosecution to produce and prove the standing rules in order to establish that the employees were guilty of breaking the contract. Political strikes: legal position in India In India, there is no law concerning political strikes. The existing law deals with industrial strikes only. The Trade Disputes Act (1929) dealt with prevention of industrial strikes having objects other than furtherance of a trade dispute and in this regard closely followed the British Trade Disputes and Trade Unions Act (1927). The Indian Trade Disputes Act (1929) provided: A strike (or lockout) shall be illegal which has any object other than (or in addition to) the furtherance of a trade dispute within trade or industry in which the strikers (or employers locking out) are engaged; and (b) is designed or calculated to inflict severe and general hardship upon the community and thereby compel any government in British India, the Federal Railway Authority or the Crown representative to take or abstain from taking any particular course of action. The reason for inserting this provision was that the vicissitudes of the British general strike of 1926 and the non-cooperation movement, which was sweeping India under the leadership of Gandhi and other nationalist leaders, worried the government of India. It was in the year 1929 that the Indian National Congress proclaimed the goal of full Independence for India. Strikes were plaguing Indian industry. The Trade Disputes Act (1929) accordingly provided: ‘If any person declares, instigates or incites others to take part in or otherwise acts in furtherance of, a strike (or lockout) which is illegal under the provisions of section 16, he shall be punishable as therein provided.’ In the late 1930s with worldwide economic unrest, trade unions, often influenced by political parties, were active for political, as well as economic, ends. The purpose of the aforesaid legal provisions was to make illegal industrial strikes having political aims. Consequently political strikes having objects beyond the furtherance of a particular trade dispute were made illegal. Thus where some of the demands of the workers were of a political character that could not be granted by the government, resulting in a general strike, the court observed: The class of strike, therefore, which is rendered illegal, is one, which is designed or calculated to coerce government by inflicting hardship upon the community . . . Difficulties may no doubt sometimes arise, because the persons responsible for a strike may not all have the same design or plan. Some of them may design that the strike should have objects that would render it illegal under section 16, whilst others may be in favour of a particular trade

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dispute. But whatever the difficulties may be, the court has to determine what the design of those responsible for the strike was at the time when they instigated it. In order to show that the strike was calculated to have the effect referred to in sub-section (l)(b) of section 16, the court must hold, having regard to the nature of the strike and the circumstances prevailing at the date of the instigation or other acts specified in section 17, that the natural and probable consequences of the strike will be to inflict such severe, general and prolonged hardship upon the community that either the government of India or the local government may reasonably be expected in consequence thereof to be compelled to take or abstain from taking any particular course of action. The ID Act (1947) neglected to incorporate the above provisions concerning non-industrial strikes. It has merely confined itself to the regulation and control of ordinary industrial disputes. In essence, industrial relations law in India is silent on this important matter.

The workman: evolution of its definition and ambit The ID Act (1947) deals specifically with ‘workmen’. Now, the very definition of this term as regards its scope and ambit has been subjected to various interpretations, owing to its vague and nebulous character. The gamut of parameters that are useful in ascertainment and determination of workmanship can be understood through the evolution of a plethora of tests/criteria enunciated by legislations and judicial pronouncements. ‘Industry’ as defined by the ID Act (1947), has to be read together with the term ‘workman’, which is thus qualified, and the distinction between the contract for service and the contract of service is consequently brought to the fore. A ‘workman’ refers to ‘any person employed’ under a contract of service, which may be express or implied. The distinction basically hinges on the characteristic of control of one by another, and hereby the common law test or the traditional control test assumes significance. The test emphasizes the criteria that the employer dictates the nature, manner and amount of work to be done. For the precise determination of the scope of the term ‘workman’, this test is no longer relevant and pertinent, since it does not talk about employment, industry, etc. in sufficient details. The other tests that are of much greater importance are, first, the integration test. The latter raises the issue whether the work done is incidental or essential to the industry. In the latter case, it would be construed as employment, but shall be a contract for service in the former. Second, the multiple test, which envisages the admixture of the two tests or criteria, since one test alone may not be the determining factor. In the celebrated case of DC Works v. Saurashtra, the question at hand was whether the persons called ‘agarias’ who manufactured salt for the unit were ‘workmen’ or not. It was observed by the court that they were in fact included within the ambit of ‘workmen’ because of the master’s power of selection,

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payment of remuneration, control over method of doing work and the power of dismissal. In another case, the issue that was raised before the court was whether the contractors who procured tobacco from the company, and supplied them beedis (the popular kind of cigars in India) were ‘workmen’, by virtue of the fact that certain specifications given by the company amounted to control over the work. It was held that the contractors did not fall within the scope of ‘workmen’ since mere directions having a bearing on process of work the person carries on does not amount to control as required by the control test. Apart from the aforesaid tests, there is the economic reality test that considers the fact of the economic dependency of the people, thereby making for a viable social security law. The ID Act (1947) provides for a plethora of stipulations pertaining to the rights and obligations of the workmen, as regards the compensation, retrenchment, wages, employment conditions, etc. Significance of the definition The definition of workman is important because the Act aims at investigation and settlement of industrial dispute, which implies a difference between employer and workmen. Therefore, a tribunal has the right to adjudicate an industrial dispute only when such a dispute relates to an employee who is a workman. According to the definition stipulated in the clause(s) of the ID Act (1947), ‘workman’, means any person (including an apprentice) employed in any industry to do any manual, unskilled, skilled, technical, operational, clerical or supervisory work for hire or reward, whether the terms of employment be express or implied, and for the purposes of any proceeding under this Act, in relation to an industrial dispute, and includes any such person who has been dismissed, discharged or retrenched in connection with, or as a consequence of, that dispute, or whose dismissal, discharge or retrenchment has led to that dispute. ‘Workman’ does not include any such person who is subject to the Air Force Act (1950), the Army Act (1950) or the Navy Act (1957), or who is employed in the police service or as an officer or other employee of a prison, or who is employed mainly in a managerial or administrative capacity, or who, being employed in a supervisory role, draws wages exceeding 1,600 rupees per month, or exercises, wither by the nature of the duties attached to the office or by reason of the powers vested in him, functions mainly in a managerial manner. The expression ‘employed’ used in the definition has two known connotations. The context would indicate that it is used in the sense of a relationship brought about by express or implied contract of service in which the employee renders service agreed upon or statutorily prescribed. It discloses a relationship of command and obedience. The essential condition of a person being a workman within the terms of the definition is that s/he should be employed to do the work in the industry and that there should be an employment of his by the employer and that there should be a relationship between the employer and him as between an employer and employee or master and servant.

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Thus, where a contractor employs a workman to do work, which s/he contracted with a third person to accomplish, the workman of the contractor would not necessarily become a workman of that third person.20 In order to trace the evolution and development of the definition of the term ‘workman’, it would be worthwhile at this juncture to look at the observation of the judge in the case of Bihar State Transport Corporation v. State of Bihar. The factual matrix comprises a person who was appointed as head clerk in the office of divisional manager and there was no evidence that s/he was doing managerial or supervisory work. His conditions of service were governed by the standing orders of the Rajya (state) transport. S/he was held to be a workman. Some case studies B.S. O.S. & D. Co. v. Management Staff Assam It was held that ‘A person cannot be assumed to be a workman on the ground that he does not come within the four exceptions in Section 2(s).’ In practice quite a large number of employees are employed in industries to do work of more than one of the kinds mentioned in the definition. In such cases the workman must be held to be employed to do that work, which is the main work s/he is required to do even though s/he may be incidentally doing other type of work. S.K. Verma v. Mahesh Chandra In the aforesaid case, the development officer of Life Insurance Corporation was held to be a workman. Keeping in view the nature of duties performed by such officers as the powers vested in them they cannot be said to be engaged in any administrative or managerial work. Ved Prakash Gupta v. M/s Delton Cable India (P) Ltd Here the appellant was employed as a security inspector at the gate of the factory premises. S/he was held to be a workman within this section because the duty of the appellant was neither managerial nor supervisory. H.S. Chauhan v. Life Insurance Corporation of India In the said case, a development officer was held to be a workman. S/he had to perform routine, manual, mechanical and clerical duties. S/he had no supervisory duties, having no power to remove or appoint or distribute work to any employee.

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Titaghur Paper Mills Co. Ltd. v. 1st Industrial Tribunal In this case, a person with technical expertise was also held to be a workman. Although she did not run the machines themselves but stood by and guarded ordinary workmen in the matter of running the machine, his/her job cannot be said to be purely administrative or supervisory. T.P. Srivastava v. National Tobacco Co. of India Ltd. In the above case, it was held that a section salesman employed by the respondent company is not a workman because the duties of the appellant require a imaginative and creative mind that could not be termed as either manual, skilled, unskilled or clerical in nature.

The apathy of the system We are concerned about the ‘right to strike’, which recently has been restricted repeatedly not merely by state legislation, but especially by the Supreme Court in the Rangarajan case, despite its explicit recognition by the 1947 ID Act. What has to be underscored is that this ‘right to strike’ is more or less recognized as natural, inalienable, inherent and almost absolute under the scheme of this colonial legislation, imposing tabs upon such right only in certain welldefined and very extraordinary situations. Though the ID Act empowers the appropriate governments to declare certain services of public importance and necessity as the ‘public utility services’, it does not bar the exercise of the right to strike in relation to these services and merely provides for a restriction of 14 days’ advance notice in such cases. This right, so well recognized even by colonial legislation, now stands negated by the recent judicial proclamation in Independent India, which is looking down upon the right with disgust, and says there exists no such right at all.

The extension of the argument For the legal system in a civil society to work in a reasonably equitable manner, all the legal principles of organizing and pressing one’s interests, must be respected and protected by law. The impairment of basic democratic, civil and political rights and entitlements of any organized force would skew the social contract and tilt the balance of economic welfare and justice. The Tamil Nadu government has fashioned a creative response to India’s crisis of employment, which has begun to loom even larger since liberalization and globalization became the reigning mantras in the early 1990s. Private employers have often used the unorganized to undermine the powers of labour unions. The power of the organized workers is not to be engaged in dialogue, but crushed through the invocation of police power. Segments of the workforce that have the nominal protection of organization and the law are to be weakened, without such recourse.

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As regards the implications of the observation made by the Supreme Court Bench pertaining to the right to strike, strikes by government employees have been termed illegal. There is no fundamental, constitutional or moral ground to go on strike, and it is against the laws of the country, in the sense that the judgment has made a sweeping assertion that the strikes are bad and thus should not be allowed.21 Strikes are internationally accepted as a part of the right of collective bargaining, and it is not a separate right as such. Collective bargaining includes negotiations, talks, mediations, state intervention, arbitration and referring of disputes to tribunals and, if all fail, then the option is to strike. Therefore, strikes are the culmination of the right to collective bargaining of the working class. Attorney General Soli Sorabjee has rightly pointed out that the Apex Court has no business to undermine this right.22 Another shocking aspect is that it does not even mention the inconvenience caused by lockouts and closures to the workers. In the case of All India Employees’ Association v. National Industrial Tribunal and Others (1962), the Constitution Bench specifically held that even a very liberal interpretation of Article 19(1)(c) guaranteeing the right to form associations or unions, could not lead to the conclusion that trade unions had a guaranteed right to an effective collective bargaining or strike either as part of collective bargaining or otherwise. But this did not consider the question of why the right to strike cannot be construed as a fundamental right with reasonable restrictions on its proper exercise. The Bench concluded that the said right was not a concomitant right of the right to form associations, that is, a strike was not a legitimate means to achieve all the objectives of the union. The Hon’ble Supreme Court in the case of Kameshwar Prasad v. State of Bihar has rejected the contention that persons in government service form a class apart, to whom the rights guaranteed by Part III of the constitution do not apply.23 In this case, it was ruled that the right to strike cannot be construed to be emanating from either Article 19(1)(a) or 19(1)(c) of the Constitution of India. While it is correct that the rights of government servants to go on strike are different from those of workmen employed in the private sector, the provisions of the ID Act (1947) apply to government servants going on strike. Government servants are subject to the conduct rules framed by the governments concerned but these rules must not be in contravention of the fundamental rights guaranteed by the constitution.24 There is an underlying economic paradigm in the entire aforesaid analysis, which essentially is the neoliberal market-oriented framework. This primarily argues that labour market flexibility is crucial for increasing investment and therefore employment, and also for ensuring external competitiveness in a difficult international environment. In this perspective, legal protection afforded to workers, in the form of curbs on employers’ ability to hire and fire workers at will, minimum wages or granting freedom to engage in collective action such as the right to strike, all actually operate to reduce employment. Additionally, in India there is a further argument that the dualism in the labour market points towards a conflict between organized workers and those in the unorganized sector.25

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That the recognized trade unions ignore the problems of the workers in the informal sector; that protection given to organized workers actually allows or even militates against the improvement of conditions of unorganized workers, who are anyway much worse off. This perception then leads people to accept that the so-called ‘privileges’ extended to the organized sector workers can be withdrawn, since they are anyway so much better off than most other workers in the economy. Nonetheless, this argument is based on poor politics and worse economics. The politics is wrong because in fact any struggle over workers’ rights necessarily affects all workers, even if this is not immediately evident to a specific cadre of workers. It is amply clear from the domestic experience, that every attack on organized workers has also reduced the bargaining power of unorganized workers, that periods of repression of organized labour have also been periods when informal sector workers find themselves even more exploited. The resulting dualism is characterized by an organized sector, which has relatively low employment, and an unorganized sector, which has low investment. If aggregate economic activity is to break out of this dualism and marry the advantages of both sectors, it is necessary to get rid of the constraints put on large employers in the matter of labour relations. The recommendations of the Second National Labour Commission and the recent court judgments attempt to create more flexible and less protective labour legislation. It is high time we created awareness of the current situation with regard to physical as well as human environment, the legal and institutional frameworks and sustainable development efforts, with special focus on the achievement of ‘smart growth’ – development that takes into account economic, environmental, as well as social considerations. Tracing the origins of competing ideologies, rationalizing the structural and functional considerations, and examining the tenability and viability of existing institutions, would contribute in the formulation of an informed judgment. The belief is obviously that reducing such ‘rigidities’ and curbing the power of organized labour will increase private investment, increase economic activity and improve productivity. All these in turn will improve external competitiveness, which is considered to be so important these days. Coming to the merits of the argument, the primary problem with this is that it completely ignores the major forces affecting investment, economic activity and therefore employment. It is now accepted across the world that aggregate investment does not respond to changes in the wage rate, but to broader macroeconomic conditions such as the level of demand, the amount of public investment, the expectation of external markets and so on. Labour costs are never viewed in isolation, but only in relation to labour productivity, which in turn is affected not only by the level of well-being, skill and education of the workers themselves, but also by infrastructure conditions, the technology used in production and so on. In such a context, greater flexibility in labour markets might simply mean the perpetuation of low-wage, low productivity practices by employers, rather than more economic growth.

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While there is a wide array of rights accepted by the Indian constitution for workers, and protective legislation as well, the problem is that they are rarely achieved or enforced. Typically they can only be even minimally enforced in the organized sector. Indeed, it is also clear that in the recent past in India, strikes have been far less relevant in disrupting production in the Indian economy than lockouts by employers. While both have been coming down over this period, the decrease in the number of strikes has been more dramatic and, in 2004, the number of lockouts was actually higher. It is in this context that the right to strike must be considered in India. In our view, strikes are ultimate weapons, which are only resorted to by workers when all other means of struggle and negotiation have been exhausted. In recent Indian experience, the working class as a whole has been relatively responsible and only used strikes in extreme cases when negotiations have failed completely or when employers have appeared to be completely insensitive to legitimate demands of labour. Denial of this right would lead to a massive deterioration of the bargaining power of workers, which has already been weakened by various macroeconomic processes such as global integration and the withdrawal of the state from important areas of regulation and provision. In any society, the socioeconomic rights of all citizens, including workers, have never been freely given by the state or employers; their recognition and implementation have always been the result of prolonged struggle on the part of workers and other groups. Changing the conditions of such struggles amounts to changing the possibility of ensuring these basic rights, which are even recognized in the constitution of India. Therefore, the right to strike for workers remains an important instrument for ensuring the basic economic rights of all citizens.

Inextricable link with the right to equality The new doctrine of non-arbitrariness, as envisaged by J. Bhagwati, in the case of E.P. Royappa v. State of Tamil Nadu,26 is enunciated as follows: Equality is a dynamic concept with many aspects and it cannot be cribbed, cabined and confined within the traditional and doctrinaire limits. From the positivistic point of view, equality is antithetical to arbitrariness. In fact, equality and arbitrariness are sworn enemies . . . Where an act is arbitrary, it is implicit in that it is unequal both according to political logic and constitutional law and is therefore violative of Article 14. In Maneka Gandhi v. Union of India,27 the court proceeded to examine the ‘content and reach’ of the equalizing principle enshrined in Article 14. The judge observed that: It is indeed the pillar on which rests securely the foundation of our democratic republic. And therefore, it must not be subject to a narrow, pedantic or lexicographic approach. No attempt should be made to truncate its all

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Now, applying this new doctrine, envisaging arbitrariness as the touchstone to determine the constitutionality of the right to strike, it can be conclusively inferred that this presents a situation where very wide and unbridled discretion has been conferred to the executive to pick and choose persons for giving differential treatment. Since the workers and the employers are evidently placed on very unequal pedestals, it is but logical and reasonable to at least confer a degree of legitimacy to the right of the workers to fight for their demands, in case of diabolic and abject violations of the same. To quote Harold Laski, in Liberty in the Modern State: You cannot compartmentalize life; and where grave emergencies arise, the weapons to be utilized must be fitted to meet them. A government, which knew that its declaration of war was likely to involve a general strike, would be far less likely to think in belligerent terms. I do not see why such a weapon should be struck from the community’s hand. I do not forget that the German Republic was saved from the Kapp Putsch by a general strike.28

Conclusion and the epilogue There have been a number of critical sociological analyses of strike activity. The assumptions underlying these analyses often vary and in many cases are not clearly established. The rationale for the activity of strikes can be explained as follows: in contemporary market economies, the conventional employment relation is, at law, an asymmetrical social relation in which workers are in a position of subordination to managerial authority. Owing to the fact that ‘capital hires labour’, this authority is primarily exercised in accordance with the interests of the owners. As a result, ‘behavioural’ problems having to do with trust, fairness and legitimacy are endemic to the employment relation. Strike activity, in turn, legally a manifestation of these problems, serves as a primary means through which workers are able collectively to voice discontent and distrust, either with the exercise of the managerial authority in general, or with management’s position on a particular issue. Labour laws play a major role within this context, for they not only provide workers with rights within the employment relation, they also tend to limit these rights and to reinforce the asymmetrical nature of this relation. Both can have major implications for the condition of subordination, for the nature and content of collective bargaining, for the ability of workers to mount a meaningful strike and, ultimately, for their livelihood. To assert that strikes under any circumstances are illegal, immoral, inequitable and unjustified is contrary to our law and industrial jurisprudence.

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Strikes and demonstrations are a democracy’s hard fought weapon against oppression and exploitation. They cannot be wished away by a Supreme Court, which has hitherto supported and advocated their disciplined use. Hence, what is at stake here is the very foundation of democracy itself, along with the basic right to voice dissent. Strikes empower the deprived and disempowered to fight injustice in oppressive cases when no constructive option is left. After all, workers are important social partners in society. If they can build up their bargaining power, if they can stimulate and strengthen their organization and striking force, it can be an effective deterrent against aberrations in the society. But if the trade union movement does not have that strength, it shall be a one-sided game for the capitalists. Therefore, in a word, the sense of bargaining power has to be strong enough not to allow foul play to go unchecked, for an immaculate functioning of a democratic set-up.

Notes 1 The Government of India Act 1935 and the conduct rules by the British framed under the same act treated the government employees of India as virtual slaves. While the colonial government behaved so in India, in its own country (the UK) government employees had the right to strike and even contest elections under certain conditions. Also, the constitution of India does not say anything about the right to strike by any section of the workers. Article 19 guarantees fundamental rights for all citizens and Article 19(2) speaks of some reasonable restrictions that the central and state governments are to consider and decide. Under Article 309 of the constitution, the central and state governments are empowered, through their legislatures, to frame rules on the conditions of their employees. The central and state governments have framed rules named as government servants’ conduct rules, just like a photocopy of the British-made conduct rules, which seek to prevent the government employees from exercizing their full trade union and political rights. Only the government of West Bengal has changed these rules. But the right to strike is a fundamental trade union right and the Indian Trade Union Act of 1926 and the ID Act of 1947 deal with the workers’ right to form trade unions and to collective bargaining. 2 As held in the case of Chemical and Fibres of India Ltd. v. D.G, Bhoir, (1975) 4 SCC 332. 3 The following abbreviations have been used in the text: Supreme Court Cases (SCC), All Indian Reports (AIR) and Consolidated Commercial Digests (CCD). 4 (1989) 4 SCC 710. 5 The court also held that: Section 8 of the Trade Unions Act provides for registration of a trade union if all the requirements of the said enactment are fulfilled. The right to form associations and unions and provide for their registration was recognized obviously for conferring rights on trade unions. The necessity to form unions is obviously for voicing the demands and grievances of Labour. Trade Unionists act as mouthpieces of labour. The strength of a Trade Union depends upon its membership. Therefore, trade unions with sufficient membership strength are able to bargain more effectively with the management. This bargaining power would be considerably reduced if it is not permitted to demonstrate. 6 ILO 1983, ‘Freedom of Association and Collective Bargaining: General Survey by the Committee on the Application of the Conventions on Freedom of Association, the right to organize collective bargaining,’ para 214.

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7 (1961) 1 LLJ 303 (Supreme Court). 8 Section 26 of IDA: ‘Penalty for illegal strikes and lockouts: Any workman found guilty of participating in an illegal strike shall be punishable with imprisonment for a term, which may extend to one month or with a maximum fine of fifty rupees or both.’ 9 The Hindu, 25 August 2003. 10 Section 8: ‘Registration – The registrar will register the Trade Union if s/he is satisfied that the Trade Union has complied with all the requirements of this Act in regard to registration.’ 11 The right to form associations and unions and provide for their registration has been recognized with the view to confer certain rights on trade unions. The basis for the formation of trade unions is the need to voice the demands and grievances of labour. Trade unions serve as mouthpieces of labour. The main aims of trade unions are the representation of the rights of the workers and the negotiation of better terms of employment. One of the main tools through which this is achieved is collective bargaining. The ability to bargain efficiently would be considerably reduced if unions were not allowed to demonstrate. 12 The Hon’ble Supreme Court in a recent case as reported in (1998) 8 SCC 227 has observed that in examining the reasonableness of a statutory provision, whether it is violative of the Fundamental Right guaranteed under Art. 19, one has to keep in mind: The Directive Principles of State Policy. Restriction must not be arbitrary or of an excessive nature so as to go beyond the requirement of the interest of the general public. In order to judge the reasonableness of the restrictions, no abstract or general pattern or a fixed principle can be laid down so as to be of universal application and the same will vary from case to case as also with regard to changing conditions, values of human life, social philosophy of the Constitution, prevailing conditions and the surrounding circumstances. A just balance has to be struck between the restrictions imposed and the social control envisaged by Art. 19 (6). Prevailing social values as also social needs, which are intended to be satisfied by the restrictions. There must be a direct and proximate nexus or a reasonable connection between the restrictions imposed and the objects sought to be achieved. If there is a direct nexus between the restriction, and the object of the Act, then a strong presumption in favour of the constitutionality of the Act will naturally arise. It is submitted that if legislation imposes restriction under Clause (2) to (6) of Article 19, the Court has to consider whether those restrictions were disproportionate to the situation. If the restrictions imposed are reasonable but the statute permitted administrative authorities to exercise discretion while imposing the restriction in individual cases, actions have been tested on the principle of proportionality, though not so expressly stated to be so. (1998) 8 SSC 227 13 14 15 16 17 18 19 20

(2001) 2 SCC 386. Giri 1960. Raja Kulkarni v. State of Bombay, AIR. 1951 Bom. 105. (1961–62) 21 FJR 63 at 74 and 75 (SC). Vasudevan v. S.D. Mittal, A.I.R. 1962 Bom. 52 at 64–65. Gajendragadkar 1965. AIR 1951 Bom. 459. As per the case of The Workmen of the Food Corporation v. M/s Food Corporation of India, (1985) 11 LLJ 4 (SC) 21 It should be noted that the workers have the statutory right to strike as enshrined in the ID Act and the Trade Union Act, and there are procedures to go on a strike and for collective bargaining. The Supreme Court judgment, thus, goes against not only

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the acts but also ILO conventions, which stipulate such rights to employees in the public sector. What is needed is for the government to intervene legislatively to protect the right to strike. It also needs to ratify the international conventions that safeguard the rights of workers and government employees. In Europe, government employees have the right to strike (Lowe 1935). AIR 1962 SC 171; see also O.K. Ghosh v. Er. Joseph, (1963) 1 SCR 789. The right to hold demonstrations and the right to strike has been recognized by almost all of the democratic countries. In India, though this right has not been raised to the high pedestal of a fundamental right, it is recognized as a mode of redress for resolving the grievances of the workers. Though the right to strike may not be an absolute right under the current industrial jurisprudence that exists in the country it nevertheless has legal sanction. Nagraj 2005. (1974) 4 SCC 3, 38. (1978) 1 SCC 248; see also Ramana Dayaram Shetty v. Airport Authority, (1979) 3 SCC 489. Laski 1938.

Bibliography Basu, D. D. (2002) Shorter Constitution of India, 13th edn, Nagpur: Wadhwa & Co. Bhattacharjee, A. M. (1997) Equality, Liberty and Property under the Constitution of India, Kolkata: Eastern Law House. De, D. J. (2000) Interpretation and Enforcement of Fundamental Rights, Kolkata: Eastern Law House. Gajendragadkar, P. B. (1965) Law, Liberty and Social Justice, New Delhi: Asia Publishing House. Giri, V. V. (1960) Labour Problems in Indian Industry, Bombay: Asia Publishing House. ILO (1983) Freedom of Association and Collective Bargaining: General Survey by the Committee on the Application of the Conventions on Freedom of Association, the Right to Organize Collective Bargaining, para 214, Geneva: ILO. ILO (1996) Freedom of Association: Digest of Decisions and Principles of the Freedom of Association Committee of the ILO, Para 541, Geneva: ILO. Iyer, V. (2001) Constitutional Perspectives: Essays in Honour and Memory of H.M. Seervai, New Delhi: Universal Law Publishing. Kapoor, S. K. (2001) Human Rights under International Law and Indian Law, Allahabad: Central Law Agency. Kumar, C. B. (1965) ‘Development of Labour Relations in India’, Journal of Industrial Relations, 2, p. 92. Lowe, B. E. (1935) The International Protection of Labour, New York: Macmillan. Laski, Harold J. (1938) Liberty in the Modern State, Harmondsworth, Middlesex: Penguin. Majumdar, A. K. and B. Singh (1999) Personal Freedom and the Civil Liberty, Jaipur: RSBA Publishers. Nagraj, A. (2005) Living to Fight Another Day: The Attack on Honda’s Workers, EPW Commentary, 10 September. Nariman, F. S. (2001) ‘New Visions of Article 14: The right to equality under the Indian Constitution’, in V. R. Krishna Iyer (ed.) Constitutional Perspectives, New Delhi: Universal Law Publishers. Sircar, V. K. (1991) ‘The old and new doctrines of equality: A critical study of nexus tests and the doctrine of non-arbitrariness’, 3 SCC (Jour), p. 1.

10 Unorganized manufacturing, flexible labour and the ‘low road’ Lessons from contemporary India Satyaki Roy

Introduction Globalization is conceived as the process that results in the convergence of relative prices, increased trade and factor movements, governance of production systems or value-chains, and increased hegemony of metropolitan capital. The perceived need of the enterprises seeking to enhance their competitiveness in times of rapidly changing global markets and technology is flexibilization of the existing industrial structure and labour processes. However, the term ‘flexibilization’ has wide ramifications. While some emphasize the changes in the organization of production in response to technological innovations, others focus on how increased competition in the global economy has prompted enterprises to search for ways to reduce labour costs and to increase labour productivity. There is another perspective about the political economy of flexibilization that explains the shifts in the balance of power between national governments, foreign and domestic capital, and labour unions (Eyck 2003). There are a wide range of strategies to attain flexibility in the organization of production, work processes and those pertaining to workers in the internal, external and peripheral workforce (Standing 2002). However, at the firm level there are three principal means of securing flexibility: numerical flexibility, i.e. more use of external labour such as contract workers, home workers, agency labour, and so on; functional flexibility, i.e. more changes in work tasks, job structure and skill for individual workers; wage flexibility, which implies a shift from fixed wages to flexible wages, and increased monetization of remuneration. The free market argument for wage flexibility runs as follows. A more flexible labour market allowing lower real wage rates would induce profit maximizing firms to produce more through greater employment, until the diminishing marginal product of labour equals that real wage. It also argues that institutional rigidities account for full and partial unemployment and those rigidities make it difficult to generate employment without accelerating inflation (Friedman 1968). This approach ascribes such rigidities to union power, legal constraints on hiring and firing, and firm specific workers’ skills. Another corollary of this argument is that because of the social welfare schemes and labour laws, entrepreneurs go underground avoiding formal existence (Schneider and Enste 2000). Small

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firms, thus, take recourse to informal transactions and are less inclined to increase their scale of operation because of the regulations and taxes related to sales volume, credit and employment of labour. These arguments call for dismantling institutions, which are the probable causes of the downward inflexibility of wages and also the social protection and entitlements that benefit labour. The discourse on flexibilization further draws attention to the potentials of small enterprises, especially spatial clusters, in getting linked to global value chains. This kind of industrial organization is believed to be appropriate in the context of rapidly changing patterns of demand. It distributes risks of investment, stabilizes labour redundancies tied to the business cycle and is resilient to external shocks.1 These spatial clusters of small manufacturing enterprises are conceived by policy makers as potential sites for growth and gainful employment in a regime of deregulation. However, there are two paths of growth – the ‘high road’ involving functional flexibility, i.e. seeking to compete by innovating and speedily reacting to market fluctuations, and the ‘low road’ depending on numerical flexibility, i.e. competition on the basis of low wages and denying basic rights to the workers. There is a growing perception of ‘converging divergence’ in employment patterns, where increased variation within each country has been coexisting with increased similarity in divergence across countries. The dominant view is that the divergence in employment patterns occurs in two basic forms: functional flexibility is more common in workplaces producing complex goods and services where entrepreneurs face a tight labour market of skilled workers, and, numerical flexibility is the usual strategy for those producing simple goods using non-unionized low skilled labour. Moreover, it is generally argued that a shift of strategy from the latter to the former occurs only when the firm has to maintain minimum labour standards or when falling wages touch the floor level. The shift in the balance of power in favour of capital in the era of globalization influences changes in the employment patterns at the firm level. This could be explained by the framework of ‘logics of action’ (Frenkel and Kuruvilla 2002). The pattern of employment relations is the outcome of three distinct logics of action: the logic of competition, the logic of employment-income protection and the logic of industrial peace. Capital seeks to maximize profits by securing maximum discretion in allocating and using labour under the logic of competition. The logic of employment-income protection tends to limit employers’ actions that adversely affect workers’ extrinsic and intrinsic benefits. Actions related to the logic of industrial peace are usually undertaken by the state to resolve or minimize conflicts between capital and labour. The logic of action related to employment patterns is a function of economic development strategies, government’s responsiveness to workers’ expectations, a country’s exposure to foreign trade and investment, labour market characteristics and, of course, union strength. Neoliberal policies of minimum government and development strategies promising greater freedom to capital, dismantle rules and institutions meant to protect the income and employment of workers.

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Nevertheless, conflicts between labour and capital escalate, especially when the state gradually withdraws from a conflict mitigating role. Yet, in the developing countries industrial peace as well as the hegemony of capital tends to be prioritized, increasing the percentage of unorganized workers, who are usually voiceless. This chapter examines the potential for growth and employment in the small enterprise clusters in West Bengal, India under the liberalized regime. The issues involved are the processes of evolution of industrial clusters, the labour processes, the production organizations and the course of response of these clusters in the face of increased competition. The lessons drawn from the study are, first, although the labour market is fairly flexible in the small manufacturing clusters, liberalization and consequent exposure to global markets could not infuse competitive efficiency. Second, the expected shift from numerical flexibility to functional flexibility does not necessarily take place with the decline of the wage rates. Third, market failure due to information imperfections and the institutional failure to resolve those imperfections only partially explains the depressed conditions in these clusters. Asymmetric power relations and conflicts arising between the trader and the small producer perpetuate the ‘low road’. Fourth, regulations in the labour market are much less burdensome to the small enterprises as compared to the contested nature of exchange and uncertainties in demand. Finally, the spawning of self-exploitative occupations helps strengthen the hegemony of capital.

Foundries in Howrah The foundries in West Bengal, mostly concentrated in the Howrah–Kolkata region, are the pioneers of the Indian casting industry. Howrah was among the four major districts in the Bengal province of colonial India, where industries emerged in the early nineteenth century. During the British rule, industries such as shipbuilding, jute, textiles, railways and trams were set up in Howrah–Kolkata. All these industries required castings, so foundries were established. Cast iron soil pipes and manhole covers were also produced to meet domestic and foreign demands. The municipal castings once used in the roads of Paris were all produced in the foundries of Howrah (Rajeev 2004). Only after Independence (1947), were foundries set up in different parts of the country. In the early 1970s the estimated total production of metal casting in India was about eight million metric tonnes; of these West Bengal contributed nearly six million, 75 per cent (West Bengal Pollution Control Board 1997). Due to the gradual development of alternative raw materials and industrial decline in eastern India, the demand for the region’s cast iron products dropped significantly. At present, the share of West Bengal in national production is about 20 per cent, while the estimated annual production capacity of foundry units including Howrah is 6.8 million metric tonnes (ibid.) There is the notion that inflexibility of the labour market hinders the competitiveness of Indian industries. Since the 1970s, the foundries in Howrah have been

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experiencing steady declines in demand from Indian railways. Lack of demand resulted in lockouts preceded by labour strikes in most of the foundries. The labour processes in the industry simultaneously have undergone notable changes. Workers are employed on job contracts. In some of the units the owner employs permanent workers only in furnace-related activities. The labour contractor is usually a ‘head moulder’, who holds the key position by dint of his superior skills in the foundry unit. The owner contracts out the whole process starting from moulding to loading finished castings, and the contractor receives a stipulated percentage of the value of outputs delivered. This kind of subcontracting is a mixture of both industrial subcontracting – including sharing the management responsibilities in securing orders and delivery – and labour subcontracting. In a foundry, there are different grades of skilled and unskilled workers as identifiable in their specific assignments in the production process. Average monthly wages of unskilled workers is lower than the scheduled minimum wages, as stipulated by the Labour Department, Government of West Bengal. The skilled worker, on the other hand, receives wage higher than the scheduled minimum for an unskilled worker in the foundry industry (Table 10.1a, and Table 10.2). Table 10.1a Average monthly income of workers at Howrah Occupational grade

Average monthly income (in Rs)

Head mould maker Mould maker Charger Furnace man Nail man Night lifter

3,000 2,000 1,500 1,800 1,250 1,250

Source: Survey data.

Table 10.1b Average wages (for eight hours) and earnings (per month) of owners and workers in Baruipur (in Rs) Owner/worker

Wages/day

Earnings/month

Owner (O) Owner (N) Owner (D) Mistri (N) Mistri (D) Helper (N) Helper (D) Boy (N) Boy (D)

N.A. N.A. N.A. 59.27 65.60 40.80 49.95 18.93 25.60

2,850 3,404 5,985 1,368 1,979 740 1,223 292.5 562.5

Source: Survey data. Notes O = Own account manufacturing enterprise (OAME); N = Non-directory manufacturing enterprise (NDME); D = Directory manufacturing enterprise (DME).

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Table 10.1c Average wages (per pair) and earnings (per month) of workers in Kolkata (in Rs) Occupational grade

Wages/dozen pairs

Average monthly income

Soleman Upperman Fitting Sewing

77–90 65–80 20–30 15–25

1,916 1,900 1,250 1,080

Source: Survey data.

Table 10.2 Minimum monthly wages of unskilled workers in different scheduled employments under the Minimum Wage Act (as on 31 December 1997) (in Rs) Name of industry

Monthly minimum wage

Oil mills Lorry coolies Tanneries and leather manufacturers Printing press Iron foundry Hosiery Tailoring Jute Engineering Cotton textile

1,770.45 1,713.80 1,573.00 994.00 1,673.00 1,377.60 1,563.00 3,079.95 3,190.80 2,430.25

Source: Government of West Bengal 1998.

So far as average labour productivity is concerned, it is found to be greater in the foundries than in an average small-scale manufacturing unit in India. It is 2.71 times higher than that in the DME (Directory Manufacturing Enterprise) units in West Bengal in other sectors, and 117 per cent higher than that of the all-India average DME.2 However, the share of emoluments in value added in these foundry units is generally lower than that in average DME units in either West Bengal or in India as a whole (see Table 10.3b). The concern about labour market flexibility diverts our attention from more important growth-related issues. The demand for metal castings has changed due to the development of alternative materials. Use of substitutes like plastic pipes, fittings, sanitary items and stainless steel and aluminium pan, as well as non-metallic railway sleepers has reduced the demand for iron castings. As a result, metal casting is facing increased competition from alternative materials such as non-metallic, power metallurgy, composites and fibre-reinforced plastics, and also from other more sophisticated methods of forming and shaping. Demand has been increasing for thin wall sections, high precision in patterns, fine finish and low machine tolerance. There are about 600 listed variables that determine the quality of castings and these are difficult to control in traditional technology (Murthy 2000).

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Second, the capital goods industry is dependent upon investment-driven demand in infrastructure or core sector projects. The compound annual rate of growth of manufacturing during the period 1990–91 to 1998–99 shows a declining trend (Chaudhury 2002). Moreover, decline in public investment throughout the last decade of the twentieth century has changed the sectoral weightage of Indian manufacturing in favour of consumer goods, which explains the declining trend in demand for casting at least in the domestic market. Chandrasekhar (1996) argues that the kind of liberalization pursued in India is a consumptionled boom where rapid growth in new markets is bound to exhaust itself. Third, studies (Nambiar et al. 1999; Beri and Rammohan 1995) show that as an effect of import liberalization, the weight of manufacturing imports in manufacturing GDP has increased significantly. Import intensity has increased in almost all of the industries during the post-liberalization period. Foundries that grew in a policy regime of import substitution, are presently facing the threat of losing demand, due to reductions in customs duties and abolition of quantitative restrictions on imports. The unpredictable fluctuations in input prices also have had a deleterious effect on the foundries in Howrah. Earlier, the government was the only supplier of pig iron. Supply was restricted and the quality of the material was inferior too. Price deregulation and increased concern for profitability in both private and public sector plants have increased the prices of raw materials, adversely affecting the small foundries. Following the withdrawal of the government control over prices and distribution of raw materials a few traders control the supply. As Stiglitz (2003) argues, privatizing a monopoly before an effective competition or regulatory authority was in place, might simply replace a government monopoly with a private monopoly, even more ruthless in exploiting the consumer. A large number of foundries closed down recently in developed countries due to environmental concerns and perhaps rising labour costs (Gandhi 2003). It was estimated that since 1980, one in every four foundries was shut down in the United States. As a result, for the developing countries, the opportunities to capture a larger share of the export market have increased. However, the share in the global market does not increase automatically. This depends largely on how the products of the developing countries adapt to the global requirements of quality, a capability most of the foundries in Howrah lack. The foundries in Howrah are characterized by lack of consistency in quality, poor surface finish, excessive machining allowance, low yield and high rates of defects and rejection. These have led to long production cycles, low profit margin and inefficient use of energy. Neoliberals assume that the technology market works efficiently and if the channels of information flow are kept open then absorbing new technologies requires no cost of search and negotiation. A firm’s effort to adopt new technology is assumed to be isolated as no technological externalities prevail and there is also no need to identify areas of coordination regarding investment. In this static framework, as endowments grow, firms automatically move towards right factor combinations, costlessly absorbing the right type of technology. If this

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were true, why are foundries at Howrah, with a large pool of skilled manpower not responding adequately to changing markets by upgrading technology? The traditional production organization in the foundries in Howrah is known as the Galamal system. The owner of a foundry owns a cupola and floormoulding area, employs his own workers for furnace operations, sells liquid metal to intermediaries and lets out the floor area for moulding. The skilled labour works as an intermediary, secures orders for diverse castings, purchases liquid metal from cupola owners, employs shop floor workers for moulding and sells castings per orders. This kind of production organization worked well in the protected market with secured demand from engineering industries, railways or textiles, and jute mills. With the decline of engineering industries in eastern India, due to a qualitative shift in demand pattern, this type of production structure faced immense pressure. As the demand decreased, financing purchase of inputs and securing orders of castings gave entry to non-Bengali traders in Howrah, creating a triad of owner–trader–labour contractor as the revised version of the Galamal system. The traders would search out orders, often get the pattern made and then would get the castings cast on a ‘cash and delivery’ basis. This suited everybody. The ‘risk-aversed’ Bengali owner does not have to depend on formal credits from banks and is satisfied with his margin. Because most of the owners inherited their foundry, to them running the unit efficiently means that it should at least ensure an earning enough to maintain their family. Besides, the trader was happy with a role confined to financing and trading, where profits can be derived without knowing the intricacies of production. For both the owner and trader it is either a survival strategy or making money without disturbing the inertia of traditional methods. With increasing dependence on finance, commercial capital gets control of the foundry leading to transfer of ownership. As a result, with the changing production organization there is a simultaneous process of gradual transfer of ownership from the traditional Bengali owners to the non-Bengali trading community. This kind of production organization has no in-built incentives to restructure the traditional production processes. The inertness and stagnation even in the face of global competition can be explained with the schematic view of X-efficiency theory (Leibenstein 1989). It is suggested that the efficiency route of a firm is activated by two types of environmental pressure – one from the ‘bottom’ and the other from the ‘top’. Pressure from the bottom arises when buyers or users of the goods have alternatives. In other words, the market is competitive and everyone is forced to reduce prices to the competitive level in order to survive. The other pressure refers to those from the owner or owner’s agent, which is a kind of managerial pressure. These two simultaneously determine the choice set of efforts at different levels in the organization of production, which in turn implies a certain mode of translation of inputs into outputs. The pressure of competition did not ‘touch’ these foundries earlier as they more or less enjoyed a protected market. In the present situation when they are even losing market shares, the foundries instead of adopting new processes take up

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other survival strategies like confining themselves to the lower end of the market, or evading government taxes. Organizational efficiency persists at a low level due to the absence of impersonal management and systematic assessment of observations. Most of the foundries in Howrah are family-owned firms. Irrespective of the type of ownership, foundries operate with traditional technology. In the absence of a detailed input–output analysis, the only feasible way to reduce costs seems to be the owner putting pressure on existing wages. The owner’s strategy is to reduce per unit cost of effort. The worker, on the other hand, alienated from the entire production process shows little concern about efficiency goals. This leads to a prisoner’s dilemma kind of situation, where the pressure sent from one level is only partially transmitted to the next level. The pressure gets released further due to the loosely connected system of owner–trader–contractor. Investments in fixed capital moreover involve long-term commitments to particular products and production volumes. Because of substantial uncertainty about future demand conditions it seems plausible to choose production techniques that heavily rely on labour. Moreover, it stimulates the tendency of transferring working capital to personal assets. In a competitive situation new capital is normally inclined to introduce the best available technologies in order to take advantage of relatively cost-efficient production. This capital constitutes the regulating capital for the key firms in the industry. However, in the foundries in Howrah, the gradual transfer of ownership establishes the dominance of commercial capital. The traders with little long-term commitment to the industry fail to play the role of regulating capital in leading the necessary technological upgrades for the industry as a whole. The availability of undervalued labour allows old vintages of capital stock to get replaced slowly. It also impedes the Schumpeterian process of ‘creative destruction’ as flexible wages give an additional option to non-innovative firms (Kleinknecht 1998; Michie and Sheehan 2003). In this situation, the regulating capital could survive by continuously shifting product market boundaries, by product and process innovations. However, so long as the numerical strength of regulating capital remains weak, introduction and diffusion of new technology is slow. As a result, destructive price competition based on lower wages moves the industry to a low wage trap, away from the ‘high’ road of development (Banerjee 2005).

Surgical instruments cluster: Baruipur This is an industrial cluster where not only the labour market is flexible but the production organization is also flexibly arranged in order to be responsive to market fluctuations. Baruipur has the largest concentration of surgical manufacturing industries in South Bengal, with a critical mass of about 300 small to medium enterprises producing 1,500 to 2,000 types of surgical instruments. There are three layers of units in the cluster according to their size and activity. The bigger units are mostly independent units; the second tier is smaller subcon-

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tracting units, which are largest in number. The third layer comprise own account manufacturing enterprises commonly known as dawa factory. The production structure has remained unaltered since the industry began – depending heavily on traditional skills, experienced workers and ‘hammering technology’. If skill is defined as the ability to use knowledge and to exercise judgment then workers in Baruipur are highly skilled, capable of producing 60 to 70 (usebased) types of surgical instruments. The production process is very much conditioned by the dependent relationships between independent units and their subcontracting satellites. Lack of adequate capital and information on market demands are the major causes of a persisting dependent relationship between the two. Moreover selling a particular product requires product knowledge and communication skills, as the buyers are private doctors, the health officials of the government hospitals or the private hospitals, which most of the units are lacking. There are three grades of labour in the cluster: skilled labour or Mistri, semiskilled labour or Half-Mistri and unskilled labour, Helper or Boy, usually a child recruited as an apprentice. In most of the cases, wages are paid at time-rate and ‘overtime’ allowances for work exceeding eight hours. Usually the helpers and semi-skilled workers are allowed overtime work because often the owner himself is the skilled labour. Turnover of labour in the cluster is high. As a result, skill dissemination throughout the cluster is fast. This discourages the owner from investing in human capital formation. A comparison of the wages and incomes of the workers in surgical instrument manufacturing with those of an average unskilled worker in any other occupation in West Bengal covered under the Minimum Wages Act (1948), shows that the semi-skilled or unskilled worker in the former earns less than half or even one-quarter of the scheduled minimum wages of unskilled workers in other occupations (Table 10.1b and Table 10.2). Further, a skilled worker in surgical instruments earns almost the same as that of an average unskilled worker in major industries in the state like jute, engineering and cotton textile. The reservation wage i.e. the minimum subsistence wage below which no worker would offer labour, is determined by such factors as the duration and level of unemployment, the social security system and the potential loss of jobspecific human capital involved in transferring jobs (Shapiro and Stiglitz 1984). Thus, the reservation wage, which is a determinant of a worker’s effort, transmits changes in external factors to changes in a worker’s productivity. Workers in the surgical units do compare wages in other work in the locality and set their reservation wage. An unskilled agricultural labour in the vicinity of this cluster receives about Rs48 (about US$1) and a skilled labour about Rs60 for an eighthour work day. The skilled labour in a surgical unit considers the latter wage rate as the minimum level of his claim. As to the outputs, the market for surgical instruments is multilayered. Where the domain of specialized instruments is segmented, the niches are mutually exclusive and quality is the basis of competition. There is also a large demand for general instruments such as knives and forceps, which most units produce.

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Any of the producers could fetch a larger share of the market by quoting lower prices. The traders in Baruipur, on whom the subcontracted smaller units depend in order to sell their products, are generally not found to be keen on exploring higher niches in the value chain. Rather, they prefer to trade with instruments, which could be sold in larger volumes, and have stable demand. It is not very easy to assess the quality standards of surgical instruments. Thus, a lower quality lookalike sells at a price almost equal to a higher-grade instrument. This rather imperfect information in the market creates a market of lemons where prices do not reflect differences in quality and the market fails to signal incentives for good quality production. High transaction costs or search costs for new ventures as well as specification costs related to quality assessment create uncertainties and thus affect investment decisions. Investors are sceptical about future possibilities of capacity utilization and prefer to keep investments and output at a lower scale. Capital thus prefers to remain confined in the informal domain (Table 10.3a and Table 10.3b). In this situation, a rational production organization can ensure flexibility without increasing responsibility. The relationship between parent and the subcontracting units in Baruipur fairly fulfils this requirement. The inter-firm relationship is very flexible with no long-term commitment. As regards

Table 10.3a Comparable ratios in different area and size category of enterprises (size category: NDME) Area

V/K

V/O

V/L

K/L

E/V

(V-E)/K

Baruipur Kolkata West Bengal India

9.79 – 1.40 1.13

0.78 0.54 0.35 0.43

22.80 13.80 14.37 17.96

2.78 – 10.22 19.73

0.38 0.43 0.57 0.49

5.89 – 0.60 0.60

Table 10.3b Comparable ratios in different area and size category of enterprises (size category: DME) Area

V/K

V/O

V/L

K/L

E/V

(V-E)/K

Baruipur Howrah West Bengal India India (SSI)

17.64 1.51 1.56 1.06 1.62

0.73 0.17 0.22 0.33 0.24

84.19 46.73 17.22 21.54 45.00

3.61 42.54 10.99 22.95 –

0.48 0.44 0.51 0.51 –

12.35 0.9 0.76 0.53 –

Sources: In Tables 10.3a and 10.3b, ratios in rows (3) and (4) are computed from NSSO 1998 and Government of India 1988. Those of Baruipur, Howrah and Kolkata clusters are based on survey results. Note V/K = capital productivity; V/O = average value added; V/L = labour productivity; K/L = capital intensity; E/V = share of emoluments in value added; (V – E)/K = return to capital.

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procurement, the parent firm can switch over to a new subcontracting small firm, only if the latter agreed to supply at a lower price. These physical constraints on investments and output by the larger units affect the smaller subcontracting units also, whose producers depend largely on a few trader-buyers. The local big dealers, in fact, face a competitive output market. However, while purchasing inputs or final products from smaller units, they behave like oligopsonists. As a result, there are pressures on the prices of inputs as well as on input use. Thus the subcontracting units produce finished products at a scale lower than the ‘optimum’. The more the degree of imperfection, the less will be the margin of profit for smaller units as the pressure for reducing costs cannot be transferred to the workers whose wage level has already touched the reservation level. The only space left for an owner of a small unit is to restrict the upward mobility of labour, by refusing to recognize his skill accumulation, and thereby his claims for a higher wage. Although, there is wage revision every year the wage increment after a certain period is not remunerative to the skills and productivity that the worker attained. Moreover, the skilled workers could not increase their total earnings as overtime jobs too are limited. Capital intensity in these units is low. A little amount of cash is sufficient to buy simple tools, pay rents for machines and open a new unit. Therefore, a skilled worker after acquiring some experience about output markets can easily open an own account manufacturing unit (OAME). Monthly gross income of the OAME owner is usually greater than that of a skilled worker working in a DME (Table 10.1b). This situation indulges self-exploitation; the erstwhile worker is now free to ‘exploit’ himself for 14 to 16 hours a day. Thus, there is a proliferation of units in the cluster. On the other hand, this ‘proliferation’ helps the larger units to enhance their gains. They gradually reduce the size of their manufacturing, increase purchasing finished products from subcontracting units and become part-time traders. As a result, there are a few traders and a large number of self-exploitative producers who become dependent upon the whims of these traders and remain confined to producing low-valued products. Despite having adequate skills to produce instruments of higher grade, the small producer concentrates in producing simpler instruments whose demand is relatively stable. The gradual process of withdrawal from producing sophisticated instruments thus erodes the skill pool in the cluster. The internal labour market in the cluster is characterized by specific skills. Unlike ‘spot markets’ of raw labour, internal labour markets define modes of entry, access to job ladders, systems of job classification, forms of payments, the degree of employment security and the deployment of labour (Grimshaw and Rubery 1998). Loss of firm-specific skills accelerates the downward spiral of low-valued production and reduces the incremental wage claims of workers. This is because as the job loses its skill specificity the employer can easily replace the worker without loss of productivity. The new orthodoxy questions the necessity of trade unions since they are assumed as impediments to the prof-

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itability of the firm and hence obstacles to growth and employment. However, Banerjee (2005) argues that workers attain firm-specific skills and create economic rent by increasing the marginal value product of labour. The trade union demands increased wages in order to share the economic rent. This neither affects employment nor the firm’s profitability. Rather, this effort protects the skill-specific internal labour market and prevents recourse to degenerating production processes involving ‘raw’ labour.

Footwear units in Kolkata Although the leather industry is one of the major industries in India, there is, like the surgical instruments, stagnation in small footwear manufacturing units clustered in Kolkata. The industry is the eighth largest foreign exchange earner of the country, and one of the most targeted areas for export promotion. During the period 1991–92 to 2001–02 there has been steady expansion of market size, domestic consumption and export of leather goods (CMIE 2003). The increased competitive strength achieved by the Indian leather industry notwithstanding, the footwear cluster in Kolkata is stagnating. The units in the cluster are barely eking out survival. The cluster is mostly confined at the lower end of the multilayered footwear market. The core of the cluster comprises roughly three layers of enterprises according to their scale of operation. Most of the units employ 5–20 hired labours and start with initial investment around Rs20–30,000. Generally, a small unit produces 4–15 types of footwear in every season. Workers and their home-based units situated in the dirty congested slums, reveal explicitly the poverty and deprivation. Places of residence and production sites overlap into a small rented room, where a wooden chouki is the only private place to take rest. As regards occupations, four grades of workers can be identified in the cluster: those involved in making the sole, the upper, and those doing the fitting and sewing jobs. The labour market is fairly flexible and competitive, and wages are piece rate. An abundant supply of labour together with the absence of trade unions has pushed wage rates down to the reservation level. Moreover, wages across occupations are more or less uniform. The average wage of a skilled worker in the cluster marginally exceeds the scheduled minimum wage of the unskilled worker in the industry. The unskilled worker receives much less than the stipulated minimum wage (Table 10.1c, and Table 10.2). The ‘soleman’ and the ‘upperman’ usually have longer tenures in a specific unit, while fitting and sewing jobs are mostly outsourced. In most of the units work is done ‘putting out’; during peak seasons a worker works for 16–18 hours per day. Workers are employed on a contractual basis, if need be. Most of the owners try to retain the skilled upperman and soleman even in the off-season. They engage them to produce a minimum level of stock or of goods, which are sold at a lower margin during the slack season. Most of the workers have to seek alternative occupations, working as rajmistri (construction jobs), mutia

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(loading/unloading jobs) or agricultural labour during off season. Many of them also migrate to other states for footwear jobs where festival seasons are different from that in West Bengal. The occupational multiplicity as well as cyclical migration of the working poor across space and occupation has been recognized as a significant feature of Asia’s labour market. These are the ‘wage hunters and gatherers’ who move horizontally for alternative occupations during crisis (Breman 1994). Most of the workers who migrated from different parts of Bihar keep their families back in home villages. These fractured households as well as their engagements in multiple jobs lead to lower ‘reservation wages’. As more and more non-leather materials are being used as inputs, the cluster has been experiencing new kinds of problems. Earlier, cobblers were only Chamars, a backward caste, and the social taboo restricted the supply of labour. With the increasing use of materials, such as rexins, PVC soles and foam, the entry barrier of ‘untouchability’ has gone. Now, other castes and religious groups, either set up units or take part in the labour market. Also, machine moulded PVC soles have substituted for some insole jobs, leading the labour component to decline. The small manufacturing enterprises, like in surgical instruments, have to depend on traders to sell their products. The only way to increase sales to the trading agent is by reducing the supply price. In other words, the small producer has to share an increasing portion of his profit with the trader in order to increase sales. Moreover, payments are delayed and a small fraction of the net claim is only realized in each deal with the trader. This mode of payment accelerates transfer of a portion of the small producer’s productive capital to the trader. And, the producers become dependent in such a way, that they cannot break the relationship until they realize the full amount of arrears at one go. In such a situation, the small producer is hardly inclined to produce goods with higher value added, because such a venture would lead to the transfer of a greater amount of productive capital to the traders. It is very difficult to compute the factor productivity in the small units due to the discontinuous nature of the production. However, our collected data mostly on a weekly and monthly basis give a rough idea about the average value added and share of emoluments in value added (Table 10.3a). The average value added in these units is higher than that of average NDME units in West Bengal and the whole of India. It would have been even greater if the owner’s margin and the workers’ share had increased alongside value added. In the developing economy marginal productivity is not an independent variable determining wages; rather wages, marginal as well as average productivity, are interdependent variables in a labour surplus economy (Dholakia 1981). The relationship between wages and work efforts of workers can be explained by the notion of ‘fair wage’, where the ‘effort’ of the worker is not guided by individual rationality but by a social norm, which regulates a worker’s behaviour. The fair wage is the perceived value of a unit of labour in the context of a wage contract. The fair wage–effort hypothesis based on the sociological notion of ‘gift exchange’ states that, if the actual wage is less than the ‘fair wage’, workers

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supply a corresponding fraction of the normal effort (Akerlof 1982). Hence, wages are low not because the labour productivity is low, but the opposite direction of causation better explains the wage–productivity relation for the unorganized workers in these small manufacturing enterprises. The existence of perfectly competitive factor markets relies on the assumptions that factors have perfect and costless mobility and the marginal products are perfectly visible. As soon as the assumptions are relaxed the possibility opens up that a factor can be paid less than its marginal product and yet finds it does not move out. This explains why the workers in the Kolkata footwear cluster do not choose to leave the occupation although they are very poorly paid. Rather, declining income due to low availability of jobs in a stifling competitive environment, forces the worker towards becoming a self-exploitative ‘owner’, very similar to the Baruipur cluster.

Lessons from small enterprises In the liberalized regime, although opportunities increased in getting connected to global value or supply chains, the small foundries in Howrah, the surgical instrument cluster in Baruipur as well as the footwear producing units in Kolkata, are even losing their share in the domestic market. The unorganized small manufacturing clusters draw our attention to the complexities of exchange relationships, which are mediated through production organizations and institutions. Market failures due to the existence of information imperfections, externalities and public good and the institutional/organizational failure to resolve those imperfections only partially explains the depressed status in these clusters. Asymmetric power relations and conflicts arising between the trader and the small producer reproduce a production relation that hinders the high road growth path. The common dynamics of growth in the small manufacturing enterprise clusters is very much conditioned by the exchange relationship between traders and small producers. The kind of exchange relationship is not similar to the competitive equilibrium in a Walrasian economy, where the identity of exchange partners is irrelevant, and all agents are indifferent between current transactions and their next best alternative. The paradigms of atomistic competition pose the market as a mechanism for mutual contracting among symmetrically placed agents of exchange. It assumes away market place frictions that are potential sources of power. However, the distribution of profit/income between small producers and traders is a space of contested exchange, where within a well-defined set of power relations among voluntarily participating agents, the small producers have progressively to lose their profit claims (Bowles and Gintis 1990). The choice of ‘low road’ could be understood by tracking the owner’s strategy of sales maximization with a minimum profit claim. The owners try to maximize their total revenue through sharing a part of the profit with the traders. The more the producers want to increase revenue, the more they have to sacrifice

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profit share, as they cannot reduce labour costs, which have already touched the bottom line. The small producer, however, expects the minimum profit, which is determined by the income of an owner of an OAME, who is independent of traders and sells his own products in spot markets. The owner cannot agree with a profit claim below this level as it becomes unworthy to deal with a trader instead of selling the outputs in spot markets. Hence, in the face of increased competition the only survival strategy left to the owner perhaps is to reduce ‘costs’ by self-exploitation. This is the rational response of the footwear producers and the same as that of small producers in Baruipur. In the foundry industry, the trader is an integral part of the production organization, and does not determine the price of castings. The trader procures orders from the big dealers and shares a part of the profit with the latter. The survival strategy in this case is obviously not self-exploitation but exploiting the public ‘self’, that is, either depriving the state of legitimate taxes, and/or procuring raw materials by ‘illegal’ means from the public sector plants. The small enterprise clusters surveyed are trapped in technological backwardness and of course stagnation. Still, the average labour productivity in these units is found to be higher than in other small-scale manufacturing activities in the rest of the economy. The labour markets are fairly flexible and labour institutions such as trade unions are either absent or too weak to demand ‘minimum wages’ or ‘fair wages’ for the workers. As a result the share of labour in value added is not proportionate to productivity. The distributional conflicts between labour and capital are never resolved on the basis of the respective claims in an otherwise ‘competitive model’. The forces of demand and supply set only the boundaries within which wages are set. Our study further reveals that the existence of surplus labour may be necessary but not sufficient to explain the low road. Firms compete on the basis of low wages and deny basic rights to workers. The advantages of surplus labour can be exploited so long as it helps to push down wages. In that case, the owner of a firm can maintain profitability even bypassing the innovative route. If the prevailing wage level had already reached the reservation level and could not be pushed further down, then the firm would not opt for the high road of competition based on improving quality standards. The wages paid to the workers in the small enterprises cannot be separated from the profits/incomes retained by the owners in these enterprises. And, the wage–profit distribution is conditioned by the amount of profit, which the small producer is rather forced to share with the trader. The relationship between the trader and the small producer is an outcome of a number of market and institutional failures. These failures could be resolved by development strategies of providing the small enterprises direct access to markets. The spawning of unorganized petty activities in the low-wage segment of the developing economies is a result of self-exploitative fragmentation. Asymmetric power relations are all pervasive and the resulting contested nature of exchanges in most of the economic activities is typical of the developing economies. This gives rise to a political economy of the ‘low road’ that facilitates accumulation

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in the capitalist economy through higher exploitation of the unprotected labour and the self-employed. Capitals invested in the small home-based units are not ‘capital’ in the general sense, as these are hardly transferable to alternative sites of investments. It has to be applied in a way to valorize the family labour. In this situation, the markets for capital and labour could not be separated from one another. A labourer turned into a self-exploitative producer and the producer partially sharing the role of labour, is the dual process, giving rise to a band of ‘intermediate class’, with contradictory locations between workers and entrepreneurs proper. Voices of these small producers/workers mostly remain unheard in political constructs. As a result the mode of accumulation of this intermediate class depends upon the extent to which they are capable of influencing policies during implementation rather than in the course of their formulation. In most of the cases, the survival strategy is evasion of taxes, illegal manoeuvring of raw materials from public sector plants, paying bribes to officials and so on. The self-exploitative small producer encounters the market and survives in the face of competition only by increasingly losing the profit margin. Capitalism exorcises the self-exploitative economy from its discursive space, it is the ‘other’ non-capitalist periphery that is suppressed but never gets extinguished. Patnaik (1997) argues that both output and price stability in global capitalism can be attained only if there is a social class whose ex ante claims are compressible – this is the vast segment of unprotected labour in the informal sector of the developing economies. The dynamics of the demand and supply of unprotected labour in global capitalism is related to the drive toward flexibilization. Ness (2005) shows that the expansion of undocumented low-wage workers in recent years in the labour market of the United States is the result of economic restructuring in the South as well as the North during globalization. The impoverishment of workers in the developing countries due to withdrawal of social protection increases distressed migration. And, industrial restructuring in the global North fuelled the demand for a pool of low-wage workers. Finally we take note of the neoliberal argument that interventions and regulations in the labour market not only increase rents accrued to powerful interest groups but, also, significantly increase the share of the informal economy. However, examining the three clusters of small enterprises we do not find evidence in favour of the hypothesis. First, not all of the small firms have the ‘choice’ of a higher scale of operation as optimal even if there were no regulations. This is precisely because in most of the underdeveloped economies, Engels’ effects skew demand for simple, low-valued manufactured products. As a result, for most of the consumer goods and services multilayers of choices coexist. The low-valued products can be efficiently produced using cottage technology that matches the smaller size of the firm. Such situations of demand–mix leave substantial space for small firms and disfavour consolidation of larger plants because of extra distributional costs (Tybout 2000). Second, the small producers who possess adequate access to capital to produce higher value-added goods and are inclined to exploit scale economies,

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would do so if the payoffs from increasing their scale of operation exceed the costs of dealing with regulations. However, to the small firms there is little to gain from producing higher value-added goods and operating in a larger scale. The greater the amount of capital the small producer engages in producing specialized goods, the greater will be the share of productive capital that gets transferred to the trader. Moreover, in a situation of contested exchange between the trader and the small producer, specialized production increases the power of sanction by the trader and consequently the enforcement rent; the small producer would have few options to exit and have to depend more heavily on the trader in order to realize the revenue.

Conclusion Exit and voice are two different ways of reacting to a state of dissatisfaction. Exit, i.e. withdrawal from a relationship, is usually an individual way of signalling discontent. On the other hand, voice normally requires collective action. Recourse to voice is relatively costlier than expressions of exit. However, the spawning of small enterprises is a result of massive exit that reduces the possibilities of voice and also makes further options of exit more difficult. This is because the increasing number of units together with a gradual decline in average market share stiffens the competition between small firms. The vast majority of workers engaged in unorganized occupations mostly survive through self-exploitation and are denied any voice or rights in their exchange with the formal economy. Flexibilization of the labour market is a project that aims at atomizing organised labour, or dismantling formal patterns of employment. This project helps in maintaining industrial peace by facilitating an employment relation where labour could express discontents only through exit and can get employed only by sacrificing voice.

Acknowledgements This is a part of the author’s doctoral thesis under the supervision of Debdas Banerjee. The author is indebted to him for his invaluable guidance. The author also greatly benefited from the comments and suggestions of Ishita Mukherjee, Robin Mukherjee, Amiya Kumar Bagchi, Michael Goldfield and V. K. Ramachandran in revising the earlier draft of the paper.

Notes 1 See Schmitz 1992, 1999; Brusco 1982; Schmitz and Musyck 1994; Humphrey and Schmitz 1996; Nadvi and Schmitz 1998. 2 DME (directory manufacturing enterprise) is an enterprise that employs six or more workers. The own account manufacturing enterprise (OAME) is defined as an enterprise that operates without any hired workers. And, non-directory manufacturing enterprise (NDME) is defined as an enterprise employing less than six workers (NSSO 1998).

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References Akerlof, G. (1982) ‘Labour Contracts as Partial Gift Exchange’, Quarterly Journal of Economics, 97 (4), pp. 543–94. Banerjee, D. (2005) Globalisation, Industrial Restructuring and Labour Standards: Where India Meets the Global, New Delhi, Thousand Oaks, London: Sage Publications. Beri, B. and T. T. Rammohan (1995) ‘Trends in Import Intensity’, Studies in Industrial Development Working Paper No. 14. Bowles, S. and H. Gintis (1990) ‘Contested Exchange: New Micro Foundations for the Political Economy of Capitalism’, Politics and Society, 8 (2), pp. 165–222. Breman, J. (1994) Wage Hunters and Gatherers: Studies of Urban and Rural Labour Markets in South Gujrat, India, Delhi: Oxford University Press. Brusco, S. (1982) ‘The Emilian Model: Productive Decentralization and Social Integration’, Cambridge Journal of Economics, 6 (2), pp. 167–84. Chandrasekhar, C. P. (1996) ‘Explaining Post-Reform Industrial Growth’, Economic and Political Weekly, Special Number, pp. 2537–45. Chaudhury, S. (2002) ‘Economic Reforms and Industrial Structure in India’, Economic and Political Weekly, 37 (2), pp. 155–62. CMIE (Centre for Monitoring Indian Economy Private Limited) (2003) Foreign Trade and Balance of Payments, Mumbai: Economic Intelligence Service. Database (2003) Indian Casting Industry, New Delhi: Komal Publication. Dholkia, J. (1981) ‘Wage Determination in a Developing Economy’, Indian Journal of Labour Economics, 23 (4), pp. 215–18. Eyck, K. V. (2003) ‘Flexibilising Employment: An Overview’, SEED Working paper No. 41, Geneva: International Labour Office. Frenkel, S. and S. Kuruvilla (2002) ‘Logics of Action, Globalisation and Changing Employment Relations in China, India, Malaysia and Philippines’, Industrial and Labour Relations Review, 55 (3), pp. 387–411. Friedman, M. (1968) ‘The Role of Monetary Policy’, American Economic Review, 53 (March), pp. 1–17. Gandhi, K. A. (2003) ‘Present and 2010 Scenario of Foundry Industry in India and Improving Efficiency of Foundry Industry’, 51st Indian Foundry Congress: Transactions, 2003, Calcutta: Indian Institute of Foundrymen. Government of India (1988) Report on The Second All-India Census of SSI Units, New Delhi, Ministry of Industry. Government of West Bengal (1998) Labour in West Bengal, Kolkata, Department of Labour. Grimshaw, D. and J. Rubery (1998) ‘Integrating the Internal and External Labour Markets’, Cambridge Journal of Economics, 22 (2), pp. 199–220. Humphrey, J. and H. Schmitz (1996) ‘The Triple C approach to Local Industrial Policy’, World Development, 24 (12), pp. 1859–77. Kleinknecht, A. (1998) ‘Is Labour Market Flexibility Harmful to Innovation?’, Cambridge Journal of Economics, 22 (3), pp. 387–96. Leibenstein, H. (1989) ‘Organizational Economics and Institutions as Missing Elements in Economic Development Analysis’, World Development, 17 (9), pp. 1361–73. Michie, J. and M. Sheehan (2003) ‘Labour Market Deregulation “Flexibility” and Innovation’, Cambridge Journal of Economics, 27 (1), pp. 123–43. Murthy, H. S. (2000) ‘Indian Foundries Urged to Adopt New Strategy for Survival’,

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Indian Foundry Congress: Transactions, 2000, Calcutta: Indian Institute of Foundarymen. Nadvi, K. and H. Schmitz (1998) ‘Industiral Clusters in Less Developed Countries: Review of Experiences and Research Agenda’ in P. Cadene and M. Holmstrom (eds) Decentralised Production in India, French Institute of Pondicherry, New Delhi: Sage Publications. Nambiar, R. G., B. L. Mungekar and G. A. Tadas (1999) ‘Is Import Liberalisation Hurting Domestic Industry and Employment?’ Economic and Political Weekly, 34 (7), pp. 417–24. Ness, I. (2005) Migrants, Unions and the New US Labor Market, Philadelphia: Temple University Press. NSSO (National Sample Survey Organisation) (1998) Unorganised Manufacturing Enterprises in India: Salient Features, NSS 51st Round Report No. 434 (51/2.2/2), Department of Statistics, Government of India, New Delhi. Patnaik, P. (1997) Accumulation and Stability under Capitalism, Oxford: Clarendon Press. Rajeev, M. (2004) ‘Labour-Entrepreneur Relationship and Technological Investment: A Comparative Study of Howrah and Coimbatore Foundry Firms’, Indian Journal of Labour Economics, 47 (1), pp. 103–14. Schmitz, H. (1992) ‘On the Clustering of Small Firms’, IDS Bulletin, 23 (2), pp. 64–8. Schmitz, H. (1999) ‘Collective Efficiency and Increasing Return’, Cambridge Journal of Economics, 23 (4), pp. 465–83. Schmitz, H. and B. Musyck (1994) ‘Industrial Districts in Europe: Policy Lessons for Developing Countries’, World Development, 22 (6), pp. 889–910. Schneider, F. and D. H. Enste (2000) ‘Shadow Economies: Size, Causes and Consequences’, Journal of Economic Literature, 38 (March), pp. 77–114. Shapiro, C. and J. E. Stiglitz (1984) ‘Equilibrium Unemployment as a Worker Discipline Device’, American Economic Review, 74 (3), pp. 433–44. Singh, B. (1992) ‘Labour Productivity and Trade Unions: Some Positive Aspect’, Indian Journal of Labour Economics, 35 (4), pp. 417–26. Standing, G. (2002) Beyond the New Paternalism: Basic Security as Equality, London: Verso. Stiglitz, J. E. (2003) Globalisation and its Discontents, New Delhi: Penguin. Tybout, J. R. (2000) ‘Manufacturing Firms in Developing Countries: How Well Do They Do, and Why?’, Journal of Economic Literature, 38 (March), pp. 11–44. West Bengal Pollution Control Board (1997) Air Pollution Control Technology for Iron Foundries, Kolkata: West Bengal Pollution Control Board.

11 Revisiting gendered home-based work in the context of reforms Meena Gopal

Introduction: liberalization and labour There has been a gradual shift to policies for a more open economy since the 1980s in India. Called variously structural adjustment programmes, stabilization measures, economic reforms, liberalization policies, globalization policies, promarket economic reforms and measures encouraging privatization, these processes have had a tremendous impact on all aspects of our society. Apart from the macroeconomic changes, these policies have also affected health, education, labour and other sectors of the economy and society. These latter areas hardly merit any attention from commentators (Kurien 1994; Vaidyanathan 1995). These sectors, as a consequence of adjustment and reform, have received less support and fewer resources as measures of ‘austerity’ are implemented. There is sufficient evidence now which, despite the alleged safety nets provided to protect the interests of the most vulnerable sections of society, recent cutbacks have seriously undermined these provisions. There are continuous attempts to cut labour costs by technological upgradations, outsourcing of production and reduction of employment (Qadeer et al. 2001; Poonacha 2004; Sheth 2004). Supporters of the reform processes say that there will be dislocations during the phase of adjustment but over time the condition of every section of society will improve. In the long run, the poor will benefit even if they carry the burden of reform on their shoulders. In terms of national economic development, the measures for fiscal, monetary and capital policies receive support, as it benefits industry. Big industrialists form the major component of those who support these reforms. They feel that being attractive to global finance is to their advantage. However, even as there is a globalization of capital, there is no concomitant globalization of labour organization. Nationalistic impulses, state repression and the divisions in the labour market have been impediments to a successful organization of labour and its global impact (Yates 2003). Globalization of capital and foreign investment, on the contrary, is seen as improving local employment prospects. However, there is now sufficient data to support the fact that multinational companies have done little to improve the working conditions in the countries in which they invest (Ghosh 2002). Moreover, economic reforms, although sometimes leading to

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higher growth, have generally failed to generate employment. In India, the growth of employment actually dipped from 2.7 per cent per annum during the period 1983–94, to 1.07 per cent during 1994–2000, whereas the GDP accelerated from 5.2 per cent per annum to 6.7 per cent (Economic Times 2004). Of special significance is that more and more women are currently entering the paid labour force. Industrial closures, layoffs and voluntarily retirement for male workers have pushed women to suddenly don the mantle of the wage earner. Many of them become casual labourers. Women also account for a small increase of the workforce in the manufacturing sector (Sundaram 2001). The key question is, even as women’s employment opportunities are increasing, are the terms of employment and working conditions an improvement? And, further, do they prove that women’s participation in paid employment contributes to their overall empowerment and control over their lives?

Trends in women’s work in the non-agricultural sectors In the 1990s the overall work participation rate of women in urban India underwent a slight decline. It does not however capture the entire range of informal activities in which women are involved. In both urban and rural areas, the gap between the skilled, educated and trained workforce and the semi-skilled, semiliterate and untrained workers is increasing. Large numbers of workers are being edged out of agriculture and ending up in low-productivity, non-agricultural activities. The official recording of women’s status as a worker (usual or not) and the type of contract (principal or subsidiary) in which they are employed is extremely important in determining their employment participation. Official data has grudgingly accepted a recording of women’s unpaid work on the farm. However, a large gamut of women’s activities in terms of the time put in and the contract still begs recognition. For instance in certain types of labour arrangements, women are increasingly employed in the manufacturing sector in a subsidiary, yet unrecorded status. The most common types of work that women do in the new phase of reforms are domestic service, which is a regular activity, and home-based or putting out work in a subcontracting form for export or domestic manufacture. Historically, in situations where capital and technology were not so easily accessible, and labour was unskilled, non-organized but in plenty, a whole range of production relationships emerged wherein work was done on the basis of wages as well as piece-rate production. The place of production is not necessarily independent and can either be the living residence of the entrepreneurs or of labourers. The terms and conditions of work also vary considerably as they are not bound by any legislative control. In this unorganized sector, household production forms an important component. Home-based industries today span a wide range of traditional activities as well as new technologies. Significantly, most of them tend to opt for employing women, whose conditions of existence are such that they are tied to domestic tasks. Most of this work is often not recorded in the employers’ statistics (Baner-

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jee 1999; Chadha and Sahu 2002; Ghosh 2002; Mukhopadhyay 2003). In homebased work, women workers who are said to be utilizing their ‘leisure time’, are made to work on piece rates for maximum utilization of their labour, and are termed ‘unskilled’. It is argued that the inequalities in wages that women face are derived from the disadvantaged position in the household (Harris and Morris 1986; Mackintosh 1981). Thus both in rural and urban areas today, there is an increasing casualization and informalization of the female workforce. At the same time another development, the impact of information technology and a concomitant growth of knowledge workers linked to mass media, communication, business and education is growing rapidly. It seems this sector has changed the concept of the workplace and included more and more women into it. In rural areas, this trend results from shifts from the self-employed to the wage labour force, while in urban areas this is due to a shift from regular salaried work to casual labour and self-employment. It has been suggested that home-based subcontracting activity or subcontracted work in small units, mostly through piece rates, and without any benefits as workers, is the major component of this casual and informal category. Even in East Asia before the crisis struck, there was movement towards labour processes that were less secure, based in small units, or home-based and that employed women workers in production chains that depended on outsourcing through large final distributors. This feature of global production of multinational corporations (MNCs), has become an important characteristic of globalization and the period of reforms. International suppliers of goods that depend less and less on direct production at a specific location represent these MNCs. Instead, they rely more on subcontracting out a substantial part of their production processes. The subcontracted producers vary in size and capacity from medium-sized factories to pure middlemen who collect the output from home-based workers. A large part of such subcontracted work is overwhelmingly female home-based work (Ghosh 2002). In recent years, following the impact of emerging new technologies of information and communication, homebased teleworking has been one of the new work domains that has evolved and attracted women. Today it encompasses call centres, medical transcriptions, data conversions, back-office operations and content development (Gothoskar 2000).

Women in home-based work: beedi industry in South Tamil Nadu The purpose of this chapter is to focus on the characteristics of the labour process in home-based production in India, using the example of women workers in a rural non-farm industry: the beedi industry in South Tamil Nadu (Gopal 1997, 2000). (Beedi is a type of cheroot with tobacco rolled in tendu leaves. It is not cigarettes but beedi that is most widely smoked by the lower income groups in rural as well as urban India.) The fieldwork for this research was conducted for 15 months between June 1993 and December 1994. My analysis seeks to identify what it is that is attractive about home-based production processes for employers

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who wish to succeed in global manufacture. The discussion will also explore the complexities of the labour process situated within the home, where, despite economic returns into the household, the ideology of a non-worker, spare-time earner, and of supplementary income continues to prevail. Further, it highlights the dynamics of the labour process where the burden of production is passed on to others, and women take on work that is detrimental to their health. The beedi industry in Tirunelveli is nearly 80 years old, and in the initial phases of its growth, it was closely linked in the urban areas with the growth of petty manufacture for the local market. In the rural hinterlands, however, it was associated with the crisis within agriculture and the loss of work in the faminestarved countryside, thus extending the putting out system into rural industry. In Tirunelveli, the beedi industry employs home-based workers via a system of contracting and subcontracting. The Melappalayam area of Tirunelveli, comprising mostly Muslim weaver families, and Mukkudal in Ambasamudram taluk, is the oldest centre of beedi production in the district. Melappalayam is one of the classic instances of the growth of petty manufacturing industry proliferating in the urban sector. The beedi industry here took advantage of the reserve of cheap female labour, mostly Muslims, who fit easily into the home-based system of beedi production. At Mukkudal, T. P. Sokkalal Ram Sait, later known as a king in the industry, established his production headquarters, primarily relying on the export markets in Sri Lanka. Sokkalal set up beedi ‘factories’, which were little shops that attracted cheap female agricultural labour who were suffering from the drought in the countryside. Sokkalal and his men taught the skill of rolling beedis to women who were either temporarily jobless during the slack season or affected by the drought. At the ‘factory’, they were taught how the beedis were rolled and bundled. Later they were given the raw material necessary to do the required quota at home and bring back the finished product. This would go on for a few months till the company’s specification was mastered. It was like an initiation into a craft with a great future. It is part of the mythology of the success of the beedi business that Sokkalal Ram Sait had amassed such wealth that he could even feed his pet elephants halwa. Today, there are numerous players in the beedi business, many of whom come and set up base from the neighbouring states, such as Karnataka, Kerala and even Gujarat. There is a consensus among employers that decentralization, a euphemism for subcontracting, is the most efficient organizational form for manufacturing beedis. Some of the prominent manufacturers admit that the subcontracting system came to prevail because of the stringent labour laws, echoing the situation today, where labour flexibility is encouraged through policies to attract investment, especially foreign investment. The beedi proprietor elabourated: prosecution was initiated if the registers pertaining to various welfare measures were not maintained. If a person owned five branches, five different prosecutions were conducted. A second offence meant imprisonment. Therefore, all these responsibilities were put on the contractor and/or subcontractor.

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By employing a system of production using contractors and subcontractors, the beedi companies are able to gain tremendous profits with very little inputs in terms of infrastructure for work and comprehensive benefits to labour. These profit-making features of the beedi manufacturers are hardly evident in the interface between the contractors and subcontractors, and the workers. It is at that level of the subcontractor and the worker that manipulation by the employers becomes visible.

Relations of production in the beedi industry In the system of contracting out the production there are two main forms: company shops and commission shops. In the company shops, the trademark holding company operates by issuing pass books to the home-based women workers in their names, giving them raw material and collecting the beedis after paying them wages for the same. They also deposit provident fund amounts in their names and 8 per cent of their total wages obtained in a month as leave wages. This provision exists in the Beedi and Cigar Workers Act. The leave wages and the bonus are given to workers twice a year during the festivals of Pongal and Deepavali. Several companies, of course, defaulted in this practice. Despite the fact that the Maternity Benefit Act covered the women workers, it had not been implemented till 1988 due to the efforts of a dynamic and sensitive Inspectress of Labour appointed in the district. Even here only the company shops were willing to give women their maternity benefit dues. In addition to passbook holders, there were on the rolls of the company shops, workers in a ‘joint’ status. These women did not have separate passbooks but rolled along with passbook holders, and got only wages and no benefits. In the commission shops, subcontractors, called commission agents, operate with the brand name of a company. These subcontractors obtain a commission of Rs1–1.20 per 1,000 beedis collected and sold. In addition, they collect from the women one extra bundle called ‘podu vundle’ for every ten bundles rolled as their commission from the women. While passbooks were issued to the workers and a few workers also retained as joint workers, some subcontractors did not issue passbooks in women’s names, but in the names of men in their families. This they do in order to avoid providing maternity benefit. Further, young girls who are just beginning to roll beedis or older women whose beedi quality may not match the best of quality are also given raw material to roll, accounted informally in a little notebook called chittai, without the recognition of a passbook. Thus the commission agents and the company keep women workers in different relations of production, thus pre-empting any unity among the workers. In addition there are traders who set up shops without possessing a brand name. They operate on a small scale with a declaration of an annual production of 20,000 beedis, for which there is a Central Excise exemption. These fly-bynight shops issue raw material and collect beedis at an appointed hour during day or night, may or may not be regular in paying wages, but will suddenly remove their shops from its place and vanish with the beedis, money, etc.

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leaving the workers in the lurch. While they operate, they may pay good wages without the passbook and hence no other benefits, and even issue good raw material, which is appreciated by women who roll for these shops; they then sell their beedis in an unauthorized manner across the border in retail outlets in Kerala. Besides women workers, the shops also have a beedi checker, who inspects the quality of beedis delivered, a tandoor, who weighs and disburses the raw material of tendu leaves and tobacco dust to the women, and one or two other men who work as stackers and bundlers of beedis. All company shops have regular and separate timings for the women to report at shops to deliver the rolled beedis and to collect raw material. A worker hardly spends 15 to 20 minutes in the shop everyday to submit her quota. Hence at one time, there would be 20 to 30 women reporting at the shop, who are sent off half an hour before the next lot comes in. Thus it is men employed in the shops who interact with women who come from their homes, and presents a strange patriarchal relation of hierarchy rather than any relations of production. The company shops insist that women come well dressed to the shops with hair oiled and combed, and in an overall neat demeanour. The shop owners draw a parallel with women in towns who go dressed well to offices. They even tell women to instruct the unkempt looking women of their village to come well dressed. During the 15–20 minutes that women spend in the shops, they hardly get to know the intricacies of the goings-on in the shop. On the contrary, their attention is focused on the saris the other women wear, the jewellery bought or worn and how some women had adorned themselves with flowers or trinkets. By focusing on gendered and feminine presentations of women, their dress and demeanour, their solidarity as workers is ruptured. An aura of female antagonism prevails engineered by patriarchal notions of ideal female comportment. Thus their dealings remain extremely individualistic and there remains no opportunity for any collective bargaining. In payment of wages, arbitrariness was evident. While some shop owners paid it on a Saturday, others paid it on a Friday, while some even asked women to come on a Sunday. They thus exercised control over the women by making them come on a holiday to receive their wages or in arbitrarily shifting the date of payment. The actual labour process of producing the beedis takes place within the homes of the women workers. Cutting the wet tendu leaves is a skilled task and is done by the beedi worker herself. She does the main task of actually rolling the leaves placing the tobacco dust inside and binding it with a thread. The final action consists of folding the top end of the beedi using a metal stick. This action is often the first task that is assigned to young girls, when they are initiated into beedi work. Sometimes, women sublet part of this work so that older and physically challenged women earn a few rupees as livelihood. Beedi work thus involves women integrating their lives with their work. These include women and girls folding beedis and assisting other workers, alone or with other labour, or rolling beedis for others, all of which constitute the informal beedi work that also goes on outside the shop sector. The disparity in worker status

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between and sometimes even within a shop, is often a reflection of their families’ position in the social structure, as well as their own status within the households, which becomes a fertile area for further manipulation and exploitation in the working of the industry.

Impact of home-based work on women’s lives The opportunities for women to opt for beedi work exist both in the company shops and the commission shops, and even in the fly-by-night shops. Women’s choice of shops is dictated by their place within their families and their social roles, and how important beedi work is for their survival. For instance, many women preferred to roll for the commission shops because of certain advantages they gained from it, compared to the company shops, such as flexibility, where women can submit fewer beedis leaving some balance in raw material that could be adjusted later. Regularity of production was not a strict feature. The shop owner will also issue more raw materials if the woman can produce more beedis. Further, timings are not strictly adhered to and women can go late, but within the reporting phase, which is a big concession. Women can also loan out beedis from other women in huge quantities, which may compromise on quality, something not tolerated in company shops. An important feature of beedi work is the differing working relations women have with each other, from whom they borrow or lend beedis daily and seek continual help. However, what happens in effect is that as the workplace enters the home, where each woman is literally on her own managing the work of her household as well as her beedi work, a situation is created where women are isolated in their struggle for survival. The resentment, jealousy and the unsympathetic attitudes that these atomized conditions of work generate gets reflected in the shop-level relations, which work against the women themselves. Being unaware of the workings of the industry and the real reasons why certain terms and conditions are imposed on them, they try to compete with each other also. Thus their own labour process exercises divisiveness. At home, beedi work spills into all the working hours, beginning quite early in the morning and continuing late into the night. Women’s routines are tension filled as they race to submit their quota for the day and various adjustments are made and losses incurred with respect to their food intake, sleep, rest, household work, leisure, cleanliness of the household, care of their own and family’s health, etc. It is by making all these adjustments that women bring valuable income into the household.

Beedi work and its relationship to women’s empowerment There are diverse perceptions of the economic value of the beedi work that women do. In the better-off households it is considered profitable for women and girls to roll beedis. Girls in these households even earn their dowry by doing beedi work. But women from other households that solely depend on beedi work

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say agricultural work, which is now unavailable, is definitely better since one does not have to suffer aches and pains, and loss of sleep, even though by rolling beedis one is assured of an income. Younger girls in these households are goaded and controlled by their mothers or aunts to be consistent and efficient in rolling beedis, as their beedi earnings contribute to the household kitty. Several other studies too have captured the insidious manner in which child labour flourishes in the beedi industry (Bagchi and Mukhopadhyay 1996). Most of the middle income and poorer families exist on an economy of credit, settling their expenses on a weekly basis on receipt of wages. Moneylending is also a thriving practice and the moneylenders lend to women who get an assured weekly wage. Despite all their economic contribution, women perceive their efforts as insignificant. This has to do with the social perception of women’s work. A comprehensive understanding of women’s work can be gained by placing beedi work in the context of household relations, social norms prevalent in the village and the ideology of women’s work prevalent in the community. Within the households, women’s relations with men is based on dependence and they have less authority for themselves in the management of household affairs, deciding the future of girls, managing household finances, having a claim on the beedi wages and other important decisions of the household. This, in turn, reflects a low self-image of women, which makes them unquestioningly accept attitudes about their work. The context of social norms in the village defines women as weak and powerless. They are ignorant and, hence, vulnerable beings, who have to be protected and taken care of. It is within this normative pattern of their lives that beedi work plays a complementary role in extracting the most from women, while simultaneously keeping them entrenched within the traditional social structure. Employers claim that beedi work for women situated within the household, is spare-time work or work done in free time. But women’s tension-strained routines demonstrate how this concept is baseless. Not only this, the manner in which women manage their food requirements, make adjustments with their time, work and leisure belies the ‘myth of convenience’ that is not only propagated by the employers but also supported by the men in the households who urge their women into beedi work. Men believe that beedi work is ‘women’s work’, which they will not do. Women, however, are unable to resist these dominant perceptions because of their atomized conditions of work, where there is no common place of work for all women to come together and share aspects of their work. Each woman working within her own home cannot realize the unity required for the collective efforts to resist these perceptions and practices.

A comparative view A comparison of the beedi workers with the teleworkers’ situation is instructive. Women teleworkers have to pay the price for some ‘benefits’ that they get as wages, by being unable to go out and escape from stress at work. Even with the advent of technology the labour process continues to exert similar work

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conditions that make women alienated as workers, feel their lack of collective space; they do not find the work at all challenging and are unable to experience the transformation of the workplace in a very liberating manner. Jobs in this sector are going to be on the increase with business outsourcing its processes to smaller firms who employ diverse labour practices recruiting mainly women. It is not just poor women but women from other classes too who are drawn into the newer forms of labour processes that are increasingly in demand to cut costs and earn profits. Even in the NGO sector, organizations working with women are facing the challenge of using technologies of information and communication to document women’s lives and are encouraging women to access these technologies to have control over their own knowledge and skills (Menon-Sen 2003). Work such as teleworking has thrown up new challenges for the organization of workers in these sectors. Even as existing work situations have to struggle to retain some of the protective measures for workers, the newer processes require further legislative protection and legal provisions. Several disadvantages such as loss of a workplace, relationships at work, lack of job security, lack of worker organization, training and benefits, and increase of the stress on the job or ‘compressed job’ are some issues related to teleworking (Gothoskar 2000).

Conclusion: securing the rights of home workers Considering the above characteristics of home-based industry that work against advantaging women workers, it is helpful to be informed about some of the efforts at mobilizing for the rights of home workers. It was the Shramshakti Report of 1988, which gave much needed recognition to home workers and suggested the introduction of a specific law to secure the rights of home workers. In 1991, the National Commission on Rural Labour also suggested that wherever possible, home workers should be organized into cooperatives. The state’s policies of liberalization, export promotion and employment generation are supporting informal work as development. Across the world, there are home workers who are producing auto parts, clothing, electronic goods, knitwear; they work on embroidery, weaving, making toys, leather, word processing, crafting bamboo, etc. Everywhere the majority is women, and in many cases, they are the main earners of their households. In India, the Self-Employed Women’s Association first initiated the idea and need for an international standard for home workers in the form of an ILO convention. In 1996, there was a second reading of the convention on home work at the end of the 83rd meeting of the ILO. At the convention there was still much resistance from employers (Mukul 1998). Given the above exploration into the vulnerability of women who work in the home-based sector, our efforts ought to be behind those who put pressure on the state to secure the rights of these workers, whom the new international players of industry and capital find increasingly attractive as labour.

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References Bagchi, J. and A. Mukhopadhyay (1996) ‘Child Labour in Beedi Industry: Murshidabad District in West Bengal: Report of a Survey Conducted in Two Blocks of the Murshidabad District’ (sponsored by the Ministry of Labour, Government of India), Kolkata: School of Women’s Studies, Jadavpur University. Banerjee, N. (1999) ‘How real is the bogey of feminization?’, in T. S. Papola and A. Sharma (eds) Gender and Employment in India, New Delhi: Indian Society of Labour Economics and Institute of Economic Growth, with Vikas Publishing House, pp. 299–317. Chadha, G. K. and P. P. Sahu (2002) ‘Post-reform setbacks in rural employment: issues that need further scrutiny’, Economic and Political Weekly, 37 (21), pp. 1998–2026. Economic Times (2004) ‘Reforms fail to prop up job market, says NCAER’, Mumbai edition, 26 April. Ghosh, J. (2002) ‘Globalization, export-oriented employment for women and social policy: a case study of India’, Social Scientist, 30 (11–12), pp. 17–60. Gopal, M. (1997) Labour Process and its Impact on the Lives of Women Workers: A Study of the Beedi Industry in Keelapavoor Block of Tirunelveli District, Tamil Nadu, unpublished PhD thesis, Jawaharlal Nehru University, New Delhi. Gopal, M. (1999) ‘Disempowered despite wage work: women workers in beedi industry’, Economic and Political Weekly, 34 (16–17), pp. WS12–20. Gothoskar, S. (2000) ‘Teleworking and gender’, Economic and Political Weekly, 35 (26), pp. 2293–8. Harris, C. C. and L. D. Morris (1986) ‘Households, labour markets and the position of women’, in R. Crompton and M. Mann (eds) Gender and Stratification, Cambridge: Polity Press, pp. 86–96. Kurien, C. T. (1994) Global Capitalism and the Indian Economy, New Delhi: Orient Longman. Mackintosh, M. (1981) ‘Gender and economics: the sexual division of labour and the subordination of women’, in K. Young, C. Wolkowitz and R. McCullagh (eds) Of Marriage and Market: Women’s Subordination in International Perspective, London: CSE Books, pp. 1–15. Menon-Sen, Kalyani (2003) ‘IT in India: Social Revolution or Approaching Implosion?’ unpublished panel presentation on Globalised Media and ICT Sytems and Structures (organized by ISIS International Manila at World Summit on the Information Society, 10–12 December, Geneva. Online, available at: www.isiswomen.org/index.php? option=com_content&task=view&id=529&itemid=217#up (accessed 9 August 2004). Mukhopadhyay, S. (2003) ‘Status of women under economic reforms’, in S. Mukhopadhyay and R. M. Sudarshan (eds) Tracking Gender Equity Under Economic Reforms: Continuity and Change in South Asia, New Delhi: Kali for Women and IDRC, pp. 89–122. Mukul (1998) ‘Homeworkers: high hopes and hard realities’, Economic and Political Weekly, 33 (14), pp. 758–762. Poonacha, V. (2004) ‘Higher education of women in the era of globalization and privatization: an enquiry into the changing policies of education’, Samyukta: A Journal of Women’s Studies, 4 (1), pp. 225–37. Qadeer, I., K. Sen and K. R. Nayar (eds) (2001) Public Health and the Poverty of Reforms: The South Asian Predicament, New Delhi: Sage Publications. Sheth, N. R. (2004) ‘The field of labour’, Sociological Bulletin, 53 (2), pp. 164–77.

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Sundaram, K. (2001) ‘Employment and poverty in India in the 1990s: further results from NSS 55th round employment-unemployment survey, 1999–2000’, Working Paper No. 95, Centre for Developing Economics, Delhi School of Economics. Vaidyanathan, A. (1995) The Indian Economy: Crises, Responses, and Prospects, New Delhi: Orient Longman. Yates, M. D. (2003) Naming the System: Inequality and Work in the Global Economy, Kharagpur: Cornerstone Publications.

Appendix: Selected statistics on Indian workers Table A.1 India: factories,1 workers, and trend in distribution of income, 1981–2004 Year

No. of factories

Total persons employed

No. of workers

Profit share in net value added (%)

Wage share in net value added (%)

1981–82 1982–83 1983–84 1984–85 1985–86 1986–87 1987–88 1988–89 1989–90 1990–91 1991–92 1992–93 1993–94 1994–95 1995–96 1996–97 1997–98 1998–99 1999–2000 2000–01 2001–02 2002–03 2003–04

105,037 93,166 96,706 100,328 101,016 97,957 102,596 104,077 107,992 110,179 112,286 119,494 121,594 123,010 134,571 132,814 136,012 131,706 131,558 131,268 128,549 127,957 129,074

7,894,254 8,166,168 7,994,406 7,981,370 7,584,007 7,548,755 7,903,826 7,858,281 8,256,712 8,279,403 8,319,563 8,835,952 8,837,716 9,227,097 10,222,169 9,536,282 10,073,485 N.A. 8,172,836 7,987,780 7,750,366 7,935,948 7,870,081

6,105,622 6,312,673 6,158,837 6,091,409 5,819,169 5,806,866 6,061,786 6,026,328 6,326,541 6,307,143 6,269,039 6,649,310 6,632,323 6,970,116 7,632,297 7,208,143 7,652,254 6,364,464 6,280,659 6,135,238 5,957,848 6,161,493 6,086,908

23.4 19.9 23.7 15.4 15.4 16.1 11.6 17.0 19.1 22.1 17.6 20.4 32.3 34.3 31.6 26.7 32.7 32.5 30.5 24.9 24.2 35.9 45.5

30.3 30.9 29.4 32.4 31.4 30.7 31.5 29.7 27.6 25.6 24.8 23.6 19.9 20.3 20.1 16.9 17.9 17.1 17.0 19.3 19.0 17.2 15.0

Source: Compiled from Government of India, Central Statistical Organization (CSO), Annual Survey of Industries (ASI), Kolkata. Note 1 Factories registered under the Factories Act (1948), using power and employing more than ten workers, as well as those not using power and employing more than 20 workers, during the reference year, are covered.

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Table A.2 India: principal characteristics by type of organization in the factory sector, 2003–04 Sl Type of organization no. 1 2 3 4 5 6 7 8 9 10 11 12

No. of factories

No. of workers

Total no. of persons engaged

33,778 3,038 44,215 13,658 30,750 433 573 45,414 149 33 2,132 314

646,661 66,694 1,213,247 2,205,333 1,495,955 33,373 201,707 3,936,368 5,600 2,929 193,398 22,012

771,084 82,802 1,493,505 2,957,416 1,929,883 44,431 269,581 5,201,312 8,201 3,884 284,068 25,224

129,074

6,086,908

7,870,081

Individual proprietorship Joint family (Hindu undivided family) Partnership Public limited company Private limited company Government departmental enterprises Public corporation Corporate sector (4 + 5 + 6 + 7) Khadi and village industry Handloom industry Cooperative society Others

Total Source: Compiled from CSO, ASI (see Table A.1).

Table A.3 India: principal characteristics of the factories and the workers employed there, by rural–urban break-up in 2003–04 Sector

No. of factories

No. of workers

Total no. of persons engaged

Rural Urban Total

48,183 80,890 129,074

2,475,567 3,611,341 6,086,908

3,154,397 4,715,684 7,870,081

Source: Compiled from CSO, ASI (see Table A.1).

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Table A.4 India: principal characteristics of factories, by major industry group in 2003–04 National industrial classification – 1998 code

Description

01 14 15 16 17 18

Agriculture and related activities Other mining and quarrying Food products and beverages Tobacco and related products Textiles products Wearing apparel, dressing and dyeing of fur Leather and related products Wood and wood products Paper and paper products Publishing, printing and related activities Coke, petroleum products and nuclear fuel Chemicals and chemical products Rubber and plastic products Non-metallic mineral products Basic metals Fabricated metal products Machinery and equipment, n.e.c. Office, accounting and computing machinery Electrical machinery and apparatus, n.e.c Radio, television and communication equipments Medical, precision and optical instruments Motor vehicles, trailers and semi-trailers Other transport equipments Furniture and other manufacturing, n.e.c. Recycling Other industries All industries

19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37

Source: Compiled from CSO, ASI (see Table A.1). Note n.e.c. = not elsewhere classified.

No. of No. of factories workers

2,868 116 23,839 3,078 13,035

Total persons engaged

75,026 91,979 8,290 9,231 1,005,538 1,297,074 455,030 478,898 1,027,074 1,210,383

3,190 2,336 3,042 3,579

327,510 118,153 38,124 136,807

379,137 145,964 50,211 174,892

3,007

70,634

112,974

918 10,226 6,999 11,838 6,523 8,051 8,850

54,990 497,586 210,534 361,477 400,280 212,832 263,042

74,071 740,441 278,654 455,375 539,415 282,463 397,945

180

12,053

21,310

3,868

150,742

218,091

997

64,839

100,580

1,009

42,740

64,728

2,757 1,723

212,966 133,184

285,666 174,291

2,198 48 4,798 129,074

114,695 147,682 1,207 1,451 91,557 137,174 6,086,908 7,870,081

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Table A.5 India: casualization of workforce in factories, trend of, 1993–2003 Year

1993–94 1994–95 1995–96 1996–97 1997–98 1998–99 1999–2000 2000–01 2001–02 2002–03

No. of workers directly employed

No. of workers employed through contractor

Total workers (col.1 + col.2)

Ratio of casual to regular workers (%) (col.2 ÷ col.1)

1

2

3

4

5,970,403 5,953,392 6,585,099 6,105,378 6,379,560 5,377,193 5,041,339 4,882,143 4,660,496 4,739,339

911,126 1,023,291 1,074,483 1,102,765 1,272,694 987,272 1,239,320 1,253,095 1,297,351 1,422,155

6,881,529 6,976,683 7,659,582 7,208,143 7,652,254 6,364,465 6,280,659 6,135,238 5,957,847 6,161,494

15.3 17.2 16.3 18.1 19.9 18.4 24.6 25.7 27.8 30.0

Source: Computed from CSO, ASI, various issues (see Table A.1). Notes The Contract Labour (Regulation and Abolition) Act, 1970, applies to every establishment in which ten or more workers are employed. Employers, by the provisions of the Act, are restrained from employing contract labour in jobs, which are permanent or semi-permanent in nature. Instead of making casual workers permanent it has become a common phenomenon to route employment through labour contractor on a purely temporary and casual basis in large enterprises.

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Table A.6 India: employment in public and organized private sectors (in millions), 1980–2004 Year

Public sector

Organized private sector

Aggregate

1980–81 1981–82 1982–83 1983–84 1984–85 1985–86 1986–87 1987–88 1988–89 1989–90 1990–91 1991–92 1992–93 1993–94 1994–95 1995–96 1996–97 1997–98 1998–99 1999–2000 2000–01 2001–02 2002–03 2003–04

15.48 16.28 16.75 17.22 17.58 17.68 18.24 18.32 18.51 18.77 19.06 19.21 19.33 19.45 19.47 19.43 19.56 19.42 19.41 19.31 19.14 18.77 18.58 18.20

7.40 7.53 7.39 7.36 7.43 7.37 7.39 7.39 7.45 7.58 7.68 7.85 7.85 7.93 8.06 8.51 8.69 8.75 8.70 8.65 8.65 8.43 8.42 8.25

22.88 23.81 24.14 24.58 25.01 25.05 25.63 25.71 25.96 26.35 26.74 27.06 27.18 27.38 27.53 27.94 28.25 28.17 28.11 27.96 27.79 27.20 27.00 26.45

Source: Reserve Bank of India, Handbook of Statistics on Indian Economy, Mumbai: Reserve Bank of India. Notes Since 1997–98, i.e. in the aftermath of East and Southeast Asian ‘crisis’, there has been steady decline in organized sector employment in India. Consequently, new jobs are overwhelmingly created in the unorganized/informal sector, where the labour market is perfectly flexible. And, the workers/employees in the latter sector have hardly any entitlement to social security benefits.

1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995

Year

2,856 2,589 2,483 2,488 2,094 1,755 1,892 1,799 1,745 1,786 1,825 1,810 1,714 1,393 1,201 1,066

Number

1,900,333 1,588,004 1,469,029 1,460,465 1,949,029 1,078,801 1,644,882 1,769,877 1,191,033 1,364,254 1,316,863 1,342,022 1,252,225 953,867 846,429 989,695

No. of workers involved 21.92 36.58 74.61* 46.86* 56.02 29.24 32.75 35.36 33.95 32.66 24.09 26.43 31.26 20.30 20.98 16.29

Person-days lost (million)

Industrial disputes (strikes plus lockouts)

Table A.7 India: trend of industrial relations, 1980–2005

Per strike

502 462 610 575 530 422 883 690 588 560 919

Per lockout 665 613 592 587 931 615 869 984 683 764 722 741 731 685 705 928

Per dispute

Average number of workers involved

648 991 1,109 719 829 797 683 759 735 775 933

■

■

8,477 12,911 10,405 9,609 7,656 7,292 9,725 14,967 6,143 8,232 7,814

Per strike

44,382 32,084 47,300 48,565 56,474 36,739 26,315 22,940 30,660 36,468 31,646

Per lockout

7,677 14,130 30,050 18,834 26,755 16,661 17,309 19,654 19,454 18,289 13,198 14,601 18,237 14,573 17,471 15,281

Per dispute

continued

Number of person-days lost

1,166 1,305 1,097 927 781 674 579 552 477 456

Number

939,304 981,267 1,288,923 1,310,695 1,269,498 687,778 1,079,434 1,815,945 2,072,221 2,913,601

No. of workers involved 20.28 16.97 22.06 26.79 26.88 23.77 26.58 30.26 23.87 29.67

Person-days lost (million)

Industrial disputes (strikes plus lockouts) Per strike 820 671 1,130 546 1,090 659 630 2,710 701 854

Per lockout 806 752 1,175 1,414 1,625 1,020 1,864 3,290 4,344 6,389

Per dispute

Average number of workers involved

798 804 1,204 2,036 2,045 1,313 3,052 3,965 8,064 8,689

■

■

10,246 7,939 14,059 19,676 23,277 14,953 32,761 12,572 20,460 29,986

Per strike 30,935 20,852 29,428 41,761 48,643 60,278 59,582 91,077 78,994 74,321

Per lockout

Number of person-days lost

17,397 13,005 20,111 28,896 34,417 27,009 29,225 49,003 39,911 35,041

Per dispute

Notes * Includes 41.40 and 13.38 million person-days lost due to Mumbai textile strike during 1982 and 1983, respectively. Number of person-days lost per lockout (or closure) has always been much greater than that per strike. However, the phenomenon gathered momentum ever since the Indian government began to withdraw from the labour market as part of its neoliberal policies. The Indian labour laws are quite rigorous to deal with the incidence of ‘undeclared’ lockout, which is the growing event in the aftermath of economic reforms, yet the government is remaining indifferent in implementing the laws through the Department of Labour at various stages. While the average number of workers involved per lockout in the post-1991 period was generally been lower than that per strike, the phenomenal increase in the number of person-days lost per lockout as compared to strike implies longer duration of an average lockout.

Source: Compiled from Government of India, Ministry of Labour, Labour Bureau, Review on Industrial Disputes in India (from 1997, Industrial Disputes in India), various issues, Simla.

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

Year

Table A.7 continued

3.1 3.2

2.1 2.2

196.74 140.48 56.26 10.60 1.80 8.80 186.14 138.68 47.46

Male

Rural

104.02 88.79 15.23 2.04 0.73 1.31 101.97 88.06 13.92

Female 300.75 229.26 71.49 12.64 2.53 10.11 288.11 226.73 61.38

Total

■ 77.05 5.06 71.99 18.71 0.15 18.56 58.34 4.91 53.43

Male

Urban

18.96 3.35 15.61 3.33 0.07 3.25 15.64 3.28 12.36

Female 96.01 8.41 87.60 22.04 0.22 21.82 73.97 8.19 65.78

Total

■ 273.78 145.53 128.25 29.31 1.95 27.36 244.47 143.58 100.89

Male

Combined

122.98 92.14 30.84 5.37 0.80 4.57 117.61 91.34 26.27

Female

396.76 237.67 159.09 34.68 2.75 31.93 362.08 234.92 127.18

Total

Notes All the casual workers and unpaid family workers in all enterprises, irrespective of the sector, are being considered as unorganized workers. Similarly, self-employed persons in the unorganized sector, and private households and other employees not eligible for paid sick/annual leave or other social security benefits offered by the employer, are also being considered as unorganized workers.

Source: Government of India, National Commission for Enterprises in the Unorganized Sector (2006), ‘Report on the Social Security for Unorganized Workers’, New Delhi.

3

2

Total employment Agriculture Non-agriculture Organized employment Agriculture Non-agriculture Unorganized employment Agriculture Non-agriculture

1

1.1 1.2

Category

Sl no.

Table A.8 India: estimates of workers in formal and informal employment (in millions)

256

Appendix

Table A.9 India: employment as categorized into ‘formal’ and ‘informal’, 1999–2000 (in millions) Sector

Employment category Formal

Informal

Total

Organized Unorganized

30.66 4.02

25.79 336.29

56.45 340.31

Total

34.68

362.08

396.76

Source: See Table A.8. Notes National Commission for Enterprises in the Unorganized Sector (2006) has defined ‘unorganized workers’ as those who are working in the unorganized sector (as defined in the Notes under Table A.8) and the workers in the formal sector but without any employment security and social security provided by the employer.

Index

Addison, J. T. 13 Africa 1, 25, 87 Airbus 24 airline industry 151 Akerlof, G. A. 41, 231 Al Jezeera 1 Albo, G. 160 All-India Trade Union Congress (AITUC) 187, 190 alternative provisioning systems 55–6 Amalgamated Workers’ Union 179, 184n59 Amsden, A. H. 38, 85 Apex see Supreme Court of India apparel 133 Argentina 26, 27, 37–8; debt crisis 132 Asian Development Bank 113, 162 Asian financial crisis 80, 103 Asis, M. M. B. 112 Australia 23, 78, 82, 128, 165, 179 Austria 32, 128 automobile see motor vehicles industry Babu, R. P. 115 Bagchi, A. K. 2, 47 Bagchi, J. 244 Baldwin, R. E. 147 Banerjee, N. 61, 238 Bangladesh 3–4, 10, 24, 74, 100, 110, 111; garment factories 3; strikes 3–4; women workers 3, 105, 114 Barcham, M. 164, 178 Bargh, M. 166 Barrow, C. 194 beedi industry: homework 242; Tamil Nadu 240–1; and telework 244–5 Beito, D. T. 52 Belgium 128 Belzer, M. H. 150

Beri, B. 223 Besley, T. 7 Bhaduri, A. 21, 127 Bhagwati, J. 77, 127 Bivens, J. 140 black car drivers: New York City 11 Boeing 24 Bollywood films 1 Bolt, P. J. 88 Bombay Mill Owners Association (BMOA) 34 Borjas, G. J. 81 Bowles, S. 231 ‘brain drain’ 81, 85, 86, 87, 92; reverse 75 Brazil 5, 23, 26, 27, 189, 196 Brecher, J. 5 Breman, J. 230 Brenner, R. 141 Broad, D. 55, 56 Bronfenbrenner, K. 141, 143, 145, 147, 150 Brooke, E. 32 Brunei 80 Brusco, S. 219 Buchanan, D. H. 33 Bukharin, N. 9 Burgess, R. 7 business process outsourcing (BPO) 25, 83, 115 call centre 115, 138, 143 Cambodia 10, 104, 105, 110, 111 Camdessus, M. 160 Campbell, D. 38 Canada 78, 82, 128 Candeias, M. 58–9 Cantwell, J. 23 capital flows 103–4 capitalism and family 51

258

Index

Caribbean 99 Carnoy, M. 97, 194 Carr, M. 109 Carrington, W. J. 82 cascading effect 11 Chadha, G. K. 239 Chandavarkar, R. 34, 37 Chandrasekhar, C. P. 102, 104, 223 Chattopadhyay, R. 188 Chaudhury, S. 223 Chavez, H. 4 Chen, M. A. 109, 110 child labour 33, 36, 37 Chile 23, 27, 110 China 6, 10, 14, 22, 27, 33, 75, 78, 85, 88–9, 101, 105, 110, 111, 132, 142, 143, 147 Chithelen, I. 85 Chossudovsky, M. 42n3 Christopherson, S. 57 civil law 13, 40; and labour market 40–1 civil society 2; international 11 Clark, J. C. 85 Coase, R. C. 88 Collier, D. 189 Collier, R. B. 189 common law 13; and labour market 39–41 Communist Party (United States) 122 comparative advantage 24–6 computer hardware 24 Congressional Budget Office 133, 140 construction workers 152 contract workers 251, 252 contested exchange 231 ‘core competence’ 23 Cortez, M. A. 10, 111 Costello, T. 5 cotton textiles 33–5, 36 Crouch, H. 187, 192 Curtin, T. 162, 179 Czech Republic 23 D’Costa, A. P. 24 Dahl, R. 194 Davis, M. 3 demographic imbalances: world 76, 83, 92 Denmark 35, 129 deregulation 160, 164 Deshpande, L. K. 185 Deshpande, R. 14 Deshpande, S. 185 Detragiache, E. 82 Dhavan, R. 40 Dholkia, J. 230

diaspora 78, 88–9, 91 Dickinson, J. 50–1 dirigisme 195 domestic labour: debate 62–3 Duménil, G. 2 Dynasty and Dallas 1 East Asia 14, 80, 85, 99, 104, 106, 107 East Asian financial crisis 80 Eastern Europe 142, 143 economic rent 9 Egypt 26, 27 El Salvador 101 Elliott, K. A. 30, 132 employment: ‘converging divergence’ 219; elasticity 99–100, 102; and job 39–40, 103; loss of 42n1, 139, 252 Engerman, S. L. 33 Engles, F. 50 English Factory Act (1802) 32–3 Enste, D. H. 218 etatism 189 European Union 25, 40, 77 Evalueserve-World Bank Institute 91 export processing zone 106, 109 Eyck, K. V. 218 factory act: India 33–4, 37 family migration 113–14 family wage 8, 39, 53, 54, 65n24 female migrants 80, 93n9 feminism 47–8, 54 feminization 56, 61–2, 80, 93n9, 106–9; and de-feminization 104, 108 Finland 129 footwear manufacturing 229–31 foreign direct investments 22, 103–4; North–South distribution 22–3, 42n4; and wage 22–3 foreign exchange reserves 104 foundries (iron): labour process 220–5 France 4, 24, 129 Fraser, D. 36 Freeman, R. B. 30, 81, 132 Frenkel, S. 219 Friedman, M. 218 Fruchart, D. 2 G7 77 G8 Summit 4 Gajendragadkar, P. B. 204 Gandhi, K. A. 223 Gandhi, M. 187 Gardiner, J. 62

Index 259 garments industry 3–4, 24, 31–2; employment 3–4, 106 General Agreement on Trade in Services (GATS) 81, 89, 92 Germany 128 Ghose, P. 34 Ghosh, B. 92 Gintis, H. 231 Giri, V. V. 203 global inequality 3, 20, 22, 42n3, 98 global value chains: de-skilling 39–40, 57–8 globalization 1, 98; commercial phase 4; and fantasies 1; and individuals 4; and inequality 98; and integration 101–6; and job loss 143, 144, 145, 146, 147–9; and social reproduction 56–9; and sovereignty 6–7 globophiles 9, 11 Glyn, A. 186 ‘golden age’ of world capitalism 7 Gothoskar, S. 239, 245 Greece 23, 129 Grimshaw, D. 228 Guatemala 101 H-1B visas 82, 89, 90, 91 Hamilton, C. 76 Harris, C. C. 239 Harris, N. 52 Harvey, D. 3 Hatton, T. J. 78 health care services 153 Hegel, G. 2 Heyzer, N. 108 Hikino, T. 85 Hind Mazdoor Sevak Sangh (HMSS) 187, 191 home-based work 97, 101, 109, 110, 238, 242–3; rights 245 Honduras 101 Hong Kong, China 10, 80, 89, 105, 108, 109, 111, 132 Hoopes, J. 38 Horton, S. 97, 108 Hudson, K. 47, 56, 57 Hughes, H. 164 Hughes, S. 89 human trafficking 20, 31, 113 Humphrey, J. 219 Humphries, J. 36 Hungary 23 Iceland 129

immigration control 77 income: inequality 20, 98, 162–3, 174–5; distribution and democracy 21, 55 India 10, 23, 24, 26, 27, 37, 41, 74, 78, 83, 88–9, 91, 100, 105, 111, 138, 142 Indian Constitution and labour rights 40–1, 202, 213 Indian educational system 83–4; technical education 84 Indian Federation of Labour 187, 190 Indian National Congress (INC) 187, 188, 189, 190 Indian National Trade Union Congress (INTUC) 191, 192 Indonesia 10, 27, 100, 104, 105, 108, 109, 110, 111, 114 Industrial Disputes Act 34, 40, 189, 198, 200, 204, 207, 208, 210 industrial safety 33 informal sector 14, 185, 212; and formal sector 212 informalization 39, 57–8, 98, 99, 109, 239, 252 information technology 24, 25, 48, 59, 74, 77, 83, 85, 89, 99, 115, 138, 143 insiders and outsiders 39–40, 228–9 Institute for International Economics 104 International Confederation of Free trade unions 161 international division of labour 22, 27, 109; and product life cycle 23; and R&D 21–2; and value chains 21, 101 International Labour Organization 12, 29–31, 33, 42n9, 82, 86, 87, 99, 105, 108, 109, 114, 161, 179, 199, 202 International Monetary Fund 4, 11, 39, 85, 104, 126, 127, 160, 162, 163, 164, 166, 177 Ireland 23, 85, 129, 138, 193 iron and steel industry 85; United States 134–5 Italy 130, 200 Janne, O. 23 Japan 23, 31, 74, 80, 130 job and work 39–40, 57 Joekes, S. 108 Jones, C. 49, 55 Kannappan, S. 34 Kapur, D. 88 Karen, A. K. 185 Katz, C. 48, 63 Katz, L. F. 81

260

Index

Keeling, F. 33 Kenworthy, L. 186 Kibria, N. 108 Kleinknecht, A. 225 Kochan, T. A. 31, 41 Krugman, P. 133 Kumar, N. 115 Kurien, C. T. 237 Kuruvilla, S. 219 Kuwait 112 La Porta, R. 40 labour costs: compared 26–7; and real exchange rates 26, 42n7 labour force participation rates: Asia 105 labour laws 13–14, 33–5, 40, 189, 198, 200, 204, 207, 208, 210; and economic development 7, 12, 33 labour market flexibility 39, 40, 220–33 labour movement 3–5, 12, 13, 41, 122, 195; appropriation of 190, 192–3, 195; fractured 186, 190–2; repression 200–1 labour power 50–1 labour productivity 26–7, 29 ; Indian factory sector 26, 28–9, 248, 249, 250 labour rights: India 33–5, 201; under British colonialism 203, 204, 206, 210 labour standards 7, 11, 28–32, 108; as efficiency 33, 35–8; and growth 6, 12, 32; and occupational accidents 33; and social reforms 35 Laski, H. 214 Latin America 4–5, 25, 31, 97, 99, 107, 142 ‘lean production’ model 57 Leibenstein, H. 224 leisure class 9 Levantis, T. 178 Levitt, P. 88 Lévy, D. 2 Lichtenstein, N. 24 Lilley, S. 49 Lim, L. L. 108 Lindblom, C. 194 Lipsitz, G. 122 Locke, R. 31, 41 Lopez-de-Silanes, F. 40 Lord Althorp’s Factory Act (1833) 35–6 Low, D. A. 187 Lowe, B. E. 211 Luce, S. 141, 143, 145, 147, 150 Luddites 3 Lund, F. 109 Luxembourg 130

Macao 89 McDonald’s 1 Mackintosh, M. 239 McMichael, P. 57 McMurray, C. 178 MacWilliam, S. 179 Magdoff, F. 47 Magdoff, H. 47 Malapit, H. J. 112 Malaysia 10, 26, 27, 74, 80, 100, 101, 104, 105, 108, 109, 111, 114 Mann, S. 51 Marglin, S. A. 21 Markovits, C. 188 Martin, P. 78, 90 Marvel, H. P. 36 Marx, K. 2, 11, 12, 51, 53, 54 Marxism 47, 62 Massey, D. 78 master-servant laws 205 Mathur, A. S. 34 Mathur, J. S. 34 Mattoo, A. 81 Mauss, M. 56 Mavroidis, P. C. 30 Mazumdar, I. 110, 115 Meillassoux, C. 50, 56 Meng, Xin 112 Menon-Sen, K. 245 Menzies, H. 57 Mexico 26, 27, 32, 37–8, 81, 110, 138, 142, 143, 147, 149, 189 Michie, J. 225 middle class 60 Middle East 1, 10, 11, 99, 111 migration: international 9, 10, 11, 73, 78, 87, 101, 110–16; public policy 116–17; refusal 112; remittances 10, 79, 86, 87, 110; of skilled labour 10, 75, 81, 82, 85; South–South 11, 80–1; and technology 74; and trafficking 113; undocumented 31, 80, 81, 112; to United States 31, 81; of unskilled labour 10, 31, 80, 81, 87, 101, 111, 112; and wage 10–11, 31; women 93n9, 101, 110–16 Migration Policy Institute 31 military expenditure 2 Milkman, R. 153, 156n9 Mines Regulation Act (1842) 36 Mingione, E. 55, 58, 59, 60 minimum wages 41, 52, 163–4, 176, 192, 226; and employment 173–4 Minimum Wages Board 104–5, 163–4, 165–6, 170

Index 261 mining 152 Moene, K. 35 Moody, K. 64 Morauta, M. 163, 169 Morris, L. D. 239 Morris, M. D. 37 motor vehicle industry (auto) 85; parts 151–2; US 140–1; world-wide 140, 141, 156n7 Mukhopadhyay, A. 244 Mukhopadhyay, S. 239 Mukul 245 Mungekar, B. L. 223 Murthy, H. S. 222 Musyck, B. 219 Muwali, A. 162, 163, 164, 166 Myanmar 10, 110, 111 Myers, C. A. 34 Nadvi, K. 219 NAFTA (North American Free Trade Agreement) 138 Nagraj, A. 211 Nambiar, R. G. 223 Nayar, K. R. 237 Nayyar, D. 127 Neetha, N. 115 ‘Nehruvian socialism’ 194, 195 neoliberalism 2–3, 11–12, 19–20, 56, 150–1, 218–19, 237–8; and state 5–7, 19, 160–1; Third Way 196 Nepal 10, 110, 111 Ness, I. 11, 233 Netherlands 130 New Deal 189 New Zealand 131, 165 North–South 19–20, 22–5, 30–2, 41–2, 74, 76, 78, 83, 160 Norway 35, 130 Novak, T. 49, 55 Nussbaum, M. 32 O’Connell, L. 110 OECD countries 25, 40, 82 Offe, C. 197 Olesen, H. 78, 86 Omitoogun, W. 2 OPEC countries 26 Osterman, P. 31, 41 outsourcing 24–5, 74, 77, 83, 92, 101, 138, 143 Pakistan 10, 27, 74, 84, 86, 89, 105, 111, 114; education sector 84–5

Palekar, S. 188 Panagariya, A. 77 Pant, S. C. 34, 37 Papua New Guinea 162; human development 162–3; Industrial Relations Act 163; minimum wage 167, 168, 170, 173, 176; Minimum Wages Board 104–5, 163–4, 165–6, 170; rural exports 172; structural adjustment 163, 167, 178; Trade Union Congress 162; wage regulation 164–5 Paris 4 Patnaik, P. 233 peaceful picketing 204–5 Perdomo, C. 2 Persian Gulf 74, 80, 89, 101 pharmaceuticals 24 Philippines 10, 26, 27, 74, 80, 100, 101, 105, 109, 110, 111, 114 Piore, M. J. 31, 32, 41 PIT-CNT 4 Poland 31 Polanyi, K. 50 Pontusson, J. 186 Poonacha, V. 237 Portes, A. 58 Portugal 131; right to strike 199 Pratt, N. C. 194 production shifts: and job loss 141, 142, 143, 144, 145, 146, 147, 148 Professional Air Traffic Controllers Organization (PATCO) 126 Qadeer, I. 237 Quijano, A. 48, 59 R&D 23–4; and investments 23; NorthSouth divide 23–6; outsourcing 23; and TNCs 23 race to the bottom 11, 28–32, 186 Rajeev, M. 220 Ramaswamy, E. A. 190, 194 Rammohan, T. T. 223 Rayanakorn, K. 112 Raynauld, A. 21 real effective exchange rate 26, 27, 42n7 Redclift, N. 55, 60 remittances 10, 60, 79, 86, 87, 110; Asian women 110, 112 rentiers: international 9 reproduction: of labour 47, 48, 50, 58–9; cultural forms 49; of labour power 51; and state 52–3 right: to equality 13, 213–14; to picketing 204–5; to strike 13, 40, 190, 201, 203–4

262

Index

Rocha, G. M. 60 Rooks, D. 156n9 Ross, A. 56 Rubery, J. 228 Russell, B. 50–1 Sahu, P. P. 239 Samuelson, P. 93 Sarkar, S. 185 Sassen, S. 61 Saudi Arabia 112 Scandinavia 35 Schmitz, H. 219 Schnabel, C. 13 Schneider, F. 218 Schumpeter, J. 93 Scott, W. D. 169 Seattle 4 Sebstad, J. 110 Seccombe, W. 50, 62 Self-Employed Women’s Association 245 self-employment 57, 99, 110, 114, 239 self-exploitation 57, 97, 110, 233 Sen, A. 32 Sen, K. 237 Sen, K. M. 61 Sengenberger, W. 38 Service Employees International Union 153 service sector 114–15 Shapiro, J. 226 Sharma, A. N. 185 Sheehan, M. 225 Sheth, N. R. 237 Shleifer, A. 40 Shyam Sundar, K. R. 185 Silicon Valley 91 Singapore 10, 23, 80, 100, 101, 105, 108, 111, 114, 132 Singer, D. 23 social clause 20, 30 social Darwinism 2 social reproduction: gender 61–3 social security 47, 48, 110 software services 24 solidarity: against market 4–5 South Africa 30 South Asia 80, 99, 113, 114 South Korea 10, 23, 26, 27, 37–8, 41, 78, 80, 85, 101, 105, 109, 111, 114, 130, 132 Southeast Asia 14, 80, 99, 101, 103, 104, 106, 107 South–South 6, 26, 101–2, 111

Spain 129 Sri Lanka 10, 100, 104, 105, 110, 111, 114 Sridharan, E. 24 Srinivas, S. 109 Srinivasan, T. N. 31, 77, 127 Staiger, R. W. 30 Stalenheim, P. 2 Standing, G. 31, 185, 218 Starbucks 1 state: and family 51, 52; market and household 55, 106; and workers 51–3, 200–1 Stiglitz. J. E. 161, 223, 226 strike 198, 254; and Indian Constitution 199, 201, 216n11; legal rights 201, 203; political 206–7; public utility services 198, 200, 205–6; Tamil Nadu 198, 200–1 Structural Adjustment Program 167, 178–9 Subramaniam, A. 81 Subramanian, K. N. 192, 193 Sub-Saharan Africa 1 Sundaram, K. 238 supra-national organization 5 Supreme (Apex) Court of India 198, 200, 202, 203, 211, 216n12 surgical instruments: labour process 225–9 sustainable development 32 sweatshops 24, 31, 127, 223–5, 226–7 Sweden 23, 35, 131 Switzerland 24, 128 Tadas, G. A. 223 Taiwan, China 10, 26, 27, 37–8, 80, 85, 89, 111, 132 Tamil Nadu 210; state-wide strike 198; TESMA (Tamil Nadu Essential Services Maintenance Act) 200–1 Taylor, E. 78 television: serial production 24 Temin, P. 132 Temporary Movement of Natural Persons (TMNP) 81 terms of trade 102 textile Industry: various countries 133 Thailand 10, 26, 27, 74, 80, 100, 102, 104, 105, 108, 109, 111, 114 Tokyo Round Agreements 75 trade: and migration 11; sanctions 30–2; and wage 11; and well-being 25 trade union 4–5, 13, 143, 147–8, 149–53, 203, 212; act 201; density 122, 123, 126, 128, 147, 154–5; initiatives 63–5, 66n68

Index 263 transnational corporation 23; and nation states 5 ‘trickle down’ effect 9 trucking and warehousing 150–1 Truman, Harry 121 Tullao Jr., T. S. 10, 111 Turkey 26, 27, 131, 189 Tybout, J. R. 233 UNCTAD 22, 23, 27, 104 unemployment 99 unequal exchange 20, 42n2 unfair labour practice: cases 125 unit labour costs 26–7, 42n7 United Arab Emirates 112 United Auto Workers Union 151 United Kingdom 23, 31, 129; Government Servants’ Conduct Code 201 United States 1, 10–11, 31, 41, 49, 77, 78, 81, 131, 233; civil rights 122; decline of organized labour 121–2, 126, 139; iron and steel industry 132, 134–5; National Labour Relations Board 122, 124; trade balance 25, 133, 136; trade union decline 149–53 Universal Declaration of Human Rights 117 unorganized workers 220–33, 255, 256 Ursel, J. 47, 48, 53 Uruguay 4, 27 Uruguay Round trade accord 75, 76, 81, 92 Vaidyanathan, A. 237 Venezuela 4–5, 110 Vidal, J.-P. 21 Vietnam 10, 24, 100, 102, 105, 110, 111 Vishny, R. 40 Voss, K. 153

Wallerstein, M. 35 Wal-Mart 24; and China 25; and workers 38, 41 Walmsley, T. L. 77 Walton, J. 58 Warren, K. 132 Washington Consensus 127, 132, 147, 167 Wayne, J. 54, 55 Wee, V. 108 Weidenbaum, M. 89 welfare state 48–9, 52–3 West Asia 80, 101 West Germany 129 Weston, A. 108 Whalley, J. 76 Wickramasekara, P. 111 Williamson, J. 127 Williamson, J. G. 78 Winters, L. A. 30, 77 women 8–9, 242–4; employment 97, 105, 108, 109, 114, 238; empowerment 107, 243–4; and informalization 39, 98, 105, 239; migration patterns 110–16; service sector 114–15; trafficking 113; wage 105–6, 239; work pattern 98–101, 238 Wood, A. 82 Wood, C. A. 63 worker recovered factories 4–5; and nationalization 5 workman: by law 207–9 World Bank 4, 6, 11, 40, 76, 79, 86, 126, 127, 132, 161, 162, 163, 164, 166, 177; and transgression 6–7 World of Warcraft 1 World Trade Organization 4, 12, 29–32, 81, 126 X-efficiency 224

wages 10–11, 27, 37–8, 54, 55, 221–2, 226–7, 230; gaps 105–6, 239; and outsourcing 25; and poverty 26, 28 wage and effort 38, 41 wage-profit distribution 21 Wall Street 122

Yates, M. D. 56, 237 Yellen, J. L. 41 Zaretsky, E. 52–3, 55 Zein-Elabdin, E. 63