Tuesday, January 1, 2019

Why the workers are angry?

Satyaki Roy 

For the past three decades the working people of our country had suffered the most in terms of their share in high growth that India experienced barring recent episodes of slowing down due to demonetization or hasty tax reforms introduced by the current government. It is now becoming a cause of concern primarily because such declining share of the vast majority of the working population ultimately leads to rising inequality and therefore even international agencies such as World Bank and IMF, those had been otherwise great votaries of liberalization recognize the simple fact of demand constraint setting in,ultimately creating barriers to profitability and growth. The worker is also a buyer and working people’s share of consumption expenditure in additional unit of income is generally greater than that of the rich, so relative decline of the workers’ buying capacity has its impact on the market, it dampens expectation of profit for private investors and hence investment and growth. In the advanced capitalist countries ‘technology unemployment’ is on the rise, use of artificial intelligence, internet of things and robots are going to replace repetitive jobs which has hardly hit particularly middle level jobs and the low skilled workers are at a disadvantageous position worldwide. Various studies suggest that in the next two decades 47 per cent of jobs in the US and 57 per cent in the OECD are at the risk of automation. There is also the effect of cheapening of finance which leads to higher capital intensity and lower requirement of labour employment in production.


The other aspect of course is the process of globalization which has made workers of developing countries like India and China accessible to global capital.  Currently 83 per cent of the world manufacturing workforce lives in the Global South. IMF computed 'export weighted global work force' multiplying numerical growth of workforce by growing ratio of export to GDP and found that effective global workforce quadrupled in size between 1980 to 2003. The relative increase in effective supply of labour has drastically reduced the bargaining power of existing workers and their share in growth fell sharply. In the advanced economies, in the past two decades, workers’ share declined roughly from 66 per cent to 62 per cent while in China it has come down from 57 per cent to 37 per cent.

The story of India’s working class is even worse. If we consider the organised manufacturing sector in which workers are supposed to have institutions of collective bargaining and hence assumed to be not so vulnerable as non-unionized workers who actually constitutes the vast majority of work force in India, have sharply lost their share in value added. Value added is simply output value minus input costs and this measures the new addition of output at a point of time, say a year, and adds up to the GDP of a country which has to be shared among various sections of the society in the form of wages, salaries, profits, rents and interests and so on, against their respective contributions.  Chart 1 shows a steep rise in the share of profit and a deep dip in the share of wages in value added in organized manufacturing sector as calculated from data reported by the Annual Survey of Industries in various years. The share of wages in value added in the organised manufacturing sector declined from 29 per cent in 1970-71 to 12.2 per cent in 2015-16. On the other hand, share of profits in value added increased from 30.6 per cent in 1974-75 to 40.3 per cent in 2015-16.

Chart 1

But why did the workers lose their share in value added? Is it because their productivities were low and since it is generally held that wages reflect productivities, then are Indian workers getting lower shares because they produce less on an average? On the contrary Chart 2 shows how productivity of workers increased sharply during the period 1993 to 2016 while the real wages (reflecting purchasing power) remained almost stagnant during the same period.

Chart 2

In fact, during the period 1991 to 2016 productivity of workers in the factory sector increased on an average by 4.17 per cent per annum while real wages increased only by 0.5 per cent per annum. The average marginal rise of real wage during this long 24 years, contains 10 such years wherein real wage fell from its immediately preceding year’s count. More so the real wage received by an average factory worker in 2015-16 is less than what a worker received in 1995-96. So the workers’ wage actually didn’t increase according to their productivity growth, on the contrary the gap between the two lines in Chart 2 increased, meaning workers are getting increasingly less of what they contributed to production and this explains the sharp rise in profit share in value added as discussed above. In fact, this relates to a larger point. Actually it never so happened that employers gleefully pay their workers measuring their productivity as suggested by power blind narratives of economics text books, rather it depends upon the class struggle at a particular point of time and that determines wage. If, for instance, the workers are in a disadvantageous position vis-à-vis their employer either because of high unemployment rate prevailing or the state being deliberately ignoring labour rights, they would have no other option but to accept lower wages even if their productivity grows. Interestingly Marx showed one hundred and fifty years back in Capital that workers are not paid for what they produce but on what they sell. They sell labour power and get wages in exchange, while in the process of production they produce value much higher than the value of labour power and hence create surplus which the capitalist appropriates.

Essentially no intrinsic ethics exists in capitalism to pay a worker a just or ‘fair wage’. A capitalist would rather prefer labour with zero wage or even slaves having appropriate skills to produce the marketed product. They do not need human beings as such, they need low cost packets of labour power. Hence moral appeal to pay workers according to their contribution has never worked and such an appeal would be considered ‘irrational’ in a society that functions on profit motive. On the contrary we come across several ways and means which are legitimized to avoid labour laws and the conscience of the society hardly pays any heed to such glaring facts. Leaving aside agriculture 70 per cent of urban male workers and 64 per cent of urban female workers in non-agriculture and related activities are unprotected. Protective institutions and trade unions are increasingly dismantled and as a result casualization creeps into the organised sector as well. Latest round of National Sample Survey reports suggests that 65 per cent of the regular and salaried workers in India are having no written contract of employment and more than half of them do not have any provision of paid leave or any social security provisions. Outsourcing and subcontracting allows employers to contractualise or casualise the existing workforce. And such moves are not benign with respect to profit.In India the average wage of a casual worker is only 38 per cent of the average wage of a regular worker hence substituting regular workers by casual labour reduces wage cost to a large extent. The proposed labour reforms therefore wants to offer the employers greater freedom to hire and fire so that they can shed the unwanted human beings during down-slides in production cycles, allow them to push down the wages as workers would be more vulnerable and make trade unions appear as the most unwanted institution creating blockades in smooth sailing of profit making.

Such a situation makes the workers angry, draw them down to the streets, make them shout so that they can be heard. They are the greatest losers in the three decades of neo-liberal reforms.


The author is Associate Professor at ISID, New Delhi    


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