Broken Markets – Reflection from the labour landscape (Part II)

The analysis of the budgetary allocations towards employment and social security schemes in the 2020-21 Union Budget has been unanimously titled as a “cruel joke” across various articles. In this article, we will discuss the trend in budgetary allocations to schemes such as MNREGA to bring out the stark reality through the data analyzed in the July Issue of Infosphere. We will discuss the labour market with a focus on employment of both skilled and unskilled workers and acts governing their wages. This series is part of the Shram Ko Naman initiative which is a collective effort of the Centre for New Economics Studies to interpret and understand the impact of the current crisis on India’s working class.

The rationale behind any budget is allocation of scarce resources towards areas that are  a priority or that have a stable return on investment. However, in India, budgetary preparations are often disguised as election manifestos. Hence, around the times of elections, we saw discussions around Ayushman Bharat, farmer issues, MSME loans. Once the party is in power, we see money gifted to the corporate sector as a way of reduction in corporate taxes. We see from the Infosphere issue that, from the two financial years of 2019 and 2020, the budget allocation towards MNREGA has seen a considerable fall by 13.4%. The Finance Minister in the 2020 Union Budget speech that also happened to be the longest speech in 17 years, did not address this reduction in allocation when MNREGA is the main programme providing direct employment in the country. This corporate tax concession was supposedly a part of the package to deal with the deficiency in demand in the country. However, according to Keynesian economics, to increase in aggregate demand, it is important to increase public spending which should be financed by the corporate sector through taxes. The capitalists in fact do not spend the entirety of their income on consumption as they set aside money in form of savings that do not form a part of aggregate demand. On the other hand, stimulating demand is effective when public expenditure is spent on working people and especially the people on the lower spectrum of unskilled and skilled labour as their wages majorly go towards consumption. 

The most important issue regarding employment is the pittance earned by the daily wagers. The minimum floor-level wages of the country are now often called “starvation wages”,  set at Rs.176 across the country and it is imperative to note that they are non-statutory. The state is free to choose its minimum wage as long as it is not lower than the minimum wage set by the Centre under the Minimum Wages Act 1984 (The code of Wages 2019). Hence, across states, we see a regional imbalance. For instance, as the minimum wage for unskilled workers in the national capital region (Rs.14,842/month) is three times the national minimum wage (Rs.4,628/month). Delhi’s minimum wage was revised in October 2019 by a Supreme Court order. This is the highest minimum wage in the country. It is also important to note that, when the parliament passed the Code of Wages Bill 2019, it mandated a universal minimum wage of Rs.178/day while an expert committee set up in 2017 consisting of officials from the Ministry of Labour, members of ILO and scholars recommended that the national minimum floor wage be Rs.375/day as of 2017-18. In an Economic and Political Weekly paper by KP Kannan, he estimates what would have been the stimulus to aggregate demand if the government agreed to increasing minimum wages to Rs.375/day. Results from the paper show that there would have been an additional purchasing power equivalent to 13.5% of GDP. Therefore, the consumption multiplier in this case works instantaneously through wages. The paper also estimates that the incentives given to the private corporate sector could have been sufficient to fund 100 days of employment under MNREGA for 7.7 crore workers at the existing wage rate. The current economic scenario in India is similar to the Marxist’s idea of control over means of production by a leading group which is paralleled to corporate giants of the day. This form of control is primarily exercised through the society’s superstructure (handful of political parties and corporate conglomerates). As Antonio Gramsci wrote “The state was only an outer ditch, behind which there stood a power system of fortresses”. 

From the Infosphere Issue, we note that there is an increasing ‘casualization’ of workforce and workers are moving out of agriculture to non-agriculture sectors from 2004-2005 to 2017-2018 due to an increase in demand for labour in expanding construction, trade and service activities. On the other hand, we also see a slow growth of employment in the organized sector. But recent experience suggests workers hired in the organized sector are done so  on a ‘flexible’ or contract basis without any social security benefits. This lack of job security has been studied according to a survey conducted by WageIndicator Foundation, on an average, salary growth rates across different sectors of the economy has not been lucrative as only 51.9% of workers are satisfied  with the pay. This is worse for women as the pay gap adds insult to injury when there are prevailing issues like glass ceiling, patriarchy, double burden and discriminatory gender roles that already pin down the growth of women across all sectors. From the graphs in the latest Infosphere issue, we see that in the early years of employment across various sectors, the share of women exceeds the share of men significantly. However, in the long term, these injustices restrict women from being employed for a longer period of time. On this front, it is the social conditioning and patrilineal structure of our society that plays a major role. 

One of the other considerations we need to make is technological advancement. Gone are those days where India can see economic growth by generating employment for unskilled labourers to manufacture goods cheaply that can compete in the global market with countries like China. With increasing automation and artificial intelligence, India’s low-skilled and unskilled workforce seeing a rapid increase is concerning. Such technological development when not escorted by rise in educated workers, leads to a supply side constraint and results in huge wage gaps between skilled and unskilled workers. Although the New Education policy gives us a ray of hope for the future to bridge this gap, the efficacy, originality and successful implementation of the policy are still in question.

Budget allocation and policies to stimulate demand have done very little to counter unemployment in the country. In fact, this has worsened the wealth inequality in the country. However, with effective implementation of schemes like Skill India Programme and the New Education Policy 2020  can provide young workers a strong skill to shift the structure of employment in the country in the future. Skilling-up is also often perceived to not necessarily translate into higher wages as firms prefer employing them as contract labour. Therefore, effective labour laws must be instituted with reasonable wage floor policies and efficient budget allocation in order to restrict casualization of labour. 

Archita Sridhar is a second year student of O.P Jindal Global University pursuing her Master’s in Public Policy.

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