Labour Laws and the Neoliberal State in India

Suramya T. K. May 17, 2015

This year we celebrated the international workers’ day at an important historical juncture; when the neo-liberal state is pushing its agenda of the second wave of labour reforms in the country. Small Factories (Regulation of Employment and Other Conditions of Service) Act, 2014, and the National Workers Vocational Institute Act, 2015 are currently under the consideration of the government along with the proposed amendments to the Employees' Provident Funds and Miscellaneous Provisions Act, 1952, and the Child Labour (Prohibition and Regulation) Amendment (CLPRA) Bill. The Modi government is pushing ahead with its plans of finalising these bills and legislative amendments by projecting them as the ‘necessary reforms’ in helping the state for clearing all hindrances to create a ‘favourable investment environment’. These proposed labour sector reforms are said to be the measures to attract large amounts of private investment, both domestic and foreign, in the country and ostensibly improve transparency in all sectors. In addition to that, the official agenda also pushes for the larger goals of labour ‘protection’. To quote, “The Government's vision is to enforce the ban on child labour, simplifying rules for small units and relaxing provident fund norms as the government looks to move a large proportion of the workforce into the organised sector, thus ensuring greater protection for them”.

In this regard, it is also important to look into some of the other developments in the recent past, more specifically after the last general elections. Last year in October, the Prime Minister had announced a host of schemes which envisaged portable PF accounts and a unified portal for labour inspection at firms. He described it as a step towards ensuring transparency in the labour sector, which is in turn part of his ambitious ‘good governance’ mission for the country. Revamping the Rashtriya Swasthya Bima Yojana (RSBY) for workers in the unorganised sector was also announced as a key point in his priority list.

BJP ruled states like Rajasthan, Maharashtra and Madhya Pradesh are accelerating their plans to have a total reform in key national labour laws to create an “industry - friendly” environment and thereby attract more investments in these states. The BJP government’s agenda is projected as a master plan for large scale job creation to tackle the twin problems of youth unemployment and poverty.

This is also the period where we are witnessing a large number of struggles led by workers in the country that offer strong resistance to anti-labour neo-liberal agendas. Whether this voice of resistance might be heard under this neoliberal regime is a serious concern. In the recent past, the issues raised in the workers' struggles have not been getting their due importance in the policies and in the media. The pro-capital ideological inclinations of the neoliberal state apparatuses are being increasingly exposed with these incidents.

So far so good. As the neoliberal state has already taught us, the function of the government is only to create a favourable investment environment for capital and in due course dole out if possible some crumbs as benefits for the people. While ‘good governance and ‘transparency’ become the key points in the policy rhetoric, the obligation of the State to protect workers' rights becomes secondary and is increasingly ignored. This analysis itself makes it clear that the labour welfare is considered to be a mere residual of this entire reform agenda. Is there an adhocism in the decisions to modify labour laws? (Chandru K., 2014). Is it the responsibility of successive governments to involve labour unions and other concerned bodies in these reform processes? None of these questions have gained importance in the recent times as the masses have always been at the receiving end.

This is also the period where we are witnessing a large number of struggles led by workers in the country that offer strong resistance to anti-labour neo-liberal agendas. Whether this voice of resistance might be heard under this neoliberal regime is a serious concern. In the recent past, the issues raised in the workers' struggles have not been getting their due importance in the policies and in the media. The pro-capital ideological inclinations of the neoliberal state apparatuses are being increasingly exposed with these incidents. The indefinite strike launched by the Assam Plantation Workers in the month of April, 2014 wasn't a concern for most of the main stream media or, for that matter, even for the Government. Their struggle was for decent wages and against the indifferent attitude of the management despite the workers’ repeated representations to improve the matters. In most parts of the country, even the bare minimum rights of the workers like minimum wages are still unachievable or are seen as an idealistic goal of the state. This is largely because of the contradictory interests of the state and the working class. The state is seeking to create an “investment friendly” climate for big business while workers are struggling to safeguard and ensure their essential rights.

The accumulative tendency of capitalism is reaching its zenith in this neoliberal era. The second generation of primitive accumulation has been carried forward by the neo-liberal policies of the state which acts as a facilitator for the development of capitalism. The dominant strategies of the on-going process of primitive accumulation are privatization of shared resources, suppression of indigenous forms of production, privatization of public sector enterprises, corporate farming, centralized credit system, Foreign Direct Investment, Special Economic Zone, Public sector looting, corruption, etc. Under neo-liberalization, capitalist forces continue to extract cheap resources from the third world. When the above stated dominant strategies are implemented, the modes of subsistence of indigenous people are destructed which force them to earn their livelihood only through selling their labour power (David Harvey, A Brief History of Neo-liberalism, 2005). When the state tries to project growth, good governance, transparency and better investment climate as the priorities of the government, they are in a way creating a favourable environment for the growth of finance capital at the cost of labour rights.

Workers at an unorganized handicraft manufacturing enterprise
Image Credits: J J Harrison

Neoliberal policies and laws by virtue are meant to weaken labour and strengthen capital with the sole motive of profit maximization. Labour welfare measures and other policy interventions by the neo-liberal state follow the same colonial method of reducing the contradictions between labour and capital. Without any precautionary measures, opening up the economy to the national and international capital to exploit the cheap labour available in India (due to its favorable demographic dividend) is a classic case of neo-liberal state acting in favor of capital at the cost of labour. The state itself encourages and relies on the casualization and sub-contracting of labour in the name of employment generation. There are innumerable labour laws such as Equal Remuneration Act of 1976, The Bonded Labour System (Abolition) Act of 1976, The Building and other Construction Workers (Regulations of Employment and Conditions of Service) Act of 1996, The Contract Labour (Regulation & Abolition) Act of 1970, National Rural Employment Guarantee Act 2005 and the Social Security for Unorganized Sector Act 2008 which are initiated by the Indian state to regulate the informal sector but pay very little attention in its effective enforcement.

We often forget the concept of regulated informality (Mohapatra, Prabhu P., 2005) while analysing the problems and prospects of Indian Informal sector, which constitute about 95% of the workforce in India according to the 2011-12 NSSO Employment Unemployment Survey (EUS 68th round). This workforce in the Indian informal sector are not provided with any social or legal protection in relation to their conditions of employment. The regulated informality is the condition in which the informal sector is being created or enlarged in the economy due to the introduction of labour laws or its amendments. Some of these labour legislations or its amendments can make the capital labour relations more informal and can push certain industries to the category of informal sector.

There is a crucial question which needs to be addressed here - is the state aiming at protecting the rights of the people through its apparatuses? Or is it moving away from its responsibilities to allow capital to pursue its interests?

Successive governments announce policies to tackle the issues in the informal sector, but none address the simple question: what is the root cause of this phenomenon? The regulated informality is a self created problem of the capitalist state to smoothen the capitalist production process by loosening the rigidities of the labour market for the investors and at the same time bringing rigid laws to discipline the workforce. Rohini Hensman views this problem as the “inability of a legislation to be applicable to a specific category of workers as there is no proof of them as the workers of an employer”(Hensman, Rohini, 2011).

The recent move to amend the Contract Labour (Regulation and Abolition) Act, 1970 is a visible example of this general tendency of the government to push more and more business units into the informal sector category. This is to make it easier for the industry to come out of the purview of labour laws and conduct their business largely unregulated. This amendment has pushed the limits of the number of workers in any unit which will come under this act from 10 with power and 20 without power to 20 with power and 40 without power. According to the NSS, that would take the share of workers employed in the unorganised sector in 2011-12 to 83 per cent in the public sector and 92 per cent in the private sector, or to 91 per cent of total non-agricultural employment as compared with 81 per cent as per the current definition (Chandrasekhar C.P, 2014). There is a crucial question which needs to be addressed here - is the state aiming at protecting the rights of the people through its apparatuses? Or is it moving away from its responsibilities to allow capital to pursue its interests?

As the state , at least on paper, is trying to negotiate this conflict of interests between the workers and capital, it is left with but one option: to move away from the role of a mediator and allow capital to pursue its interests; even if at the cost of the workers' right to have a decent living. To quote “Capitalists preference for a minimum of state regulation or preferably none at all, is understandable” (Harris White & Gooptu, 2000). The ruling governments have been blind towards the law evading business class in the name of greater investments and job creation. And they conveniently ignore the problems such as sabotage of labour laws, tax evasion, illegal use of electricity, evasion of environmental laws etc. Their focus is always on the projection of growth rates while the ground reality suggests that this numerical growth often occurs without the actual development of the masses.

In this context, it is interesting to look into the status of the implementation of one of the most celebrated acts in the country- the Minimum Wages Act of 1948. The Minimum Wages Act came into existence in India so as to provide for the fixation of minimum wages in certain employments. Under the provisions of this act, both Central and the State Governments are equally responsible to fix, review and revise the minimum wages of the workers employed in the scheduled employments under their respective jurisdictions. Hence, the effective implementation and modernisation of the implementation of this act comes under the purview of both the centre and the state.

Ensuring minimum wage is integral to India’s commitment for meeting the targets of Millennium Development Goal. The first MDG goal - “Eradicate extreme poverty and hunger” requires intervention by the state in ensuring minimum wage. Further section 1.A of the MDG states that the number of people living below the income of $1 should be brought down by fifty percent between 1990 and 2015. The 12th five year plan of India also commits for a reduction of poverty by 10 percent. It should also be noted that section 1.B of MDG mandates states to ensure “full and productive employment and decent work for all, including women and young people”. Decent work inevitably points to the implementation of Minimum Wage Act as any employment below this wage can be considered as forced labour. There has been a wide criticism from various quarters that the implementation of minimum wage is not up to the desired level. It is essential for the state to ensure that the proper implementation of acts such as Minimum Wage Act and to establish an efficient and speedy grievance redressal mechanism to justify its credibility as a welfare state.

Minimum wage legislation is an area which is an important concern for the larger population of the country. Various studies make it clear that enforcement of minimum wage act has not reached a desirable state. The most worrisome fact is that often this legally defined minimum wage has been the maximum wage in the informal sector. Unlike the formal sector, the wages of workers in the informal sector are not periodically revised with the rising inflation. As a measure to protect the minimum wage against inflation, a variable dearness allowance was introduced in 1988. The VDA is revised twice in a year. A minimum wage is supposed to cover the current cost of food, clothing and accommodation of a family. It is often noticed that many states do not consider the concept of living wage while fixing the minimum wage. Yet another issue which is plaguing the minimum wage is that it is not revised in every five years as mandated by the act. The act suggests that prevailing wage will continue if the wage is not revised. This has resulted in a situation where workers are being pushed below the poverty line due to non-revision of the minimum wage. Many states still have not implemented VDA.

Extending the coverage of minimum wage to the entire work force is a major challenge faced by the country. The existence of more than 1000 categories of minimum wages at the state and central levels has complicated the issue. Wages differ widely across states even for the same occupation. There are also serious on-going discussions on extending the Minimum Wage Act to other groups such as domestic workers. If we compare the implementation of minimum wages in various countries such as in developing and developed world we can see interesting results. One study points out that in “developed countries, the proportion of workers paid less than the national minimum wages ranges from about 1.3% of all wage-earners in the UK to 2.6% of all hourly paid workers in the US (Bureau of Labor Statistics 2009; Metcalf 2008). Non-compliance in developing countries, as measured by the proportion of wage-earners who are paid below the minimum wage, is comparatively higher”(Belser, Patrick, & Rani, Uma, 2011).

The struggles of the workers to ensure minimum wages are always looked down upon and are even repressed by the government to aid the business interests. The struggle of Maruti Suzuki workers is a good example in this context. The state acted in solidarity with the company management in repressing the historic struggle waged by the Maruti Suzuki workers in the Gurgaon and Manesar plants against the repressive attitude of the management towards workers' demands.

The number of scheduled employments included in the central government act is 45 whereas in the state sphere the total number is 1232. The criterion for including the employment categories in this list is that there should be at least 1000 workers engaged in that activity in the state. This criterion for inclusion has left a very large number of workers in the unorganised sector outside the purview of the Minimum Wage Act (Varkkey, Biju & Mehta, Khushi, 2008). For example in 2009-10, only 68 per cent of the overall wage workers in India were actually covered by any schedules of employment in the Minimum Wages Act (Belser, Patrick, & Rani, Uma, 2013). Most importantly India does not have adequate administrative efficiency to enforce and monitor these many different minimum wages. In recent times, the minimum wage act has been under severe threat as NREGA wages are not linked to the minimum wage act. It is often visible that the implementation of the Minimum Wage Act is merely restricted to the papers. There are multifarious issues regarding the criteria on which minimum wage is fixed.

Another side of the story is that the struggles of the workers to ensure minimum wages are always looked down upon and are even repressed by the government to aid the business interests. The struggle of Maruti Suzuki workers is a good example in this context. The state acted in solidarity with the company management in repressing the historic struggle waged by the Maruti Suzuki workers in the Gurgaon and Manesar plants against the repressive attitude of the management towards workers' demands. The workers were agitated by the exploitative working conditions and the abysmal wage levels. Their organised attempts to fight against these atrocities by unionizing themselves were brutally oppressed by the management. Instead of acting upon the workers' complaints and ensuring the proper implementation of the labour laws, the state blindly aided the management in repressing this struggle. It is a classic example of the state apparatuses working towards the interest of the capital. The corporate media also played their role in supporting the capitalist class by describing it as a “law and order” problem. As one of the pamphlet issued by the workers of the Delhi – NCR industrial area rightly points out “the more than two and a half year long struggle of Maruti workers and the brutal state corporate repression faced by them is also an indicator of the simmering unrest among the working class, directly emanating from neoliberal policy framework of the country”. But this spark has spread across the Delhi – NCR industrial belt and between 2006 – 2012 there were working class struggles across 39 industrial units. In many of these factories the protesting workers could formulate trade unions irrespective of the challenges raised by the management and the state.

While moving away from the responsibility of the regulatory mechanisms in the labour market, the state becomes proactive in using its repressive apparatuses to tackle workers' struggle for their bare minimum rights. This is almost to the point of becoming a watchdog in the hands of the business class. The Laissez faire characteristics of the neoliberal states are exposed in each of these events in the past. In one hand, the state is withdrawing from the labour market with convenient amendment of selected laws, and on the other hand it is ever vigilant to perform its policing responsibilities whether in disciplining the workers or in repressing them.

We are currently in a scenario where the ideology of the state is visibly converging with the interests of capital and its getting reflected in the policies and legislations of the neo-liberal state. Thus, in this 21st century, the trade unions and other workers' rights collectives are double burdened with the task of fighting against these neoliberal agenda of the state and the exploitative and repressive tactics of the business class. Under this unique scenario of absentee capitalism, workers are caught up with the tricky situation of not having a direct employer with whom they can negotiate for their rights. Most of the workers in the informal sector do not even have the status of employees. The demand and supply chains are invisible here. And so is the exploiter. Conceptualisation of these specific capitalistic tendencies and the modes to attack these systems need to gain wider attention of the workers' rights collectives. Although at present, the neoliberal state is moving away from its duties, there can be no doubt that in this struggle, the immediate target is the state. This is so as the state is the only visible body responsible in mediating these contradictions.

While the ideological and repressive apparatuses of the Indian state extends all its support to the profit maximising drive of the domestic and foreign capitalist classes, the workers' rights are becoming secondary or not even entering the policy discussions as a primary concern. When governance becomes the priority, the efficiency debates rule out all the possibilities of reforming the labour market by keeping equity and minimum rights of the workers as the key concerns. The international agencies like ILO which is the so called guardian of labour rights are now interested only in the discussions around the labour market rigidities and how it is an impediment to the investors in the developing countries. The question of regulated informality or workers’ rights have vanished from the picture. The conditions of informality creates an insecurity among the workers and this has weakened their bargaining power. As Rohini Hensman rightly points out “the systematic violation of the rights of informal workers to unionize, despite the fact that the Trade Unions Act is supposed to cover them, indicates that certain employers have found that they do not need to have the law changed; they just sidestep it by changing the employment relationship that is they vacate the law”(Hensman, Rohini, 2011). In order to use the power of the collective against these policies of the state and the capitalist class, the trade unions have to be equipped with nuanced techniques of mobilization. The wide disparities in the nature of employment in the Indian unorganized sector needs to be analysed carefully. While strengthening the working class struggles in the country the immediate task in front of the trade unions is that of sharpening the collective bargaining of the workers with context specific interventions. The techniques and tactics of bargaining needs to evolve over time when the state and capital invent new methods of exploitation to extract the surplus value. The recent working class struggles in the country that we are witnessing from 2006 onwards is a positive development in the trade union front. The networking of these struggles and workers’ collectives will be the immediate target in front of the working class struggle in India. What is even more important here is that these struggles in the formal sector should encourage and support the workers in the informal sector to mobilise themselves to put up a struggle against the exploitative system in which they are in. Let’s hope that, coming days will be a crucial period in the history of working class struggles in the country and their resistance will shake the cornerstones of the neo-liberal exploitative regimes in India.


References

Chandru K., 'Ad-hocism in the Decisions to Modify Labour Laws', Economic and Political Weekly, Vol. 49, Issue No.30, July 26, 2014
Harvey David, A Brief History of Neo-liberalism, Oxford University Press Inc., New York, 2005 Mohapatra, Prabhu P., Regulated Informality: Legal Constructions of Labour Relations in Colonial India 18-1926, Workers in the Informal Sector: Studies in Labour History 1800-2000 (ed.), Macmillan India Ltd., New Delhi, 2005
India - Employment and Unemployment : NSS 68th round :July 2011- June 2012, National Sample Survey Organization Office – NSSO, Govt. Of India, Ministry of Statistics & Programme Implementation
Chandrasekhar C.P, 'India’s informal economy', The Hindu, September 3, 2014
Harriss-White, Barbara and Gooptu, Nandini, 'Mapping India's World of Unorganised Labour', in Leo Panitch and Colin Leys (eds), Working Classes: Global Realities, Socialist Register, Merlin: London and Monthly Review: New York, 2000
Belser, Patrick, Rani, Uma, 'Extending the Coverage of Minimum Wages in India'
Simulations from Household Data', Economic and Political Weekly, vol xlvI no 22, May 28, 2011
Belser, Patrick, Rani, Uma, 'There’s a Hole in the Coverage', The New Indian Express, 21 Jan, 2013
Hensman, Rohini, Workers, Unions and Global Capitalism: Lessons from India, Columbia University Press, 2011
The Minimum Wages Act, Act No.11, 15th March, 1948, Govt. Of India
Varkkey, Biju, Mehta, Khushi, 'Minimum Wages in India: Issues and Concerns', 15 April, 2008

Essay, labour reforms, mayday, neoliberalism, India, Labour, Neo-liberalism Share this Creative Commons Attribution-ShareAlike 4.0 International

Reactions

Add comment

Login to post comments