Employment Policy in Emerging Economies

The Indian Case

Elizabeth Hill, Amitendu Palit

• Publisher: Routledge
• Year: 2017
• Print ISBN: 9781138918702
• eBook ISBN: 9781317420798
• Topic: Business
• Subtopic: Business General
• Index: Business

Employment is a critical part of the macro-economy and a key driver of economic development. India's employment policy over the past three decades provides an important case study for understanding how government attitudes to the labour market contribute to an emerging economy's growth and development. This study contains important insights on the policy challenges faced by one of the world's most populous, labour abundant economies in securing employment in a context of structural change.

The book considers India's approach to employment policy from a national and global perspective and whether policy settings promote employment intensive growth. Chapters in the first half of the volume evaluate India's approach to employment policy within the national and international context. This includes the ILO Decent Work program, the national agenda for inclusive growth, and national regulatory frameworks for labour and education. Chapters in the second half of the volume focus on how employment policy works in practice and its impact on manufacturing workers, the self-employed, women, and rural workers. These chapters draw attention to the contradictions within the current policy regime and the need for new approaches.

Employment Policy in Emerging Economies will interest scholars, policy makers and students of the Indian economy and South Asia more generally. It will support undergraduate and postgraduate academic teaching in courses on economic development, global political economy, the Indian economy and global labour.

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Part I

Employment policy in the global and national context

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1 Re-thinking employment in the Indian economy

Inclusive growth and well-being

Elizabeth Hill

In September 2015 the state government of Uttar Pradesh in northern India advertised 368 jobs for peons at the Uttar Pradesh Secretariat with a starting salary of Rs. 16,000 per month. The minimum qualification required was school level education of at least grade five and the ability to ride a bicycle. More than two million people applied for the 368 jobs on offer. Amongst the applicants around 200,000 were reported to have graduate degrees and 255 had a PhD (Sharda 2015). This story is not unique: mass applications by overqualified candidates for government jobs are a regular event in many states in India. The tabloid nature of these reports makes for captivating headlines. But the stories are important because they focus attention on some of the systemic problems confronting the contemporary Indian labour market and highlight the urgent need to make employment policy a national priority.

Employment policy in developing economies like India has been strongly influenced by Arthur Lewis’s pioneering theory of economic growth with unlimited supplies of labour (1954). Lewis argued that as economies grew the labour market would be transformed, with labour from agriculture and “traditional” modes of petty production smoothly reallocated to more productive forms of formal industrial employment. This normative approach has left an explicit focus on employment policy sidelined in macro-economic planning, even as traditional modes of petty production, informal employment, and under-employment flourish—often in high growth economies. This laissez-faire approach to employment policy is not delivering decent work or efficient labour markets. Unskilled workers entering the Indian labour market for the first time or shifting out of subsistence agriculture are rarely absorbed into formal employment in high productivity jobs. Instead most find employment in the informal economy where the absence of a formal employment contract leaves workers unprotected by formal labour laws and social protection legislation. Many educated workers also face problems accessing formal employment and likewise find themselves working in informal jobs.

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Employment in a global perspective

At the global level the importance of employment as both an economic and social goal has begun to gain traction in policy circles. Employment has been the focus of a number of recent reports by large international economic and development institutions such as the United Nations Development Programme, the International Labour Organization and the World Bank. These reports highlight the specific role that employment plays in promoting inclusive patterns of growth and development (UNDP 2015; ILO 2015; World Bank 2012). In recent years, concerns regarding deepening inequality and the capacity for decent work to promote social and economic inclusion and growth have seen employment policy brought centre stage (Stiglitz 2015). The positive relationship between decent work and economic growth has been recognised in Goal 8 of the new Sustainable Development Goals agreed to by the global community in 2015 (United Nations 2016). Policy that delivers regular, secure and safe employment is increasingly understood to be essential for global growth, prosperity and well-being.

The demand for decent work has also made it onto the national agenda in emerging and developed economies. Rapid economic growth across many emerging economies has delivered a new class of aspirational young people with expectations of decent employment, prosperity and well-being. Many of these economies have a very young demographic profile and burgeoning working age populations—key ingredients in the much vaunted “demographic dividend”. Sub-Saharan African nations have the youngest populations, with South Asian countries not far behind. In India the working age population is growing by around 1 million every month, equating to a projected overall rise in the working age population of 33 per cent by 2050 (UN DESA 2015). A steady stream of quality jobs is required to meet this emerging demand, and failure to deliver risks turning the demographic dividend into a demographic disaster.

In the rich OECD economies the issues are different, but the focus on employment is the same. In many developed economies the proportion of the population that is of working-age has peaked and debate centres on how governments can intervene to maintain economic productivity and living standards as the population ages and dependency ratios increase.¹ Middle-income China also has a rapidly aging profile on account of its one-child policy: by 2050 the working-age population is projected to decline by 212 million and the proportion of citizens over 60 years of age to more than double (UN DESA 2015). In these economies with rapidly aging populations and high dependency ratios employment policy is understood to be an essential tool for securing well-being and ongoing prosperity. Policy initiatives include raising the retirement age and redesigning work so people can remain in the workforce longer.

The employment challenges that define the economies of the global south and the global north on account of their demographic profiles are also being shaped by rapid change in the industrial and consumer landscape. Increased automation and outsourcing opportunities in both manufacturing and services have changed the structure of the labour process. Global value chains and production networks in particular highlight the close link between the structure and quality of employment opportunities in the global south and those in the global north. New regimes of global capital accumulation have fundamentally changed the conditions of employment in complex and often contradictory ways. When “old economy” manufacturing in the USA, Australia or Europe is moved off-shore to Mexico, the Caribbean or China, global poverty is reduced as poor, often rural, people access new employment opportunities that pay more than subsistence agriculture or casual day labour. The hours of work may be long, the work dangerous and low-paid by global standards, but these jobs often provide a stepping stone for the rural poor to improved well-being. Meanwhile middle-class male breadwinners in the global north and their households confront a decline in employment opportunities and rising unemployment. For many men in the manufacturing sector, the new service jobs in retail, communications, banking and finance do not easily accommodate their skills, interests or sense of masculinity. And many of these jobs— particularly those focused on back office support—are increasingly outsourced to call centres in the Philippines and India, providing in turn, new employment opportunities for educated English-speaking workers in these countries.

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The employment challenges that define the economies of the global south and the global north in the early twenty-first century are complex and connected. It is a multifaceted story shaped by class, gender, race and ethnicity, and globalisation has rendered workers both winners and losers. However one clear outcome of the restructuring of the labour process and international trade that is evident in all economies has been the global shift toward precarious non-standard forms of employment that are not covered by national labour laws, do not provide workers with basic social protection and have limited or no security of tenure (Standing 1999, 2011). In the USA, this global shift has seen the rise of a new class of the working poor (Shipler 2004). In emerging economies global production chains have underwritten the prevalence and even growth of the informal economy and vulnerable forms of low-skilled employment such as home-based work, which are essential to the production of cheap consumer durables for the global middle-class (Barrientos and Kritzinger 2004; Phillips 2011, 2013). This particular structure of global production and accumulation has supported global growth for several decades. But whether or not the model is sustainable under emerging economic and political conditions is unclear.

Political sentiment in the USA and the United Kingdom is turning against globalisation, partly on account of concerns about adequate and decent employment. Faltering global growth since 2008 and concern that structural problems in the Chinese economy will deliver further contraction have seen increased competition between individual countries for foreign investment and market share. The prevailing conditions mean that the labour-intensive and export-oriented manufacturing model that proved so successful in East Asia and China is now more difficult to sustain than in previous decades, creating new challenges for the low-wage labour surplus economies in South Asia, Africa and Latin America.

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In many economies where wages are low and labour is abundant, manufacturing is not providing the expected level of economic activity and growth in employment is declining, even as Chinese wages rise and China’s dominance in global manufacturing begins to recede. Dani Rodrik labels this shifting and shrinking profile of manufacturing “premature deindustrialisation” (Rodrik 2016). While the forces of deindustrialisation are varied and are driven by both global and national economic dynamics, the failure of many emerging economies to develop a large manufacturing sector creates serious problems for governments with millions of unskilled workers in need of decent employment opportunities to secure their future. The lack of regular low-skilled manufacturing jobs has seen a critical rung on the traditional ladder to economic development kicked away. And in many cases the dearth of regular employment opportunities has underwritten the prevalence and even growth in informal employment—particularly self-employment.

Debate about the role of informal employment in economic development is conflicted. Some scholars argue that informal employment provides an essential safety net and a basic livelihood for the impoverished masses, even though it is unproductive and prone to excessive rates of exploitation (Portes, Castells and Benton 1989). Other scholars see informal employment as a vibrant sphere of economic entrepreneurship and innovation that can be deployed by individuals wishing to build their own futures (De Soto 1989). Empirical evidence shows that for some, informal employment can deliver economic prosperity. However, for the majority, the conditions of informal work do not support capital accumulation and for most informal workers this type of employment is closely correlated with poverty, vulnerability and inter-generational inequality (Breman 2013, 2016; Chen 2012; Hill 2010; Sanyal 2007).

The global response to these employment challenges has been led by the International Labour Organization and its Decent Work agenda. Since 2000 the ILO has been at the vanguard of research and policy development on decent work, defined as employment that delivers a fair income, provides respect for rights at work and social protection for workers and their families. The rationale is that decent work is an essential component of sustainable, inclusive economic growth and the elimination of poverty (ILO 2016b). The Decent Work agenda deploys existing ILO conventions, protocols and recommendations on wages and conditions, such as the minimum wage, working hours, right to association, maternity leave and social protection. In addition a number of new conventions have been developed to support decent work for the hundreds of millions of workers, particularly women, who are employed in the informal sector of emerging economies as home-based workers (C177) and domestic workers (C189). ILO tools are used to support governments working to improve employment opportunities and develop alternative approaches to employment policy.

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In recent years the ILO’s research and policy agenda has been complemented by World Bank (2012) and United National Development Program (2015) reports on the critical role that employment plays in national economic development. The case for decent work was reiterated in the aftermath of the global financial and economic crisis of 2008 and has been progressively embedded in a range of international and human rights agendas. In 2015 decent work was adopted as a universal objective in the UN’s 2030 Agenda for ...

Table of contents

• Cover Page
• Employment Policy in Emerging Economies
• Routledge Studies in Development Economics
• Title
• Copyright
• Contents
• List of Figures
• List of Tables
• Notes on Contributors
• Preface
• Part I Employment Policy in the Global and National Context
• Part II Employment Policy in Practice
• Index