The key to Indian Economy is in Better Wages for the masses – Part 3


In the previous article of this trilogy, we looked at the enterprise dimension within the textile and apparel sector and had argued that deeper sectoral analysis can throw crucial insights on how enterprises can remain competitive despite higher wages. Using the insights from the same sector, in this final piece, we will focus on the labour dimension to emphasise that commensurate labour welfare is essential to ensure sustained demand, lower inequality and hence overall economic wellbeing of the individual, society and nation.


There is nothing that can drive home this point better than the meaning of the term ‘wages’ as explained by renowned economist, Nitin Desai. In his paper:‘Work and Welfare’ published last year, he notes that wages are the return that the labourer gets for the physical and mental capacities and the acquired skills that he or she offers for the production of goods and services of value to consumers.


What this definition reveals is that wages is not just a remuneration for physical work but is also a return for present and acquired capabilities. In other words, the ‘jobs ecosystem’ should ideally not only reward present capabilities but should also provide avenues for capability enhancement so that incomes can increase steadily.


Therefore, a key question to ask is if indeed our labour intensive sectors have the requisite ‘jobs ecosystem’. Lessons from textile and apparel clusters show a very high variance on this aspect. But first let’s see some broad trends that are common to all.


In almost all clusters, the data on number of workers is disputed. Depending on who one is talking to, the number can vary substantially. For instance, in Bhilwara it varies from 65000 to one lakh while in Surat it varies from 15 lakh to 20 lakhs. On a closer look, one finds that this is due to the presence of large number of smaller units engaged in job work where maintaining records is not as systematic as in the large ones. The wages are also much lower in these smaller units, often below the statutory minimum. Even in the large ones where the statutory minimum is ensured, workers feel it is not enough to live decently. On an average, the desired wages, for all labour in both small and big units, fall short by about Rs 10,000-15000 a month.


A similar trend can be observed with regards to working conditions. Invariably in all clusters, the smaller units have only two workers rather than the mandated three for a 24 hours’ production cycle. The fact is that most of these workers are not local but migrants from the poorer states of eastern India. They are engaged in continuous work to make ends meet. There is conspicuous absence of their participation on any platform of collective voice – a fact noticeable in weak trade unions all over the country.


Making things worse is the reliance of enterprises on labour contractors. Contractors flourish due to ‘surplus-shortage’ phenomena that plays out at the cluster level. What this really means is that there is an overall surplus of labour in a cluster but a perpetual shortage at a firm level. The contractors ensure a regular supply while overall labour surplus drives their value down.


Things are somewhat better for apparel workers mainly because Indian apparel units currently cater to a dynamic market where consumer palette changes regularly. This ensures greater value for human skills as opposed to textile value chain where automation is steadily taking control. Workers, however, claim that this does mean that wages are adequate even in the apparel sector.


Going back to the question of ‘jobs ecosystem’, lets now see if textile and apparel workers have a room to learn and earn more. To understand this better, it will help to see how our enterprises and clusters are designed. At an enterprise level, workers start as helpers and can normally aim to become supervisors in textile mills and tailors in garmenting units. However, skills for both are markedly different. While in a textile set up what counts more to move up are the leadership and managerial skills, in garmenting units it is usually the work skills. What one observes on the ground is that the latter can be acquired with far more ease than the former.


To further understand the opportunities for skill uptake, it may help to look at the cluster design as well. Here one can observe that where value chain is more compact and integrated, the overall health of a cluster is better as opposed to where fewer activities are happening. For instance, just spinning or weaving. Integration of garmenting with textile seems to be helping this even further. This can be best seen when one compares a cluster like Bhiwandiin Maharashtra and Tirrupur in Tamil Nadu. While Bhiwandi, a predominantly weaving cluster, is barely surviving – Tirrupur, a somewhat fully integrated cluster, has not seen a dip in overall revenue since its inception, barring a minor blip in the last financial year.


Besides cheaper availability of raw material, an obvious reason why integrated clusters do better is because there are no traders to suck up the margins. However, a lesser obvious reason is, that more integrated clusters provide greater avenues for workers to learn new things including entrepreneurial skills. Tiruppur cluster again exemplifies this clearly. As an exception and unique quality, many workers in this cluster have become entrepreneurs i.e. unit owners, having learnt business skills while working as labourers. Unofficial estimates suggest that as high as 60% of today’s unit owners come from traditional families of workers. Such graduation helps the people at the bottom of the pyramid to raise their standards of living.


But despite different clusters showing different performance levels, workers all over the country are largely underpaid and overworked. Today, we have perhaps better data on plant and machinery than workers operating – a fact that shows they are increasingly being separated from the concept of productivity.


Bringing them back into production and ensuring them adequate compensation can lift up the economy sustainably. In this trilogy of articles, we have thus far argued that it is indeed possible to look at productivity from a human lens, for if there are no workers and wages, there are no businesses as well.