Labour Reforms: A Marxian Relook

Satyaki Roy

We begin with
two stylized facts related to labour and industrial growth in India: first, the
share of wage cost in gross value of output has declined sharply from 9 per
cent in 1973-74 to roughly 2 per cent in 2011-12. This simply reflects the fact
that in organized manufacturing the relative costs of employing labour seem to
have drastically declined over the years. The second important fact being that
the workers working in labour intensive sectors account for a lower share of
both total wages and output compared to those working in other sectors.  In other words the significance of labour
intensive sectors in terms of providing wage income and producing manufacturing
output is on the decline. It has been widely recognized as well that capital
intensity in manufacturing has been increasing in India despite being a ‘cheap
labour’ economy. And this is largely related to ‘compression of time and space’
in globalization that internalizes global competition in the ‘local’. The
local-global dichotomy in terms of markets and competition is increasingly
becoming blurred. Industries face global competition in the local space and as
a result often adopt technologies developed in the West that are labour
displacing. This is further triggered by the trajectory of growth in India
which has been heavily dependent on profit income that favour consumption of
luxuries and importables that also induce labour displacing technologies.
Moreover there has been a relative cheapening of capital because of easy flow
of finance that also favoured capital intensive technologies.

 Given these
standard narratives on the declining importance of ‘living labour’ in
production the moot point however is why it is so important to bother about
labour cost and talk about labour reforms that anyway constitute a miniscule
share of the production cost in today’s manufacturing? On the contrary the
importance of such reforms which to a large extent are meant to destroy the
legitimate rights of the working class, whatever little exists, appears to be
so obvious that none of the mainstream media did ever debate these issues at
any level of seriousness. It appears that a social sanction possibly has been
arrived that one can choose to be ‘ethical’ and ‘humane’ to question the grand
narrative of market but there is no point of being ‘ideological’ and ‘orthodox’
to question policies that lead to devaluing labour.
Let us recall
once again the narrative of ‘competitiveness’ which is often assumed to be something
beyond question in a market driven ‘enterprise society’. In the wake of global
competition although concentration and centralization of large capital embodied
in global monopolies increased but it has largely destroyed local monopolies
that are no longer protected from external competition. As a result barring a handful
of TNCs/MNCs in the global plane most of the producers in developing countries
are ‘price takers’ and hence feel the pinch of competition. Excepting some
niche areas it is largely a competition based on costs and therefore efforts to
bring down production costs seems to be a legitimate move for an individual
capitalist. As Marx characterized long back that competition in capitalism is
war like, it is a ‘do or die’ for individual capitalist and one can hardly come
across the silence and serenity in such competition as depicted in general
equilibrium models pursued in mainstream economics. And the most important
point that old Marx taught us is that all other inputs except labour power that
the capitalists purchase enter into the value of the final product as it is,
they reproduce exactly the same value to the final product. Given the dominance
of capital over labour, it is only the labour power out of all that has the
unique character of producing more value than itself, and it is the source of
capital’s surplus value that gets realized in the form of profit (Capital vol. I). Therefore capitalist
competition, other factors remaining unchanged, is all about ways and means to
reduce the absolute or relative value of the labour power. Therefore whatever
be the component of ‘living labour’ in the production process it is the only
source of surplus value that gives rise to capitalist’s profits.
Moreover in the
context of globalization uncertainty in global demand has increased, parameters
of corporate performances are increasingly linked to shareholder returns and
finance dominated parametric structures make the demand more volatile. Hence to
ride over the swings of global market capital demands more flexibility to
handle the labour at their disposal, avoid permanent nature of jobs that involve
addition to fixed costs rather prefer an ‘as and when’ kind of arrangement. The
advantage of this kind of arrangement is that it relieves the capitalist class
from the social burden of treating workers as human beings. And once relieved
from such costs, to the capitalist labour becomes very similar to any inanimate
input, coal or electricity, wood or plastic, easy to buy and throw, without the
moral hazard of providing a living to a human being or bear the costs of their
institutionalized rights. Individual capitalist is always keen to reduce the
exchange value of labour power, pay lesser wages to workers or relatively
reduce their claim in the total value produced. In other words a capitalist
would always be happy to reduce real wages paid to workers but s/he would also
be happy if real wage increases but the gap between labour productivity and
real wages widens faster. Making the worker more vulnerable helps the capitalist
reducing wages as it increases competition between workers. On the other hand
weakening institutions that protect claims of workers makes it easier to reduce
the claim of workers out of what they produce.
The value of
labour power as Marx conceived is given by the value of goods and services
required by the worker to live and be in the labour force. But what is required
for the worker is not determined by some physical attributes but by what society
considers necessary and that is time and space dependent. For instance, societies
for whatever reasons if collectively agree that a worker should have a decent
living, get access to good health and safe drinking water, their children
should go to school, and should have provisions to a minimum cultural life, at
least one television set and so on, valuing of labour power should factor in
those as requirements. A society which considers that for the sake of some
defined efficiency and competitiveness labour should not claim a human living,
why should their children think of going to school? or have the luxury to play,  then the sanctioned value for the labour
power gets reduced. The crucial point however is what determines the attribute
‘socially necessary’ and the way Marx understood it is that the value of this
crucial variable is determined by the class struggle. Therefore the calculus of
the value of labour power or the amount of total labour value that society
agrees to spend on maintaining the workforce is determined by none other than
the struggle between the capitalist and the working class. When the
workers  of the world as a class gained
some strength with increased bargaining power in the presence of the socialist
bloc, capitalism responded with models of ‘social contract’ and ‘welfare state’
agreeing to the idea of living wage. While in the past three decades the
workers of the world experienced a setback vis-a-vis capital and capitalism
henceforth gave up notions of ‘living/family wage’ rather adhered crude norms
of market to determine wages of workers.
The irony
however is that even if it seems to be ‘rational’ for an individual capitalist pursue
de-valuing the labour power but the capitalist class as a whole also requires
the social reproduction of these problematic people called ‘workers’. Therefore
the capitalist state as a representative of the capitalist class as a whole put
a check on the individual capitalist’s motive to reduce the value of labour
power. Historically the enactment of Factories Act or the Minimum Wages Act are
some of the acts which the capitalist state was forced to institute as a
response to working class struggles in order to at least set some minimum
workplace norms and a floor to restrict the free fall of wages. In the neo
liberal regime however unshackling the ‘enterprise’ is the social goal and
competition is the mode of organizing societies. Therefore wherever and
whenever possible the institutions that protect the rights of workers are taken
to be causing unfreedom to capital and hence needed to be dismantled. But the
social reproduction of the working class has to be maintained as well. And as a
response to this contradiction the state comes in rescue sharing some burden of
social security and welfare schemes that act as surrogate safety net in the
context of state being largely withdrawn from the realm of production.
Therefore the cost of rearing the future stream of workers goes to the state
while the freedom to exploit this workforce lies to the capitalist. And since
it is not the capitalists who alone pay taxes rather the larger part of the
revenue would be coming from taxes direct and indirect paid by people other
than the capitalists; the onus of maintaining the future stream of workforce is
partly shifted to the society at large while the right to appropriate the
fruits of using this workforce remains to private capitalists. Therefore
society in a sense provides a continuous supply of workforce ready to be exploited
by the capitalist class at their whims. This change is being embedded in a
shift in public discourse as well and the way it goes is the following.
Individual capitalists should be relieved from the pains of paying their
workers’ legitimate claims, they should get the freedom to hire and fire
instead of maintaining the future stream of workers but should share some
‘corporate social responsibility’ in roadside gardening or maintaining a park
within the locality. The  advantage of shifting
the whole discourse from ‘workers’ and their rights to that of ‘consumers’ or
‘citizens’ is precisely this. The worker, capitalist, middleman, merchant,
clerk, teacher, student all are equal citizens and consumers and this apparent
equality of rights as citizens and consumers help concealing the underlying
class process reducing social contestations to a ‘governance’ discourse
premised on ‘state-citizen’ conflicts.
One may argue
that the declining share of the labour component in the value of output
actually allows little space to squeeze surplus value out of that. And why
control on the labour process is so important to the capitalist class given the
declining importance of labour as input in production?  Samir Amin (1975) once argued “there is no
economic ‘rationality’ that can be placed above the class struggle” (Rule of Capitalism in Agriculture). Now
if it is a struggle in the realm of production, the determination of wages and
prices needs to be analysed in the process itself, meaning how capital as a
whole confront labour and the way wages and prices are influenced by this
conflict. For this one has to depend on Marx whose method of analyses was
distinctive. It puts forth the dialectical methodology that the conflict
between capital and labour as a whole sets the limits of concrete determination
of rate of profit and prices realized by individual capitalists. Therefore the
labour process has to be viewed in its entirety rather than looking into the
tip of the iceberg which is the organized manufacturing sector. One needs to
look at how layers of capital interact and confront with each other and the way
capital as a whole take advantage and negotiate with labour strata having
different degrees of vulnerability. One has to recognize the fact that the
spontaneous nature of capitalism entails an underlying contradiction and that
is labour process unleashed by an individual capitalist confronts the social
division of labour that is accepted by the capitalist system at a given
concrete time and space. In other words an individual capital can introduce a
higher technology that raises labour productivity or can employ labour at
precarious work processes with extended hours of work, but the amount of profit
that would be realized by the individual capitalist is not an autonomous
process rather co-determined by the average capital that employs certain
average technical composition (Capital
vol. III)
. This simply means that the surplus value generated by exploiting
labour by an individual capital would not generally be equal to the amount of
profit that particular capital would realize rather it depends on the average
level of technology in that industry and where does that particular capital
stand in reference to that average. Hence surplus value is only potential
profit and the actual profit realized by the individual capital is determined by
the complex interaction between individual process of production and the
general level of production processes at a given point of time. This is
precisely the reason why control over the entire production process is so
important to the capitalist class as a whole. An individual capitalist might
agree to pay fair wage to his workers and can provide facilities which are not
given by others. If s/he uses improved technology and skilled labour and can
get back from the worker much above the expenses on wages, s/he would not mind
raising wages because the widening gap between labour productivity and wages
would increase the relative surplus-value even though the real wage increases. But
this individual capitalist would not indulge in protecting rights of workers
because the entire production process influences returns to individuals. High
tech global assemblers of various products starting from shoes, automobiles or
i-pads involve subcontracting arrangements with firms located in developing
countries where the labour process includes lower wages, longer hours of work
and extreme vulnerability. The return realized by high end tips of the icebergs
depend on sub-human exploitation of labour dispersed across the world and hence
it is important for the whole capitalist class to maintain its class control
over the entire labour process even if at an individual level one might agree
to pay a ‘living wage’ depending on the returns.
 Finally in the context of globalization countries
are getting integrated to a global production network. Now in a particular
industry the average rate of profit is driven by the regulating capital who are
sort of leaders in terms of innovation and technology but the average rate of
profit is the rate of profit realized by the average capital that matches with
the scale needed to set in motion the socially normal methods of production.
Now each individual capitalist can realize a level of profit which is in
proportion to their share in aggregate capital. Given the average rate of
profit in a specific industry the amount of profit that enters in the
calculation of prices over and above the capital advanced in materials,
machines and labour is the product of the average rate and the capital advanced
by that particular capitalist. Once industries in the developing world are
getting integrated to global production network the scale of operation at which
they operate might be well below the social normal scale of operation in that
specific industry and as a result such firms can survive in the chain only by
accepting a below average rate of profit. 
With increasing concentration and centralization of capital at the
global level and with rising average scale in most of the industries the firms
in developing countries face further threat of profit squeeze. In this milieu
what is needed for the capitalist class in countries such as India is to depend
on segments that provide a cushion at the end of the vertical chain. The
smaller capitals survival strategy is to compare present returns with potential
interest earnings attainable by liquidating its productive assets. Therefore
they survive at the margin while others who are at the middle of the value
chain take advantage of heightened competition between input suppliers and can
get a buffer facing a squeeze in return from above. Therefore the labour in the
lowest rung has to be brought under greater control of capital. The recent
moves to increase the threshold limit of number of workers from 10 to 20 (with
power) and 20 to 40 (without power) for Factories Act to be applicable is in
this line only . This means that roughly 12.6 lakh workers in the organized
manufacturing sector who are employed in factories comprising a large share of
65 per cent of the total number of factories in India that employ less than 40
workers would be out of the purview of labour laws governed by the Factories
Act. Furthermore the proposal to raise the threshold limit of number of workers
from 100 to 300 for factories that require prior permission from the government
to retrench workers under Industrial Disputes Act implies that about 93 per
cent of the factories in India can retrench workers without seeking any
permission from the government. The tranquillity at the tip would be maintained
by the turmoil at the bottom, the world underneath. And the silence in
mainstream media and the society at large on the denial of rights of this huge
number of workers simply expresses the futility in invoking fancy norms such as
‘rationality’ and ‘distributive justice’. It is a class war at the end of the

The author is Associate Professor at ISID, New Delhi.