India has long been criticized for strict labour laws and burdensome business regulatory environment. This can also be easily substantiated by the fact that India is ranked 134 out of 189 economies in terms of ease of doing business by World Bank in 2014 (1). Indian labour market is subject to more than 50 central government laws and regulations that deals with range of subjects such as employment condition, social security, wages, industrial relations to name a few. As labour is a “concurrent” subject in Indian constitution, both state and central government can pass laws pertaining to this subject within their jurisdiction. As a result, there are numerous other state specific labour laws as well which varies from one state to other.
Labor and Social Protection
Sewing Floor, Armana Apparels, Dhaka. Photo: Shobha Shetty
Contradictory trends in female labor force participation in South Asia continue to pose a puzzle for policymakers. On the one hand, Bangladesh’s ready-made garment industry, one of the mainstays of the national economy, has a high female labor participation rate of 85%. On the other hand, the female labor force participation rates continue to fall in India in spite of recent high economic growth. During my recent visit to Dhaka, I was once again reminded about the enormous challenges of tackling these issues.
I was in Dhaka to attend the 7th Meeting of the BEES (Business, Enterprise and Employment Support for Women in South Asia) Network. Founded in May 2011, the BEES network, facilitated by the World Bank, brings together 15 civil society organisations that work for the economic empowerment of poor women across South Asia. Currently, the network represents women at the bottom of the economic pyramid, with a collective reach of over 100 million. It was a sombre coincidence that the week of our visit marked the first year anniversary of the horrific Rana Plaza disaster in which over 1,100 perished.
The rise of the ready-made garment industry in Bangladesh in the last decade has been stunning by every measure. By 2013, about 4 million people - almost 85% women - were working in the US$22 billion-a-year industry. The industry now contributes to over 75% of Bangladesh’s export earnings and accounts for over 10% of GDP, making it the world's second-largest apparel exporter after China.
But what does it mean for the millions of women employed in this industry? Thanks to Manusher Jonno Foundation (MJF), one of the Bangladesh BEES network members and co-host of the Dhaka meeting, I was lucky to visit the Awaj (“voice”) Foundation to understand this issue better. Founded in 2003, the organisation focuses on empowering female RMG workers. We got an opportunity to meet Nazma Akter, the feisty General Secretary of the foundation and a former garment worker. After spending 7 years in the ready-made garment industry as a young girl, she turned to activism on behalf of her fellow women workers. She is now a well-recognised national name and Awaj has a direct outreach to 60,000 women workers (and 600,000 indirectly).
The 10th South Asian Economics Students Meet (SAESM) was held in Lahore, Pakistan, bringing together 82 top economics undergraduate students from the region. The theme was the Political Economy of South Asia, with a winning paper selected for each of the six sub-themes. In this post, Rumela Ghosh presents her winning paper on the political economy of social security. Posts from the other winning authors will follow over the next few weeks.
Employment is one of the burning problems affecting South Asia. India now has a diminished growth rate below 6% per year. In recent years although the living standards of the 'middle classes' have improved, reform for underprivileged groups has not been so exciting. According to National Service Scheme (NSS) data the average per capita expenditure rose at the exceedingly low rate of 1% per year in India. There has been a sharp decline in real agricultural wages also. A quantitative assessment of the impact of various rural wage employment schemes during the last two five-year plans and the current one shows that the results in terms of employment generated have been steadily decreasing.
My paper looked at schemes to tackle unemployment in India. A Bird's Eye View into Mahatma Gandhi National Rural Employment Guarantee Act firstly examines the Maharashtra Employment Guarantee Scheme (MEGS) introduced in the 1970s. It examines how at different time frames and contexts the elite managed to maintain their support base and reinforced its legitimacy by supporting a poverty alleviation program – the EGS. It also highlights the issue of gender concern and the problem of migrant workers.
Among various EGS, the Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA) is the flagship program implemented at the national level which achieved measurable success, though with some flaws. It guarantees every rural household up to 100 days of wage employment in a year within 15 days of demand for such employment. My study highlights the significant interstate differences in the supply of employment and tries to explore the reasons why. Supply falls far short of demand, particularly in low-income states, where the organizational capacity to implement the scheme is limited.
The paper examines the conceptual design and delivery of MGNREGA to assess its effectiveness against unemployment and poverty. I discuss existing labor laws applicable to workers in the unorganized sector covering wages, contract and poverty incidence. The paper also seeks to derive the short run and long run implications of a minimum wage law. A detailed empirical analysis of the spatial dimension of implementation, problems of funding, and budgetary incidence of MGNREGA.
A comparative study of MGNREGA scheme as implemented in Tamil Nadu where it is largely fair and corruption free with respect to that in Uttar Pradesh where the implementation has some serious flaws with corrupt practices of local officials paying wage payments to non-existing laborers has been illustrated. It studies the differences in utilization, extent of targeting, magnitude of income transfers and the cost-effectiveness of food subsidies.
I designed a game-theoretic model to design a near-perfect scheme with suggestions to eliminate the loop holes. Various falsified implementation strategies by contractors like fictitious names in muster rolls, commission to the contractor for partially/not working laborers has undermined the objectives of MGNREGA. This illegal money laundering from a subsidized scheme like MGNREGA digs a deep hole in India's economic pocket when the economy is reeling under inflation and rupee value depreciation pains. The model attempts a systematic game theory based solution approach for restricting these scheme implementation faults. A graphical presentation shows that, with such a policy laborers in the long run will have an incentive to deliver under MGNREGA only.
The fallout from the April 24 collapse of the Rana Plaza building in Dhaka, Bangladesh has had severe domestic and international reactions. The international buyers and governments have responded vehemently to these events. Careful reappraisal of labor issues has been universally identified as a key area of reform. The objective is to ensure workers’ safety and workers’ rights. Poor labor standards can adversely affect Bangladesh’s overall reputation in the exporting sector. The government has been pressured to take a series of measures to improve workers’ safety. Representatives of the Bangladesh government, the European Union and the International Labor Organization met in Geneva on July 8, 2013 to promote improved labor standards and responsible business conduct in Bangladesh’s garment industry. Following up on the commitments made in Geneva, Bangladesh’s legislature recently amended the Bangladesh Labor Law to provide improved protection, in law and practice, for the fundamental rights to freedom of association and the rights to collective bargaining, among others.
Are these good economics and good politics now and in the future?
In the World Bank, we recently did a report titled Bangladesh: Towards Accelerated, Inclusive and Sustainable Growth—Opportunities and Challenges. For this study, we did a survey of 1,000 garment firms to get their perspectives on the drivers and obstacles to urban competitiveness. I report below some key findings from the survey presented in the growth report.
Dhaka City is still the most productive location for garment firms in Bangladesh. Access to markets and a relatively better quality of power supply are Dhaka city’s main comparative advantages. Dhaka has the best-performing city locations for access to skilled labor and power supply––the two factors garment firms’ value most when deciding on location––proximity to suppliers, sub-contractors, machine-repair technicians and support businesses.
Dhaka is falling behind other locations in accessibility and, for some firms, Dhaka city’s costs have started outweighing opportunities. Dhaka is the worst-performing location for urban mobility and access to the highway. Firms in the city also are disadvantaged in access to the port and airport, compared to those located in Chittagong city. Both firms and workers located in Dhaka also struggle with limited availability and high prices of land and housing.
“Bye sir!” Rahul was running ahead into the distance. It was hard for me to imagine how he could be running… The cracked soil was incredibly hot and extended all the way to what looked like a lake in the distance. It was not a lake…it was a mirage.
“He wants to be a doctor,” said his mother, who was walking next to me. “His sister does not know yet. She is only 2...”
When I came home from my visit to Gujarat, where we met Rahul Kalubhai Koli in Dhrangadhra in Surendranagar district, I could not stop thinking about him. He is 4 1/2, and he wants to be a doctor.
On Jan. 7 from 2-4 p.m., there will be a live chat on Sri Lanka's aging population at facebook.com/worldbanksrilanka. Tehani Ariyaratne, from the Centre for Poverty Analysis, will be joining the chat. Here, she discusses her recent work on the subject.
In Sri Lanka, an individual above the age of 60 is considered 'elderly'. Our documentary focussed on individuals in two districts, Hambantota and Batticaloa, and captures a diverse, rural elderly population. During the course of our fieldwork, we met and spoke with many individuals about their ideas regarding the benefits of and constraints to maintaining an active lifestyle.
Sri Lanka's population is young now, but getting older quickly. What does this demographic transition mean to you and for Sri Lanka?
Join a live chat Jan. 7 on the World Bank Sri Lanka Facebook page with experts including Indralal De Silva, professor at the University of Colombo; Sundararajan Gopalan, senior health, nutrition, and population specialist with the World Bank; Shalika Subasinghe, social protection consuiltant with the World Bank; and Tehani Ariyaratne of the Center for Poverty Analysis (CEPA).
The discussion will focus on the dimensions of growing old in Sri Lanka and move on to the challenge Sri Lanka is facing in dealing with an aging population with limited resources.
On Nov. 7, 2012, a motorboat carrying 110 illegal immigrants heading for Malaysia capsized in the Bay of Bengal close to Bangladesh’s southeastern border with Myanmar. This tragedy came less than a fortnight after a boat with more than 135 passengers capsized in the same area. “Boat capsized with illegal immigrants from Bangladesh” is a recurring story, with Thailand, Malaysia, and other Southeast Asian countries the destinations of illegal work seekers. What makes Bangladeshis resort to such extreme methods of migration?