‘It would take more than 800 years for the bottom billion to achieve ten per cent of global income under the current rate of change’, says an UNICEF report based on the figures of income inequalities from 141 countries and suggests that ‘the extreme inequality in the distribution of the world’s income should make us question the current development model, which has accrued mostly to the wealthiest billion’ (UNICEF 2011, p. vii). It is argued that the real picture behind the talk of development in the present world negates the prevalent liberal propaganda—in fact, globalization has increased inequality in the world (Lee and Vivarelli 1996; Sutcliffe 2004; Milanovic 2006). Most studies on inequality at the global-level cite inter-country data to substantiate their findings; however, intra-country figures, if seen, would also lead to similar figures. In India, the disparity between rural peripheries and urban centres are getting starker. ‘In the rural areas of some of the poorest states, there has been virtually no increase in per capita expenditure between 1993–94 and 1999–2000. Meanwhile, the urban populations of most of the better-off states have enjoyed increases of per capita expenditure of 20 to 30 per cent’ (Deaton and Dreze 2002, p. 3729). Besides urban–rural inequality in the countryside, severe regional, inter-state and intra-state differences are noticeable. It can be seen that in spite of considerable flow of capital to IndiaFootnote 1 during the liberalization phase, sectoral allocation and the spatial distribution of these investments have encouraged concentration of wealth. A recent IMF study has cited that ‘the net worth of India’s billionaire community has soared 12-fold in 15 years (which is) enough to eliminate absolute poverty twice over in the country’.Footnote 2 A similar picture has emerged in China after 25 years of liberal development. The numbers of billionaires are in China are more than those in the USA.Footnote 3 The inequality index of ChinaFootnote 4 has grown to be as high as some of the strife-ridden countries of Africa. Development with globalization founded on the principles of, free-market, competition, and labour market flexibility has been blamed for increasing precariousness at work and pushing millions to the margins. ‘Development of capitalism everywhere means developing regional inequalities. Thus each developed country has created within itself its own underdeveloped country’ (Amin 1976, p. 362). Moore and White (2003) see the rising intra-national inequality as an inherent tendency of economic globalization resulting due to ‘the shift of bargaining power away from both governments and organized labour, toward increasingly mobile capital’ (op.cit Kohli et al. 2003, p. 79). The drive towards flexibility and precariousness of labour in the present era of globalization is capitals’ ‘unfinished business’ (Standing 2011, p. 31). The capitalist market mechanism ensures that wherever production is linked to the global supply chain, euphoria is created so that gradually the voices of the workers are lost in its pursuit towards labour market ‘flexigulation’.Footnote 5 The rise of the global ‘precariat’ consisting of millions of insecure workers around the world without any anchor of security is a cause of grave concern. The matter of alarm is the mounting instability rising world over is seen as a consequence of the vagaries of the market-led development with no alternatives. Standing calls the ‘precariat’ class a dangerous class which is the ‘child of globalization’ (ibid, p. 4)—what he considers more troubling is the fact that the marginalized workers who are leading unrests everywhere is only the tip of the iceberg, as there is a much larger number who are living in fear and insecurity. In India, the recurrent incidents of industrial violence led by contract workers as seen in Graziano Noida plant,Footnote 6 Regency Ceramics Yanam factory,Footnote 7 Maruti Manesar plantFootnote 8 are early warning of things to come if such a developmental path is not seized or altered. While China has a well-entrenched system of collective bargaining and has taken conscientious steps to curb precariousness by enacting the three labour laws in 2008, even then the growing instances of labour unrest in the country underscore that more needs to be done to arrest rising social disparity.

Our study has shown that the presence of the contractor or agency, who is the official middleman and a profit-seeking agent, makes the contract labour system by its very nature prone to manipulation. Such contractors manoeuvre the compensation due to workers—the disjoint between the employer and employee in the form of ‘contractor’ ensures that the workers remain marginalized. As the contractor is the de jure employer of the workers, any attempt to provide support to his/her workers by the principal employer or any other body is considered as undue interference. Thus, most policy initiatives for the benefit of the contract workers are thwarted by the contractor or passed on to the workers only after extracting significant rent. The futility of a third-party contract labour system in meeting the employer and employee expectations is increasingly being felt.Footnote 9 A written direct contract (WDC) as practised in China between the employer and the employee minus the agency and comprising of a collective bargaining agreement (as made mandatory by the 2008 Chinese Labour Law (Chapter V, Part I)) can be a much better system which can provide both flexibility to the employers and recognition to the workers. With the judgement in the State of Karnataka versus Uma Devi case (AIR 2006 SC 1806),Footnote 10 a WDC agreement would carry limited liability for the employers and at the same would provide tenurial job security to the workers. Though such a direct engagement may create some problem in the supervision of workers and may also increase wage cost—however, the experience with irregular contract workers, the vexatious problems of indiscipline and lack of skill shows that the WDC system can prove to be a pragmatic alternative. Moreover, directly engaged workers can be made responsible, and also the problems and cost of hiring a contractor can be saved by adopting this methodology. The lessons learnt from field insights from China can be listed as follows:

  • Lesson learnt: Presence of intermediary or contractor who is a profit-seeking agent allows third-party manipulation of dues to be paid to workers and increases surplus extraction.

  • Policy recommendations: Public policy should be reoriented to eliminate indirect contract labour system and adopt direct written contract labour system on the pattern of the Chinese labour market. Wherever possible, the intermediary should be expelled and instead a written direct contract (WDC) between the employer and the employee may be formalized by strengthening the Indian Contract Act. In such a changed regime, law and public policy should be amended to safeguard the interest of workers by making definitive provisions for, collective bargaining, promotion, award, compensation, social security, workplace safety, besides, regularization after a certain period.Footnote 11

Our work has further pointed that though intermediaries are a liability and is parasitic agents in a workplace, in some areas like construction and off-site short-term work (DMRC), their role becomes essential to lower the transaction costFootnote 12 or otherwise the transaction cost involved would make the overall venture uneconomical. Thus, in these places, third-party practice of engaging workers through contractor/agency could be continued, however, to safeguard the interest of the workers a written contract with collective bargaining agreement (as, Mahindra case) should be made mandatory before initiation of any work. The provisions of ILO convention no. 181 on Private employment agencies (1997) should be the guiding principle for running such third-party contracts. As the finalization of such contracts involves competitive bidding, it should be ensured by the principal employer that the tendering process should be such that the cost of labour does not end up as an important element of competition. As also enshrined in ILO convention no. 94 (1949) and Recommendation no. 84, labour laws in India should incorporate suitable provisions ensuring that public contracts do not exert downward pressure on labour wages and working conditions. All contract documents should have cost provision for providing labour standards based on the number of workers involved which should not be open for bidding. The lesson learnt in the study and policy recommendations are as follows:

  • Lesson learnt: The contractor being a profit-seeking agent competes for public contracts by lowering prices and once he has the tender in hand, uses all means to exploit the ‘labour power’ of the workers to complete the task while maintaining a profit margin for himself.

  • Policy recommendations: Labour wages and standards should not be made the element for competition in tenders and a suitable provision should be made under all labour laws to this effect.

  • Lesson leant: It is seen that in many areas especially in construction work and short-term work being executed in remote premises, the supervision of work may be a problem and getting work executed through intermediary contractor may be helpful.

  • Policy recommendation: For those work at third-party premises (outsourcing) or in construction work wherever intermediary or contractor is essentially required for job execution and supervision, a tripartite collective bargaining agreement should be made mandatorily by law (as in Chinese Labour Contract Law, 2008) to be signed between the recognized trade union/workers committee, contractor and principal employer encompassing labour standards obligatory on the part of employer/contractor and production concerns to be complied by the workers. Only contractors who produce a tripartite agreement before the start of work may be allowed to execute the job assigned.

In an open economy with surplus labour, the downward pressure on labour standards is bound to be high. China has realized this after about three decades of liberal development and thus enacted the new labour laws in 2008 making written contracts and CB mandatory, and with many other intended benefits for the working class. In a developing economy like India, the perspective of law and public policy should be towards safeguarding the interest of workers from the vagaries of the market. Also, at the same time reasonable working environment needs to be provided to the industries to grow as otherwise the opportunity of fruition in globalization will be lost. As seen in the case study (DMRC), a top-down approach of uplifting labour standards through regulatory and enforcement measures has not worked on the ground. Instead, a collective bargaining mechanism similar to what is practised as seen in the case of Mahindra tractors is more beneficial. The unified CB regime typical to China as seen is even better for labour standards. The following lessons have been learnt in the research study:

  • Lesson learnt: Unwritten and informal workplace relationship as perpetuated in the present contract labour system in India is the source of exploitation and marginalization of workers.

  • Policy recommendation: All employment relationship should be written among parties ‘competent’ to contract.

  • Lesson learnt: All workplace should compulsorily have one responsible recognized union representing all workers which should take up workers issues and also resolve contentious matters.

  • Policy recommendation: Suitable amendments shall be made in the Trade Union Act and the Industrial Disputes Act for compulsory recognition of ‘one trade union in one enterprise’ encompassing all workers irrespective of their nature of employment.

  • Lesson learnt: By only giving collective voice to workers without taking into consideration production concerns of the employers will not establish a fruitful and long-lasting workplace relationship in the new global order. With liberalization, employers are free to relocate to those regions/nations where there are less wages to pay, more stability and less industrial unrest.

  • Policy recommendation: Collective bargaining agreements should form a part of employment contracts. Suitable provisions should be made in law for annual collective bargaining agreements incorporating both the concerns of the workers and the employers at the workplace (as seen in Mahindra and China case studies).

It has been seen during the fieldwork in India that due to legal and policy vacuum existing on training matters, skill development has taken a back seat in all areas/establishments where contract labour system is being practiced. Under the existing law and public policy, no incentive has been provided to the contractor, who is the de jure employer, for training his/her workers. The principal employer who is the real beneficiary has not been stipulated under law to skill the contract workers; moreover, due to the temporary nature of the engagement, the PE feels disinclined to invest on contract workers. The workers on their part have little resources or interest to partake on this long-term venture. As seen in the Rudrapur case study, the employers complain that while labour is available there is a severe shortage of skilled labour in the market. The shortage of skill as maintained by the contract labour system is hitting at the productivity of the Indian manufacturing sector. In sharp contrast in China, both the 1994 and 2008 laws make specific provisions for vocational training and skill development. The laws entrust upon the enterprise for job-related training of all workers including dispatch workers, before induction in employment.

  • Lesson learnt: Contract workers remain unskilled even after a long duration of employment. The productivity of the whole workforce and consequently the industry remain low due to poor skill development.

  • Policy recommendations: Public policy should incorporate suitable provisions for formal training with certification of contract workers before engagement. Training may be imparted by a third party the cost of which can to be shared by all the stakeholders or as provided in the 2008 Labour Contract Law of China, the cost-component of training should be made a part of written employment contract.

The contract labour system kills all motivation and innovation of a workman. The workers are herded into gangs and forced to work in a mechanical way. The system has no mechanism to reward a worker for exemplary performance, neither is there any incentive for commitment or sincerity. Moreover, there is no inbuilt provision in the law for salary upgradation or regularization of a contract worker even after years of devoted service. A contract worker is expected to perform day in and day out like a machine without any human façade for living wages. This was manifested at almost all the Indian case study sites where contract workers complained of lack of any incentive or recognition for their work the youthful vigour of many women and men were seen to be lost and dejected in endless toil. Management experts point that ‘when men work in gangs, their individual efficiency falls almost invariably down to or below the level of the worst man in the gang; and that they are all pulled down instead of being elevated by being herded together’ (Taylor 1911, p. 25). Motive and ambition play an important role at workplace. Performance depends on incentive as ‘the average workman must be able to measure what he has accomplished and clearly see his reward at the end of each day if he is to do his best’ (ibid, p. 33). In the master–domestic servant relationship, the master can extract relentless work from the servant, but ‘the largest quantity of work will not be done by this curious engine for pay or under pressure. It will be done when the motive force, that is to say, the will or spirit of the creature is brought to its greatest strength by its own proper fuel, namely by affection’ (Gandhi 2007, pp. 8–9). Similarly, in the case of commander and his regiment (ibid, p. 9) or a robber’s gang (ibid, p. 10), no amount of discipline or remuneration can enthuse an individual to lay his life; however, by inculcating a sense of loyalty and affection, such a feat can be accomplished. Gandhi believes that the notion of ‘honour’ or ‘dignity’ needs to be infused in the job of workers for better performance. Polyani (1944) like Gandhi believes in non-contractual obligations like neighbourhood and kinship which are based on trust. The research study has taught:

  • Lesson learnt: Under the contract labour system, a contract worker is treated like manpower and there is no recognition or reward for human enterprise and traits like sincerity, commitment, motivation, affection or loyalty. Consequently, there is problem of disaffection, absenteeism, indiscipline and low productivity of contract workers.

  • Policy recommendation: Provision of time-based upgradation, rewards and performance-linked incentives needs to be created for contract workers by devising suitable contracts and by incorporating clauses in the labour laws.

  • Development for whom?

All policy discourse concerning industrialization and development of a region should start with the basic question, Development for whom? Will the development efforts benefit few industrialists, white-collar workers of the region or couple of investors abroad? Or should it benefit the numerous workers who will find-in jobs, and the area as a whole? As seen in settings like Rudrapur with abundant supply of labour, precarious workers who fit-in get only subsistence wages while the bulk of the profit of production is pocketed by the employers, investors and labour suppliers who split the surplus value generated among themselves. Though jobs are created, these jobs do not provide succour to the holders in the long run. The net result of development is increased precariousness, inequality, industrial unrest and problems like social disharmony and naxalism. Law and public policy revisions based on some of the recommendations made in the research study are needed to make development more inclusive.

Globalization is an irreversible stage of development which has brought civilizations closer than any other time in human history. The integration of the world and the easy flow of men and material have provided immense potential for human advancement; however, at the same time, the change in lifestyle and enormous increase in consumptionFootnote 13 has caused rapid urbanization, deforestation and depletion of resources. The alarming level of environment degradation reached by globalization has become unsustainable for the human civilization. Rising inequality, precariousness and labour unrest is threatening the social fabric in almost all nations. At this crossroad of development, Gandhi’s reflections on economics and ethics are worth contemplation because Gandhi did not draw any sharp distinction between economics and ethics. ‘Economics that hurt the moral well-being of an individual or a nation are immoral and, therefore, sinful’ (Gandhi 1947, p. 62). True economics for Gandhi stood for, ‘social justice, (and) it promotes the good of all equally including the weakest, and is indispensable for decent life’ (Bose 1948, p. 52). If the owner class keeps only that much resources which was necessary for their livelihood, and retains and uses the rest as a trustee for the welfare of the society, many vexatious workplace issues can be genuinely resolved. Sarvodaya which implies the enlightenment and welfare of all in the society coupled with antodaya which means ‘up till the last man especially the weak and the downtrodden’ are the tenets of Gandhi’s principles of inclusive growth. Unlike the traditional economists who view man wants as unlimited, Gandhi visualizes a society where the wants of man are simple and limited. Gandhi’s concept of ‘dignity of labour’ or shramyagna through bread labour evolved from such an understanding of the social order where all could meet their two ends while maintaining harmony in the society.