The introduction in Tamil Nadu of a Bill raising the number of working hours from eight to 12 hours a day, and its withdrawal amid protests, has reopened the discussion around the strategies for industrialisation that do not undermine workers’ rights. The core ideal of the Dravidian model is the pursuit of inclusive industrialisation that addresses both economic deprivations that arise through the market and social deprivation that emerges from caste inequality. The model is about sharing prosperity through productivity. In that sense, the introduction of the Bill raising working hours was a deviation from its core ideal. Even as the Bill stands withdrawn, the Dravida Munnetra Kazhagam (DMK) government claims that the amendment would have attracted more investments to the State and created employment. This understanding is deeply flawed.
Structural change reversing?
Tamil Nadu is one of the few States to have achieved structural change and poverty reduction simultaneously in India. A key indicator of this is the lower share of agriculture in total employment in the State as against the all-India average. However, this trend is reversing now. The share of agricultural employment increased from 27% in 2018-19 to 30% in 2020-21. Even in absolute terms, it increased from 8.5 million to 10.5 million. The entry of 2 million people into agriculture is driven by distress. The share of manufacturing declined from 20% to 16.8%. The decline is sharper in absolute terms, from 6.5 million in 2011-12 to 5.8 million in 2020-21. Of course, the period discussed here precedes the present DMK government assuming power. Yet, we do not see the course correction followed since then to be promising either. For instance, a recent government release says that State investments worth ₹2,73,448 crore were secured in two years by signing 224 memorandums of understanding. While we are not sure how much of the investment was actually realised, what is interesting is the claim of the creation of 4,10,561 jobs which work out to be 0.01 per unit of promised capital (less than one job per crore of investment), much lower than earlier. As per the latest Annual Survey of Industries data (2019-20), the ratio of jobs created per unit of capital (number of worker to gross capital formation) investment was 0.58 for Tamil Nadu, 0.34 for Gujarat and 0.33 for Maharashtra. Unless we arrest this trend, we will end up in the situation of diminishing wages and vanishing jobs.
Historically, Tamil Nadu’s uniqueness lies in the pursuit of development that delicately balances the needs of capital with a requisite degree of safeguards for workers. As a result, even when wage share in national income has been falling across the world due to increases in capital intensity, Tamil Nadu has a higher share of wages in gross value added (GVA) terms in the factory sector when compared to most States. The average wage share in GVA for 2019-20 was 21% in the State, nearly twice that of Gujarat (12%) or Maharashtra (14%). The world over, the share of wages has been declining due to policies that favour capital by pushing for labour market flexibility. Tamil Nadu is no exception, but has been able to protect its workers in relative terms. The relative wage levels are higher because of lower levels of contractualisation and the better bargaining strength of labour. The share of directly employed workers in the State was 80% in 2015-16 as compared to the all-India average of 66%. This trend is fast declining now (76% in 2019-20) due to use or abuse of contract labour under the Contract Labour (Regulation and Abolition) Act, 1970. There has been a shift against workers both in the interpretation of these acts in courts and on the ground. That is the strength of Tamil Nadu, but it is waning now. In fact, the DMK itself came with the promise in its election manifesto in 2019 that it will work with the Union government to form a tripartite committee to address the grievances of workers at the State and national levels.
Tamil Nadu need not follow this race to the bottom. Dilution of labour laws or tax concessions are not the only source of competitive advantage. The State’s advantage lies in its skilled workforce, robust infrastructure, the existing institutional ecosystem that generates positive externality through good forward and backward linkages, and its governance style that reduces operating costs.
Skilling and future of work
While the trend of labour-saving automation in manufacturing and the new-age platform economy is going to be deepened, dispossession of routinised jobs and the shrinking share of the wage bill in the GDP of almost all countries are inevitable. With the average life of a skill becoming shorter and shorter, manufacturing alone may not be the solution for the future of work. The shift to knowledge-based industry in the service sector is inevitable. However, Tamil Nadu’s achievement in higher education with a Gross Enrolment Ratio of 51.4% compared to the all-India average of 27.1% has not helped this transition either. The poor quality of school education, lack of infrastructure in higher education, and poor applied skills imparted in vocational education have created a skill gap or employability problem of youth.
Recent efforts in attracting software investments in Tier-2 cities are encouraging. While Naan Mudhalvan, the skill-enhancement scheme for less privileged students, is laudable, the impact of such measures in terms of access to employment is not known.
What Tamil Nadu requires is a renewed approach to address the qualitative aspects of social policy, and an industrialisation strategy that ensures decent wages and dignified working conditions.
Kalaiyarasan A. is Assistant Professor at the Madras Institute of Development Studies and Research Affiliate at the South Asia Institute, Harvard University
