Blaming welfare schemes for labour woes ignores real economic shifts

About a year after the United Progressive Alliance launched its signature rural employment guarantee scheme, a sugar baron was heard complaining on a post-Budget TV show that the NREGA, or the National Rural Employment Guarantee Act (as it was called then before “Mahatma Gandhi” was prefixed to it in 2009), had made it difficult to find labour to bring in that year’s sugarcane harvest. In Punjab, the media reported, farmers faced a similar labour crisis for the kharif harvest. Soon, an MGNREGA-driven labour shortage rapidly became the received wisdom in corporate circles. This, even as it increasingly became clear that it was not the MGNREGA template of rock-bottom wages paid out at unpredictable intervals for backbreaking work that was causing the problem but unprecedented economic expansion. In particular, the booming construction industry became a major employer of contractual labour from India’s poorer eastern states, drawing labour away from the fields and factories. 

But Larsen & Toubro (L&T) Chairman S N Subrahmanyan is not an outlier in his latest pronouncement on work and workers. For India Inc, like big business everywhere, the standard response is to view welfarism as an impediment to business plans. During the Emergency, when civil liberties were being violated in every possible way by the state, businesspeople openly praised Indira Gandhi (except those who inconveniently found themselves caught in the coils of the laws related to internal security and foreign exchange). Such untrammelled authoritarianism, it was thought, was good for business because it forced labour to fall in line whatever their grievances. They, like many in the Indian middle class, fully imbibed the Orwellian slogan daubed on public places: “The Nation Is On The Move”. Many pointed to the faster growth during the period, ignoring the fact that the real cause had less to do with draconian bans on strikes and protests than the age-old factor that influences the Indian economy to this day: Bountiful monsoons in 1975 and 1976. 

Now, it is possible that L&T, one of India’s most successful engineering companies by a long margin with billions worth of projects under construction, is struggling to maintain a stable labour force. Mr Subrahmanyan is not wrong in highlighting the issue but in diagnosing its cause. L&T needs 400,000 workers but hires four times that number to account for attrition. This is admittedly a problem for many other labour-intensive businesses. But welfare schemes are not the cause of his problems.

It is a fact that the domestic migration rate has been falling steadily; it fell from 38 per cent of the population in 2011 to 29 per cent in 2023, according to a report by the Economic Advisory Council to the Prime Minister. But the report did not identify the MGNREGA, Jan Dhan, and direct benefits transfers as reasons for this tapering. Instead, it pointed to localised economic growth and improved infrastructure — both physical and social. In fact, it added, national social-security schemes such as the Ayushman Bharat medical insurance scheme and one nation one ration card — it could have included online instant payment systems — are all likely to ease the plight of migrant blue-collar labour. 

To this can be added the fact that demand for work under the MGNREGA has been subdued for most months this financial year compared to the post-pandemic years. This drop in demand would have been expected as the economy recovered but the fact is that large numbers of migrant labour did not return to their original places of work. A Reserve Bank of India (RBI) report pointed out that the slack was taken up by an improvement in the rural economy, including the agricultural sector. Interestingly, the RBI report also pointed out that employment in the organised manufacturing sector had grown steadily, suggesting that companies like L&T faced more competition for labour services from other organisations. At least one of them would be the Government of India, with its massive Rs 111 trillion National Infrastructure Pipeline with over 1,100 projects under development, most of them being implemented by private players. 

The L&T chairman also suggested that his conglomerate was competing with employers in West Asia. Big employers in India may, however, also need to introspect on why labour working in India records such dismal productivity levels when Indian workers see dramatically improved productivity — despite being paid higher wages — in West Asia. 

As for white-collar labour, the post-pandemic flexibilities of Work from Home and flexi-hours have morphed from privileges to entitlements. Mr Subrahmanyan’ observation that requests for white-collar workers to migrate from one city to another leads to resignations is a reflection of today’s realities. You feel for him. He grew up in a work environment where limited job opportunities forced you to do whatever the company asked (including, perhaps, working on Sundays). But as the head of a Rs 2.21 trillion corporation in the 21st century, he has to come to terms with the fact that labour markets today, of whatever hue, have changed forever.