Labour pains

Labour pains

Children making clothes for the American clothing company Gap Inc. and adult labourers rioting in Dubai seem disparate events, in different worlds with no connect. Yet both illustrate the poor working of labour markets in India and the world at large.

Both “incidents" took place last week. It was found that a subcontractor of Gap in New Delhi was employing children of 10 years to sew clothes. Apparently, the children had been “sold" by their impoverished parents.

In Dubai, some 4,000 labourers struck work protesting their low wages and poor working conditions. Of these, 90 from India are being prosecuted.

At a proximate level, the causes of the two incidents are different. In Dubai, it is the weakening of the dollar, to which the local currency, the dirham, is pegged, that has resulted in real wages falling.

When coupled with rising costs of living and the lower amounts that Indians can remit from Dubai, the context in which the protests took place appears to be clear. In the child labour case, it’s the poor implementation of laws banning child labour that seems to be the cause.

Both, however, demonstrate the limits to the working of international labour standards. In spite of attempts at labelling products as “child labour free", India continues to employ an estimated 13 million children.

Child labour activists place the figure as high as 60 million. The fact that children were found working in the garments export industry—a $10 billion industry that grew by 20% last year—only makes the problem appear in starker hues.

Apart from poor implementation of child labour laws, institutional arrangements that can arrest the phenomenon are missing. For example, studies have shown that compulsory schooling of children can go a long way in curbing child labour. India is far away from compulsory schooling for children and more so for labouring children born of poor, impoverished, parents.

It’s also clear that improvements such as the smooth functioning of adult labour markets can keep child labour at bay. That, too, is not taking place.

There is still hope that implementation of social clauses in trade agreements may slow down child employment. But it’s not clear what trade arrangements can do when labourers, instead of goods manufactured by them, move to another country.

The Dubai episode is a stark reminder of that.

In Dubai, there is a double-barrelled problem. Most of the labourers who go there have no knowledge of contract law. They do not know their rights and obligations under the law, which in any case is implemented in an opaque fashion. They also have little or no access to legal counsel. When coupled with the prevailing economic problems—low wages coupled with the falling exchange rate of the dirham— it’s a combination designed to be combustible.

In any case, these labourers are mostly engaged in construction work or in menial jobs. There is little that international labour standards, even if they are implemented in a hypothetical case, can do. The firms in Dubai have no pressure on them to treat their labour fairly. The economic incentives that can make them fall in line simply do not exist.

In both instances, the demand and supply of “bad" labour is high. International labour standards applicable to all nations will not work. To bring the situation back to a “good" equilibrium—where labour is treated fairly and market wages prevail—requires institutional innovation of an order that does not exist at the moment.

Perhaps it’s time that governments spent some energy in creating the right institutional framework, instead of expending it on useless debates about organized versus unorganized labour.

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