The Labour Puzzle

AT TIMES, IT feels as if the only ones bending backwards are those of us who’ve read too much for our own good. Or can’t rid ourselves of the itch to slap our snapshot of reality onto an elegantly curved graph of an economic theory—an error that some ancient texts would call ‘adhyaas’ (it’s eminently googleable, try it). Trying not to slip up, however, is particularly tough when the slope in question is this odd little thing called the Backward Bending Supply Curve of Labour.

At first glance, the theory backing it makes intuitive sense. One can devote time to either labour or leisure, and while workaholism does exist, it’s only human—and rodential and avian too—to prefer the latter of the two. If one earns more for every extra hour put in, one would work more and more to pack in the money, but only up till a certain point. Once the ‘income effect’ kicks in, a rising pay packet induces a sharp reversal; more moolah makes one want to work less and take more time off. An extra hour to oneself is now more satisfying than the extra dough one could’ve made. People do it, rats do it, mice do it. Even pigeons, which happen to be ace slackers—once their bellies are full—among bipeds of the feathered kind, say researchers. The unstated message of such lab tests on other species, of course, is that the broad concept of a bend in the Curve shalt not be debunked. It applies to all, it all adds up, and if this implies that a point arises in every job market after which higher pay levels result in less work getting done, a kind of natural cap on what employers ought to pay people if they know what’s good for business, then so be it. Worse, if cultural conditions dictate a bend backwards at low levels of income, then that’s just too bad for the hard worker aspiring to a better life; best, then, to go with the flow, slacken off and spout words of wisdom on destiny or whatever. By the same token, it follows that too many job markets with low bend-back points could cramp an entire economy. No, it’s not a pleasant thought in a country as poor as this.

So, to what extent do workers in India conform to the Curve? And if they do, at what point do they ease off? Since the market for daily-wage labour (‘majdoori’) is the only one that has not been ‘distorted’ by modern complications like job contracts, office rules and KRA incentives, it suggests itself as a good place to look.

It’s not a good time to look, though, as it turns out, barely three months after the Centre expunged not just high-value currency notes, but also—as collateral damage—the bulk of demand for manual labour, especially for construction projects.

“I have been standing here looking for work since eight in the morning,” says Dharmendra, a 19-year-old daily wager, still shivering at 10-past-10 in the fog that has only just begun to lift over a street crossing near Gurgaon’s Sikanderpur Metro station, a spot where thousands gather for contractors to come by and pick up a lucky few for all-day grunt jobs. Some months ago, their wages used to range from Rs 350 to Rs 500 per day, but many are now ready to work for less, he says, and at the risk of being relieved several hours later than promised. “I have had only four days’ wages since notebandi,” says this teenager from Beguserai, Bihar, his voice thinning to a plea, “and no work at all for two months.”

These are hard times, 27-year-old Sanjay Singhania of Bhagalpur, Bihar, barges forth to say. “Yeh log dhokebaaz bhi hain.” Employers often refuse to pay up and then tolerate no protest, he adds, showing a hand he’s had broken at work. It serves as a cue for others to mill around and air their woes. Some have been evicted from their homes, a few have been beaten up by creditors, and nobody knows when all this will end.

Given their desperation, it seems insensitive to even ask about time off. Earlier, Singhania says, he used to go visit his family in Bihar every four months, but putting together the Rs 15,000 he’d need for such a break is simply out of the question now. Intoxicants, he whispers, are what many make do with. “They drink and dream of being rich. Some just want to ease their aches. They even take needles,” he says, unsure if he should envy the two men who’ve just been picked from a crowd of hundreds at the chowk. “They’re being taken to lay 40 metres of cable on word of Rs 350 each, but who knows what they will get or when they will be let off? Even 40 metres is a lot for two men, but there must be 50 or 60 metres to do.”

In some parts of India, the Rural Jobs Guarantee is found to have deprived urban projects of workers, an outcome perhaps of the Backward Bending Supply Curve of Labour

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The impact of demonetisation, however, might only be a blip in the larger scheme of things. For a longer view, older workers prove better subjects to quiz. Not only do they express less anger, they are clearer about how they balance labour with leisure under normal circumstances. Mukesh Nand Kishore, for example, a 40-year-old who’s been on daily wages for 18 years, says he has “no bank account” but likes to go back home to his Kumhrai village in UP every four months for a three-month vacation. That’s if his earnings allow it. The enabler, he says, is a monthly take- home of Rs 20,000, which is enough to cover his rent of Rs 4,000, rations of Rs 6,000 and other expenses for a wife and two sons, his daughter already having been married off (via a costless jaimaal at a temple). This year, he’s not sure if he’ll be able to afford a break. He’s had only 36 days of work in the past three months, though his wife made Rs 6,000 this January. God, he hopes, will play the job-giver—and rest assurer—of last resort. “It’s all in the hands of Parmatma.”

With or without divine intervention, an entire quarter off after every four months of work does sound like a classic case of the Backward Bending Supply Curve of Labour. But the younger lot seem somewhat nonplussed as they listen to Kishore speak. Might their attitudes have raised the income at which their Curve begins to bend? Could an emerging set of lifestyle aspirations be playing a role in this? For all the adversity of the cash crunch, they’ve all kept their mobile phones paid up and running. If they could afford smartphones, one of them admits, they would upgrade.

IN ACADEMIA, THE CURVE is frequently cited to explain such phenomena as the falling female participation in India’s workforce, a trend that’s gaining force as the country emerges from poverty. The reasons, as Professor Jayati Ghosh of JNU lists them, include higher levels of women’s education, firewood gathering having become a thing of the past, greater mechanisation of farming (with machines under male operation), and a ‘decline in distress work as wages and real incomes of households improve—the family-level Backward Bending Supply Curve of Labour’, apart from ‘the role of MNREGA in providing better work alternatives and reducing the need for extremely arduous and low paid work.’

Construction workers in Gurgaon appear to exhibit behaviour that conforms with both the classic textbook model of labour supply and an alternative one that takes grim realities into account

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Brought in a decade ago, the National Rural Employment Guarantee scheme—which assures a member of every rural family at least 100 days of work at a daily wage of about Rs 200—was arguably the last time a Central policy had an all-India impact on the unskilled labour market. In a single stroke, it upped the wages that had to be dangled for employers to lure migrant labour as harvest hands on farms, as hard-hat workers at construction sites, and as various other doers of odd jobs elsewhere. In some parts of India, according to a few surveys, even offers of higher pay have failed to attract labourers. ‘A crucial dimension of the rural labour market is the target income of the poor,’ write Parmod Kumar and Dipanwita Chakraborty in MNREGA: Employment, Wages and Migration in India (Roultedge, 2016, 318 pages, Rs 10,000), ‘Their target income is the root cause of the Backward Bending Supply Curve of Labour… the income from MNREGA alone can be a substantial part of the target.’ Once a family reckons it has made enough, under this analysis, it looks for no further work, ‘which may lead to an aggregate reduction in agricultural output’ in spite of ‘a moderate improvement in agricultural productivity’ delivered by local projects under the scheme. ‘So the policy focus,’ Kumar and Chakraborty argue, ‘should be to increase the target income by creating more market access and opportunities for poor households [to enhance] their standard of living.’

Austerity and aspiration have always had a vexed relationship in India, but almost everyone who worries about how low-level bends in the Curve could condemn millions to drudgery wants the latter to win. Not just for the sake of the poor, but also for the economy as a whole. And for this, perhaps nothing would work better than a massive outreach of bank credit. Aadhaar to the rescue, then: accounts for all and loans for everyone with a verifiable identity. Once better lives begin to beckon, goes the rationale, more work will get done.

So far, so earnest. But what if the Curve turns out to be false? Among the scholars who are sceptical of its universal applicability is Professor Pradipta Chaudhury of the Centre for Economic Studies and Planning at JNU’s School of Social Sciences. He draws attention to the likelihood that ‘fundamental differences exist between the realities of poor societies and the economic conditions underlying a labour supply schedule in the text books.’

In this view, a poverty-stricken market does not necessarily display the same behaviour. People here do not work more for more money and then merely reverse this at shockingly low levels of income, as the classic Curve would have us think. Instead, plain survival dictates life. Not only is the ‘unit of labour supply’ a family (rather than individual), the goal of its members is to meet subsistence needs, for which a modest target is set and labour services promptly withdrawn once it’s met. Why so? Think slavery, think caste oppression, think of all the indignities at the edge of starvation. The less one earns, the more one is forced to work. If one gets enough money, one would stay as far away from a task master as possible. The bending, in other words, begins right at the onset.

Professor Chaudhury has studied it in detail: ‘Some evidence shows that in a predominantly agrarian economy, lower wages and incomes are associated with higher work participation rates, greater shares of females in the workforce, more unemployment and out-migration of labour. This suggests that the labour supply curve in such an economy is downward sloping.’

If true, the implications of such a slope are grim: ‘A rise (fall) in the wage rate, or an increase (a decline) in amount or regularity of employment opportunities for adults, caused either by economic change or by state policy, will lead to a drop (rise) in supply of labour, particularly of child labour.’

WHICH OF THE TWO GRAPHS to trust? Is life below the poverty line worse than what the classic Curve leads us to imagine? Since data from field studies can be tortured to confess adherence to either model of labour supply, it’s hard to make out. Contradictory though they appear, both are plausible. Or perhaps such puffy parabolas of market theory should be seen as art more than science, as attempts to reflect the truth with all the follies that attend such gestures. So long as these drawings evoke empathy and set us thinking, it’s good enough.

“Majdoor toh majboor hai,” sighs one of the men looking for work in Gurgaon. He feels so helpless that how much to work or not is the last thing on his mind. Almost nobody is hiring. Contractors say there just isn’t enough cash to go around. Yes, access to credit would help. What about hand-outs—as in a ‘Universal Basic Income’? He’ll have to see the money to believe it.

Alas, at the very bottom of the scale, that would still leave the oppression factor unaddressed. It’s a tough nut to crack. Much bowing and scraping goes on even at higher levels of employment. But, surely, something can be done to ensure that all bending, backwards or otherwise, happens by choice.

About The Author

Aresh Shirali