India’s living-wage gap: another modern slave work ethos


Álvaro J. de Regil

India is one of the so-called BRIC countries of the global economy; an acronym coined by global financial speculator Goldman Sachs –a key player in the global crisis that we are far from overcoming– to refer to Brazil, Russia, India and China. In 2003 this so-called institutional investor published a paper that argues that, over the next few decades, the growth generated by the large developing countries, particularly the BRICs, could become a much larger force in the world economy than it is now. The paper suggests that, if this goes right, the economies of the BRICs together could be larger than those of the U.S., Germany, Japan, France, Italy and the U.K. combined.

As could be expected, things are not going nearly as they envisioned, but it is indeed a fact that the overall size of these economies is already ranking them among the largest in the world. China is already the third largest economy in the world, in GDP terms, behind Japan, and it is bound to surpass it at any moment now. India is currently the twelfth largest economy and it is slated to become larger than Japan before 2050, assuming the current unsustainable marketocratic context remains. Yet, since both China and India also have the two largest populations in the world, and endure a high incidence of inequality, their per capita gross national income, in purchasing power parities (PPP) for 2008, ranked them 122 and 153 respectively in the world. Relative to trade, in 2008 China was the second largest U.S. trading partner, whilst India was fourteenth. Similarly, in 2008 China was the second largest exporting nation, after the combined exports of the European Union, whereas India ranked eighteenth.5 Moreover, unlike China, India is not yet a strategic trading partner for the U.S. The structure of its economy explains why. Whereas China had 112 million people working in the manufacturing sector in 2006, India only had 8,8 million or 7,7% of China’s workers formally employed in the sector. As a result, the value added contribution of the industrial sector –including the informal manufacturing sector– was only of 29% in 2008, whilst Chinese’ industries contributed with 49%. In contrast, India’s service and agricultural sectors contributed with 54% and 17% respectively, whilst in China they contributed with 40% and 11% respectively. India’s service sector is rapidly becoming a contributor to exports thanks to the marketing of India for the outsourcing of software development, outsourced research-and-development and a wide array of customer relationship services delivered over the Internet or phone lines. India’s high incidence of bilingualism has enabled it to sell many outsourcing services to English-speaking countries, which would otherwise be provided in domestic facilities in the home countries. The catch, to be sure, or comparative advantage, is always the offering of this labour pool at a meagre labour cost that has nothing to do with the actual cost of living in India –in PPP terms. Thus, wages in the sector do not constitute, by any means, labour endowments of a living wage condition but clearly of the modern slave work kind: the system of labour exploitation that is so pervasive across the developing world.

Indeed, relative to the real value of the manufacturing wages, India’s living-wage gap is not as dramatically dire as that of China. However, as could be expected, it is still one of the worst in the world, for it clearly exhibits its sheer modern slave work nature. As a result, India’s increasingly deregulated economy is rapidly becoming a very important source of misery wage manufacturing workers for the Darwinian capitalist system of today’s global corporations and their institutional investors. India’s population is growing faster than China’s, and it reached 1,14 billion people in 2008, amounting to 86% of China’s 1,32 billion population. Given that India’s demographic structure depicts a “bottom heavy” or much younger population structure than China’s, it will contribute, for the foreseeable future, a fast growing pool of available labour force to the global economy. Whereas there is increasing talk about China reaching a turning point when its pool of surplus labour would start declining, India is expected to contribute, over the next few decades, a larger labour supply to its manufacturing sector than China. Yet, to be sure, this will continue to occur at rather meagre real wages. Consequently, along with China, India will continue to exert tremendous downward pressure on the wages of all the developing nations that have bet their economic strategy on the traditional centre-periphery relationship, anchored on the offering of comparative advantages. In this way, from the perspective of real democracy and human rights, this poses a rather intractable problem for the labour endowments of workers worldwide, but all the more so for those in the periphery of the world’s Darwinian capitalist system in which we have been undemocratically immersed.

Brief prepared in August 2010. For a full review of this brief, click here or on the picture to download the pdf file.