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Problems of Labour in India | Economics


Land is an indispensable but a passive factor production in economics. No production is possible without the use of labour. We cannot expect any production without labour i.e., why it is said to be an indispensable and active factor of production. Labour is one of the main factors which constitute the material foundation of society.

In an economy, where agriculture is the primary occupation and most of the national income is contributed from agriculture, problems related to labour are there but not in a complex form. Labour problems may be considered as social problems which result among different groups where there is absence of cooperative endeavor for the realization of common goal.

In agriculture, labour problems do not arise because of the presence of cooperative mentality. Workers and owners of means of production work together with a sense of cooperation and therefore they do not think in terms of their exact share and the exploitation in the hands of the owners. In agricultural sector mainly family farming prevails where everybody thinks in terms of contributing towards production.


Even if some of the person is removed from this sector, the production remains unaltered and therefore total production is same and the problem of disguised unemployment is faced by this sector. It means agricultural sector does not realise labor problems, however they crop in the system itself.

Things have altogether changed because of the changes in the structure of the economic system. With the development of the society, there is a demand for more goods and services. Agriculture sector cannot meet the rising demand for goods and services. It is the industry sector which can discharge the things at this juncture.

When there is need for large scale production, division of labour and specialisation, machinery, senior skilled labour etc. are automatically on the scene. When normal social relation guided by the existing norms and values are disturbed then problems of social nature automatically emerge. Industries being a substantial change in the society.

Industrial revolution brought a substantial change in our contemporary society. Similarly the economic order which India wants to establish is also changing very fast with the expansion of money supply and credit. The monetary institutions are increasing and the mode of transactions is also changing very fast.


In advanced countries the share of agriculture is low and that of manufacturing and services is high. With the accelerated growth of population in the last few years, the pressure of population on the available land has increased tremendously in the absence of growing industries at the same pace of absorb the new labour force.

The labour ratio being higher, agricultural holdings have become very small and uneconomic. All these factors have brought a radical change in the agrarian Indian society. Consequently various problems are arising out of the new situation e.g. the problem of unemployment; social security and industrial relations etc. are the outcomes of the process of industrialisation.

(1) Wages:

Wages are a payment for the service of labour, whether mental or physical. Though in an ordinary language an office executive a minister or a teacher is said to receive a salary, a lawyer or a doctor a fee, and a skilled or unskilled worker a wage, yet in economics no such distinctions are made for different services and all of them are said to receive a wage.

In other words, wages include fees, commissions and salaries. It is another thing that some may be receiving more in the form of real wages and less in terms of money wages and vice versa. Wages may be paid weekly, fortnightly or monthly and partly at the end of the year in the form of bonus.


These are time wages. But the bonus may be a last wage if a work is finished within a specified period or before that. Wages are also paid in accordance with the amount of work done, say in a shoe factory or a tailoring department as per one pair or parts manufactured.

If the rate per pair of shoes or for pants is Rs. 5 a worker will be paid according to the number of pairs of pants manufactured. These will be piece wages. Sometimes, time wages are supplemented by wages earned by working extra time. They are overtime wages.

Sometimes wages are regulated by the State in the interest of the low paid workers in certain or all industries that is minimum wage which ensures a minimum standard of living. In a capitalist society the workmen are exploited. In such a society there are two main classes—the capitalists and the workmen; the former owning the means of production and the latter selling their labor-power.

Owing to the expansion of large scale production with the help of machinery, the number of wage earners increases. Over production is another characteristic of an industrial society. Commodities are produced for the market, and when the market contracts workmen are rendered unemployed.

When demand for commodities increases, their labour power is required again. Such laborers form an industrial reserve army. Even if trusts and cartels are organized, that does not mean that all the workmen will always remain employed. Some of them may still remain unemployed because such industrial organizations close their unremunerated units.

Another contributory cause is the expropriation of the proletariat from land who move to the cities to swell the number of their birth rate. In reality capitalism is the outcome of class struggle which will overthrow the present regime with the result that the expropriators will themselves be expropriated.

Capital is taken to mean money which is used for exploitation. Whereas in pre-capitalist society commodities were produced for their value in use (utility) and their exchange increased utilities, money was not used for exploitation. In a pre-capitalist economy, the equation of exchange was C-M-C in which C stood for commodity and M for money.

Commodity was exchanged for money with the help of money another commodity was purchased. But in a capitalist society since production is undertaken for profit, the question of exchange is M-C-M. The capitalist enters the market with M. M. M the difference being the profit of the capitalists. This shows the degree of exploitation.

While the first process is based on qualitative difference between two goods, the second process must be based, if it is to have any purpose at all, on a qualitative difference between two sums of money. In a slave feudal society exploitation was open; in a capitalist society it is hidden. A worker in any industry works for example 8 hours a day.


It is clear, therefore the exchange value of the product of his labour, will be equal to 8 hours’ labour. The wages that he gets are equivalent to 5 hours labour (necessary labour); and the remaining three hours’ labour is called surplus labour which creates surplus value, and it goes to the capitalist.

Wages in India are very low. A thorough analysis of the index number of cost of living, money and real earning, may reveal the right of the workers. Effort were made to ameliorate the grievances of workers and the British Government appointed a commission to go into the matters of labour the commission (Royal Commission) suggested exploring the possibilities for fixing up machinery which can look into the matter of the wages but due to certain administrative difficulties the idea was dropped. After Independence, the Minimum Wage Act was passed in 1948 and this Act has been amended subsequently from time to time.

The question of wage is of great significance and importance to the working class. Any one impalpable of maintaining himself and his family out of his income is bound to become discontented.

There will be no peace in his mind and he would always aspire to overthrow the order which compels him to lead a life of poverty, degradation and humiliation inspite of his hard work. It will give rise to industrial unrest. Ultimately the industrial production will suffer. Therefore, a study of wages in different industrial establishments is of paramount importance.


At present, in India, there are three views with regard to wages. The employer’s association is trying for fixing a wage which is equivalent to the subsistence wage. The workers unions are striving for a living wage, while Government is considering a middle way approach for fixing fair wage.

The minimum wage is higher than the subsistence wage and the fair wage is something between minimum and living wages. The Fair Wage Committee (1949) stated that, “the state of national income is highly relevant to the problems of wages because no wage policy can be regarded as just or even economically sound unless it encourages increase of the national income and secures to the wage earner a legitimate share in that increase.”

We consider that a minimum wage must also provide for some measure of education, medical requirements and amenities. The demand for a living wage is a principal objective of the workers and the pressure for increases in existing wage levels constitutes a problem for economic development.

(2) Unionism:

The trade union is a unique organisation in that it explicit, indeed sole, purpose is to protest. The basic fact that has to be firmly grasped is that trade unionism is a system of opposition and not of government, and that unions cannot be responsible for managing anything except their own internal affairs.


Trade unions exist to oppose exploitation in such diverse organisations as factories, banking and insurance companies, government bureaucracies, universities, research institutions and even cooperatives. Inequality is universal to the distribution of money and power in modern industrial society.

Of course, some organisations are economically and politically more exploitative than others. Trade unions have a number of methods open to them to go about the job of protecting against inequality and ensuring a more egalitarian distribution of economic gain and political power. They may negotiate with the management the terms and conditions under which their members are employed.

They may bring pressure to bear on the government to enact legislation that will ensure a better deal to working men. But their most important weapon, and one which unions have fiercely clung to throughout their history, is the collective withdrawal of labour, otherwise called the strike.

The collective withdrawal of labour would be meaning less if the employer were permitted to get others to do the job of striking men. Hence the reliance of unions on picketing, preventing the entry of black-logs and strike breakers of all kinds.


Stated boldly disruption of normal industrial production and the provision of essential services is an inevitable consequence of the pursuit of legitimate trade union activity. Unions cannot protest except through disruption.

The problem of collective bargaining and industrial democracy has become most complicated. It has generally found that no solution is equally acceptable to employers as well as to employees. There are strikes and lockouts on account of low wages, long working hours, bad working conditions, non-payment of dues and bonus, absence of security of employment, absence of medical aid and victimisation.

The role of organised labour becomes more significant in the context of present industrialisation and economic development of the country. Hence the study of unionism is very important aspect of the study of labour problems. The agricultural labourers are scattered and are unorganised with the result nothing concrete has been done to ameliorate their grievances.

(3) Employment Security:

Lod Keynes diagnosed unemployment in advanced economies to be the result of a deficiency of effective demand. It implied that in such economies machines become idle and demand for labour falls because the demand for the products of industry is no longer there.

Thus Keynesian remedies of unemployment naturally concentrated on measures to keep the level of effective demand sufficiently high so that the economic machine does not slacken the production of goods and services. This type of unemployment caused by economic fluctuations did arise in India during the depression of thirties which caused untold misery.

But with the growth of Keynesian remedies, it has been possible to mitigate cyclical unemployment. Similarly after the Second World War, when wartime industries were being closed there was a good deal of frictional unemployment caused by retrenchment.

These workers were to be absorbed in peace time industries. The process of rationalisation also causes displacement of labour. But more serious than cyclical unemployment or frictional unemployment in an underdeveloped economy like India is the prevalence of chronic under-employment or disguised unemployment in the rural sector and the existence of urban unemployment among the educated classes.

It would be worthwhile to emphasise here that unemployment in underdeveloped economies like India is not the result of deficiency of effective demand in the Keynesian sense, but a consequence of shortage of capital equipment or other complementary resources.

The shifting levels of business activity constitute the most important disrupting factor in a capitalistic economy. The seasonal, cyclical and secular changes in activity lead to corresponding variations in the total demand for labour. Loss of jobs may also result from changes in technology or from the inevitable imperfections in the operation of a free labour market.

These various causes interact on each other e.g., technological unemployment tends to be greater during periods of cyclical decline in business activity. The sheer idea of unemployment is prejudicial to a worker’s happiness and efficiency, while actual unemployment is the chief source of social maladies and exploitation.

The economic aspect of unemployment is closely related with social, moral and even mental aspect of a worker. An unemployed becomes easy prey of many evil habits and his talents are rusted. For him, all social norms and values appear in a state of dilapidation and ultimately he loses his mental equilibrium.

The Planning Commission has preferred to use NSS data for making a projection of unemployment for the 1990. Taking 28 million as the backlogs of unemployed in 1990, net additions to the labour force during 1990-95 are expected to be 37 million. Thus the total number of persons requiring employment during the Eighth Plan would be around 65 million.

It is expected that during 1995-2000, labour force would increase by 41 million. Thus by the year 2000 A.D. the total number of job seekers would be around 106 million. This analysis is able to convince that the area of employment security is main source for all labour trouble and without the study of this area; we will be unable to understand the nature and scope of labour problems.

(4) Social Security:

Social sufferings such as poverty, unemployment and disease are the sound grounds for advocating the provisions of social security measures in India as national programme.

Social security is a dynamic conception which is considered in all advanced countries of the world as an indispensable of the national programme with the development of the idea of the welfare state; it has been considered to be the most essential for the industrial workers, though it includes all sections of society.

Social security is that security which the society furnishes through appropriate organisation, against certain risks or contingencies to which its members are exposed. These risks are essentially contingencies, against which the individual cannot afford by his small means and by his ability or fore sight alone.

As the State stands for the general well-being of the people, it is the duty of the state to promote social security which may provide the citizens with benefits, designed to prevent or cure disease, to support him when he is not able to earn and to restore him the gainful activity.

To enjoy security, one must be confident that benefits will be available as and when required. Social security means the security as provided by the society to its members, against the contingencies, they cannot meet out of their small means effectively.

Such contingencies imperil the ability of the working man to support himself and his dependents in health and decency. It has been realised after World War II that the State exists for the general well-being of the people, it must be the State’s responsibility to provide social security to its citizens.

That security society furnishes through appropriate organisation against certain risks to which its members are exposed. These risks are ignorance, want, disease, squalor and unemployment. The man requires freedom from these contingencies and the provisions against these risks are labelled as social security measures.

Social security is a very comprehensive term and includes in its schemes of social insurance and social assistance as well as some schemes of commercial insurance. Social insurance scheme protects an individual from falling to the depths of poverty and misery while social assistance is one of the devices according to which benefits are given as a legal right to the workers, who are eligible for such assistance.

Commercial insurance includes all voluntary efforts and covers individual risks only. The social security system of a country consists of its social insurance and social assistance schemes and a clear-cut demarcation cannot be made between these two. Providing social security for the workmen against social obligations to the duty of the State towards its countrymen.

It includes security of employment, security of income and security of work. Although social security measures had been introduced in many countries decades ago in India they were introduced only after the Independence of the country because of the lack of official sympathy and the weakness of trade unions. Thus, the importance of social security measures in India cannot be exaggerated.

The question arises, does the realm of social security belongs to the area of labour problems. From the point of view of labour economics we can have only three areas. Wages, unionism and employment but from social point of view we have to take a broad outlook of the whole situation.

And it is certain that in the absence of social security measures many labour problems may arise. Society is supposed to provide security through appropriate agencies and organisations to its members against certain risks to which they exposed.

It is a well-established fact that ours is a poor country and the wages of our workers are so low and so niggardly as to permit anything but a below subsistence standard. In some parts of the country, it is too low to maintain a minimum standard.

It is, therefore, an open fact that social security measures are urgently needed to Indian workman.

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