There is no silver bullet to fight inequality
Less dogma and more evidence should guide our fight on this front
That economic growth has led to significant reduction in absolute poverty in India is beyond doubt. This growth has also brought with it increasing inequality. The longterm way to achieve equality is to provide quality education to future wage-earners. Inequality in skill endowments, however, is not the only factor which is responsible for wage inequality in India. Differences in bargaining power of workers vis-à-vis employers, social biases such as discrimination against women and lower caste workers and obligations which make it mandatory for employers to make contribution s for social security of workers etc can play a large role on determining the extent of wage-inequality in an economy.
Pro-market voices often blame India’s labour laws as an impediment to next-generation reforms. The opponents of such a view believe that any change in these laws will dilute the rights of workers in India. An International Labour Organisation (ILO) report shows that this debate is more likely to be a false binary. The report says that only 10.7% of India’s workforce had a trade union membership. Share of labour in national income has actually gone down between 1981 and 2013. These statistics show that the balance between capital and labour in the economy is tilted in favour of the former. What is ironical is that India’s labour laws have also failed to work to the advantage of workers. Despite the regulations, over 33% of wage workers were paid less than the indicative national minimum wage in 2009-10. The report also calls for facilitating transition from the informal to the formal economy while ensuring the preservation of existing livelihoods. Such prescriptions are easier said than done. Many small informal businesses work on very small margins and are only viable because they manage to stay out of the tax net and social security commitments.
Less dogma (of either variety) and more evidence should guide our fight against inequality.