1 Global Crisis and Its Macroeconomic Impact

The global economic crisis spread fast into the real sector of the Indian economy by the fourth quarter of 2008, destabilising in particular the external trade and export-oriented production. The annual rate of growth in the gross domestic product (GDP) at constant prices fell from 9.1% to 6.7% between 2007-08 and 2008-09 and export growth turned negative from the second quarter of 2009 onwards, which would have a major impact on workers in the export-oriented sector (Government of India 2007; Rakshit 2010).

Although workers in traditional industries and artisans production still do not fall under the purview of full-blown capitalist production relations, integration with the external market through trade makes these workers and petty producers susceptible to even mild fluctuations in economic activity in India and are likely to see a deterioration in living standards: (i) when they lose their jobs they find they possess little staying capacity to remain unemployed even for a short while, and (ii) they lack skills to get re-employed in other sectors during the crisis.

The dynamics of capitalist production and its inherent crisisprone characteristics have been theorised and debated from the standpoints of different paradigms. The financial capital marketled crisis in late 2008 and its spread to the real economy have been explored and debated in the Indian context as well. In spite of the differences in perception of the origin, causes and effects of the economic meltdown and the solutions suggested to avert it in the future, social scientists in general agree on the need to step up state mediation and enforce stringent regulations on actors in the financial market (Chandrasekhar 2009; Onaran 2009). Those with a left slant perceived the crisis as an inherent and inevitable outcome of the deep-seated contradiction of the capitalist system and therefore suggested a scaling up of state expenditure to boost effective demand and prevent the deterioration

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in the absolute standards of living of workers, as against the massive state-funded stimulus packages handed out by governments the world over to inject liquidity into the financial market (Patnaik 2009; Vakulabharanam 2009). The deterioration of living standards of workers during the crisis calls for a political solution to avert it in the long run and it rests on the mobilisation of workers and peasants to wrest control from the state (Vakulabharanam 2009). Contrary to the often suggested remedial measures of increased government spending and regulatory measures, Beams (2008) argued that state mediation to improve the living standards by augmenting government spending would only exacerbate the crisis because improving the living conditions of workers would further squeeze the profit of finance capital. This view stems from the fact that the crisis has originated from the overaccumulation of fictitious capital in relation to the surplus extracted. Rescue packages for the financial intermediaries by governments around the world would further drive down the living standard of the wage-earners (ibid).

In the discussion on capitalist crises, Marx restricts his remarks to the impact of the crisis on workers in terms of wage cuts and massive unemployment. The consequences of unemployment, wage cuts and other measures adopted to exploit the vulnerable in the labour market are discussed in greater detail in Capital Vol 1. As in the fledgling phase of capitalist growth, the income and assets of the rich grow much faster, relegating constantly the living standard of the working class even during a crisis. The absolute decline in the average standard of life of workers takes place during a crisis due to unemployment, cuts in wages and other benefits to workers. The standard of living comprises:

(i) a physical component; and (ii) a historically evolved and socially determined cultural content (Marx 1984: 165).

As employment and wage income fall during a crisis, workers tend to curtail first the expenditure on their social cost of reproduction or the social component of the wage. In the initial phase of an income fall, the worker tends to cut the expenditure on health and education. As the crisis gets aggravated, workers are forced to compromise on wages and other allowances to remain in their vocation, which in turn makes them cut their spending on necessaries indispensable for perpetuation – in other words on the quality of food, clothing, shelter and other basic necessities of life. Alongside, the State too would also be cutting down its spending on the social sector as the apparatus faces a credit crunch due to the crisis. The impact of the crisis on workers in the unorganised sector in particular is multidimensional. However, on theorising the impact of economic crisis, Marx perceived labour as a homogeneous and composite entity, implying that a crisis has an impact on labourers uniformly across different social groups, sectors and gender. In the setting of the recent crisis, the study hypothesises that the crisis has worsened the relative and absolute life standard of workers and further the extent of deterioration was more severe for workers of vulnerable social groups.

Sample Size and Study Area

The sample size for the study comprises 350 labour households in the unorganised segment, evenly distributed between the gem polishing and construction industries in Rajasthan.

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The selection of the gem polishing and construction industries for the study was guided by following factors: (i) gem polishing is a traditional industry with high labour intensity while the construction sector exhibits the characteristics, to some extent, of modern industrial activity, (ii) the construction industry is highly sensitive to income change whereas the demand for gem and jewellery is less income elastic, and (iii) the construction industry engages a sizeable number of female workers, while gem polishing is primarily a male-dominated activity.

Although a systematic stratified random sampling could have been more appropriate for the study, data constraints for stratification compelled us to go for simple random sampling. The samples for the gem polishing industry were selected from Jaipur city, historically known as the centre of jewel and diamond processing in India. Considering the spread out nature of the construction industry, the samples in this case were drawn from four adjacent districts, viz, Jaipur, Tonk, Udaipur and Dungarpur. Quantitative data on family income and living standard of workers, especially in the unorganised sector during a crisis period, is likely to be less reliable. Crisis-affected households naturally tend to exaggerate their hardships and therefore, information from the household survey was verified with employers. Focus group discussions (FGDs) were also held in many places. The qualitative and categorical expression of the impact of the crisis could, to a certain extent, help improve data quality. In this study, the crisis period covered six months from November 2008 to May 2009. Household information was elicited on changes in employment, income and living standards during the six months after November 2008, as compared to the preceding six months, the post- and pre-crisis periods, respectively. The primary survey commenced in June 2009 and was completed within 30 days.

2 Industry Profiles

Gem Polishing Industry in Jaipur

Gem polishing is the name given to a set of activities ranging from sorting of gem stones to its marking, cutting and polishing. The gems and jewellery business is a $45 billion industry in India. Jaipur1 in Rajasthan and Surat in Gujarat are the two major hubs of gem stone manufacture and exports in India. Although the domestic market for gems is fairly large, it is primarily an exportoriented industry depending heavily on external markets as more than 60% of the products find its customers abroad. Important items of exports from India include diamonds (64%), jewellery (34%), coloured gemstones and pearls (1.30%) (Economic Intelligence Service 2009). The major markets for Indian gems before the onset of the recession were: the United States (US) (30%), Hong Kong (22%) and the United Arab Emirates (UAE) (21%) in 2007-08 (Economic Intelligence Service 2009). Other export destinations of less importance include Belgium, Israel, Japan and Britain.

Exports of gems and jewellery from India were valued at $27,749 million, which accounted for 15% of the total value of Indian exports in 2008-09. Even before the crisis in 2008, the relative share of the US in exports of Indian gems and jewels had started falling. In absolute terms, exports of gems and jewellery

Construction Industry

The construction industry has three important characteristics:

(i) women workers are not allowed by tradition to assume the status of a main mason and they therefore remain mason’s helpers, irrespective of their experience and physical capability, (ii) male workers in the industry graduate to a mason’s status within 12-24 months of continuous work and to a main mason’s status after a few years, and (iii) for carpentry, entry is, to a great extent, restricted by caste, while women are forbidden from undertaking carpentry work. The labour market for construction workers, especially for masons and their helpers, functions differently as compared to the market for gem polishing workers. The workers in urban localities assemble at particular places in the town between 6 and 6.30 am. The master mason selects his team of junior masons and mason’s helpers, before proceeding to the work site. Little regional difference, therefore, could be observed in the daily wage rate for construction workers within a district in the urban areas, as the workers meet and discuss their work site issues during their brief interaction at the common place in the morning.

The daily wage rate of a mason and carpenter in Jaipur city was Rs 250, while a mason’s male helper received Rs 150 and his female counterpart had to be content with Rs 130 (June 2009). As construction activity slowed down, master male helpers were preferred to female workers as the daily wage rate for males fell to Rs 130. Often builders and contractors, irrespective of their scale of operation, contract out plumbing, electrical work, flooring and carpentry to the subcontractors to get rid of managerial issues pertaining to labour. Subcontractors keep a pool of reserve workers of different types in the construction sector to ensure uninterrupted labour supply to the work site. About 5 to 10% of the wage is deducted from workers and distributed to the array of middle men from subcontractors to master masons. When the labour market is dull, the commission rate too goes up. Even a mild change in the domestic economy has an immediate impact on the construction industry because the dependence of the construction sector on financial capital is highly pronounced. There exists another set of masons and carpenters too who take orders from individuals and carry out the work without agents’ help. They often do not get continuous work and the daily wage rate for them is 10% to 20% less than wage rates offered by builders. However, the wage rate for masons and carpenters are set and revised from time to time by those working with large builders under the contractors (they need to complete the work on time) and the masons and carpenters in villages usually follow the wage set in urban centres, but with a time lag of six to nine months depending on labour market conditions.

Workforce Composition

As mentioned elsewhere, the impact of the economic crisis was not uniform across social groups. A social group-wise composition of workers in gem polishing and construction industries revealed that dalits (3.80%) and adivasis (6.67%) in the total workforce of the gem polishing industry were relatively fewer in number than in the construction industry – where 28.70% were dalits and 23.70% were adivasis. Family size and earning strength of the labour households are positively correlated (Mohanakumar 2007). The average family size of a labour household in the Muslim community was 6.78 and it was 4.39 for Hindu labour households. Drawing on the Durkheim theory, studies on agrarian crisisrelated farmer suicides have highlighted the importance of joint

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families and social relations in mitigating the hardships of the affected during the crisis period (Mohanty 2001). It is found that more than 50% of labour households of the Muslim community in the gem polishing industry live in joint families, while the corresponding proportion among Hindus is 31.42%. Further, single-member labour households in gem polishing constituted 14% of the total and they were mostly migrants from other districts. The proportion of nuclear families in construction sector is high as compared to gem polishing, which is partly attributed to a relatively larger proportion of migration workers in the industry. Education and acquired skill enable workers to switch to alternative employment during a crisis period. The proportion of workers reported to have not attended schools was as high as 73% in gem polishing and 64% in the construction industry. It is worth mentioning that not even 2% of the labour households possessed employable qualifications of any type or skill to get re-employed in other industries during the crisis.

Impact on Employment and Income

It is a widely accepted practice for employers to lock out their production units during any crisis so as to push the burden of the economic turmoil onto the workers. In a fragile labour market, workers have little option but to be subservient to employers’ conditional ties. The impact of the crisis on the labour market could be captured by comparing the days employed, type of work, working hours and the allowances paid to workers during the pre-crisis period (before November 2008) in relation to the crisis period (after November 2008). Table 1 compares the response of employers in gem polishing and construction industries to the crisis situation. The important observations from Table 1 are: (i) workers were not thrown out of employment from medium and large units of gem polishing and construction on any significant scale. On the contrary, workers were subjected to different forms of intensification as evident from the fact that 16% of workers in the gem polishing and 2.30% of workers in the

Table 1: Crisis Impact on Workers (% Distribution within each industry, N = 350)

*-During the crisis period the working hours of unskilled and semi-skilled workers hired on time wage basis in the gem polishing industry were extended. It may be noted that working hours in the construction industry could not be extended further to any significant scale because mason’s helpers and mason’s assistants work with the main mason in the construction site. The main mason often takes the work on a piece rate and employs helpers and mason assistants. The tradition in the industry is that the assistants should stop working only after the main mason puts down his tools. Extension of daily working hours is practised when the labour market is dull. ** Working days were cut down by declaring holidays on less important festival days and on Saturdays and Sundays or in certain cases not opening shops in time. In the construction sector, the main mason either abstained from the local spot market or took a smaller number of workers to the site. Although it may appear that extension of working hours and reduction in employment days could take place simultaneously, its implications are different in the sense that the former extracts more from time wage workers. *** Other impacts included the lukewarm attitude of the employer to the worker. Even if a worker of more than five years of experience in production unit did not turn up for a few days, the employer did not enquire but replaced him with another one. This was never the case in the past. It was reported to be common for unskilled and semi-skilled workers. In the construction sector, there was no factory or workshop, but the master mason preferred more able-bodied and young male workers to females and aged workers.

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construction sector reported that they were forced to put in more hours of work. Further, compromising on the terms and conditions, 9% in the gem polishing and 14% of workers in the construction sector could remain in their previous jobs. Other measures resorted to by employers included delayed as well as part payment of wage; (ii) 34% of workers in the gem polishing industry and 70% in the construction sector reported a decline in the number of days of employment.

Table 2 supplements the qualitative response presented in Table 1. The average number of workers employed in gem polishing units was reduced by 61.01% and by 9.28% in the construction industries in May 2009 compared to October 2008. The fall in employment was more or less the same for both industries as it is not feasible to extend working hours beyond its physical limit. The daily wage rates of workers in the gem polishing industry were reduced by 35.57% during the six-month period between December 2008 and May 2009. To an extent, wage reduction was effected by degrading the workers’ status by substituting semiskilled workers with skilled workers, and unskilled workers with semi-skilled workers. While the nature of work is kept unchanged, the status change is manifested mainly in the wage rate. The wage rate of female workers in the construction industry was 20% to 30% less than that of their male counterparts. It is rather common that the less able-bodied lose their jobs first in a fragile labour market. In the construction industry, as male helpers were available in plenty at a reduced wage rate, female workers were pushed out. Table 2: Impact of Economic Crisis on Workers (N=350)

Impact Index Gem Polishing Construction Pre-Crisis % Pre-Crisis % Crisis Period Change Crisis Period Change

Average size of unit 7.97 4.95 -61.01 18.64 16.91 -9.28

Working hours 8.36 8.67 3.71 8.63 8.67 0.46

Monthly working days 26 24 -8.33 22 18 -18.18

Average monthly earning per labour household (Rs) 5,801 4,118 -40.87 12,000 9,000 -25.00

1 Average unit size in construction sector refers to the number of workers employed per day on an average in a construction site.

The average monthly earning per labour household in both gem polishing and construction sector recorded a fall of 40.87% and 25% during the crisis period. The average household income refers to the total income of all working members engaged in both primary and secondary occupations. No social protection exists for workers in the gem polishing industry while an abysmally small proportion of workers in the construction sector employed with large builders avail of certain benefits, but they constituted only 2% of the total workers in the industry in the study area.

Table 3: Average Monthly Earnings of Labour Households during the Pre-Crisis and Crisis Period (Size class distribution in %)

Table 4: Impact of Economic Crisis on Labour Households in Gem Polishing (% of households reporting low cost medicines (28% in gem polishing and 66.8% impact of each type)

Impact Indices Gem Polishing Construction Not Notchildren into the labour market to compensate for the Yes No Applicable Yes No Applicable

Reduced food expenditure 51.42 22.87 25.71 54.28 34.29 11.43

Changed residence 6.28 65.14 28.57 8.60 74.70 16.70

Stopped sending money home* 5.71 41.71 52.57* 10.23 24.57 63.21*

Stopped treatment 46.00 38.28 28.57* 63.80 25.90 10.30*

Reduced health expenditure 28.00 45.14 27.42* 66.80 31.90 12.30* college or shifting from private to government schools.

Sent children to work 5.71 64.59 29.7* 13.71 44.43 42.85* In the gem polishing industry, 15.40% of labour

Reduced education expenditure 15.40 53.70 25.70* 26.00 45.43 29.67* households reported that they reduced expenditure

Women and children pushed to work 6.28 61.14 32.58* 25.90 61.50 12.60* on education, the corresponding proportion in con-Domestic violence/conflict 26.28 42.28 29.71 55.00 13.38 31.72*

Excessive drinking 13.14 29.71 57.45 43.40 47.20 9.40

Income or job loss driven depression? 40.57 28.00 31.43 64.40 18.40 17.20

doctor, postponing visit to hospitals, administering medicines at home and so on.

3 Impact on Living Standards

In this section, the impacts of the economic crisis on the living standards of workers in gem polishing and construction industry are discussed. Table 4 summarises the workers’ response to the income fall and its effect on their living standards during the crisis phase.

More than half of the labour households in the gem polishing and the construction sectors reported that they reduced their food expenditure in the following ways: (a) they stopped/reduced eating non-vegetarian food and eating out, (b) skipped breakfast, and (c) stopped/reduced eating vegetables/milk.

Other measures they had to resort to in order to adjust to the fall in income included: (i) shifting to a lower cost residence (6.28% in gem polishing; 8.6% in construction), (ii) stopping treatment of prolonged illness like diabetes, blood sugar and arthritis (46% in gem polishing, 63.80% in construction), reducing health expenditure by shifting treatment from private to government hospitals, ignoring pains and other diseases in the initial phase, stopped consultations at doctors’ residence and shifted to

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gem polishing and 64.40% in the construction industry reported having undergone/undergoing economic stressdriven psychological disorders, and turned to excessive drinking and smoking. Further, 26.28% of the labour households in gem polishing and 55% in the construction sector reported an escalation of domestic violence during the crisis period, the brunt of which fell mostly on women and children.

The impact of the crisis appear to be more severe in the construction sector, which is attributable mainly to two factors:

(i) a higher share of socially vulnerable groups (dalits and adivasis) in the workforce; and (ii) compared to gem polishing workers, construction workers live in nuclear or single member households.

The impact of the economic crisis by income group in gem polishing and construction industry is reported in Tables 5 and 6,

Table 5: Response to Economic Crisis-Gem Polishing Industry (by Income Group)

Figures in the parenthesis indicate the percentage share of labour households who responded to the question. For instance, out of 175 labour households, only 22 households (12.57%) reported that they sold assets. Those 22 households are reported in their respective income groups.

Table 6: Response to Economic Crisis by Income Group- Construction Sector (N=175)

Income Class % of Sold Changed Reduced Reduced (Rs) Households Assets Children Food Health N=175 N=18 Education Expenditure Expenditure (10.29%) N=19 N=92 N=111 (10.86%) (52.57%) (63.46%)

< =3,000	25.29	16.67	36.84	28.26	11.71
3,000-6,000	37.93	38.89	31.58	44.57	41.44
6,000-9,000	17.82	22.22	26.32	19.57	19.82
9,000-12,000	7.47	11.11	5.26	5.43	10.81
12,000-15,000	3.45	5.56	0.00	0.00	5.41
>15,000	8.04	5.56	0.00	2.18	10.81
Total	100.00	100.00	100.00	100.00	100.00

Figures in the parenthesis indicate the percentage share of labour households in the sample size of the industry who responded to the specific question. Others did not respond because the question was not relevant to them or they refused to respond.

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respectively. The important observations emerging from Table 5 Moreover, even moneylenders showed a reluctance to lend to are: (i) about half of the labour households reported cutting workers during the crisis as the workers’ repaying capacity had their spending on food during the crisis, of which 65.51% greatly come down. belonged to the lowest two income groups, and (ii) 17.71% of labour households, reported reducing expenditure on health,

4 Conclusions

1 The monarch Jai Singh invited a number of jewel

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engaged in making holes in beads and women Mohankumar, S (2007): “Rural Wage Formation in

workers perform bindai work on precious stone. Relation to Agrarian Conditions in India: A Study

Vakulabharanam, V (2009): “The Recent Crisis in Global The demand for workers specialised in the manu-of Kerala”, unpublished PhD thesis (New Delhi: Capitalism: Towards a Marxian Understanding”, facture of a particular product is influenced by its Jawaharlal Nehru University). Economic & Political Weekly, 44(13): 144-50.

MANAGER

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