What part does labor play in the economic progress of a country?
The economic progress of a country is vitally dependent on its labor supply. Labor should be meant not only the number of workers but also their efficiency. A highly developed state of industrialization, no less than prosperous agriculture, requires a plentiful supply of skilled and efficient labor.
Prosperous agriculture is dependent on a painstaking, persevering, thrifty, and toiling peasantry. Therefore, also the industrial progress of a country is dependent on its supply of skilled and efficient labor. Laborers should be sufficiently alert and intelligent to tend to highly complicated types of machinery, which are nowadays used largely in modern factories. Moreover, unless industries are run on a large-scale basis, the economy of production can hardly be achieved and economic progress remains a distant dream.
In developing countries, wages are in some sense both less and more important as a
source of labor income than in developed countries. They are less important because
a smaller share of the labor force holds a wage job, as opposed to being self-employed or a family helper than in developed countries. Global statistics show that by 2010, the share of wage earners represented 20 percent of all workers
in South Asia or sub-Saharan Africa, about 50 percent in East Asia and North Africa,
roughly 65 percent in Latin America and the Middle East, and more than 85 percent
in developed economies – clearly indicating that the proportion of wage employees
increases with the level of economic development.
In another sense, however, wages
matter far more as a source of labor income for the 1 billion or so wage earners who
live in the developing world, than for the 400 million in the advanced countries. This
is because the former have much more limited access to social transfers and alternative social protection schemes. Their wage is thus often what makes the difference
between a decent life and a life of destitution, between affluence and poverty.
The first part of this chapter discusses the determination of wages and the empirical
link between wages and labor productivity, the determinants of labor productivity,
the impact of excess labor supply on wages, and the role of trade unions and collective
bargaining in imperfect markets. The second part of the chapter looks at the personal
distribution of wages, discusses how wages are linked to the level of education and
skills, how globalization has increased the returns to education, why women earn less
than men and why wages of similar workers differ across industries, and across firms
and plants. This second part also discussed the role of minimum wages and collective
bargaining in reducing inequality in developing countries.
Labour's Role in a Developing Economy
INDI A is in the process of economic growth. Condemned
to servitude for centuries, her economy till recently was geared to
the bandwagon of another country, which exploited her for its
own purpose. She was not allowed
to, develop her own basic industries
and to utilize fully the productive
potential warranted by the existing
state of technical knowledge. Her
backward economy was marked
by such features as the concentration of ownership of land by a
few rich people, growth of commerce and trade in respect of
consumers' goods, excessive dependence on exports of raw materials, the inadequacy of transport facilities,
subsistence peasant economy and
the development of consumers or
semi-raw materials industries with
substantial foreign capital.
Her
agriculture suffered from a large
mass of landless laborers living
below the poverty line, on the one
hand, and prosperous Intermediaries, absentee landlords, and unscrupulous money-lenders, on the
other.
After Independence, it became
obligatory on the part of the
State to devise ways and means
to take the country on the path
of economic development. The
backwardness of our economy
which had remained stagnant for
the last few decades offered a
formidable challenge that had to
be accepted. Out of this acceptance came the First Five-Year
Plan. It made proposals for the initiation of institutional changes
and for meeting certain urgent
problems that had arisen out of
the war and partition. It gave
certain assurances to labor in
recognition of its rights which had
long been neglected. In return,
it sought labor's cooperation in
having more production.
The
Second Five Year Plan, though a
continuation of the first plan,
made the objectives of planning
more clear. It affirmed that the
benefits of economic development
must accrue more and more to the
relatively less privileged classes of
society. The objectives of the
plan were an increase in national
income with a consequent higher
standard of Living, rapid industrialization, particularly of basic
and heavy industries, a large expansion of employment opportunities,
reduction of inequalities of Income, and a more even distribution of
economic power.
Labour, not only
as a vital section of the community but as the most important factor
In production, is directly concerned
with these objectives.
The plan's commitment to progress towards a socialist pattern
of society follows the ideal for
which our labor movement strived.
It is, therefore, in the interest of
our laboring classes to get the
plan implemented successfully and
to achieve their material well-being
through such implementation.
Labour's Traditional Role
The labor movement and the
trade union movement in India
have grown as a response to the
challenge thrown by the modern
capitalist system. They have been
a natural and inevitable reaction
to the development of large-scale
industries. Modern industrialization,
with its impersonal character and
loss of cordial relations between
the manager and the manager, created complex labor problems,
which have been channelized
through organized movements.
Capitalist enterprise in India has
naturally created a gulf between
Capital and Labour and this gulf
has been widened so much during industrial development that, at present, employers
and employees are being viewed as
two distinct classes with divergent
interests. This divergence of interests has resulted in mutual distrust and suspicion, unhappy
industrial relations, reluctance to
negotiate voluntarily, and recourse to State machinery
for settlement of disputes. Workers are not only not interested in
higher productivity, but they do not
mind obstructing the implementation
of measures for higher production
like rationalization, production
committees, work measurement
studies, re-organization of wage
structure, vocational training
schemes, production planning and
control, simplification, standardization and specialization, proper
maintenance of machinery and
efficient plant layout.
Workers'
interests are mainly on the consumption side, as seen in demands
for higher and higher wages and
allowances, more amenities, fewer hours of work, and for
more rest intervals. This has been
the traditional role of labor,
which has been strengthened by
the concept of class conflict. The
worker demands a larger and
larger share of the cake, without
in any way striving for the enlargement of the cake. The
employer has vehemently opposed
this demand because it cuts
straightaway into his profits. This
struggle of getting the maximum
spoils with minimum effort has
adversely affected the industry and,
consequently, its two partners
Capital and Labour.
Labour's New Role - The traditional attitude of labor
of demanding an increasing share
in the produce, without increased
production, must be modified, if
the country is to progress on the
path of economic development.
The traditional role of labor as
an adversary to capital in the
field of industrial relations may
prove a serious hindrance in the
process of economic growth.
Child Labor and Economic Development
218 million children work in the world today. 70 percent are in activities classified as child labor
under local laws. While in policy circles child labor is often viewed as a rights issue, it is also an
economic issue. Working children are both a cause and a consequence of a lack of economic
development. Widespread child employment dampers future economic growth through its
negative impact on child development and depresses current growth by reducing unskilled wages
and discouraging the adoption of skill-intensive technologies. Child employment also appears to
result from a lack of economic growth. Rising incomes are associated with improvements in the
family’s ability to triage economic shocks without child labor, shifts in production to the outside of
the home, and greater demand for education and leisure. These factors all lead to declines in the
economic activity of children.
1. The Impact of Child Labor on the Economic
UN Sustainable Development Goals list the elimination of child labor as a practical and
measurable target for sustainable development under Goal 8: “Promote inclusive and sustainable
economic growth, employment, and decent work for all.” Child labor has the potential to
undermine economic growth through its impact on child development, wages, and technology
adoption.
2. The Impact of Economic Growth on Child Labor
To understand how economic growth impacts child labor, it is useful to have a simple analytical
framework in mind. Poor families balance the child's potential economic contribution in each
possible activity against alternative uses of child time, such as schooling or leisure. Different
activities vary in their potential economic contribution. Families also may have preferences about
these activities beyond the economic contribution. Children work when their family’s valuation of
the child’s economic contribution is at least as large as the family’s valuation of other uses of child
time.
3. The Role of Governments
A review of how governments can foster growth- or how growth impacts the functioning and
activities of governments- is beyond the scope of this essay. This section presents a brief overview
of the types of actions that governments take in the process of economic development that will
directly impact child labor. Specifically, how does child labor-related policy change with growth?
Each topic could be worthy of its own separate review, and this is not intended to be a complete
review of policy responses to child labor.
Child labor is a human rights issue. This essay is motivated by the question of whether child labor
is also a sustainable development issue. This review of the literature, suggests it is.
The world’s 218 million working children depress economic growth in the short run by
depressing the wages of unskilled labor, worsening poverty, and discouraging the adoption of skill-intensive technologies. In the long run, work today depresses child development and leaves a
country with a substantive share of the future adult labor force poorly positioned to take advantage
of new opportunities for growth. Of course, not all child employment is on balance bad for the
country, but the developmental impact of both common forms of work and hazardous forms of
child labor merits attention in the process of sustainable development.
Because of this impact of child labor on economic growth, there is a strong case that child
labor policy should be part of policy efforts to promote sustainable development, without
appealing to human rights issues, even though those issues can be important. This essay has
reviewed child labor policy that is likely to evolve with economic growth. It is not a thorough
review of policy tools available to combat child labor. Nonetheless, the main lesson from the policy
discussion herein seems broadly relevant: promote positives and social safety nets. Promoting
alternatives to child labor leads families to choose those alternatives, and social safety nets can
eliminate motives for child labor. An important lesson from all the literature reviewed herein is child labor can change dramatically and quickly in countries as a result of changes in the
economic and policy environment.
While sustainable development projects and programs can focus on child labor and child
labor policy may hasten its decline, this study has also documented how central poverty appears
to be in explaining the existence of child labor. Thus, a lack of attention to child labor may
understate the benefits of projects that promote sustainable economic growth and development.
Evidence suggests that in the short run sustainable development projects could increase child
employment as households first acquire productive assets or transitory opportunities that induce
families to engage their children to take advantage of a short-term opportunity. However, long-run
growth and development should eventually lead to declines in child labor as motives for child labor
become less salient with improved living standards.