Reshaping the social contract: emerging relations between the state and informal labor in India


As states grapple with the forces of liberalization and globalization, they are increasingly pulling back on earlier levels of welfare provision and rhetoric. This article examines how the eclipsing role of the state in labor protection has affected state–labor relations. In particular, it analyzes collective action strategies among India’s growing mass of informally employed workers, who do not receive secure wages or benefits from either the state or their employer. In response to the recent changes in state policies, I find that informal workers have had to alter their organizing strategies in ways that are reshaping the social contract between state and labor. Rather than demanding employers for workers’ benefits, they are making direct demands on the state for welfare benefits. To attain state attention, informal workers are using the rhetoric of citizenship rights to offer their unregulated labor and political support in return for state recognition of their work. Such recognition bestows informal workers with a degree of social legitimacy, thereby dignifying their discontent and bolstering their status as claim makers in their society. These findings offer a reformulated model of state–labor relations that focuses attention on the qualitative, rather than quantitative, nature of the nexus; encompasses a dynamic and inter-dependent conceptualization of state and labor; and accommodates the creative and diverse strategies of industrial relations being forged in the contemporary era.

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  1. 1.

    I use the term “globalization” to encompass the myriad of economic, social, political, cultural, and technological changes that are taking place to increase interdependence, integration, and interaction across national boundaries. As Charles Tilly writes, “Ideally, globalization means an increase in the geographic range of locally consequential social interactions” (Tilly 1995: 1).

  2. 2.

    Although debates abound on how to define the informal sector, this definition, which is drawn from Portes et al. 1989, has been accepted in much of the literature (see Cross 1998; De Soto 1989; Portes 1994). To operationalize this definition, I use the worker-based definition of informal work that was endorsed by the 17th International Conference of Labor Statisticians (ICLS) in 2003 and utilized by the National Sample Survey of Employment and Unemployment (NSS) in India in 1999.

  3. 3.

    Kulshreshtha and Singh 1999; Kundu and Sharma 2001; Mahadevia 1998; Oberai and Chadha 2001; Sundaram 2001; Unni 1999.

  4. 4.

    This is a narrow claim, specific to worker-protection. Collective action by industrialized workers has, of course, benefited the mass population in arenas such as suffrage and citizenship (see Collier and Mahoney 1997; Rueschemeyer et al. 1992).

  5. 5.

    In addition to formal and informal labor movements in India, there is a growing group of radical, leftist political movements that address labor issues, such as the Naxalites. Much of their activities to date have focused on rural labor.

  6. 6.

    See Stiglitz 2003 for an in-depth look at how this argument came to dominate the policies of the World Bank and the International Monetary Fund (IMF) during the 1990s.

  7. 7.

    I define “neoliberal reforms” as the set of policies designed to decrease government control regimes and facilitate investment and capital formation. Policies to this end have included the de-licensing of industries, de-reservation of the public sector, easing of competition controls, decreasing import tariffs, deregulating interest rates, easing the interstate movement of goods, opening capital markets, and reforming labor laws.

  8. 8.

    Note the two exceptions the World Bank makes in terms of government interference in labor policy are on issues concerning child labor and gender discrimination.

  9. 9.

    Recently, some notable exceptions have emerged to analyze new movements among immigrant workers and service workers in the US (see Fine 2006; Milkman 2006).

  10. 10.

    In 2001, India became the second demographic billionaire after China. Forty-one percent of the Indian population, nearly 400 million people, is in the labor force. In recent years, scholars, activists, and government officials have achieved a near consensus that 93% of the labor force is informally employed. Nearly 6% of formal workers are in the public sector (NSSO 2001). Recently some scholars have argued that a more accurate picture would exclude India’s massive agricultural workforce, which has never aimed to become formalized (see Satpathy 2004). The 82% figure, which is limited to the non-agricultural workforce, was calculated by the author using the NSS 2000.

  11. 11.

    The exception was the State of Emergency between 1975 and 1977.

  12. 12.

    Union density is defined as the number of trade union members/paid employees. There is no internationally agreed upon definition of “paid employees.” According to the most recent figures available at ILO, India’s union density is 23% (ILO 2004). According to the NSS 1999, India’s union density is lower. If “paid employees” are defined as regular wage workers and casual workers, India’s union density is 10% for all workers and 21% for non-agricultural workers. If the self-employed are included (along with regular wage workers and casual workers), union density is 6.5% for all workers and 15% for non-agricultural workers. (These figures have been calculated by the author.)

  13. 13.

    This figure has been calculated by the author using the NSS 1999.

  14. 14.

    Note this is a study about variations and strategies among organized informal workers. While an examination of why informal workers are most organized in construction and bidi is important, it requires a comparison of organized vs. unorganized workers. Finding and accessing the latter, however, requires extensive resources, which were beyond the scope of this study.

  15. 15.

    Calculated by the author using the NSS 1999.

  16. 16.

    The bidi industry is under pressure from domestic and international campaigns against smoking. To reduce costs (from municipal taxes and fees), most bidi production has shifted to rural areas.

  17. 17.

    As Peter Swenson argues, capital also supported these movements for compressed wages and universal, state-provided welfare policies, because they provided capital with a ceiling in labor market competitions (Swenson 2002).

  18. 18.

    Much of the scholarship on Indian state–labor relations has focused on critiquing the state’s bias in this system (see Ramaswamy 1988).

  19. 19.

    Each political party in India has its own federation of trade unions. To date, the largest, most revolutionary federations have been attached to India’s two left wing political parties: the Communist Party of India (CPI)’s federation is called, All India Trade Union Congress (AITUC), and the Communist Party of India-Marxist (CPI-M)’s federation is called Center for Indian Trade Unions (CITU). Bidi unions formed close ties to these parties during India’s independence movement. While construction unions have operated more independently, the earliest construction union for informal workers was affiliated to CPI-M. Unions affiliated to right-wing and center parties have not made major gains in the bidi and construction industries. Note also that construction industry employers until the 1990s were largely state-owned.

  20. 20.

    Although bidi manufacturing is not mechanized, the work-sheds in which employees sat to roll bidis together were referred to as “factories.”

  21. 21.

    Interview with Ram Ratnagar, July 1, 2003.

  22. 22.

    Interview with Sundar Navelkar, August 4, 2003. Emphasis in original.

  23. 23.

    Interview, August 4, 2003.

  24. 24.

    Although organizational strategies appear consistent across states, I find that the conditions for success or failure vary by state-level economic policy and political leadership. Industry-level variations remain absent in terms of conditions of success. For more on this analysis, see Agarwala 2006.

  25. 25.

    Interview, May 27, 2003.

  26. 26.

    Interview, August 13, 2003.

  27. 27.

    ADMK stands for Anna Dravida Munnetra Kazhagam. This is a local party in the state of Tamil Nadu, and it is one of the two major parties that have ruled the state since the early 1960s. The other party is DMK (Dravida Munnetra Kazhagam).

  28. 28.

    Interview with Geeta Ramakrishnan, July 9, 2004.

  29. 29.

    Interview, November 16, 2003.

  30. 30.

    Interview, April 16, 2003.

  31. 31.

    In the case of the Calcutta Bidi Union, although union leaders stated they were fighting for the implementation of the Bidi Welfare Board, most members did not know what the Board was and stated that they needed “everything,” when asked what their primary needs were. The reasons for this appeared to be located in leadership style. Further exploration on this is beyond the scope of this article.

  32. 32.

    Mumbai Bidi Union, interview, May 30, 2003.

  33. 33.

    Manohar Lal, Director General of Labour Welfare Organisation, interview, June 2, 2003.

  34. 34.

    The first industry-level labor welfare acts in India were: The Indian Dock Labourer’s Act (1934), Mica Mines Labor Welfare Fund Act (1946), and Coal Mines Labor Welfare Fund Act (1947).

  35. 35.

    Although many are also fighting for a minimum wage, the welfare demands form the bulk of the activity.

  36. 36.

    Jhiru Viruthagiri, Interview July 2003. Viruthagiri is a Joint Commissioner of Labor in the Tamil State Government.

  37. 37.

    Interview, March 31, 2003.

  38. 38.

    Although traditional unions have traditionally shunned informal workers, recently their dwindling membership has forced them to increase their interest in partnering with informal workers’ movements. At the 2005 annual meeting for CITU, one of the largest and oldest union federations in India, for example, leaders made understanding and mobilizing informal workers their top priority for the year.

  39. 39.

    The centers are funded by grants attained by NIRMAN, as well as contributions from some employers.

  40. 40.

    Construction workers in all three states include on-site workers and day job workers who stand at a street corner. For historical reasons the Mumbai NGO targets on-site workers, while the West Bengal and Tamil Nadu unions target the day job workers.

  41. 41.

    On the same day, the government also enacted The Building and Other Construction Workers’ Regulation of Employment and Conditions of Service Act, which catered to the requests of the Builders Association to apply minimal protections on work conditions.

  42. 42.

    In 1976, the Government of India passed the Bidi Workers Welfare Cess and Fund Act. However, the collection of the cess designed to fund the welfare board was stopped in 1979. Unlike the Construction Boards, the Bidi Board is controlled by the Central Government, under the Directorate General of Labor Welfare (DGLW) in the Ministry of Labor.

  43. 43.

    Jyotsna used the word “empower” in English, although she does not speak English.

  44. 44.

    Interview, December 16, 2003.

  45. 45.

    Interview, July 14, 2003. Emphasis added.

  46. 46.

    Interview, May 27, 2003.

  47. 47.

    Interview, July 12, 2003.

  48. 48.

    Chennai Construction Union, July 18, 2003.

  49. 49.

    Interview, July 18, 2003.


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The research for this article was funded by a Fulbright-Hays Foundation Doctoral Dissertation Research Abroad Fellowship and a Dissertation Research Grant from the Program for Urbanization and Migration, Princeton University. I wish to thank (listed in alphabetical order): David Bensman, Fred Block, Vivek Chibber, Dan Clawson, Patricia Fernandez-Kelly, Ron Herring, Atul Kholi, Ching Kwan Lee, Alejandro Portes, Andrew Schrank, Gay Seidman, Marta Tienda, and Theory and Society reviewers for their extremely insightful comments on earlier drafts.

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Correspondence to Rina Agarwala.

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Agarwala, R. Reshaping the social contract: emerging relations between the state and informal labor in India. Theor Soc 37, 375–408 (2008) doi:10.1007/s11186-008-9061-5

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  • Minimum Wage
  • Labor Relation
  • Informal Sector
  • Construction Worker
  • Industrial Relation