Labour pain: Chinese workers in India

China and India are two of the largest countries in the world, by, with well over a billion people in each. If there is one thing that is available in plenty in both countries, is labour, that is people willing to work.

There are 30,000 people Chinese working in India today. But these are not people who have come to work on Chinese projects in India. I did not even know that Indian companies, particularly those working on short term projects and contracts, are hiring Chinese workers to work in India. And these are not high skilled professionals, but relatively low skilled workers, mostly working on power projects across India. Why is India importing labour from China?

From all accounts, there are two reasons why firms are opting to import labour. First, and most critically, India’s archaic labour laws—which the broader polity has little interest in reforming—are a huge disincentive for firms to hire workers on their payroll. For firms which work on a project to project basis, it is impossible to hire labour on a ‘permanent’ basis, as is required by our labour laws, which frown upon ‘hire and fire.’ Given that constraint, firms are forced to outsource their labour requirements to another party. This, of course, raises the cost—the firm which gets the outsourcing deal will obviously charge a commission above the regular charges for labour. It also creates a larger principal-agent problem, because the outsourced, contracted labour does not have a direct stake in the firm or project they are working on.

Add to this the fact that Indian labour—and this is the second reason for importing labour—in general works at lower productivity levels than similarly skilled labour from China. Anecdotal evidence suggests that Chinese workers put in longer hours and complete projects at a much faster speed than Indian workers do. This is not to argue that Indian workers are inherently less competent or hardworking—it’s just that work ethics and working cultures are different.

However, for senior management at profit making companies, what matters most is efficiency, not culture and nationality. They are, therefore, making the right decision by importing labour from China. As far as projects get completed faster, it involves a huge benefit to the Indian economy at large... ... ...

It may seem cruel to equate human labour with physical goods but the economic construct is the same—trade is good and free trade is optimal. Look at what years of trade protectionism did to the quality and standards of our industry and look how they have lifted their game after liberalisation. Competition is always good and that goes for labour as much as for physical goods and services. The government has missed this important nuance by simply banning the import of unskilled and semi-skilled Chinese labour. Instead, the [Indian] government should focus on skill upgradation and training of locals so that firms hire them out of free choice... ... ...

If the government is really serious about helping low skill Indian labour, it should reform labour laws immediately, rather than play populist politics.

Please read the originaly article "Bad solution for Chinese labour pain" by Dhiraj Nayyar in the Financial Express. While there is a lot of negotiations at WTO on movement of skilled labour, and professionals, hundreds of millions of workers in India are paying the price for a labour policy that has privileged the 10% of the over 450 million workforce in India, at the cost of the latter. Import of low skilled Chinese workers by Indian companies is a telling illustration of the high cost of indigenous labour due to "protective" labour laws. The price of this protectionism is being paid by the vast majority of Indian workers, Indian companies, and Indian consumers. Yet, any discussion on reforming labour laws, and lowering the cost of hiring is seen as politically sensitive, because of the political muscle of the small minority of workers who form the organised labour in India.