October 25, 2015

The Structure of the World Labour Force

Prabhat Patnaik

THE International Labour Organisation (ILO) provides useful data on the world labour force. The concept of “labour force” includes both the employed and the unemployed. The employed part of the labour force consists of: wage and salaried workers (who are called “employees”); the self-employed workers with “employees” (who are called “employers”); and the self-employed workers without “employees” (among whom are “own account workers”, unpaid family workers, and members of producers’ cooperatives). It turns out that the proportion of wage and salaried workers in the total employment in the world is around 48 percent today.

The ILO also has another classification. It takes “own account workers” and unpaid family workers together as constituting those who are “vulnerably employed”; while “employers”, together with wage and salaried workers, are taken to constitute the “non-vulnerably employed”. The composition of the world labour force on this classification can be given as follows: the proportion of those who are unemployed is around 6 percent; the “vulnerably employed” constitute 47 percent (of whom unpaid family workers are 14 percent, and “own account workers” are 33 percent); and the “non-vulnerably employed” are another 47 percent (of whom wage and salaried workers are 45 percent and “employers” or self-employed workers with “employees” are 2 percent).

There is however one major problem with the ILO data, namely that there is always a segment of the labour force that does not appear either among the employed or among the unemployed; and this segment is not counted at all in the ILO statistics, thereby underestimating the magnitude of the actual labour force. This segment consists of the “discouraged workers”, who are economically inactive not because they wish to be so, but because they are so completely without any hope of finding employment that they do not even report themselves to be searching for work. They are actually unemployed but are not counted among the unemployed because they do not even report themselves to be looking for work. It is naturally difficult to estimate their numbers, but if we take the entire world population in the 25-54 age-group which is economically inactive as belonging to this category, and hence to the labour force, then we get a breakup of the total global labour force in 2011 as follows (estimated from Bellamy-Foster, McChesney and Jonna, Monthly Review, Nov, 2011): unemployed plus “discouraged workers” 20 percent; “vulnerably employed” 43 percent; and “non-vulnerably employed” 37 percent. Among the non-vulnerably employed, wage and salaried workers would be around 35 percent and “employers”, ie, self-employed workers with “employees” 2 percent.

From these figures it would appear at first sight that 35 percent of the entire global labour-force is employed under capitalism; but this impression is erroneous. Among the “employees” there are some who are employed by the “self-employed” (the “employers” by the ILO definition). For instance, a part of the 35 percent of the global labour force that consists of wage workers would be employed by rich peasants. The fact that they employ labourers would, in the eyes of some, entitle them to the status of being “capitalists”. But such a categorisation is erroneous; for, on such a categorisation, India can be said to have had a significant capitalist sector over much of its history, long before capitalism appeared as a phenomenon in Europe.

Indeed a prolonged debate on whether the fact of employment against wage payment can alone be said to define capitalism had taken place in India some years ago; and the general consensus that emerged was that the mere employment of labour against wage payment in agriculture does not entitle the employer to be called “capitalist”. It follows therefore that the proportion of the global labour-force that provides labour-power directly to capitalist employers cannot be more than a third.

On the other side we have 63 percent of the global labour-force, or almost two-thirds, consisting of workers who are either unemployed, or constitute “discouraged workers”, or are “vulnerably employed”. Bellamy-Foster et al consider this percentage to be the maximal size of the reserve army of labour in the world economy. But even leaving aside the reserve army aspect, this proportion by definition constitutes the vulnerable segment of the world labour-force.




This however gives a misleading impression. To assume that the entire body of wage and salaried workers are “non-vulnerably employed” is erroneous. We know that among the wage and salaried workers there are casual workers, part-time workers, temporary workers, intermittent workers and such like, who are in fact a highly vulnerable segment of the work-force. To categorise them as non-vulnerable, as the ILO does, amounts to a gross violation of reality.

In India for instance, only about 4 percent of the total labour-force or less is not vulnerable to instantaneous dismissal at the employer’s will; the remaining segment can be fired without any notice if the employer so chooses. Even so, however, several so-called “researchers” have argued that India’s industrial growth is held up by the absence of this absolute power on the part of the employers to fire workers; and that “labour market flexibility”, which means employers’ absolute power to fire workers at will whenever they wish, must be introduced forthwith to remove this impediment to India’s industrial growth. The total magnitude of those who are “vulnerably employed” therefore far exceeds the two thirds of the global labour force mentioned earlier.

There is a further point of importance that needs to be noted. The various proportions mentioned above, of the unemployed, the economically inactive population in the 25-54 age-group, the wage and salaried workers, and the vulnerably employed, to the global labour-force has hardly undergone any significant change in the last several years, especially between the years 1997 and 2011 which are covered by Bellamy Foster et al’s empirical figures. The proportion of the wage and salaried workers to the total global labour-force for instance, which was 35 percent in 1997 went up barely perceptibly to 37 percent in 2011.

We do know however that during this very period there has been a massive attack on petty producers, especially the peasantry, under the aegis of neo-liberalism. Indeed a veritable process of what Marx had called “primitive accumulation of capital” has been let loose; and in India itself we have had a drop in the number of peasant households between the last two censuses, which is indicative of the fact that displaced petty producers are flocking to cities in search of jobs. Given the high growth rate of GDP in the economy, one might have expected a burgeoning demand for labour-power on the part of capital, which should have increased the share of wage and salaried workers in the Indian economy, and hence by implication (since a similar experience would have been expected elsewhere) in the global labour force.




The fact that this has not happened, that the ratios of the various categories to the total global labour force have remained more or less unchanged over time, suggests that those displaced from the agrarian economy, or from the petty production economy in general, have again entered the vulnerably employed segment in the cities. They have in short migrated from one segment of the “vulnerably employed” to another segment, from the peasant economy to the service sector in the urban areas.

Put differently, the process of primitive accumulation of capital that is effected under neo-liberalism, does not lead to an increase in the proportion of the labour force absorbed by the capitalist sector. This fact at the global level may appear strange at first sight. Even if India’s rapid growth has not led to an increase in the proportion of its work-force getting absorbed into the active army of labour employed by capital, the same could not be true of China where even the London Economist has been talking about the emergence of a tight labour market because of rapid industrialisation (on the basis of wage payment). Nonetheless it appears to be true for the global economy as a whole. The displaced petty producers in traditional sectors in other words, who have been facing the full blast of the onslaught of capital, have not been absorbed into the ranks of wage and salaried workers.

The magnitude of the reserve army can be identified differently under different criteria. Bellamy Foster et al. see the maximum size of the reserve army as consisting of the unemployed, the economically inactive population in the 25-54 age group, and the vulnerably employed; the actual reserve army however would be smaller, consisting of only a fraction of this maximum (since a part of it comprises peasants and petty producers who are not immediately in the reserve army). But no matter how we define it, the relative size of the reserve army in the total global work-force (which includes both the active and the reserve army) appears to have remained more or less unchanged during the last several years.

This is important because it explains the growing inequality in world income distribution. The non-shrinking relative size of the reserve army ensures that the absolute magnitude of the vector of real wages in the world economy does not increase even as labour productivity goes up. This entails an increase the proportion of surplus in world output, ie, in the proportion of income accruing to capitalists and their “hangers on”, which manifests itself as an increase in income inequality.

It also refutes theories which suggest that the pace of capital accumulation is restricted by the growth in the size of the total army (active and reserve) of labour. Bourgeois economics of course believes that there is always full employment under capitalism, and that the only unemployed are those who either choose to be so or are “between jobs”; it therefore holds, necessarily, that the pace of accumulation is constrained by the growth of the labour force. But even among writers who reject the view that “full employment” prevails under capitalism, some would still argue that capital accumulation is constrained by the growth of the labour force; Otto Bauer, the well-known Austrian Marxist, whom Rosa Luxemburg had criticised on this score, was one such. The labour force statistics relating to the world economy do not support this view.