Precariousness as Growth: Meritocracy, Human Capital Formation, and Workplace Regulation in Brazil, China and India

Abstract

The place of labor regulation in contemporary development discourse revolves around the validity of the neoclassical assertion that any interference with market wage-setting mechanisms leads to a cruel twist–workers left unemployed in a less productive economy. The push for reducing individual and collective labor rights across the globe, commonly termed labor flexibilization, has been justified on the grounds that not only do “rigidities” arising from ostensibly pro-worker regulations hurt workers, they are also key and central impediment to growth. While the empirical grounds of the neoclassical assertion have become ever murkier over time, the appeal of this pro-growth assertion has been recurrent in economies of diverse incomes. For lower-income countries this has been doubly true, with pro-worker legacies cast as urgently necessary targets for reform. However, no true sustained example has emerged of a country that has unleashed employment growth through workplace deregulation. Instead, most attempts at such reform have ultimately led to political backlash when this promise has not materialized and populations have suffered the dislocations of ever-more precarious work. In this context, this paper looks at the recent discourses on workplace deregulation as applied to three of the largest global economies: Brazil, India and China. Each currently is at a different stage of what will be called “the flexibilization cycle.” In China, the Chinese Communist Party is grappling with a fundamental challenge to its legitimacy stemming from the accumulated dissatisfaction with weak workplace regulation and has rejected the flexibilization agenda. In India, workplace regulation has been promised by a new administration, but has been frustrated in attempts to combat significant backlash. And in Brazil, a new political administration has made the promise of flexibilization as foundational to reinvigorated growth after a pause in a decade of inclusive growth. Examining these case examples will expose why the cruel neoclassical twist never materializes and then leads to popular unrest. The twist’s assumptions about wage setting, especially in lower-income nations, ignores but is ultimately undermined by inherently unequal power dynamics in workplace institutions and the primacy of enforcement mechanisms. Further, general levels of human capital formation are far more central to actual economic development, which are in turn eroded by precarious work. The common emergence of labor flexibilization discourses during periods of economic recession is driven instead by opportunistic attempts to re-entrench elite status by diverting attention away from meritocratic reforms. By refocusing the debate on human capital development, the truly elusive growth potential of genuine meritocracy, rather then flexibilization, becomes clear as a driver of developmental success and as an explanatory factor in politics of labor regulation debates.