Why reservation is necessary Sukhdeo Thorat
WITH a rapi WITH rapid d scal scalin ing g down down of our our tiny tiny publ public ic sect sector or due due to privatisation and increasing incre asing withdrawal of the state under the impact of liberalisation, serious concern has been expressed about the fate of the present public sector reservation policy. Because of indirect and backdoor dereservation, dereserva tion, there is a growing demand for some sort of affirma affirmativ tivee action action policy policy for the privat privatee sector sector which which so far has remain remained ed outsid outsidee the purvie purview w of any kind kind of antid antidiscr iscrimi iminat natory ory measure and in which more than !"# of dalit and adivasi workforce is engaged. The issue found a place in the election manifesto of political parties and in the $ommon %inimum &rogramme of the present government. 'rawing from theoretical and empirical liter literatu ature re on the the issue issue of econ econom omic ic disc discrim rimin inati ation on,, I will will try to provide reasons for a reservation policy for the private sector as a remedy against discrimination in labour, capital and other markets and indicate general guidelines for framing such a policy. 'iscrimination on the basis of race, religion, ethnicity, national or social origin exists in many nations under diverse social, economic and political systems. In order to correct the imbalance in terms of acce access ss to capi capita tall asse assets ts,, empl employ oyme ment nt,, edu educati cation on,, polit olitic ical al participation and other spheres, countries have turned to practices of reservation, affirmative action, positive action or e(ual opportunity policies for these discriminated subgroups in addition to general pro poor policies. ) great ma*ority of these policies and programmes of intervention operate in respect to subgroup populations identified by ethnic, racial, religious or gender characteristics. The examples are not only from the West +-), , /orthern Ireland and 0ugoslavia1 but also from 2atin )merican countries like Bra3il, Bolivia, &eru4 )frican countries like /igeria, -udan, -outh )frica and countries like %alaysia, &akistan, $hina, 5apan and India from )sia. It is surprising that while the affirmative action policy in many of these countries was, to begin with, used for both private and public sector, the India state never thought of bringing the private sector under the purview of a reservation policy 6 even though it is the fact of discrimination in the private domain that led us to accept the reservation policy for the public sector.
Why are governments in developing and developed countries concerned about exclusion and discrimination7 Why do they develop policies against such practices7 Is discrimination only an issue of e(uity or does it also involve economic costs to the society7 )re the costs it imposes on the society more social and political than economic7 The insights from mainstream economic theory indicate that economic, particularly market, discrimination has multiple conse(uences4 it hampers economic growth, induces income ine(uality and creates potential for intergroup conflict by denying e(ual opportunity to discriminated groups +Birdsall and -abot 8!!81. Therefore, remedies against discrimination 6 legal, affirmative action or compensatory in nature are re(uired both for e(uity and economic growth. I will argue that we need a reservation policy for private sector in India for reasons of e(uity as well as economic growth.
Let us first discuss the case for reservation from the point of view of economic growth. )ll standard theories of economic discrimination predict adverse conse(uences of market discrimination on economic growth through their detrimental conse(uences on profits, wages and efficiency in the allocation of labour. They suggest that economic discrimination will slow down growth by reducing efficiency due to suboptimal allocation of labour among firms and economy, by reducing *ob commitment and effort of workers who perceive themselves to be victims of discrimination and, by reducing the magnitude of investment in human capital by discriminated groups, returns on this investment. +Birdsall and -abot 8!!81.
The conse(uences of discrimination on ine(uality are far more evident and therefore *ustification for reservation9affirmative action policy from e(uity consideration is clear. 'enial of access to resources, employment, education and common facilities that others have, it impoverishes the lives of individuals from excluded groups and is a clear denial of certain basic human rights. The concern about discrimination thus is an issue not only for e(uity but also for economic growth.
Ambedkar pioneered the reservation policy as early as the 8!:"s, mainly on the basis of widespread and ubi(uitous discriminatory and exclusionary character of Hindu society with devastating conse(uences, particularly for former untouchables. The caste system;s characteristic feature of fixed and compulsory occupation
+or property rights1 with concomitant fixed economic rights for each caste, implies
?, -coville 8!@A, 2al 8!!8, and )mbedkar 8!@>1. ixed occupations essentially involve restrictions on mobility of labour and capital across caste groups, leading to an imperfect market situation and a fragmentation of economic activities. )kerlof -coville2al;s theoretical model thus predicts that given the segmented and imperfect character of the labour market, the economic outcome of the caste economy is lower than posited in the model of perfectly competitive markets. )mbedkar added that efficiency and productivity of labour is adversely affected by multiple disincentives involved in customary rules of castes. The economic pursuit in a caste system is not based on individual choice, sentiment and preference, in so far as it involves an attempt to allocate a task to an individual in advance, selected not on the basis of training or capacity but on the social status of parents. The social and individual efficiency re(uires us to develop the capacity of an individual to the point of competency to choose and make one;s own career. This is missing in the overall scheme of the caste system. urther, some of these occupations are considered polluting or impure and therefore socially degrading. The social stigma of impurity and pollution reduces the social status of persons engaged in them and thus lowers the economic incentives.
The conse(uences are particularly pronounced in terms of income distribution, employment and poverty experienced by the excluded9discriminated groups. -ince property rights under the caste system are assigned une(ually across castes, income distribution is generally skewed along caste lines. The une(ual and hierarchical assignment of occupation and property rights among castes implies
that although every caste, except those at the top of the caste order, suffers to various degrees from an une(ual division of social and economic rights, the former untouchables, who are located at the bottom of the caste hierarchy, suffer most as they face
Beside the general negative impact on income distribution, labour immobility across occupation also adversely impacts employment. )mbedkar +and )kerlof in a different context, 8!@"1 argued that by restricting mobility of labour across caste occupation and thereby not permitting read*ustment of employment, caste becomes a direct cause of
Thus, *udged by the standard criterion of economic efficiency, the caste system as an economic organisation lacks all elements re(uired to fulfil the conditions for optimum economic outcome. The caste and untouchability based economic discrimination have serious conse(uences on economic development, income distribution, right to individual development and e(ual right to employment, all of which cumulatively have povertyinducing conse(uences, particularly for the low caste untouchable.
R educing economic discrimination thus becomes essential because it is likely to increase economic growth, provide e(ual access to discriminated groups, reduce ine(uality between groups and minimise the potential for conflict which ine(uality between groups may give rise to. What are the remedies against market discrimination7 $onclusions regarding the conse(uences of market discrimination on economic growth and income distribution are derived from mainstream economic theory. The same theory also predicts that in highly competitive markets, discrimination will prove to be a transitory phenomenon as there are costs associated with discrimination to the firm9employer which result in lowering profits. irmsEemployers who discriminate, face the ultimate sanction
imposed by the markets. This theoretical perspective thus posits the resultant erosion of profits as a selfcorrecting dimension of discrimination. The free market solution is not, however, a practical remedy as, discrimination might persist, particularly in the labour market, over long periods with or without prevalence of a free market situation. irst, not all markets are highly competitive. The persistence over decades of labour market discrimination in high income countries attests to that. Indeed, in developing countries, employers have significant monopoly power to discriminate at will. -econd, even if competition exists in all markets, is not a sufficient condition for the elimination of discrimination if all employers are discriminators.
These two theoretical viewpoints have obvious policy implications. Those who believe that discrimination is indeed selfcorrecting argue for strengthening competitive market mechanisms. But if discrimination continues to persist despite competitive market process +which in reality is the case1 or for other reasons mentioned above, market interventionist policies will be necessary.
outcomes are thus a function of the hegemony exercised by dominant groups, the resistance offered by subordinate groups, and the institutions that mediate their relationship. 'iscrimination, in this view, is an inherent feature of the economic system. $ompetition is either not powerful enough to offset the group dynamics of identity and interest, or it actually operates so as to sustain discriminatory behaviour. 'iscrimination is due to the dynamics of group identification, competition, and conflict rather than irrational, individual attitudes. %arket mechanisms, far from being relied upon to eliminate discrimination of their own accord, must be scrutini3ed and pressured to further the goal of e(uality of opportunity; +-hulmen and 'arily 8!@!1. The policy implications of this view on persistence of discrimination are obvious. -ince the markets will continue to operate in an imperfect manner, discrimination will persist. It will also persist even if market forces are competitive in nature under certain conditions mentioned above as a normal phenomena4 it therefore calls for intervention in the form of an affirmative action policy and other measures as safeguards against discrimination.
The customary regulatory framework of the institution of the caste system and untouchability, on which mainstream theoretical formulations are based, has now undergone significant change. )fter the adoption of the $onstitution in 8!F", in theory at leas t castebased customary rules and norms governing occupation, property rights, employment and wages, and education were formally replaced by an egalitarian legal framework of property rights under which the
action to overcome market imperfections caused by caste based discrimination and to induce market competitiveness. =mpirical studies on the working of labour and other markets, and social needs like education, housing and health services, provide evidence of the persistence of market discrimination, particularly of former untouchables, and its end result in the form of lack of access to fixed capital assets, employment, human development and culmination in high poverty and deprivation among them. +)ction )id study :""F, Thorat 8!!!, reports of the -$9-T $ommission1. The studies also bring out the exclusionary and discriminatory working of private industrial labour markets +&apola :""A1. -o the claim of the corporate sector that it follows fair and competitive hiring practices is not borne out by facts. %ore than ?"# of recruitment in organised industrial sector is through informal modes of recruitment which are exclusionary in their outcome. )ffirmative action is thus necessary for promoting competitiveness and economic growth, if not for the goal of e(ual opportunity. )n efficiency conscious corporate sector cannot avoid the lessons from the theories which they use as *ustification for pushing the liberalisation agenda. How and in what forms we need to extend the existing public sector reservation policy for discriminated groups in the private sector is, however, as crucial. There is the huge experience of our own public sector reservation policy. The Indian state could also learn from the measures used against discrimination in private sector of other countries in the world. 'rawing on both Indian and international experience, I wish to spell out the possible elements of reservation or affirmative action policy for the private sector in India.
In designing remedies against discrimination we need to clearly distinguish between legal, e(ual access and other positive measures. These aspects relate to +a1 the type of economic sector or market for which the legal and affirmative action measures are developed and +b1 the type of method or procedures used in their application for the private and public sector. irst, with respect to the economic spheres or markets, countries such as -), /orthern Ireland, -outh )frica and %alaysia have mainly developed policies for religious, racial and ethnic minority groups. Broadly speaking, in these countries multiple economic and social spheres are covered under the orbit of legal and affirmative action measures which include labour, agricultural land, capital, product and consumer goods markets and also the transactions in supply of social goods, such as education, housing and the transactions undertaken by the government with private minority businesses. The specific economic spheres covered var y from country
to country. In countries like -) and /orthern Ireland, where the non agriculture sector constitutes more than !"# of the workforce, the focus is mainly on affirmative action policies for the labour market, both in public and private sectors. In some countries like -), besides the labour market, legal and affirmative action measures also cover education, housing, and government contracts for construction and purchase of goods from minority businesses. In developing countries like %alaysia and -outh )frica where a substantial portion of population is engaged in the agriculture sector, and minority groups suffer from poor access to land and capital in addition to the labour market, the affirmative action measures are also extended to agriculture land and capital market in addition to affirmative action policies for basic social needs like education and housing.
) second aspect relates to methods and procedures used to operationalise the safeguards against discrimination. $ountries have used at least three kinds of procedures or methods. irst is the legal protection against discrimination in the form of =(ual =mployment Dpportunity 2aws +==D21. These laws prohibit any private or public employers from discriminating against workers or persons based on group identities like religion, gender, colour, ethnicity, national and social origin and provide legal safeguards to discriminated groups in the event of discrimination in employment and other spheres of economic activities. )rticle GII of the $ivil )ct which established =(ual =mployment Dpportunity as law +==D21 +=xecutive Drder 88:A?1 in -), and air =mployment )ct in /orthern Ireland, are some examples.
) second strategy relates to affirmative and positive actions of various type. In principle, affirmative action can be distinguished from other antidiscrimination measures re(uiring proactive steps to ensure fair participation of discriminated groups +in employment and other spheres like education, housing, government contracts etc1, in contrast to laws that only prevent employers from taking steps that disadvantage minorities in the labour market and other spheres. iven the limitations of ==D2 in ensuring fair participation of discriminated groups, they are supplemented by affirmation action and positive measures, which attempt to ensure a fair share to discriminated groups. The principles +and methods1 applied to *udge
some cases *ust participation is viewed in term of fixed (uotas +similar to India1, in other cases it is expressed in term of racial9religious minority +population or labour force1 balance, and 1. It is necessary to recogni3e that different affirmative action policies are generally deployed as a measure and safeguard against
It is necessary that the government enact an e(ual opportunity law to provide legal safeguards against discrimination for various markets, namely capital, agriculture land, employment, product and consumer goods, education, housing, health and others. The legal safeguards should then be supplemented by more positive and
reservation9affirmative actions to improve their effective access to private employment, agricultural land, capital, production and consumer goods, and private education. -ince these reservation9affirmative action policies address the issue of present discrimination, they do not generally help to compensate for historical exclusion. This can be addressed within the framework of reparation or compensation measures. The former untouchables are a potential case for reparation or compensation due to denial of property rights and other rights and in*ustice for long periods in history, which is reflected in their overwhelming presence as wage labour, insignificant share in business and low literacy and educational levels.
References
eorge )kerlof +8!>?1, ?. eorge )kerlof +8!@"1, 1, <&hilosophy of Hinduism;, 8:"""1 and /ational 'evelopment &olicy +8!!8:"""1;, Journal of Social Science and !istory, all 8!@@. 'eepak 2al +8!@A1, !indu E"uilibrium# $ultural Stability and Economic Stagnation, Gol. I, $larendon &ress, Dxford. /ancy Birdsall and ichard -abot +8!!81, <nfair )dvantage 6 2abour %arket 'iscrimination in 'eveloping $ountries;, World Bank
-tudies, 7777777. T.-. &apola + :""A1, <-ocial =xclusion and Hiring &ractices by &rivate Industrial -ector;, &aper presented a -eminar on emedies )gainst 'iscrimination in the $ontext of eservation in the &rivate -ector, II'-, 'elhi, )ugust :""A. 5ames .2. -coville +8!!?1, <2abour %arket nderpinnings of a $aste =conomy 6 ailing the $aste Theorem;, %he American Journal of Economics and Sociology FF+A1, Dctober 8!!?. )martya -en +:"""1, <-ocial =xclusionK $oncept, )pplication, and -crutiny;, )'B Working &aper. -.. Thorat +8!!!1, <$aste and 2abour %arket 'iscrimination; +with .-. 'eshpande1, &ndian Journal of 'abour Economics, $onference Issue, /ovember. -.. Thorat +8!!?1, <)mbedkar on =conomics of Hindu -ocial DrderK nderstanding Its Drthodoxy and 2egacy; in Walter ernandes +ed.1, %he Emerging Dalit &dentity, Indian -ocial Institute, 'elhi. William 'arity 5r. and -teven -hulman +8!@!1, Question of Discrimination ( )acial &ne"uality in the *.S. 'abour +arket , Wesleyan niversity &ress, %iddletown, $onnecticut.
