Ramesh* was 15 when he left his home and family in rural Uttarakhand and migrated to Delhi NCR. He had left in search of work and the opportunity to help his family whose financial situation, already precarious, had grown dire when his father became unwell. As a teenager alone in an unfamiliar city, Ramesh became easy prey for unscrupulous brokers eager to exploit his vulnerability. Deceived by a recruiter, he became trapped in a situation of debt bondage, unable to leave his employer until he managed to escape with the support of a local social worker.
For the next eight years, Ramesh worked as a daily wage laborer on various construction sites. Eventually, he progressed to obtaining work orders for minor components of construction projects and was able to hire a small team of workers. However, despite his near-decade of experience with the work itself, Ramesh was unversed in how to navigate the informal nature of the construction business. He was defrauded on multiple occasions by larger contractors and developers who took advantage of verbal agreements and informal quotations to pay him unfairly, late, or, in some instances, to default on payments entirely. Ramesh faced significant losses, losses that were born not just by Ramesh but by the team that he had hired. He was unable to pay his workers the wages he had promised. Nor could Ramesh raise his grievances with authorities. He relied on word-of-mouth relationships with these larger contractors for references and future work orders. The optimism with which he had viewed the opportunity quickly deflated. Without any real understanding of formal contracting, Ramesh and those whom he employed, were cheated, exploited, and left with no outlet for redress.
Migrant workers are at high risk of exploitation
Ramesh is one of hundreds of thousands of micro-contractors, situated at the very end of the sprawling and fractured supply chain in India’s construction sector. This sector is one of the fastest-growing in the world and accounts for 9% of India’s GDP. It is the country’s second-largest employer, attracting millions of migrant workers to urban centers each year.
The industry is characterized by a complex and multi-layered value chain that relies heavily on a floating workforce of migrant workers to meet labor demands. The majority of these workers are low-skilled rural migrants and members of socially disadvantaged communities.
Commonly, they depend on daily wages for their livelihoods, making them particularly vulnerable to exploitation. In a large-scale worker voice study with over 17,000 migrant construction workers in 2019-2020, the Global Fund found that approximately 30% of respondents experienced some form of forced labor risks, with nearly 5% experiencing critically severe forced labor conditions. More than 20% reported restrictions on their movement after work shifts, and over 10% reported facing threats to themselves and their families at their workplace.
Micro-contractors can improve working conditions but face structural constraints
Micro-contractors like Ramesh are the primary employers of this vulnerable migrant population, employing between 5 and 25 unskilled and semi-skilled workers at a time. They represent the node of the construction supply chain that is most directly connected to migrant workers – they are usually the first point of contact for workers at the end of their migration journey, and are responsible for their recruitment, scope of work, working conditions, working hours, and wages.
Their direct influence over worker well-being makes micro-contractors critical stakeholders that need to be engaged and involved in any programming efforts aimed at worker protections and welfare.
Most micro-contractors spend several years as daily wage workers and often belong to the same communities as the migrants they employ. Rising to the role of micro-contractor may seem a step up, but micro-contractors are at the mercy of structural constraints that often leave them with very few options to improve working conditions. Critically, micro-contractors regularly face irregular and delayed payments from their contractors which often limits their ability to pay timely and full wages to workers. As they are only paid when they complete a particular work order, they absorb the majority of risk as it is passed down the supply chain. Since they typically have no access to affordable financing options and often lack financial safety nets, they often take out high-interest loans through informal channels in order to stay afloat, increasing volatility and potentially trapping them in a cycle of debt bondage.
Further, most micro-contractors operate as unregistered and informally managed businesses and lack the necessary know-how to effectively structure and formalize their practices, leaving them, and consequently the workers they employ, vulnerable to exploitation and without access to channels for redress and remediation. This is the situation that Ramesh confronted. Despite his years of experience in the industry and the seeming opportunity to achieve a better future, Ramesh lacked the necessary support systems and business acumen to succeed in his new role. By extension, so too did the workers he had hired.
Addressing these systemic constraints faced by micro-contractors has the potential to generate very tangible and immediate positive effects on worker welfare.
Given the absence of clear and direct channels between big developers and the workers on construction sites, micro-contractors present a much more relevant and effective intervention point to drive worker benefits than top-down efforts through large industry stakeholders.
Between 2019 and 2021, the Global Fund and our partners worked to test this hypothesis and piloted efforts to train micro-contractors on both ethical labor practices and technical skills for business development (such as digitizing payment transactions, developing accurate quotes for work orders, and formalizing business contracts). The aim was to support the development of non-exploitative employment conditions that were mutually beneficial for workers and contractors. During this period, over 3,000 migrant workers were employed with the 570 micro-contractors trained through the project.
A large-scale quantitative study run simultaneously to this project found that workers who were employed with trained micro-contractors faced lower forced labor risks than those in the larger study pool who did not receive this intervention. Qualitatively, workers employed by trained micro-contractors expressed a desire to stay on with these employers as they had taken steps to create safe and equitable work environments, including ensuring on-time wage payments, providing safety equipment for risky jobs, and helping meet essential needs such as food, accommodation, and childcare at construction sites. Notably, women working for trained micro-contractors highlighted the non-discriminatory practices employed in the workplace. Unlike their previous experiences in the construction industry, they were now paid separately from their spouses and at an equal rate. The trained micro-contractors internalized the concept that fostering ethical relationships with workers contributes greater value on both sides. They further confirmed that technical and business practice training allowed them to formalize their work agreements and develop more secure contracts with clients to avoid payment defaults, enabling them to pay their workers on time and yielding positive outcomes with worker retention and productivity.
Buoyed by these initial learnings, GFEMS is currently investing in expanded programming in India through our partners Sattva, Labournet, and Kois Invest.
This programming is focused on providing additional cohorts of micro-contractors with access to low-cost working capital loans, channels for stable work orders, and training on ethical labor and business practices. The Global Fund views engagement with micro-contractors as a cornerstone of our approach to eliminating forced labor in the construction industry. We continue to generate evidence to build the “business case” for investing at the micro-contractor level. Trained in business and ethical practices, micro-contractors can better protect themselves and the men and women they hire. They can transform systems of exploitation.
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*Ramesh is a composite character based on research findings and discussions with implementing partners. Uttarakhand is a state in Northern India.