India’s labour reforms

India’s “tryst with destiny” was to provide “Poorna swaraj” (i.e., full freedom) to all its citizens: political freedom, social freedom, and economic freedom.

After 75 years of independence, we examine whether we have been able to provide socio-economic freedom to one of the most deprived classes of or population: labourers

India’s fault lines:

State of Working India 2021:

• ‘One Year of Covid­19’ brought out by Azim Premji University’s Centre for Sustainable Employment reported that 100 million jobs were lost during the April-May 2020 lockdown.
• Though most of these workers had found employment by mid-2020, 15 million remained out of work.
• Between 1980 and 1990, every 1% of GDP growth generated roughly two lakh new jobs; between 1990 to 2000, it decreased to one lakh jobs per per cent growth; and from 2000 to 2010, it fell to half a lakh only.
• India’s gravest socio-economic problem is the difficulty a vast majority of citizens have in earning good livelihoods.
• Their problem is not just employment. It is the poor quality of employment: insufficient and uncertain incomes, and poor working conditions, wherever they are employed — in factories, farms, service establishments, or homes.
• The dominant ‘theory-in-use’ to increase employment is to improve the ease of doing business, with the expectation that investments in businesses will improve citizens’ ease of earning good livelihoods.
• In this theory, large and formal enterprises create good jobs, and labour laws must be ‘flexible” to attract investments. Investors say the laws protect labour too much.

Labour reforms: Background

• In India, labour is a subject in the Concurrent List, so both the Parliament and the state legislatures can enact laws on it.
• Before the new labour codes were passed, there were more than 40 central laws and more than 100 state laws on labour and related matters.
• The Second National Commission on Labour (2002) recommended that the central labour laws should be integrated into groups like: Industrial relations, Wages, Social security, Safety, Welfare and working conditions.
• The Commission suggested simplification of the labour codes for the sake of transparency and uniformity.

The new labour codes:

In 2019-20, the Parliament enacted 4 labour codes to consolidate these multiple laws:

• Code on Wages, 2019
• Industrial Relations Code, 2020
• Social Security Code, 2020
• Occupational Safety, Health, and Working Conditions Code, 2020

Impact of reforms:

The V.V. Giri National Labour Institute’s interim report, “Impact Assessment Study of the Labour Reforms undertaken by the States”, provides insights into the impacts of the reforms so far.

• The report has focused on the reform of the Industrial Disputes Act, which is to raise the limits of applicability of laws relating to terms of service and modes of dispute resolution (roles of unions) to 300 people.
• The report spans the period 2004-05 to 2018-19. It focuses on Six States which have implemented reforms.
• The report reminds readers that labour laws are only one factor affecting business investment decisions.
• Investors do not go out to hire people just because it has become easy to fire them.
• An enterprise must have a growing market for its products, and many things must be put together to produce for the market — capital, machinery, materials, land, etc. not just labour.
• Therefore, it must be worthwhile to employ more people before firing them.
• Reforms of labour laws have had little effect on increasing employment in large enterprises either.
• The report says, employment in formal enterprises is becoming more informal.
• Large investors can afford to use more capital and are also employing increasing numbers of people on short-term contracts, while perversely demanding more flexibility in laws.

Way forward: closing the gap

• Fundamental reforms are required in the theory of economic growth: more GDP does not automatically produce more incomes at the bottom.
• And the paradigm driving employment and labour policies must also change to enable the generation of better-quality livelihoods for Indian citizens, now and in the future.

To achieve this, fundamental reform is required in the ways policies are made. If the benefit of reforms is supposed to be the improvement of ease of earning, better livelihoods for all citizens and with more dignity, whether they are farmers, factory workers, or service employees, they must be listened to most of all, within their enterprises, and in the process of shaping policies.

Source: The Hindu