Opinion

A skewed approach to labour issues

KR Shyam Sundar | Updated on January 03, 2019

Women power Strict enforcement of gender-friendly rules can hit employment in the short run   -  V Ganesan

NITI Aayog is stuck on a misguided notion that ‘labour flexibility’ will boost investment, ignoring skilling and other factors

The NITI Aayog (NA) has outlined its strategy for taking India to a nearly $4-trillion sized economy riding on 9-10 per cent growth rate which in turn will be fuelled by a peaking of the investment rate at 36 per cent and a near-doubling of export revenue to $800 billion by 2022-23. Hopefully, the economic miracle that it envisions will be “inclusive, sustained, clean and formalised”.

The subtext to this larger strategy implies generating good quality jobs and increasing female work participation rates. Its strategy with respect to labour and employment is based on two contestable assumptions. One, economic growth is essential to employment generation. Two, lack of labour flexibility is the main obstacle in the march to growth and creation of jobs.

The jobless growth story that India has experienced during the 2000s should have prompted the NITI Aayog to be more nuanced in its approach. The relationship between growth and jobs is not a linear one.

The NITI Aayog is not alone in blaming labour laws for all the ills in the economy and the labour market.

While launching the Atal Bimit Vyakti Kalyan Yojana last September, the Centre observed that “the current scenario of employment in India...has transformed from a long- term employment to fixed short-term engagement (FTE) in the form of contract and temping,” thereby implicitly accepting the nature of this arrangement. The Centre has exhorted States to formally adopt FTE, in a notification issued last March.

The Centre needs to understand that labour flexibility has not produced the desired outcomes such as higher investment. In a conference on “Jobs and Livelihood Creation” organised by the Confederation of Indian Industry and NITI Aayog in February 2018, former Labour Secretary Satyavathy observed that the amendment of Chapter V-B in Rajasthan and other States has not impacted significantly the investment inflows into them.

A study undertaken by Sanjay Upadhyaya and Pankaj Kumar of the VV Giri National Labour Institute in 2017 concluded that, “On their own strength, these amendments in labour laws have neither succeeded in attracting big investments, boost to industrialisation or to job creation...Rapid industrialisation, growth in investments and job creation would ultimately depend on so many other factors as well like development of infrastructure, stable law and order, availability of skilled manpower as per the requirements of the industry, boost in skill upgradation and multitasking efforts and the like.” (p.69).

Again according to the Ease of Doing Business Study by the World Bank (2014), only a little over one-tenth of the respondent firms in India perceived labour regulations as a major constraint. Put in economic language, the actual percentage rise in economic benefits like employment and investment is much less than those anticipated by the law-makers. Hence, it will pay well to look elsewhere for resolving labour market risks.

Women workers’ issues

The Report is disjointedly written — for example, in a para on “protection and social security” (p.14) it talks more about multiplicity/complexity of labour laws and enforcement issues than on the theme. Its recommendation, though positive, that women workers’ friendly laws should be enforced well, in fact, will have adverse effects on women’s employment, though arguably during the short and medium term.

Extension of maternity benefit to 26 weeks amongst others under the amended Maternity Benefit Act has arguably adversely affected employment prospects and even the existing employment of female workers, especially in start-ups which the government is keen to promote vigorously.

Now, the government is proposing to subsidise wages of female workers earning less than ₹15,000. However, it has little to say on the gender composition of committees and institutions created under the labour laws. While focusing on supply side issues concerning women workers, this should be combined with institutional strengths.

The NITI Aayog talks of effective compliance with respect to working conditions, the new maternity benefit law, and minimum wages and a National Policy for Domestic Workers.

But all these require an adequate and trained enforcement machinery which in the name of reform has been dismantled. To be sure, no one is arguing against reform of labour administration system to make it more transparent and vigilant.

While speaking on the enforcement issue, the NITI Aayog’s recommendation for speedy and low-cost resolution of industrial disputes begs a lot of questions; it is utterly oblivious to the inadequacies of labour judiciary system. It is well-known that delayed justice results in inefficient economic outcomes especially in a market-driven economy.

Back-of-the-envelope calculations show that there was one judicial body for nearly 85,000 employees during 1998-99 and it ‘may’ be worse now — “may’, because growing informalisation of workers and weakening of trade unions have ‘reduced’ industrial disputes and hence the workload on the labour judiciary!

Various law commissions have highlighted delayed justice for labourers/firms. Compulsory adjudication was being considered even in the 1940s and it continues to be relevant even today for voiceless workers. But the debate on reforms has been centred around by easy hire-and-fire clauses and not on judicial system reform.

Trade union rights

Further, the NITI Aayog typically completely leaves out any mention of ‘industrial democracy’ to meet stated objectives like fair wages or even minimum wages. Trade unions perform important social and economic functions (as an agency of collective agreements, reduction of transaction costs, etc). They constitute one of the fundamental human rights, according to the ILO. Yet, trade union recognition law is still absent in most States and at the national level.

Facts concerning skills — around 95 per cent of workforce without formal training in India — are far more threatening to productivity than trade unions, strikes or restrictive labour laws.

The NITI Aayog needs to really retool itself to be able to come up with a balanced and conceptually consistent labour market and industrial relations strategy, to deliver quality jobs and inclusive growth.

The writer is Professor, Xavier School of Management, Jamshedpur

Published on January 03, 2019

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