Poor labour policies: Reserving jobs for locals impacts labour flow and skill development. It is unconstitutional

With more than one State in India now trying to ape the Andhra Pradesh Employment of Local Candidates in the Industries/Factories Act 2019, which reserves 75 per cent jobs for locals, the threat of parochialism torpedoing larger economic interests is clear and present. This must be countered at the outset. Organisations that pursue social diversity as a matter of policy (‘equal opportunity’ employers) have tasted commercial success as well, as they are able to tune in to the needs of an equally diverse marketplace. While this is particularly true for sectors with a direct customer interface (such as FMCG, aviation and media), it extends to other areas as well. If the workforce from a particular region is identified with a particular set of skills, it is because of social, economic and geographical factors specific to that region. Labour contractors in infrastructure projects are acutely aware of these aspects as they seek to maximise efficiency and quality. For an economy whose strength is its diverse labour pool, it is strange that some States should seek to disregard this advantage. They are likely to lose their productive edge in the process. It will increase risks of labour shortages, can trigger a rise in unemployment, aggravate wage inflation, render labour markets rigid and incompetent and exacerbate regional inequalities.

It is odd that States should erect labour market barriers at a time when the country is moving the other way: removing barriers to inter-State trade and to the movement of capital across entities, if not geographies, by implementing the bankruptcy law. It is another matter that protectionism is gaining ground under Trump, with inward-looking tendencies generally on the rise. However, there is no reason for India to go down this road.

Cosmopolitanism has been one of the driving forces in India’s early industrial success, in Mumbai, Kolkata, Ahmedabad and other industrial townships created in the hinterland. When ‘outstation’ workers merge into the host populations they initiate a social process (be it ‘melting pot’ or ‘salad bowl’) that make societies more egalitarian, secular and tolerant. The UNDP notes that integrating immigrants (including migrants) in destination countries in a safe, orderly and regular manner in employment, education, health, transport and farming could add between $800 billion-1 trillion to the global economy on a yearly basis. India’s Constitution guarantees labour mobility: Article 19 says every individual can freely move in and around the country and work anywhere she wishes to. The free movement of labour and capital must move hand in hand for the evolution of capitalism under a democratic framework – as one of the basic principles of the WTO, this principle holds as true for internal markets as global ones.

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