Ranking games and the woes of workers

| Updated on: Nov 12, 2017
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Labour pays the price, as the Government panders solely to businesses in order to earn plaudits from the World Bank

India’s jump from 130th (2016) to 100th (2017) rank in the Ease of Doing Business (EDB) exercise by the World Bank has at once been received with celebration and disbelief (given that the economy is barely recovering from the deleterious effects of demonetization and GST). Employment growth is dithering and companies in the telecom and IT sectors have been laying off workers.

While the bureaucracy needs to be prodded to ease business processes, should this logic of deregulation be extended to labour in the name employment generation? The World Bank is known for endorsing labour market deregulation.

Political economy of ranking The ranking exercises are important because pressure groups lobby for change in regulatory policies, and countries pride in responding to them. The report for 2018 acknowledges that 119 of the 190 countries enacted at least one regulatory reform, surely for being regarding as more business friendly. Although labour market regulation has not been ranked since 2010 due to a chorus of criticism, it figures in the regulatory mindset of World Bank.

The problem is that business and ruling parties ignore the marked contrast in the rankings on components of social and economic progress. While India has “arguably” got a good rating on business ease, in other realms it fares badly. The Global Wage Report of ILO shows income distribution in India in poor light. The highest-paid top 10 per cent of income groups receive almost 43 per cent of total wages paid to all employees, whereas the lowest-paid bottom 50 per cent income groups receive only 17 per cent. India was rated 149 out of 152 countries on social spending, 91 on progressive taxation and 86 on labour rightsby the recent policy report of Development Finance International and Oxfam. The Labour Rights Index measured by the International Trade Unions Council has placed India on worst ranking (indicating no guarantee of workers’ rights) for three consecutive years.

While the EDB seeks to ensure that the small and medium firms do business unshackled by bureaucratic hassles, it has the power to influence a race to the bottom in deregulation, between countries and States. Some countries like Rwanda have formed a bureaucracy to manage their business profile. It is not surprising that the Centre has, under pressure from World Bank, initiated a domestic business ease ranking exercise.

Ease of doing vs labour rights It is significant, even disturbing, that the department of industrial policy and promotion (DIPP) in the commerce and industries ministry has replaced the labour ministry in dealing with matters concerning labour laws. DIPP has issued detailed “regulations” to deregulate the labour market in States. Now, State labour departments are quoting the World Bank instead of ILO even as they proudly announce liberalisation of labour inspections for “ease of doing business”!

Borrowing from product market deregulation, labour departments have introduced “deemed” registrations and renewals to user enterprises and contract workers if not granted within a given tenure and conduct post-registration inspections for compliance.

But they show relatively far less interest in extending labour-friendly reforms in terms of granting deemed union registration of workers or reforming the bureaucracy in helping workers’ claims of social security benefits. Risk-based inspections (without even a reliable data base), machine-regulated inspection orders (to remove the rent-seeking element of “discretion” in labour inspectors), third party auditing, removal of unannounced inspections, self-certification, etc have been designed by many States to facilitate “ease of doing business”.

In liberalising labour inspection systems India has violated the the ILO Labour Inspection Convention (081) which it has ratified — the convention states that the establishment should be inspected as often as possible and at any time even without prior intimation.

Worse, legislative reforms have expanded the pie of informality by relieving firms and contractors from legal purview. On the other hand, more workers remain outside the purview of benefits and regulation. Ease of doing business has little use for social welfare.

Sundar is a professor at XLRI, Xavier School of Management; Sapkal is an assistant professor at Maharashtra National Law University, Mumbai

Published on January 09, 2018

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