Labour reform hits the headlines every now and then without ever making it to the statute book. With the Finance Minister advocating “fixed term employment” in his budget speech, it is in the news once again.

Talk of labour reform is in fact as old as the republic itself. Our present laws are a carryover from war-time legislation promulgated by the British to protect industry from disruption.

These laws morphed into the industrial Disputes Act in 1947 and continue to be in existence even today. The crux of the law is government intervention in industrial disputes to patch up between labour and management.

Hope of voluntarism

It never worked well. In the early 1950s, Jagjivan Ram, and later VV Giri who succeeded him in the labour ministry, tried to end this war-time anachronism. What they wanted was bilateral resolution of conflict, as happens in every liberal democracy.

Giri, himself a trade unionist, saw no role for the state in what was essentially an issue between labour and management. He met with stiff with opposition from within the Government, and had eventually to quit as labour minister.

Looking back, it is no wonder Giri failed. His bid for voluntarism was pitted against a state that was to become monstrously omnipresent and omnipotent, spreading its octopus-like tentacles in every direction.

It was left to Indira Gandhi to finally send any hope of voluntarism to the gallows. She ruled at the peak of the emergency that permanent workers cannot be sent away nor places of work closed down without the consent of the state.

A burden

The rule was so populist that it could never be implemented. And it is so populist that it cannot be repealed. In short, it is a millstone round everyone’s neck, labour included.

Industry’s response to this impractical law has been a massive shift to contract labour. Indeed, I know of plants that employ no permanent workers at all. Except for a small clutch of officers, the entire labour force is on contract.

Although employers are the driving force behind this shift, there is no serious opposition from any quarter. The Government is supportive. The law that forbids the employment of contract labour in core processes is being watered down in one industry after another.

Permanent workers are unconcerned with these changes so long as their interests and emoluments are secure. Trade unions are complicit because they only organise permanent workers.

Lately, some unions are beginning to organise contract workers. I have been witness to this development in steel and coal sectors, which are big employers. But the same unions that ask for the moon for regular workers only ask for the minimum wage for the contract labourer. Employers will in any case not pay more. The unions cannot call a strike because permanent workers will not back it. And the contract workers themselves cannot go on strike because they risk losing their jobs. In short, employers call the shots.

A permanent worry

Organised industry is riding on cheap labour, thanks to the law that confers immortality on the enterprise and interminability on its workforce. No government will want to meddle with this law for fear of trade union resistance. Permanent employment may be a myth, but for unions it is the jewel in the crown.

The fixed labour contract has to be seen against this backdrop. It offers an alternative to the bind we are in, perhaps the only alternative. While the contract does not promise lifetime employment, there will at least be a clear tenure. This is better than the present unfixed contract that can be terminated any time.

A good worker can expect the contract to be renewed while non-performers would be seen off, which is what happens right now. He will also get the occupational wage, the going rate for the job. For the contract worker who typically earns no more than a fourth to a third of what a permanent hand gets for the same job, this is manna from heaven.

For sure, the fixed contract will run into opposition from both labour and management. Trade unions will not give up on lifetime employment although they know it to be a mirage. Fixed contracts will push up the wage bill, which employers will resist. These are important considerations, but not the only ones.

We must also ask whether India can hope to become a manufacturing powerhouse on the back of an insecure and impoverished labour force.

An even more basic question is whether the crass exploitation of the weak and vulnerable that we find in the formal sector can be justified in a society that is concerned about growing inequality.

Labour reform is a political minefield, but one that has to be faced. The sooner it is done the better.

The writer is a labour relations and HR consultant