Opinion

Tough job

Rituparna Chakraborty | Updated on March 09, 2018

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Our labour market needs urgent reform



Ensuring freedom from unemployment still remains a distant dream. To achieve this, we need flexible labour laws. It is critical to eliminate redundant labour regulations. A complicated web of laws has led to a rigid labour market which pushes employers towards labour substitution. The growing capital intensity of production leads to low growth in formal employment.

In an attempt to protect existing jobs, current labour laws in India have counter-intuitively reduced the scope for creation of new jobs in the formal sector. In addition, labour legislation creates high wage islands in the organised sector, as a result of which India’s comparative advantage in labour cannot be efficiently tapped.

Our laws are outdated. Of the 44 Central labour laws in force, only three were enacted after 1990. Of the 35 post-Independence Central labour laws, 26 came into force between 1948 and 1979, and six more in the 1980s. Latest statistics from NSSO show a mere 16 per cent labour in the organised manufacturing sector. Labour market reforms will bring down the divide between the formal and informal employment.

A country like India that adds 12 million to the workforce annually needs different types of jobs, including flexi-jobs in the formal sector, enabling smoother and faster labour market transition, with higher level of employability.

Responding better and faster to the seasonal, cyclical or even structural changes in the economy is one of the main attractions of the flexi staffing industry. Reduction in unemployment and boost in labour mobility enables mapping skills to jobs.

A balanced vision

There needs to be a debate around how the current legal provisions affecting industry can be modified. In the absence of change, growth in industry is likely to take place more in the unorganised sector. Any further slippage towards the unorganised sector will also have an adverse impact on the welfare of the worker, as the wage and social benefits due to them cannot be ensured in practice.

To ensure the ease of compliance, the laws need to shift from complexity to simplicity. There is an immediate need to unify different labour laws into a compact number. A single labour law covering all aspects may not be possible. But as recommended by the Working Group on Labour Laws and other Regulations for the Twelfth Five Year Plan (WGLL-12FYP) and the Second National Commission on Labour (under the chairmanship of Ravindra Varma), labour laws should be unified into different categories.

Unified laws will also help protect the interest of workers in the unorganised sector by providing minimum wages, social security and labour welfare schemes.

Labour law reform is an ongoing and constant process. It is imperative that the Government gives serious consideration to it, in order to meet modern-day demands.

The writer is President of Indian Staffing Federation

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Published on May 18, 2014
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