Why ‘jobs for the boys’ is a bad idea

Venky Vembu | Updated on July 26, 2019 Published on July 26, 2019

Regressive move Protecting jobs for so-called ‘sons of the soil’ will have an adverse impact over the long run   -  AndreyPopov

Andhra Pradesh’s nativist move to reserve 75% of jobs for ‘locals’ ignores the sweeping changes in the employment landscape

In times of perceived trouble, the instinctive defence mechanism of besieged leaders and armies is to pull up the drawbridge that connects them with the world beyond the frontiers they command. Such an action affords the comforting feeling of immunity — or at least of momentary insulation — from the perils and complexities of the external world.

It is easy to fall into the error of believing that this reclusiveness of spirit may have characterised only medieval characters in times gone by; in fact, it lives on to this day, as contemporaneous socio-politico-economic events around the world, both near and far, testify.

Earlier this week, one such creaking drawbridge, signalling a nativist impulse, was pulled up in Andhra Pradesh, with the passage of a Bill to provide for 75 per cent job reservation for locals in industrial units, factories, joint ventures, and projects set up under the public-private partnership mode.

The precise delineation of who will quality for this quota is yet to be made, but to the extent that this takes the State past the point of no return in terms of institutionalising job reservations in the private sector, it marks a defining moment in its industrial history.

Once the law takes effect, it will apply to all existing and upcoming industrial units, although the former will have three years to comply. Under the law, if skilled personnel are not available for the jobs at hand, these industrial units cannot ‘import’ labourers from elsewhere; the burden of imparting the requisite skills to, and of employing, locals will fall on the units.

Unintended consequences

The measure has come about in response to a perceived need to “protect” industrial jobs for so-called ‘sons of the soil’. And while it may play well by the political playbook to the extent that the new ruling dispensation is seen to be looking out for ‘locals’, it is certain to have unintended consequences that will have adverse impact over the longer term.

The trouble with the State sliding down the slippery slope of sub-nationalism with such restrictive geography-bound job quotas is that, as with all bad habits, it is a contagious failing, and is bound to be emulated by other States too.

Indicatively, the Madhya Pradesh government, hanging on by a slender majority and evidently looking to shore up its support base, has already given voice to a policy to reserve 70 per cent jobs in the private sector for ‘locals’. A few other States, too, are articulating similar parochial sentiments.

The malefic effects of such games are manifest at the global level. When countries wage ‘trade war’ — by debasing their currencies to gain competitive advantage or by erecting protectionist barriers — they only advance a zero-sum game where both sides lose from such ‘beggar thy neighbour’ policies.

In more extreme cases, when a fear of losing jobs to “outsiders” overruns rational policy-making, it has had disastrous consequences. Britain’s torturous experience of ‘Brexiting’ the European Union is testimony to the perils of a short-sighted stoking of provincial sentiments.

Andhra Pradesh’s regressive move, which will from all accounts likely find traction in other States, risks triggering much the same kind of a race to the bottom. It will almost certainly push up the cost of doing business in such geographical entities that embrace this policy idiocy, and make a mockery of the concept of the ‘Indian Common Market’, which rests on the foundational premise of unfettered labour mobility.

Changing jobs landscape

The erection of sub-national protectionist walls with the stated intention of fencing off industrial jobs is also flawed on another count: it doesn’t reckon with the shifting of the tectonic plates of the employment landscape.

As a sheaf of government documents, including the Economic Surveys of years past, bear out adequately, India is actually experiencing a peculiar phenomenon of “premature non-industrialisation”: as a consequence of this, it has begun to “de-industrialise” even before reaching peak industrialisation.

A McKinsey study of the impact of jobs at risk globally from “technically automatable activities” reckons that India is among the four top economies (along with China, Japan and the US) where some 1.1 billion jobs are on the line. India and China together account for the largest “technically automatable employment potential” — of over 700 million full-time equivalents between them, the study projected.

Exercise in futility

For Andhra Pradesh, therefore, to attempt to artificially ‘protect’ industrial jobs within its domain, when in fact the ground is shifting beneath it, amounts to an exercise in futility; it is akin to rearranging the deck chairs of the Titanic long after the ocean liner has struck an iceberg.

As was said on a more famous occasion, it reflects a colossal failure to distinguish between a bicycle accident and the collapse of a civilisation.

There is one other supreme irony to the timing of the populist move by Andhra Pradesh. Economists had thus far bemoaned the absence of labour market reforms, and in particular the failure to iron out entrenched rigidities therein, as one of the primary contributory factors for the inability to generate manufacturing jobs in sufficient quantities to absorb the new entrants into the workforce.

Just this week, the Centre took the first tentative steps towards untangling the spaghetti bowl of labour laws in order to enhance the ease of doing business.

There still remains much to be done, but it held out the hope that it would help reverse (at least in part) the de-industrialisation currently under way, and perhaps generate jobs.

However, backward-looking initiatives, such as the one undertaken by Andhra Pradesh, may put paid to such hopes prematurely.

Follow us on Telegram, Facebook, Twitter, Instagram, YouTube and Linkedin. You can also download our Android App or IOS App.

Published on July 26, 2019
This article is closed for comments.
Please Email the Editor