INDIA’S LABOUR REFORMS

Introduction

India’s gravest socio-economic problem is the difficulty a vast majority of Citizens have in earning good livelihoods.

Dominant theory

• The dominant theory in use to increase employment is to improve the ease of doing business with the expectation that business investments will improve citizens' ease of earning good livelihoods.
• In this theory, large and formal enterprises create good jobs, and labour laws must be flexible to attract investments.
• Investors say laws protect labour too much. Reforms were begun by UPA and NDA became bolder in 2014 and moved to reform the content of the laws.

Labour is a concurrent subject

• Impact of labour reforms so far
• Labour laws cover many subjects –payment of wages, safety conditions, social security, terms of employment, and dispute resolution.
• The proposed national reforms the government is gearing up to make shortly are the conversion of all these laws into four codes.
• The report has focused on the reform of the Industrial Disputes Act, which is to raise the limits of applicability of laws relating to terms of service and modes of dispute resolution (roles of unions) to 300 people.
• The report spans the period 2004-05 to 2018-19.
• It focuses on six states which have implemented reforms-Rajasthan, Maharashtra, Andhra Pradesh Tamil Nadu, Jharkhand, and Uttar Pradesh
• The report reminds the reader that labour is one factory one factor affecting business investment decisions.
• An enterprise must have a growing market for its products, and many things must be put together to produce the market capital, machinery, materials, land, etc, not just labour.

Deductions of the Report 

• Reforms of labour laws have had little effect on increasing employment in large enterprises.
• The report says that the effects of labour reforms cannot be revealed immediately: they will take time.
• Therefore Rajasthan the first state to implement the reforms seems to have benefitted the least from them.
• The share of employment in plants employing more than 300 people increased from 51.1% to 55.3% between 2010-11 to 2014-15 and then increased less from 55.3%to 56.3% in 2017-18 when some states made the bolder reforms favourable for employers.
• Though overall employment is affected by many factors, the bolder reforms post-2014 were designed to promote large factories.
• Employment in formal enterprises is becoming more informal.
• Large investors can afford to use more capital and are also employing increasing numbers of people on short-term contracts while perversely demanding more flexibility in-laws.
• The report defines “formal” employment as the grant of paid leave, a written contract, and some "social security".
• An enterprise should not have to employ more than 300 people before it provides these benefits.
• Along with the right to be heard and dignity at work, there are the minimal "essentials' all employers must provide to all those who work for them, whether in small enterprises or domestic help.
• Increasing the threshold of the laws dilutes the rights of association and representation of workers in small enterprises.

A  Widening Gap 

• The gap between where our economy is and where it needs to be is increasing.
• Between 1980 and 1990, every 1% of GDP growth generated roughly two lakh new jobs, between 1990 to 2000, it decreased to one lakh jobs per cent growth and from 2000 to 2010, it fell to half a lakh only.
• Fundamental reforms are required in the theory of economic growth: more GDP does not automatically produce more income at the bottom.
• And the paradigm driving employment and labour policies must also change to enable the generation of better quality livelihoods for Indian citizens, now and in the future.