Labour Reforms
Need for Holistic Strategy
The Classical theorist of Economics classified the factor – Wage,
sequentially after Rent. The rent reflected the cost of usage of land capital
in the production of goods and articles as against the labour for usage of
human capital in the economic value of such goods or articles produced. With
passage of time, the reliance on labour as the most important factor of
production came to fore, which now is abundantly evident in the present day
scenario. The human capital by no means is mean to the economic capital.
Coming to the spiritual existence of humanity, the purpose of human
life is to work towards salvation to experience God, if not achieve it. Therefore,
while we lead our respective life by carrying out our assigned or destined
vocations, we as humans have divine responsibility in ‘developing’ humans or
helping them grow. Labour Reforms therefore must lead to Human Development.
From exploitation to empowerment, from deprivation to abundance and from an
ordinary human to a realized soul – the reform process, to be really thriving
must make humans grow to realize their spiritual existence.
The Lost Opportunity
The nation initiated the liberalization process in 1990s and started
with fiscal reforms. These reforms paid much dividends as we see today in the
growth data available to us. The GDP growth, Industrial production, higher
savings and investment rate leave no doubt about the success of liberalization
process. These were the result first generation reforms. However, what the planners
could not perceive was, that mere fiscal reforms at the first place, will
result in skewed development. The development – that will be harbinger to
further disparities. Disparities - between haves and have not’s, increased urban
and rural divide, enhanced division - between employers and employees. These disparities
in the longer run will do no good to the nation or its nationals. Any reforms
to be really successful must be in tandem with the societal perception. Did we
perceive a society with disparities. Probably, no.
The complete exercise of the reforms should have been planned in a
comprehensive manner, where capital and labour must have been the part of same
first generation reforms. Capital and Labour, both were to be in the same berth
of reforms’ cycle. Had that been done, the kind of economic growth we see today
would have been qualitatively different. It would have been explosive and
beneficial to each class and segment of the economy. Still nothing is lost.
The Need
Traditionally we did not give labour the due it was entitled to. With
the huge population, where labour was in abundance and the capital in short
supply, it ought to be obvious. The labour laws were made to leash the
employers thinking that the liberal labour laws will give an authority to the
employers to further exploit the already
over-exploit class. Therefore, the legislations were enacted that were
unidirectional to check the exploitation of labour class. How far these
legislations could achieve the desired objectives may be a different arena of
study. Little did we realize that the laws legislated may transgress into the economic
deprivation of the businesses and entrepreneurs. In the bid to protect labour,
the leaders of the unions and the political class ensured sickness and death of
certain industries which were flourishing at one point in time. Textile as an
industry is one such classical example.
The Labour Facts
Let us examine certain startling facts about our ‘labour’. We are a strong country of over 1112 million
(4th advance estimates 2005-06). The quantum of labour force stood
at 428.37 million. There were 13.10 number of unemployed in 2004-05.
·
Of these 43 crores in the work
force, only minuscule 7% of the workers are employed in organized sector. The major
chunk 93% of our work force therefore, comprises the unorganized workers
employed in construction sector, farm sector or such other tertiary sector.
Only 8 to 9% of the total work force is covered under social security as being
part of the organized sector.
·
Educational levels of labour
force are very low. Around 44% of all workers are illiterate and another 22% have
education upto primary level. The scenario is worst on the rural side, where
just 25% of the workforce is literate. The educational situation of females in
the workforce is too grim, around 69% are illiterate while another 16% have
education only upto primary level. Thus only 15% of the total female workforce
is educated upto middle level or beyond.
·
Amongst the workforce, the
percentage of the skilled are abysmally low. As per the 50th round survey
on Employment by NSSO, over 90% males and 94% females did not posses any
marketable skills on the rural side. In urban areas, around 80% males and 89%
females had no marketable skills.
·
Internationally too, even
amongst developing countries, our labour force ranked too poorly in terms of
proportion of vocationally trained youth (20-24) forming its part. While we
have just around 5%, countries like Botswana
and Mexico Australia
and Canada
The Employment Realities
As per the Approach Paper of the Planning Commission on XIth Plan,
the number of workers is growing and its direction is towards non-agricultural
employment. However, the quality of employment and increasing differentials in
productivity and wages are the areas of concern. Working age population is
growing faster than the total population and labour force participation rates
have increased. If the participation from amongst the women is on the rise, the
phenomenon of under-employment is also escalating. Let us juggle with some
certain data here,
·
During 1999-2000 to 2004-05, workforce
or employment grew faster at an annual 2.48% as against 1.57% during 1993-94 to
1999-2000. Signifying higher employment generation during NDA regime.
·
The share of agriculture in
total employment has come down from 62% in 1993-94 to 59% in 1999-2000 to even further
down to 54% in 2004-05.
·
During the period 1994-2004, in
the organized sector there was negative growth (-0.80%) in public sector
employment. However there was a positive growth of 0.61% in private sector
employment.
With the declining share of agriculture in GDP, there is limited
scope of absorption of additional labour force there. Construction and
services, particularly transport, storage and communication have contributed in
maintaining employment growth. Employment growth in manufacturing sector is not
encouraging.
The Productivity
The productivity of labour is the outcome of the quality of labour force
and the industrial relations. Over the years industrial relations though seem
to be improving all across, poor industrial relations have brought death to
once flourishing industries also. Apart from the Trade Union Leaders, a large
(dis) credit goes to the archaic laws which instead of promoting cordial
relations amongst workers and industrialists perpetuated strikes or lockouts. Man
days lost are the most odious kind of a loss any nation could afford.
23.87 million of man days were
lost in 2004 in 477 numbers of lockouts and strikes taken together. In 2005 man
days lost were higher at 29.66 million despite number of lockouts and strike
falling marginally at 456, signifying substantially higher man days lost and indicating
poor industrial relations. Note that the Left having dominating position in
UPA. In 2006 till September, West Bengal experienced
the maximum instances of strikes and lockouts followed by Tamil Nadu.
The Laws
Constitution of India
The Expectations
The labour reforms probably have become synonym of giving the
industrialist, an unbridled power to hire and fire the labour. An industrialist
or entrepreneur should have flexibility and discretion to run his venture with
his wisdom in the most efficient way. It is he who takes a lead to set up, administer
and make economic value addition to the resources of the society, therefore the
right to deploy or withdraw the resources must lie with him; and labour is one
such resource. However, the businesses nowadays are so modeled that it is not
the industrialist individual who is the lone stakeholder, but whole lot of
societal elements responsible to the success of the venture, the labour being
the most important one. In the market economy, it the most efficient that shall
survive. The regulatory framework must be conducive to maintain a fine balance
between labour and capital. If the industrialist should have a right to bid
farewell to a worker or a class of them which he considers no longer necessary
for his business, the labour must also be secured enough to bear the vagaries
of changed market scenario. Proper compensation and security on severance need
to be adequately addressed. Let the contacted employment be the order of the day.
The labour reforms must be directed to improve the quality of
employment by addressing the need of training and skill up-gradation as a continuous
process, which in the longer run will be a building block for self-employment
of the workers if laid off.
Labour reforms need not mean reduction in employment opportunities. Way
back in 2003 the then Union Commerce Minister, Mr. Arun Jaitley while
addressing India Economic Summit said that ``Labour reforms would be
labour-friendly in the long run. They are aimed at making Indian industries
competitive globally which will create more jobs though not in the short run,''
He had then allayed the fears of the trade unions that the labour reforms will
shrink the job market. The successful labour reforms can only be said when we
have large employment opportunities coming our way.
Compliance to the regulatory framework must be based on mutual trust
between the state and the industry. Still the industrialist shudders on a visit
by an inspector from the labour department, unless the visitor is friendly.
Higher reliance must be placed on third party certificate. By their sheer
education and training, a chartered accountant is the best bet which comes at a
cost effective value to the entrepreneur. Compliance Certificate issued by them
submitted with the concerned department be accepted on its face value.
Each policy initiative and program, whether at the Centre, State or
even at Municipal level be tested and reviewed in the light of contemporary
business environment. Bajaj Auto closed its Arkudi Plant as octroi levied by
the local body was proving detrimental to its market. Despite that the company
continued to pay all its 2700 workers the wages each one was entitled to.
However, political bigwig Mr. Sharad Pawar intervened and the management
reopened the plant’s door just to make workers come to the site spend the time playing
cards and carom and go back in the evening. How long it can continue or what shall
be happening to the human resource, is anybody’s guess.
Fiscal incentives in the form of weighted deduction of expenses from
income under the Income Tax Act be considered for expenditure incurred by the
businesses on training, education and skill up-gradation of the employees. The
retrograde step of UPA government by introducing Fringe Benefit Tax on expenses
incurred on travel, board and lodging in relation to training of employee be
done away with. This is the time to develop humans.
Physically challenged need to be brought in to the main stream of
the labour force. Exceptional creative abilities are common to be seen in this
segment of the society. What is needed is to provide them with the opportunities.
Enterprises be encouraged to hire by incentivising by way of tax relief and
priority in land allotment for expansions if such enterprises already have
employed more than 10% of their total workforce from amongst the physically challenged
in their existing ventures.
In the abolition of child labour, co-workers have a major role to
play. Workers be made aware of their persuasive role towards the abolition of child
labour and deterrent role for such hiring towards the employer. Empower them
with awareness, without being afraid of losing their jobs if they report such
malpractice by the employer. Civil Society Organizations may be roped in to
this end.
The Unorganized
When we talk of reforms, probably we ignore the fact that it is the
labour force in the unorganized sector which really necessitate a first look. Construction
workers, weavers, domestic workers, fisheries workers, petrol pump workers,
beedi workers, transportation workers and casual workers in making a livelihood
across sectors including agriculture farm labour comprises over 90% of our
labour force as a class that has been at the receiving end than their organized
counterparts. We haven’t cared for them nor have the trade unions or political
class taken sight of their welfare ever since we gained independence. Largely
those working in the mills were the backbone of the leaders, who thrived on the
(un)welfare of the mill mazdoors. All
labour reforms therefore must target to the development of unorganized workers
to the fore. They must be provided training, marketable skills, health and
social security at no or minimum cost.
The labour department hitherto takes care of just 7% of the labour
force. These offices must be redefined as
counseling points for taking care of the needs of the unorganized labour. Members
of such labour force be certified with a Unique Identification Number valid in
whole of the country. The way, the organized workers are granted benefits under
ESI, modalities must be worked out whereby such workers may suo moto make
contributions to avail to the benefits under ESI or any other similar scheme.
The Road Map
The laws no doubt must ensure prevention of a cause and protection
of the targeted group but at the same time, laws must ensure that it do not
become a stumbling block in the development. This is true for any law, be it
economic, political or social. The laws are legislated to help the society grow
and the humans are its most dynamic element. It is the time now to review each
individual piece of legislation in the labour domain and assess it in the
touchstone of Human Development and Economic Growth at the same time. We need
to test each legislation to assure that it does not lead to labour exploitation,
it makes an employee realize his or her true potential and simultaneously it
enables the entrepreneur grow economically but ethically. No piece meal or
lopsided review will do.
Given the political and social compulsions we should not have
radical reforms. Reforms must be incremental. To begin with areas and
industries be identified where we need immediate intervention. For example,
construction and farm, both these segments employ large number of workers. It
is pathetic that despite The Building and Other Construction Workers Welfare
Cess Act having been legislated in 1996, a lot of states haven’t given the
effect to by passing necessary local regulations.
All societal stakeholders need to be involved
in the reform process. The Government, Trade unions and industry though
predominantly be the partners in the process, media must act as opinion builder
by helping disseminating factual position to the masses. The role of the
professionals like us, be the catalysts to enable achieve the desired.
Economists, social scientists, industry associations and lawyers each one has
to play a proactive role to make it happen. Involve institutions like Urban
Local Bodies and Panchyaats in the service delivery mechanism.
Politicians have a much bigger obligation in
the direction of reform process. At the Centre, they must legislate at the
first possible opportunity after elaborately debating each bill threadbare to
the advantage of the disadvantaged. It is disheartening to observe lot of bills
for the welfare of workers in unorganized sector either lapsing over the period
of time or pending with the legislature. States must also ensure speedy
enabling legislation. Keeping aside narrow political gains by providing the
reform process a boost by cutting across party lines will be the great service
our politicians will do the nation.
The UPA government came to the power riding on
the wave of the sacrosanct National Common Minimum Program, which enlisted labour
reforms as one of the priorities. However, not much headway could be seen on
this front except referring a few pieces of intended legislations for
examining, e.g., the Unorganized Sector Workers
(Conditions of Work & Livelihood Promotion) Bill, 2005 and the Unorganized
Sector Workers Social Security Bill, 2005. The
government must ensure that these bills be debated upon thoroughly and ensure
that they see the light of the day sooner than later.
Dr Charles W. Baird, the director of the Smith
Centre for Private Enterprise Studies at California
State University ,
remarked a few years ago: "India
- This article by the author Avineesh Matta was published in the document "Economic Development Roadmap Ahead" by BJP CA Cell in 2007 and factually valid today also to a larger extent.
No comments:
Post a Comment