Unless you belong to the ideological Left — and even if you do — it is impossible to argue that India’s complex web of labour regulations serve the public interest.
Simply put, they are part of the reason why 90 per cent of India’s labour force is “informal”, without the basic protections that law ought to have given them. Our labour laws are part of the reason why we have failed our migrant workers, millions of whom have not been paid their wages, have been prevented from going home, were killed on the rails and are trying to walk the long distance home. Over the past few decades, both employers and workers have found a working optimum outside the Kafkaesque labour regime, which more or less worked during normal times, but showed its failings during the coronavirus pandemic-triggered lockdown.
Consider the counterfactual — if a greater proportion of our workforce had enjoyed the basic protections of employment, the migrant crisis might have been less acute.
So, when Uttar Pradesh and Madhya Pradesh, two Indian states that acutely need new economic engines, surprisingly announce that they intend to do away with a substantial chunk of their labour laws, they deserve the right kind of support.
What are the objections to reform?
In addition to the traditional opposition, the current attempt at labour reform is controversial for three reasons.
First, that it is being pushed, in Uttar Pradesh, by Yogi Adityanath’s government, which has followed a hardline Hindutva agenda, shown little regard for constitutional norms, and brutally suppressed the anti-CAA protests before the pandemic upstaged everything. The bona fides of such a government, the argument goes, are suspect.
Second, that the economic crisis caused by the lockdown has already caused millions of job losses, and labour reform will make things worse for workers.
And third, exempting employers from all but four labour laws will undermine the rights and protection of workers, leading to their exploitation.
Unless you are a hardcore BJP supporter — and even if you are — there is little doubt that the Adityanath government’s track record is dubious at best. The manner in which it managed the anti-CAA protests was particularly shameful.
Yet it is entirely possible to oppose and condemn its social and political acts in the strongest terms while simultaneously treating its labour policy on its own merits. Yes, the politics cannot be kept out of economics, but economics also imposes constraints and discipline on politics. One reason the southern states are better governed is because their economic considerations — including the upside for the political class — limit the damage unbridled populist politics can do.
To the extent the Hindi heartland could also be bound by the economic straitjacket, it might even improve its politics. Labour reform is not a bad idea merely because a party or politician you do not like is implementing it. Political partisanship should not destroy our ability to judge public policies on their own merits.
But India also needs jobs
This brings us to the second point: is this economic crisis a good time to push drastic changes to labour laws? The short answer, actually, is “yes”.
Even before the coronavirus crisis, the Hindi heartland was struggling under the weight of its demographic dividend. If India needed to create 20 million jobs a year, the northern states accounted for the largest chunk of that. It is because of a lack of employment opportunities in their home states that lakhs of workers went thousands of kilometres in search of jobs. If the Covid-19 crisis eases in a matter of months, many of them might be able to head back again. If it doesn’t, then the northern states will find they have millions more looking for jobs. Jobs don’t grow on trees, nor do they grow in government. With state finances flashing red, state governments’ ability to expand MGNREGS or similar schemes is also limited.
So, what has been clear for decades is now bleedingly so: India in general, and northern states in particular, need to create millions of job opportunities especially at lower skill levels. Despite every generation of politicians and policy wonks finding excuses for “why mass manufacturing is not the answer”, mass manufacturing, along with infrastructure industries, is pretty much how every other big country solved its employment problem.
We now think artificial intelligence and robotics will replace Chinese workers, and so “manufacturing is not the answer”. Even if we accept that for the sake of argument, there is a window of opportunity between the jobs shifting out of China and being replaced by robots in California. That window of opportunity can stretch into years. What’s wrong with buying time and employing millions of Indians in manufacturing industries for say, five years? We might be getting in the game at the tail end, but better late than never.
Signalling early and moving fast is certainly a necessary step to wrest some of the jobs moving out of China. Whether or not it is sufficient is another question. Yet it is undeniable that without labour reform, India cannot address its demographic challenge.
The unanswered questions
What about the third count? Will exempting employers from labour laws hurt the protections workers enjoy? Even in the worst case, assuming all employers are exploitative, only around 10 per cent of the workforce, the “formal” bit, is affected. On the other hand, if a more relaxed labour environment leads to greater investment, it will cause more people to be employed, and also increase the numbers in “formal” employment.
In other words, it is more likely that a rational labour framework will lead to a larger number of workers enjoying basic protections. Why can I say this with confidence? Because we have more than a century of empirical evidence from Europe, America and East Asia for it.
A lot depends on exactly what the new labour landscape in Uttar Pradesh and Madhya Pradesh looks like. Contrary to what people think, it is almost certain that basic protections will remain on the books, while a lot of the cholesterol will be cleared out.
But labour reform is only a necessary condition for the massive growth of employment. What we should be concerned about is whether investors will build plants in a country and in states where rule of law is fraying, where governments treat contracts as political footballs, where some corporate houses always enjoy favour, and where social harmony is purposefully wrecked.
What about our courts — which might rule, years later, that all jobs that came under the new regulations are null and void? How can the Narendra Modi government assure investors that they need not allow such political risk assessments to deter them?
The author is the director of the Takshashila Institution, an independent centre for research and education in public policy. Views are personal.