Context

• India’s socio-economic problem is not just employment but also the poor quality of employment. 
• By poor quality of employment we mean insufficient and uncertain incomes, and poor working conditions.
• The dominant “theory-in-use” to increase employment is to 

• Improve the ease of doing business
• This will attract investments in businesses
• Hence the creation of jobs

Labour laws

• One way to ease doing business is reforming labour laws
• In this direction, the government initially focused on improving the administration by simplifying procedures and digitisation. However, they did not make the labour laws more employer-friendly.
• Since 2014 the government has moved on to reform the content of the labour laws.
• Since labour is a state subject, it encouraged states to implement changes. Rajasthan was first to do so and other states followed.

Impact Assessment Study of the Labour Reforms undertaken by the States

• The V V Giri National Labour Institute’s interim report, “Impact Assessment Study of the Labour Reforms undertaken by the States”, provides insights into the impacts of the reforms so far.
• Labour laws cover many subjects — payment of wages, safety conditions, social security, terms of employment, and dispute resolution. 
• 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 persons.
• The report spans the period 2004-05 to 2018-19. It focuses on six states that have implemented reforms: Rajasthan, Maharashtra, Andhra Pradesh, Tamil Nadu, Jharkhand, and Uttar Pradesh.

Report says

• An enterprise must have a growing market for its products, capital, machinery, materials, land, etc. not just the labour reforms.
• Reforms of labour laws have had little effect on increasing employment in large enterprises employing more than 300 person

• Increased from 51.1 per cent to 55.3 percent between 2010-11 to 2014-15
• From 55.3 percent to 56.3 percent, in 2017-18

• Conceptual flaw of increasing the threshold of application of Industrial Disputes Act

• The bolder reforms were designed to promote larger factories but they cannot induce the creation of large enterprises to whom the laws will continue to apply.
• In fact, the report says, employment in formal enterprises is becoming more informal by employing increasing numbers of people on short-term contracts

• The report defines “formal” employment as the grant of paid leave, a written contract, and some “social security” along with the right to be heard and dignity at work.

• Increasing the threshold of the laws dilutes the rights of association and representation

of workers in small enterprises. 

• The question the report leaves unanswered is whether the reforms have benefited workers.
• The total effects of labour reforms cannot be revealed immediately but will take time.

Concluding part

• Between 1980 and 1990, every one percent of GDP growth generated roughly two lakh new jobs; between 1990 to 2000, it decreased to one lakh jobs for every per cent growth; and from 2000 to 2010, it fell to half a lakh only.
• Labour policies must change to enable the generation of better-quality livelihoods for Indian citizens now and in the future.
• To achieve this, a fundamental reform is required in the ways policies are made.