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Rebooting labour reforms

The compression of 44 labour laws into four ‘codes’ or broad categories — wages, social security, industrial relations and occupational health and safety — forms a central aspect of the Centre’s labour reforms push since 2015. This is not a bad idea, as it simplifies access to numerous provisions of the law by all stakeholders concerned. As part of this exercise, the Cabinet recently approved the tabling of the Code on Occupational Safety, Health and Working Conditions Bill in Parliament, which encapsulates 13 laws. The Wage Code Bill, on which the Parliamentary Standing Committee on Labour drew up its comments last December, will be introduced in Parliament soon. While piloting these changes, it is important that the Centre reaches out to a cross-section of stakeholders, some of whom have already expressed misgivings.

The Code on Wages has some positive proposals, such as extending the minimum wage law to all activities, not just the 45 ‘scheduled’ ones. A benchmark national minimum wage will set a floor. However, the definition of worker is not clear. The calculation of the level of minimum wage by an expert committee is at variance with ILO parameters. A lean inspector regime is all very well, but it must monitor workplace safety. The code on industrial relations has evoked strong reactions, as the right to form unions and accord them powers of representation have been severely curtailed. This can be both anti-democratic and economically counterproductive. An approach that regards workers as partners in production is likely to promote industrial harmony. Shutting out legitimate avenues of expression can lead to violent outbursts.

Workforce entitlements should not be disregarded in the urgency to ease the conduct of business. The latest Economic Survey cites studies to observe that a 10 per cent rise in minimum wages leads to a 6.34 per cent increase in employment in rural areas in the case of both men and women, with a statistically insignificant impact in urban areas — questioning the bias against raising wages. In an age when productivity and skills count for a lot, India is unlikely to gain very much from wage arbitrage alone. Its manufacturing is likely to prosper on the back of a skilled and well paid workforce, with a supportive ecosystem in terms of infrastructure and logistics, as Economic Survey 2017-18 suggests. Speaking of the potential of the labour-intensive garments sector, it observes: “Clearly, India still has potential comparative advantage in terms of cheaper and more abundant labour. But these are nullified by other factors that render them less competitive than their peers in competitor countries.” Garment wages in not just China, but Vietnam and Indonesia are higher than in India and their yet their exports are growing. An approach to labour regulation that cuts out compliance headaches, while improving the lot of the employees should be the guiding principle — as in the developed world.

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