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Why passing laws does not count as reform

Back in 1992, I happened to visit Boeing’s plant in the US. It was part of a series of visits organised by the US State Department to showcase the technological might of the United States to a motley bunch of economists and journalists from what were then called developing countries. As far as the first part went, the visit scored a 100 per cent. The building was the biggest I had seen in my life (still is), and the sight of the complex assemblies where towering aircraft took shape was breathtaking.

But it was, PR-wise, not a very opportune time. I had just seen in the local papers that the factory had started laying off workers. It was, actually, the start of a massive and painful contraction at Boeing. Between 1991 and 1995, its workforce in Seattle would shrink from over 1,00,000 to about 70,000.

Labour reforms

Back then, reforms had just started in India. While foreign trade had been opened up, manufacturing licences in many sectors axed and the rupee made partially convertible, labour reforms were something which India Inc at that time could only talk about in hushed expectations. More than one industrialist had said even then that if only they got the freedom to hire and fire as needed, they would be able to throw off all shackles to growth.

Naturally, the prospect of a few thousand workers being let go by the end of the week at one of the biggest factories in the world made for an exciting prospect. I scented a huge story, and while the others were oohing and aahing over giant aluminium skeletons, I sneaked off from my minders to go chat with the Human Resources department.

I piled on the questions breathlessly. “How were they going to actually fire people?” “What compensation were they paying?” “Did they anticipate trouble?” “Would there be violence? A strike?”

The poor man was befuddled. Why should there be violence, he wondered. The job cuts had been agreed to by the union. People would be fired on the ‘last in, first out’ principle. And there would be no compensation for temporary workers, just the proverbial ‘pink slip’; permanent staff would get compensation as per their wage agreement. And no, there was no strike planned. And it was true — with a few hundred people scheduled to be fired in a couple of days, the line was buzzing, there were no placards or pickets visible anywhere.

This opened up a world which I, a child of “planned development” and an infant of reforms, had not even imagined was possible — that it would be possible to achieve a very large reduction in workforce in an organised, high technology industry in a very quick span of time, without the heartache, drama, violence, heartbreak and unending legal cases that we routinely associate with such an exercise in India.

Indian legislation

While leaving, we exited through the workers’ car park. This was another revelation for me — tens of thousands of cars belonging to factory workers. If this is what reforms could achieve, I thought to myself, what a golden future awaits my country!

Three decades on, that still remains a golden dream. More than three decades after reforms started, the Rajya Sabha finally passed the Code on Wages 2019 Bill on August 14 (Lok Sabha passed it on July 30). Among other things, the Code promises a guaranteed minimum wage of ₹178 per day across all States and in all sectors. It also amalgamates four separate laws — four laws relating to labour — the Payment of Wages Act 1936, the Minimum Wages Act 1948, the Payment of Bonus Act 1965 and the Equal Remuneration Act of 1976.

The Bill also proposes a single (or at best a few) authorities to handle disputes. This is possibly the most significant provision of all, since there is simply no way one can predict how long a case will actually last. I came across a case filed by some terminated workers of the Delhi Society for Prevention of Cruelty to Animals (apparently a Delhi government outfit), where after 40 years, the court finally ruled that seven workers had been wrongfully terminated and should be reinstated. Only, over four decades, four had died and the others too old to work! Over half the labour-related cases in Indian courts have been running for more than three years, nearly a quarter over five years. Take minimum wages, the other big reform in the new Labour Code. The Economic Survey of 2018-19 highlighted the big problem with the existing laws — implementation. Despite 429 scheduled “employments” and over 1,900 job categories defined under the Minimum Wages Act, a chunk of the informal sector workforce did not even qualify.

Working together

The short point is that mere legislation does not mean reform. If laws were equal to reality, then every child in India would be getting educated (Right to Education) and every Indian would be getting fed (Right to Food). We don’t need more or less laws. We need to observe the law — in letter and spirit.

It is here that employers — the other side of the worker coin — have also to play their part. The world’s biggest manufacturing economies (China excepted) also have very strong legal and protection of workers’ rights. And the growth of US, German or Japanese manufacturers were not hampered by the fact that they had to provide decent working conditions, pay a living wage or share profits. It did not also — as the Boeing example showed — stop them from re-sizing in times of trouble.

But for that to happen, both employers and workers have to accept certain realities, and work together as partners. The abysmal state of India’s workers is not because they lacked legal protection — but because that protection stayed on paper.

I think the economy is entering a phase of massive churn in the manufacturing sector. If we are to survive this and emerge with minimal hardship for all stakeholders, we need to stop looking to lawmakers to solve problems on paper and start tackling them at the workplace.

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