Blitz Bureau
NEW DELHI:NOVEMBER 21 marked a landmark for India’s labour landscape as the four Labour Codes on Wages, Industrial Relations, Social Security and Occupational Safety and Health came into effect. This should prompt the hesitant among the state governments to get their ‘Acts’ together. A uniform policy framework for the labour market is key to structural improvement of the economy, and would complement the reforms undertaken for other factors of production. This is the biggest labour and employment reform in the country since Independence. The Government can justifiably claim the unification of 29 labour laws to be a game-changing move for ease-of-doing business. Over 1,400 rules have been scrunched into 365, with the compliance formalities in terms of registration, and filling up forms and registers, too, coming down sharply.
Significantly, the codes also expand the social security net – bridging the gap between a ‘labour aristocracy’ and the rest. To this end, the Government must be credited for the net increase in numbers under the Employees’ Provident Fund Scheme (ESIC).
A notable reform is the creation of a category of ‘fixed term employees’ (FTE), apart from regular and contract workers. The FTEs will receive benefits equal to permanent workers after a year of being in the job, except for retrenchment compensation. All forms of work will be covered under minimum wage laws, and all workers shall receive mandatory employment letters. Women can work at night with the requisite safety measures in place, and without wage discrimination.
The Govt can justifiably claim the unification of 29 labour laws to be a gamechanging move
An estimated 10 million gig and platform workers will get social security coverage, from contributions by aggregators. The ESIC coverage has been expanded to all establishments with over 10 employees and not just some notified areas and hazardous industries. The codes do not view ‘labour reforms’ as a race to the bottom. Employers have much to cheer, as self-certification for compliance becomes the norm. The new labour codes contain finer regulatory and stronger rights-based features. The states that have adopted them have reported “significant economic and employment gains”, like relatively higher GSDP growth, rise in organised-manufacturing employment, and increase in the share of female workers.
Even at a broader level, the country has at best had a mixed experience over the last decade and more when it comes to producing decent remunerative jobs. While 7-8 million people enter the employment market every year, the job creation is faltering. A rise in the share of employment in the farm sector, which is losing share in the gross value added, is worrisome. While “formal work arrangements” are on the rise, the share of workers without any social security cover remains high.
There can’t be any argument with the need to streamline labour laws. But safeguards are required to ensure that the policy steps don’t end up giving an undue focus on preventing average factor cost of labour from rising faster. Adequate wages and reasonable social security cover for workers are critical for boosting purchasing power and economic growth. The assorted Government schemes for skilling need to be broadened in scope and capacity, and public spending on education raised as a fraction of the GDP. India’s labour productivity is about one-eighth of that of the US in purchasing power parity terms. Raising this should now be the top priority of the Government
