Labour Experts Dismiss Modi’s ‘Boost to Economy’ Brouhaha Over Codes

The labour codes approved by Parliament are the wrong solution for the wrong problem, experts and academicians argue, even as the Centre continues to harp on about bolstering investments and creating jobs through relaxing regulatory laws, now, more desperately in the wake of the pandemic-triggered disruptions.

The wrong problem: labour laws that regulate overall industry norms and working conditions cause hindrance to economic progress. The Economic Survey 2018-19, prepared by Union Ministry of Finance, had explicitly made a case for this by claiming that, “deregulating labour law restrictions can create significantly more jobs.”

Consequently, the recently concluded Parliament session saw the passage of three labour code bills; the one regulating wages and bonus payments was passed last year. In total, the four codes are set to replace and subsume 29 central labour enactments.

Labour experts warn that such a reform process – also involving dilution of certain regulations – will, on the contrary, deteriorate the working conditions of entire labour force in the country – a move that will benefit neither employer, nor economy, let alone a worker.

The further empowering of state governments to make amendments, under the three labour code bills that are currently awaiting President’s assent, has only furthered the fears voiced by experts, for the future of the country’s labour arrangement.

“It will lead to a race between the states to reach the bottom of labour standards,” said Anamitra Roychoudhary, professor at the Centre for Informal Sector & Labour Studies, JNU, adding, “Is there any empirical evidence to support that it will create jobs? None that I can think of.”

What Do the Codes Entail

The Industrial Relations Code Bill, 2020 – with industrial disputes, trade unions, and safeguards against retrenchments and lay offs – in that context, carries the most severe blows.

It has proposed to do away with the requirement of framing standing orders for the workforce in companies that employ up to 300 workers. This legally binding document, constituting terms and conditions of a service, currently applies to establishments having 100 or more workmen. Retrenchment norms are similarly eased – requiring only factories with more than 300 workers to attain government’s nod before retrenching, laying off or shutting down.

Also read: Will the Labour Code Bills Take Us Back to the 19th Century?

In addition, the state governments have been bestowed with powers to exempt new industrial establishments “unconditionally” from “all or any” provisions of the Code “in the public interest,” without clearly defining what the later amounts to. The states can also further relax retrenchment norms by increasing the threshold – of 300 workers – to higher numbers “by notification”.

The Standing Committee on Labour had opined that such a provision, especially with respect to the standing orders, may cause “large scale variations” in its content and implementation across the states.

Likewise, The Occupational Safety, Health and Working Conditions Code Bill, 2020, allows the states to grant exemptions to new factories from any provisions of the Code “in the public interest that is necessary to create more economic activities and employment opportunities,” subject only to conditions that the respective governments “think fit”.

The said Code deals with matters relating to workers’ safety and welfare, and workplace-related norms. Firstly, covering only establishments with 10 or more workers, the Code also reduces the law compliance burden on a significantly large section of establishments – by diluting Factories Act of 1948 through increasing the numeric thresholds.

Further, it also increases the threshold of applicability of provisions regulating use of contract labour from 20 to 50 workers.

Prime Minister Narendra Modi didn’t hold back to fete the bills, at a time when his government is faced with an economy that is in doldrums and skyrocketing unemployment. “The reforms will ensure well-being of our industrious workers and give a boost to economic growth,” he said in a tweet, soon after the three legislations were approved in Parliament last week.

Ease of Doing Business or Unemployment?

But ‘labour’ is not even a defining variable any more to bring fresh investments, Roychoudhary argued. “They say it will achieve ease of doing business in the country. In last five years, we improved our ‘ease of doing business’ rank by several points; take a look at how many jobs it has got us.”

India had jumped 79 positions in five years – from 2014 to 2019 – as per World Bank’s Doing Business report. While data released by Centre for Monitoring Indian Economy (CMIE), a leading business information company, showed unemployment rates hovered around 8% in 2019. 

It had plunged to over 27% in the early weeks of May this year, post a nationwide lockdown in March. It averaged 8.3% in the month of August.

Jayan Jose Thomas, who teaches Economics at IIT Delhi, told NewsClick, “The current market reality clearly tells us that labour is anyway not in a very commanding position – a significant percentage of them, even in organised setup, are on contractual basis. Even trade unions are very much restricted, enjoying lesser bargaining power than before against the employer.”

In such a scenario, he repeated what other economists have contended already, “The dilution of labour regulations will not help much.” For any growth, considering also the emergent COVID-19 situation, he added that, “the country needs an economy that is led by rise in wages and standard of life of workers – both of which misses the focus in the current labour codes.”

As far as investments are concerned, electricity, corruption and tax rates are bigger constraints than labour regulations for Indian firms, revealed a 2014 survey of 9,281 companies across the nation.

Also read: What is Wrong With the Centre’s New Labour Codes

Divya Varma of Aajeevika Bureau, a Rajasthan-based public service initiative that works with migrant workers, also remained sceptical of creation of any jobs through easing of labour norms. “The codification, in its present form, is nothing but a process to legalise the already pervasive informality and arbitrary labour practices,” she said.

Varma, moreover, is worried about the deplorable consequences of the reform process. “Rights enjoyed by the organised workforce acted as a standard for a migrant or an informal worker to strive for,” she added, and said, “Now, when those very rights will get diluted, it will certainly also make the fight for social security and acceptable work conditions for the vulnerable group even more difficult.”

To be sure, labour falls under the concurrent list of the Constitution, already allowing both the central and state government to form legislations. As many as 16 states have already eased the norms for retrenchment, Union Labour Minister Santosh Gangwar had informed Parliament during the debate on the three Code bills.

So what has changed now? Senior advocate Sanjay Singhvi explained that the Codes, while widening the the powers of the states, allows them to bypass legislature altogether and opt for the executive route.

The need to seek the Centre’s approval before certain relaxations has been done away with under the IR Code. Similarly, as per Factories Act, states were required to approach the central government for allowing exemptions for more than three months at times of public emergency. This is no more required now.

“First of all, this is fundamentally undemocratic,” Singhvi, who has been actively involved with labour matters in the past, told NewsClick. “And secondly, what will remain of the central laws if states are encouraged to dilute regulations within their region – all in a false hope of attracting investments,” he added.

On Sunday, September 27, Labour Minister Gangwar hinted that the four labour codes will see implementation in one go by December this year – a news that was reportedly welcomed by employers’ groups.

Roychoudhary rued that amid states competing with each other over “employer-friendly conditions,” even if jobs are created in a handful of instances, the conditions of employment will be a “disaster.”

“The workers will not leave the job market anyhow, because their subsistence is dependent on their employment; how ever worse the conditions are,” he said, adding, “that is why the question is whether in a democratic country such a dehumanising process should be allowed or not?”

Also read: ‘Code on Social Security’ Omits Anganwadi, ASHAs as ‘Employees’, Unlike in Earlier Drafts