Labour Reforms Agenda for India

 

THE LABOUR REFORMS INDIA NEEDS

For Faster Growth with Fairer Safety-Nets

 

SUBHASH CHANDRA GARG

Economic, Finance and Fiscal Policy Strategy and Former Finance and Economic Affairs Secretary, Government of India

 

 

THE JOBS AND EMPLOYMENT CHALLENGE OF INDIA

It is human labour which produce all economic goods and services, with skills, tools and technology. The households of labour also consume practically all of the economic goods and services produced. Human labour, therefore, has pre-eminent role in the entire economic system.

Physical energy and manual skills make the primary labour force. In the agricultural age, the labour force used this labour to work the land to produce the agriculture crops. Acquisition of skills and invention of tools enabled the labour force to branch into handicrafts and handlooms. After invention of steam engine and electricity, machines started becoming more powerful. The machines expanded the range of goods which could be produced in industry which led to the transfer of labour from agriculture to industry. At some stage, the machines started substituting human labour. Advancement of industrial economy gave rise to requirement and production of numerous services- retail, finance, construction, and so on. The labour started plateauing in industry and getting absorbed in services. In the latest edition of technological advancement, especially the onset of digital technologies, a lot of service work is being done more efficiently and productively by digital programmes, applications and internet. There is significant substitution now of human labour in the services.

The digital technologies and the requirement of digital age are leading to several new services for consumption and investment. However, with agriculture, industry and services requiring much less of human labour in producing all the goods and services humans need for consumption, the humanity is likely to witness an epochal change. Requirement of labour force has been going down which is likely to further accelerate. This calls for acceptance of the big change in economic relationship- full employment of entire labour force is not going to be needed for producing all the goods and services required for consumption of humanity. Besides welfare of labour, the humanity would need to frame policies for dealing with the era of excess labour.

India Measures Labour Employment and Unemployment Erratically

The ILO assessed global working age population at 5.7 billion people in 2019. 3.5 billion or 61% of the working age population was in the labour force and 2.3 billion or 39% working age people were out of the labour force. Of the 3.5 billion workers in the labour force, 3.3 billion were employed (57% of the working age population) and 188 million were unemployed (4% of the working age population). The unemployment rate (unemployed/work-force) was 5.4%. Total labour underutilised were 473 million and the underutilised labour rate was about 14%.

The employment to population ratio is gradually reducing globally for last twenty-five years. It reduced .8% during 1994-99, 1.0% each during 1999-2004, 2004-09 and 2009-14. The reduction rate declined to .6% during 2014-19. ILO expected, even before Covid-19, that employment rate is likely to reduce by 1.1% during 2019-2024. The proportion of population to the total working age population has declined by about 4.5% in last 25 years.

Labour employment is a dynamic phenomenon. In the world of fast changing technologies, free trade and events like Covid-19, the labour employment situation changes very fast. The lockdown imposed in March 2020 shuttered millions of enterprises rendering millions of workers unemployed. The Government was required to respond to the situation. However, Indian statistical system and the Ministry of Labour collects no dynamic data of employment and unemployment status of the work force and consequently the Government could not directly respond to the distress labour faced.  

India’s official labour data collection and reporting of labour employment status is nothing short of horrible. India used to conduct large sample sized five-yearly employment and unemployment surveys, as part of the National Sample Survey rounds started in 27^th NSS round (1972-73). The last Survey was conducted in 2011-2012, which has been discontinued and no such survey took place in 2016-17.

The five-yearly employment-unemployment surveys were replaced by annual employment and unemployment survey called Annual Employment-Unemployment Survey. The first such survey was conducted in 2010 and the last, the 5^th, was conducted in 2015, after which this annual exercise was also discontinued. The annual surveys were replaced in 2017 by a system of Periodic Labour Force Survey (PLFS) to estimate the three key ratios of employment rate (worker population ratio), labour force participation rate and unemployment rate at the interval of three months in the urban areas only in the current weekly status basis. This is not being conducted on quarterly basis and last PLFS for the year (July 2018-June 2019) was released on 4^th June 2020.

It is the CMIE which conducts weekly employment survey called Consumer Pyramids Household Survey or CPHS. CMIE CPHS is the only survey in India which brings out the three key labour ratios- workers participation rate, employment rate and unemployment rate every week. The official policy decisions about the economy and employment do not have any official data to use.

There are Many Disturbing Aspects of Labour Situation in India

The LPR for males in rural areas and urban areas was recorded to be 56.5% and 54.3% respectively in 1977-78. For females, the LPR was recorded at 34.5% and 18.3% respectively in the rural and urban areas. Combined LPR was 45.8% in rural areas and 37.2% in urban areas. The labour participation rates have gradually declined since then. By the year 1999-2000 the LPR for rural areas had declined to 42.3% and for urban areas to 35.4%. The decline in female LPR was more pronounced as it declined in rural areas to 30.2% and in urban areas to 14.7%. As per PLFS 2018-2019, the only latest available official data, the labour force participation rate, the LFPR, in India (rural and urban area combined) was only 37.5%, the employment ratio (WPR) 35.3% and the unemployment rate 5.8%. The GDP has been rising at much higher rate in 1980s and 1990s indicating expansion of economic activities. However, labour participation rate has been declining continuously.

As per the CMIE, the unemployment situation worsened massively following lockdown in March, 2020. In the week ended 29^th March 2020, the unemployment rate spiralled to 23.8%. As the lockdown was rolled back over next few months, the unemployment rate returned to more normal level of 7% by September 2020. Labour participation rate declined from 41.9% in March 2020 to 35.6% in April 2020 from 42.7% in 2019-20. There is no official estimate of labour situation in India post Covid-19. It is no wonder that the Government of India was not in a position to respond to the labour distress post imposition of lockdown. It had no data and therefore no information on the loss of jobs and income suffered and the hardships endured in migration.

The ILO modelled database, using the international definition, informs that labour force participation rate in India has declined from 58.4% in 1990 to a little over 49% in 2020. The female labour force participation rate declined sharply from about 30% in 1990 to a little over 20% in 2020 which is massively lower than the global LFPR of 46.9%. In India, only one in five women of working age participates in labour force. There are only a handful of countries- Algeria, Syria, Yamen and a few other Arab countries- which have female LFPR lower than India.

The young (in the age group 15-24) are expected to be in educational and training institutions or working in the labour force. The youth not engaged in any of these three activities are most likely wasting themselves. The world measures such youth as Not in Employment, Education and Training or NEET. Of the 1.2 billion young persons in the age group 15-24 in 2019, ILO assessed 36% to be in employment and 42% to be in educational and training institutions. However, as many as 267 million (22%) of the youth were NEET with more young women (31%) being in NEET than the men (14%). For India, youth NEET was as high as 30.4% implying that 3 out of every 10 youth were not in employment or education or in training. There were 24.75 crore youth in the age group of 15-24 in India in 2019 which meant 7.5 crore young Indians were wasting themselves in unproductive activities in 2019.

In 2019, 53% of the workers in the work-force globally were wage and salaried workers, 34% own account workers, 11% contributing family members and only about 2% employers. The proportion of workers in wage and salaried employment is constantly going up in the world indicating larger proportion of workers in formal organised employment rising from 44% in 1990 to 48.5% in 2010 and is nearly 53% now. India’s workers in wage and salaried jobs lag far behind the global average. There were about 24% of India’s workers who were in wage and salaried jobs in 2020 as against global average of 53%. The share of workers with wage and salaried jobs, however, is rising in India as well having gone up from a measly 14.5% in 1990 to 24% in 2020.

India’s Labour and Employment Challenge is Massive

India policy makers face multi-faceted and massive labour and employment challenge.

First, A very large proportion of people of working age (15+)- about 58% of Indians of the working age- are not in labour force. 3/5^th of India’s labour does not participate and contribute to the production of goods and services. The challenge is to increase work-force participation rate and/or provide for sustenance of households with no ‘bread-winner’.

Second, Most Indian women- about 80%- of Indian women are not in the labour force. There are enormous social issues as well which hinders women’s participation in labour force. The challenge is to educate and skill women, nudge them in gainful productive employment and take care of the nutrition and health needs of women not in workforce.

Third, more than 30% of about 25 crore Indian youth (in the age group 15-24) are not in employment or in educational institutions or in training. The challenge is to get massive number (over 7.5 crore) of Indian youth to get into productive labour or educate and skill itself.  

Fourth, less than 1/4^th jobs in India are salaried or wage-paid jobs. The challenge is to increase formalisation of economy to create more salaried and wage paid jobs.

Finally, the nominal unemployment rate at about 7% is relatively higher than many other countries but the real problem is low wage of those who are employed. Indian workers earn pitiably low wages on an average.

Policy makers are trying to address some of these challenges like low wages by fixing minimum wages but all other challenges- low workers participation rate, excessively low female worker participation rate, excessively high proportion and number of the youth outside employment, education and training and pitiably low wages- have not received sufficient attention of the policy makers.

India has Fragmented Labour Welfare Schemes

The Ministry of Labour and Employment (MoLE) operated, in all, 29 schemes in 2018-19 and spent a total amount of Rs. 9291 crores. Two schemes- The Pradhan Mantri Rozgar Protsahan Yojana (PMRPY), with expenditure of Rs. 3499 crores and government contribution to the Employees’ Pension Scheme, 1995, with expenditure of Rs. 4900 crores, accounted for about 90% of the entire expenditure of the MoLE. The EPS budget is used to make Government’s contribution of 1.16% of employee’s salary. The PMRPY, started in August 2016, incentivises employers to generate new employment as the Government pays employer’s contribution towards employee provident fund and employee pension scheme for the new employees recruited for a period of three years. Until September 2020, the Government had paid, in all, Rs. 8450 crores under the Programme.

In the financial year 2019-20, the Government introduced two contributory new pension types of schemes meant for all unorganised sector workers (termed Pradhan Mantri Shram Yogi Mandhan or PM-SYM) and for small traders and farmers (termed Pradhan Mantri Karma Yogi Mandhan or PM-KYM). For the financial year 2020-21, allocations of Rs. 500 crore and Rs. 160 crores have been kept for these two schemes respectively. The PM-SYM provides for a monthly pension of Rs. 3000 to any unorganised sector worker in the age group of 18-40, on self-declaration basis, provided he/she makes a monthly contribution of an amount of which depends upon the age at which he/she joins. For a worker of 29 year of age, the monthly contribution fixed is Rs. 100 per month. The Government has assumed major financial responsibility under the Scheme administered by the LIC which makes investment of the Corpus as per the investment pattern approved by the Government. The Government makes contribution equal to the contribution of the unorganised sector worker. The Government has also underwritten shortfall, if any, in the corpus of the Scheme to discharge its pensionary obligations. The Government had stated that there are about 50 crore unorganised sector workers in India at the time of launching the scheme. In more than a year and half since the scheme was launched, total registrations under the scheme are 44.50 lakh, or about 1% of the targeted workers. The PM-KYM, almost with similar design of contribution, benefits and government support, is still slower to take off.

Two major aspects of labour welfare- skills upgradation and unemployment insurance- are dealt with by two other Ministries- the Ministry of Skills Development and the Ministry of Rural Development. The MGNREGA, the rural employment guarantee scheme, has provided a good safety valve for millions of migrant workers who returned to villages after Covid-19. The demand for work under MGNREGA shot up from the month of May 20, peaked in June 20 and then started tapering off. In April 20, a total of 1.28 crore households demanded work under MGNREGA, which went up to 3.62 crore in May 20 and to 4.40 crore in June 20. The demand for work came down to 2.42 crore in July and to 1.78 crore in August. These trends coincide very well with the overall trend of labour participation, employment and unemployment in the country. About 84% of those who demanded work got employment under NREGA during this difficult period.   

REAL LABOUR REFORMS INDIA NEEDS

The Workplace Has Transformed Significantly

The extant labour laws were designed to take care of the conditions obtaining in the industrial factories of nineteenth century. The workplaces, the factories most specifically, which employ most of the workers in the organised establishments have changed massively over last two centuries. There is enormous automation. The steam technology has been replaced by electricity mostly transforming the working conditions in factories. There is literally no soot, humidity, heat in most factories. Mechanical engineering has improved so much that machine safety is not a such a major issue these days. The automation, electricity, use of air-conditioning and many other innovations have made workplaces quite safe and healthy.

Larger value addition in the economy now takes places in services. Services establishments using information technology, internet and sleeker gadgetry are relatively nicer places to work. The advancement of digital technology and its application in production of services has transformed the working conditions so much that there is very little difference in living conditions in homes and offices. This has been so eloquently demonstrated after covid-19 shifted large amount of work to homes or for that matter anyplace.

Work has been transforming making workplaces redundant in many cases. The labour in the gig economy provides his services not to any fixed employer or at a fixed workplace. The digital economy increasingly is doing away with the requirement of operating from any workplace.

If workplaces have transformed so much and if the workplaces are disappearing increasingly, don’t we need a very different approach to deal with safety and working conditions in the workplaces?

The labour laws relating to safety, health and work place working conditions are still caught up in the time-warp of nineteenth and twentieth century. The consolidated Code of Occupational Safety, Health and Working Conditions displays the same outdated mindset. All it does is to group together different occupational laws in one code and build in a dividing line of 10 workers or less. All occupations employing 10 or more workers would need to follow certain standards and regulations for workmen safety, health and working conditions. This does not help much. This does not change much. It will only mean same compliances by all the establishments employing more than 10 workers.

There is a clear need to think fresh. In fact, possibly we need a law which deals with only hazardous workplaces and safety and health aspects in such workplaces. Every other workplace can be freed completely of these burdensome compliances.

Share of Labour in Value Addition Is Trending Lower

Twentieth Century saw two mega trend impacting labour as a factor of production- one concerning the labour supply in relation to demand of goods and services and the other concerning automation and digitalisation reducing demand for labour.

Increasingly improved living conditions led to big jump in labour supply as the global population witnessed the largest increase in a century- from 1.6 billion in 1900 to 6 billion in 2000. This increased the supply of labour four times. The improvement in life expectancy also added to the longevity of labour supply. This phenomenon was in play in most of the 20^th century. Late in the 20^th century, the population started stabilising in higher income countries. In the 21^st century at some stage the global population is expected to peak. The rate of growth of labour has reduced substantially in the 21^st century.

The value added in production of goods and service effectively equals total income earned. This total income is shared by three principal participants- the labour (wages), the capital (profits) and the government (taxes). The share of labour in the total income started peaking in 1980s in advanced countries and has been declining ever since.

The ILO calculates different values of labour income share which was 51.4% in 2017. The labour income share in OECD countries peaked at 58% in 1972 and declined to 52% by 1997 and is currently estimated to be only about 51%.

These trends are likely to get accentuated in times to come with internet of things and widespread digitalisation taking place.

Nature of Work Is Changing the Nature of Labour

The world of 20^th century had physical economy. Goods were produced in a factory, transported by trucks on rail or roads, the wholesalers bought from the producer and sold to retailers. Retailers finally sold it to the consumers. Everything was physical and manual. Mechanisation and robotics reduced requirement of physical labour. Digitalisation is changing the work itself. Wholesalers and retailers are being replaced by e-commerce companies. Banks and financial services companies are being replaced by fintech and mobile app based banking and financial services companies. The work is getting massively digitalised.

The changing work is changing requirement of labour. The changing work and engagement of labour is changing the traditional relationship of employer and employee for engaging labour. The changing work is making work divested of the fixed workplaces. Lot of work can be done from anywhere. The work in 21^st century requires specific labour input and not a person as a labour. This is changing the nature of labour massively.

The Labour Issues India Faces

There are five key policy objectives relating to labour and employment in India for ensuring most productive employment of labour in production and also to provide most appropriate social safety nets for labour.

First, reforming the laws and regulations relating to workplaces, whether factories, mines, construction sites, office-establishments or any other workplace, including home as a workplace, in line with the modern requirements and mode of doing work, keeping productivity of production systems and health and safety requirements for labour;

Second, rethinking the basic concept of ‘employer-employee’ as the only or pre-dominant form of engagement of labour in the production process. The laws and regulations need to be reformed to reform the employer-employee relationship-based engagement of ‘labour’ contributing to the production of goods and services;

Third, reforming the laws and regulations relating to labour compensation for the work done or contribution made in the value added, keeping in consideration all the modes in which the work is done today without over-protecting or under-protecting any particular mode of labour engagement;

Fourth, reforming the laws and programmes relating to social safety nets for the workers of today who face irregular incomes, periods of non-deployment, low interest and returns on the investments made from the savings and obligations for servicing capital expenditure made in acquisition of technology, tools and assets to gainfully employ his/her skills and labour; and

Fifth, recognising the fact of increasingly lesser proportion of working age population being required to do all the work required to produce all the economic goods and services required for consumption and investment by the humanity and reforming the concepts, programmes and laws relating to determination of age of work and days/hours of work, expansion of public works for use of services of human beings and expansion of redistribution programmes to provide ‘livelihoods’ to all households.

Four Labour Codes Brings Considerable Consolidation of Concepts and Definitions but Only Marginal Reforms

The Labour Code on Wages, which was passed by the Parliament in 2019, is getting ready for implementation with the Draft Rules circulated by the Ministry of Labour in July 2020. This Code consolidates four dimensions of pay and allowances by bringing four laws- Minimum Wages Act 1948, Payment of Wages Act, 1936, Payment of Bonus Act, 1965 and Equal Remuneration Act 1976- under a single Code. The other three Codes- The Occupational Safety, Health and Working Conditions Code, 2020 or Workplace Conditions Code, The Industrial Relations Code 2020 or Labour Disputes Code and the Code on Social Security 2020 or Social Security Code- were passed by the Parliament on 23^rd September 2020. The four Labour Codes consolidate 29 labour laws.

Labour had been variously defined in different labour laws as workman, worker, employee, organised worker, unorganised worker and so on. All existing laws defined labour in the context of that particular law. Numerous terms to refer to labour and defining it differently created enormous confusion and also vexatious litigation.

Bringing greater uniformity in key definitions of different forms of labour in different kind of occupations is the largest contribution which the consolidation exercise on labour laws is making. The Social Security Code includes several forms of labour like gig workers and platform workers which are not used in the other three code to make the social security code applicable to the largest proportion of ‘labour’. There has been consolidation of several other concepts and definitions brought about by the Consolidation exercise.

There are some ‘reforms’ built in the labour code consolidation exercise. By consolidating key concepts and definitions, the coverage of the protections afforded to the labour by the four Codes has expanded to much wider universe of working class. The artificial distinctions of different kind of occupations- factory, mine, shop, platform etc. and different kind of legal structures- organised, unorganised, platform, shop, gig etc. have been done away with.

Right Reforms for Occupational Safety, Health and Working Conditions for Workplaces

The Occupational Safety, Health and Working Conditions Code, 2020 does away with different conditions for registration of different kinds of workplaces by defining ‘establishment’ widely but keeping the uniform condition of ‘ten or more’ workers employed. However, everything in terms of occupational, safety and working conditions remains as it was earlier depending upon whether the workplace is a factory, mine, plantation or another form of establishment. From the reform perspective, the Code is essentially a patch-work of existing thirteen laws into a single law and does not really reform or lesson the obligations and compliances required earlier.

A reformed workplaces safety, health and working conditions law should address following principal shortcomings in the existing laws which gets carried over to the Code:

First, the Code should cover all ‘workplaces’ for producing goods or services and therefore should use a more explicit and inclusive definition of ‘establishment’ as ‘every business workplace, whether for producing and distributing goods and services.”

Second, there is no rational connection between workplace to be regulated and ‘ten and more workers.’ The hazardous nature of work should be the real differentiating factor. The Code should eliminate the condition of ten or more workers and instead distinguish workplaces in terms of  hazardous nature of work.  

Third, there is no rationale in excluding government offices from the scope of the Code. All workplaces, whether government or non-government, public or private, goods producing or services producing should be covered and be dealt with depending upon the hazardous nature of work.

Fourth, by not creating a single template for registration and conferring authority on the State Governments to prescribe the forms and appointing officers for registration, the opportunity of creating one single database for all the establishments of the country and having a uniform regulatory mechanism for enforcing safety, health and working conditions related standards seem to have got lost.

The workplaces where production of mostly goods and some services takes place in the 21st century have got transformed. Even the dominant workplaces of yesterday, the factories and mines have got transformed massively. The Code, despite adopting a wider definition, does not seem to cover a number of modern workplaces like malls, warehouses, logistic centres, airports, information technology centres, datacentres and so on.

It would be better to categorise the establishments in three broad groups of extra-hazardous, hazardous and non-hazardous occupations irrespective of whether the establishments are factories, mines, construction sites, office establishments or any other type of service establishment. The extra-hazardous establishments can be subjected to licencing, stricter standards of safety and health. Hazardous establishments might be subjected to only periodic reporting requirements. The non-hazardous establishments might be subjected simply to event-based reporting requirements.  

The Wages Code Represents Status Quo and No Reforms

The Wage Code makes the least changes as part of the labour laws consolidation exercise and continues with all the deformities which are there presently in the four laws.

The anachronistic and wasteful practice of determining thousands of minimum wages would continue as the Code on Wages stipulates that the appropriate government “shall” fix the minimum rate of wages payable to employees. By having removed the condition of fixing minimum wages only for scheduled establishments, the Code seems to stipulate that the minimum wages will now be fixed for all establishments with ten or more employees.

Wage is a matter of judgement about the contribution a worker makes in the value added and a matter of negotiations between the employer and the worker. That is the way the compensation gets fixed in real life. The Government cannot understand the variations of skills and the behavioural aspects of employer-labour engagement to be able to decide appropriate wages for millions of the types of jobs and variations therein. It becomes more complicated in the emerging economies where fixed and stable jobs are becoming increasingly lesser and lesser.

The statutory concept of minimum wages tries to determine appropriate minimum wages from technocratic standpoint- skills required for each kind of job. The concept of minimum wages should do more with the requirement of minimum income required for meeting minimum needs of a household. The multi-dimensional poverty line and other similar concepts try to determine minimum income required to live a life above such standards. It is preferable to fix minimum wage at a level related to the poverty line and dismantle the wasteful system of determining and notifying thousands of minimum wages in the country.

The other practices of paying minimum bonus even when the establishment makes no profit, detailed prescriptions regarding the method of payment of wages, the elaborate but artificial definition of wages etc. also continues without any change. The Wages Code should recognise the concepts of cost to company and leave the matter of wage between employer and employee. The wage code should only define, identify and regulate pecuniary exploitation of labour.

The Social Security Code Expands the Social Security but Implementation is the Key

The Social Security Code provides for material expansions in coverage of labour or applicability of social security benefits. First, it allows non-covered establishments to voluntarily join the Employees Provident Fund and the Employees Pension Scheme. Second, the Code defines new forms of employment- “aggregator”, “gig worker”, “platform worker” to include them within the ambit of social security law. Third, the Code defines the establishment, without putting the condition of minimum 10 employees, thus including all establishments in the country within its scope. Fourth, the Code seeks to establish an electronic system of registration of establishments which has the potential of creating the largest database of establishments in the country. Fifth, it makes employees on fixed term contracts eligible for gratuity.

The Social Security Code, however, continues with the institutional arrangements for the labour social security system in the country almost as it exists today. The Employees Provident Fund system continues without any change in its system of Trustee Board, EPF Organisation and Provident Fund Commissioner. Same is true of the Employees State Insurance Scheme system or the institutional system under the Building and Construction workers’ law. Even the almost non-operational system of Unorganised Workers Social Security system with its Board etc. continues as it is. The same applies for the system of gratuity, maternity benefit, employees’ compensation etc. which have been merged in a single law.

There is no integration in the institutional, administrative, scales of subscription and benefits, investment pattern or any other aspect of the schemes/funds as these operate currently. The Social Security Code incorporates all the definitions which exist in different laws and most of the key provisions of these laws almost unchanged. In this sense, this Code is also a patchwork of bringing 9 nine laws together, rather than creating an integrated system of social security.

The Social Security Code creates new structural templates gig workers and platform workers. The Code mandates the Central Government to formulate and notify, from time to time, welfare schemes for life and disability cover, accident insurance, health and maternity benefit, old age protection, creche and any other benefit determined by the central government for such workers.

The Social Security Code offers mandates for formulating and funding the welfare schemes for unorganised workers, gig workers and platform worker. No specific entitlements have been created. Nor has any specific scheme been announced. The unorganised workers, gig workers and platform workers would have to trust the good intentions and abilities of the central and state governments to bring any such welfare schemes.

The Industrial Relations Code, the Most Controversial Code, Has Seen Some Significant Reform Movement Forward

The Industrial Relations Code merges three labour related laws- the Trade Unions Act, 1926, the Industrial Employment (Standing Orders) Act, 1946 and the Industrial Disputes Act, 1947.

Significant changes brought in by the Code, include:

First, include the concept of fixed term employment as a regular mode of employment and building provisions relating thereto in the law;

Second, eliminate misuse of casual leave as a weapon of industrial action by bringing the same within the scope of ‘strike’;

Third, eliminate multiplicity of negotiating trade unions in an establishment by mandating that only the trade union with the support of 51% or more workers would be allowed to participate in the negotiations. Further, eliminate strong arm tactics by providing for a seat on the council for support of every 20% workers.

Fourth, make the life of enterprises employing less than 300 workers simpler, by making certain restrictive conditions- getting mandatory certification of complete standing orders and taking prior permission before lay-off, retrenchment and closure-applicable only on those industrial establishments which have three hundred or more workers on their rolls.

Fifth, prohibiting strikes and lockouts in all industrial establishments without giving notice of fourteen days.

These changes tilt the balance in favour of entrepreneurs as there are only a few thousand industrial establishments in India with more than 300 workers. There is hardly any meaningful role which the Government can play in viability or continuance of a business which has failed but employs more than 300 workers but may help in preventing violence and destruction of whatever property is left in such cases.

Requisites of a Modern Comprehensive Labour Welfare Regime

The consolidation of labour laws is a good exercise but with limited gains. It mostly perpetuates status quo. There are some reforms in industrial relations code and some expansion in possible coverage for social security in the social security code. The wages code and the workplace conditions code hardly contribute anything. The labour laws and the consolidated labour codes would deal with the labour realities and issues of 20^th century. The consolidated codes are not fit for purpose for the future labour realities.

The future policies, programmes and laws for dealing with labour, in fact, for the welfare of households in general, would require to be designed and formulated while keeping the three fundamental realities:

First, the contribution of labour in production and distribution of goods and services will increasingly reduce in the value added thanks to automation and digitalisation of production processes. This will accentuate already visible trend of last thirty years of workers’ participation rate going down despite labour supply growth also tapering off.

Second, the labour contribution and jobs are increasingly getting disconnected. The labour is becoming more and more skilled and delivering her contribution in value added in modes very different than fixed time jobs. Jobs have become, in popular mindset, equivalent of passports for earning incomes to maintain and finance households. The labour contribution would be delivered in gig form, contract work, becoming labour entrepreneurs, joining platform companies to deliver services and in myriad different ways. This will require humanity to think beyond jobs as the mainstay of keeping the world going. Workplaces would also change enormously.

Third, all the needs of goods and services of the people would be produced by a fewer proportion of people leaving much more time in the hands of people. This will call for rethinking allocation of time in a person’s life from jobs to other occupations- more education, more sports, more community service and more entertainment. This will call for the governments to think of the ways to supplement the incomes of people to mee their wants.

Taking into account these emerging realities, it would be necessary for the government to redesign and restructure policies, programmes and laws relating to labour welfare. Four specific reforms appear necessary:

First, bring a new businesses/enterprises/establishment law to define workplaces, register and assign a unique business registration number by creating a single database of all businesses which capture key public characteristics of all businesses. This law should also provide for categorisation of all enterprises in three broad categories of hazardous, marginally hazardous and non-hazardous. All businesses/enterprises must require registration but licensing should be limited to only hazardous enterprises. Marginally hazardous might be required to file workplaces information with some periodicity. Non-hazardous should not be required to be bothered to file any information relating to health, safety and working conditions. The Code on Occupational Safety, Health and Working Conditions should be annulled thereafter.

Second, bring a single labour management law by replacing the code of wages and industrial relations law. Minimum age of labour should be revised from 15 to 20. Until 20 years, all children should be normally expected to study, play and learn skills. The law should provide for compulsory single registration of every person as a working age person/ labour upon completion of 20 years of age. The system should have all the basic details about the skills and experience possessed by every such person. The Government should reform ideas about wages, overtime, bonus, gratuity and other ‘job’ related benefits into a simple cost to company compensation to be agreed between the employer and employee. The Government should only create a machinery to deal only with the exploitation of labour.

Third, the government should redesign all employed oriented programmes by merging these into and expand the Mahatma Gandhi National Employment Guarantee Programme into a work programme to provide work on national minimum wages, fixed on the basis of consumption expenditure requirement of a healthy person, to every person of 20 years or more on demand to be utilised for creation of public infrastructure and provision of public goods and services to community. The programme would convert labour into public goods and would help both the labour to get means for sustaining him/her and his/her family and the government to get public works done using the skill set of persons.

Finally, the government should bring out a comprehensive social security code for households and not for labour. Productive workers of today can take care of their off-work requirements. Temporary joblessness can be taken care by the revamped employment guarantee programme. It is only three kinds of people who will need government support. First, children until age 20 to pursue their education and acquire requisite skills. The government must offer to meet this cost for any child whose parents are not in a position to take care of this expenditure. Second, all less than able-bodied persons, who cannot earn their livelihood either working as part of the main economy or under public works, should be provided financial assistance equivalent to the national minimum wage for sustaining them and their families. Third, the government must take care of the aged who don’t have adequate savings/ means of their own to support their normal and medical expenditures. Other than these three, all other social security programmes can be simply shut down.

Such a rationalisation and reformation would help India deal with the labour challenge of 21^st century.                  

 

SUBHASH CHANDRA GARG

NEW DELHI 29/09/2020