Dev 360: Can gutting labour laws spell advantage to India?

Prime Minister Narendra Modi wants India to be “self-reliant” and a lead player in the 21st century. Demography, which is all about human populations, figures in Mr Modi’s list of the five pillars of self-reliance. In his 8 pm address to the nation on Tuesday, Mr Modi also told us that all the issues related to “labour” will be factored into the latest economic package to reboot the ailing and wailing locked-down Indian economy.

How do we achieve these grand goals?

Several states have taken the lead in diluting our labour laws. They feel this will bring the economy back on track. The Uttar Pradesh Cabinet has gone the ordinance route, exempting all factories and establishments engaged in manufacturing from pretty much all labour laws for three years. Only the Building and Other Construction Workers Act; Workmen Compensation Act; Bonded Labour System (Abolition) Act; and Section 5 of the Payment of Wages Act (which says wages must be paid on time) and the Maternity Benefits Act are still applicable. Several other states, including Madhya Pradesh, Gujarat, Haryana and Himachal Pradesh, are following in UP’s footsteps, with some variations.
It is argued that all these changes will give industries more flexibility to hire and fire workers, in deciding working hours, what wages to pay employees and so on, and this will help remove obstacles on the road to economic recovery.
The key assumption is that labour rights are a major roadblock to business growth.

But can weakening the existing labour laws, which will have a knock-on effect on core labour standards for everyone, help India leverage its demographic dividend? How does sharply increasing working hours and leaving elementary facilities like providing drinking water, first-aid boxes, protective equipment, cleanliness, ventilation, lighting up to the discretion of factory owners help increase productivity?

Is it fair to conflate instances of irresponsible trade unionism from past years with basic safeguards for labourers who are already under great distress?
You don’t have to be a labour law expert or an economist to see some of the flaws in the argument that sees weakening of core labour protection standards as “labour reforms”.

Two key assumptions need to be challenged.

First, that labour is dictating terms to industry. To some extent, that may once have been true of organised unionised labour. But now, the organised industrial sector contracts out much of its work to the informal sector, and those millions of workers are in no position to insist on any rights or protection, as Rajendran Narayanan, a professor at the Azim Premji University, Bengaluru, and many other experts  point out. These are among the myriad migrant workers who are still trying to walk home, as pointed out in the recent reports put out by Stranded Workers Action Network (SWAN), a network with which Prof. Narayanan is associated.

That is why landmark decisions of the Supreme Court regarding minimum wages need to be respected. In 1983, in the case of Sanjit Roy versus the State of Rajasthan, the Supreme Court declared: “Where a person provides labour or service to another for remuneration which is less than the minimum wage, the labour or service provided by him clearly falls within the meaning of the words ‘forced labour’. If anything less than the minimum wage is paid to him, he can complain of violation of his fundamental right under Article 23 and ask the court to direct payment of the minimum wage to him.”

Another landmark decision was in the Workmen versus Management of Raptakos Brett (1991) case. The Supreme Court laid down the case for a moral “living wage” to ensure the basic dignity of life.

The government’s own Economic Survey (2018-19) points out that one in every three wage workers in India is not protected by the minimum wage law. And now existing protections are being circumvented.

The latest report by SWAN notes that out of the 16,863 people they interacted with between April 14 and 26, only about six per cent had received their full wages during the lockdown, and about 16 per cent had been partially paid. Hardly a sign of labour dictating terms.

The second assumption that needs to be challenged is that is diluting core labour standards will help India tap its demographic advantage.

A 2005 paper by Ritash Sarna for the Japan Institute for Labour Policy and Training, Tokyo, offers interesting insights. Titled “The impact of core labour standards on Foreign Direct Investment in East Asia”, the paper notes that “though weak labour standards may not have been completely absent from investors’ minds while deciding about FDI locations in East Asia, there were other more important factors affecting their decision. Important reasons for the region’s success in attracting FDI were factors like maintaining competitiveness through superior technology, high levels of human capital, skilled labour force, agglomeration effects, dynamic growth and the role played by the state in strategically allocating FDI in the right sectors”.

Mr Sarna argues that while the enforcement of core labour standards (CLS) may increase labour costs and may have negative effects on FDI in certain industries, in the long run “these negative effects can be offset by the positive effects gained through human capital development and stable environment if CLS are enforced”.

He points out: “The deliberate lax enforcement of CLS might seem an easy option for developing countries to attract investors but this strategy may result in some short-term benefits restricted to low-tech, labour-intensive industries… Complying with basic and minimum of labour standards, developing countries will not only improve conditions of their workers but will also gain legitimacy against the protectionist concerns (under the guise of labour standards) raised by the North.”

Is Indian labour in a position to protest these changes? Some critiques have started, including from the Bharatiya Mazdoor Sangh (BMS), an affiliate of the Rashtriya Swyamsevak Sangh (RSS) that is the parent of India’s ruling BJP. “This is a senseless approach,” BMS general secretary Vrijesh Upadhyay told this writer this week. The BMS has asked state governments to reverse the decisions that allow labour law holidays.

The bottom line: complying with core labour standards does not hinder competitiveness of either a single industrialist or the entire country. Profitability and complying with basic labour standards go hand in hand. Sick workers lead to a sick industrial unit and an unhealthy economy.