CENTRE for POLICY ANALYSIS

CENTRE for POLICY ANALYSIS

“Social progress can be measured by the social position of the female sex” - Karl Marx

ARTICLE


Ease Of Doing Business VS Human Development


Following Covid-19 and induced economic disruptions, up to 135 million people have lost their jobs and 120 million been pushed back into poverty in India, according to recent reports by the Centre for Monitoring Indian Economy and Arthur D Little, a management consulting firm, which estimates that disemployment 'may rise to 35% from 7.6%' pushing 40 million Indians into 'abject poverty'.

The nature of data collection prevents us knowing the exact number of migrant workers among these people. Increasingly informalised, casualised working conditions, particularly in the urban jobs worked by migrants, mean that workers' current strategies of survival - walking and withdrawing - can hardly be understood as a temporary displacement.  

A 2015 research paper pointed out that in the organised manufacturing sector, the share of owner-profits has tripled since the 1980s, from 20% to 60% of net value added, whereas the labour share has fallen by the exact same proportion.  

In almost the same period (1980s to 2012), as the study conducted by Prabhu Mohapatra points out, contract labour (workers hired indirectly through 'subcontracting') in the formalised manufacturing sector has risen from 7% to 35%. As per National Sample Survey Office data from 2011, the share of contract labour in organised manufacturing was 34% as compared with 14% in 1996.  

Where does this leave the labourers?  

It seems that the changes made to labour law by several state governments since the pandemic are based on the following grounds:  

One, due to return migration and stranded migrant workers' hesitation to undertake new work, employers have repeatedly complained of "labour shortages".  

Two, India needs to offer labour flexibility to firms quitting China in order to capture the vacated produce market space.  

Three, suspending labour laws for the next three years will help industrialists overcome the present crisis.  

Four, governments must change labour laws in favour of employers to allow them to generate employment, especially for workers returned from the cities, and to protect existing jobs.  

What appears to be a simplification of labour law is a specific kind of state initiative premised on the theory that giving free rein to big businesses will eventually boost economic growth for everyone, including workers.  

To my mind a law has usually two parts: one that deals with punishment by the state, say if a contract is breached, and the other that deals with workers' social security, which the state alone can guarantee.  

Labour protests are virtually impossible due to the lockdown. Employers have seized the moment and the state.  

The Sixth Economic Census recorded that 97 million people are employed in establishments without any hired worker, while 118 million are employed in establishments with one or more hired workers.  

Broadly speaking, the former category falls under the Shops and Establishments Act and the later with the Factories Act.  

It found that the vast majority, 172 million people, work in establishments with eight or fewer employees. Only 18 million people work in establishments with more than 100 employees.  

The new economy is not going to generate enough jobs for the millions of reasonably skilled and educated youth. Developments in automation (of software programs and robots) reduce the need for labourers even as the economic share of manufacturing shrinks in favour of services.  

While those with education degrees are better placed, employment for the vast majority will be precarious to say the least. Here emerges a new responsibility for the state: to serve and protect those who cannot find employers.  

For several years the employer's community argued that rigid labour regulation was the main reason their workers were overwhelmingly informalised. Available research studies do not support this claim.  

The International Labour Organisation in its 'Report on Decent Work and Informal Economy' notes that labour regulations are only one of many causes of an informalised workforce. Changes in patterns of production, in information and communication technologies, and global competition have also caused the growing informalisation of work and the dismantling of workers' rights.  

The 'Working Group of Experts of the Commission on the Legal Empowerment of the Poor' set up by the United Nations Development Programme found barely adequate conclusive evidence of the oft-presumed causal relationship between "rigid" labour market regulatory frameworks and informality.  

Several OECD countries with significantly more employer-friendly labour regulation have also witnessed massive informalisation of work in the last three decades. And a study of four states - Rajasthan, Uttar Pradesh, Andhra Pradesh and Madhya Pradesh - by the V.V. Giri National Labour Institute in Noida found that "amendments in labour laws neither succeeded in attracting big investments, boost to industrialisation or job creation."  

The changes to labour law made by several state governments and employer organisations' demands to "nationalise" a 72-hour working week violates the cardinal principle of a 48-hour workweek mentioned in the ILO's Conventions C001 and C1919. These laws to limit working hours to eight per day and 48 per week were won after decades of struggles by workers from 1881 to 1948.  

Now in Covid India work hours have been officially extended albeit with statutory overtime pay, except in Gujarat. A 12-hour workday will mean workers spend more than half their days away from home including the unpaid time spent in under-resourced public transit. It will also reduce the participation of women in wage-work, a "gender penalty" imposed by how dangerous our cities are for women.  

The ILO calls for a transition to a "decent working time" to ensure our health and safety, a work-life balance, to create gender equality, enhance worker productivity, and to increase workers' control over their working hours.  

In essence the punitive aspects of labour law are in the hands of private business owners, and the state willingly and unconstitutionally stands as the guarantor of employer, not worker rights.  

The economic growth that emerges from this model, if it does, will be built on the backs of deeply casualised labourers. Layered systems of subcontracting will emerge to progressively dilute the responsibility of those at the top, and reduce the negotiating power of those at the foundation, leaving them with reduced wages and dignity.  

Any future crisis might be even worse. For governments to focus on the minority of formalised workers, without extending social security and dignified living to the majority informalised workers, can only lead to yet worse working conditions for yet more of us.  

These changes to labour law will also likely lead to higher occupational health and safety hazards and risks, with no appropriate protection or compensation, with the increased likelihood that these workers suffer from workplace illness, accidents or death.  

For example, excessive working hours have negative effects on workers' health including depleted immunity and a higher risk of workplace accidents.  

Employers meanwhile will engage in risky behaviour by allowing workers to work in hazardous conditions. The proposed Labour Code obliges employers to ensure a risk-free workplace, but it further assumes that employers will self-enforce these Codes, without any incentive, punishment, regulation or enforcement.  

The several recent incidents of large-scale toxic chemical spillage and boiler blast including the LG Polymer, Vishakhapatnam incident indicate that the health hazard and fatality risks of working in Indian factories have already increased tremendously, a trend that is likely to continue unless the mandatory routine inspections and safety clearances are actually enforced.  

The existing evidence shows that if we choose to let employers self-enforce labour regulations, rather than the state enforcing them as workers' laws, then employers are likely to seek rent to maximise their own profits. It is unlikely they will safeguard workers' rights if they are not even compelled to negotiate with them.  

The International Trade Union Confederation's Global Rights Index from 2016-19 gave India a rating of 5 on a scale of 1-5+, where 5 signifies "no guarantee of rights".  

Successive Parliaments have so far ratified 47 ILO conventions and 1 protocol, of which 39 are in force. But we have yet to ratify the conventions on freedom of association and collective bargaining-C 87 and C 98-which the ILO has declared to be "fundamental conventions". The non-ratification of these and other important conventions concerning occupational safety and health are a serious cause for concern.  

It further seems that state governments have consulted neither trade unions nor employers' bodies before announcing these changes. This violates India's commitment to social dialogue, as was ratified in C144, the Tripartite Consultation (International Labour Standards) Convention, 1976.  

Moreover, they have issued these changes via executive ordinance and not as laws enacted by the assemblies, negating the struggle for labourer rights.  

At the same time, India's jump from 130th (2016) to 63rd (2019) rank in the Ease of Doing Business index has been appreciated across all industries. Every year, whenever India tops the higher rank on EDB, our global ranking point estimate slips towards the bottom quartile in all global parameters such as hunger, peace, slavery, worst formed labour and workers' rights indexes on the lowest scale.  

The suspension of labour laws will rapidly dilute the formal economy by weakening multiple labour market securities like employment, health and safety, skills, and income. Flexi-workers with low and moderate skills will either be pushed out of the organised sector or they may be hired only for the disposable nature of their labour.  

Both scenarios will intensify informality. Workers ousted from the organised sector will rush into the unorganised sector, thus increasing the supply of labour. In the absence of adequate legal protection, wages will be driven down.  

Should "ease of doing business" imply human rights violations that de-humanise our society? Should it lead to weaking worker protections and rights, thereby eroding industrial safety and our own? Why should governments allow unregulated mines, polluting industrial units to flourish and damage the health of the people and our ecology?  

Governments at both the Centre and States must answer these questions now.    

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