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
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
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
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
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
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)
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
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.