Pitfalls of Labour Reforms


Globalisation isn’t benefiting everyone. This was the impression gained from the rallies in the state and elsewhere on May Day. There is urgent need to make growth exclusive.

And growth can be made inclusive only by generating more employment and providing labour more security. The lack of a safety net and insecurity of service is causing concerns and governments need to step in to remedy the situation. At the same time employers should be given some leg room to manoeuvre should an economic exigency arise.

Contract and incentive-based labour is gradually becoming the order of the day. This generally benefits those with higher job skills and willing to work long hours. The general rule is: the best way to keep your job is to do it well. This might work well for an insurance salesman, a bank employee tasked with a particular project or marketing personnel. But this kind of employment offers no particular advantage for the vast number of lower level office staff. The downside for everyone is, if business is down everybody gets fired.

There is loss of incentives, salaries and associated benefits like PF and ESI; and more important, loss of bargaining power. This situation was highlighted on May Day by the Goa unit of the Hotel Employees Federation of India which has demanded abolishment of the contract system in the hotel industry, a levy of 10 per cent service charge which is to be distributed to all employees, a minimum basic wage of Rs 10,000 linked to the consumer price index and preference for locals in the industry.

In 1970 the central government passed the Contract Labour (Regulation and Abolition) Act with the sole purpose of stopping employers from exploiting labour through the contract system. The aim of the law was to abolish contract labour where the work was of perennial nature, where the work was incidental to principal activity of the industry and where the work was of the nature that it can employ a considerable number of full-time workmen. However, despite this law governments have been lax in implementing it correctly and the courts have given contradictory orders.

May Day commemorates the strike by workers in Chicago in 1886 to demand an eight-hour work day. Since then many countries have adopted a five day week and in India only government employees enjoy this benefit. In this respect the suggestion by AITUC leader, Mr Christopher Fonseca that the mining industry adopt five day week is an attempt to get better working conditions for those associated with the industry. Whether this is workable or not is something that the industry will have to consider.

The issues engaging the nation’s policymakers regarding labour reforms have cropped up owing to their perceived need for more investment flow into the country. Foreign investors are demanding ‘flexible’ labour laws, which include the right of a company to lay off employees without the need to inform the government. The flexibility demanded also includes freedom of a company to close down its shop without any hassles. Speaking at the Indian Labour Conference in February this year, the Prime Minister, Dr Manmohan Singh suggested that there was a need to for a periodic assessment of regulations to ensure that they did not impact on employment and industrial expansion. This is a Catch-22 situation for the government, which is finding it difficult to balance the demands of labour with the needs of industry. The government must understand that labour reforms would not be equitable and just if they are not accompanied by better mechanisms for securing higher standards of living for the labourers.


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