Labor laws can be good for business in the country

Between 2016 and 2021, UP’s working-age population increased from 148 to 170 million, but its number of employed people decreased by more than 1.5 million. A complex set of factors have fueled these adverse trends and dissatisfaction. Among these are inadequate and ineffective policy action. For example, consider UP’s 2020 decision to suspend labor laws to ease the burden on companies and attract investment; Other states took similar action – all to no avail. At most, such actions are misguided; At the very least, they are harmful to both the work and the workers. They fuel discontent.

Let’s imagine a country with no labor laws. Most businesses in India have fewer than 20 employees; Do we believe that if all labor laws are removed they will increase? Some firms may be, but most are not. Why? Because most do not have adequate access to finance, markets, electricity etc.; They have the capacity to satisfy no more than 30,000 non-labor compliances and no more than 3,500 filings; They complain of lack of access to and maintaining a skilled, productive and professional workforce. Labor laws may take the blame for keeping our businesses small and informal, but the reality is more complex. Failure to accept the array of constraints that can hold businesses back and blaming labor regulations is a poor response to a serious problem.

The claim that labor regulations discourage hiring and prevent businesses from reaping the benefits of scale is often underappreciated. But the ground reality does not support this claim. Even when industrial units are small on paper, these companies often merge certain operations to take advantage of scale. Until recently, individual state tax regimes—GST tried to rectify this but had other problems—and inverted fee structures were major obstacles to realizing the benefits of scale compared to labor regulations. Weak regulations, far from increasing employment, increase the uncertainty of employment and working conditions.

The government’s thrust for an Atmanirbhar Bharat, skill development and securing the future of our youth is in stark contrast to the disempowerment of workers under weak labor laws. Not only are workers the backbone of our economy—a fact underscored by the labor shortage after millions of migrant workers left big cities during the pandemic—but necessary investments in occupational safety and health, social security, training and apprenticeship, and fair wage productivity. Huh. , The provision for these calls is for more private sector participation, not less. An effectively designed and implemented labor system is good for business and investment.

What does an effective labor system look like? Not as we have been assigned. Consolidating over 100 state and 40 central labor laws into four codes is welcome, but current codes have shortcomings that miss a valuable opportunity to help build productive businesses by enabling productive workers.

Let’s take some examples. Four codes replace 29 of the existing labor laws, leaving at least 11 central and many more state regulations in existence, doing little to solve the maze. When it comes to Social Security, the government’s stated priority is to expand coverage to include informal workers. But instead of moving in a financially prudent and iterative manner toward broad-based coverage, the relevant code provides coverage to specific groups such as inter-state migrants and gig workers, while providing coverage to other categories such as intra-state migrants and others. The self-employed ignores the informal. staff. In addition, the code relies on a number of plans to increase coverage, but many of these have low participation rates. The implementation has been shifted to the e-Shram portal, which poses challenges in access, registration and ultimately the distribution of benefits.

In addition, the code creates a social security fund to protect gig workers. Aggregators will have to contribute 1-2% of their annual turnover to the fund. The recognition that gig workers should be covered is commendable, but the past administration of such funds has been poor. For example, in March 2019, the cumulative of labor welfare boards was less 50,000 crore, less of which 20,000 crores were spent.

The Occupational Safety, Health and Working Conditions Code excludes an estimated 99% of the manufacturing sector as it applies to factories that have at least 20 workers with electricity or 40 workers without electricity. Are the safety and well-being of those working in small units low? State governments can also be completely exempted from the application of this code. Similarly, the respective State Governments may decide to exempt establishments from the application of the Industrial Relations Code. There are many additional lapses, but the point is that these gaps are bad for the workers and also for the business.

The dilution of labor laws is not the only reason for unease in UP or elsewhere, but it suggests reckless policy making. If our laws encourage employers to treat workers as expendable, then businesses are unlikely to take on the responsibility of helping them build human capital, encourage productivity, and promote mobility. This will likely continue to create resentment, to the detriment of our economy, businesses and workers.

Sabina Dewan is President and Executive Director of JustJobs Network and Senior Visiting Fellow at the Center for Policy Research