Education, labour and agriculture reforms will usher in individual freedom

 

The recent reform is substantial but must be followed by civil service, banking, compliance, decentralisation, and urban reform

It’s unfair to simultaneously regret and defend the status quo in education, agriculture and labour markets. Change is a form of hope.

India’s agriculture laws were neither pro-farmer nor pro-consumer but pro-middleman. India’s labour laws were neither pro-labour nor pro-employer but pro-labour inspectors. India’s education laws were not pro-student or pro-employability but pro-UGC, AICTE and block education officers. Yet, why didn’t we change them for decades?

A wonderful new biography of Dadabhai Naoroji by Dinyar Patel has three lessons for reforming dysfunctional regimes. First, any change needs evidence: Naoroji’s drain theory used government data to prove India’s exploitation. Second, any change must be balanced: Naoroji was too moderate for the radicals and too radical for the moderates. Finally, any change requires openness because you can’t simultaneously regret and defend the status quo: Naoroji became more radical well into his eighties because he embraced new ideas instead of retreating into the safety of his old convictions.I make the case that our labour market status quoists chose vested interests over individual freedom, our education, labour and agriculture reforms are deeply connected, and change is a form of hope.

Delivering the equality and justice dream of our Constitution needs individual economic freedom. But vested interests create a minority rule in agriculture (only 6 per cent of farmer benefit from MSP and 45 per cent of our labour force only produces 15 per cent of our GDP), minority rule in employment (only 22,500 of 6.3 crore enterprises have a paid-up capital of more than Rs 10 crore and only 10 per cent of our workers have social security) and minority rule in education (only 15 per cent of our kids who start Class 1 finish Class 12 and only 10 per cent of Indians have a college degree). Policy change is difficult because effectiveness needs the right balance of conviction with listening. If you don’t listen, seek out hearing aids and surround yourself with cognitive diversity, you make avoidable mistakes. But if you don’t have convictions, you become a perfectly oiled weather vane who doesn’t get anything done. The great sentinel Tagore’s advice to Gandhiji — “Ekla cholo re” or walk alone — was hardly anti-listening but suggested courage on the difficult path of the greatest good for the greatest number. It would be unfair to deny that 10 per cent of India’s farmers, workers and educators would be adversely affected by the recent reforms. But it would be insane to allow this organised vocal minority — economist Mancur Olson called them distributional coalitions — to continue their punishment of 90 per cent of India’s farmers, workers and youth. A vote cannot be a veto because nobody cuts the tree they are sitting on.

The three reforms in education, agriculture and labour laws are related because employed poverty is a bigger challenge than unemployment, farmers are not self-employed but self-exploiting, our employers are mostly dwarfs not babies, our labour is handicapped without capital, our capital is handicapped without labour, unemployability is a bigger problem than unemployment, helping farmers involves having less of them, our government school teachers have no fear of falling or hope of rising, and our universities are over-regulated and under-supervised. India is still poor because the Avadi resolution of 1955 sabotaged individual freedom in entrepreneurship and factor markets. Purity is the enemy of progress and individually NEP, four labour codes, and three farm bills balance extreme positions while creating a new chance for India’s land, labour and capital to work together and raise “total factor productivity” (sadly India lost magnificent economist Isher Ahluwalia last week whose early work on the Solow residual thought hard about productivity).

The big gainers from these individual freedom reforms will be the youth, factories, farmers, MSMEs, and wages: Youth because an employment contract that is marriage without divorce doesn’t lead to fewer marriages, but fewer registered marriages; factories because nobody could comply with 100 per cent of our labour laws without violating 10 per cent of them. The criminalisation of politics and politicisation of trade unions is a poisonous combination and China factory refugees hesitate with laws that make them ATM machines for labour inspectors. Farmers will get a larger share of retail prices and the farm to non-farm labour transition is easier to factories than services. MSMEs don’t have the margins to manufacture their own employees and labour laws are inimical to scale. Finally, the only sustainable and scalable minimum wage programme is higher human capital and formal non-farm job creation.

Change is a form of hope especially as the COVID-19 pandemic destroys fiscal space. The Indian welfare state doesn’t lack ambition but resources. Historian Ramachandra Guha reminds us that India has remarkably created the world’s largest democracy on the infertile soil of the world’s most hierarchical society. A new national goal should be our grandchildren living in the world’s largest economy — Chinese and American demographics suggest we get there at $15,000 per capita income. India has a unique chance to create mass prosperity because structural opportunities (a new world of work, organisations and education), global opportunities (capital glut that overvalues growth, China fatigue, toxic politics in ageing countries) and domestic opportunities (young population, productivity frontier distance, and lower corruption) combine to create a potent policy window. Our choices must reflect our hopes rather than our fears.

The recent reform is substantial but must be followed by civil service, banking, compliance, decentralisation, and urban reform. Over the next decade, they will combine to raise manufacturing employment from 11 per cent to 18 per cent of workers, reduce farmers from 45 per cent to 15 per cent of workers, raise women’s labour force participation from 25 per cent to 50 per cent, and raise India’s per capita income from $2,500 to $10,000.

India’s old economic path often cited John Maynard Keynes’ 1923 comment, “In the long run, we are all dead”, allowed vested interests to control our land and labour markets, and blunted individual economic freedom. Our new path involves changing our minds, taking risks that expand individual choice for our workers and farmers, and citing Keynes’ 1942 comment that, “In the long run, almost anything is possible”.

This article first appeared in the print edition on October 1, 2020 under the title ‘About three reforms’. The writer is Chairman, Teamlease Services

Source: Indian Express, 1/10/20

Why abrogation of labour laws is problematic

It could reduce participation of women in workforce, create incentives for exploitative practices.

Written by Ashish Bharadwaj and Shohini Sengupta

In terms of the number of people infected by COVID-19, India is amongst the worst-hit by the disease. The impact of the pandemic has been particularly tragic for the socio-economically depressed categories of people, including informal economy workers, migrant labourers, pensioners, women and children — people who lie at the intersection of abject poverty, caste and other systemic forms of oppression. The nation-wide lockdown aggravated their problems leading to the mass exodus of migrant labourers who have little or no social security. The institutional response to this humanitarian crisis was grossly inadequate.

Last month, labour laws in 11 states were changed in an attempt to promote business operations and maintain industrial output, particularly in the manufacturing sector. The major changes proposed include increasing working hours from 8 to 12 hours — Uttar Pradesh, however, took back the ordinance on this issue — no inspection of SMEs and firms employing less than 50 workers, easing the process of securing a business license, amending the Industrial Disputes Act to increase the threshold for lay-offs and limiting the submission of annual returns to once a year as opposed to multiple returns under various labour laws.

There has been a growing need to rationalise labour laws in India, with several scholars and economists pointing out the perils of having a vast multitude of labour laws operating at the Centre and state level. This has resulted in both overregulation of the formal economy, driving labour costs in the regulated market, and expanding the number of people outside this formal economy (roughly 90 per cent according to some estimates). The move to assimilate various labour laws into a draft code on social security last year was a necessary first step in this direction. However, removing the scant social welfare protections to correct existing regulatory arbitrariness creates incentives for employers to continue with exploitative labour practices, and even terminate businesses without compensation and other terminal dues.

Women and children have been excluded from the changes in the labour laws. On the face of it, this may appear a good step. But this could create a new incentive for not hiring women, since it is now cheaper to hire men. In addition, a sizeable portion of the relaxations involve doing away with inspections by labour commissioners, resulting in the creation of a regulatory black hole where employers might get away by hiring low-cost child labour. Whilst the Child Labour Prohibition and Regulation Act (1986) remains in effect, there are fears that several employers will pay no heed to the legislation.

Relaxation of labour laws can also have other far-reaching, adverse implications on the rights and well-being of women, young workers and children. According to the World Bank, the female labour force participation rate in India was a meagre 17.5 per cent in 2017-18. Extended working hours and other labour law relaxations are likely to further decrease the participation rates of women in the labour market and increase the already widening wage gap. It will also have a detrimental impact on childcare and could force elder siblings (particularly girls) to shoulder the responsibility of providing care to younger children. Adverse working conditions could have an undesirable impact on the mental health of parents and lead to children adopting adverse coping mechanisms, including violence and self-harm.

The absence of inspections and monitoring and a reduced focus on safety measures at workplaces will increase health hazards and may translate into an increase in health expenditure. This could divert limited resources away from childcare. Informal economy protection measures adopted by countries across the world include unemployment insurance, facilitating direct cash or in-kind transfers, public work programmes and support to struggling small businesses. The right to satisfactory working conditions has to be a necessity both during a crisis, and otherwise. Efficient monitoring mechanisms are the only way to reduce if not prevent exploitation and abuse.

Complete de-regulation of an already oppressive labour market, in the middle of a humanitarian crisis, represents a failure of the state to cater to the needs of the most vulnerable people.

(Bharadwaj is Professor & Dean and Sengupta is Assistant Professor of Research, Jindal School of Banking & Finance, O P Jindal Global University, Sonipat. Views are personal)

Source: Indian Express, 17/06/2020

Breaking the stranglehold

There is scant focus on India’s secret shame: bonded labour

Last year, on December 22, an incident of bonded labour reached the national headlines, even if only for a fleeting moment. BJP president Amit Shah tweeted on the subject. A week earlier, 52 trafficked labourers had been rescued from a ginger farm in Karnataka where they had been made to work inhuman hours with little pay. Yet, for the most part, both the mainstream discourse and social media commentary miss the underlying phenomenon: bonded labour, India’s secret shame.

The practice was abolished under the Bonded Labour System (Abolition) Act, 1976 after the issue found a place in the Emergency-era’s 20-point programme. Four decades on, independent surveys and State government-led committees still point to its myriad forms. The Global Slavery Index 2016 estimated there to be 1.8 crore Indians in modern slavery, including bondedness, while the International Labour Organisation said there were 1.17 crore bonded labourers in 2014.

However, there has been no government-led nationwide survey since 1978, despite each district having been given Rs. 4.5 lakh for such surveys. Instead, the government relies on rescue and rehabilitation numbers: Since 1976, over 3.13 lakh people have been rescued, with Karnataka topping the list (nearly 66,300 people). This does not reflect the extent of the prevalence of bonded labour, as most labourers are not aware of the Act and turn to the authorities only when it becomes overtly violent.

Moreover, National Crime Records Bureau data show that not all cases are reported by the police. Between 2014 and 2016, they recorded just 1,338 victims, with 290 police cases filed — a stark difference from 5,676 rescues reported by six States in this period.

This becomes important given the structure of the disbursal of rehabilitation funds: Rs. 20,000 is given as immediate relief while the rest (which depends on the case) is given only after conviction of the accused. In these three years, only 28 cases (of the 334 in trial) saw judicial resolution, resulting in a conviction rate of just 32%. It is no surprise that the Centre has had to spend just Rs. 7.65 crore on rehabilitation in this period. Some patterns emerge. Traffickers continue to source labour in socio-economically backward districts, an example being Bolangir in Odisha. Tribals and Dalits remain vulnerable. Advances and small loans accompanied by promises of steady pay are tools of entrapment. Brick kilns, quarries, horticulture farms, shoe and plastic factories in metropolises are venues for this practice.

The Ministry of Labour says, “The root of the problem lies in the social customs and economic compulsions,” before listing a “multi-pronged” strategy which focusses solely on rescue and rehabilitation processes. However, a preventive measure, which must start with a survey, is missing. Creating financial access for vulnerable communities/vulnerable districts could help. Further, regulatory attention must focus on trafficking rings and sectors.

The writer is a Principal Correspondent at The Hindu’s Bengaluru bureau

Source: The Hindu, 3/01/2019

India had fastest wage growth in south Asia in 2017

Globally, the rate of growth in wages in 2017 fell to its lowest level since 2008, but workers in India had the highest average real wage growth in Southern Asia of 5.5% over the period 2008-17. At the same time, India and Pakistan had the dubious distinction of having the highest gap between what men earn and what women do. The mean gender pay gap of 34.5% for India and 34% for Pakistan on the basis of hourly wages were the worst among 73 countries for which data was available. Globally, women continue to be paid about 20% less than men. Not surprisingly, the gender gap in wages was lowest in high income countries and highest in low and middle income countries. These were among the findings of the Global Wage Report 2018 brought out by the International Labour Organisation (ILO). Globally, growth in wages in real terms (that is, adjusted for price inflation) declined from 2.4% in 2016 to just 1.8% last year, far below the level of 3.4% before the global financial crisis. If China with its huge population and rapid wage growth were excluded, the global real wage growth would be just 1.8% in 2016 and 1.1% in 2017. The slowdown in wage growth in 2017 occurred in spite of more rapid economic growth. Workers in Asia and the Pacific have enjoyed the highest real wage growth among all regions over the period 2006–17 with countries such as China, India, Thailand and Vietnam leading the way. However, even here, wage growth in 2017 was lower than in 2016, falling from 4.8% in 2016 to 3.5% in 2017. Again, if China were removed, the growth would be even lower. Over a longer period, 1999 to 2017, real wages have almost tripled in the emerging and developing countries of the G20, while in advanced G20 countries they have increased by just 9%. Yet, in many lowand middle-income countries, average wages remain low and insufficient to adequately cover the needs of workers and their families, pointed out the report. According to the report, gender pay gap is wider at the high end of the pay scale in high-income countries, while in low- and middle-income countries the gender pay gap is wider amongst the lower paid workers. The report also shows that traditional explanations, such as differences in the levels of education between men and women workers, play a limited role in explaining gender pay gaps. “In many countries women are more highly educated than men but earn lower wages, even when they work in the same occupational categories,” said Rosalia Vazquez-Alvarez, econometrician and wage specialist at the ILO and one of the authors of the report. “The wages of both men and women also tend to be lower in occupations with a predominantly female workforce. To reduce pay gaps, more emphasis needs to be placed on ensuring equal pay for women and men, and on addressing the undervaluation of women’s work,” she said

Source: Times of India, 28/11/2018

Indentured Labour

Pundit [Madan Mohan] Malaviya [in Simla on September 11] moved that the Government of India should move the Secretary of State for India to negotiate with the Crown Colonies concerning the early release of those Indian labourers whose indentures have not yet expired. This was no mere sentiment but a practical question. Lord Carmichael, presiding over Mr. Polak’s lecture, had emphasised the fact. The speaker, continuing, pointed out that contracts were already broken from the side of Fiji Government and that they were not sending out men and women who had finished their indentures on account of shortage of ships and that their passages were held up. Detailing his arguments he read extracts from the excellent reports of Mr. Andrews who visited Fiji last year for a second time. The speaker paid an eloquent tribute to him and Mr. Pearson and urged that the Government of India should take the right view and stop the system. He alluded to the serious cases in coolie lines and these, he said, should not be allowed to continue. Talk of Imperial partnership was no use when these things continued.

Source: The Hindu, 12/09/2018

Vagaries of the job market 

The mismatch between the number of people who annually reach working age and the availability of jobs has been a matter of constant concern globally during the better part of the period since the global financial crisis of the last decade. The International Labour Organisation’s latest forecast that a few more millions are set to join the pool of the jobless during this year and the next, is in line with its own previous estimates. In any case, with the growth in global gross domestic product registering a six-year low in 2016, expectations of generation of new jobs were always going to be low. But a no-less-serious concern in the ‘World Employment and Social Outlook 2017’ pertains to the stubborn challenge of reducing the extent of vulnerability that currently affects about 42 per cent of the total working population. This concern refers to lack of access to contributory social protection schemes among the self-employed and allied categories, unlike their counterparts in the wage-earning and salaried classes. The former segment accounts for nearly 50 per cent of workers in the emerging economies and 80 per cent in developing countries. The hardships faced by these 1.4 billion working people will become more apparent when seen in the backdrop of either the absence of strong welfare legislation or its effective enforcement in a majority of these countries. It is no surprise that besides Sub-Saharan Africa, South Asia has been the most affected by such volatile conditions.

To be sure, the overall share of these vulnerable workers dropped from 46 per cent of total employment in 2015 to 42 per cent in 2016. But the latest report projects only a mere 0.2 percentage point rate of reduction through 2017-18. In comparison, it says the proportion of the population in jobs characterised by vulnerability declined by an average annual rate of 0.5 percentage points in the previous decade. As a result of the relatively slow reversal rates in more recent years, these numbers are projected to increase globally by 11 million a year. The other implication of an increase in the number of people facing vulnerable working conditions is the real danger this poses of a slowdown in reducing the incidence of working poverty. It is this celebrated rise in income levels in the lowest rungs of the population that lent the current phase of globalisation the social and political legitimacy, a phase that has otherwise posed the risks of economic dislocation and unprecedented mass migration. The challenge for policymakers worldwide is to ensure that incomes do not fall below the levels of basic subsistence as the world marches towards the poverty reduction targets under the 2030 Sustainable Development Goals.

Source: The Hindu, 17-01-2017

 

What can governments do when jobs run out?

Martin Ford writes in the Rise of the Robots: Technology and the Threat of a Jobless Future that around 47% of total employment in the US, around 64 million jobs, have the potential to be automated perhaps within a decade or two. Europe is already facing a crisis of jobs. Youth unemployment in Italy stands around 36% while it is nearly 44% in Spain. Thanks to offshoring and automation, we are seeing a polarisation in the labour market that is split between low-wage service jobs and highly-paid top end with middle class jobs disappearing everywhere. India has a mass of low-paying jobs (which masks the problem); its pace of job creation pales in comparison with the millions entering the workforce each year and, according to the World Bank, 69% of jobs in India are threatened by automation. Education and skill training no longer guarantee jobs as the tech landscape is changing and making jobs scarce.

Governments need to wise up to the political implications of the lack of opportunities in their economies. There is also the wider crisis of capitalism to contend with; a lack of jobs naturally means a decline in the number of consumers for goods and services, a fact compounded by the millions who retire each year and spend less as their savings deplete. Ford writes that “if automation eliminates a substantial fraction of the jobs that consumers rely on, or if wages are driven so low that very few people have significant discretionary income, then it is difficult to see how a modern mass-market economy could continue to thrive”.

One way of managing social tensions, he argues, is for governments to implement a guaranteed minimum income for all citizens. Also known as a universal basic income (UBI) or a guaranteed basic income, the idea of an income for all has been around for years – it was backed by the Left and even libertarian thinkers like Milton Friedman and Friedrich Hayek and is beginning to gain traction again among economists.

Proponents like Ford feel that a cash boost via a universal basic income mitigates the political problem of creating jobs and it provides disposable income that can be used to pay for goods and services, which companies depend on. The idea appeals to some conservatives because (a) it boosts the economy, (b) it is easier to administer and (c) it can potentially downsize the bureaucracy which currently manages a range of welfare programmes.

Universal basic income has been criticised and reckoned as unfeasible on two grounds. One is that it reduces beneficiaries’ incentive to work and encourages delinquency and, two, that it would be too expensive to implement in mass societies.

There are good counterarguments to both these contentions. Studies have shown additional income does not really reduce the incentive to work. Chris Hughes, a co-founder of Facebook and a backer of UBI, points to research which shows that people in the US used cash transfers for mostly housing and food costs and that less than 1% of the money was spent on alcohol or drugs. The Freakonomics radio show this year discussed UBI and referred to an income transfer experiment in the town of Dauphin, Canada, which was implemented in the 1970s but not properly evaluated owing to lack of

funding. Research subsequently showed that in poor families that received up to $15,000 a year, hospitalisation rates fell, high-school completion rates increased (as families chose to keep boys in schools rather than press them to work); those with full-time jobs did not reduce the number of hours they worked and women spent more time with their new-borns and pace their return to jobs.

Implementing basic income is, of course, expensive. Ford calculates that an unconditional $10,000 basic income for all adults in the US would cost around $2 trillion. This cost, according to him, can be offset to an extent by reducing or eliminating numerous federal and state anti-poverty programmes – but it would still require around $1 trillion in new revenue. Ford says that governments will need to tax businesses a lot more, rather put this burden on workers and employees who already pay for existing welfare programs. He writes “if you accept the argument that our [US] economy is likely to become ever less labour-intensive over time, then it follows logically that we ought to shift our taxation scheme away from labour and toward capital”.

These discussions in the developed world seem far removed from India as the costs seem prohibitive and as the country grapples with more foundational issues like ease of doing business, addressing education and skill deficits and kick-starting investments while banks are stuck with bad loans. But given high poverty levels and the anger among youth that will inevitably rise following failure to find rewarding jobs, policymakers will need to serious consider basic income, or at least some form of it.

Tadit Kundu reviewed the debate among economists about the scope of implementing universal basic income in India. The idea has the support of prominent experts like Pranab Bardhan and Jean Dreze. Bardhan says that a basic income of Rs. 10,000 per year – about three quarters of the official poverty line – would entail a cost equivalent to 10% of GDP, far more than the 4.2% that the government spends on explicit subsidies. He writes that discontinuing some or all of the subsidies (including tax exemptions for the corporate sector) while retaining expenditures on health, education and rural and urban development programmes can secure a reasonable basic income for all. Kundu points to research which shows poor families in Madhya Pradesh which received unconditional cash transfers ended doing more labour and work (not less). There was also a shift from casual wage labour to more self-employed farming and business activity and there was also reduction in migration caused by distress.

Ideas such as universal basic income are yet to be mainstreamed in India. But as developed countries increasingly warm to the idea (Finland is set to implement its version in 2017), policymakers may find it difficult to avoid discussing guaranteed minimum income.

Source: Hindustan Times, 27-12-2016

Dec 13 2016 : The Economic Times (Delhi) Almost 40% Indians Don't Go on Vacation New Delhi: Our Bureau   Country ranks fifth among the most vacation-deprived countries About 40% Indians do not go on vacations due to their work schedule that either does not allow for vacations or there are not enough staff to look after their job in their absence, shows a survey.South Korea is the only country where work schedule prevents a higher percentage of people -43% -from going on vacations, according to the 2016 Vacation Deprivation Study by Expedia, an online travel company with presence in 33 countries. It ranks India fifth among the most vacation-deprived countries, behind Spain (68%), the UAE (68%), Malaysia (67%) and South Korea (64%). Indians on average received 21 annual vacation days in 2016 but could only take 15 days in the year, the survey shows. This is much less compared with countries such as Brazil, France, Spain, Finland and the UAE, where people took 30 vacation days. About 21% Indians do not go on vacation because they feel important work decisions will be made in their absence. Elsewhere, this is the reason for 18% of people from avoiding vacation in both Hong Kong and the UAE. Interestingly, about 21% Indians feel that their not going on leaves would be perceived positively by their boss. About 12% respondents in South Korea and 11% each in Brazil and Thailand have similar feelings. While work schedule is the main reason for not going on leave, 14% Indians also said they cannot afford to take holidays. In Germany, the Netherlands and Belgium, 6% could not book holidays due to cash crunch. Unable to plan a holiday was another reason. About 27% said they found it difficult to coordinate time that works for them and their spouse, partner, family member or friend. The survey also shows that spouses are the favourite travel buddies for Indians: about 73% holiday with the spouse, followed by 59% with children, 53% with friends, 26% with colleagues and 9% with tour groups. The survey also shows that Indians are the second most in the world when it comes to exploring new destinations during holidays. While 78% Italians love to explore new destinations during vacations, 77% Indian respondents said they love to explore new places on vacations. Source: Economic Times, 13-12-2015

Jobs vs Wages

Three faultlines in wages sabotage private formal job creation. Demonetisation will undo some damage.

Two events that trigger the most predictable, irrelevant and frenzied media circus around jobs are the application numbers for a government recruitment advertisement and small moves in the official unemployment rate. Both are irrelevant; India doesn’t have a jobs problem but a wages problem. Our official unemployment rate of 5 per cent is not a fudge and anybody who wants a job has one; they just don’t get the wages they want or need. The creation of high-paying private sector jobs is being murdered by three faultlines in wages: Government vs private, nominal vs real, and gross vs net.

Why? Because we estimate that almost 85 per cent of the 30 lakh applicants with PhDs, degrees, etc for government peon posts in Uttarakhand recently already had a job (they were chasing above market wages with the additional upside of an employment contract that is marriage without divorce). Because we know that a child equates a salary of Rs 4,000 per month in Gwalior with Rs 18,000 in Mumbai (the difference in not salary but cost of living reimbursement for rehna, khaana and office jaana). Because we know that applicants in job fairs make decisions on haath waali salary rather than chitthi waali salary (there is a 45 per cent difference between gross and net wages for poor-value-for-money statutory deductions). Let’s look at each faultline in a little more detail.

One, government vs private wages. People at the top of the government get paid too little but people at the bottom of the government get paid too much. Unfortunately people at the bottom are 85 per cent of the numbers and greatly distort the labour market because Class 3 and 4 employees get paid more than 200 per cent of their private sector counterparts for the same job not including low performance accountability and high job security. The huge number of government job applications is not people running away from insecure low-paying private sector jobs but people running towards overly secure high-paying government jobs. Government employment should be public service with reasonable wages; not a rigged rate like LIBOR that distorts the market.

Two, nominal vs real wages. Since we cannot take jobs to people in the short run, we need to take people to jobs. But the migration to cities is being retarded by the huge mispricing of land that directly affects living, eating and commuting costs in India’s few job magnets (we only have 50 cities with more than a million people versus China’s 375). The economic wastelands of Mumbai, Delhi, Chandigarh can’t compete with job magnets like Gachibowli, Mohali, Gurgaon and Bangalore because the new clusters combine an infinite supply of mixed use commercial and residential real estate (happiness economists suggest that commute time is a key component of happiness).

Three, gross vs net wages. A monthly salary of Rs 15,000 per month in a cost-to-company salary world only ends up as a Rs 8,000 bank credit because employers are required to make mandatory deductions of 45 per cent of salary for poor value programmes like provident fund, ESI, LWF, EPS, and much else. Government data suggests that workers with annual incomes of Rs 1.8 lakh do not have any saving and cannot live on less than half their salary; consequently they prefer working for the informal sector where haath waali salary is equal to chitthi waali salary.

These faultlines murder high-paying formal private jobs and we need three regulatory interventions: Faster urbanisation, lower regulatory cholesterol, and broader human capital. Faster urbanisation means an increase to the number of Indian cities with more than a million people from 50 to 200; bad urbanisation is better than no urbanisation but high quality urbanisation like having real mayors, robust city finances, etc could create the virtuous cycle of higher formalisation, higher productivity and higher wages.

Making bribing a core capability for builders has been bad for formal job creation and labour migration and demonetisation will bring down land prices, accelerate construction, and raise labour mobility. Land was the most inefficient and unfair of the three factor markets of land, labour and capital and demonetisation is a wonderful intervention. Lower regulatory cholesterol for job creation is important because most of our workers work in low-productivity enterprises that are not productive enough to pay the wage premium; our 6.3 crore enterprises only translate to 18,000 companies with a paid-up capital of more than Rs 10 crore. Human capital is key; neglecting primary school education for decades after Independence is a mistake being amplified by the new world of work that disproportionately values reading, writing, arithmetic and soft skills.

As the long-term plans for formalisation, urbanisation and human capital yield results, it’s time for a time-bound monitoring on three overdue and impactful interventions in regulatory cholesterol by the ministry of labour. First, we must overrule its self-serving case for an Establishment Number and replace the 27 different numbers issued to every employer with a single Universal Enterprise Number. Second, we must set a date for 100 per cent paperless, presenceless, and cashless compliance for all state and Central labour laws. Second, we must end the shameful stonewalling of the ministry of labour of the provident fund and ESI reforms announced in the budget by making employee contribution to the provident fund voluntary and creating competition for ESI and EPFO by allowing employees to choose alternatives like NPS and health insurance.

Recent youth unrest — the idealisation of Burhan Wani by Kashmiris and the reservation agitations by Patels, Jats, Gujjars — have roots not in a job emergency but a formal job emergency. Gandhiji said the difference between what we do and what we are capable of doing would suffice to solve our problems. Time to remind the ministry of labour.

The writer is chairman, Teamlease Services

Source: Indian Express, 21-11-2016

SC: Temporary staff should be paid on par with regular ones

AmitAnand Choudhar y

New Delhi





`Follow Equal Pay For Equal Work Principle'

In what comes as a relief for lakhs of temporary employees who have been hired by government departments and agencies across the country on contractual basis, the Supreme Court held on Wednesday that they are entitled to wages on par with permanent staff under the `equal pay for equal work' principle.A bench of Justices JS Khehar and SA Bobde said the principle of `equal pay for equal work' constitutes a clear and unambiguous right vested in every employee, whether engaged on regular or temporary basis.
“In our considered view, it is fallacious to determine artificial parameters to deny fruits of labour. An employee engaged for the same work, cannot be paid less than another ... Certainly not, in a welfare state. Such an action besides being demeaning, strikes at the very foundation of human dignity ,“ the bench said.
The bench said the principle had been expounded through a large number of judge ments rendered by the apex court and constitutes law declared by the Supreme Court.
“Any act of paying less wages as compared to others similarly situated, constitutes an act of exploitative enslavement, emerging out of a domineering position. Undoubtedly, the action is oppressive, suppressive and coercive as it compels involuntary subjugation,“ Justice Khehar said.
The court passed the verdict on petitions filed by temporary employees working for Punjab seeking wage parity with regular employees. They approached the SC after the Punjab and Haryana HC held that temporary employees were not entitled to the minimum of the regular pay-scale.
Setting aside the HC order, the SC held that the principle of `equal pay for equal work' must be followed as India is a signatory to the International Covenant on Economic, Social and Cultural Rights. “ There is no escape from the above obligation, in view of different provisions of the Constitution and in view of the law declared by this court under Article 141 of the Constitution. The principle of `equal pay for equal work' constitutes a clear and unambiguous right and is vested in every employee -whether engaged on regular or temporary basis,“ it said.

Source: Times of India, 27-10-2016

Labour’s love’s lost

The proposed labour reforms seek to weaken worker protection at a time when the Indian economy is not creating enough jobs, and the right kind of jobs.

On September 2, 10 trade unions in India organised what was said to be one of the largest labour strikes in history. An estimated 120 million workers took part. The unions were protesting against the government’s unwillingness to grant a 12-point charter of demands they had put forward. A year ago, unions had signalled their discontent by having a similar nation-wide strike.

This year, one of the principal demands of the unions was an increase in the daily minimum wage for unskilled workers from Rs.246 to Rs.692. They rejected an increase in the wage to Rs.350 offered by the government. Some of their other major concerns were: proposed changes in labour laws; growing casualisation of labour; privatisation; and greater opening up to foreign direct investment (FDI).

Future tense, present imperfect 

Labour is restive today. It is apprehensive about what the future bodes for itself. But it’s not as if labour militancy has gone up in recent years. On the contrary, man-days lost due to industrial disputes (lockouts and strikes) came down from 23.7 million in 2001 to 13 million in 2012 before rising to 19 million in 2013. These figures are considerably lower than those in the 1970s and 1980s.

However, there is little doubt that organised labour in India, as in the rest of the world, sees itself as a loser in the changes unleashed by liberalisation and globalisation. It fears that if the government goes ahead with some of its proposed “reforms”, its losses will begin to mount.

Indian businesspeople as well as many economists have long clamoured for greater “flexibility” in labour laws, a euphemism for freedom to hire and fire. The Industrial Relations Code Bill, 2016, which is said to favour such flexibility, is due to be tabled in Parliament in the near future. It is bound to evoke a strong reaction from unions as well as Opposition parties.

Several economists say that rigid labour laws are the reason India has not generated enough jobs in the formal sector — only about 10 per cent of jobs are in the organised sector and the remaining 90 per cent in the unorganised sector. As large firms do not have the confidence that they can shed workers in adverse conditions, they do not wish to enter labour-intensive, low-skilled sectors. This is the reason India has not been able to replicate the Chinese success in labour-intensive manufacturing.

This argument may have well been overtaken by events in the global economy. Many other low-cost economies have already positioned themselves in these sectors. Automation in the West means that the window of opportunity in these sectors is fast closing. The idea that reforming labour laws will trigger a huge expansion in low-skilled manufacturing is thus highly suspect in today’s changed situation.

The experience so far

Moreover, the academic literature on the subject is not unambiguously in favour of easing labour laws as a means for hiring more labour. Dismissal laws in France are more stringent than in India, but that did not come in the way of France’s prospering for over a century. China itself has made its labour laws more stringent so that they are comparable to those in India (except in special economic zones).

Indeed, some of the literature suggests that giving workers greater protection helps increase productivity by giving workers more incentives to invest in firm-specific skills. Along with collective bargaining, worker protection leads to more egalitarian outcomes in society. There is also evidence that the bias against workers in Indian industry may have more to do with tax incentives for capital than with restrictive labour laws.

A second issue that agitates unions is the growing trend towards casualisation of labour. This was one of the reasons for labour unrest at Maruti’s plant at Manesar in Haryana last year.

Companies find it expedient to employ labour on contract. They can then leave the job of managing regulations and inspectors to the contract labour firms. They can also stay small and escape various labour regulations. Most importantly, contract labour tends to be cheaper in general; at Maruti’s Manesar plant, contract workers earned less than half the wages of permanent workers.

Contract labour is a serious assault on workers’ rights. The Supreme Court has made strong observations on companies’ resort to contract labour in order to avoid statutory obligations. The Economic Survey (2015-16) believes that contract labour is merely a corporate response to “regulatory cholesterol”. However, reducing worker protection in the organised sector may not be the answer — many firms would still prefer the contract option simply because it’s cheaper. Rather, we must extend worker protection and benefits to contract labour as well.

Privatisation and FDI are other areas of concern for organised labour. It is not that we have seen major initiatives to sell off PSUs. But there are clear attempts to further shrink the role of the public sector. Public sector banks (PSB), for instance, have been starved of capital and many banks are today without chairmen and managing directors. Moves have also been initiated to merge PSBs. Unions see these moves as impacting jobs in the formal sector adversely.

In principle, FDI should mean more investment and more job creation. However, in a situation where domestic firms have weakened by inadequate growth, FDI is seen as displacing jobs in domestic firms.

It’s the jobs

The proposed labour reforms seek to weaken worker protection at a time when the Indian economy is not creating enough jobs and the right kind of jobs. The rate of growth of employment slumped from 2.8 per cent in 2000-05 to 0. 5 per cent in 2011-12. In the same period, the labour force grew at 2.9 per cent and 0.4 per cent, respectively. In the organised sector, the share of informal employment rose from 48 per cent in 2004-05 to 54.6 per cent in 2011-12.

Job creation in the private sector is depressed by the low rate of investment. Investment itself is constrained by numerous factors: high levels of debt, high interest rates, a deceleration in corporate loans growth in PSBs, etc. In these conditions, a focus on weakening dismissal laws in the organised sector as the key to job creation is misplaced.

The International Monetary Fund’s World Economic Outlook (April 2016) lends support to this view. It cites studies that have shown that weakening dismissal conditions under adverse economic conditions tends to reduce employment. The IMF argues that if such changes to labour laws are to be carried out, there must be offsetting fiscal expansion that helps raise demand for labour. India is in no position to meet this condition as we are still in the process of fiscal consolidation.

There is a time for undertaking certain structural reforms and there is a time for not doing so. Focussing on changes to labour laws at the present time, far from fostering job creation, is likely to be counterproductive and can only result in greater labour unrest.

T.T. Ram Mohan is a professor at IIM Ahmedabad. E-mail: ttr@iima.ac.in

Keywords: labour, labour reform, labour unrest, unions, strike

Source: The Hindu, 12-09-2016

Do we need a minimum wage law?

The number crunching over an appropriate minimum wage belies the fact that the state and industry only pay lip service to it

In April this year, Union Labour Minister Bandaru Dattatreya announced that thegovernment will raise the minimum wage for contract workers to Rs.10,000 per month. It would do so, he said, through an executive order. The executive order never came. What did, however, were news reports on industry’s opposition to the proposal. In July, the proposal had been shelved.

This week, in a bid to get trade unions to call off their All India strike on September 2, the governmentagain announced a hike in minimum wages, but only for unskilled non-agricultural workers, from Rs.246 to Rs.350 per day, or Rs.9,100 per month. The central trade unions, barring the Rashtriya Swayamsevak Sangh-affiliated Bharatiya Mazdoor Sangh (BMS), have dismissed the hike as meaningless and announced that they will proceed with the strike.

This chain of events raises many questions: What is an appropriate minimum wage? How does one arrive at it? Does India still need something like a minimum wage?

Many reasons have been adduced for scrapping the minimum wage. The most important one is the doxa of liberalisation, which dictates that the market and not the government should determine prices so as to preserve efficiency and competitiveness. This was the objection raised by industry and heeded by the government.

The second reason to scrap the minimum wage, especially now, is that it contradicts the National Democratic Alliance (NDA) government’s flagship ‘Make in India’ initiative. For foreign capital to make in India, Indian labour has to remain cheaper than Chinese, Vietnamese, Cambodian and Bangladeshi labour.

Third is a logic that is popular among economic reformers: scrap it if it’s not working. Neither industry bodies nor the state nor unions can claim that the Minimum Wages Act (MWA) is seriously implemented. India anyway has still not ratified the United Nations’ Convention No. 131 (adopted in 1970) on Minimum Wage Fixing. So why not scrap the MWA?

Why have a minimum wage?

MWA is one of the first laws of independent India, legislated in 1948, even before we had a Constitution in place. Why was it enacted?

The real motive was to buy peace on behalf of a national bourgeoisie that had to manage a working class that was far more militant in those days. But there were other reasons as well. India was a poor country with a major surplus of labour. There were too many jobs where labour did not have the bargaining power to demand a wage sufficient to survive on. Conditions where employers get away with paying workers too little generate several social costs, such as poverty, malnutrition, endemic debt leading to bonded labour, and child labour, which could be avoided through fair wages.

Three levels

The Tripartite Committee on Fair Wages, appointed in 1948, defined three different levels of wages: a living wage, a fair wage, and a minimum wage. Living wage is what a human being needs to get the basic essentials of food, shelter, clothing, protection against ill-health, security for old age, etc. A fair wage is lower than the living wage and takes into account efficiency, from the employer’s perspective. Minimum wage is similar to the fair wage except in two respects: it is even lower, and has a statutory dimension. Today, there is broad consensus among patriotic businessmen and nationalist policymakers that mandating a living wage or even a fair wage for Indian workers is a ridiculous idea not worth discussing. What’s left on the table is the minimum wage. How much should it be?

The resolution passed at the 15th Indian Labour Conference in 1957 mandates taking into account five factors for calculating the minimum wage: 1. The wage must support three consumption units (individuals); 2. Food requirement of 2,700 calories a day; 3. Clothing requirement of 72 yards per worker’s family; 4. Rent for housing area similar to that provided under the subsidised housing scheme; 5. Fuel, lighting and miscellaneous items of expenditure to constitute 20 per cent of the minimum wage. In 1991, the Supreme Court called for adding another 25 per cent to the wage yielded by the above calculation in order to take into account children’s education, medical requirements, etc.

If calculated using these parameters, some estimates put the minimum wage at Rs.26,000 per month. This is the amount Central government employee unions are demanding from the Seventh Pay Commission, which had fixed their minimum wage at Rs.18,000.

Minimum wage via pay parity

But figures such as Rs.26,000 or even the Rs.10,000 mooted by the Labour Ministry sound fantastical in comparison to the official minimum wage in some parts of India, which can dip as low as Rs.1,650 a month (Puducherry, agriculture, 2013). Typically, the actual minimum wage is close to or less than Rs.4,800, currently the National Floor Level Minimum Wage.

Ironically enough, despite the MWA not being taken seriously by anyone, even a pro-reform government such as the one in power dare not speak of scrapping it, preferring instead to undermine it.

As A.K. Padmanabhan of the Centre of Indian Trade Unions (CITU) puts it, “If a government is serious about ensuring that contract workers get better wages, it would amend the Minimum Wages Act to stipulate that permanent and contract workers get the same pay for same work. But this government has not touched the Act.”

Even in post-liberalisation India, no industry lobby can openly argue that contract workers should be paid less than permanent workers for the same work. The NDA government has a brute majority in the Lok Sabha. No party in the Rajya Sabha will oppose an amendment mandating pay parity between permanent and contract workers. So, if there is one ‘labour reform’ that can be said to have universal consensus as well as logic on its side, it is this simple amendment. In one stroke, it would raise the minimum wage of contract workers by bringing it on a par with permanent worker wages, and encourage their regularisation. But neither the United Progressive Alliance in its time nor the NDA now is interested in passing such an amendment. It is not hard to fathom why, or who benefits from this pay differential.

sampath.g@thehindu.co.in

Keywords: Labour Ministry, minimum wage, labour unrest, contract workers, Minimum Wages Act (MWA)

Source: The Hindu, 1-09-2016

60% of countries most likely to use slave labour'

London REUTERS





Almost 60% of countries are at high risk of using slave labour in their supply chains, according to a new global index launched on Thursday , which also ranked North Korea as having the worst record of slave labour.By assessing incidents of human trafficking or slavery , national laws, and the quality of law enforcement across 198 countries, risk analytics company Verisk Maplecroft found that 115 countries were at high or extreme risk of using slaves. “Few countries in the world are actually immune to modern slavery ,“ said Alex Channer, lead analyst for human rights research at Verisk Maplecroft.
Nearly 46 million people around the world are living as slaves, forced to work in factories, mines and farms, sold for sex, trapped in debt bondage or born into servitude, according to the 2016 Global Slavery Index by rights group Walk Free Foundation.
Modern slavery has become a catch-all term to describe human trafficking, forced labour, debt bondage, sex trafficking, forced marriage and other slave-like exploitation.
Channer said Verisk Maplecroft's index aims to help businesses identify countries most at risk of slave labour.
The issue has received in creasing attention in recent years with exposes in sectors as diverse as fishing, mining and textiles. Last year, Britain passed an anti-slavery law requiring companies with a turnover of 36 million pounds ($47 million) or more to report what they are doing to eradicate slavery from their supply chains.
After North Korea, the report ranked South Sudan, Sudan and Democratic Republic of Congo as countries with the most slave labour.
Heavyweight exporters India and China had an `extreme risk' of using slaves in their supply chains, along with DRC and Ivory Coast, a leading cocoa bean producer, the report said.
The European Union had a `medium risk' of using slaves, while Britain, Germany , Denmark and Finland were the only four major European economies that had a low risk of slave labor.

Source: Times of India, 12-08-2016

Six-hour work days can increase productivity'

Rebecca Greenfield

BLOOMBERG





Study Shows Employees Get Sick Less, Work Harder

For about a year, nurses at the Svartedalens retirement ho me have worked six-hour days on an eight-hour salary. They're part of an experiment funded by the Swedish government to see if a shorter workday can increase productivity . The conclusion? It does.As with any cultural shift in the workplace, the six-hour day has to prove itself more than just humane. For any employer, in Sweden or elsewhere, an abridged workweek can't damage productivity if it's going to have a chance. A year's worth of data from the project, which compares staff at Svartedalens with a control group at a similar facility , showed that 68 nurses who worked six hour days took half as much sick time as those in the control group. And they were 2.8 times less likely to take any time off in a two-week period, said Bengt Lorentzon, a researcher on the project.
“If the nurses are at work more time and are more healthy , this means that the continuity at the residence has increased,“ Lorentzon said. “That means higher quality (care).“ Less surprising was that the nurses were 20% happier and had more energy at work and in their spare time. This allowed them to do 64% more activities.
Svartedalens is part of a small but growing movement in Europe.Sweden has dabbled with shorter workdays before: From 1989 to 2005, home-care-services workers in one Swedish municipality had a six-hour work day , but it was abolished due to a lack of data proving its worth. The Svartedalens experiment is designed to avoid that problem: “This trial is very , very clean because it's just one homogenous group of workers,“ said Lorentzon. In Sweden's private sector, the practice is taking root in places such as Toyota service centers in Gothenburg. In the UK, a marketing agency adopted a staggered schedule to allow for re duced work hours while ensuring coverage; a survey last month found that six out of 10 bosses in that country agreed that cutting hours would improve productivity .
The key result --that productivity can increase with fewer hours worked--eliminates a major stumbling block to globalising the shorter work day .
While the Svartedalens experiment offers evidence that shorter hours improve productivity , nursing as an occupation may be more analogous to that of medical residents, rather than a desk job. The study equates productivity with quality of care, which doesn't necessarily translate to white-collar work.

Source: Times of India, 7-06-2016