New India's labour market

It has been reported that Union Labour and Employment Minister Santosh Kumar Gangwar has written to industry organisations and trade unions, asking them to join a consultation process on policy changes that would address India’s burgeoning job problem as well as increase India’s women labour force participation rate. This is a welcome admission that job creation in India needs attention. In spite of some recent figures from the Centre for Monitoring Indian Economy, suggesting September alone saw an increase in jobs by about 7 million, the National Sample Survey data indicated that India had not experienced such high unemployment since the 1970s, and confirmed anecdotal fears that large numbers of women were leaving the labour force. The ministry is in the process of rationalising the existing labour laws into four codes. Unfortunately, this at the moment falls short of real labour law reform, which would allow employers more latitude in hiring and firing workers. It is to be hoped that the ministry’s outreach to unions is in part to convince them of the importance of such reform.

However, the ministry must correct errors of the past in its outreach. India’s labour laws are structured to please unions and those already engaged in formal employment. This is part of the reason they are overly restrictive, and have retarded the growth of manufacturing. Instead of talking only to insiders, the government must broaden the scope of its consultation to include job-seekers and informal workers, in order to create a constituency in favour of real labour law reform. A broader outreach would not only be useful in creating a counterweight to powerful interest groups, it would also reflect the very real changes that are transforming the Indian economy at the moment. In a moribund investment environment, many new job opportunities are being created in the logistics sector and the gig economy, and by internet platforms. These jobs cannot be seen as being “formal” in the traditional sense, although the employers are frequently large companies that can indeed be regulated. They are analogous in some ways to the contract workers who have begun to fill up the spaces in the formal sector created by companies’ unwillingness to hire regular employees under conditions of uncertainty created by the current labour laws. The government must find a way to reach out to such workers. If necessary, they must be encouraged to organise among themselves to have a voice regarding their own welfare. This would help in creating a more accurate picture of the economy, as well as in giving a new and aspirational tone to conversations with labour more in keeping with the current times.

The Indian state’s long-term objective of formalising the economy — most recently seen in the stated arguments for demonetisation and the goods and services tax — should not ignore the rise of the gig economy. What is needed is a clearer and more universal approach to benefits, protections, and job creation. It is welcome that the Prime Minister’s Office is focused on ensuring that labour code rationalisation also becomes universalised. The Union labour and employment ministry must now get on board.


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