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Business News/ Opinion / Jobs for the young not old
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Jobs for the young not old

India is not creating enough jobs. Without labour reforms, it can't

The issues cited for the national trade union strike confirmed the suspicion that trade unions are a geriatric ward run by old people, for old people and by old people. Photo: Ramesh Pathania/MintPremium
The issues cited for the national trade union strike confirmed the suspicion that trade unions are a geriatric ward run by old people, for old people and by old people. Photo: Ramesh Pathania/Mint

Obviously, trade union leaders have not read Norwegian playwright Henrik Ibsen, who wrote, “One day, the younger generation will come knocking at our door. Make no mistake, the next generation will ask us one of two questions. Either they will ask: ‘What were you thinking; why didn’t you act?’ or ‘How did you find the courage to resolve a crisis that so many said was impossible to solve?’"

The issues cited for the national trade union strike confirmed the suspicion that trade unions are a geriatric ward run by old people, for old people and by old people. In fact, being in Kanpur—once a citadel of Indian manufacturing—on Monday, the day of the national trade union strike, was surreal because this city of six million was seemingly oblivious to the strike call. Close to zero formal employment is the heavy price paid by Kanpur for the wrong kind of trade unionism. The strike reinforced that India’s job emergency cannot be solved without radically reforming labour laws and the voice of the silent unorganized majority of young job seekers must not be drowned by the shouting organized minority of formal employees. Labour unions must recognize that a voice does not equal a veto, they represent less than 10% of India’s workers, and job preservation is not a form of job creation.

Labour reform hardly equals hire and fire; the recent draft labour code on wages that consolidates four labour laws into one is a great document that not only clarifies many issues which currently breed litigation and inspector corruption, but hands over minimum wage setting to state governments after years of back-seat driving by the central government. This devolution is important; trade unions must recognize that decentralization is not a passing shower, but climate change.

The biggest thing Delhi can do—there are 50 central labour Acts of which six are defunct and only 16 are actively used—is to consolidate these into four labour codes. The most impactful labour law change of the last 20 years—three choices for employees in how they spend their salary, announced in the budget—needs to be implemented. The time for vertical industry central legislation is rare—if not over—and this regulatory cholesterol must go: Dock Workers Act 1948, Plantations Labour Act 1951, Mines Act 1952, Working Journalists and other Newspaper Employees Act 1955, Motor Transport Workers Act 1961, Beedi and Cigar Workers Act 1966, Sales Promotion Employees Act 1976, Inter-State Migrant Workmen Act 1979, Cine-Workers and Cinema Theatre Workers Act 1981, Private Security Agencies Act 2005, Coir Industry Act 1953, and Building and Other Construction Workers Act 1996.

A high impact central reform would be giving all non-hazardous enterprises an option to comply under the Factories Act or Shops and Establishments Act. As background, all our companies that Make in India like Tata Motors Ltd, Bharat Forge Ltd and Hindalco Industries Ltd are required to comply nationally under the Central Factories Act, while Infosys Ltd, Bharti Airtel Ltd and Oberoi Hotels comply nationally under various state Shops and Establishments Acts. The Factories Act has been amended only three times since independence—1954, 1976 and 1987—while various Shops and Establishments Acts have been amended more than 1,900 times since independence (more than 180 times by Maharashtra alone). Job creation depends on many things, but could the divergent destiny of employment in services and manufacturing have been influenced by the higher responsiveness of states? Action must shift to states because there is no such thing as India’s labour market; per capita incomes vary 10 times between our richest and poorest states (the same number is four for China, three for the euro zone and two for the US).

State governments can craft multi-layered agendas. The biggest impact lies in moving 100% of labour registrations and licences online with automatic approval (the online deadline mantra). They can use Article 254 (2) of the Constitution to pick their Industrial Disputes Act appetite; legitimize fixed-term contracts and remove tenure restriction (Sec 25G), changing silly rules that require removing younger people before older ones in redundancy and giving priority in re-hiring to older ones (Sec 25G & H), and tweaking third-party notification, approval, notice periods and severance pay (Sec 25 F, K, M). The Trade Union Act can be amended to make them representative; the politicization of trade unions and the criminalization of politics is a toxic combination.

In 1919, the Montagu Chelmsford reforms introduced dyarchy, under which the British retained important subjects and transferred lightweight subjects to Indian elected ministers. This unfairness sowed the seeds for provincial autonomy in 1935 and independence in 1947. Delhi has too much power in labour markets; devolution is crucial for Make in India. But it will also create the positive spiral Estonian economist Ragnar Nurkse called “Demonstration Effect", under which the behaviour of goofy leaders exposed to performing leaders creates unhappiness with what was previously acceptable. The best states will create the most jobs and choose young people over old ones. Who will complain?

Manish Sabharwal is chairman of TeamLease Services Ltd.

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Published: 03 Sep 2015, 12:20 AM IST
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