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Labour, laws and lawlessness

Labour, laws and lawlessness

In a perfectly competitive world, it does not matter whether labour hires capitalists or capitalists hire labour. But in Noida’s imperfect milieu, hammer-wielding workers call the shots. Indian labour laws are helping them create a workers’ paradise.

On Monday, labourers of Graziano Transmissioni India killed their CEO, L.K. Chaudhary. Happenings of the kind seen at Graziano have been witnessed time and again across India’s industrial landscape. Workers are hired on a contract basis. Soon, they begin demanding higher wages and permanent jobs, and unrest follows. They are sacked, a lockout takes place and before you know it, politicians step in — on the workers’ side, of course.

Yet, barely a day later, labour minister Oscar Fernandes blamed the “hire and fire" policies of private companies for such industrial disputes. He said the Noida incident should serve as a warning to companies. Disparities in wages between permanent and contract employees fuel discontent, Fernandes said.

The minister is right, of course. But he just got the cause-and-effect sequence wrong. India’s labour laws, such as the Industrial Disputes Act, 1947, make laying off workers almost impossible. They are also a roadblock in generating employment for the army of unemployed persons. As a result, employers either keep the number of employees low or hire them on contract basis to avoid legal entanglements. This, and not the alleged heartlessness of companies, is at the heart of the problem.

Because of such laws, there is little employment creation for low-skilled labour. As a result, whenever jobs become available, the first resort of employees is to seek “permanent" status. This scares prospective employers who have to bear with such workers in all situations: economic downturns, political interference by trade unions and little or no worker discipline. This only perpetuates a vicious circle, unless such laws are done away with. As long as they continue on the statute book, the employment scenario will remain bleak. Labour laws represent a domain untouched by the economic reforms that began in 1991. If Noida-type situations are to be averted, we’d better get rid of such laws.

Is the lack of labour reforms hurting the Indian economy? Write to us at views@livemint.com

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