HOW RIGID IS THE LABOUR MARKET?

THE INDIAN GROWTH STORY HAS SO FAR BEEN

ONE OF THE JOBLESS GROWTH IS NOW WIDELY
KNOWN.DESPITE A MARKED ACCELERATION IN
GROWTH OF GROSS DOMESTIC PRODUCT IN THE
POST LIB. PD,EMPT GTH HAS BEEN FALLING IN THE
LAST THREE DECADES.

THE MOST RECENT ROUND OF NSSO SHOW A

SHARP DECELERATION IN THE GTH RATE OF EMPT
IN RECENT YRS.
THERE HAVE BEEN GRADUAL CHANGES IN THE
STRUCTURE OF EMPT AS WELL.THE SHARE OF
PRIMARY SECTOR IN TOTAL EMPT. HAS DECLINED
FROM 58.5% IN 04-05 TO 48.9% IN 11-12.AT THE
SAME TIME SHARE OF SEC. AND TERT. IN TOTAL
EMPT INCREASED TO 24.3% AND 26.8%
RESPECTIVELY.
SELF EMPT CONTINUE TO DOMINATE WITH A 52.2%
SHARE IN TOTAL EMPT.INDIA’S TOTAL LABOUR
FORCE IN 11-12 IS ESTIMATED TO HAVE BEEN ABT
484 MN AND ITS MOST REMARKABLE FEATURE IS
THAT MORE THN 90% OF THEM BELONG TO THE
CATEGORY OF INFORMAL WORKERS.
THE TRENDS IN FORMAL & INFORMAL EMPT
INEVITABLY RAISE THE QUESTION OF HOW RIGID
INDIA’S LABOUR MKT IS.THE EVIDENCE AVAILABLE
SHOWS THAT NO SIGNIFICANT CHANGES HAVE
BEEN MADE IN LABOUR LAWS INSPITE THERE ARE
CHANGES HAPPENING IN INDIAN LABOUR MARKET.

WE THUS HAVE THE PECULIAR PARADOX OF A SO

CALLED RIGID LABOUR MARKET THAT HAS WITHIN
IT THE MASS OF WORKERS WHO CAN BE HIRED AND
FIRED AT WILL.

LABOR MARKET REFORMS

NEARLY ALL LABOUR LAWS IN INDIA ARE MORE
THAN FOUR DECADES OLD,WITH THE CONTRACT
LABOUR(REGULATION AND
ABOLITION)ACT,1970,BEING THE LAST MAJOR
LEGISLATION PASSED BY PARLIAMENT.
IDEALLY,INDIA NEEDS TO REFORM THE LABOUR
LAWS WHOLESALE.BUT LABOUR LEGISLATION IS
ONE OF THE TOUGHEST TO MANGE POLITICALLY.
EVIDENTLY,THE LAW IN THE MOST URGENT NEED
OF REFORM IS THE 1947 INDUSTRIAL DISPUTES
ACT.
SEVERAL CHANGES IN IDA WOULD BE ENORMOUSLY
HELPFUL.FIRST,THE DEFINITION OF RETRENCHMENT FOR
PURPOSES OF INDUSTRIAL DISPUTES NEEDS TO BE
TIGHTENED.
SECOND,THE IDA ALLOWS EVERY SINGLE INDUSTRIAL
DISPUTE TO GO TO THE LABOUR COURTS AND TRIBUNALS.
THIRD,SECTION 9A OF THE IDA,WHICH IMPOSES A HEAVY
BURDEN ON an employer wishing to reassign a worker to an
alternative task,needs to be replaced by one that gives the
employer greater flexibility.
FOURTH,CHAPTER V-B OF THE IDA,1947,WHICH MAKES IT
NEARLY IMPOSSIBLE FOR AN EMPLOYER OF A FACTORY
WITH 100 OR MORE WORKERS UNDER ANY
CIRCUMSTANCES,NEEDS TO BE REPEALED.
THE 1926 TU ACT ALSO NEEDS TO BE MODIFIED.IT HADS
LED TO A HIGH NO. OF TU IN LARGER FIRMS.
THERE NEEDS TO BE FURTHER REFORM OF THE ACT THAT
WOULD LIMIT THE NO. OF TU TO A MANGEABLE LEVEL.
 FLIGHT OF INDIAN ENTREPRENEUR FROM
LABOUR
IT IS IRONIC THAT IN A COUNTRY WITH NEARLY
470MN WORKERS,ALL EVIDENCE INDICATES
EXTREME AND EVEN INCREASING RELUCTANCE OF
INDIAN ENTREPRENEURS TO EMPLOY UNSKILLED
WORKERS.
THREE KEY FACTORS ARE BEHIND THIS:-
Slow growth of mfg
IN INDIA THE SHARE OF MFG IN GDP ACTUALLY FELL
FROM 16.8% IN 81-82 TO 15.8% IN 08-09.
Poor performance of labour-intensive mfg
The labour intensive SECTORS WERE RELATIVELY
UNIMPORTANT IN OVERALL MFG,TO BEGIN
WITH.BUT THN THEY REMAINED SO:THEIR SHARE
ROSE TO 15.9% IN 00-01 & FELL BACK TO 12.91% IN
03-04 AND THN DECLINED SINCE 03-04.
A FINAL AVENUE TO RAISING GAINFUL EMPT OF THE
UNSKILLED COULD HAVE BEEN A SHIFT TOWARDS
LBR-INTENSIVE TECHNOLOGIES WITHIN EACH
PRODUCTION SECTOR WHILE MAINTAINING THE
SAME STRUCTURE OF PRODUCTION.BUT EVEN
HERE,THE EVIDENCE POINTS TO MOVEMENT AWAY
FROM,RATHER THN TOWARDS,LABOUR.