Following the COVID-19-induced economic disruptions, up to 135 million jobs
have been lost and 120 million people have been pushed back into poverty in
India, all of which will have a hit on consumer income, spending and savings,
says a recent CMIE report.
According to a report by international management consulting firm Arthur D
Little, the worst of COVID-19's impact will be felt by India's most vulnerable
in terms of job loss, poverty increase and reduced per-capita income, which in
turn will result in a steep decline in the Gross Domestic Product
(GDP). 'Unemployment may rise to 35 per cent from 7.6 per cent resulting in 136
million jobs lost and a total of 174 million unemployed. Poverty alleviation
will receive a set-back, significantly changing the fortunes of many, putting
120 million people into poverty and 40 million into abject poverty,' the report
We do not know how many deaths could have been caused by job losses, but we know
that scores of lives were lost because of people falling asleep on tracks or
dropping dead on their way walking home. We will probably never know how many
died because of hunger, how many children were stunted because of malnutrition
caused by the lockdown. And, we can never count the loss of dignity. Hunger,
fear, anger and desperation is writ large on the faces of people wanting to save
their lives from the lockdown.
In India, therefore, COVID-19 has exposed the condition of the labour force. The
nature of data collection does not allow us to know the exact number of migrant
workers in this pool. Of the total workforce of India, around 90-92% (about 450
million) is informal, which means they work without social and employment
security. The growing informalisation, particularly in occupations of urban
centres based on migration, reflects the casualisation of labour. The current
labour strategies of survival by walking and withdrawing can hardly be
understood in terms of 'temporary displacement.'
Declining labour standards exhibit this trend in a fairly long-term
framework: a 2015 research paper pointed out that in the organised manufacturing
sector, the share of profits have tripled from 20-60% of net value added,
whereas the labour share has fallen by exact same proportion since the 1980s.
Almost in the same time scale (1980s-2012), as Prabhu Mohapatra points out,
'contract labour' (through the subcontracting system) in the manufacturing
sector has risen from 7% to 35%. Moreover, as per the National Sample Survey
Office data in 2011—that the share of contract labour in organized manufacturing
was 34%, while it was 14% in 1996. Where does this then leave the labour force?
With the changes in labour laws, hiring and firing in firms operating with 50 to
100 workers has been made easier (to allow labour flexibility
inspection of factories and workplaces has been relaxed, the issue of licenses
has been made easier (in effect this means less time examining relevant papers
and hence leading to wilful or genuine bureaucratic lapses), working hours of
shifts have been increased from eight to 12 (which means a hard-won labour right
in the 20th century has been lost or reversed in the 21st) and the role of
unions has been minimised. These changes have a time limit of three years and
are clearly intended to aid capital by creating a regime of deregulation.
It seems that the introduction of labour law reform by several state government
during the COVID-19 pandemic is based on the following grounds. One, due to
return migration and stranded migrant workers' hesitancy to undertake new work,
employers have repeatedly complained of labour shortages
Two, India needs to offer labour flexibility to firms quitting China in order to
capture the vacated produce market space. Three, the suspension of labour laws
for the next three years will help the industry overcome the present crisis.
Four, labour laws need to be changed in favour of labour flexibility to allow
employers to generate employment to protect existing jobs as well as to create
new jobs for the returning migrants. What appears to be rationalisation of
labour law is a specific kind of state intervention which is premised on the
theory that a free hand
to employers community will eventually boost
economic growth and that will also be beneficial to the worker.
It does not require wading through a web of theories to realise that a law
usually has two components of regulation. One deals with punitive aspects – say,
the provisions applicable when a contract is breached, and the other deals with
social security aspects, of which the state and its legal apparatus are alone
the guarantors. It seems that due to the lockdown and the ensuing restrictions
on public gatherings, labour protests are virtually impossible. Anticipating a
lower growth rate for the economy, employers have seized this moment to insist
upon their long-pending demand for labour flexibility.
According to the Sixth Economic Census, 97.39 million (45%) work in
establishments without any hired worker; whereas, 118 million (55%) of workers
works in establishments with at least one hired worker. Broadly, the former
category falls under the Shops and Establishment Act and later with the
Factories Act. Across the employment threshold sizes, 172 million of workers
(79.85%) works in the establishments that have less than nine workers and 20.1
million are employed in establishments which have more than 10 and less than 49
workers. Only 17.60 million (8%) work in establishments with more than 100
Ironically, it is important to first appreciate that the new economy is not
going to generate lots of low-skilled jobs for millions of reasonably skilled
and educated youth. Automation, artificial intelligence, robotics and machine
learning will replace labour even as manufacturing shrinks and the services
sector takes over. While the highly educated and those with an education in the
arts will be well placed, employment for the large majority is going to be at
the crossroad, to say the least.
Therefore, a new responsibility for the state emerges, not one where jobs are
created, but where those who cannot find jobs are protected too and taken care
of. In India, we have never been able to create enough quality jobs as the
manufacturing sector could not grow beyond contributing a fifth of the gross
domestic product (GDP). There was a time when an increase of 2% in GDP would see
an increase in employment of 1%, exactly as explained by a widely used principle
in economics called the Okun's law.
However, Okun had also said that for unemployment to constantly decline, the
economy must grow to its potential. The Indian economy, with low private capital
investment and an inexplicable reduction in demand, has been growing at a rate
far lower than its potential. That adds to the problems which began when
two-thirds of GDP started coming in from the services sector, which employs less
than 30% of the workforce.
In 2013, the Planning Commission asked Bain & Company to conduct an objective
study of enterprises in India. The study concluded that the companies that
invested in their workers, and held on to them as assets, did much better, even
though they went through the same dips in the business environment as their
peers did. The Bain study had revealed that the practice of engaging workers
through contractors to work alongside permanent skilled workers had permeated
all the best employers in the country. In fact, in many companies they accounted
for over 50 per cent of the workforce.
It reduced the cost of workers no doubt. However, the study had revealed that
the companies' profits would be only marginally reduced if all workers were paid
similar wages. Employee costs constitute less than 20 per cent of the companies'
costs and, within employee costs, the share of compensation of CEOs and senior
executives was often half of the total. (CEO compensation had risen to over 300
times the salary of a worker in many companies; in the early 1990s, it had been
less than 20 times.)
Over the period of last several years, employer's community had been arguing
that rigid labour regulations are the primary driver of the overwhelming
informality of the labour force. Available research studies do not support this
The International Labour Organisation in its:
Report on Decent Work and Informal Economy had noted that labour regulations are
only one of the many determinants of informalisation of workforce. Changes in
patterns of production, advances in information and communication technology, as
well as global competition have also facilitated the growing informalisation of
The Working Group of Experts of the commission on the legal Empowerment of
set up by the United Nations Development Programme found barely
adequate conclusive evidence of the oft-presumed causal relationship between
rigid labour market regulatory frameworks and informality. Indeed, several
countries which are part of the European-led Organisation for Economic
Co-operation and Development (OECD) and have significantly more liberal labour
regulation, have also witnessed massive informalisation of work in the last
three decades. In addition, a study of four states – Rajasthan, Uttar Pradesh,
Andhra Pradesh and Madhya Pradesh – by the V.V. Giri National Labour Institute,
Noida found that:
amendments in labour laws neither succeeded in attracting big investments, boost
to industrialisation or job creation.
The International Labour Organisation, in its 2018 India Wage Report states that
sustainable wage policies contribute to sustained economic growth given its
reliance on a progressive increase in domestic consumption by lower- and
middle-income groups and raise aggregate demand. The setting of a low floor wage
ignores this principle while not taking cognisance of the potential of the
mentioned in the Economic Survey 2018-19.
Ironically, labour law reforms carried out by several state governments and the
employers' organisations demands for nationalising
a 72-hour workweek
violates the cardinal principle of a 48-hour workweek, as is mentioned in ILO
Conventions C001 and C1919. Limiting working hours to eight per day and to 48
hours per week was acquired after decades of struggles from 1881 to 1948. Now
under the guise of the pandemic, work hours have been officially extended,
although with statutory overtime pay (except in Gujarat).
Moreover, a 12-hour workday means workers will spend more than half of their day
away from home, without including time spent in transit. This will reduce female
workforce participation and will impose a gender penalty. In fact, the ILO calls
for a transition to a decent working time
to ensure health and safety,
work–life balance, promote gender equality, enhance productivity, and facilitate
worker choice and influence over working hours.
An increase in working hours, the relaxation of inspections, and flexibility
in terms of hiring and firing mean that in essence not only are the punitive
aspects of the law now in the hands of private capital, but the state willingly
ceases to stand as the guarantor of the rights of the workers. The economic
growth that will emerge from this model, if it does, will be premised upon
expansive and deep casualisation of labour.
A layered system of sub-contracting will emerge in which the responsibility from
the top keeps reducing, leaving workers at the bottom with unpaid or reduced
wages at times. Any future moment of crisis, such as the current one, will once
again divide two strongly opposed sections i.e. employer and employee; perhaps
it will be even worse. It is very much clear that targeting the minority
organised workforce without extending universal social security to the vast
informal workforce is simply the introduction of a legally framed system of
Moreover, in January 2019, a seven-member labour ministry panel had recommended
that the single value of the national of the national minimum wage for India
should be set at Rs 375 per day
alongside a housing allowance of Rs 1,430
for urban workers. After the passage of the Code of Wages 2019 by Parliament,
however, the ministry indicated a national minimum wage of Rs 178 per day, a
mere Rs 2 increase over the current national minimum wage of Rs 176. This does
little to address existing wage inequality among workers with 57% of regular
workers earning less than Rs 10,000 per month and nearly 60% of casual workers
earning less than Rs 5,000 per month. Therefore, the question here is does
government genuinely care for labour community?
Further, labour law reforms undertaken by several state government will
potentially lead to higher exposure to occupational health and safety risks, no
appropriate protection, and an increased likelihood that they will suffer from
illness, accident or death.
For example, excessive working hours have negative effects on workers' health
which leads to poor immunity and exposes them to a higher risk of industrial
accidents. Moreover, in order to minimise the recurring costs, employers will
engage themselves in risky behaviour by allowing workers to work in hazardous
The proposed Labour Code in the de jure spirit obliges employers to provide for
a risk-free workplace and instruct employees on safety protocol. It further
assumes that all employers will self-enforce these Codes without any deterrence
from enforcement authorities.
Several recent incidents of large-scale chemical spillage and boiler blast
including LG Polymer, Vishakhapatnam incident indicates that the health hazard
and fatality risk of working in Indian factories have increased tremendously and
it could likely to continue unless a routine inspection and mandatory safety
clearance are enforced effectively. Existing evidence shows that if we allow
self-enforcement of labour laws, then employers would likely engage in an
opportunistic rent-seeking behaviour to maximize their own self-interests of
profit. Hence, the behavioural dynamics on the part of employers offers less
credence in safeguarding the rights of workers.
The International Trade Union Confederation's (ITUC) Global Rights Index 2016–19
gave India a rating of 5 on a scale of 1-5+, where 5 signifies no guarantee of
rights. Till date, 47 ILO conventions and 1 protocol has been ratified by India
of which 39 are in force, 5 Conventions have been denounced; 4 instruments
abrogated. However, India is yet to ratify the conventions on freedom of
association and collective bargaining—C87 and C98—which the ILO has declared to
be fundamental conventions. The non-ratification of these and other important
conventions concerning occupational safety and health are a serious cause for
Furthermore, it appears that the state governments consulted neither trade
unions nor the various employers' bodies before announcing these changes. This
violates India's commitment to social dialogue, as was ratified in C144, the
Tripartite Consultation (International Labour Standards) Convention, 1976.
Moreover, issuing these changes via ordinances and not as laws enacted by the
respective state assemblies negates the historical struggle for labour rights.
India's jump from 130th (2016) to 63rd (2019) rank in the Ease of Doing Business
(EDB) is boasted across all industries. Every year, whenever India tops the
higher rank on EDB, our global ranking point estimate slips towards the bottom
quartile in all global parameters such as hunger, peace, slavery, worst formed
labour and workers' rights indexes on the lowest scale.
To make the Centre more comfortable, all states government are now engaged in a
race to bottom
to reform existing labour market institutions to encourage
ease of doing business and to promote flexibility. Hence, the series of
unfortunate industrial disastrous incidents that recently took place have
compelled us to assess and evaluate the future of Indian workers and industrial
relation systems in the free- market capitalism order and the pandemic.
The suspension of labour laws will informalise the formal sector by weakening
multiple labour market securities like employment, health and safety, skills,
and income. Flexi-workers with limited skills will either be pushed out of the
organised sector or they may be hired only for the disposable nature of their
labour. Both scenarios will intensify informality. Workers ousted from the
organised sector will crowd into the unorganised sector, thus increasing the
supply of labour. In the absence of adequate laws, wages will be driven down.
Should ease of doing business
imply human rights violations that de-humanise
the society? Should it lead to diluting the labour laws, thereby eroding
industrial safety and eroding the safety of the workers? Should ease of doing
business imply allowing polluting industrial units to flourish and damage the
health of the people? Both the Centre and the States need to answer these
questions. India is a signatory to several international conventions that
safeguard the interests of the workers and conserving the environment.
Should we commit a breach of those conventions in the guise of ease of doing
? Should we encourage businesses that cut at the root of the basic
values of the constitution? Should workers be left to the whims and fancies of
their employers in the matter of payment of minimum wages, working environment
and security of employment?
No doubt, the business houses are known to fund the political parties. Should
that mean that they can dictate the policies of the government? Every new
disaster, every new calamity and every new situation, has taught us to improve
upon the existing laws and make them more progressive.
Should the Centre and the States cast aside this approach to accommodate the
limited, often people-unfriendly demands of the business enterprises? India must
remain a democracy. Workers, and those who speak on their behalf, must be heard
while framing or changing regulations. Their voices must not be silenced by
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