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Labour reforms: The cost of optimising Indian economy

The Modi government is presently in the process of introducing labour law reforms. Over the years, several administrative and e-governance initiatives have been undertaken by both the Centre and state governments to generate employment and facilitate the ease of doing business. But outdated labour laws have remained a deterrent to economic growth in the country and the government seeks to change this.
The reform will see the repealing of 38 of the existing labour laws, and replace them with four new labour codes with the stated objective of streamlining labour law and making it more efficient. These are the Industrial Relations Code (replacing three labour laws), the Code on Wages (replacing four labour laws), the Code on Social Security (replacing 15 laws) and the Code on Occupational Safety and Health and Working conditions (replacing 16 laws).
The government aims to restructure the employment sector by bringing in administrative ease and making the sector more employer-friendly through the four central codes. Making it, in effect, easier for businesses and corporate biggies.
The informal sector engages 94 per cent of the workforce of the country. Some of these workers in the informal sector have found their way into the workers’ schedule, which makes them recognised by the government. However, like the domestic workers who fall into the informal sector, there are several other sections of workers that remain informal. The trade unions are struggling for greater recognition of these workers and regulation of the conditions of employment.
According to labour law expert Govind Yadav, the new codes are “outright unconstitutional”. He claims it is clear when one takes a closer look at Part IV of the Directive Principles in the Constitution, which states that it is the state’s duty to provide “equal pay for equal work for both men and women”.
The Code of Wages Bill, 2017 states that the overall minimum wages will be fixed nationally based on which each states can fix wages, thus promoting migration from low wage states to high wage states. The struggle of equal pay for equal work has, therefore, been diluted and will impinge consequently on the rights of women. The struggle for the “aam aadmi” in the country will only get worse.
Yadav further emphasised that the Contract Labour Amendment Bill, 2017 reduces a man to a slave, “sabko saman adhikar hai jeene ka, kisi ko bandhu mazdoor banana ha haq nahi diya hai constitution mein” (everyone has an equal right to live, the Constitution does not give the government any right to create slave labour). He claims that such a reform would only increase labour exploitation in the country, especially with the easing of clauses such as hiring and firing, and that the state is ignoring its duty to apply the Directive Principles when forming a crucial policy.
At the base of the problem, there remains an absence of uniformly applicable and comprehensive set of laws that guarantee fair terms of employment and decent working conditions. Although labour law reform is welcome, many activists and experts say the new codes seem to be initiated from a perspective of globalisation and ease of doing business. They claim that in the name of universalisation, many important protective provisions will be withdrawn and social security privatised. Hence, central trade unions have raised their joint protest to these codes, which would strengthen the hands of the employers and weaken the hands of workers.
The rights to collective bargaining and to strike have been made complicated and easily deemed illegal along with the tripartite character of negotiations removed and the government taking a back seat. Moreover, the threshold of the workers in the factories will be increased to 300, which means that all small factories will be out of the control of labour law. This also means that without permission from the government, lay-offs and closures can easily take place in companies employing up to 300 workers.
Furthermore, no non-workers or retired workers will be permitted to take leadership positions in trade unions, especially in the unorganised sector. There will no longer be any labour schedules and minimum wage will no more be sector-specific.
The campaign for a nationally applicable and effective labour law for domestic servants in India has resurged recently. In light of this, the National Platform of Domestic Workers held a press meeting and national rally of domestic workers on August 2 in New Delhi from Mandi House to Parliament and presented a petition to Union labour minister Santosh Gangwar as well as to the Petitions’ Committee of the Lok Sabha.
The national rally was organised to demand withdrawal of the central codes and enactment of Comprehensive Legislation for Domestic workers. “It is essential to fight for a separate legislation for domestic workers as a policy such as the one the government proposes does not give any support to the domestic workers,” says Sr Kalaiselvi, one of the individuals who led the rally on Thursday. Various legislations like the Unorganized Social Security Act, 2008, Sexual Harassment against Women at Work Place (Prevention, Prohibition and Redressal) Act, 2013 and Minimum Wages Schedules notified in various states refer to domestic workers. While informal workers are mentioned in the new codes, these do not seem to take serious measures to improve on their needs. Laws like the Contract Labour (Regulation and Abolition) Act, 1970 and Unorganised Workers’ Social Security Act, 2008 have been far from being effectively implemented.
There are over five crores domestic workers and they are a growing number in India. According to the NPDW for the past five years, they have been voicing the demand for a comprehensive legislation on domestic workers, including ‘decent conditions of work’ and regulation of work, wages and placement agencies and social security through tripartite boards as well as ratification of ILO Convention 189 on domestic workers. The government, meanwhile, is pushing for a bill that will create central codes to ease the contracts of employment for the employers and scrap existing labour laws for small labour-oriented communities and small-time labourers.
There seems to be a growing fear that even privatisation of social security in India could result in millions of rupees being collected by private companies, which will do so under the direction of the central government. The fear essentially lies in accessing such welfare accounts, especially by those living on the margins. There needs to be an inclusion of clauses that would help support people if they are unable to provide certain documents to access their welfare accounts, and for necessary spaces to appeal if there is any wrong-doing.
Under the code of Universal Social Security, workers are divided into four categories, with no clarity on who will belong to which category. The Code III envisages repealing of various labour laws, including the Employees’ State Insurance Act, a self-financing social security and health insurance scheme for workers and the Employees’ Provident Fund Act. One welfare board is to be created for organised and unorganised workers wherein the unorganised workers will have to pay 12 per cent of wages towards the fund (similar to organised workers) and the employers 17 per cent of wages.
The provision of pension, sickness benefit, medical benefit, and gratuity will be provided, but the quantum of benefits has not been stated. The unorganised workers have negligible representation within the proportion of workers’ representation in welfare boards not even being one-third. All informal workers are to be brought under the universal ‘poor’ category in the name of universalising social security. The trade unions and workers complain that there is negation of workers’ rights and regulation of work, which is being masked under the garb of universal social security coverage.
According to the Code on Social Security, the central government would make no contribution towards social protection, but it will have majority representation and control of the social security organisations, national social security council, central board and state boards. Moreover, workers would have to register again as various groups of unorganised workers will not exist. Social security measures in terms of registration of workers, management of contribution, record keeping, services and provision of benefits will be privatised; hence, the Employees’ State Insurance Corporation (ESIC) and Employees’ Provident Fund Organization (EPFO) will be either privatised or completely demolished with all the unorganised labour boards being wiped out.
The case for insurance scams among various another infamous scams is well-known and being suffered by one too many in India. It can only be hoped that the social security scheme does not end up the same by helping businesses grow at the cost of the nation’s citizens. The government’s ambitious labour reform needs more work to be done in terms of inclusion and representation.