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Business News/ Opinion / Online-views/  Manish Sabharwal | Making India job-friendly
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Manish Sabharwal | Making India job-friendly

The labour reforms cleared by the cabinet will impact poverty in ways that no subsidy ever can

The labour law changes cleared by cabinet recognize that most job creation happens in small enterprises who suffer the brunt of the licence and inspector raj. Photo: Priyanka Parashar/MintPremium
The labour law changes cleared by cabinet recognize that most job creation happens in small enterprises who suffer the brunt of the licence and inspector raj. Photo: Priyanka Parashar/Mint

Oscar Wilde once said we are all in the gutter together but some of us are looking at the stars. India has been a hostile habitat for non-farm, formal, private sector job creation, yet the perspective of people who have never created jobs themselves—summed up by an opinion piece in this paper on Thursday by a former member of the National Advisory Council—has largely won the battle for ideas since independence.

According to this negative or gutter view of labour markets, all employers are exploiters, most employees have no options, most employers are big companies, and shareholders pay salaries, not customers. This thought world has led to four painful defects in India’s labour market: 12% manufacturing employment (same as post-industrial US), 50% agricultural employment (240 million Indian produce less food than four million Americans), 50% self-employment (the poor cannot afford to be unemployed so they are subsistence self-employed), and 90% informal employment (100% of net job creation since 1991 has happened informally).

The labour law changes cleared by the cabinet on Wednesday were—as graciously admitted by the labour ministry—neither comprehensive nor complete. But they are wonderful. They recognize that a job changes lives in a way that no subsidy can. They recognize that the one million young joining the labour force every month need manufacturing jobs and recognize India’s manufacturing opportunity as China’s wages approach 20% of US wages, up from 5% of US wages 10 years ago.

They recognize that most job creation happens in small enterprises who suffer the brunt of the licence and inspector raj. They recognize that women’s labour force participation has to be raised from the anaemic 23% that is only slightly higher than Saudi Arabia’s. They recognize that the Apprenticeship Act written in 1961 should have meant India should have 15 million apprentices or 5,000 CEOs in jail but we have neither. They recognize that learning-by-doing and learning-while-earning are powerful vehicles for skill development yet India’s 300,000 apprentices are shamed by Japan and China’s 10 and 20 million, respectively.

Most employers agree that India should have fewer laws that are better enforced. They agree we should have non-negotiable laws around minimum wages, social security, safety and leave. Yet our labour laws have reached way beyond this base with painful unintended consequences like corruption, low formal employment, low manufacturing employment, and lower employment elasticity as machines substitute people. The changes to the Factories Act, Apprentices Act, and Returns and Registers Act are useful, targeted and specific. The most obvious outcome should be a target of 10 million apprentices in five years.

The disappointment with no action around hire and fire is misplaced and immature. There is so much low hanging-fruit in labour law that needs to be dealt with that Chapter VB of the Industrial Disputes Act should be, as Deng Xiaoping said, left to the future when we will be wiser.

The current labour ministry—the darkest and most dyslexic part of government for the last 20 years—deserves thanks from millions of job seekers because 10 million apprenticeships will change young lives more than 2 trillion spent on the Mahatma Gandhi National Rural Employment Guarantee Scheme.

After 50 years of vested interests positioning their narrow self-interest as national interest and colluding with the lack of political courage, these labour reforms seem almost unbelievable. Mahatma Gandhi once said, “When I despair, I remind myself all through history the way of truth has always won. There have been tyrants and for a time they can seem invincible, but in the end they always fall. Think of it. Always". Guess, as always, the Mahatma was right.

Manish Sabharwal is chairman of staffing firm TeamLease Services Pvt. Ltd.

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Published: 31 Jul 2014, 03:08 PM IST
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