7 PM Editorial |Ensuring Labour Rights Without Constraining Capital| 7th July 2020

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Ensuring Labour Rights Without Constraining Capital

What has happened:

Covid 19 pandemic has brought the global economy to a standstill. Due to this, migrant labour suffered immensely due to loss of livelihoods. Faced with dwindling savings and no income, a migrant exodus was seen from urban centres. This exodus has exposed the fragility of Indian labour market due to its informal nature with lack of social security.

Meanwhile, some state governments have mooted, deregulation of labour laws to attract investments. This deregulation included doing away rules mandating basic amenities like providing toilets. Such hasty policy measures will compromise the legitimate labour rights.

Any labour reform must consider basic principles of labour rights, informality of Indian labour markets, state capacities of regulation and emerging economic realities. Only then can India enact meaningful labour reforms.

 Fragile labour market:

Indian labour market is highly informal.

  • More than 90% of India’s workforce is informally employed
  • About 75% of workforce is either self-employed or casual labourers, with no income and employment security or benefits
  • Organised sector is characterised by stagnant wages, and a decrease in the proportion of employees with social security benefits
  • Complex legal regime for labour regulation with labour-capital relations governed by 463 Acts, 32542 compliances and 3048 filings.
    • Economic survey 2015-16 mentions “Regulatory cholesterol” is one the main constraints in creating formal jobs and Ease of Doing Business.

In such a labour market, deregulation will only increase informality. Any labour reform must rebalance the labour – capital relations to safeguard bargaining power of labour.

Rebalancing labour – capital relations:

Labour policy reform  must consider following ground realities:

  • Weak state capacity to regulate: Regulatory agencies lack technology, manpower and finances to implement labour laws. This leads to arbitrary implementation of laws, corruption and abuse of regulatory powers. Lack of grievance redressal and dispute resolution further weakens the regulatory regime.
  • Labour surplus: Labour surplus and resulting competition for jobs weakens the bargaining power of labour. In such a scenario, labour laws will be ineffective and informal employment will be dominant. Laws for child labour and construction labour are examples where these are hardly implemented. Considering this, there is a need for universal social securityin the form of PDS, MGNREGA, healthcare etc.
  • Structural changes in global economy:
    • Increasing protectionismacross the world will hinder export oriented global value chain based growth. Hence Chinese or East Asian model of growth based on attracting foreign investments is not completely replicable.
    • Technology induced changesthrough digitalization and automation. This is changing labour – capital relations. Platform based firms like Uber, ola are examples where drivers are not considered employees and hence not provided social security benefits. This gig economy must be factored in labour reforms.
    • Increasing automation and use of robotstoo can displace labour. These must be addressed through steps like robot taxes and Universal basic incomes.
  • Contractualisation of Indian labour market: After 1991 liberalisation, temporary or contract workers have increased. This changes labour – capital relations into labour – contractor – capital relations. Contractors are not adequately regulated.

Only by considering these economic realities can a progressive labour regulation regime be evolved which balances labour and investor rights.

In addition, other factor markets of land, capital have their own problems. These have to be addressed in tandem to achieve the objective of attracting investments


Reforming labour laws is the need of the hour. But such reform must balance labour rights and rights of investors by considering ground realities. Labour rights must be viewed as moral and constitutional(directive principles) imperatives to protect dignity of labour. By protecting labour rights, productivity of labour can be increased which boosts growth and attracts investments.

Source: https://www.hindustantimes.com

Mains question:
  1. Labour reform must balance labour rights and investor interests while considering changing labour – capital relations. Discuss? [15 marks, 250 words]
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