Labour reforms continue to be a jarring game

Labour reforms continue to be a jarring game

Labour is on the concurrent list of the Constitution and hence it allows both Central and state governments to legislate on the same subject matter.

The Constitutional principle in resolving the conflict between state and central law on the same subject is that the former remains void to the extent of repugnancy. Further, Presidential assent is needed in case of laws undertaken by the state on matters in the concurrent List.

The main demands from the employers include freedom to hire contract workers even for core areas of work, to fire workers and close down establishments without prior permission, to liberate small establishments from the clutches of onerous labour regulation and so on. The larger demand is to rationalise numerous labour laws into compact and homogenous codes.

The Central government (including the present NDA government) has been trying to effect these reforms in vain as trade uni-ons, irrespective of political affiliation, have in rare and sustained unison successfully stalled these efforts. The social dialogue pro-cess has been effected more as a tokenism; as a result no consensus has been reached.

Further, some trade unions have insisted on social dialogue on a bi-partite basis between the government and trade unions akin to dialogue process held by the government with industry bodies on taxation and other issues. So, there are complexities even in the consultation process.

The Centre has indicated its keen desire to codify numerous labour laws and introduce the core reform measures in the pro-cess of introducing new labour codes. This has stirred the hopes of employers. However, unions including BMS (labour wing close to the BJP) are stridently opposing them. The option then for the government is to sidestep dialogue process and introduce the codes in Parliament. But two “political” problems pose considerable obstacles.

One, wittingly or otherwise, the government has got embroiled in social conflicts, especially in academic institutions, and these engulf the political space. The political line that the BJP has taken is that “nationalism” issue is of far-reaching significance and requires full attention and it perceives that economic issues could wait. Its stance that the economy has been functioning during NDA regime better than it did during the UPA-tenure comforts it.

The opposition will not let go of good opportunities such as these to put NDA at a disadvantage. Thus, the political class at the national level has taken a clear stance that pursuit of political objectives yields higher political returns and hence, political issues “crowd out” economic and labour issues out of the debate forum.

Secondly, the NDA has the problem of number inadequacy in the Upper House, even in case the bills are allowed to be intro-duced. Now every forum available to the ru-ling party – social dialogue, political consultation, parliamentary debate, etc – are shut. 

Thanks to the Constitutional arrangement mentioned above, the labour law reforms shift to the state level. Recent initiative has been taken by the Haryana government. States enjoy autonomy in economic policy-making and directly compete for investment, both domestic and foreign. On both counts, state governments are well placed to initiate labour law reforms.

The industry, in fact, has raised the demand that labour subject should be placed on the state list to make things much easier for the state governments to adopt such laws as they deem fit without going through the present procedure of seeking President’s assent, which may or may not be given. 

The industry has reason to feel confused and trade unions could feel frustrated. Shifting the reform onus on to the state governments is predicated on the assumption that willing and competent states in quest for capital will seek to ease business and in that process will introduce reforms. To strengthen such competitive streak, the Centre has introduced the ease of doing business index. So far, this has resulted in procedural reforms and not much substantive reforms. 

Reform in various guises

State-level labour law reform strategy is considered easier because of the localised nature of protests, local political complexities and, hence, limited unity among strong union federations, and low noise and visibility. Also, state governments often adopt non-law amendment methods like notification to slip in certain reforms, which is the prerogative of the executive.

Further, the state government can turn the other side when violations take place (reforms by stealth) and weaken inspection system easily. Therefor, reforms take place in different guises which often miss the attention of the social actors.

But several discomforting questions arise with this strategy. Where are reforms happening? What kind of reforms is happening? In what guise it is taking place? When will rationalisation of numerous labour laws by the Centre happen? Is piece-meal reform of selected clauses satisfactory to investors? Can not competitive reform strategy lead to race to bottom? Will it not lead to significant differentiation in labour standards?

Weak states will be penalised while strong states flourish. Is this a good indicator of cooperative federalism? Who will monitor whether the state government measures are in conformity with the ILO standards?  Will they not go overboard as the Haryana government, which proposes to involve the police to monitor labour recruitment to prevent violent industrial unrest? 

Complaints to the ILO monitoring mechanism will witness a significant rise as a result of insensitive legal measures by the state governments, as it probably is. What about the processes in place at the national level? If it is proposed to happen, will it not be a doubling of labour unrest, i.e. once at the state level and another at the national level?
Is this strategy not determining abjectly the developmental discordances among the constituents of the nation? Incognito and confusing reform signals may not be valued by investors, even going purely by the interests of this volatile class.

(The writer is Professor, XLRI School of Management, Jamshedpur)

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