The labour reforms we truly need

The labour reform debate in India has acquired renewed vigour under the new government.

The Rajasthan and the Haryana governments have recently proposed to amend a few Central labour laws. The Ministry of Labour and Employment has also circulated labour reform proposals. The Department of Industrial Policy and Promotion has issued an “advisory” to the state governments to institute reforms relating to inspection.

Labour flexibility measures, especially in respect of hire and fire and contract labour, have caused industrial unrest and violence. India is committed to the pursuit of the ‘decent work’ agenda of the International Labour Organisation (ILO) which essentially seeks to promote just and efficient workplaces.

The pursuit of some “good” reforms could also contribute to a rise in productivity via nutritional, incentive-based and efficient governance systems.

The use of “thresholds” such as size of employment to exclude vast sections of workforce amounts to exclusionary governance. According to Economic Census 2005 about 75 per cent of total workers in India in 2005 were employed in establishments employing less than 10 workers, and these workers are most likely to be not covered by most labour laws save the Shops and Establishments Act and the Minimum Wages Act, 1948. The coverage of all the workers by separate legislations for micro and small enterprises and medium and large establishments would raise the floor level labour standards.

India has not ratified four of the eight ILO Core Conventions concerning child labour (C.138 and C.182), trade unions and collective bargaining (C.87 and C98). Out of 185 countries, 153 countries have ratified conventions covering these three areas. While mere ratification does not lead to solutions, the commitment of the Indian Government to decent work makes early ratification imperative.

The Trade Unions Act, 1926, merely provides for voluntary registration of trade unions and not for recognition of trade unions, which is more relevant for collective bargaining. Trade union recognition is provided for by laws at the state level, such as in Maharashtra. Legal amendments providing for trade union recognition, time-bound union registration, sharing of information by parties for efficient collective bargaining, strong union democracy and proscription of unfair labour practices must be initiated.

The law on minimum wages and its implementation urgently needs reforms. For example, there is no definition of “minimum wages” in the law. The penalties prescribed in the law for violations of this important socio-economic law are absurdly low. Minimum wage boards are not re-constituted in time and minimum wages are revised after a considerable time lag. The frequent incidence of fatal industrial accidents especially among contract workers calls for stricter regulations and efficient governance.

The inspector raj critique is a case of overstatement. The introduction of self-certification in some states and sectors, relaxation in inspections in several states, high person-power deficits and multiple tasks of inspectorates in the labour department have weakened the inspection regime. Labour inspections and conviction rates have significantly declined in the post-reform period. According to the Government of Maharashtra, in 2010-11, an inspector for minimum wages had 5,062 establishments under him. With a workload of 100 inspections per month, he cannot cover the universe even in three years!

Penalties need to be kept high enough to dissuade cheating. They need to be inflation-indexed to sustain their bite. Most penalties for violations are in the lower range, that is, less than ₹1,000 and only the Factories Act imposes heavy penalties (₹1-2 lakh in exceptional cases). This also weakens the significance of the critique of corruption by labour officers as compared to other high-profile government departments. Imprisonment for labour law violations is often not invoked.

Due to the inadequate number of judicial bodies and judicial officers, there are delays in dispensation of justice. These are costly not only for the workers but also for the employers. The Government must increase the number of judicial bodies and personnel proportionate to the workforce.

The writer is a professor at the Xavier Labour Relations Institute, Jamshedpur