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Globally, a 'flexible' labour market seems to have become the mantra of those pushing for high growth. In India, an amendment to Industrial Disputes Act, 1947, has long been discussed. An examination of the issues involved.
India's increasing integration with global economy has made its labour market the subject of much heated debate. The winds of change in Indian economy have already effected far-reaching changes in the labour market. The public sector employment is no longer regarded as the cushiest and most desirable employment by the urban middle class. Since 1991, when India started on the path of economic reforms, the government policy has been to downsize bureaucracy and scale down what it deems inefficient public sector enterprises. This policy has already resulted in large-scale job cuts in public sector banks through voluntary retirement schemes, privatisation of certain public sector enterprises, also resulting in job cuts, and scaling down of certain government departments. The expanding private sector has been leaving its own impact on the labour market. The labour mobility has increased. More and more jobs are now offered on short-terms contracts, making both hiring and firing easier. All this is happening when the country hasn't effected many changes in its labour laws, which means that the changing economy is etching out its own path through the labour market, circumventing the laws that are in conflict with its needs. About 154 laws regulate and influence the country's organized labour market consisting of about three crore workers. However, the desired legislative reforms of the labour market have centred on the issue of the ease with which companies' can hire and fire. This is also an issue workers' unions feel most strongly about. Under the Industrial Disputes Act, 1947, for instance, companies cannot cut jobs without government permission. The Act is applicable to establishments employing one hundred workers or more. The employers are demanding that this provision in the Act must be relaxed in line with their need to carry out changes in the workforce without having to seek government permission. That flexibility, they say, is absolutely essential for them to become competitive in the global market. For the government, this issue throws up the need to expand and deepen social security for the workers. It would be politically untenable for the government to impart the desired flexibility to the labour market without strengthening and widening the social security net. According to a recommendation of the Second Labour Commission, the Industrial Disputes Act should be amended to allow establishments employing less than 300 workers to hire and fire as they desire. Some data is now available that shows that the reforms era seems to have reduced the loss of man days, prima facie an index of improvement in industrial relations. The pre-reform 1981-90 period saw the loss of 402.1 million man days. This loss declined to 210 million man days in 1991-2000, the post-reform decade. The employers contend that the flexibility that they seek will make it possible for them to hire more workers without the fear of getting stuck up with employees they don't need. That would mean that overall the labour market will expand because even if a worker loses his job, he will be able to bag a new job more easily than he can do now. The workers will also be able to demand better benefits including better work conditions, safety standards, welfare measures and health benefits, goes the argument. The idea is to introduce the organised workforce to an environment that is more attuned to the needs of the emerging economy. Another important issue surrounding the labour market relates to the need to upgrade the skills of workers. The survival of workers in the job market and expansion of employment opportunity will crucially depend on the opportunity that the workers have to upgrade their skills.
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