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Insights into Editorial: Tread with caution: on labour laws

Insights into Editorial: Tread with caution: on labour laws


As a part of its ease of doing business initiative, the government will be subsuming a total of 44 labour laws into four codes — on wages, social security, industrial safety and welfare and industrial relations.

The Four codes of Labour laws are:

  • Code on Wages Bill
  • Code of Occupational, Safety, Health and Working Conditions Bill, 2019
  • Code on Industrial Relations
  • Code on Social Security

As part of its commitment to simplify and consolidate labour rules and laws under four codes, the Union Cabinet has cleared the Occupational, Safety, Health and Working Conditions Code, earlier it approved the Code on Wages Bill.


The Code on Wages Bill:

The Code on Wages Bill seeks to include more workers under the purview of minimum wages and proposes a statutory national minimum wage for different geographic regions, to ensure that States will not fix minimum wages below those set by the Centre.


The Code of Occupational, Safety, Health and Working Conditions Bill, 2019:

The Code on labour safety and working conditions include regular and mandatory medical examinations for workers, issuing of appointment letters, and framing of rules on women working night shifts.

Other codes that await Cabinet approval include the Code on Industrial Relations and the Code on Social Security.


Labour reforms: No one knows the size of India’s informal workforce:

The Economic Survey of 2018-19, says “almost 93%” of the total workforce is ‘informal’. But the Niti Aayog’s Strategy for New India at 75, said: “by some estimates, India’s informal sector employs approximately 85% of all workers”.

There is yet another government report, ‘Report of the Committee on Unorganised Sector Statistics’ of the National Statistical Commission (NSC), 2012, which says the share of the informal workforce is “more than 90%” of the total.

So is the case with its contribution to the economy. The government does recognise that the informal sector and workers contribute significantly. The NSC’s 2012 report pegs it at “about 50% of the national product” without revealing how it arrived at such a conclusion.

Stressing the importance of labour law reforms, it said that according to the latest comparable figures available with the International Labour Organisation, the man-days lost in India were a staggering 23.34 lakh as compared with 1.7 lakh in the UK and 7.4 lakh in the US, with Russia at a low of only 10,000.


In Past: China’s labour laws v/s India’s Labour laws

China’s flexible and business friendly labour laws have ensured continued investment in Chinese manufacturing, whereas plethora of restrictive labour laws in India, around 245 in total, make it difficult for employers to downsize during business downturn and introduce a new technology.

As a result, FDI inflows in India is insignificant in capital-intensive industries unlike in case of China during the first couple of decades of reforms.

The existing laws protect only 10% of the total labour force and come in the way of creating opportunities for the rest.


Consensus from Labour Unions is also must be considered:

Unlike these pending bills, especially the one related to industrial relations that will be scrutinised by labour unions for any changes to worker rights and rules on hiring and dismissal and contract jobs, the two that have been passed should be easier to build a consensus on, in Parliament and in the public sphere.

Organised unions have vociferously opposed changes proposed in the Industrial Relations code, especially the proviso to increase the limit for prior government permission for lay-off, retrenchment and closure from 100 workers as it is currently, to 300.


Friendly Labour Laws will spur the Growth rate: Economic Survey 2018-19:

The Economic Survey highlighted the effect of labour reforms in Rajasthan, suggesting that the growth rates of firms employing more than 100 workers increased at a higher rate than the rest of the country after labour reforms.

But worker organisations claim that the implementation of such stringent labour laws in most States is generally lax.

Clearly, a cross-State analysis of labour movement and increase in employment should give a better picture of the impact of these rules.

The Centre and state governments need to pursue labour law reforms as these are necessary for improving investment and generating employment, SBI said in its research report ‘Ecowrap’.




Simplification and consolidation of labour laws apart, the government must focus on the key issue of job creation.

The Periodic Labour Force Survey that was finally made public clearly pointed to the dire situation in job creation in recent years.

While the proportion of workers in regular employment has increased, unemployment has reached a 45-year high.

In such a situation, the government should be better off building a broader consensus on any major rule changes to existing worker rights rather than rushing through them for the sake of simplification.

The consolidated code bills should be thoroughly discussed in Parliament and also with labour unions before being enacted.