Labour Reforms and Social Welfare: The Developmental Debate

The much debated labour market reforms maintains the centre stage in the policy debate in India, caught in the vortex of the ‘Make in India’ campaign. The question posed by the author is how will labour law reforms address the concern of expanding employment and creating better quality employment for 78 percent of the work force in India, which do not fall within the ambit of labour laws and are classified as the unorganised sector. The second question posed is that if labour rigidities were an obstacle to increasing employment then reasons have to be traced for the significant increase in the share of contract workers in the total employment in the organised sector. Further if labour market rigidities were an obstruction, for employers to expand by hiring more workers, then the number of workers would have increased at least to a number less than 50 or 100 if the cause was to escape the implications of the labour laws since only numbers beyond this critical size of labour employed attract different laws to various degree. Thus to assess the complete picture, it is imperative to take a view of the interdependent drivers of growth like infrastructure, adequate power, access to credit etc. Most of all, the fact that more than 70 percent of workers in India earn marginal survival wage and are not protected by social security regulations, the proposed labour law reforms has the potential of increasing their vulnerabilities on account of the vagaries of globalisation.