Policymakers who say that labour laws don’t matter for job creation have obviously never had a child who is unable to find a job despite merit, never been responsible for finding the money in a small organisation to pay salaries and never tried to pass a labour inspection without paying a small bribe. Or maybe they have just never been to a job mela to answer the three standard questions from kids: How do I get a job without work experience? How do I live on half my salary? How do I find a formal job that pays enough for the first six months for me to move to a big city? Job creation is hardly a wicked problem like cancer or climate change but it does require taking on vested interests. This is never painless but when there are no good choices, somebody has to make the hard ones. Thankfully, not all lessons need to be learned experientially; states that care about India’s job emergency can now photocopy Rajasthan’s courageous start in reforming labour laws that choose the old over the young and are written for a colonial, agrarian and stagnating India.
The most obvious cost of India’s labour laws is corruption, because they are written so badly that it is impossible to comply with 100 per cent of the laws without violating 10 per cent of them. But the non-obvious costs are more toxic: manufacturing employment is the same as that of post-industrial US at 12 per cent of workers, 240 million Indian farmers produce the same amount of food as six million Americans, and 200 million Indians in subsistence self-employment want wage employment but the jobs drought means that the poor cannot afford to be unemployed and are therefore self-employed. But the biggest cost is that 100 per cent of net job creation since 1991 has happened informally. Informal employment, the slavery of the 21st century, is a child of our labour laws.
The amendments to the Industrial Disputes Act, Factories Act and Contract Labour Act proposed by Rajasthan represent political, social and economic innovation. Political because the concurrent list of our Constitution creates many policy orphans, since the state and Central government rarely agree on every detail. As Socrates said, a slave who has two masters is free. Social because it is clearly unfair to argue against the thesis that continued…