Laboured policies

Much is being made of the new-found political consensus on labour reforms, with both the BJP-affiliated BMS and the Congress-affiliated AITUC making soothing noises about how they are in favour of labour reform now that, as they put it, the government has consulted them on the issue. It also helps, though the BMS and AITUC won’t say so, that the government has decided to considerably water down the proposals made by ex-finance minister Yashwant Sinha in his budget speech last year. Sinha had proposed that any unit which employed less than a thousand workers did not need prior government permission to close down — this limit is currently 100 workers. What has now been more or less agreed to, is that the new limit will be between 200 and 300 workers. In other words, a Hindu rate of labour pains. Well, as your mother may have told you, unless the pains build up some momentum, there is going to be no real result.

A recent Planning Commission study, in fact, bears this out. It says in a nutshell that if things carry on like they are — and that, don’t let them fool you, is what the BMS-AITUC really want — unemployment in India will double in the next five years alone. From around 26 million right now, to a little under 50. Of course, it is also true that simply giving India Inc the freedom to fire its workers is in itself no solution. It has to be accompanied by major reforms like genuinely freeing up small-medium industry from red tape, and completely cutting loose the farm sector — since organised labour, which the BMS-AITUCs represent, constitutes just 8 per cent of India’s workforce, the real growth in employment has to come from elsewhere. Moreover, the issue is not just of getting rid of labour, it is of closing down the industrial unit, of liquidating it, and using the capital elsewhere, to create fresh jobs. Tens of thousands of crore rupees are locked up today in sick industries that cannot close down. Yet, once a unit goes sick, it just downs its shutters and stops paying workers anyway — unless it’s a PSU that is. Since the workers’ interests are getting hit in any case, why not allow the unit to shut down and create fresh employment somewhere else?

Of course, no trade union will tell you this. Instead, they will spread misconceptions about how more flexible policies will hit labour. In exactly the same manner as PSU Defence Minister George Fernandes said the other day, that disinvestment of PSUs caused unemployment. Yet, the fact is that long before privatisation began, in the nineties itself, employment in PSUs had fallen by close to 4.5 lakh, simply because the PSUs weren’t competitive anymore. After privatisation, in fact, salaries of those in these firms have gone up. But dispelling myths in a country with 5000 years of mythology behind it is, of course, never going to be an easy task.