Updated: January 6, 2015 12:00:39 am
The year 2014 was good for labour law reform. Why? The obvious reason is that the government will now need to act swiftly against regulatory cholesterol because job creation was at the heart of election campaigning. But the real reason is that policymakers are finally realising the difference between a recipe and a list of ingredients. The focus is shifting from “what” to “how” and “who”.
In the last 10 years, we had somewhat forgotten that policy is the child of politics and that politics is a contact sport which is largely about strategy. One of the most interesting books of last year was Lawrence Freedman’s Strategy: A History, in which he dismisses explanations of human affairs that depend on capricious fate and mischievous gods and concentrates, instead, on leaders and their strategies. His narrative highlights some of the central themes of strategy faced by Indian politicians: The limits imposed by circumstances of time, the importance of coalitions as a source of strength but also instability, the challenge of coping with internal opponents and external pressures simultaneously, the difficulties of strategies that are defensive and patient in the face of demands for quick and decisive offensives, the impact of the unexpected, and the role of language as a strategic investment.
His narrative highlights some of the central themes of strategy faced by Indian politicians: The limits imposed by circumstances of time, the importance of coalitions as a source of strength but also instability, the challenge of coping with internal opponents and external pressures simultaneously, the difficulties of strategies that are defensive and patient in the face of demands for quick and decisive offensives, the impact of the unexpected, and the role of language as a strategic investment.
While the ingredients for job creation have been known for a long time, the recipe involves focusing on sequencing, proportioning, demonstrating, communicating and decentralising. Sequencing is important because equating labour reforms with liberalising hire-and-fire restrictions ignores the many other laws that currently inhibit formal non-farm employment. Proportioning is important because progress is more important than perfection and thresholds in labour laws can be raised once they are touched.
Demonstrating is important because policymakers are children of precedent and prefer the warmth at the centre of the herd — four states have followed Rajasthan by proposing labour law changes, just like four athletes ran the four-minute mile within four months of Roger Bannister showing them that it was possible. Communicating is important because, as Maya Angelou said, the universe is not made of atoms but stories, and the labour aristocracy has successfully peddled a tragic narrative of job preservation as a form of job creation. And decentralising is important because while there is something called India’s capital market, there is no such thing as India’s land and labour markets. Economic wastelands like Uttar Pradesh have very different dynamics than job magnets like Karnataka, Tamil Nadu and Gujarat.
After decades of being a political no-go zone, the labour law changes made in 2014 are impressive: Amendments to the Apprentices Act, a revamped labour inspector regime, introduction of unique numbers for employees and employers, tentative moves towards online compliance, and a template for state governments to take more charge. But this is not enough to tackle the scale of our jobs problem. We need to accelerate progress in 2015 with five interventions.
First, we must give more power to the states. The British needed three lakh people to rule 300 million from Delhi and Indira Gandhi believed that strong states lead to a weak nation. Consequently, 70 per cent of IAS officers in Delhi work in ministries that deal with state subjects and Central laws always override state laws. But the current government’s willingness to use Article 254(2) of the Constitution, which allows state government legislation to diverge from Central acts with the president’s approval, is a political innovation started in the labour sector and must be extended to education and land acquisition. Giving the states more of a say also means that the economically insane proposal to raise the national minimum wage must be shelved as it takes power away from the chief ministers.
Second, we must accelerate the reform agenda in school education because preparing is more effective than repairing. This means modifying the right to education act into a right to learning act. More room for innovation must be created by shifting recognition norms from hardware to learning outcomes, reintroducing exams before Class VIII, and giving private schools two different options for admitting economically disadvantaged students (25 per cent of total intake with government fee reimbursement or 10 per cent with no reimbursement, funded by cross-subsidisation).
Third, we must end the Delhi-based licence raj in distance and online education so that Indian private universities can compete with global massive open online courses and experiment with new life forms — for example, for-credit apprenticeships from online vocational universities. Also, employees must be allowed to choose how they are paid their salaries because the current labour laws that mandate 45 per cent salary confiscation for low-wage employees make informal employment attractive.
Fourth, we must decide if we are truly going to give horizontal departments like the skill and commerce ministries the power to get things done or allow vertical ministries to drive the agenda. The current “vetocracy” — anybody can say no but nobody can say yes — is dysfunctional. The success of the commerce ministry’s “Make in India” mission and plan to make doing business easier depends on giving it more authority in four areas: flick-of-pen or legislative reforms, coordination in Delhi, cooperation between Delhi and the states, and the expansion of state capacity. And the skills ministry will become just another layer unless it gets more resources and somebody resolves the traffic jams with the education and labour ministries.
Finally, job creation needs a more adventurous state that takes more risks. We need the same radical reboot of human capital in policymaking as the last election was for national politics. This means the Seventh Pay Commission must institutionalise lateral entry, move to cost-to-government compensation by monetising benefits, formalise sharper performance management, and create top job pathways for younger people.
Mark Twain said that the two most important days in your life are the day you are born and the day you find out why. The government knows why it was born quite well — because it won the election based on the promise of job creation. The “what” of job creation is also well known. Fulfilling election promises in 2015 means getting to the “how” and “who” faster.
The writer is chairman, Teamlease Services
📣 The Indian Express is now on Telegram. Click here to join our channel (@indianexpress) and stay updated with the latest headlines
- The Indian Express website has been rated GREEN for its credibility and trustworthiness by Newsguard, a global service that rates news sources for their journalistic standards.