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The justice of policy

To use our demographic dividend,we must craft education,job policies

Written by Manish Sabharwal | Published: November 1, 2011 11:27:53 pm

In theory,all the three branches of government — executive,legislature and judiciary — are equal. But in practice,cautioned Alexander Hamilton in the Federalist Papers,the judiciary is the weakest because it controls neither sword not purse. But I suspect that Hamilton would have reviewed his conclusion if he’d studied the decisive role of India’s courts in shaping higher education and employment policies. Indian courts have not nudged policy in education and employment; they have made it. This policy drift — a consequence of absent executive and legislative leadership — is dangerous because one million young people will join India’s labour force every month for the next 20 years. A demographic dividend does not mean people but productive people. Productivity — output per worker — is the elixir of poverty reduction and depends on human capital that produces more with less. Few disagree that higher education and employment policy is challenging because it tries to solve what Keynes called “the political problem of mankind; how to combine economic efficiency,social justice and individual liberty”. But complexity or difficulty are poor alibis for outsourcing policy-making to courts.

The role of the Supreme Court in shaping higher education policy is detailed in a wonderful paper by Devesh Kapur and Madhav Khosla. They don’t worry about the growth in higher education cases (2 in the 1950s to 206 for 2000-2009) but the court’s involvement in regulation and articulation of a certain vision of higher education. The “profiteering” narrative in higher education — initially reserved for cases involving abusive and unfriendly market practices relating to essential commodities or land and property matters — was first used in Unnikrishnan (1993) but has roots in the earlier case of St Stephens College (1993). The T.M.A Pai case (2002) accepted the place of private institutions,and permitted them to generate a “ploughed back” surplus. But they believe this narrative of educational enterprises being distinct from other private enterprises and professions has little constitutional basis. The court’s decision to side with petitioners in Tirthankeer (2011) — a college challenging a regulatory authority’s denial to expand — seems to have been ultimately motivated by its understanding of how best to reform Indian medical education and address the nation’s health concerns. These interventions undermine the independence of regulators,represent a lack of fidelity to the specific legal problem before them,and are likely to increase litigation by setting a low threshold for justiciability. They conclude that courts have been resolving higher education litigation by assessing how to “fix the system” for which they lack the requisite knowledge or expertise.

Courts are at the forefront of making sense of India’s 25,000-plus overlapping and contradictory labour laws. Courts have upheld internal process reorganisation as unfair labour practices (Siemens 2011),expanded coverage of the dysfunctional Provident Fund (Gadodia 2011),upheld the conversion of part of the defined contribution provident fund into a badly designed and now bankrupt pension plan (EPS 1995),made temporary workers permanent (Air India 1997),overruled legitimate salary deductions (Salal Hydro Project 1983),overruled the principles of fixed-term employment (RSEB 2010) and judged who can do what activities in a company (Haryana SEB 1991). The “thought world” of the courts seems to recognise employment contracts as one-way and permanent. But deconstruction of the world of work has shifted employment from a lifetime relationship to a taxicab contract; short,intimate and finite. Nobody denies that Indian labour markets are unfair,with 93 per cent of workers outside formal employment. But trying to legislate formal employment is like treating obesity by mandating small sizes and solutions lie in labour market policy. The biggest victims of labour laws are not companies — one of India’s chief labour commissioners said he was trying to enforce the unenforceable — but informal employees. Their plight will only improve when policy recognises that job preservation is not a form of job creation.

Education and employment policy are too important to be left to courts. India,and its people,must take a view on the four thorny issues. The first is a legitimate private sector in education. We need to end the lie about non-profit in India’s education delivery — 90 per cent of capacity created in the last 20 years is for profit — so that we can increase transparency and use currently foregone taxes as scholarships for the needy.

The second is education regulation. The current licence raj amplifies the competence and corruption weaknesses of our current regulators to deliver neither quantity nor quality. We need a regulator that has open architecture,focuses on outcomes and is designed to avoid becoming the old regulator.

The third is recognising employment as a voluntary,fixed-term contract that is reversible. The current “marriage without divorce” nature of employment breeds informal employment,retards job growth,has kept manufacturing

at 12 per cent of employment,encourages buying machines rather than hiring people and creates corruption.

The fourth is recognising that wages are set by complex market and regulatory mechanisms. Wage legislation must enable productivity linkages and allow for a cost-to-company world where benefits (Provident Fund,ESI,Gratuity,etc) are included in wages.

All four issues are key to harnessing our demographic dividend and need holistic policy responses that combine the tactical (definitions,jurisdictions,etc) with the philosophical (mandate,objectives and vision). But court orders often allow the specifics of single incidents or local conditions to set national policy. This is wrong,inefficient and dangerous. Noting the lack of court-driven policy in financial markets is also important because it testifies that strong executive and legislative action — SEBI — can enable policy-making outside courts.

Oliver Wendell Holmes once said in his court: “This is a Court of Law,young man,not a Court of Justice.” India’s economic and social injustices are gut wrenching but solving them is not the mandate of courts. Courts are making policy; the important question is why. Simple,nature abhors vacuum.

The writer is chairman,Teamlease Services,

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