ExplainSpeaking: Are Indian labor laws as inflexible (or pro-worker) as is often claimed?

In the coming days and weeks, we could see the impact of summary suspension of labor laws on both job creation and job well-being. (Express photo: Arul Horizon)

Dear readers,

Last week, three states governed by BJP announced radical changes in the enforcement of labor laws in a bid to boost the economy. Other non-BJP states also amended labor laws, but those changes were not as great as the ones Uttar Pradesh in particular unleashed.

These state governments argue that, without being limited by laws of any kind (minimum wages, dispute resolution, health compensation, etc.), Indian companies will return to health and ultimately reach their potential to be world leaders.

But some questions arise. One, the changes seemed rushed. Take for example the UP Ordinance that exempted “Factories and other manufacturing establishments [from the] application of certain labor laws for a period of three years. “

The use of the word “true” was strange: nowhere did the ordinance establish what specific laws were being suspended. Nowhere in the ordinance, for example, did it mention companies that, by law, were required to pay “minimum” wages to workers.

In the coming days and weeks, we could see the impact of the summary suspension of labor laws both on job creation and on labor welfare (wages, exploitation, rights, etc.). In that regard, we are likely to witness a mass non-random control trial to assess whether (and to what extent) India’s labor laws have been holding back its growth.

Radhicka Kapoor, senior member of the Indian Research Council on International Economic Relations, says this notion of “inflexibility” is out of place. She points to a 2019 article by Aditya Bhattacharjea, a professor at the Delhi Faculty of Economics, which traces the origins (and the iffy journey, as it turns out) of the notion that Indian labor laws are “inflexible”.

The story begins in 2004 when Timothy Besley and Robin Burgess created an index to measure regulatory variations in Indian states. “This measure,” says Bhattacharjea, “was based on state-level amendments to the Industrial Disputes Law (IDA), which is just one of dozens of Indian labor laws.”

He then goes on to explain the technicalities (read ‘multiple inaccuracies’) of this index, as well as the incorrect way (read ‘blind’) in which this index was repeatedly used by researchers over the years to reinforce the point that Indian labor laws were “inflexible” – “which has distorted the political implications of their research results.”

Bhattacharjea concludes: “As in the children’s game of Chinese whispers, subsequent researchers successively distorted the interpretation of the index by their predecessors, so that it was ultimately characterized as a measure of the legally required degree of job security, which was not was supposed to be. “

Perhaps our legislators should get more clarity on flexibility or lack of it in Indian labor laws; after all, this is the fundamental premise on which workers in some of the most populous states are being subjected to work under rules that were considered exploitative even when we were governed by the British.

Stay safe!

Udit

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