Latest reforms dilute workers’ rights in India

ILO raps government for enfeebling unions and worker welfare


May 27, 2020

/ By / New Delhi

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Over 90 pc of India’s workforce is employed in informal sector like this brick kiln (MIG Photos/Aman Kanojiya)

Union finance minister Nirmala Sitharaman’s famed INR 20 trillion bailout package delivers a blow to workers even as job losses, triggered by lockdown, rise to highest level in over 40 years.

One of the most important elements of the ‘bailout package’ unveiled by Prime Minister Narendra Modi and detailed by his finance minister Nirmala Sitharaman concerns one of the most sought after and long-demanded measures by industry, Indian or foreign. It involves India’s labour laws that have long been criticised for being extremely inflexible and onerous, making it practically impossible for companies, notably those employing 100 persons or more, retrench any worker in the normal course of business.

The new measures, pushed by the federal government, and greedily followed up on by various state governments, have been roundly welcomed by industry associations as steps in the right direction. But the move also came in for harsh criticism from labour and human rights activists who said that not only had the workers been sacrificed in the name of modernisation and reforms, but also alleged that the government had simply yielded to the greed of businesses who, for all their criticism of the state of labour conditions in India, have continued to reap enormous profits, while keeping the workers’ wages and other benefits as low as possible.

This practice, enshrined for decades, has led to a startling rise in inequality at workplace in the country and the gap between the top executives and the average workers in companies has increased sharply over the past two decades as the CXOs of companies paid themselves millions of dollars in their own bonuses and paychecks, while keeping the workers’ wages rock bottom. This trend has picked up pace and the gap become even more glaring in the course of last six years. The organised sector, which accounts, for a pitiful 10 pc of all industrial employment in the country, saw wage growth rise from barely 4 pc at the turn of the millennium to nearly 12 pc a year during the boom time of 2011-15. Subsequently, the growth has fallen dramatically to under 6 pc in the course of the past five years.

Oxfam India, a charity, has collated data to show the state of inequality at the workplace. Here are some data points:

  • In countries like India, at least one in every two workers in the garment sector are paid below the minimum wage.
  • It would take 941 years for a minimum wage worker in rural India to earn what the top paid executive at a leading Indian garment company earns in a year.
  • It would take around 17.5 days for the best paid executive at a top Indian garment company to earn what a minimum wage worker in rural India will earn in their lifetime, presuming 50 years at work.

If the reference was cross-sectoral, then the gap would be even more glaring as the CEOs in key start-ups and ITES firms have pay packages that are many times that of a garment firm boss. And the situation is even more alarming when one looks at the informal sector that employs 90 pc of the people in the country. These workers don’t have any contract, minimum wage, workplace safety, social security or even health benefits. They also don’t have any pension rights, meaning decades after working at pitiful wages, the workers find themselves without any savings and back the point where they began their working lives from.

Unfortunately, the abuse of workers’ rights is no longer the exclusive purview of the informal sector. Large companies, Indian-owned or foreign, have been violating basic labour rights by taking on many more non-contractual workers than those on contracts. Only the contractual workers get all the benefits, including pension, gratuity, healthcare and bonus. Government data says that while in 2004, workers with employment contracts in organised sector numbered 23 million, almost double of those without any contracts whose number was just over 13 million. By 2017, the number of workers without any contract had risen almost three times to 36 million, while those on contract grew only to 28 million, a growth of barely 30 pc in the 13 years.

Labour rights at India’s workplaces have taken a further beating following the recent reforms that give untrammelled powers to employers.

The situation of the workers in India has since deteriorated sharply, first due to the economy, which has been since 2017, and of course due to the pandemic which has seen unemployment rise to historic levels of almost 27 pc according to the data released by the Centre for Monitoring Indian Economy (CMIE). In addition, hundreds of millions of workers, and not just those in the informal sector, have not been paid their salaries since the lockdown was imposed over two months ago, leading to an existential question for most of them. The government has not yet released any data to show the impact of the lockdown on the workers and their income levels or spending patterns since March 25, but with the country poised to hit its first recession in over four decades, the numbers must be bad.

It is in this backdrop that the governments, central and state, have decided to move ahead with labour law reforms, knowing fully well that as most of the companies have been ordered shut and workers locked down inside their homes, there would be hardly any opposition or resistance from them or their trade unions. Some governments like the Uttar Pradesh government, have taken almost draconian steps, suspending application of all labour laws across the state for the next three years. Some other states, notably Madhya Pradesh, has increased the working hours to 72 hours a week from 48 earlier.

The measures have come in for sharp criticism from economists and analysts who say they open the door for further exploitation of workers, just at the time when they need protection the most. Radhicka  Kapoor of ICRIER, a research body, says these reforms created an enabling environment for exploitation. “That’s because far from being a reform, which essentially means an improvement from the status quo, the removal of all labour laws will not only strip the labour of its basic rights but also drive down wages. For instance, what stops a firm from firing all existing employees and hiring them again at lower wages,’’ Kapoor was quoted by media.

This is also a complete turnaround for the Modi government which, at the beginning of the lockdown, had urged companies not to fire any workers and pay them their full salaries for the duration of the lockdown. These labour reforms put the workers totally the mercy of their employers, who anyway had a patchy record of worker welfare. The new rules could also lead to a spike in workers working without any employment contracts, entering the informal economy, quite the opposite of the stated goal of the government of formalisation of the economy and the workforce.



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