Interview: ‘India should prioritise employment generation in its macroeconomic policy’

“Employment generation must occupy the centre stage in macroeconomic policy,” KR Shyam Sundar, a labour economist, and visiting professor at the Xavier School of Management, told IndiaSpend in an interview for International Workers Day.

“We need a universal minimum wage, universal social security, not just a promise,” added Sundar, also the author of the book, Impact Of Covid-19, Reforms, Poor Governance on Labour Rights In India.

Since the Covid-19-induced nationwide lockdown began in March 2020, India’s rate of economic growth first fell and then recovered, but the number of unemployed people increased by 1.2% to 3.33 crore from 2019-’20 to 2021-’22, according to the Centre for Monitoring Indian Economy, a think-tank.

Although two years have passed since four labour codes, for social security, industrial relations, occupational safety and wages, were passed in 2020, the rules for the codes are in various stages of drafting at the state level. On April 27, Bhupendra Yadav, the Union labour and employment minister, is reported to have said that these codes would be rolled out “soon”.

These are “political messages”, said Sundar. “I feel much may not happen until the general elections in 2024,” he said, adding that the labour codes were passed in a hurry to score on the ease of doing business rankings by international agencies.

In this interview, Sundar talks about why India’s labour codes are unimaginative, the need for a wider strategy for trade unions to represent workers and the impact of the pandemic on labour rights.

Excerpts from the interview:

The Covid-19 pandemic created unemployment, slowed economic growth and resulted in lower wages. What would be your assessment of the last two years in terms of worker and labour empowerment in India?
Economic slowdown, and a high level of unemployment and labour market inequalities, existed even before the pandemic. But what did the pandemic do? I have four observations on its impact on the labour market.

It intensified informality. The pandemic created underemployment and forced skilled workers like plumbers and electricians to reverse migrate, following which they were working as unskilled workers in the Mahatma Gandhi National Rural Employment Guarantee Scheme [the government’s jobs programme], for instance. Informal workers in the formal sector were the first to be laid off which impacted income security. Due to lockdowns, the urban informal sector was affected a lot more, at least initially.

Informality became precarious as it threatened lives and livelihoods. Before the pandemic, they were the working poor, but because informal sector workers are frontline workers [hawkers, street vendors and retail workers], there was a threat to their lives following the pandemic.

Thirdly, while the gig economy flourished, gig workers [food/grocery delivery executives, app-based taxi workers] faced difficulties. The labour market got “gigified” because it was the most dominant form of work available.

Finally, there was an increase in income and wealth inequality. Even in the formal sector, there were reports of employees getting paid less or delays in payments.

To make matters worse, the pandemic was used by the state and by firms to increase [labour] flexibility and weaken labour rights. Many states increased the hours of work and the Uttar Pradesh government suspended almost all labour laws with a one-page notification.

It has been two years since the four labour codes were passed. Yet, various state governments have only pre-published the draft rules of the codes and the rules are at different stages of finalisation. What is the reason for the delay, and what has been its impact on workers?
The labour codes were passed in a hurry to score on the ease of doing business, which was a measurement for international agencies and institutions. The government wanted to send out signals for [attracting] investment.

It was ironic that the economy was non-functional but Foreign Direct Investment increased [in 2020-’21]. Employers had a problem with the redefinition of wages (and cap on allowances) and were exerting pressure [on the government]. They lobbied with the government, but the government cannot change it in the rules. It has to be amended by Parliament. If it is amended in favour of employers, it opens the laws up to further changes.

[A change in the structure of salaries under the new code would increase the contribution to the provident fund and gratuity by employers, raising overall costs.]

The government did not see a favourable outcome in some of the bypolls and waited for the Assembly elections [to finalise rules]. I feel much may not happen until the general elections in 2024. If it has already been delayed by two years, it can be delayed further. The Union government can always blame the state governments for not passing the rules.

There is ambiguity due to which employers may be implementing labour flexibility measures as if the codes are being implemented. Some rules have been amended. For example, Chapter V-B of the Industrial Disputes Act on the layoff threshold (which says companies do not have to inform the government if upto 300 are being laid off) at the state level which means [some] aspects of the codes are only a formality.

The employer demands are being carried out at the state level. They are not worried about the Occupational Safety, Health and Working Conditions Code or social security code as it maintains the status quo. Only the definition of wages pinches employers.

There are reports that the government is modifying working hours upward from eight hours currently to 12 hours a day, and accordingly changing the compensation and weekly holiday structure. The International Labour Organization’s Hours of Work (Industry) introduced a maximum standard working time of 48 hours per week and eight hours per day as an international norm with extensions based on national regulations. Why is the Indian government making these modifications, and how do they impact industry-labour relations?
The rule limits work hours to 48 hours a week. It does not matter to the government if it is four or six days, although it [this flexibility] is beneficial for the industry.

For example, if a company has to ply buses on four days compared to six days, the operating costs reduce. Once the worker is in the factory, it does not matter to the employers if workers work for eight or 12 hours.

But it creates tension between workers and employers. The government has to scientifically frame labour laws. In European countries, there is a labour deficit, and four days a week may work. But in a labour surplus country like India, we cannot be doing it. The hours of work cannot be left to rule-making [by the executive], it has to be legislated.

Courts disallowed changes to working hours. It [the proposed change in work hours by the government] cannot be implemented. I feel trade unions must not rely on direct action alone, they should intelligently use legal options also.

They should seek the support of the legal fraternity and academia. They do not have a strategy. Calling a strike for a few days in a year alone will not be useful. I find that the state and trade unions are unimaginative and in that sense, there is an ironical convergence between the two.

The government announced surveys – on migrant and domestic workers, on employment generated by professionals and the transport sector, and the quarterly employment survey – in 2021, which were expected to help formulate a National Employment Policy. But there is no committee yet to draft such a policy, according to the government.
India ratified the International Labour Organization’s Employment Policy Convention, 1964. I do not understand the need for multiple surveys. Periodic Labour Force Surveys provide [some] information. These [five] surveys were announced months ago but nothing has come to light. There is no transparency.

The National Employment Policy is important because the convention requires that there should be an employment policy. It gives a direction for macroeconomic policies, labour market policies that are needed for the government. It helps understand variation in the employment of every sector, forms of employment generation.

There are two types of statistics we have: enterprise and household-based information. The National Employment Policy is framed by combining these two. We have never had a National Employment Policy despite ratifying the International Labour Organization convention. Employment generation must occupy the centre stage in macroeconomic policy.

Does the new Occupational Safety, Health and Working Conditions Code address safety issues that gig and industrial workers face? For instance, food delivery corporations have introduced 10-minute food delivery which has resulted in concerns about worker safety. Similarly, there are various issues of industrial safety and instances of accidents in the construction and auto sector.
Earlier, all hazardous factories needed to have a bipartite safety committee as a result of Chapter IV(a) of the Factories Act. Now, in the code, it is by notification and not mandatory.

The Occupational Safety, Health and Working Conditions Code covers factories, mines, plantations, construction and journalists. The service sector is under a regional or state-level act. Even in the Social Security code, gig workers are those workers who are not within the traditional employer-employee relationship and they are not covered under unorganised workers.

Safety officers are mandatory only in hazardous factories employing 250 or more workers. How can laws be framed this way? The codes are being framed in an unimaginative fashion, without a conceptual basis and without any evidence.

Laws have to be either based on some principles or evidence. You cannot tinker with thresholds [such as that of 250 workers for a safety officer] in an arbitrary manner.

What would be your wishlist for labour empowerment in India in the next five years?
We need a universal minimum wage and universal social security, not just a promise. Further, we need safe working conditions and effective implementation of labour laws.

These remain unfulfilled labour market dreams since Independence. The Social Security Code gives rights to organised sector workers through a Provident Fund, medical insurance, maternity benefits and injury compensation. But for the unorganised sector, there are promises of schemes.

This cannot be determined by the executive but has to be structured into the law. The recommendations [on social security for unorganised sector workers] by the National Commission for Enterprises in Unorganised Sector must be considered proactively by the government.

This article first appeared on IndiaSpend, a data-driven and public-interest journalism non-profit.