Should Indians work longer for less pay? A proposal in the Economic Survey sparks debate

Longer overtime working hours with lower wages is what the finance ministry has advocated in the Economic Survey presented on Monday.

The survey argues the cap on the number of hours a factory worker can be made to do overtime was “limiting the monetisable time for Indian workers and affecting their families and the country’s prosperity”.

Ironically though, even as the survey talks about increasing the “monetisable time” of workers, it also talks about lowering overtime wages. The survey cites an article which says that the provision under Section 59(1) of the Factories Act mandating double the hourly wage for overtime work was a stricter regulation than in other countries.

The regulation was “potentially hindering the growth of the manufacturing sector by driving production to nations with lower overtime costs”, the survey said, citing data that showed countries like Vietnam and Bangladesh allowed longer work hours than India.

The Economic Survey’s recommendation comes at a time when governments, both at the Centre and in the states, have been making moves to increase the permissible work hours by relaxing provisions of the Factories Act, the key law governing working hours and conditions in India.

Last year, both Tamil Nadu and Karnataka amended the Factories Act to allow up to 12-hour work shifts – Tamil Nadu had to withdraw the legislation following protests from labour unions.

This week, a draft bill by the Congress government in Karnataka to increase the work hours of those employed in the information technology sector to 14 hours a day has elicited sharp reactions. Working hours in the information technology sector are governed by the Shops and Establishment Act. Like the Factories Act, this law states that workers cannot be made to work more than nine hours a day and 48 hours a week.

Labour economist KR Shyam Sundar told Scroll that the laws aimed at increasing regular work hours as well as the proposal for longer overtime hours are both motivated by the idea of increasing production without hiring more workers.

The fact that the Economic Survey proposal for longer overtime hours has been coupled with the suggestion to lower overtime wages, Shyam Sundar said, was aimed at bypassing the extra wages industries are required to pay for overtime. “This is tantamount to treating overtime work as regular work,” he said.

What the economic survey argues

The Economic Survey’s contentions are based on an article published in 2023 by Delhi-based private think tank Prosperiti Insights which talks about how relaxing work hours could increase a worker’s yearly earnings. The article says that work hours restrictions prescribed under the Factories Act are a hindrance to workers earning more.

To illustrate their point, authors of the article pointed out that Section 51 of the Factories Act, workers cannot be made to work more than 48 hours in a week in a factory. Meanwhile, Section 56 of the same law prohibits workers from spending more than 10.5 hours a day in a factory. This includes eight hours of work and the remaining time for rest, intervals and change of shifts.

The Prosperiti Insights article says that if a worker could potentially spend 10.5 hours in a factory each day in a six-day working week – approximately a total of 60 hours. By doing this, the worker could earn overtime wages for the extra 12 hours every week, and for 144 hours in 12 weeks in a quarter. However, this is not possible since Section 65 of the Factories Act caps overtime work at 75 hours in a quarter, the article says.

The economic survey borrows this argument from the article to suggest that laws should be made flexible to allow more overtime, like in other countries.

Why experts say the argument is flawed

Experts told Scroll that the survey’s proposal is both uninformed and exploitative.

Gautam Mody, the general secretary of labour union New Trade Union Initiative, pointed out that the assumption that workers would work for the entire 10.5 hours they spend in a factory was impractical. “Are workers not supposed to eat or take breaks?” he questioned. “The extra two hours over and above the regular work hours have been allocated for such intervals. The workers cannot be expected to do overtime during that period.”

Moreover, Mody said that a large section of Indian workers already do overtime hours for their subsistence. “The wages in India are so low that in any case the workers at the lower levels of India’s workforce work overtime for two to three hours every day to earn their living,” he said.

Even for the sake of increasing production, longer work hours is not a good idea, labour economist Shyam Sundar said.

“It is a standard economic theory that as the number of working hours increase, the marginal productivity of the workers will decline due to fatigue, health implications and other factors,” he said.

Why governments want to increase working hours

The Economic Survey’s recommendation comes against a backdrop of growing debate about whether India needs to make its labour laws more flexible to tap manufacturing opportunities created by western companies wanting to reduce their reliance on China.

In February 2023, Karnataka, then ruled by the Bharatiya Janata Party, had passed a bill which allowed industries to extend work hours up to 12 hours in a day. In May 2023, the Tamil Nadu government also introduced a similar law but it had to withdraw the legislation following protests from labour unions and political parties.

Both laws were seen as a bid by the state governments to cater to the demands of longer working hours posed by companies like electronics giant company Apple and its vendor Foxconn.

Both governments defended the move saying that the law did not violate the Factories Act mandate of 48 hours of work in a week because under the new law, workers would work for four days in a week, instead of six.

While state governments are at the forefront of changing labour laws, trade union leaders point out the ground for these changes has been laid by the Centre.

Tapan Sen, the general secretary of labour union Centre for Indian Trade Unions, blamed the new labour codes – central legislation passed by Parliament in 2019 and 2020 – for state governments “feeling empowered” to introduce such laws. The new labour codes, which are yet to be implemented, have been criticised for putting workers at a greater risk of exploitation. “On exploiting workers, the Centre is not only on the same page, but it is the leading force,” Sen said.

Of the four labour codes, the relevant code for work hours is the Occupational Safety, Health and Working Conditions Code. Much like the Factories Act, Section 25(1)(a) of the Code states that no worker shall work for more than eight hours a day, and Section 26(1) of the Code caps the work week at six days.

However, Section 127(2) of Code provides an exemption from these provisions in cases where the state government finds it necessary in the public interest “to create more economic activities and employment opportunities”.

Even as the Code has not been enforced yet, Sen said that its intent was encouraging state governments to make laws to increase work hours. He pointed out that the basis of exceptions allowed in the Factories Act were contingent on “extraordinary situations”. Section 65(2) of the Factories Act allows state governments to make laws for extending work hours beyond the daily and weekly cap “to deal with an exceptional press of work”.

“But the new labour code links the exemption to increasing production,” Sen said.

Indeed, ministers and officials in both Karnataka and Tamil Nadu argued that the laws to relax work hour regulations were needed to boost electronics production and attract further investment.