Provide income support, restore jobs

Context: As India battle the economic and social consequences of COVID, many State Govts have seized the opportunity to scrap labour laws. Such a decision makes less sense currently. 

Scrapping of labour laws

• Certain state govts. Including UP, MP etc. have scrapped labour laws related to occupational safety, health and working conditions, regulation of hours of work and wages and settlement.
• Reason: to attract FDI currently leaving China and to boost manufacturing growth. 
• Believed Impact: will reduce wage costs, increase profits and augment productive investment to create demand. 

Failure in government understanding 

• Not a supply issue: Demand was already contracted (GDP growth fell to 4.7% in December) and the present slowdown is also due to lack of demand. 
• Scrapping labour laws to save on labour costs: it will reduce wages, lower earnings (particularly of low wage workers) and reduce consumer demand.

• Labour laws not the only evil: Industrial performance is not just a function of the labour laws but of the size of the market, fixed investment growth, credit availability, infrastructure, and government policies. (in fact wage growth has been flat since 2001)

• Labour not retained: Governments have been miserly in providing overflowing grain stocks and income support to migrants to retain them in their places.

Consequence of abrogation:

• It will increase informal employment in the formal sector
• It will create fertile ground for the exploitation of working class 
• It will create more supply than demand in economy, as exports cannot be an option for now due to global recession, 
• It will lead to an increase of low paid work that offers no security of tenure or income stability.

Way forward

• Rationalising labour laws must have a delicate balance between firms adaptation and worker rights.