Labour Reforms

Written by The Financial Express | Updated: Jul 4 2014, 07:24am hrs
Given that new jobs will drive almost 75% of poverty reduction in the future, as per From Poverty to Empowerment, a McKinsey report, Rajasthan amending the Apprentices Act to make it easier for industry to create jobs is a move that the rest of

India would do well to emulate. Moving to make hiring easier both for employers and job-seekers by easing compliance and compensation norms, Rajasthan has set a template for labour reformsin June, the state had also amended the Contract Labour Act, the Factories Act and the Industrial Disputes Act, providing much-needed flexibility to employers in hiring contractual labour.

There is no denying that the lack of reforms in the labour law have severely crunched organised employment. The McKinsey report found that states with flexible labour laws had a higher proportion of the labour force in organised employment than those that had a rigid setin 2010, the former had 35.3% of the workforce in the organised sector versus the latters 23.2%. Organised sector employment, typically seen in big firms with high employee strength,deliver better wagesglobally, firms with 2-48 employees had an average annual wage (in 2005 dollar terms) of $587 while those with a strength of more than 200 had an annual average wage of $2,699. Given how a Crisil report warned earlier this year that slowing economic growth was eroding jobswhile 50 million new non-farm jobs will be needed in between FY12 and FY19, if growth remains low, only 38 million will actually materialise in the period. Given how little sense it makes to continue with outdated labour laws and restrict job creation further, states must hurry along the path that Rajasthan has shown.