1. Labour laws have to be calibrated away from job protection towards job creation

Labour laws have to be calibrated away from job protection towards job creation

Labour laws have to be calibrated away from job protection and towards job creation, if India is to do justice to its youth.

By: | Updated: May 18, 2017 2:15 PM
Two stakeholders figure prominently in every conversation over employment in India—industry and the youth. (Reuters)

Two stakeholders figure prominently in every conversation over employment in India—industry and the youth. We have a million youth entering the workforce every month, and that is how it is going to be for the next two decades. Hence, every policy decision needs to consider the impact on employers and the youth. It is imperative to think of every agent of transformation that enables the youth in finding jobs of dignity, and not just any job. Over the last decade-and-a-half, organised temporary staffing in India has made its case by providing millions of youth a path to a better life. It has reduced unemployment as well as underemployment and has crafted a distinct space for itself as the country’s employment liquidity provider. It has enabled job-market outsiders like retired professionals, married women, college drop-outs in accessing the organised workforce.

An apprenticeship programme on steroids, it has acted as a stepping stone to a permanent job—over 50% of our temps get absorbed by the user company, 45% leave us within an average tenure of 10-12 months for permanent jobs elsewhere. It has helped lower the arbitrage typical of unorganised or informal (the rogue sector) employment. It has also given a sizeable fillip entrepreneurship and productivity—India’s e-commerce and start-up ecosystem, over the past five years, is testimony to that. Given a country like India can’t afford a publicly-funded social security system, organised temporary staffing has provided formal employment thereby reducing the social cost of unemployment. It has also helped tackle India’s severe employability challenge.

Three things stand between a million jobs a month and the youth. One, regulatory cholesterol—56 labour laws that have seen little updation since being enacted as far back as the 1940s and 1970s. They end up slowing down progress and economic development, and speeding up informalisation of our workforce. Two, the lack of enforcement—we have too many laws with very little resources to enforce and supervise them, leading to widespread misuse and corruption. Slow and non-uniform acceptance of digitisation and inadequate technology infrastructure compromises transparency and leads to fraudulent players taking advantage and exploiting the youth.

Three, unemployability—even if India manages to somehow create a million industry vacancies a month, the skilling ecosystem is underprepared to deliver and convert available work into meaningful jobs. So, this means, by design, nine out of 10 kids in India have to opt for jobs in the informal sector. It would lead to a lowering of the quality of human capital across organisations. Widespread exploitation and discrimination, thanks to nefarious labour contractors who offer questionable contract-staffing options and benefit off wage arbitrage.

However, from the perspective of organised temporary staffing acting as a force multiplier for ‘formal jobs for all’, amending the Contract Regulation and Abolition Act (CLRA) to shift from its fragmented premise to specific licensing and ushering in an era of national licensing for credible staffing organisations is necessary. The current law holds that every enterprise, every customer of a staffing organisation, across all states, location and premise that has more than 20 temporary staff requires a separate license that must be renewed every year. Hence, a consumer-durables customer of a staffing organisation, for instance, with operations across 2,500 towns and villages and two offices/depots in each location, must apply for 5,000 licences every year.

Just to enable the staffing organisation in the licence process, the consumer durables company must also register itself and issue 5,000 Forms Vs. This is unproductive experience and an administrative nightmare, one most organisations (big or small) would prefer avoiding. Thus, that becomes the starting point of all that goes unreported, unaccounted and unprotected. National Licence will (i) ensure that only credible and trusted organisations act as staffing organisations, (ii) reduce the tendency to avoid compliance, giving policy-makers an accurate view of contract staffing in organisations, (iii) encourage formalisation of employment through credible organisation, (iv) promote ease of doing business and (v) enable labour market transformations towards reducing poverty.

While India’s fight should be with informality, we have seen three fatal flaws/assumptions made by those who treat temporary staffing with contempt and suspicion—idealism (good being the enemy of the great), averaging (one size fits all), stability, (a belief that the world is predictable and linear, and that job creation and growth are driven by mostly by investments. Apart from good infrastructure, the only way to increase job creation and growth in any economy is to act pragmatically by changing expectations from labour laws—and gearing them away from job protection to job creation, from static to dynamic, from patronising to providing choice and a self-healing ecosystem.

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