Given how contract workers constitute nearly 70% of the organised sector workforce, the government proposing to amend the Contract Labour (Regulation and Abolition) Act 1970 to ensure that they are paid on a par with regular workers would seem to be a good idea. However, the government must pay heed to the fact that contract labour has proliferated largely because of the inflexible labour laws, and in a situation where, as Maruti Suzuki chairman RC Bhargava pointed out at The Indian Express Idea Exchange programme, wages are not linked to productivity. Employers have recruited contract workers by the droves as existing labour laws do not permit a liberal hiring and termination culture that is driven by the companies’ performance. This also indicates that employers even are willing to overlook skill requirements if it means a lesser regular-worker burden, though pay gaps and other issues have spurred labour trouble in many corporates.
Creating a framework for hiring temporary workers—who would enjoy the same benefits as regular workers, expect a marginal difference in salary—would be a fundamental reform. This would allow companies to lay-off workers in case of a downturn, with adequate compensations, of course, and then rehire them when the tide turns. This would mean slimmer labour overheads for employers, while creating more jobs as companies would be more eager to hire if the inflexibility over firing goes. Therefore, reforming inflexible laws holds greater promise for both employers and workers than mandating ‘equal pay’—after all, what good would the legislation be if the companies are not willing to hire in the first place?