The need is to create more jobs, not place onerous asks on industry, causing them to relocate or shut down
So, against the backdrop of thousands of jobs lost because of the pandemic hitting the informal sector hard, the Haryana government had, in November 2020, passed a law reserving 75% of private sector jobs that pay upto Rs 50,000 a month for persons domiciled in the state; this reservation, which is to stay in effect for the next 10 years, has just received the governor’s nod.
To assuage public anger over failure to make policies that create jobs in the numbers and pace needed, many governments in India turn to promising an assured share to one group or the other in the job pool. Never mind the actual realisation of jobs from such quotas. So, against the backdrop of thousands of jobs lost because of the pandemic hitting the informal sector hard, the Haryana government had, in November 2020, passed a law reserving 75% of private sector jobs that pay upto Rs 50,000 a month for persons domiciled in the state; this reservation, which is to stay in effect for the next 10 years, has just received the governor’s nod. The Haryana State Employment of Local Candidates Act 2020 had first come up as an ordinance last year in July; the ordinance was then withdrawn in October. While Swarajya reports that the Union ministry of labour and employment had examined the ordinance and advised against it, Hindustan Times reports that the state’s law department had advised the governor to send the ordinance for consideration of the president since it likely violated some central laws as also many Constitutional provisions.
If the state didn’t see reason then, it should now, with prominent industry voices expressing serious concern, as per a report in The Economic Times. Not only could the law be in violation of fundamental rights like Article 19 (1) that guarantees the freedom to practise any profession, or to carry on any occupation, trade, or business, and Article 14 that guarantees equality before the law, it also undermines the autonomy of industry. Mandating largely local hiring hobbles private sector employers when it comes to hiring the right talent. While the Bill talks about allowing private-sector employers to hire non-domicile candidates if they can’t find talent locally, the government empowers itself, under Section 5 (2) (iii) of the Act, to direct companies to train local youth for the achievement of desired skills and qualifications if it deems this fit. This means that employers could be forced to take on additional training costs. The penalty provisions—upto Rs 2 lakh for failure to meet the 75% rule, and Rs 1,000 per day for continued violation after breach—will punish smaller employers disproportionately as the penalty amount could have a significant bearing on their finances; also, the chunk of the jobs in such firms will be of the salary bracket specified by the law, while the corporates will have a smaller pool of such jobs. Also, the law will likely ensure domicile-certificate fraud becomes a minor industry, and exemption from compliance being subject to the discretion of a government-appointee portends a thriving ‘inspector raj’.
Other states have also flirted with domicile quotas—Andhra Pradesh, last year, wanted similar reservation in private sector jobs, but it was challenged in the High Court. Madhya Pradesh wanted all state government jobs to go to locals, while Gujarat has had a domicile quota of 85% for over two-and-a-half decades now. Maharashtra reserves 80% of the jobs in private sector firms that sought state government incentives or tax benefits for locals. Assam and Karnataka, too, have tried to impose domicile quotas. The fact is that all the states have had very little success. In Madhya Pradesh and Gujarat, locals already form more than 90% of the workforce, making their quotas unnecessary. And Karnataka trying to stop the migrant labour exodus during the lockdown shows how dependent it is on labour from outside the state. Governments will have to choose neater, more effective solutions to create jobs that can cater to the demand in the states, such as labour law and tax reforms, easing availability/affordability of land. As per CMIE data for February 2021, Haryana’s unemployment rate far exceeded India’s, at 26.4% versus 6.9%. This clearly shows that the state government needs to facilitate job creation rather than placing onerous asks on the industry, forcing them out of the state.