Labour policy - the way out of paternalism

By S. Swaminathan

The wave of protests against globalisation, whether in the industrially advanced countries or in the developing South, seems to have a dominant focus and that is on the phenomenon of ``Jobless growth.'' So obtrusive is the advancement of new communications and information technology that vast sections of the working class attached to traditional manufacturing industries are increasingly coming under the grip of technological unemployment.

While this trend is largely evident in the rich countries, the negative impact of globalisation seems to be spreading in the poorer countries in the form of stagnation in employment opportunities (for all but the knowledge workers who are exposed to the higher ranges of IT).

The current Indian predicament seems to be that while pessimistic conjectures suggest that overall employment is either stagnant or is even declining, more level-headed assessments would have it that the growth of employment since 1991 has largely been in the informal sector - agriculture, household industry and a range of small enterprises such as garment manufacture, gems and jewellery, leather products, electronics, besides the services sector.

According to official data, employment in the organised sector which was 26.7 millions in 1991 increased to 28.3 millions in 1997 - that is, hardly by one per cent per year. In the public sector, the growth has been less than 0.5 per cent per year. From 19.2 millions in 1991, employment in the public sector rose to 19.6 millions in 1997 while the corresponding increase in employment in the private sector was from 7.7 millions to 8.7 millions. In 1997, out of the total employment in the organised sector of 28.3 millions, manufacturing accounted for 6.9 millions (hardly 25 per cent) while construction and services together accounted for 17.9 millions or 63 per cent of the total.

The portents are clear. Even if larger flows of investment seem inevitable on the spur of liberalisation, the economy can support a larger working population only through increasing diversification of the agricultural and services sectors. Nor will the problem be confined to the generation of new employment opportunities. A great deal of restructuring of industry both in the private sector and in the sprawling public sector at the Central and State levels, with its inexorable fallout of retrenchment of surplus labour, will have to be addressed.

The question is whether the policymakers have at all come to grips with the dilemmas involved in shaping a labour policy that will be compatible with a competitive market-driven economy. If the past nine years of economic reforms is the testimony, successive governments in India have only dodged the issues while all the time talking brave rhetoric about hard options and the imperatives of competitiveness.

Three voices

The Indian situation is not all that unique even if it is granted that as a labour-endowed economy, the challenge of employment is much more compelling here than elsewhere. Mr. Juan Somavia, Director-General of the International Labour Organisation, during his visit to this country last February, argued for strengthening and upgrading the informal sector which had played an important role as a refuge for surplus labour and as an embryo entrepreneurial sector. He had no illusions about global competition producing a growing sense of insecurity for the workforce, at all levels.

More recently, the Vice-President of India, Mr. Krishan Kant, addressing the World Federation of Trade Unions in New Delhi, made a fervent appeal to trade unions ``to force the world to address questions such as whether market-based reforms which exclude the poor can be an ethical imperative for the new world order.''' All this, of course, is a contribution to the fashionable tirade against the World Trade Organisation which has emerged as the common enemy of many developing countries that have been chasing the false god of statism for decades. On how countries like India can sustain rigid labour laws designed in a by-gone era, there is nothing much by way of sober reflection.

The Prime Minister, Mr. Atal Behari Vajpayee, made a different pitch at the Indian Labour Conference in New Delhi recently. His message primarily was to the employees of Central public sector enterprises in the form of a bold assurance that their interests would be safeguarded while restructuring the PSEs. And then there was the pious reiteration of the eternal verity that labour, capital, management, society and the state are all bonded together in harmony. A more significant point made by the Prime Minister was about ``legislative and administrative rigidities'' which had become hurdles for new investments. Was Mr. Vajpayee conceding that protectionist labour laws have constricted employment growth in the organised sector? And that restructuring of PSEs involving disinvestment, privatisation and closure in irretrievable cases, cannot be averted merely because labour will be put to unavoidable pain?

The case for a safety net

Modalities such as those of voluntary retirement scheme (VRS) and the ``golden handshake'' are certainly designed to compensate workers displaced by organisational restructuring. Whether fiscal considerations will ever permit large public resources to be put aside for such a purpose within a short period is a moot point. Even apart from this, there is the accumulated question of discrimination as between workers in the organised sector and their woebegone counterparts in the unorganised sector, in agriculture, fisheries, in the handloom sector and so forth.

Who deserve the safety net more - the relatively pampered workers in the organised sector or the millions in the informal sector who have continued to suffer for lack of regular income? Can the country make a start with basic unemployment insurance for the educated who swarm the labour market?

The configuration of employment in the economy is certainly undergoing a significant change. Gone are the days when the government functioned as the main source of employment. Whether a programme of downsizing of Government is politically feasible or not, fiscal compulsions cannot but lead to such an eventuality. Excepting for retrograde politicians who continue to play the caste-card for ensuring reservations in public employment (and their number is by no means diminishing), government jobs are no longer the preferred first choice for young people. If global practice is any pointer, the Government itself will opt for many services ``to be contracted out'' rather than continue to maintain an army of staff.

Moreover, the concept of life-time employment is being substituted with ``contract employment'' in different segments in the private sector. That a swing in favour of employee mobility (both horizontal and lateral) is at work, even in India, can hardly be overlooked. Nor is economic progress being held inconsistent with a vibrant metabolism in corporate business which manifests itself through bankruptcies and ``exit'' routes for promoters. The presumption that pro-labour state paternalism is conducive to rapid employment generation stands discredited with a vast constellation of sick units and enormous capital being kept immobilised.

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