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Are we moving towards Modern Slavery?

Following the COVID-19-induced economic disruptions, up to 135 million jobs have been lost and 120 million people have been pushed back into poverty in India, all of which will have a hit on consumer income, spending and savings, says a recent CMIE report. 

According to a report by international management consulting firm Arthur D Little, the worst of COVID-19's impact will be felt by India's most vulnerable in terms of job loss, poverty increase and reduced per-capita income, which in turn will result in a steep decline in the Gross Domestic Product (GDP). 'Unemployment may rise to 35 per cent from 7.6 per cent resulting in 136 million jobs lost and a total of 174 million unemployed. Poverty alleviation will receive a set-back, significantly changing the fortunes of many, putting 120 million people into poverty and 40 million into abject poverty,' the report said.

We do not know how many deaths could have been caused by job losses, but we know that scores of lives were lost because of people falling asleep on tracks or dropping dead on their way walking home. We will probably never know how many died because of hunger, how many children were stunted because of malnutrition caused by the lockdown. And, we can never count the loss of dignity. Hunger, fear, anger and desperation is writ large on the faces of people wanting to save their lives from the lockdown. 

In India, therefore, COVID-19 has exposed the condition of the labour force. The nature of data collection does not allow us to know the exact number of migrant workers in this pool. Of the total workforce of India, around 90-92% (about 450 million) is informal, which means they work without social and employment security. The growing informalisation, particularly in occupations of urban centres based on migration, reflects the casualisation of labour. The current labour strategies of survival by walking and withdrawing can hardly be understood in terms of 'temporary displacement.'

Declining labour standards exhibit this trend in a fairly long-term framework: a 2015 research paper pointed out that in the organised manufacturing sector, the share of profits have tripled from 20-60% of net value added, whereas the labour share has fallen by exact same proportion since the 1980s. Almost in the same time scale (1980s-2012), as Prabhu Mohapatra points out, 'contract labour' (through the subcontracting system) in the manufacturing sector has risen from 7% to 35%. Moreover, as per the National Sample Survey Office data in 2011—that the share of contract labour in organized manufacturing was 34%, while it was 14% in 1996. Where does this then leave the labour force?

With the changes in labour laws, hiring and firing in firms operating with 50 to 100 workers has been made easier (to allow labour flexibility), inspection of factories and workplaces has been relaxed, the issue of licenses has been made easier (in effect this means less time examining relevant papers and hence leading to wilful or genuine bureaucratic lapses), working hours of shifts have been increased from eight to 12 (which means a hard-won labour right in the 20th century has been lost or reversed in the 21st) and the role of unions has been minimised. These changes have a time limit of three years and are clearly intended to aid capital by creating a regime of deregulation.

It seems that the introduction of labour law reform by several state government during the COVID-19 pandemic is based on the following grounds. One, due to return migration and stranded migrant workers' hesitancy to undertake new work, employers have repeatedly complained of labour shortages.

Two, India needs to offer labour flexibility to firms quitting China in order to capture the vacated produce market space. Three, the suspension of labour laws for the next three years will help the industry overcome the present crisis.

Four, labour laws need to be changed in favour of labour flexibility to allow employers to generate employment to protect existing jobs as well as to create new jobs for the returning migrants. What appears to be rationalisation of labour law is a specific kind of state intervention which is premised on the theory that a free hand to employers community will eventually boost economic growth and that will also be beneficial to the worker.

It does not require wading through a web of theories to realise that a law usually has two components of regulation. One deals with punitive aspects – say, the provisions applicable when a contract is breached, and the other deals with social security aspects, of which the state and its legal apparatus are alone the guarantors. It seems that due to the lockdown and the ensuing restrictions on public gatherings, labour protests are virtually impossible. Anticipating a lower growth rate for the economy, employers have seized this moment to insist upon their long-pending demand for labour flexibility.

According to the Sixth Economic Census, 97.39 million (45%) work in establishments without any hired worker; whereas, 118 million (55%) of workers works in establishments with at least one hired worker. Broadly, the former category falls under the Shops and Establishment Act and later with the Factories Act. Across the employment threshold sizes, 172 million of workers (79.85%) works in the establishments that have less than nine workers and 20.1 million are employed in establishments which have more than 10 and less than 49 workers. Only 17.60 million (8%) work in establishments with more than 100 workers.

Ironically, it is important to first appreciate that the new economy is not going to generate lots of low-skilled jobs for millions of reasonably skilled and educated youth. Automation, artificial intelligence, robotics and machine learning will replace labour even as manufacturing shrinks and the services sector takes over. While the highly educated and those with an education in the arts will be well placed, employment for the large majority is going to be at the crossroad, to say the least.

Therefore, a new responsibility for the state emerges, not one where jobs are created, but where those who cannot find jobs are protected too and taken care of. In India, we have never been able to create enough quality jobs as the manufacturing sector could not grow beyond contributing a fifth of the gross domestic product (GDP). There was a time when an increase of 2% in GDP would see an increase in employment of 1%, exactly as explained by a widely used principle in economics called the Okun's law.

However, Okun had also said that for unemployment to constantly decline, the economy must grow to its potential. The Indian economy, with low private capital investment and an inexplicable reduction in demand, has been growing at a rate far lower than its potential. That adds to the problems which began when two-thirds of GDP started coming in from the services sector, which employs less than 30% of the workforce.
 
In 2013, the Planning Commission asked Bain & Company to conduct an objective study of enterprises in India. The study concluded that the companies that invested in their workers, and held on to them as assets, did much better, even though they went through the same dips in the business environment as their peers did. The Bain study had revealed that the practice of engaging workers through contractors to work alongside permanent skilled workers had permeated all the best employers in the country. In fact, in many companies they accounted for over 50 per cent of the workforce.

It reduced the cost of workers no doubt. However, the study had revealed that the companies' profits would be only marginally reduced if all workers were paid similar wages. Employee costs constitute less than 20 per cent of the companies' costs and, within employee costs, the share of compensation of CEOs and senior executives was often half of the total. (CEO compensation had risen to over 300 times the salary of a worker in many companies; in the early 1990s, it had been less than 20 times.)

Over the period of last several years, employer's community had been arguing that rigid labour regulations are the primary driver of the overwhelming informality of the labour force. Available research studies do not support this claim.

The International Labour Organisation in its:
Report on Decent Work and Informal Economy had noted that labour regulations are only one of the many determinants of informalisation of workforce. Changes in patterns of production, advances in information and communication technology, as well as global competition have also facilitated the growing informalisation of work.

The Working Group of Experts of the commission on the legal Empowerment of the Poor set up by the United Nations Development Programme found barely adequate conclusive evidence of the oft-presumed causal relationship between rigid labour market regulatory frameworks and informality. Indeed, several countries which are part of the European-led Organisation for Economic Co-operation and Development (OECD) and have significantly more liberal labour regulation, have also witnessed massive informalisation of work in the last three decades. In addition, a study of four states – Rajasthan, Uttar Pradesh, Andhra Pradesh and Madhya Pradesh – by the V.V. Giri National Labour Institute, Noida found that:
amendments in labour laws neither succeeded in attracting big investments, boost to industrialisation or job creation.

The International Labour Organisation, in its 2018 India Wage Report states that sustainable wage policies contribute to sustained economic growth given its reliance on a progressive increase in domestic consumption by lower- and middle-income groups and raise aggregate demand. The setting of a low floor wage ignores this principle while not taking cognisance of the potential of the lighthouse effect mentioned in the Economic Survey 2018-19.

Ironically, labour law reforms carried out by several state governments and the employers' organisations demands for nationalising a 72-hour workweek violates the cardinal principle of a 48-hour workweek, as is mentioned in ILO Conventions C001 and C1919.  Limiting working hours to eight per day and to 48 hours per week was acquired after decades of struggles from 1881 to 1948. Now under the guise of the pandemic, work hours have been officially extended, although with statutory overtime pay (except in Gujarat).

Moreover, a 12-hour workday means workers will spend more than half of their day away from home, without including time spent in transit. This will reduce female workforce participation and will impose a gender penalty. In fact, the ILO calls for a transition to a decent working time to ensure health and safety, work–life balance, promote gender equality, enhance productivity, and facilitate worker choice and influence over working hours.

An increase in working hours, the relaxation of inspections, and flexibility in terms of hiring and firing mean that in essence not only are the punitive aspects of the law now in the hands of private capital, but the state willingly ceases to stand as the guarantor of the rights of the workers. The economic growth that will emerge from this model, if it does, will be premised upon expansive and deep casualisation of labour.

A layered system of sub-contracting will emerge in which the responsibility from the top keeps reducing, leaving workers at the bottom with unpaid or reduced wages at times. Any future moment of crisis, such as the current one, will once again divide two strongly opposed sections i.e. employer and employee; perhaps it will be even worse. It is very much clear that targeting the minority organised workforce without extending universal social security to the vast informal workforce is simply the introduction of a legally framed system of greater informalisation.

Moreover, in January 2019, a seven-member labour ministry panel had recommended that the single value of the national of the national minimum wage for India should be set at Rs 375 per day alongside a housing allowance of Rs 1,430 for urban workers. After the passage of the Code of Wages 2019 by Parliament, however, the ministry indicated a national minimum wage of Rs 178 per day, a mere Rs 2 increase over the current national minimum wage of Rs 176. This does little to address existing wage inequality among workers with 57% of regular workers earning less than Rs 10,000 per month and nearly 60% of casual workers earning less than Rs 5,000 per month. Therefore, the question here is does government genuinely care for labour community?

Further, labour law reforms undertaken by several state government will potentially lead to higher exposure to occupational health and safety risks, no appropriate protection, and an increased likelihood that they will suffer from illness, accident or death.

For example, excessive working hours have negative effects on workers' health which leads to poor immunity and exposes them to a higher risk of industrial accidents. Moreover, in order to minimise the recurring costs, employers will engage themselves in risky behaviour by allowing workers to work in hazardous conditions.

The proposed Labour Code in the de jure spirit obliges employers to provide for a risk-free workplace and instruct employees on safety protocol. It further assumes that all employers will self-enforce these Codes without any deterrence from enforcement authorities.

Several recent incidents of large-scale chemical spillage and boiler blast including LG Polymer, Vishakhapatnam incident indicates that the health hazard and fatality risk of working in Indian factories have increased tremendously and it could likely to continue unless a routine inspection and mandatory safety clearance are enforced effectively. Existing evidence shows that if we allow self-enforcement of labour laws, then employers would likely engage in an opportunistic rent-seeking behaviour to maximize their own self-interests of profit. Hence, the behavioural dynamics on the part of employers offers less credence in safeguarding the rights of workers.

The International Trade Union Confederation's (ITUC) Global Rights Index 2016–19 gave India a rating of 5 on a scale of 1-5+, where 5 signifies no guarantee of rights. Till date, 47 ILO conventions and 1 protocol has been ratified by India of which 39 are in force, 5 Conventions have been denounced; 4 instruments abrogated. However, India is yet to ratify the conventions on freedom of association and collective bargaining—C87 and C98—which the ILO has declared to be fundamental conventions. The non-ratification of these and other important conventions concerning occupational safety and health are a serious cause for concern.

Furthermore, it appears that the state governments consulted neither trade unions nor the various employers' bodies before announcing these changes. This violates India's commitment to social dialogue, as was ratified in C144, the Tripartite Consultation (International Labour Standards) Convention, 1976.  Moreover, issuing these changes via ordinances and not as laws enacted by the respective state assemblies negates the historical struggle for labour rights.

India's jump from 130th (2016) to 63rd (2019) rank in the Ease of Doing Business (EDB) is boasted across all industries. Every year, whenever India tops the higher rank on EDB, our global ranking point estimate slips towards the bottom quartile in all global parameters such as hunger, peace, slavery, worst formed labour and workers' rights indexes on the lowest scale.

To make the Centre more comfortable, all states government are now engaged in a race to bottom to reform existing labour market institutions to encourage ease of doing business and to promote flexibility. Hence, the series of unfortunate industrial disastrous incidents that recently took place have compelled us to assess and evaluate the future of Indian workers and industrial relation systems in the free- market capitalism order and the pandemic.

The suspension of labour laws will informalise the formal sector by weakening multiple labour market securities like employment, health and safety, skills, and income. Flexi-workers with limited skills will either be pushed out of the organised sector or they may be hired only for the disposable nature of their labour. Both scenarios will intensify informality. Workers ousted from the organised sector will crowd into the unorganised sector, thus increasing the supply of labour. In the absence of adequate laws, wages will be driven down.

Should ease of doing business imply human rights violations that de-humanise the society? Should it lead to diluting the labour laws, thereby eroding industrial safety and eroding the safety of the workers? Should ease of doing business imply allowing polluting industrial units to flourish and damage the health of the people? Both the Centre and the States need to answer these questions. India is a signatory to several international conventions that safeguard the interests of the workers and conserving the environment.

Should we commit a breach of those conventions in the guise of ease of doing business? Should we encourage businesses that cut at the root of the basic values of the constitution? Should workers be left to the whims and fancies of their employers in the matter of payment of minimum wages, working environment and security of employment?

No doubt, the business houses are known to fund the political parties. Should that mean that they can dictate the policies of the government? Every new disaster, every new calamity and every new situation, has taught us to improve upon the existing laws and make them more progressive.

Should the Centre and the States cast aside this approach to accommodate the limited, often people-unfriendly demands of the business enterprises? India must remain a democracy. Workers, and those who speak on their behalf, must be heard while framing or changing regulations. Their voices must not be silenced by ordinances.

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