Budget 2019-Survey pitches for labour reforms for more job creation

Labour law reforms can generate significantly more jobs as seen in the case of Rajasthan compared to other states, the Economic Survey for 2018-19 stated. India needs to create 55-60 lakh jobs every year in the next decade at labor force participation rate of 60 percent, the survey, which was tabled in Parliament on Thursday pointed out.

"Deregulating labor law restrictions can create significantly more jobs, as seen by the recent changes in Rajasthan when compared to the rest of the states," the survey said. The document predicts that the working-age population will grow by roughly 97 lakh per year during the coming decade and 42 lakh per year in the 2030s.

It said, "If we assume that the labor force participation rate (LFPR) would remain at about 60 percent in the next two decades, about 55-60 lakh jobs will have to be created annually over the next decade." The survey found that no major labor reforms were initiated by the states from 2007 to 2014.

In 2014, Rajasthan was the first state that introduced labor reforms in the major Acts. Thereafter, many states followed Rajasthan. A comparison between the indicators for labor, capital, and productivity of manufacturing firms makes it clear that flexible labor laws create a more conducive environment for the growth of the industry and employment generation, it said.

The states which are rigid in respect of their labor laws are suffering in all dimensions and are unable to create enough employment and cannot attract adequate capital, it added. On average, plants in labor-intensive industries and in states that have transited towards more flexible markets are 25.4 percent more productive than their counterparts in states which continue to have labor rigidities, it pointed out.

The major reforms undertaken by Rajasthan included the amendments in the Industrial Dispute Act, 1947, the Factories Act, 1948, the Contract Labour (Regulation & Abolition) Act, 1970 and the Apprentices Act, 1961. The labor ministry wants to create four labor codes – wages, industrial relations, social security and welfare, and occupational safety, health and working conditions by amalgamating, simplifying and rationalizing the relevant provisions of the existing 44 central labor laws.

The Cabinet approved the Code on Wages Bill on Wednesday, which would be pushed for passage in the ongoing Parliament session. The other three codes are at the pre-legislative stage.