Authors: Anoushka Das and Madhav Talwar are students of Symbiosis Law School, Pune
The article delves into the Central Government’s efforts to consolidate 29 labour laws into four comprehensivesteamlined ‘Labour Codes’ as an initiative towards boosting economic growth,removing redundancies and promoting ease of doing business. However, these labour codes may have an adverse impact on workers’ rights, and this erosion of rights has sparked significant debate over the validity of this controversial move. This article explores the delicate balance between boosting economic growth via the promotion of ease of doing business, and protected labour rights to ensure an equitable and sustainable future for the Indian workforce.
Introduction
The Central Government has introduced the New Labour Code for New India via its press release dated 12.10.2022, wherein it elaborated upon its aim to consolidate the 29 labour laws into 4 labour codes.
The multiplicity of labour laws and the need for overarching reforms in labour rights prompted the Central Government to undertake this initiative. However, this legislative move has faced significant backlash on account of its attempt to trade of worker’s rights of expression against the ease of doing business. This legislation is a classic example of governmental attempts at sacrificing worker’s rights in an attempt to achieve progress on a macro scale.
Ease of Doing Business vs. Labor Rights: The Dichotomy
The balancing of business convenience and labour rights is difficult. Governments seek to attract investment and employment by facilitating business operations, but they also protect workers’ rights to equitable compensation, safe working conditions, and freedom of association. This economic growth versus labour rights dilemma confronts governments worldwide. Changes to India’s labour code that seek to simplify employment regulations illustrate this tension, highlighting the delicate balance between ease of doing business and labour rights protection.
Ease of doing business
The legal framework and administrative procedures that stimulate business in a country are defined as Ease of Doing Business. This notion has gained popularity as nations reduce bureaucratic barriers and create a favourable business climate to attract investments, encourage entrepreneurship, and boost economic growth.[1]
Simplifying and streamlining business startup and administrative processes is essential to ease of doing business. The following parameters are used to develop an overall EoDB ranking[2][3]:
- Starting a Business off: This includes the time and expense required to register a business, acquire licences and permits, and engage employees.
- Compliances pertaining to property: This includes the time and money required to obtain construction permits, hire contractors, and establish utility connections, as well as the time and money required for electricity grid access, permit acquisition, and electricity payment, as well as the time and money required for property registration, title deed acquisition, and property tax payment.
- Trade Facilitation: It encompasses various factors that contribute to the ease of conducting business, such as the time and cost required to obtain a loan, collateral requirements, interest rates, the time and cost associated with importing and exporting commodities, the number of required documents, and the implications of customs duties and taxes.
- Protection to Minority Investors: This includes the extent of shareholder protection, the simplicity of contract enforcement, and the availability of bankruptcy protection.
- Enforcing of Contracts: This includes the time and cost required to resolve a commercial dispute through the courts, the effectiveness of the judicial system, and the likelihood of success in court.[4]
By enhancing the ease of conducting business, nations can attract foreign direct investment, encourage domestic entrepreneurship, and stimulate job growth.[5] For instance, India’s “Make in India” strategy expedites corporate processes, improves infrastructure, and attracts foreign investment to boost the manufacturing sector’s GDP contribution.
Ease of doing business includes factors such as streamlined procedures, credit availability, efficient trade, and transparent regulations.[6] For holistic prosperity, however, this must consider societal impact, particularly labour rights and social responsibility.
Labour Rights
Labour rights are fundamental concepts and safeguards that ensure workers are treated fairly and respectfully at work. International treaties and national labour laws protect the health, safety, and rights of workers in various economic sectors.
Among the acknowledged and significant rights are:
- The right to a fair wage, paid leave and social security: This implies that workers should be compensated enough to satisfy their basic needs and support their families. This implies that employees should be granted paid time off for vacation, illness, and other personal reasons. India’s Social Security Code, 2020, demonstrates a commitment to providing comprehensive coverage to all employees, including those in the informal sector, through the introduction of social security codes.
- The right to safe and healthy working conditions: This means that employees should be protected from hazards in the workplace, such as exposure to toxic chemicals or dangerous equipment. For instance, regulations mandating protective equipment in industries such as construction and mining seek to prevent accidents and occupational diseases.
- The right to freedom of association: This means that workers should be able to join unions and negotiate collectively with their employers.
- The right to equal treatment: This means that all employees should be treated equally, regardless of their race, gender, religion, or other personal characteristics.
Thus, to prevent exploitation, ensure equitable treatment, and protect worker health, labour rights are indispensable. They also promote economic expansion. Integral to social justice, these rights address inequalities, protect vulnerable groups such as informal and migrant labourers, and guarantee equal treatment. In the aggregate, they construct equitable societies and empower marginalised workers while fostering economic stability.
Challenges and Concerns Concerning this Balancing Act vis-à-vis the Code
India’s new labour standards conflict with ease of doing business. The codes condense legislation for efficiency but may violate workers’ rights.
Combining labour laws into fewer codes streamlines rules, eliminates administrative overhead, and enhances operations. Less unclear codes may diminish rights. Strict enforcement may hinder operations, pitting labour rights against ease of doing business.
Concerns about the retrenchment approval threshold decrease. The new criteria allow enterprises to lay off up to 300 people without government approval, which might lead to significant informal sector layoffs.
The new labour codes threaten workers’ social security. The codes make hiring contract workers, who lack benefits, easier. They complicate injured worker compensation. India’s development paradigm promotes economic growth with low state control. This indirectly lets small and medium enterprises avoid rules.[7] These organisations benefit from more legislative exemptions for “ease of doing business”.
Economic progress and labour protections contrast sharply. Addressing labour exploitation and inequality hinders business growth. Opposition to labour regulations shows comprehension of this trade-off, underlining the need to balance worker rights and business considerations.
Stakeholder Analysis
The stakeholders’ interests need to be analysed to understand the impact of these codes:-
Central and the State government
In India, labour laws fall under the Concurrent list, granting both the Central and State Governments the authority to develop worker-friendly policies. Their responsibilities include regulation, policymaking, and enforcement, resulting in considerable influence. The government initiates reforms to codify laws, nurturing an environment conducive to economic growth, investment, and employment. State governments implement local regulations while balancing corporate interests and worker safety.[8]
Workers/Employees
Labour laws exert substantial influence over the rights and welfare of workers, with potential positive or negative effects. However, codes may not adequately address security, safety, and bargaining issues in the freelance economy. Critics fear that consolidated codes could impair safeguards and negotiations.
Employers
Employers are significant stakeholders who influence labour rules. Their actions affect business, employment, and economic progress. They benefit from simplified labour rules that attract investments and boost efficiency to expand and profit.
General Public
The public’s vital position as a stakeholder in labour codes influences the societal, economic, and ethical equilibrium between corporate and labour interests. This equilibrium is shaped by the perspectives, expectations, and responses of the public.
The equilibrium between business expansion and labour rights is determined by the interactions and actions of the aforementioned stakeholders. This analysis highlights the need for a balance between economic development and workers’ rights in India’s evolving socioeconomic environment.
Policy Recommendations and Conclusion
Policy Recommendations
The authors make the following recommendations in this regard:-
Balanced Approach: The government should prioritise labour rights and business ease. Policies should foster economic growth and labour rights rather than prioritising one over the other. This could incorporate targeted inefficiency changes without compromising worker well-being.
Social Safety Nets: The government should strengthen social safety nets to reduce worker harm. Social security can ensure gig economy and informal sector workers have access to healthcare, unemployment benefits, and other supports.
Stakeholder Consultation: Labour unions, employers, and civil society groups must be consulted to create effective policies. Inclusive conversation may balance interests and concerns, creating more complete and equitable labour regulations.
Monitoring and Enforcement: Labour rights should be monitored and enforced strictly. Regular assessments can follow the codes’ effects on workers’ circumstances and well-being, allowing for revisions if unfavourable effects occur.
Promoting Responsible Business Practices: Encouraging ethical business practises helps reduce the codes’ harmful effects. Rewarding companies that prioritise employee rights and well-being might inspire others.
Conclusion
The New Labour Code for New India is a difficult trade-off between economic convenience and labour rights. This ambitious bill consolidates labour laws into four codes to reduce regulations and boost economic growth. However, worker rights and safeguards may be threatened, illustrating the delicate balance between economic growth and worker well-being.
In conclusion, combining ease of doing business with labour rights is complex. The Indian government may create a labour code framework that promotes economic progress and worker protection and well-being by following the above guidelines, creating a more equitable and sustainable future for New India.
[1] Ashok, M. L., & N, D. A. (2020, August 30). Ease of Doing Business Rank: A Direction to Reach India’s 5 Trillion Economy Target. Social Science Research Network.
[2] Department for Promotion of Industry and Internal Trade. (n.d.). EASE OF DOING BUSINESS – Make in India. Www.makeinindia.com. https://www.makeinindia.com/eodb
[3] Ministry of Commerce and Industry. (2022). Starting a Business. Department for Promotion of Industry and Internal Trade.
[4] Central Coalfields Limited And Another v. Sll-Sml (Joint Venture Consortium) And Others, 2016 AIR SC 3814.
[5] Ministry of Commerce & Industry. (2021, December 16). Initiatives to boost domestic and foreign investments. Pib.gov.in; PIB Delhi. https://pib.gov.in/PressReleasePage.aspx?PRID=1782353
[6] Doshi, R., Kelley, J. G., & Simmons, B. A. (2019). The Power of Ranking: the Ease of Doing Business Indicator and Global Regulatory Behavior. International Organization, 73(3), 1–33. https://doi.org/10.1017/s0020818319000158
[7] Ministry of Finance, Reorienting policies for MSME growth, Economic Survey 2018-19.
[8] Kuruvilla, S., & Verma, A. (2006). International Labor Standards, Soft Regulation, and National Government Roles. Journal of Industrial Relations, 48(1), 41–58. https://doi.org/10.1177/0022185606059313.
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