Provide income support, restore jobs 

#GS3 #Economy 

On the contrary, scrapping labour laws will only reduce wages, lower earnings and reduce consumer demand 

  • Following the adage, “never waste a crisis”, the government of Uttar Pradesh, last week, introduced an ordinance that has scrapped most labour laws for three years — ostensibly for creating jobs and for attracting factories exiting China following the outbreak of the novel coronavirus.  
  • These laws deal with the occupational safety, health and working conditions of workers, regulation of hours of work, wages and settlement of industrial disputes.  
  • They apply mostly to the economy’s organised (formal) sector, that is, registered factories and companies, and large establishments in general.  
  • Madhya Pradesh and Gujarat have quickly followed suit. Reportedly, Punjab has already allowed 12-hour shifts per day (72 hours per week) in factories without overtime payment to overcome worker shortage after the migrants have left in the wake of the national lockdown. 

Shock point 

  • Snatching away labour rights in the midst of a global pandemic and national lockdown is distressing and shocking.  
  • Over the course of the last seven weeks, we have witnessed unheard of human distress as lakhs of migrant workers continue to desperately trudge to their villages after losing their jobs, livelihoods, and toeholds in cities.  
  • Despite overflowing food grain stocks, governments have been miserly in providing adequate food security.  
  • There are no inherent shortages at the moment as the inflation rate remains moderate.  
  • Agricultural produce is rotting in farms for lack of transport.  
  • Industrial production is held up as migrant workers have fled for their lives. 
  • The slowdown is due to lack of demand, not of supply, as widely suggested.  
  • With massive job and income losses after the lockdown, aggregate demand has totally slumped, with practically no growth.  
  • Therefore, the way to restart the economy is to provide income support and restore jobs. 
  • This will not only address the humanitarian crisis but also help revive consumer demand by augmenting incomes.  

Rationalise labour laws 

  • Depriving workers of fundamental rights such as freedom of association and the right to collective bargaining, and a set of primary working conditions (such as adequate living wages, limits on hours of work and safe and healthy workplaces), will create a fertile ground for the exploitation of the working class. 
  • Presently, over 90% of India’s workforce is in informal jobs, with no regulations for decent conditions of work, no provision for social security and no protection against any contingencies and arbitrary actions of employers.  
  • Abrogation of labour laws, as proposed by the Uttar Pradesh government, will free more employers from the obligations they currently hold for ensuring the job security, health, and social protection of their workers. 
  • It will increase informal employment in the formal sector instead of encouraging the growth of formal work. 
  • As India battles the economic and social consequence of the COVID-19 pandemic, many State governments have seized the opportunity to scrap labour laws on the pretext of encouraging employment.  
  • Such a decision makes little economic sense currently, as it will reduce share of wages in output, thereby reducing growth in domestic demand and hurting output expansion. 
  • Significantly, exports cannot be an option for now as the global economy is staring at the possibility worse than the Great Depression. 


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