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Mainstream, VOL LIV No 19 New Delhi April 30, 2016

Climate Change and Workers / Push for Labour Law Reforms—Intelligent Market Arguments, but Poor Social Sense!

Saturday 30 April 2016

May 1 is the International Workers’ Day. The following two articles are being published on that occasion.

Climate Change and Workers

by Bharat Dogra

It is now well known that life in the near future can be acutely and adversely affected by climate change. Despite this, very few efforts have been made to have an understanding of the impact of climate change on various sections of vulnerable workers. Here an attempt is being made to form a preliminary understanding of the impact of climate change on a few vulnerable groups of workers.

1. Mining and Stone Crusher Workers—

India has a large number of workers in mining and stone crushing units who have been often found to be employed in very difficult conditions in extremely hot weather. If their working conditions, which are already known to be hazardous, are not improved in the coming phase of global warming, the health of these workers can deteriorate very fast.

2. Construction Workers—

India has a very large number of construction workers who have to do most of their work in the open. Sometimes even basic facilities like clean drinking water are not available. The accident rate in this sector is known to be quite high, particularly in the construction of sky-scrapers and dams. In times of climate change, exposure to intense heat and other extremes of weather can increase the health problems for workers resulting in increase in the possibilities of accidents. Hence relief needs to be provided to workers in the form of longer afternoon lunch break-cum-rest period, better provision of cool and clean drinking water, ORS and first aid facilities at work sites apart from overall improvement in working conditions.

3. Domestic Workers—

India has a large and increasing number of domestic workers, particularly in urban areas. These domestic workers often work in a number of homes. Even now they frequently face exhaustion due to hard work in many homes and their poor nutrition. Their problems can increase greatly in heat wave conditions as they go to many houses for work, apart from commuting from their own home. Helpful laws should be enacted so that their working conditions, nutrition and income can improve. With some educational inputs, they can help in energy conservation and reducing GHG emissions in many homes.

4. NREGA Workers—

Workers employed under the rural employment guarantee legislation are often called NREGA workers in short. Although this law enables them to get their employment near home, they often have to do earth-digging and carry on work in intense heat. The exposure to extreme heat can increase with global warming. They can be helped by regulating the work-hours, avoiding hours of extreme heat and providing better water and care facilities near the work sites.

5. Industrial Workers with Heavy Thermal Stress—

Many industrial workers—such as steel and iron workers, other metal workers, glass workers and others—are exposed to heavy thermal stress. Protective covers should be provided to these workers in times of climate change and resultant heat waves.

Bharat Dogra is a free-lance journalist who has been involved with several social initiatives and movements.

Push for Labour Law Reforms—Intelligent Market Arguments, but Poor Social Sense!

by K.R. Shyam Sundar

The Economic Survey 2015-16 is arguably a work of tremendous industry and intelligence and seeks to push for “reforms” of various types to perhaps ensure achievement of projected impressive growth rates. One of the reform exercises carried out is with respect to labour market reforms on the proposition that slow or absence of labour law reforms hurt the prospects of creating “good” jobs, meaning jobs embedding good labour standards obviously existent in the “formal” labour market. The Survey, among others, argues that competitive federalism in terms of introducing labour law and governance reforms is a good initiative and payroll taxes, such as Employees’ Provident Fund (EPF) contributions, actually benefit the “rich” and rob the lower waged workers of “choices” of saving (employee earnings rigidity) and thus making the funds markets less competitive.

The competitive federalism argument is built on a new flavour in that it is not for mere growth and employment that State governments relax labour laws but to provide opportunities for firms to travel beyond these market metrics (that is, scale) from low-technology embedded products (say, cables) to high-value-added products (say, cell phones) like in China. There are some problems here. Even operating in the supposedly rigid labour market firms in India have changed the export basket significantly from dominantly primary to engineering and electronic goods. Secondly, labour regulations and trade unions have not opposed innovations in the product so long the employment interests are not hurt, which stance cannot be ignored easily in the name of accrual of economic benefits in future. Further, ILO research has shown that social dialogue, if used wisely by the social actors and actively enabled by the government, make things easier for introducing several measures in many firms which cannot be even assured by labour laws. In other words, there is not much support for the implicit argument flagged by the Survey to justify reforms to enhance value-addition-driven prospects.

Though the Survey recognises the possibility of “race to bottom” inherent in competitive federalism of providing “too many concessions” to attract capital, it argues that “India seems far from such a situation” and justifies this by a simplistic and convenient citation of reforms in labour administration such as e-maintenance of labour records and rationalisation of forms, etc. which are cosmetic examples. The real burning controversy surrounds radical amendments made or proposed to be made by several States to the Factories Act, Contract Labour (Regulation and Abolition) Act and Industrial Disputes Act which basically in differing margins remove firms from the regulatory framework which is weakened by three arguments. One, a lion’s share of the economic enterprises employs less than 10 workers and it would take a long time for them to travel to the threshold of Chapter V-B. Two, contract workers are majorly exploited primarily due to small-sized ones and relaxations in thres-hold ignore this. Three, workers employed in micro and small enterprises are far more vulnerable than those in the medium and large organisations due to limited presence of trade unions and access to labour judiciary in the latter.

The basic argument here is that these reforms will lead the firms to pursue the “low road to development” by cutting primarily labour costs —which militates against the high-flown “what-you-export” argument. Again, the labour standards made or unmade at the State level may not conform to the ILO-standards-framework as, say, the inspection reforms which will only invite global scrutiny. ILO research has shown that capital ideally chases good labour standards and not vice-versa.

Another twist from the Survey is to challenge a social security law. According to the EPF Act, workers (earning less than INR 15,000) must legally (hence involuntarily) contribute 12 per cent of their basic salary and the employer concerned makes matching contribution apart from bearing the administrative costs of running the EPF scheme. The law also allows workers earning more than INR 15,000 to voluntarily access the scheme. The Survey argues for releasing the employees’ contribution while retaining the employers’ contribution on four grounds, namely, significant number of employees especially lowly-paid and flexi-workers like contract workers do not value the EPF and prefer “more take-home pay”(as they want more liquidity and are impatient, due to high trans-action costs and uncertainty in accessing EPF accounts)—this is testified by the highly inoperative EPF accounts; it means lessening of transaction costs for firms and higher adminis-trative costs for the government; the EPF scheme “benefits” the rich (that is, the non-covered employees) and worse so the “covered” workers will not fall in the income tax net to avail multi-fold exemptions from taxes; and it widens “investment choices” of workers and hence making the funds market more competitive. This move is expected to incentivise on both supply and demand fronts which will lead to more formalisation of jobs.

These are contestable. Highly inoperative accounts are mostly due to governance failure. If the contract workers do not appreciate the EPF, it is due to the fraudulent behaviour of the contractors and utter failure of the inspection and governance system and absence of a portable and simple EPF governance system. It is a case for administrative reform (which has been initiated). Secondly, since when has the government started “listening” to the workers’ concerns as in this case to push a dubious reform measure! Social security as an institutional measure that promotes labour commitment which through longer employment tenure is a win-win-win solution for workers, firms, and the government—for firms by increasing productivity and reaping returns of capital invested in workers; the government because the social security burden is borne by the two parties mostly. Thirdly, there is enough evidence that “capital” received through voluntary retirement schemes have almost always been squandered by workers and to expect them to take rational choices in investment would be foolish. Coerced saving is “bad” in macro-economic terms but individually and conventionally speaking it is a virtue. Again, numerous uncovered employees and their employers access the EPF system voluntarily because there already exists a “system” which can be accessed with “zero fixed costs”. Finally, if the EPF is aiding the so-called “rich” (uncovered) workers, then there are alternatives for it.

However, it is not clear how uncovered workers could be deemed to be rich. Secondly, in a country that does not boast of any old-age assistance schemes for any person, the dubious distinction of poor and rich is simply untenable. But the solution provided by the Budget, which is yet to be clarified, is perverse in character. Is this measure to divert the salaried classes to turn to NPS which is partly on investment in equity away from the EPF which is based on investments in secure instruments.

The government’s thinking on reforms is widening radically as it is going beyond the simplistic procedural reforms to flexibility reforms to dismantling social security systems, the latter being the last frontier of workers’ rights. Last year it was with the employees’ health insurance and this year it is with the EPF. Notwithstanding intelligent arguments in the Survey, the government is rooting for hurting not only contemporaneous but also future rights and even the securities of workers.

Dr K.R. Shyam Sundar is a Professor, HRM Area, XLRI, Xavier School of Management, Jamshedpur.