Sunday, September 21, 2003		Books

Of labour markets
Ashu Pasricha

Labour Market and Institution in India: 1990s and Beyond
edited by Shuji Uchikawa. Manohar, New Delhi.
Pages 183. Rs 400.

THE dominant view in today’s world is that a flexible economy, one that can readily adjust to the needs of time, will achieve faster development than the economy with a rigid structure. While an inflexible economy is more easily prone to bottlenecks due to mismatch of demand and supply, leading to inflationary pressures and other economic dislocations, the flexible economy, in which individuals, firms, organisations and institutions efficiently adjust their goals and resources to changing constraints and opportunities, involves flexibility in all markets, i.e. land, capital, financial, labour and product markets. One well-researched aspect of market efficiency bearing on adaptability or flexibility of the economy is the operation of labour markets. The notion of labour market flexibility has been given different meanings that revolve around the idea of the capacity to adapt to change.

This is precisely the main theme of the six essays written by different scholars in the book under review edited by Shuji Uchikawa. After economic reforms, the Indian economy changed profoundly, as industrial licensing was withdrawn, companies could expand capacity and set up new units on the basis of their own judgement. In fact, investment in industry grew rapidly after 1991. Regulation in the financial sector was also relaxed. Imports increased because quantitative regulations were abolished and import duty had been reduced. Domestic and foreign companies in India were exposed to severe competition. They were forced to adjust to new circumstances.

The purpose of this study is to examine change of institution in the labour market after economic reforms. The labour market is different from other markets in role of institution. At macro-level, not only labour laws and trade unions but also subcontracting affect market. At micro-level, wage of employees depends on the recruitment and promotion system and labour management. Economic reforms have had different impacts on industries and sectors. Each author focuses on the organised sector, the unorganised sector, the financial sector, declining industries and subcontracting.

Shuji Uchikawa examines employments of the organised sector. It was argued that labour market rigidities caused by government regulation of wages and job securities restrict expansion of employment opportunities.

Jeemol Unni compares growth rates of the GDP, employment and labour productivity between the organised and unorganised sectors. She argues that a dynamic element was introduced in the economy with reforms in an effort to achieve more flexibility in the system.

Errol D’souza has compared turnover per employee of public sector banks and that of private and foreign banks. Private banks improved turnover per employee much faster than public sector banks in the 1990s.

Tirthankar Roy points out that the overall extent of job-loss in the organised sector was limited in the 1990s. The problems of firm bankruptcy and loss of jobs have been especially acute in certain industries where these problems have had older roots. The book is a valuable addition to this subject.