Labour reforms, Asian experience
J. Sri Raman

Labour Market Regulation and Deregulation in Asia, Experiences in Recent Decades.
Ed. Caroline Brassard and Sarthi Acharya. Academic Foundation (in association with Lee Kuan Yew School of Public Policy, Singapore), New Delhi. Pages 229. Rs. 595.

Labour market reforms are less often talked about than market reforms themselves. And, when the subject is raised, it is usually as a result of a headline-hitting instance of labour unrest that represents only a minuscule section of the employment market.

The agitation by employees of the Airports Authority of India against official moves for ‘modernisation’ of airports, which the unions saw as job-threatening ‘privatisation’, was one example. Another was the earlier eruption of labour-police violence at the Hero Honda unit in Gurgaon, focussing attention on the question of industrial relations under foreign collaboration. Professedly pro-reform commentators pounced upon both the opportunities to demand labour law reforms of a drastic nature, without showing signs of recognition that the vast majority of India’s workforce was not involved in such instances.

It is not only the gains of ‘globalisation’ that the devout votaries of labour market deregulation are concerned with. In a recent article titled "Why India’s labour laws are a problem", economist Kaushik Basu, for example, talks of "the ‘culture’ that pervades our labour markets, which in turn is a consequence of the complicated and ill-conceived laws that govern the labour market." He adds: "The travails of Calcutta’s famous Great Eastern Hotel illustrate nicely much of what is wrong." They do not.

The state of affairs in a starred, public-sector hotel is not representative, either, of the larger labour market. The main impact of labour market deregulation must be measured by its consequences for the workforce, above all, in agriculture, and in mainstream industries of the manufacturing sector besides, of course, the sprawling unorganised and informal sectors.

The volume under review takes a more holistic view of the subject than the pro-reform pundit in a hurry.

The editors, Caroline Brassard and Sarthi Acharya, hope that the book, which highlights the regulation and deregulation process in some Asian countries over recent decades, will "help develop an interface of growth (or) development and its sustainability with welfare (or) distribution of gains".

Each section in the book has a point for the aforementioned pundit to ponder. One of the findings in the chapter on The Indian Experience, for example, is that, "irrespective of the growth rates achieved (or not achieved) and eras when these growth rates occurred, the employment potential, particularly in the large-scale organised sector, has been low and that there has been high differentiation in the work place by both earnings and labour standards".

The chapter on the Impact of wage and labour regulation in Vietnam (which has fared very well indeed in securing foreign direct investment) takes specific note of the fact that "foreign-invested enterprises are required to pay their employees wages that are more than twice that of their domestic counterparts".

The chapter by Suzanne Jameson, who proposes a "gender perspective" on the issue, calls for laws (and no deregulation) to deal with the added, post-globalisation disparities that women workers face. This labour law reform, it is stressed, "should recognise the hazards women face at the work place without reducing them to the status of mothers who work, and denying them their full status as industrial citizens".

One of the findings, presented by the editors on the basis of "empirical evidence", trashes (if in strictly academic terms) the theory that lays the blame for India’s employment problem on unreformed labour laws. It says: "Low employment growth outside the primary sector in India in (the period from) the 1940s until the 1980s might have resulted from rigid labour laws (among other reasons), but the employment situation has not changed much in the post-1980s period despite liberalisation and the relatively higher growth achieved…"

This is of a piece with the conclusion of a study sponsored by the Asian Development Bank (no dangerous enemy of deregulation), published recently under the title Labour Markets in Asia: Issues and Perspectives. The study, according to an ADB summary, finds that "while labour market reforms may be necessary in some specific cases, by no means are labour market policies the main explanation for the widespread increase in unemployment and stubborn underemployment" in Asia.

It should interest our captains of industry (who are critical of even such measures as an education cess) to learn that both the studies agree that the region, which is home to 500 million unemployed and underemployed persons, needs a massively increased "investment in human capital".

The one noticeable omission in the book is a section devoted to China. This may be because of a lack of access to reliable data. But a look at the labour law and market situation there would have been interesting and instructive, as the Chinese example of deregulation is often commended for Indian emulation. Do the increasing reports of social unrest from that country, especially the mutinies of migrant labour, have nothing to do with deregulation?

HOME