Professional Documents
Culture Documents
Session 8
Session 8
Session 8
Informal w o rk er s
Formal w o rk ers
1999-2000 5.3 (0.5) 94.7 (58.0) 100 (8.5)
T o ta l
• Minimum wages
• Regulations
• Social Protections through employment
guarantees.
• Skilled versus unskilled labour
• Shift towards contract labour
• Current Government’s labor market reforms
MINIMUM WAGES
Regulations
Minimum Wages
• Historical perspective:
• First introduced in New Zealand in 1894.
• Followed by Australia (1896), United
Kingdom (1909) and the United Sates (1938)
• India: Minimum Wages Act (1948)
• What is the current Minimum wage rate?
• INR 333/per day
Basic Microeconomics model
Supply
W
Wage rate
W*
Demand
L*
Number of workers
Basic Microeconomics model
Supply
W
Wage rate
Demand
LS LD
Number of workers
Minimum Wages: Empirical Findings
1.8%
1035.6 1036.6
1000 987.7
1.6%
928 943.3
Total value of export in million USD
645.1 636.4
600 585.7 1.0%
581.7
543.5 532.6
510.2
0.8%
400
0.6%
0.4%
200
0.2%
0 0.0%
9
4
-9
-0
-0
-0
-0
-0
-0
-0
-0
-0
-0
-1
-1
-1
-1
-1
98
99
00
01
02
03
04
05
06
07
08
09
10
11
12
13
19
19
20
20
20
20
20
20
20
20
20
20
20
20
20
20
Value Percentage of total export value
Source: RBI.
India is the largest importer of carpets into the
United States
Papola, T. S. (2013). Role of labour regulation and reforms in India. Country case study on labour market segmentation. ILO
Working Paper No. 147.
Labour – The Indian Reality
• Marginal increase in GDP share of the manufacturing sector
– 22% in 1980 25% in 2006
• The manufacturing sector was disadvantaged because:
– Tough competition from China
– Restrictive labour laws
– Moderate corporate investment
– Ranked 134/175 on World Bank’s ‘Ease of Starting Business’ survey
– Skill shortage
• Example: In Maharashtra, only 17% of the workforce is
marginally skilled
• Unskilled labourers found it difficult to move out of the
agricultural sector due to lack of employment in the
manufacturing sector
On the macroeconomic front:
• Combined fiscal deficit or state and central government
remained high at 6.4% of GDP in 2006-07
• the balance on goods and services had been consistently in
deficit for the past three decades
• Portfolio investment was higher than FDI, this was a cause of
concern as such investments could be easily reversed.
• The increasing cost of living was a heavy burden on low-
income families
• India’s growth was taking place despite government polices
and not because of them.
REGULATIONS
Reducing them to have ease of doing business
Modi’s Labor Market Reforms
Necessary for “Make in India”
Proposed:
• Make firing workers easier
• Increase cap to 300 employees.
• Women can work night-shifts
• Change child labor laws and Minimum wages laws
• Companies allowed filing one self-certified returns for a
clutch of labour laws
• EPF number portability
• Consolidation of 44 labour laws into four labour codes.
• Where are jobs? Which is a good job? What is a decent
work?
Introduced So Far
Caution
• Some of the proposed reforms could make it a
“dangerous place to do business
• Removing “red tape” may leave vulnerable
groups exposed
• Removing red tape implies dismantling labor
inceptions, restricting labor unions, moving
employment violations to civil code, ending
absolute ban on child labor, removing penalties of
gender-based discrimination
• Bad, long run strategy as US and Europe
awake to more socially conscious produces!