Fri. Mar 29th, 2024

Last week the government of Haryana notified the employment of Local Candidates Act, 2020 last week providing 75 per cent reservation for locals in private sector jobs offering a monthly salary of less than Rs 30,000, with effect from January 15 next year. It would empower authorised officers to enter premises of firms, check records and impose penalties. The law has not settled down well with either the industry or applicants, and can potentially generate several issues.

The law was issued with the intent to prioritise the youth of the state, allowing local candidates to receive opportunities. While the purpose might be meaningful, industries do not run on sentimental whims if the output involves compromises. Mere application of a law will not guarantee the local public of jobs.

“A lot of big ticket deals are pending and were expected to be closed in this quarter. The notification will make corporates to rethink their strategy and postpone the decision,” said a consultant with the global brokerage firm, requesting anonymity.

“Reservations of any kind do affect the overall ease of doing business sentiment of a state or a country. Haryana needs to be cognisant of the signals it sends out to companies. Multinational Companies come to the National Capital Territory for superior talent and they can easily relocate from Gurgaon to Noida if they feel that business will get more difficult,” said Gagan Randev, Executive Director, India Sotheby’s International Realty.

If the industry does not spot sufficiently skilled labour, it would simply not hire. Industry bodies have warned that they might end up migrating if their skilled workforce is not sufficiently ‘local’. But the extended problem is that migrating is not an easy option as well. It would more or less end up being a permanent move and might cost even capable individuals of possible local jobs. Smaller firms associated with larger entities that cannot afford to migrate would end up suffering, and cost several already employed individuals of their livelihood.

One must at the same time acknowledge the fact that the rise in regional inequalities since the 1990s has deepened social divisions, with migration largely headed towards the western and southern States where infrastructure is better developed. Yet laws of such purpose will serve no purpose. Areas lagging behind must be worked on, by setting up educational and skills institutions in order to bridge the gap. Once these regions transform into hubs of economic activity, the solution would be stated.

Auto component MSMEs will bear the hardest brunt, as most of their employees fall in the below ₹30,000 salary bracket. For these businesses to keep the status quo, their compliance costs may rise. After all, the industry cannot substitute skilled for unskilled labour, nor can it relocate overnight.

“At the time when the Government of India is pushing to improve the ease of doing business, this move will adversely affect the business sentiment. The threshold of Rs 30,000 is significant and is likely to hamper the ability of the employers requiring skilled talent, including in IT and ITES sectors to hire the right talent,” said Mani Gupta, partner, Sarthak Advocates & Solicitors.

Other states to process through similar policies are Andhra Pradesh and Karnataka among others. In March this year, Noida in Uttar Pradesh had announced a 40 per cent local quota for private-sector jobs. Similar moves are apparently afoot in Maharashtra, where domicile politics has been old rigged culture. The IT sector in Gurugram has said that it could mount a legal challenge, like the one being faced by the Andhra Pradesh Employment of Local Candidates in the Industries/Factories Act, 2019.

At their core, these proposals signal an acknowledgement in the political class that not enough remunerative jobs are being created in the economy for the unskilled and semi-skilled labour force. Hence the easiest way out to hold on to the electoral base, similar to any field for that matter, is to opt for reservation.

In the absence of a labour-intensive manufacturing sector, with the public sector shrinking in size, such demands are only likely to gain traction. But if each state responds in a similar fashion, it threatens to diminish the benefits branching out from the free and unrestricted movement of the labour force. Migration, after all, not only provides a steady pool for labour, and leads to higher value addition, but also helps in the economic development of the less developed regions through remittance.

 

Even if one keeps aside all logical and apparent reasons for the unpopularity of the law, we cannot for the fact ignore that the law defies the Constitution. the Constitution provides for affirmative action for the disadvantaged but prohibits discrimination on a domicile basis. Article 19 guarantees citizens freedom to move throughout India, and Article 14 provides equality before law and prohibition of discrimination on grounds of place of birth. Hence, the laws are most likely to be struck down anyways by the courts or at least kept in abeyance.

The law has been and might again end up being a mere decorative façade for political parties to receive some praise and votes.

Such laws simply throttle the right to equality and free movement, and to practice any occupation. Moreover, the state would be gradually stripped of its sheen as a viable investment destination and damage its economic interests. Such restrictions, hardly in keeping with the stated policy of improving the ease of doing business in India, will only lead them to reconsider their investments in the state, forcing them to look at other alternatives. The policy thrust should be towards easing restrictive labour laws, not creating further hurdles for business.

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