New Delhi, May 9 (KNN) The wishes of the governments notwithstanding, the laws and regulation related to labour in India seem to discourage employing more people.

Reacting to media reports that Prime Minister Modi asks outcome of every expenditure proposal in terms of number of jobs that the initiative would create, small industry owners look at it as the right approach but feel the entire administration down to the district magistrates has to be aligned towards employment creation. 

“For all these years Government policies have been mainly for the benefit of organised labour and other groups that constitute just 5% of the total numbers; it is time that this government starts thinking for the 95% and makes growth of employment in industry as the core of its labour policy”, says  V.K Agarwal of Lucknow based Shashi Cables Ltd. 

According to Agarwal, “this calls for so redesigning rules and regulations that unorganised employers (including MSMEs) give up all hesitation in employing new workers and  the current trend to buy expensive automating equipment and machines just to reduce the number of workers in arrested or reversed”.
Employing people formally requires businesses to fork out almost forty per cent additional costs towards social security besides the compliance burden it entails.

What infuriates employers is that regulations force them and the workers to pay up for services such as Medical insurance which are not even provided and there is no market based option available for insurance. 

“Last year, one fine morning, the Delhi Government announced 50% increase in minimum wages without following the process of consultation. How should businesses react to this if not by shedding workers as they cannot pass on the populist burden to consumers”, says an entrepreneurs based in Delhi.

Similarly, Government doubled the maternity leaves for women workers without realizing the fall out of this decision; MSMEs will think ten times before employing women in productive age. Whose interest was served, asks the businessman.

According to Federation of Indian Micro Small and Medium Enterprises (FISME), “the minimum wages and other benefits should be as closely aligned to the market conditions as possible and large difference between what prevails in the marketplace and what is mandated causes all sorts of distortions and violations of laws”.

FISME is also critical of disparity between government wages and market rates.

There is need to bring in some rationality between what the Government pays to its employees and what is the prevailing market rate based on the supply and demand of job seekers. Extremely high government wages and perks enhanced with successive pay commissions have distorted markets and created a class of elite workers. That is why there is so much craze for government jobs.  After pay commission led hikes, the Trade Unions push for wage hikes  in PSUs and large private sector companies too who react by increasing wages but shedding more jobs at the same time.

It is a vicious cycle that can be broken only if the Government places more faith on market forces in determining fair wages and refrain from distorting labour markets.

According to FISME, the choice is between providing employment to more people with moderate wages or employing only a few people with high wages and high social security costs. (KNN/ AB)