Organized Manufacturing Employment-Government’s Fault?

125990190_533581114f.jpgIn the year 1999-2000, there was a registered manufacturing employment of 8 million people – about 3/4th were workers and the rest supervisors and managers. They represented 2% of the economy’s workforce producing about 11% of domestic output and using about 25% of renewable capital stock. Where 1980’s was a period of jobless growth in this industry, the 1990’s witnessed a boom for 4 years during 1992-96.

In 2001-02, 1.3 million people lost their jobs. It was mostly workers who lost their jobs but employment of managers increased steadily, though they too experienced job losses. Growth rates of workers and supervisors in the year 1980-81 and 2000-01 was,

0.9% and 2.2%, respectively.

Most economists and policy makers believe that the nature and extent of state intervention of industrial labour market is excessive, increasing labour costs and reducing flexibility to respond to vagaries of business in an increasing open and competitive economy. The lack of managerial freedom to ‘hire and fire’ is widely believed to adversely affect output and employment growth. Lack of adaptable labour market has become a binding constraint on expansion of labour-intensive manufacturing and their export, holding back India’s ability to effectively compete with East Asia. The job losses are widespread across industries and states. 11 out of 15 major industry groups witnessed a fall in employment during 1996-01, and employment declined in 13 out of 17 major states, constituting close to 90% of the workforce, with only exceptions being Kerala

and Himachal Pradesh. Real wages per worker has stagnated in the 1990’s while real emoluments for supervisors went up by 77%. The reasons for the same could be the increasing need of education, skills and experience and growing technological complexities.

One of the reasons for the decline in employment is the setting up of the National Renewal Fund- to finance retrenchment of workers in public sector enterprises- which was a signal of government’s tacit support for similar initiatives in the private sector. Although, the labour laws remained the same, their enforcement was diluted or government ignored their evasion by employers. In effect, it was reform by stealth. Some of it was perhaps unavoidable with the growing domestic and external competition. Introduction of information technology could have also led to displacement of workers.

The real need of the hour, is perhaps not greater freedom to employers to ‘hire and fire’ at will, but to ensure that those losing jobs during industrial restructuring get their legitimate dues from their employers. They require retraining to acquire marketable skills, and financial assistance to become self employed. There is also a need to move towards income security with workers accepting multi tasking and flexible use of their labour.

Aparna Vyas

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