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Application of job security laws, workers’ bargaining power and employment outcomes in India

Published online by Cambridge University Press:  01 January 2023

Anamitra Roychowdhury
Anamitra Roychowdhury*
Affiliation:
Jawaharlal Nehru University, India
*
Anamitra Roychowdhury, Centre for Informal Sector and Labour Studies, School of Social Sciences-I, Jawaharlal Nehru University, New Delhi 110067, India. Email: rcanamitra@gmail.com; anamitra@mail.jnu.ac.in
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Abstract

This article empirically investigates two propositions normally advanced to explain employment stagnation in the organised sector of the Indian labour market namely, rigid labour laws regulating the ‘hiring and firing’ of workers (along with factory closures) and militant trade union activity boosting workers’ bargaining power. It is claimed that labour laws arrest employment creation by making the labour adjustment process difficult. Additionally, it is claimed that workers’ increased bargaining power raises the effective cost of labour, hindering employment creation. This article critically examines both these claims. First, it questions whether labour laws can be held responsible as an explanation for employment stagnation in the organised sector as a whole, since a close reading of the Indian legislation reveals that labour laws apply in less than 35% of aggregate employment in the organised sector in India. Next, it investigates whether employment stagnation in those industry segments where labour laws apply – namely, organised manufacturing – is due to restrictions on ‘hiring and firing’. We find no evidence to support this hypothesis. Finally, it analyses the trend in workers’ bargaining power through various indicators, and finds such power to be unambiguously declining. Thus, the study finds no empirical support for the two conventional arguments put forward to explain employment stagnation in the organised sector of the Indian labour market.

Keywords

J31J63J88Bargaining poweremployment protection law (EPL)employment stagnationhire and fireIndiajob security regulationslabour lawslabour market flexibilityorganised sectortrade unions
Type
Job quality and security: do laws work?
Information
The Economic and Labour Relations Review , Volume 30 , Issue 1: Symposia: Post-Crisis Rebuilding: Job Quality, Job Security and the Law , March 2019 , pp. 120 - 141
Copyright
© The Author(s) 2019

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