Labour reforms are in the limelight again as Narenda Modi government has set a target  to implement  four labour codes by  December, this year. This will be the final stretch of labour reforms. During the last session, the parliament had  passed three labour code bills; the industrial relations code, social security code and occupational safety, health and working conditions code. All such codes,  including the wage code bill, which was passed by the parliament last year, need more attention in the light of the serious down trend in the economy, especially in the COVID times.

Normally,  discussions are carried out  only about the  labour in the organized sector and regulations apparently affect the  people who work  in the organized sector. But, there is an intrinsic relationship between labour in  the organized and  unorganized sectors.   The   present laws and their modifications  affect not only the organized sector but the unorganized sector and their interactions also.   More than 90 percent of the Indian labour force is in the unorganized sector.  Of this, 60 to 70 percent is not directly in agriculture sector. Some of them are in tiny/ small units in   rural sector but most of them  indulged in  various kinds of unorganized activities.

Interestingly, the unorganized sector works as a reserve army of labour for the organized sector in many ways. Wages in the  organized sector cannot be raised without affecting the unorganized sector because employers would immediately start subcontracting out for  availing  labour from the unorganized sector. Apparently,  this  is what sets a capital discipline on labour in the organized sector. This is  a very crucial  function of the unorganized sector in the labour front  and if there is improvement in   wages in the unorganized sector,  in a way it will also strengthen the organized sector. This is mainly because of the organized sector can bargain for higher wages in line  with the unorganized sector. Firstly, the unorganized sector is a reserve army of labour but it indirectly disciplines labour in the organized sector.  The second thing, normally it is typical of economists,  mainly  in the American universities, World Bank and  IMF to suggest that the state policies can be used to regulate the relationship between the organized and unorganized sectors. This requires a notion of a relatively neutral state, an umpire between labour in the organized  and    unorganized sectors and capitalists as somebody who dictate  the rules and stick to them. Now, this is what has been violated.

In the case of  changes in  labour law it was always more in favor of capital from the time of Dr. Manmohan Singh onwards.  Now,  this has totally been gone in favor of the capitalists. That is why there is discussion about longer working hours, change in the hire  and fire  policy, giving sops to private enterprises,   but nothing in favour of  labour.  Obviously one can state that  the state not being neutral but  becoming more and more biased against labour. The implication of this is the most severe as  one seldom talks  about the fact that  the state does not care about unemployment. People talk about the use of   surplus food grains which is so much in stock, deficit financing to improve the employment situation and  to create demand by transferring money to the people.   The reason is  that the state is more interested in controlling labour in  favor of the capitalists rather than changing it in a neutral way so that the capitalist don't control the workers. This clearly indicates the non-neutrality of the state and a state which is hell bent on controlling labour rather than creating more  employment.

The unorganized sector and its low wages,   vast  under employment and  its huge  reserve of labour,  works   as a disciplining factor or reserve army for wage bargain in the organized sector. The second point is that the state have been far from neutral and the last set of  regulations only show extreme bias in favor of the capitalists and industrialist.  This  is totally  against the realm of  labour  to strengthen employment   either in the organized or in  the unorganized sector,  but its main purpose is to discipline labour for the sake of capitalists.

Liberalism, liberalization and neo-liberalism are basically  mechanism by which the state gives up all its responsibilities of development, growth, employment generation and is handed over to the private business. Based on this ideology governments  give more incentives to the private sector including drastic changes in  labour laws so that more private investment can be generated. The catch in this is not ideology, but is simple. To improve private investment, it  takes  time and one doesn't  know how long it takes before private business confidence returns. Tax  concessions, liberal  loans and  monetary and fiscal policies which have been in favor of the private sector has not really increased investment anymore and for this, it is essential for the state to step in and do deficit financing. People should ask, how long should it take before private business picks up and employment shoot up, unfortunately   there is no answer to that. The answer, if anything is negative and this is where the  labour policy should concentrate on.  If you don't do it within a limited period of time, if your investment doesn't increase sufficiently to turn around the economy, it has to be the state. This discipline on time by which the economy can turn around,  is really what is democracy, not going against the labour and their supporting capital.