This Act is not Independent India’s legislation. There should be no prescribed levels, and wages and salaries should be left to the free play of demand and supply.


It’s time to take another look at the country’s thinking on the fundamentals of employment. Over the last six months or more, several questions have been raised in media on jobs. In fact, the Opposition made the much talked about inadequacy of jobs a major electoral plank. And now, a Cabinet Committee has been formed to deal with the challenge.

This writer’s impression is that not many in the Opposition have an understanding of the subject. How many of them would be aware that the Industrial Disputes Act 1947 and its corollaries pose a major obstacle to the growth of employment? This Act is not Independent India’s legislation. It was amongst the last legislated legacies of the British Raj. The authors of the Act belonged to the same school of thinking as those who gave Britain its labour laws. We all know how the ethos around employment brought the British economy to its knees. And how Prime Minister Margret Thatcher condemned this ethos, denigrated everything socialist, fought with the trade unions like a tigress and shut down many coal mines. But for Thatcher, a British wit had commented, Britain was certain to join the Fourth World of Europe.

The Industrial Disputes Act has been the parent of Indian thinking on virtually all employment, except for the uppermost layer of officers and executives. When the Act was passed, the government intended it essentially for workers. Because of the low salaries prevailing then, the clerical staff got included in its ambit. In the absence of any other guidelines, the situation has degenerated to an extent that any employee can file a suit in a labour court. As a result, every responsible employer thinks not just twice, but at least thrice before making appointments at the levels of Class II, III and IV staff. As far as the number of jobs is concerned, it is these categories that are critical. Employers, up to a point, take shelter in outsourcing. However, such proxy appointments can hardly help in generating jobs on a national scale.

If one wants to see glaring examples of what damage the Industrial Disputes Act and its corollaries have done in India, one should visit West Bengal. This state, which was once India’s leading industrial province, is now a graveyard of industries. Similar is the situation in Kerala, although at a smaller scale because the Industrial Disputes Act-inspired trade unionism stopped the state’s economic growth early in its tracks. In the heydays of monopolies and restrictive trade practices, a majority of large business houses were headquartered in Kolkata. The Industrial Disputes Act Act-bred trade unionism effectively chased them out. It is time that India chased out the ID Act.

In order to seem pro-worker, successive governments in West Bengal went to the extent of looking the other way even when crimes were committed in factories. Even if hell broke loose in a factory, the standard government practice was to deprive the police of the authority to enter the premises without the permission of the labour minister or his IAS secretary. Trade unionism was pampered to the extent that employers were forced to deduct from the workers’ wages their contribution to the union and hand that over to the union secretary on every payment day. This was called the checkout system, which was included in the official periodical agreement between the union and the management. The agreement would also include the various designations of workers and their duties.

As a result, one factory in a Kolkata suburb had 119 designations for a total of 2,360 workers. The effect of this was, for example, a gum carrier had to bring to the machine-head a bucket of gum every 45 minutes. This took about five-odd minutes every time in an eight-hour shift. This meant that the particular worker worked for 40-50 minutes during the course of the day and loitered around on the floor for the remainder of the time. For unloading the wagons bringing raw material, the factory had several gangs of 14 workers each. If one or two workers of gang 1 were absent, gang 2 could not provide any substitutes. Instead, two temporary workers had to be employed, while all the other gangmen sat idle. Surprisingly, for the sake of short term profits, very few employers resisted this sort of oppression, possibly not realising that their businesses could close down during a recessionary phase.

The situation has undoubtedly changed with liberalisation, but the mindset remains the same or very similar. Labour laws, therefore, need to be scrapped; the equations between the employer and employee should be left to the two sides and not interfered with by state laws. It would therefore, be best if the government recommends to the two sides to sign an agreement or a contract. If either side defaults, a tribunal or court should be there to adjudicate.

A trend has been growing in recent years of state governments insisting on minimum wages for skilled and unskilled workers. Often these minimums are much higher than the prevailing market. For small and medium employers, these minimums are unaffordable. Such businesses have been known to close down. All in all, these minimum wage levels are a severe dampener on employment. Ideally, there should be no prescribed levels and wages and salaries should be left to the free play of demand and supply. However, to restate, each appointment should be covered by an agreement or a contract and countersigned by someone like a notary public, so that the employee is protected by educated guidance before signing.

There is widespread demand for reforms and further liberalisation for setting up and running business and industry. In other words, there is demand for more freedom to do business. Logically, there should be complete freedom to employ or get employed, subject to terms being mutually agreeable. These regulations were essential in the days when capitalists who ran industries were feared. There was no doubt until World War II began there were more or less ruthless exploiters among industry owners. Until the time of Henry Ford I, a number of them influenced the police to go to the extent of even firing upon and killing agitating workers. Fortunately, those days are long gone.

Uncannily, it was Vladimir Lenin who proved to be the harbinger of non-exploitation and labour welfare in the capitalist countries. Industrialists realised two things—one, that the poor person mattered; two, unless the masses had money in their pocket, the products of industry could not have an expanding demand. In other words, especially in democracies, any significant exploitation is not possible. Hence, laws to protect workers against being maltreated are no longer necessary. In short, the Industrial Disputes Act is obsolete and, therefore, ripe for abolition.

The resulting free job market should lead to many labour intensive enterprises that entrepreneurs are not able to start today. Moreover, jobs in other sectors would also increase once the fear of labour laws is removed. This is exactly what our country is crying out for.