India Inc: Relaxing labor laws will result in more formal sector jobs

The World

My position on India's labor market got some much needed backing from the Financial Times' BeyondBrics blog today:

India's union workers are forcing the government to take up the issue of the country's screwed up labor market, Hemal Shah writes. But they're missing the point in asking for greater regulation, instead of relaxed rules that will allow the 90 percent of the work force now employed by unregulated sweatshops to enter the formal sector — where safety regulations, minimum wage laws, and other policies that benefit workers can be enforced.

The FT is rightly sensitive about copyright infringement, so I'll leave you to visit the link for the argumentative ligature, and suggestions for how this plan could work without erasing the gains workers have already made. 

However, I'll leave you with this note from Shah's piece: Even as India's growth rate doubled, between 2000 and 2005, the number of jobs in the formal sector acounted for only around 15% of the total added.  And since then, the proportion has gotten even worse.

For more details, read my articles on the folly of preferential policies for small scale industries, "Did Gandhi kill India Inc?" and the resurgence of labor unions at Maruti-Suzuki and other firms this summer, "Union strikes threaten India Inc."

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