Reservation in private sector jobs is a sign of government failure to expand the economy

Haryana’s bill for reservation of private sector jobs paying a gross salary of up to Rs 50,000 a month for locals has caused consternation in industry circles.  It challenges the logic of the central government moves to create one national market through the Goods and Services Tax; one agricultural market with a law enacted last year for cess-free trading outside the regulated mandis; one-rank -one-pension for veterans; one-nation- one- card for migrant workers; and Ek Bharat, Shrestha Bharat to promote cultural exchanges between paired states and union territories.

Our cities and industrial hubs are salad bowls of people who migrated in search of economic opportunity and in doing so brought skills, raised industrial productivity, reduced regional inequality and brought prosperity to the states hosting them.

“India’s labour market is vibrant nationally,” says K P Krishnan who retired as Secretary in the Ministry of Skill Development.  Consequently, the plumbers of Kendrapara in Odisha, the carpenters of Rajasthan, the farm hands of Bihar and eastern Uttar Pradesh, construction workers and those engaged by garment exporting industries are able to escape local poverty and even social oppression. While informal sector jobs will not be affected by the Haryana bill which has got the Governor’s assent, the workers might be set upon by vigilantes.

The bill’s target is entry-level formal jobs in companies, societies, trusts and limited liability partnerships that employ 10 or more persons.  That has the organised sector worried.  “It is restrictive, definitely,” says Chandrajit Banerjee, Director-General of the Confederation of Indian Industry (CII), an industry chamber.  “Reservation is not the right way to go,” when we are trying to attract foreign investment. “It will affect productivity and the competitiveness of industry.”  Bannerjee says CII has taken up the issue with the Haryana government.  Dilip Chenoy, Secretary-General of the Federation of Indian Chamber of Commerce and Industry (FICCI) says his organisation had opposed the bill when in was introduced in the Assembly last November.  He says the state governments are free to incentivise jobs for residents, but there should be no compulsion. “We are extremely worried; there’s an upheaval going on,” says KC Kesar, Director-General of the Delhi’s Okhla Garment and Textile Cluster, whose members have garment factories in Haryana. They fear the law will give more harassment power to labour inspectors.

Some say that the law violates fundamental rights.  Article 15 prohibits discrimination, among other grounds, on the basis of place of birth. It might also affect the right to practice a business or profession. But governments can impose reasonable restrictions. The courts have upheld the domicile requirement for admission to institutes of higher education and for state government jobs.

Andhra, Madhya Pradesh, Maharashtra and Karnataka provide reservation in local jobs. Some observers say the Supreme Court in various judgements has said place of birth cannot be the reason for reservation; it should be educational and social backwardness.

The Manmohan Singh government which emphasised inclusiveness had considered reservation for dalits and tribals in private sector jobs.  A committee was set up but the idea was not implemented, Instead companies offered to bring in diversity though education, skill development and vendor development.

Employment in the public sector is shrinking. Powerful caste groups like the Jats and Marathas have earlier agitated, often violently, for reservation in government jobs.  But with the economy growing anaemically and work opportunities shrinking, states are resorting to rationing of jobs.  Reservations are a sign of desperation and failure to create jobs, says Krishnan.  The only sustainable solution is to make it easy for industry to invest and for small industries to grow big and create well paying jobs.