Reforming Labour Legislation on Working Conditions for Competitive Advantage: An Empirical Study

By Deb, Tapomoy | Indian Journal of Industrial Relations, October 2010 | Go to article overview
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Reforming Labour Legislation on Working Conditions for Competitive Advantage: An Empirical Study


Deb, Tapomoy, Indian Journal of Industrial Relations


Globaliztion & Competitiveness

Globalization has facilitated the integration of world economy thereby making geographical boundaries only of political relevance. Globalization is considered to be a major force behind liberalization and privatization of hitherto closed or somewhat closed economies primarily in the developing world. Since it is the firms and not nations that compete in the market the onus of gaining and sustaining competitiveness lies on the firms. The increased competition has forced firms to reduce their operating costs in order to reduce price of their products and services. Thus, it has become imperative for firms to control their costs especially at present time due to global meltdown fuelled by economic slowdown. Under such a compelling business scenario, Indian firms are looking at ways for cutting down their costs especially the labour cost. This is because labour cost constitutes a major component of operating and consequently product costs of firms.

Competitiveness is a complex term which requires firms, government and mechanisms to be readjusted and reoriented for ensuring long-term success. At the micro level, the labour reform seeks to improve working conditions of the workforce on one hand and frees employers from the shackle of cumbersome and archaic legal system on the other. The trade unions should act as facilitators and play the role of a resource person to bring about greater awareness amongst workforce about the working condition regulations, motivate and guide workers towards greater cooperation for improving the productivity and competitiveness of the firm so that all its stakeholders including the employees, management, suppliers, customers and society can be benefited. At the macro level, reform of the working condition regulations seeks to bring the key stakeholders of the firm, that is, workers, trade unions and management closer and move towards the path of success across the different sectors of the industry. This will result in creation and/ or development of a business-conducive environment in the country with win-win approach. The creation of a business-conducive environment will help in attracting more and more foreign direct investment (FDI) necessary for spearheading socioeconomic development of the country. Commentators may argue that such a scenario is too idealistic and cannot be realized in practice given the past experiences. It may be argued that the very object of working condition regulations or as a matter of fact any other labour legislation is a piece of social welfare measure. If the laws are not serving its intended purpose either to business or to labour, then its existence is questionable or debatable. India has to make its legal environment such as working condition regulations growth inducing so that employers, workers, and the society gains.

Over the past one decade there has been increasing globalization of Indian economy, which has necessitated increasing the competitiveness of Indian industry through human resources in general and workers in particular. There has been an increasing demand from the industry for reform in labour legislation in order to increase efficiency, effectiveness, competitiveness and productivity of Indian workers so as to face the onslaught of global competition, especially from China. In general, the Indian labour legislations are partly archaic and have outlived their utility in a globalizing world. However, reforming labour legislation is a very touchy issue and there are conflicting interest groups involved, which has resulted in lack of initiative of the government to make necessary amendments. Much has been talked but little seems to have been done.

Review of Literature

Literature survey indicates that there is a widespread concern at the present level of effectiveness of labour legislation on working conditions in view of global business competitiveness. Peru-Pirotte (1996) observed that labour legislation is quickly evolving in order to take into account the impacts of technologies on working conditions and on human resources within firms.

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