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Labor Flexibility in India and New Zealand

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Employers in India have the same arguments for reforms as those in New Zealand or any other developed country. Neo-liberals reflect the sentiments of employers in their arguments against labor market institutions. Legal restrictions in this area affect the creation of jobs, encourage law violations, facilitate the hiring of nonregular workers and may encourage bribery, etc, they argue. [Basu et al; Zagha 1999]. Employers in India feel that the law, which is affecting restructuring of enterprises in the country, is Chapter V B of the Industrial Disputes Act (ID Act). This provision was inserted during the Emergency of 1975-77 and once the situation was under control, most of the laws introduced during the period were repealed with the exception of Chapter V B.

Even though the workers opposed emergency itself, they sing praises for Chapter V B which can be criticized for its strict provisions on laying off even when a company is deep in financial crisis. It is often felt that this provision should be removed and removal wouldn’ t hurt workers as is often argued. “ This is because employers do not invest money only to retrench workmen or close the undertakings” [Bharucha].

It is argued that resources invested in non-performing units can be transferred to other more productive units and this would help in the creation of jobs. Labor protective laws along with trade unions have given rise to ‘ labor aristocracy’ which according to Johri (1996:447) “ can delay or obstruct all worthwhile change in technology, workload, manning, shift work, etc” . Trade Unions, on the other hand, have a number of arguments to support their stance on the issue.

These unions argue that workers must not be laid off even if they are surplus but instead be absorbed in some other section of the firm. However, if it becomes impossible to retain some surplus workers, they must be given good compensation and then terminated. [AITUC 1997; Mahadevan 1999a] For trade unions in India Chapter V B “ encompasses the right to livelihood, natural justice and transparency” [D’ Costa].

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