Critics have accused the recently passed labour laws, namely the Industrial Relations Code, 2020, of favouring employers. The code, among other things, makes it easier for smaller firms to lay off workers. But what if labour laws favoured workers instead?
A study of apparel makers shows firms in states with pro-worker labour laws prefer using machinery and automation over hiring labourers. Rana Hasan of the Asian Development Bank and his co-authors arrive at these results by comparing labour laws across states, and using data on around 1,800 Indian garment makers from 2009-10 to 2013-14. The garment industry was chosen because it employs labour heavily and so, any impact of labour laws is felt most strongly there.Pro-worker laws have the effect of increasing labour costs, compelling firms to move away from labour-intensive methods and adopt more capital-intensive ones. Being part of global supply chains, they have to ensure quality products, meet tight schedules and produce in high volumes, which is possible only through capital-intensive methods.
Courtesyg: Google (photo)
