Thursday, March 30, 2006

Kaushik Basu on the need for labour reforms

One pervasive myth is that making labour laws flexible will hurt organised sector labour.

What this overlooks is that India has a shockingly small organised private sector less than 10 million workers because of our restrictive labour laws.

Once these are changed, the demand for labour in the organised sector will increase and this is bound to raise wages and mop up part of the unemployment. To make this change politically feasible government needs to spell out the argument in public.

Once ordinary workers realise that the laws need to be changed not to elicit sacrifices from them but in their interest, there will be more support for the change.

From this ToI column by Kaushik Basu, an economics professor at Cornell.