Parochial economics – The Hindu BusinessLine

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The Haryana law reserving private sector jobs for locals is anti-industry. It will stifle the labour market

The Haryana government’s notification last week of the Employment of Local Candidates Act, 2020 has triggered alarm bells. The law mandates reservation for local residents of up to 75 per cent for private sector jobs that offer a salary of less than ₹30,000 a month. Industry bodies have warned that the enactment may push businesses to migrate, as their skilled workforce is not sufficiently ‘local’. Migration, however, is easier said than done. The smaller entities may find it difficult to carry on, once the new law comes into force from January 15, 2022. It empowers “authorised officers” to enter premises of firms, check records and impose penalties.

Industry has battled similar policy nativism in Andhra Pradesh and Karnataka. In March this year, Noida in Uttar Pradesh announced 40 per cent local quota for private sector jobs. Similar moves are apparently afoot in Maharashtra, where domicile politics is old hat. The IT sector in Gurugram has said that it could mount a legal challenge, like the one being faced by the Andhra Pradesh Employment of Local Candidates in the Industries/Factories Act, 2019. Auto component MSMEs will bear the brunt, as their employees fall in the below ₹30,000 salary bracket. For these businesses to keep the status quo, their compliance costs may rise. After all, industry cannot substitute skilled for unskilled labour, nor can it relocate overnight. The perfunctory and cynically populist intent behind such enactments is apparent. The laws are clearly ultra vires of the Constitution that provides for affirmative action for the disadvantaged but prohibits discrimination on domicile basis. Article 19 guarantees citizens freedom to move throughout India, and Article 14 provides equality before law and prohibition of discrimination on grounds of place of birth. Hence, the laws are most likely to be struck down by the courts or kept in abeyance. But the politicians couldn’t care less as the objective is only to score some brownie points with local youth. Rather than address the core issue of skills shortage by investing in education and skilling, job reservations for locals is the easy way out.

However, the rise in regional inequalities (east vis-a-vis west and south) since the 1990s has deepened social divisions, with migration largely headed towards the western and southern States where infrastructure is better developed. The setting up of educational and skills institutions in backward areas can bridge the gap. These regions can turn into hubs of economic activity. This, in turn, will check the advance of parochial economics.

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