T C A Srinivasa-Raghavan: Unemployed of the world unite

OKONOMOS

The Communists (and, in fairness, assorted other political parties with publicly socialist pretensions but privately electoral ones) have been the biggest enemies of India's unemployed millions. Everyone knows the reason.

To protect existing vote banks, they will not allow labour reform. But no labour reform means stagnant, or at best, very slowly increasing investment. And without continuous and increasing investment, jobs cannot be generated.

Instead of accepting this, the Communists and their cousins in the Congress and the BJP blame economic reforms for the slight increase in unemployment in the 1990s. As usual, they avoid the truth.

And the truth is that if labour market reform had been even half as rapid as product and financial market reform has been (and these have also been quite slow, actually), far more jobs would have been generated.

But while the Communists may deny the existence of the market, they can't prevent it from functioning. So even as the formal part of the labour market remains sclerotic and rigid, as ordained by the Messrs Communists and Co., the informal side of it is booming.

As the paper* cited below (by TeamLease, a labour temping company) shows, the boom is proving several things. The most important of these is an inescapable Indian and Chinese "objective reality".

This is that permanent employment means fewer jobs and more employment means temporary jobs. Given the excess supply of labour in India, you simply can't have both at the same time. TeamLease has recognised this essential fact and is leveraging it. Established in 2001, it now employs over 15,000 "associates". It is thus the single largest "HR outsourcing service provider".

Its website says "For career aspirants seeking flexible employment or an organisation seeking flexible workforce, recruitment and staffing solutions in any function or category we assure speed, flexibility, transparency, dependability and excellent service, needless to say, value addition and a solution-based approach."

In short, TeamLease is who you turn to if you need people but don't want to give them permanent jobs. It finds them for you. As the company puts it "we have become an efficient resource partner offering staffing solutions."

The paper it has crafted is one of the best to be written on the state of the labour market in India and some other major economies. It is free of ideology and looks at the issues purely from the point of view of how to get more people into jobs.

Fake altruism isn't the motive. Being a volume business, that is what increases its turnover and profits "" never mind that these are temporary. The point is that everyone except the politicians benefits.

As might be expected from a company engaged in leasing out temporary workers, it suggests some changes to the Contract Labour Act. It is tempting to dismiss these as self-serving. But a more sensible way to judge the recommendations is to see if they will increase employment.

They will, because they introduce rationality into what is otherwise an irrational legislation. The irrationality has been caused by pursuing the mirage of social equity rather than equity itself.

Finally, those who object on moral grounds to finding a realistic solution to India's employment problem would do well to read the section on China. It is very revealing.

The most striking revelation is that there is no longer any permanent employment in China. Nor is there a concept of minimum wages. There are no strikes. There is no labour court worth the name.

And most crucially, there are no Communists.

*India's Labour Market: The Case for Temporary Staffing Reform, TeamLease Services, www.teamlease.com