Authored by Charmi Khamesra, a 3rd-year law student at National Law University, Jodhpur
Rising unemployment has always been a grave concern for a country like India. Studies indicate the cascading effect of unemployment in societies in the form of poverty, increased crime rates and suicide rates, and concerns over the mental and physical health of the individual. This also puts a strain on public resources. As per reports from the World Bank, nearly 70 percent of India’s manufacturing jobs are in danger of becoming obsolete or redundant due to automation, thereby highlighting another aspect of jobless growth. So, improvement in job prospects may take much longer than the speed of the economic revival.
In our country, employment concerns directly impact voter sentiments. Curbing unemployment and generating jobs is often an agenda on every political party’s manifesto pushing political parties towards regional and populist policies. Recently, the Karnataka State Employment of Local Candidates in the Industries, Factories and Other Establishments Bill, 2024 was cleared by the cabinet but is currently withheld because of the uproar. The Bill envisioned that industries and other establishments would appoint local candidates in 50% of management positions and 75% of non-management positions, and had set stringent criteria along with linguistic requirements for defining local candidates.
Similar legislations have also been tabled in states like Andhra Pradesh, Haryana, Jharkhand, and Madhya Pradesh. As of now, the legislation enacted in Haryana has been stayed by the Apex Court emphasising that no coercive action can be taken against the employer based on this legislation. Similarly, all such legislations of other states are currently under the scrutiny of the Supreme Court. There is a need for a more equitable, harmonic and inclusive strategy for addressing unemployment nationwide highlighted by the Apex Court’s continuing scrutiny of these state-specific reservation laws, which highlights the potential for constitutional and economic conflicts.
Implications of the Legislation on Employment and the Economy
As per the 2011 Census 30.3% of all the people who migrate in various forms undertake inter-state migration for employment or business. Karnataka has a higher percentage of inter-state migration than India’s average. As per 2011 census, India had a staggering 5.6 crore inter-state migrants which is an indicator which helps in predicting how much higher the numbers are likely soaring today.
These migrants contribute positively to the local economy by rendering services while gaining meaningful employment in the state. It is also pertinent to note that different industries require particular types of skilled labour which might be available only through the migrant labour force. Forcing industries to implement such legislation will dry up their source of manpower which in turn will harm their interest. When the government imposes such onerous obligations on private businesses, it requires them to make intricate regulatory changes in its framework. This will exacerbate the grievances of smaller businesses and hinder their capacity to compete and expand. The state has also not adequately considered the effects on both the migrants and industries while introducing such legislative measures.
Besides that, a uniform implementation of this legislation is not possible due to the diversified needs of various industries. From the perspective of labour economics, it can distort the efficiency of the labour market by creating skill gaps forcing businesses to hire workers who may not have the required skills and experience. The needs of a textile industry which requires semi-skilled workers cannot be equated with that of an IT sector which hires a highly skilled workforce. This will create peculiar employment patterns within the state and result in unequal treatment of the local population and other migrant workers. The private sector requires various talents and skills which cannot be confined to the geographical boundaries of specific states. Such obligation severely limits the discretion of the employer which further can lead to a lack of investments and economic inefficiency.
A Constitutional Lens to the Local Job Reservation
The legislation directly and adversely affects the constitutional rights of migrants in the state by breaching their right to equality. The State Government is effectively creating a distinct and separate class of citizens without providing a valid rationale, leading to unjust discrimination against migrants. This legislation goes against the mandate of Article 16 (2) and 16 (3) which emphasises that reservation cannot be provided solely based on domicile. The basis of reservation has to be a place of residence plus some other factors such as socio-economic backwardness. Although Article 16 is restricted to matters of public employment, reservation in the private sector is contended by many states claiming that various tax concessions, land grants and incentives permit them to include the private sector under this mandate.
Such legislation also impinges upon the right of the individuals to move freely and carry on the business or trade of their choice as enshrined in Article 19(1)(d). It also curtails the right of the industries to carry on the business freely as guaranteed by Article 19(1)(g) of the Constitution. Article 19(1)(d) ensures the right of every citizen to move freely throughout the territory of India. The bill, by preferring local candidates, could indirectly limit the mobility of non-local candidates by making it harder for them to find employment in Karnataka. This restriction on movement for employment is not constitutionally valid as it discriminates against non-locals, contradicting the freedom enshrined in Article 19.
This also falters on constitutional grounds as Article 14 of the constitution guarantees the right to equality before the law and equal protection of the law. The Reasonable Classification Doctrine allows laws to differentiate between groups in cases where there must be a clear, rational basis distinguishing the group the law affects and there should be a rational nexus to the object sought to be achieved. Thereby the legislation passed by the state violates the Reasonable Classification Doctrine laid down in the case of State of West Bengal v. Anwar Ali Sarkar as it creates a class between people who are Kannadigas and Non-Kannadigas without justifying any clear and rational basis for it.
Additionally, the Act makes it mandatory for an employer to hire 50% local candidates for posts in the managerial category and this limit exceeds 75% for posts in the non-managerial category. This creates a discriminatory classification between people based on their category of employment disproportionately affecting individuals from lower socio-economic strata. Such unreasonable legislations passed by the state government will encroach upon the fundamental rights of citizens especially the migrants and people from the lower rung of the society, coercing them to look for livelihood in other states without any form of compensation for their past contributions. Relying on Indra Sawhney v. Union of India, the 75% reservation falls foul of the maximum cap of reservation affixed by the Supreme Court. Thus, the law is both constitutionally unsound and detrimental to the broader interests of social justice and economic growth.
It even remains unjustifiable on the touchstone of intelligible differentia and the doctrine of reasonable nexus laid down in Chintaman Rao v. State of Madhya Pradesh, as it might hamper the overall merit and efficiency of the workforce, ultimately harming the economic performance of the state. As per the judgement, the state ought to balance the right to freedom and social control. Furthermore, this would lead to loss of livelihood for many migrants who are majorly from the marginalised sections of the society which is in contravention to Article 21 of the constitution.
The Constitution guarantees every citizen freedom in matters of employment and business as substantiated by the judiciary in Sukhnandan Saran Dinesh Kumar v. Union of India that any unreasonable restriction on trade can be challenged under Article 19(1)(g). It also directly affects other freedoms enshrined in Article 19(1)(d) and Article 19(1)(e) which guarantees freedom to move freely throughout the country and reside or settle in any part of the territory.
The judgement of the Apex Court in the case of Maneka Gandhi v. Union of India helped establish a symbiotic relationship between Articles 19 and 21 and the two cannot be separated. A. Peeriakaruppan v. State of Tamil Nadu an attempt at intra-state reservation in admissions of All India Exams was found to be a violation of both Articles 14 and 19. A similar analogy can be drawn from this in the context of the impugned legislation.
The private education institutions cannot be compelled to follow the reservation policy under the 93rd Constitutional amendment. Similar exemptions must be extended to the private industries as well. The state cannot justify its legislative intent with reasons like local welfare and rising unemployment as limited resources cannot be grounds for compelling private institutions to abide by reservation policies as highlighted by the Supreme Court in P. A. Inamdar v. State of Maharashtra. In the case of Dr. Pradeep Jain v. Union of India, the court opined that regionalism must be avoided by the legislators to protect the rights of the people and the diversity of the country. It would also fail to abide by Article 41 which emphasises the security of work for its citizens.
Violation of Employment Rights under International Conventions and Declarations
The right to livelihood has also been acknowledged as a vital part of the right to life and liberty under Article 21. It also qualifies as a violation of human rights. the apex court has in many landmark judgements read fundamental rights with human rights enshrined in the Universal Declaration of Human Rights (hereinafter UDHR). Article 7 protects individuals from any form of discrimination. Article 13 provides that everyone has a right to freedom of movement for procuring job opportunities. The state should not curtail this freedom and provide for such legislation. Article 23 protects freedom in choice of employment, while this legislation restricts people’s free choice of employment.
India has also ratified the ILO Convention No. 111: Discrimination (Employment and Occupation) Convention in 1960. The convention ensures equal opportunity and treatment for all workers in terms of access to employment and working conditions, which includes the right to non-discriminatory employment opportunities. Article 6 of the International Covenant on Economic, Social and Cultural Rights (ICESCR) obligates the state to recognise the right to work, which includes the right of everyone to the opportunity to gain his living by work which he freely chooses or accepts and will take appropriate steps to safeguard the economic freedom of the individuals. Therefore, any discrimination in providing job opportunities would qualify as discriminatory and in violation of the declarations and conventions of which India itself is a signatory.
The Power of Skill Development Over Local Job Reservations
States like Kerala have adopted forward-thinking policies, such as training migrant workers in the local language (Malayalam) and providing quality education for their children to accommodate migrants also in jobs along with locals instead of creating barriers for migrants through reservations. This approach highlights that the real solution lies not in reserving jobs for locals but in focusing on education, skilling, and human capital development. In the medium to long term, building a more skilled workforce will eliminate the need for job rationing and ensure that everyone, regardless of where they're from, has the opportunity to contribute. Clearly, local job reservations miss the mark when it comes to achieving long-term objectives of national and economic growth.
Navigating the Path Towards Sustainable Alternatives
The problem of unemployment and providing suitable jobs to the workforce remains an unending concern that India grapples with. Regional differentials, unequal labour outcomes, and inappropriate working conditions are the auxiliary challenges that need to be dealt with. However, this kind of parochial legislation fails to consider the regional disparity, societal divisiveness and negative implications for employers and investments in the state.
The conceivable mechanism to solve the problem can be to develop policies focusing on harnessing the potential of the manufacturing and service sectors of the economy. This calls for providing educational, vocational and skillset development training to the workforce to minimise the existing gaps between the workforce and technology. The new policies of the government should advocate for the establishment of new industries, startups, policies for enhancing the quality of employment for the workforce, and technology advancement.
Ease of doing business in governmental policies along with an integrated labour market with a mobile workforce is quintessential for boosting the economy and generating employment. Digital literacy can also open up new avenues of employment through freelancing, upskilling and contributing to the thriving gig economy. Adapting to the technological changes in the industry along with proficiency in industry-specific tools and software can prevent the workforce from becoming obsolete. Other than conventional avenues of job creation in the public and private sectors the government should also incentivise employment opportunities in furtherance of environmental sustainability like sustainable agriculture and forestry, funding waste management, renewable energy, green finance, etc. through its new legislations that would be a step towards India’s commitments to become a green economy.
The government should ensure better implementation of the labour codes as they aim to ensure that labourers receive wage security, social security and health security, gender equality in terms of remuneration, a minimum floor wage, and make the lives of inter-state migrant workers easier. The four newly enacted labour codes along with the several initiatives spearheaded by the Central Government under ease of doing business with the aim of creating a conducive business environment is a step in the right direction. The code on social security has widened the definition of employees to include inter-state migrant workers as well. Therefore, in the present environment, local job reservations promoting regionalism as a policy would be regressive in nature.
In the interest of increasing employment the government by amending the existing policy framework can incentivise private institutions also to register themselves to the employment exchange mechanism, wherein through the National Career Service Portal the government tries to connect job seekers and employers. These initiatives have not reached their full potential because of under-utilisation of the mechanism by job seekers and employers, skill gaps and lack of effectiveness of the portal in updating the database at regular intervals of time.
Conclusion
While unemployment and weak labour market outcomes are serious issues in India, the solution does not lie in regional job reservations at local levels. It will increase societal divides and may deter investment and growth. The government should thus undertake to develop an integrated and mobile labour market through the enhancement of skills, promotion of manufacturing and service sectors, and support toward sustainable industries. Labour codes will be strongly implemented, and the National Career Service portal mechanisms refined to narrow down gaps between job-seekers and job-providing organisations. An effective labour market will be dynamic and inclusive, and there will be employment opportunities in a future with India where access, equality, and equity become the governing criteria and gradually align with technological advancements; job opportunities will come within the reach of private institutes when they are registered for employment exchange registration and the refinement of job-matching platforms and interfaces. Local job reservations, though, would be a step backwards and a denial of the promise of the united national workforce.