Reservation in Private Sector Jobs : Answer writing Frontier IAS

Reservation in Private Sector Jobs

Mains Question: Argue how reservation to locals in the private sector jobs and protectionist measures affect the economic growth prospects of the state. Give examples to explain your viewpoint.

Following points are considered in the present post along with the mains question based on it.

• Trade and non-trade barriers affecting economic growth and investment in a state and country 
• Examples of countries and states and what happened there
• Existing local jobs quota in private sector jobs in Indian states
• Reasons for such laws 
• Discuss Haryana's 75% reservation in private sector jobs bill, its provision, and likely effects
• The legal aspect of it (constitutionality angle), interstate relations, socio-cultural impact, economic impacts 
• The way forward 

Trade and non-trade barriers affecting economic growth and investment in a state and country 

The economic growth and development of a state or country are basically influenced by trade barriers and non-trade barriers. 

Trade Barriers

Some Barriers/restrictions are usually imposed by the government on free import/export activities. Such government policies are called trade barriers. It can either make trade more difficult and expensive or prevent trade completely. A government can use the trade barriers in the following ways :

• Increase or decrease in the foreign trade of the country.
• With the help of trade barriers, the government can decide 
• the kinds of goods and 
• the amount/quantity of goods, that should be traded in the country.

Examples of Trade Barriers

• Tariff Barriers: The government can impose taxes on certain imports to raise the price of imported goods. This makes imported products less competitive in the domestic market. 
• Non-Tariff Barriers: When the government comes up with some rules and regulations that make trade more difficult, it is known as non-tariff barriers. For example, foreign companies have to adhere to complex manufacturing laws that make the trade difficult.
• Quotas: A limit placed on the number/amount/quantity of imports.
• Voluntary Export Restraint (VER): It is similar to quotas. Under this, the countries agree to limit the number of imports. This was used by the US for imports of Japanese cars.
• Subsidies: This policy is used to encourage the domestic market. A domestic subsidy from the government can give the local firm a competitive advantage.
• Embargo: If there is a complete ban on imports from a certain country, it is known as an embargo. E.g. US embargo with Cuba.
• Antidumping policies: Anti Dumping duty is imposed by the domestic government on that foreign product which are usually priced below the fair market price and tend to harm the domestic trader’s interest. For example, India has imposed anti-dumping duties on various Chinese products so as to give Indian traders a level playing field.

Non-Trade Barriers

Human Resources: It is the first and foremost factor on which the economic growth and development of a country depend. Following aspects related to the workforce have a direct impact on the growth of an economy :

• Skill
• Education
• Training

An educated, skilled and well-trained workforce is more productive. It increases the efficiency and quality of the output. The opposite is also true. An illiterate and unskilled workforce acts as a hindrance in the economic growth of the country.

Natural Resources: The availability of natural resources plays an important role in the overall development of an area. The discovery of more natural resources generally leads to the growth of the economy subject to some other factors like the use of adequate technology, skilled and educated labour, and the availability of capital, etc. 

Technology: Generally, the better the technology the more effective is the utilization of available resources. All this results in the more productive and efficient use of resources. The overall result is better economic growth.

The opposite is also true. An area may be rich in resources, but the lack of efficient technology makes it difficult for the labour to convert the resources into final goods and services. This acts as a roadblock in the development of the economy.

Poverty cycle: Some states/countries are trapped in the vicious cycle of poverty. Poor people usually have low incomes. Low incomes generate comparatively low savings. Low savings results in lower levels of investments which in turn results in low income. And the cycle continues. 

Apart from above-discussed barriers, some of the factors given below also act as a roadblock in the growth and investment in the area.

Institutional and Political factors:

• Ineffective tax structure
• Lack of property rights 
• Political instability
• Corruption
• Unequal distribution of income
• Formal or informal markets
• Lack of Infrastructure

Social & Cultural factors: 

• Religion 
• culture 
• tradition 
• gender issues

Existing local jobs quota in private sector jobs in India states

Domicile-based job quota

• The domicile-based reservations have already been implemented in education in India.
• However, courts have shown their reluctance to expand this reservation to employment.
• This is because the reservation solely based on place of birth would raise constitutional questions relating to the fundamental right to equality.

What are various Constitutional Provisions about domicile based reservation?

• Article 16(2) of the Constitution: It guarantees equal treatment under the law in matters of public employment and prohibits the state from discriminating on grounds of place of birth or residence.
• Article 16(3) of the Constitution: It provides an exception by saying that Parliament may make a law prescribing a requirement of residence for jobs in a particular state. This power is only given to the Parliament, not to state legislatures.
• Article 371 of the Constitution: Under it, some states have special protections. For example, Andhra Pradesh under Section 371(d) has powers to have “direct recruitment of local cadre” in specified areas.

Why is domicile based reservation prohibited by the Constitution of India? 

• This is because India is described as an indestructible ‘Union of States’ under the Constitution of India. And there are provisions for ‘Single Citizenship’ for every citizen of India regardless of the State in which they live.
• That means that people of India are recognised as ‘Citizens of India’ and not the ‘Citizens of States’. Under such circumstances, giving preference to the locals in-state jobs hurts this very principle of citizenship.
• Apart from this, the Constitution of India provides some Fundamental Rights to its citizens. Under these, citizens have the liberty to move around the country freely and settle in any part of the country and get employed in any state. 
• Thus, providing reservation to the locals also violates this basic principle of equality provided by the Constitution of India.

Observations made by the  Supreme Court / High Courts of India:

• In 1984: Dr Pradeep Jain v Union of India: The court expressed an opinion that the policy of “sons of the soil”, prescribing reservation or preference based on domicile, would seem to be constitutionally impermissible and violative of Article 16(2).
• In 1995: Sunanda Reddy v State of Andhra Pradesh Case: The Supreme Court affirmed the observation in Pradeep Jain to strike down a state government policy that gave 5% extra weightage to candidates who had studied with Telugu as the medium of instruction.
• In 2002: Appointment of government teachers (where preference was given to applicants belonging to the district or the rural areas of the district concerned) in Rajasthan was invalidated by the Supreme Court, as it was liable to be rejected on the plain terms of Article 16(2) and in the light of Article 16(3). 
• In 2019: A recruitment notification by the UP Subordinate Service Selection Commission was struck down by the Allahabad High Court where preference was given to women who are “original residents” of the UP alone.

Laws that reserve jobs for locals:

• The Public Employment (Requirement as to Residence) Act: The Parliament of India exercising its powers under Article 16(3), enacted the law aimed at abolishing all existing residence requirements in the states.

• Exception:  The provides exceptions only in the case of the special instances of Andhra Pradesh, Manipur, Tripura and Himachal Pradesh.

• Special protections under Article 371: As per the Constitution of India some states have special protections under Article 371. For example, Andhra Pradesh under Section 371(d) has powers to have “direct recruitment of local cadre” in specified areas.
• Manipulation of Article 16(2): In the states where official business is conducted in their regional languages, knowledge of the language is described as a criterion for various recruitments. 

• This ensures the preference to local citizens for jobs in the state. For example, states including Maharashtra, West Bengal and Tamil Nadu require a language test.

• Article 16: Some states argue that article 16 talks about only ‘public employment’ and does not explicitly mention ‘private-sector employment’. So there is no violation of Fundamental Rights if a state provides reservation to local candidates in the private sector jobs.

What are the reasons cited behind the domicile-based quota :

A strong will of the youth of the region: Various National level surveys, centred around the youngsters, were conducted by different NGOs and private organisations, etc. Majority of which shows that the youth is always in favour of doing a job in the home state, whether public or private. In the views of youngsters, the preference should be given to local youth in the employment opportunities in the state.

The influx of migrants: A large number of migrants come from other states to a particular state. These migrants compete with the locals for limited employment opportunities. It makes it more competitive for the locals to get a job in their home state and most of them remain unemployed or have to go outside their state. Some other implications of the influx of migrants are :

• It acts as a strain to the infrastructure of the state. Because now an increased population is using it. 
• It leads to the proliferation of slums. Because it becomes very difficult for the labour migrants to come to other states and own a home. Therefore they find shelter in the form of slums. And this in turn creates a pressure on the locals and the local government to handle all this.

The election manifesto of political parties: Providing job opportunities to the locals is on the top of the election manifesto of almost all political parties. So, to influence the locals, the ‘Local First Policy’ is usually seen in action whenever a new government forms. 

What is ‘Locals First’ Policy? This is a very popular policy. Under this policy, preference is given to the locals in the employment opportunities created in the state. Some analysts argue that this policy is a result of the fear of locals. Actually, when there is not any particular law/policy stating the rights/quota for locals, there is always a fear in the minds of people that the job opportunities that should be given to them are provided to people from other states.  The states which favour this policy argue that it is the very first responsibility of the state to fulfil the aspirations of the locals. And getting a job in the home state is among the topmost aspirations of the local public. It is also argued that when a state is providing various incentives to the industries then there should not be any problem from the side of the industries in employing the locals. One of the biggest and bitter truths of this policy is that the laws enacted to implement such policies usually remain on the paper and not implemented on the ground. There are just talks, but no actions are in this regard.

The Indian States providing local job quotas :

Some Indian states provide reservation in private sector jobs :

Madhya Pradesh

The previous Government has announced  70% reservation for locals in industries in 2018. But this law was not implemented by private companies. The new government is also planning to provide reservation in government jobs also. 

Haryana

Recently, the state has provided for 75% reservation for locals in the blue-collar jobs. 

Karnataka 

A new industrial policy (2020-2025) is released by Karnataka in 2020. Under it, the Karnataka labour department will give a 100% horizontal reservation for Kannadigas in all private industries. If the industries don’t follow these guidelines, the government will not provide incentives to them. 

Andhra Pradesh

In 2019, Andhra Pradesh became the first state to pass such a law. By the state, 75% of private jobs were reserved across all categories in industrial units, factories, joint Ventures as well as Public-Private Projects.

Some other states provide reservation in Public sector jobs:

Meghalaya

In the state of Meghalaya, 80% of government jobs are reserved for Garos, Khasis and Jaintias. Other STs and SCs have a reservation of 5%.

Arunachal Pradesh

There is 80% reservation for Arunachal Pradesh Scheduled Tribes in state government jobs.

West Bengal

No such reservation in Bengal. But, in certain posts in state government, reading and writing skills in Bengali is a criterion.

Assam

In Assam, there is no reservation for residents of the state. 

• But the MHA-appointed committee for implementation of Clause 6 of Assam Accord has recommended job reservations upto 80-100 per cent in different levels in government and private sectors for “Assamese People”. 
• This is to be determined on the basis of a 1951 cut-off — persons or their descendants residing in Assam prior to 1951.

Maharashtra

Only local residents fluent in Marathi are eligible for government jobs. 

• A local is defined as one who is domiciled in the state and has lived there for over 15 years. 

Jammu and Kashmir

• Before abrogation of the special status, the jobs were reserved for state subjects.
• Presently, Government jobs are reserved for domiciles. 
• Any person who has resided in J&K for 15 years and their children are domiciled. 
• Those who have studied in J&K for seven years and appeared for Class 10 and 12 exams from there are domiciles. 
• Central government employees, who have served in J&K for 10 years, and their children are also eligible to apply for government jobs. 

Some states have gone around the mandate of Article 16(2) by using language.

• States that conduct official business in their regional languages prescribe knowledge of the language as a criterion. This ensures that local citizens are preferred for jobs. For example, states including Maharashtra, West Bengal and Tamil Nadu require a language test.

The Haryana Assembly passed a bill providing 75% reservation of factory and other blue-collar jobs for local candidates.

• The Haryana State Employment of Local Candidates Bill 2020 was recently passed by Haryana State Assembly.
• It will be applicable only to new private-sector job openings.
• All jobs with a monthly starting salary of below Rs. 50,000 come under the ambit of the proposed law. 
• Privately managed companies, societies, trusts, limited-liability partnership firms and joint ventures based within the state and employing 10 or more people can hire only up to 10% of the approved local quota from one district.
• The bill is against Article 14 and 19 of the Indian Constitution. So, it will require presidential assent.

Blue Collar Jobs: A blue-collar worker is a working-class person who performs manual labour. Blue-collar work may involve skilled or unskilled labour. Blue-collar work often involves something being physically built or maintained. Other categories of jobs : White Collar Jobs: A white-collar worker is a person who performs professional, desk, managerial, or administrative work. White-collar work may be performed in an office or other administrative setting.  Pink Collar JobsA pink-collar worker is someone working in the care-oriented career field or in fields historically considered to be women’s work. This may include jobs in the beauty industry, nursing, social work, teaching, secretarial work, or child care. While these jobs may also be filled by men, they are typically female-dominated and may pay significantly less than white-collar or blue-collar jobs.

Which all sectors will be covered under this Bill?

Following entities/organisations/establishments come under the ambit of this Bill:

• All the companies, 
• societies, 
• trusts, 
• limited liability partnership firms, 
• partnership firms and 
• any person employing 10 or more persons and 
• an entity, as may be notified by the government 

What is the definition of “employer” given in the Bill?

As per the Act, the definition of “employer” includes:

• a Company registered under the Companies Act, 2013 (Central Act 18 of 2013)
• a Society registered under the Haryana Registration and Regulation of Societies Act, 2012
• a Limited Liability Partnership Firm as defined under the Limited Liability Partnership Act, 2008 (Central Act 6 of 2009)
• a Trust defined under the Indian Trust Act, 1882
• a Partnership Firm as defined under the Indian Partnership Act, 1932
• any person employing 10 or more persons on salary, wages or other remuneration for the purpose of manufacturing or providing any service
• such an entity, as may be notified by the government from time to time.

Who is excluded from this definition?

• The central government or state government or any organisation owned by the central or state government do not come under the ambit of this Bill.

What does the “local candidate” mean?

• A local candidate means a candidate “who is domiciled in the State of Haryana” 
• And she/he shall be able to avail the benefit of this reservation while seeking employment in the private sector. 
• There shall be a designated portal where the candidates have to register themselves, to get the p benefit under this reservation. 
• All the recruitments by the employers will be done through this portal only.

Does it mean 75% of the total workforce of an employer will be from Haryana only?

The answer is No. Because every employer is required to employ 75 %  local candidates for the posts where the salary is 50,000 or less for a month. There is no such quota for the jobs where the gross monthly salary is more than 50,000. So, we will not say it is 75% of the total workforce. It is 75% of the workforce with a salary up to 50,000.

Is there any exemption mentioned in the Bill where an employer can leave this 75% quota?

The answer is Yes. But all this can be done by the employer only after going through a long procedure. This is possible only if the government-appointed officers find the employer’s request, seeking exemption, valid.

• The employer may give the reason that the required number of local candidates with the desired skill, qualification or proficiency is not available.  
• The employer then gives the application to the Designated Officer (an officer not below the rank of a Deputy Commissioner) and that too be in a particular format (to be drafted later). 
• The Designated Officer has to inquire into the matter and evaluate the whole process carried out by the employer in the recruitment of the local candidates of the desired skill, qualification or proficiency. 
• The final decision is of the Designated Officer. He may accept/ reject the claim of the employer seeking exemption. 
• The Designated Officer may also direct the employer to do arrangements to train local candidates to achieve the desired skill, qualification or proficiency.

How will the government monitor the implementation of the Act that the employers are using the 75% reservation rule or not?

The bill also provides for a proper monitoring system to check the implementation process of the act. There is a provision for a quarterly report to be prepared by the employer. 

• Every employer will have to publish a quarterly report on the designated portal. This report shall have mention of details about local candidates employed and appointed during that period. 
• The reports furnished by the employer will be scrutinised by the authorised officers (not below the rank of Sub-Divisional Officers). 
• These officers shall have many different powers like to call for any record, information or document in possession of any employer for the purposes of verifying the report furnished by them. 
• The officer can also go to the employer’s workplace to examine any record, register, document if the officer has a reason to believe that the employer has committed an offence under this Act.

What will be the punishment for the employers not following the provisions of the act?

If it gets proved that the employer has committed a violation of provisions of the Act, he may be charged with a fine of minimum Rs. 10,000 to a maximum Rs. 2 lakh.

• If the same violation of provisions continues even after the charging of this fine, there shall be a penalty of Rs. 1,000 per day till the violation continues.
• If an employer produces false records or counterfeits or knowingly produces false statements, there shall be a penalty of Rs. 50,000.

Who shall be liable for the violation of the provisions of the Act?

• If the offence shall be committed by a company, every Director, Manager, Secretary, Agent or other officers or person concerned with the management shall be held guilty of the offence. 

• If the offence shall be committed by a limited liability partnership firm, all the partners or designated partners shall be held guilty of the offence.
• If the offence shall be committed by a Society or Trust, every person who was in charge at the time of the commission of the offence, or the person who was responsible for the conduct of the business of the society at the time of the commission of an offence shall be held guilty of the offence.

Mains Question: Argue how reservation to locals in the private sector jobs and protectionist measures affect the economic growth prospects of the state. Give examples to explain your viewpoint. 

Introduction

• Discuss the concept of reservation in private sector jobs in India
• Provide a base by giving examples from the Constitution of India.

Body

• Discuss the economic effects of providing reservation in private sector jobs to locals.
• Discuss how the labour-receiving and labour-supplying states get affected by such moves giving proper examples.

Conclusion

• Conclude with giving some suggestions and a fair conclusion.

Answer : 

Soon after the Haryana Assembly passed the Haryana State Employment of Local Candidates Bill 2020, the topic of the domicile-based quota has come to limelight again. A debate has triggered all around the country. A number of states in India are now opting for this option. Since 2019, five states have announced job quota for locals in the private sector. These states are - Maharashtra, Andhra Pradesh, Karnataka, Haryana and Madhya Pradesh.

The Constitution of India basically prohibits the states from providing quotas in employment on the basis of residence. But, by using the loopholes in the provisions of the article, some states have provided the job quotas. One of the arguments cited by various State governments is that Article 16 is related to only public sector jobs. So, if the States are giving reservation in the private sector jobs, they are not violating any Fundamental Right.

Apart from the issue of violation of provisions of equality, the reservation to locals in the private sector also raises some economic concerns. 

If every state one after the other starts providing such quotas then many short-term and long-term effects can be seen. Such moves are going to distort the labour market. It is going to affect both the labour-receiving and labour-supplying states.

Some problems that can arise for labour-receiving states are :

• Shortage of labour: Since now the employers have to recruit mostly the local people, it will be more costly and hard for them to hire the worker than ever before. This is because now there will be a shortage of labour with the required skills in the state. For example, if we take the example of Haryana. Haryana is basically an agrarian state of India and most of the households are associated with agriculture. Now if a textile factory wants labour and it starts finding for the same, it will be difficult for them to find a suitable workforce from Haryana only. Because till now most of the factory workers were from Bihar, and Uttar Pradesh.
• Increased Cost: If the employers have to employ more workers from the home state only, then to get the required skilled workers, they have to train the local people. This will add to the cost of the business and in turn, it will affect the prices of the goods and thus leads to high prices. For example, if a farm worker is to be trained to work in the textile or carpet industry, the cost of employing labour increases.
• Inefficiency: If the new workforce to be employed is not having a proper skill set required for a particular job, then the efficiency of the business will surely decrease. For example, most of the workers in the carpet factories of Panipat, Haryana are from Uttar Pradesh. There are many small establishments where all the workforce is from some particular states only and not from Haryana. In such a scenario, if the employers have to take 75% of local people, they have to face a lot of problems. This will lead to inefficiencies in the wake of the shortage of the experienced workforce.

Some problems that can arise for labour-supplying states are :

The labour-supplying states like Uttar Pradesh, Bihar, Jharkhand and West Bengal, etc., now need to create productive capacities in order to absorb the large workforce within the state only. This is going to create an extra financial burden on these bigger states. The conditions of states like Bihar and Jharkhand are already not in a good state. 

If we see the recent scenario, the states are going one after the other in providing such job quotas to the locals. The basic statements in the favour of such moves are

•  Most of the jobs in the states are snatched by the outsiders.
• This leads to unemployment among the locals of the state.
• Increased influx of labour force increases the problem of a slum in the state.

But, the reality is far away from that. The reality is that

• Workers go to places where jobs are available and labour is required.
• Employers have to employ the migrants because either the locals are unavailable or they are unwilling to do the intended jobs.

So, it can be pointed out that the idea behind giving such reservation for the locals is only a step to psychologically impact the locals.

To meet the challenge of joblessness, an inclusive and job-centred growth model is required. Domicile based job quotas are just diverting the attention from the main issues. The reason is that such laws are enacted only upon papers and not implemented on the ground. Many states including Gujarat and Maharashtra have announced such quotas but the opposition from the industries let them in word only. They never came into force in reality. 

There may be a quota for the locals in some particular fields according to the skills of the workers of a particular state. But reserving all the jobs for locals is not going to be fruitful. Because the industries need skills to work properly and they have nothing to do with the domicile status of a worker. 

The best example is the Tamil Nadu which is one of the largest vehicle manufacturing states of India. It needs a technical workforce. Most of the workforce (more than 90%) is available within the state only. So, they do not have to rely upon the migrants and the state government has no need to enact any law reserving jobs for the locals. 

So merely providing quotas in every sector is not a solution to the unemployment of migrant problems. The state governments need to have a proper growth model for the sure economic success of the states.

UPSC Mains Syllabus