Recently, the Haryana government announced that the Haryana State Employment of Local Candidates Act 2020 shall come into force effective May 1, 2021. This legislation aspires to address the rising unemployment rate in the state by triggering the parochial “insider-outsider” debate and mandating reservation of new low-paid jobs in private establishments for locals. The clamor for job quotas in a tepid economy is understandable but a closer scrutiny of the legislation reveals that it is on a whole constitutionally impermissible, difficult to enforce and antithetical to the employment climate in the state.
The economy of Haryana accounts for 3% of India’s GDP and has cumulatively contributed up to 9% of FDI inflows into the country. Ironically, the state also ranks first in the rate of unemployment (at 26.4 percent). And this is not a one-off trend attributed to the COVID-19 pandemic. It has far exceeded the national average since August 2017. The high proportion of graduates amongst the unemployed point towards a gap in skills for employability and slow growth in the creation of good quality jobs in labour-intensive large and medium enterprises. Jobs generated in the public sector stand at a meager 2.5%. In the rural areas, the seasonal nature of agriculture and overcrowding of land adds to the woes. In 2017-18, Haryana was only able to generate 33 days of work per person (i.e. 3rd lowest in India) under MGNREGA. Safe to say that the unemployment problem here is real and deserves the attention of policymakers.
However, there is not sufficient evidence to connect the unemployment problem to migration. Studies have revealed that the decade rise in urban population in India has been primarily due to intra-state rather than inter-state migration. Even in the case of Gurgaon that attracts a sizable number of inter-state migrants, the free flow of labor has actually helped small & large industries alike to address the local skill gap and perform competitively. Skilling locals and integrating skilled migrants into the economy can bridge the gap. Reserving jobs for locals just does the opposite.
Now that the cat is out of the bag and the legislation is almost in force, it is worthwhile to examine whether it will stand the test of time. First of all, mandating private enterprises to hire locals directly violates Article 16(2) that guarantees equality of opportunity to citizens (no discrimination allowed based on place of birth or residence) and Article 19(1) (g) that guarantees the freedom to practice any profession or trade. Domicile requirements for public sector jobs can be legislated but only by the Parliament (as per Article 16(3)) or by special category states (such as Andhra Pradesh as per Article 371). Even then, such cases need to establish that deviation from “selection by merit” has been done to achieve “equity” of some sorts (i.e. advance any particular backward section of the society). The same principle has been extended primarily to State-aided private enterprises. Multiple SC & HC judgments have stayed the implementation of state policies running counter to the above principles. The Haryana legislation is quite likely to suffer the same fate.
What if the legislation goes unchallenged? Make no mistakes in assuming to witness a classic comeback of the “license raj”. Ensuring compliance to the 75% domicile quota rule (for new jobs) can be challenging since private companies don’t necessarily conduct recruitment drives in bulk at a specified time in the year. Also, the burden of documentation to verify domicile status shall be enormous. In case labor of required skill & proficiency isn’t available, enterprises can seek exemptions but that decision shall lie at the absolute discretion of the officers (who in turn are protected from any legal scrutiny). To avoid hassles (including penalties running into lakhs per instance), rent-seeking will increase & so shall costs of doing business. Not to forget, the inflated costs of hiring skilled locals in short supply and high demand. To thrive, enterprises shall either opt for informal labor or exit to more business-friendly states. The high transaction volumes, discretion by officials & stakes for private parties are bound to make the implementation of this policy near to impossible.
Other states have also joined the bandwagon by enacting similar laws. But now that we understand that this promise is untenable and can potentially exacerbate unemployment by disintegrating labor markets, shall the political elite stand up and answer for potentially defrauding its citizens? Do we sufficiently hold our representatives accountable to any code of ethics? I often wonder.
The author is currently pursuing PGP in Public Policy from the Takshashila Institution. Views are personal and do not represent Takshashila Institution’s policy recommendations. The author can be reached at firstname.lastname@example.org