Laboured arguments

State job reservations are counter-productive

The Karnataka government has done well to backtrack on a law that would have required businesses, including multinationals, to display on a dashboard the number of Kannadiga employees they employ. The requirement, articulated in a statement by the state culture minister, caused consternation in Bengaluru’s corporate community. Former Infosys chief financial officer and current venture capitalist T V Mohandas Pai pointed out the rule would have restricted hiring practices and led to violence. He pointed to the vandalism that occurred two months ago after the state had proposed to reserve 60 per cent of a billboard or name-board for the Kannada language. But the issue is unlikely to recede anytime soon. Indeed, the tight market for quality jobs across India is raising competitive parochialism in employment across states.

Andhra Pradesh, Madhya Pradesh, Uttar Pradesh, Jharkhand, and Haryana have all passed laws requiring reservations for local candidates in both government and private-sector companies. Andhra Pradesh set the tone by guaranteeing a law requiring 75 per cent of jobs to be reserved for local candidates. Maharashtra and Tamil Nadu made similar announcements but these are yet to be translated into law. Ironically, these impulses are strengthening just as states are competing for private investment by hosting lavish investor summits. Yet few leaders have understood that restrictive hiring laws contradict a basic tool of business and commerce — the freedom and flexibility to hire — which companies need in the constant battle for talent. Forcing them to stay restricted to locals is a sure-fire way to repel them. Andhra Pradesh, which passed its law in 2019, was also the first to realise the limitations of the law — the shortage of qualified local candidates being the key —and has chosen not to enforce it. A challenge to this law is being heard in the Andhra High Court. Nevertheless, the prospect of grappling with another layer of the inspector raj is unlikely to raise investor confidence — more so at a time when investment options across the globe have opened up. This apart, such laws are harmful in the larger national perspective because they impact the fortunes of migrant workers, who typically travel from India’s poorer, underdeveloped states to the richer ones.

Both these issues figured in a judgment by the Punjab and Haryana High Court late last year. The court quashed, on constitutional grounds, the Haryana State Employment of Local Candidates Act, 2020, which mandated a 75 per cent reservation for local candidates earning up to Rs 30,000 a month in private-sector jobs. The court struck down the law on two counts: Article 14 of the Constitution, which guarantees equality before the law and equal protection; and freedom of trade and commerce under Article 19(1) (g). The court also pointed out such laws created barriers that were not intended by the framers of the Constitution. The state government has appealed against the ruling in the Supreme Court. Whatever the apex court’s ruling, the private sector would continue to face pressure on this account, especially given the contraction in government employment and inadequate job creation in general. Political parties, both in power and in the Opposition, must refrain from such promises. The focus must be on improving the business climate, which will attract investment and create jobs.