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A potential jobs breakthrough

June 15, 2014

Abstract: The slow pace of employment generation in the manufacturing sector is a major concern for the Indian economy. It is widely recognized that the existing legal prohibitions on relatively large employers to lay off workers without government permission dissuades employers from large scale hiring in the first place. It also hurts the manufacturing unit’s cost competitiveness and distorts its choice of technology. Several past attempts at labour reforms by both central and state governments have been unsuccessful because of stiff resistance from trade unions.

In the context of the Rajasthan Government’s announcement to amend the state law to allow employers in manufacturing units greater flexibility to lay off workers, some complementary measures are considered necessary to make the amendment a potential jobs breakthrough. Notable among them is the creation of a safety net for laid off workers, such as unemployment insurance.

Keywords: jobs; employment; labour reforms; safety net

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