Context:
The Economic Survey 2025-26 projects that new labour codes will boost formalisation and employment, but concerns remain regarding job security and increased informality.
Key Highlights:
- Formalisation Targets
- Aim to increase formal workforce from 60.4% to 75.5% by 2029-30.
- Expected to generate ~77 lakh jobs.
- Relaxation of Labour Regulations
- Increased thresholds for defining factories and contract labour.
- Firms may avoid compliance by staying below thresholds.
- Rise of Fixed-Term Employment
- Provides limited benefits, but reduces long-term job security.
- Gig Economy Inclusion
- Platform companies required to contribute 1–2% of turnover for gig worker welfare.
- Weak Enforcement Mechanisms
- Labour inspectors rebranded as “Inspector-cum-Facilitators”.
Relevant Prelims Points:
- Four Labour Codes (2020):
- Code on Wages
- Industrial Relations Code
- Social Security Code
- Occupational Safety, Health and Working Conditions Code
- Informal Sector:
- Employs ~80% of India’s workforce.
- Lacks social security and job protection.
- Fixed-Term Employment:
- Contract-based jobs with limited duration.
- National Floor Wage:
- Minimum baseline wage set by the Centre.
Relevant Mains Points:
- Formalisation vs Flexibility Debate
- Labour codes aim to reduce compliance burden.
- However, may incentivize informalisation and contractualisation.
- Impact on Workers
- Reduced job security and bargaining power.
- Limited access to social security benefits.
- Structural Nature of Informality
- Informality persists due to cost advantages for firms.
- Labour codes may not address root causes.
- Challenges in Implementation
- Weak enforcement and regulatory dilution.
- Lack of clarity in wage-setting mechanisms.
- Economic Implications
- Formalisation can boost productivity and tax revenue.
- But precarious jobs may affect consumption and welfare.
- Way Forward
- Balance ease of doing business with labour protection.
- Strengthen social security frameworks.
- Improve labour inspection and compliance systems.
- Encourage skill development and formal employment incentives.
UPSC Relevance:
- GS Paper 3: Economy, labour reforms, employment.
- GS Paper 2: Governance, welfare policies.