India Vs China

If you want to know why China is growing faster than India, it’s partly because of India’s labor laws like this:

As soon as a company hires more than 100 employees, it is impossible to fire anyone without government permission. Such laws have long deterred foreign investors, hampered manufacturing, and prevented the nation of more than 1 billion people from experiencing an industrial takeoff similar to China’s. Now legislators are fighting to push a law through Parliament to let a company expand its workforce without surrendering the power to lay off workers to bureaucrats. The bill faces fierce opposition from labor unions.

Of course unions have a vested interest in opposing the law but they do so at the expense of the unemployed and those hoping for wage and job growth. But then again, whoever said unions were on the side of the downtrodden and poor?

The story continues:

Companies must keep 6 attendance logs and 10 separate accounts for overtime wages, and file 5 types of annual returns. There are at least 11 definitions of the word “wage.” Other rules regulate the height of urinals in workers’ washrooms, how often a building must be lime-washed, and how many sand-filled buckets must be on hand to put out fires.

In a speech to trade unions on Nov. 23, Prime Minister Manmohan Singh wondered if these laws had hampered India’s growth. “Is it possible that our best intentions for labor are not actually met by laws that sound progressive on paper but end up hurting the very workers they are meant to protect?” he asked. India could have added 2.8 million jobs to the formal economy in the decade through 2007 had labor laws been less restrictive, the World Bank said in 2007. As few as 30 million Indians work in the formal private sector or government, according to the Central Statistical Organization, the government statistics group. (The rest work in agriculture or the underground economy.) Credit Suisse (CS) economist Robert Prior-Wandesforde calls this number “absurdly low.” China has at least 260 million workers in manufacturing, mining, and nonfarming activities, according to International Labor Organization estimates. “It’s unusual how successful India has been without any sort of industrial revolution,” says Prior-Wandesforde, head of South East Asia and India Economics at Credit Suisse.

The full story can be found here.

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