How Jharkhand’s Move To Reserve Private Sector Jobs For Locals Will Damage State’s Growth

Jharkhand Chief Minister Hemant Soren announced in his Republic Day address that the state would ask the private sector to reserve 75 per cent jobs for locals.

The economically-backward state which is, however, rich in mineral resources will join a few other states that have gone down the same path.

But unlike the other states that imposed this reservation for only group ‘C’ and ‘D’ jobs (that is, for blue-collar or unskilled and semi-skilled workers), Soren has not clarified if the reservation policy will extend to all private sector jobs.

Be that as it may, this is clearly a move that the Union government needs to discourage.

Jharkhand is emulating other states, including Bharatiya Janata Party-ruled ones, that have started implementing this protectionist and populist policy.

This move is also unnecessary and redundant. The private sector in any part of the country will never hire workers from other states, or even from outside the areas they operate in, if locals can be hired for those jobs.

That’s because hiring locals makes more business sense for the private sector. It is inconceivable that an industrial unit in, say, Rajasthan, will accord preference to workers for Bengal rather than hiring locals.

Hiring non-locals means providing them accommodation and other facilities which the private sector, which seeks profits — and reducing operating cost is an integral part of enhancing profits — will be loath to do if the same jobs can be done by locals.

In effect, thus, reserving unskilled jobs for locals is a mere populist eyewash by states. However, it sends out the wrong message to potential investors.

Investors, who all states compete with each other to attract, view job reservations as regressive and unwelcome. Such reservation rules add to the long list of stifling and unnecessary government regulations that the private sector views as unwelcome and business-unfriendly.

A job reservation law also becomes a handy extortion tool in the hands of the bureaucracy in India. Corrupt and exploitative babus will use this rule to harass and extort money from private employers.

It also induces slackness on the part of locals who, secure in the knowledge that they will find local employment, do little to upgrade their skills.

That adversely affects employers, who have to remain competitive to stay afloat and make profits. Low productivity induced by reservation policies (as has been the experience all over the country) makes business uncompetitive and, in the long run, harms the local economy and the very people that such (reservation) policies aim to benefit.

Migration from one state or region to another, especially migration of large numbers of unskilled and semi-skilled workers, goes a long way towards building understanding and harmony between communities that is very essential for strengthening national unity.

Given this, state-level politicians have to be actively discouraged from spawning or encouraging parochial and regressive sentiments which lead to moves like job reservation for locals and that ultimately trigger centrifugal tendencies.

Cross-cultural influences enrich all entities and institutions, be they industries, the service sector, a society, state or region. Closing doors to migration from others states encourages parochialism and inward-looking attitudes that prove counterproductive.

States like Karnataka, Haryana, Rajasthan, Madhya Pradesh and (now) Jharkhand which have or are mulling such job reservations in the private sector should remember that their people, too, go to other states to seek employment.

If all states were to follow the examples of Karnataka and Rajasthan and bring about such laws, inter-state migration that keeps the wheels of the country’s economy turning would reduce starkly. And job-seekers in all states will be adversely affected.

A general job-reservation law for the private sector would encourage populist politicians to enact legislation to force the private sector to mirror caste and community (SC and ST) quotas of the public sector and in government.

Politicians like Mulayam Singh Yadav had tried that unsuccessfully in the past. They would feel encouraged to make more attempts now if more and more states bring in job reservation for locals in the private sector.

Such laws also fly in the face of the Narendra Modi government’s determined moves to make operations easy for the private sector.

States which bring in reservations for the private sector should remember that they will surely go down a few notches in the ‘ease of doing business’ index. That will hurt their investment prospects and prove counterproductive.