In the weekly column we take turns writing about innovation and economic trends in Asia.
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Bangkok India’s labor law is notorious for not being particularly employer-friendly. For example, companies with more than 100 employees are only allowed to make redundancies if they receive permission from the authorities to do so. This deters many entrepreneurs – and gives them incentives to keep their businesses small rather than focus everything on growth.
Economists have long argued that such rigid rules do more harm than good – an important reason is that the majority of workers in India are employed in the informal sector rather than in regular jobs. This work is not included in the official statistics. However, changes to labor law can only rarely be enforced – the social resistance is usually too great.
The world’s largest technology group is now bringing momentum to the debate: Apple no longer wants to be dependent solely on the factories in China and is therefore currently in the process of massively expanding production capacities in India together with its suppliers.
145 hours of overtime per month will be allowed in the future
However, the fact that the labor law provisions in the country are significantly stricter than in the People’s Republic seems to disturb the iPhone group in its ambitions on the subcontinent. According to media reports, he and his lobbyists made representations to several Indian states to lobby for the liberalization of the regulations.
Apple, which reportedly approached the local government with its most important contract manufacturer Foxconn, was apparently successful: in the state of Karnataka, where the Apple supplier Wistron currently produces, parliament decided at the end of February to increase the permitted shift length from nine extend twelve hours.
Instead of a maximum of 75 overtime hours per month, 145 additional hours will be allowed in future. And in contrast to the past, women should also be allowed to work the night shifts.
Labor regulations in India are stricter than in China.
(Photo: Bloomberg/Getty Images)
The changes clearly correspond to the ideas of Apple and its suppliers, who, according to the financial service Bloomberg, find similar conditions in China – and are therefore currently also campaigning for corresponding changes in labor law in the state of Tamil Nadu.
In Karnataka, days after the deregulation decision, it became known that Foxconn was planning a new iPhone factory there, which local authorities say could create 100,000 jobs over the next ten years.
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For India, the development is extremely ambivalent: On the one hand, the country urgently needs to increase its international competitiveness – especially compared to China, the country still has a lot of catching up to do in terms of its attractiveness as a production location.
If corporations like Apple, which has the full attention of Indian politicians because of its enormous financial power, can help to remove barriers to investment, then that’s good news.
Trade unionists call for reversal of labor law reform
However, this becomes a problem when international corporations carry out the diversification of their supply chains on the backs of factory workers – and use their economic power to enforce lower standards. In Karnataka there is clear criticism of the new rules: “It is slavery to exploit workers twelve hours a day,” complained MP Ayanur Manjunatha. The trade union organization IndustriALL Global Union described the new rules in the state as an anti-worker law and called for its immediate repeal.
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The lobby organization Indian Cellular and Electronics Association (ICEA), which advocates for the interests of companies such as Apple and Foxconn, describes the reform of labor law as overdue. It is fundamental to the Indian government’s goal of bringing more manufacturing companies into the country and would also help to increase women’s employment opportunities.
That may well be true – it’s very likely that iPhone production in India will grow significantly faster if the authorities succumb to employers’ demands. However, it is questionable whether the affected workers really have a real choice when they have to decide whether to continue under the new conditions.
In the Asia Techonomics column, Nicole Bastian, Sabine Gusbeth, Dana Heide, Martin Kölling and Mathias Peer take turns writing weekly about the most exciting technological and economic trends in the world’s most dynamic region.
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