Background of the Karnataka Bill
- The Karnataka State Employment of Local Candidates in the Industries, Factories, and Other Establishments Bill, 2024, seeks to reserve 50% of management and 70% of non-management positions for local candidates.
- However, businesses in Bengaluru, the hub for IT, startups, GCCs, and pharma industries, have opposed this move, leading the government to pause the bill for further review.
Historical Context of Local Reservation in India
Local reservation in private jobs has a decade-long history with various state governments attempting similar policies:
Maharashtra (2008):
- Proposed 80% reservation for locals in private sector jobs to prioritize employment for residents over migrants.
Andhra Pradesh (2019):
- Mandated 75% local reservation, applicable to industries, factories, joint ventures, and public-private partnerships. This law aimed to tackle the high unemployment rate among local youth. For example, the law targeted sectors with high local youth unemployment.
Haryana (2020):
- Enacted 75% local reservation for jobs paying less than ₹50,000 per month. However, the Punjab and Haryana High Court later declared it unconstitutional, as it restricted the right to work across state boundaries, a fundamental right guaranteed by the Constitution.
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Arguments Supporting Local Reservation
Right to Livelihood:
- State governments aim to protect the employment rights of local residents, ensuring they have access to job opportunities within their state. For example, local reservation policies can help residents secure jobs in industries established within their home state.
Constitutional Mandate (Article 16(4)):
- States argue they can reserve jobs for backward classes inadequately represented in employment. For instance, Tamil Nadu has invoked Article 16(4) to justify similar reservations, ensuring social justice for underrepresented groups.
Tackling Unemployment:
- Local reservation aims to provide jobs for local youth, addressing high unemployment rates. For example, Haryana cited its high unemployment rate of 9% in 2021-22 as a rationale for the policy, aiming to provide more opportunities for local job seekers.
Addressing Local Resentment:
- Aims to reduce tensions between local workers and migrants, which can lead to social unrest. The Gokhale Institute of Politics and Economics highlighted such tensions in Maharashtra, where locals felt displaced by migrant workers.
Legitimate State Right:
- Proponents argue states have the right to demand local reservation as private industries utilize public infrastructure funded by state taxpayers. For instance, industries benefit from local roads, electricity, and other public services, justifying a demand for local employment.
Social Equality:
- Aims to achieve social equality, given the limited availability of public sector jobs. For instance, the private sector in Karnataka provides significantly more employment opportunities compared to the public sector, making local reservation a tool for social balance.
Preventing Exploitation:
- Seeks to end the exploitation of migrant workers who often work under poor conditions. Studies have shown that migrant workers in sectors like construction and hospitality often face exploitative practices, such as long working hours and low wages.
Global Practices:
- Cites international examples like the US Civil Rights Act of 1964, which prohibits employment discrimination, and Canada’s Employment Equity Act, which promotes equitable representation of designated groups in employment. These laws aim to ensure fair treatment and opportunities for all citizens.
Arguments Against Local Reservation
Economic Impact:
- Decreases labor mobility, potentially impacting businesses and the economy. For instance, the flight of firms from Gurugram to Noida due to similar policies in Haryana showcases how restrictive employment laws can drive businesses away.
Discourages Investment:
- Imposes compliance burdens, reducing the competitiveness and attractiveness for investments. Haryana’s requirement for companies to submit quarterly compliance reports on local reservation is a case in point, adding bureaucratic hurdles for businesses.
Hampers Inclusive Growth:
- Reduces job opportunities for workers from underdeveloped states, widening the HDI gap. Bihar and Uttar Pradesh, which rely heavily on migration for employment, are adversely affected, as local reservation in more developed states limits their job prospects.
Threat to National Unity:
- Fuels regionalism and antagonism, impacting the social fabric. The attacks on Bihari workers in Maharashtra in 2008 exemplify this risk, where local resentment towards migrant workers escalated into violence.
Exceeds Reservation Ceiling:
- Violates the Supreme Court’s 50% reservation limit set in the Indira Sawhney judgment, which aims to balance affirmative action with merit-based opportunities.
Dependence on Migrant Workers:
- Many industries, especially MSMEs and construction, rely heavily on migrant labor. For instance, the construction sector in cities like Bengaluru depends significantly on workers from states like Odisha and West Bengal, making local reservation impractical.
Reduced Competitiveness:
- Limits access to the best talent, impacting industry efficiency and productivity. For example, IT companies in Bengaluru need a diverse talent pool to maintain their global competitiveness and drive innovation.
High Court Judgment on Local Reservation
The Punjab and Haryana High Court declared Haryana’s local reservation law unconstitutional, citing:
- Violation of Article 19(1)(g): Restricts the freedom to practice any profession across India, a fundamental right.
- Legislative Overreach: Article 16(3) gives Parliament the power to set domicile requirements, not states, ensuring a uniform national policy.
- Discrimination: Creates unfair barriers for non-locals, leading to artificial walls of local residence requirements, which can be seen as exclusionary.
- Inspector Raj: Mandating firms to submit quarterly reports on local reservation imposes excessive regulation, reminiscent of the pre-liberalization “Inspector Raj” era in India, which was characterized by heavy-handed bureaucracy.
Way Forward
- Uniform Labor Rights: Ensure basic labor rights for both migrant and local workers, creating a fair playing field. States should focus on improving working conditions and enforcing labor laws uniformly, protecting all workers from exploitation.
- Focus on Development: Shift from reservation to initiatives like ease of doing business reforms, skill development, and infrastructure improvement. Karnataka’s efforts to boost its startup ecosystem, such as the “Elevate 100” program, can serve as an example.
- Supreme Court Guidelines: The Supreme Court should establish clear guidelines for local reservation in private sectors, similar to the ceiling on reservations in public sector jobs, ensuring consistency and fairness.
- Promote National Unity: Counter regionalism through initiatives like ‘Ek Bharat Shrestha Bharat’, which promotes cultural exchanges and national integration, fostering a sense of unity and shared identity.
Consultative Approach:
Engage with industry stakeholders to create balanced and practical legislation. The Karnataka government could set up a task force including representatives from industry, labor unions, and civil society to review the bill, ensuring that all voices are heard and concerns addressed.
