Haryana Reservation Law Sparks Fears Of Ripple Effect In Other States, Rise In Unemployment

Twenty-three-year-old Shabbir Mohammed moved from his home town in Purulia, West Bengal to Jhajjar, Haryana, in early 2020 to seek employment opportunities. He found seasonal jobs and was hoping for a full-time role at an electronics company when a shocker hit in the form of a reservation policy in Haryana.

The Haryana government, led by Chief Minister Manohar Lal Khattar, has passed a law reserving 75 percent of private sector jobs for local youth. This is applicable for all jobs with a monthly pay of up to Rs 50,000. However, hiring experts said that implementation of such a scheme is likely to have a ripple effect in other States and lead to a rise in unemployment.

As per the gazette notification of the Haryana government, the new policy came into effect on March 2. This means that for thousands of migrant job-seekers such as Mohammed, companies in Haryana will have barely any job opportunities left.

Rituparna Chakraborty, co-founder and executive vice president, TeamLease Services, told Moneycontrol that this will kill the institution of ‘One India’.

“If such job reservation policies are implemented, companies will move to States that have open policies. Populism is never good for economics. This is an ill-thought-out step,” she added.

What does the policy say?

As per the new law, every company will now have to register all prospective employees earning up to Rs 50,000 in a designated government portal. This applies to private companies across sectors.

Only after these individuals are designated on the government portal can they be employed in any job role in Haryana. No new candidate (earning up to Rs 50,000) can be employed unless he/she is registered with the government.

Insiders said that this move is aimed at arresting the high unemployment rate in the State. Data from the Centre for Monitoring Indian Economy (CMIE) showed that the unemployment rate in Haryana was at 26.4 percent as of February 2021, which is the highest in the country. The national average was 6.9 percent.

Haryana is the manufacturing hub for sectors such as consumer electronics and automobiles. Further, IT sector firms and startups have a large presence in the region and will be worst hit by this sudden change in policy.

The law states that in case a company is unable to find skilled local talent for a particular job role, the company could apply to a designated government officer. However, the Haryana government has not clarified on what basis such proposals will be approved or rejected.

Companies violating this candidate registration requirement will have to pay up to Rs 1 lakh as penalty for the first offence and Rs 500 per day for the subsequent offences. For violating the 75 percent local reservation rules, the penalty is up to Rs 2 lakh for the first offence and Rs 1,000 per day till the time corrective action is taken.

This is not the first time that the Haryana government has brought out protectionist policies. In November, the Khattar government introduced a new bond for MBBS students of up to Rs 9.2 lakh per annum over and above the course fee. This bond will be returned only if the candidate pursued a job opportunity within the State, else it would be forfeited.

Will other State governments follow suit?

This is not the first time that a job reservation policy is being mooted in India. Gujarat Chief Minister Vijay Rupani and Maharashtra Chief Minister Uddhav Thackeray have publicly spoken in 2018 and 2020, respectively, about their plans to have up to 80 percent reservation for locals in the private sector.

Here, locals are defined as those individuals who have been residing in the State for 15 years or above. In Maharashtra, CM Thackeray had in fact made this part of his party’s election manifesto in 2019.

In Andhra Pradesh, the government had passed a law in 2019 reserving 75 percent jobs for locals in government and private jobs. However, the Andhra Pradesh High Court had said in 2020 that this decision could be unconstitutional. As of now, this policy exists on paper but is not being fully enforced.

Similarly, the Gujarat government had first mooted a formal law bringing 80 percent reservation for locals in manufacturing and service sector jobs in 2018. However, this hasn’t been made a law. As part of this law, Rupani had also said that such employers had to recruit at least 25 percent of the 80 percent from local youth in the area where they set up their production facility.

The Assam government had also made a similar proposal of 80 percent employment reservation for locals in 2018 but it hasn’t been formally presented as a Bill in the State legislature.

Industry experts are of the view that the Haryana government’s decision will also nudge other State governments to move forward with their reservation proposals.

KR Shyam Sundar, labour economist and a professor at XLRI-Xavier School of Management, Jamshedpur, told Moneycontrol that job reservations have become a political/economic strategy in the post-pandemic world by ruling parties.

However, he explained that a few questions need to be answered.

“Can the government create job opportunities for those who will stay back in the State? Does the government have a set strategy for skilling local youth to help them become employable? If the answer to these questions is affirmative, then it is fine. Else, this policy will become unviable and will increase unemployment,” he added.

What will be the impact of the move?

Hiring consultants are of the view that such laws could partially help local youth in States such as Haryana to get skilled for new job roles.

Sunil Goel, Managing Director of HR firm GlobalHunt, said that job reservation for locals will lead to higher skill development because people would need to have the ability to take on these employment opportunities.

“But there is a flip side. This policy could also restrict talent availability — it is not giving an opportunity to the best talent,” he explained.

Explaining further, Goel said that rather than having 75 percent reservation for locals in private jobs, there could be a policy of having 25 percent reservation for locals, seeing the impact and making necessary tweaks.

“There is intense competition between companies on getting good talent. How will these companies compete in the global market with the absence of skills if reservation is mandated?” he questioned.

Rather than having multiple State governments pass laws reserving jobs for locals, a unified policy could be beneficial said Shyam Sundar.

“This calls for a National Migration Policy and is a signal to the central government to design this policy. This should be drafted in consultation with State governments and skilling policies could also be designed simultaneously with this policy,” he added.