Context:

• This article is based on the news “High Court sets aside Haryana law guaranteeing 75% reservation to locals in private sector” Which was published in the Hindu.  The Punjab and Haryana High Court quashed Haryana State Employment of Local Candidates Act, 2020  guaranteeing 75% reservation to locals in private sector jobs in Haryana.

Reservation in Private Sector –  Why HC Has Struck Down Haryana’s Private Sector Quota

• The High Court asserted that the law to give effect to reservations in Haryana’s private sector was unconstitutional. 
• Industry associations from Gurugram, Faridabad, and Rewari districts of Haryana had sought judicial recourse and had submitted that the law goes against constitutional provisions and the basic principle of merit underpinning private sector growth.

What arguments of the Haryana Government regarding Reservation in Private Sector?

• Non-Discrimination in Employment Allocation: The Haryana government contended that the Act did not discriminate regarding employment under the central or state governments or any other organisation owned by them. 
• Domicile-based Employment and Article 15(1): It also argued that reservation on the basis of place of birth would violate provisions of the Constitution but employment on the basis of domicile would not offend Article 15(1) of the Constitution. 
• Distinct Class and Reasonable Classification: It said unemployed local youth were a distinct class and reasonable classification could be made of this particular class for the purpose of providing 75 per cent employment in private sectors.

What is the Reservation in Private Sector?

• The concept of a reservation in private sector was born out of concerns about job shortages and the necessity for governments to satisfy their domestic electorates.
• The policy states that the jobs created in a state will be offered first to those who belong to that State. 

Why is there a demand for Reservation in Private Sector?

• LPG Reforms and Jobless Growth:
  • The economic reforms initiated in India in the early 1990s, known as LPG reforms, have been criticised for contributing to jobless growth.
  • This suggests that economic growth has not adequately translated into job creation, further exacerbating economic insecurity and fueling the demand for local reservation.
• Agrarian Distress: Years of low returns from agriculture, coupled with fractured landholdings and inadequate non-farm incomes, have contributed to the demand for local reservation.
• Lack of opportunities: The lack of sufficient employment opportunities in the manufacturing sector has made it difficult for surplus agricultural labor to find alternative employment. This has led to increased competition for jobs in the rural areas, further fueling the demand for local reservation.
• Employment Situation: The COVID-19 lockdown exacerbated the unemployment crisis, particularly among migrant workers in urban areas.
  • The hardest hit were migrant workers in cities, who are employed in construction, restaurants, malls, courier services etc. Most of these are in the informal sector, i.e. jobs which are not covered by health or retirement benefits.
• Populist Impulse and Youth Support:
  • Implementing local reservation measures is often seen as a populist move to appease voters.
  • A 2017 national survey by CSDS and Lokniti found that nearly two-thirds of the youth support job reservation for locals.
• Reservation in Private Sector and Other States’ Examples
  • Several states, including Jharkhand, Madhya Pradesh, Andhra Pradesh, Maharashtra, and Karnataka, have implemented local reservation policies in the private sector.
  • These policies mandate that a certain percentage of jobs in private companies must be reserved for local residents.
• Fear of losing out: This is not unique to India or the Indian States, but is universal. 
  • It was spectacularly manifest in the Brexit vote, when Britons thought that foreigners were taking away local jobs, and hence voted to secede from the European Union.
  • In America too, the anti-immigrant sentiment was exploited during the recent presidential election campaign.

What Arguments Against Reservation in Private Sector?

• Balancing Fundamental Rights and State Intervention: Reservation in private sector creates an unprecedented intrusion by the State government into the fundamental rights of the employers to carry on their business and trade as provided for under Article 19 of the Constitution of India. 
  • It was also submitted in the petition that the law was an infringement of Article 14 of the Constitution of India.
  • Dr. Pradeep Jain v Union of India (1984) case: The Supreme Court discussed the issue of legislation for “sons of the soil”. Further, The court held an opinion that such policies would be unconstitutional but did not expressly rule on it. 
• State Domicile Quotas and the Erosion of Common Citizenship in India: A fundamental wedge is sought to be created between persons domiciled in different States by the statute in question which is contrary to the concept of common citizenship provided in the Constitution of India.
  • Dilemma of ‘One Nation, One Everything’ versus Regional Employment: Reservation in Private sector would be a direct attack on the fundamental idea of the Indian economy as one unit. 
  • For Example: On the one hand, the Centre outlines ‘One Nation, One Everything,’ businesses – both domestic and multinational – may struggle to find skilled workers in a particular state (Haryana) Potential Ripple Effect on National Growth: Local Hiring Mandate in States such as Haryana Could force relocation, affecting National Growth. 
  • Haryana has received fewer new investment projects compared to previous years, causing the state’s share of new investment projects in the country to drop to 1.06% in 2022-23 from 3 % the previous year, the lowest in six years.
• Exodus of low-paid workers: There would be an exodus of low-paid workers as they would be unable to find work unless their states of origin give them sufficient job opportunities.
• Striking at the Core of Meritocracy in the Private Sector:  Reservation in private sector goes against the fundamental principle of merit that alone drives the private sector, as opposed to the public sector, where the governments continue to hire on the basis of an archaic flawed reservation system for their political purposes.
  • Giving 75 percent or above reservation goes against the Supreme Court’s ceiling of 50 percent for maintaining meritocracy.

What Arguments in Favor of  Reservation in Private Sector?

• Discriminatory HR Policies: A 2019 study conducted by Azim Premji University found that the SC/ST communities were “over-represented” in low-paying jobs and “under-represented” in high-paying ones. 
  • The study, thus, suggests that this massive under-representation of the marginalized sections in private sector employment couldn’t have been possible without discriminatory and biased corporate HR policies.
• Upholding Social Justice in the Private Sector amid Privatization Concerns: Social justice movements have increasingly feared that increasing privatization may lead to a complete decline of opportunities for the historically marginalized caste groups. 
  • A quota-based reservation system in the private sector in this context becomes not only necessary but also inevitable.
  • As per estimates  less than one percent (only .69 per cent) of jobs in the country for educated citizens are covered by reservations.
• Global Precedents: Even in the US, companies like General Motors and Ford have systems in place to employ African Americans, Asians, and so on.
• Advocating Parity in Social Commitments Between Public and Private Sectors: In a mixed economy, when the public sector is being asked to discharge its social commitment through the reservation of jobs, there is no reason why similar conditions should not apply to the private sector that has been given a lot of concessions by the government to enhance industrial growth.
• Employment Equality for Stakeholders in the Private Sector: Our private sector takes a lot of money from public sector banks and financial institutions, and there is a huge default in loan repayment and taxes. 
  • Those whose land, labor, and capital are being used by the Indian entrepreneurial class can definitely seek some modicum of equality in job distribution.

Way Forward

• Voluntarily Code of Conduct (VCC): India Inc. declared that they would adopt a voluntary Code of Conduct (VCC), according to which, they would take up measures to ensure social justice in their organizations.
• Focus on Human development: The government should train the labor and also pose restrictions on the contract by the industrial sector which poses a “hire and fire” basis and promote long-term contracts.
  • For Example: The flagship Pradhan Mantri Kaushal Vikas Yojana (PMKVY)  was launched in 2015 to provide short-term training, and skilling through ITIs and under the apprenticeship scheme.
• Shifting Government Focus from Employment Guarantees to Inequality Reduction: The governments should create an environment through their policies such that those policies can help minimize inequalities in income, status, facilities, and opportunities. So, the government should focus on its role rather than guaranteeing employment.
• Safeguarding Fundamental Rights in Policy Formulation: It is crucial to guarantee that any policy decision aligns with the Constitution of India, upholding the fundamental rights of citizens and avoiding any violation thereof.”

Also Read: Job Creation – A big challenge for the Government

Conclusion:

Rather than focusing on the reservation to provide jobs, the government should focus on skill enhancement and job creation.  Moreover, this goes against the spirit of “Ek Bharat Shreshtha Bharat,” which demands an integrated and mobile labor market within the country.