January 29, 2024


Should states mandate job reservations for locals?

Irrespective of who you believe or read concerning India’s economic health, one constant talking point and worry is unemployment. The pandemic threw a wrench in the mix for India’s employment issues. The 2021 India Skills Report stated that half of India’s graduates are unemployable. And states are taking matters into their own hands.

Over the past couple of years, several states have introduced reservations for locals. From their point of view, it’s a necessary step to safeguard the local population from an influx of migrants taking away good-paying jobs, especially from the private sector. However, some experts and economists aren’t happy with this trend. Could such a policy backfire for the states?


As the COVID-19 vaccines began to roll out, attention turned toward the economic fallout of the previous year, marred by lockdowns and travel restrictions. At the time, many posited that the biggest challenge that India would face would be unemployment. That prediction came true.

Before the pandemic, estimates from the Centre for Monitoring the Indian Economy (CMIE) stated that about 35 million people were unemployed. Between 2017 and 2022, the overall labour participation rate decreased from 46% to 40%. By January 2021, only 400 million were employed.

The unemployment crisis in India was compounded by slow economic growth and spotty social security benefits. People couldn’t afford to stay unemployed. Unemployment figures released at the time weren’t the entire picture; there was always disguised unemployment.

India’s employment issues are compounded for those in the informal sector, like agriculture or construction. There’s no guarantee of work or a sustainable minimum wage. Even gig workers have complained about a lack of job security, benefits, and timely salaries.

What economists worried about was an increased pool of unemployed workers, which would reduce their bargaining power and resulting wages. Many called for the Indian state to step in to boost their bargaining powers by having a minimum wage. Some states decided to go the reservation route to stave off a massive unemployment crisis.

In August 2020, Madhya Pradesh announced that all government jobs will only be given to ‘children of the state’. The previous Kamal Nath government announced 70% reservation in industrial units reserved for locals. This set off a wave of sorts. Other states like Jharkhand, Andhra Pradesh, Karnataka, Gujarat, and Maharashtra followed suit with similar policies. Kerala’s draft IT policy plans to provide incentives to investors who offer at least 50% of jobs to Keralites.

Haryana is arguably the example that received the most attention with the Haryana State Employment of Local Candidates Act, 2020. It came into force in January 2022 and mandated all private employers in the state reserve three-fourths of jobs paying less than ₹30,000 a month for locals. However, the law is mired in legal tussles.

The states want to safeguard residents and ensure that corporations hire from the local talent pool. Is it the right approach?

VIEW: Need to keep people employed

While there’s an argument to be made that such local reservations are populist politics, there is some public support for it. A 2017 study by the Centre for Study of Developing Societies and Lokniti showed that nearly two-thirds of youngsters support job reservations for locals. As the pandemic set in, the hardest hit were migrant workers. Employment is usually the last indicator to pick itself back up after a crisis. States need, or rather, want to ensure the local employment situation is healthy.

If we take Haryana as an example, employment prospects in the agricultural sector are dwindling. This means the state needed to have something ready to ensure they didn’t have millions of youngsters unemployed. The state also identified temporary migration as a cause for its unemployment issues. From the state’s point of view, they see this as a win-win. Companies get benefits and can hire from a diverse qualified workforce, and the state doesn’t have to depend on migrant employees.

The Haryana policy is also more lenient than, say, Maharashtra’s, which has employment provisions based on language. The issue of migrants seems to be front of mind for states. A large influx has led to competition and burdened infrastructure.

COUNTERVIEW: Backwards approach

These types of policies are certainly populist but are also rooted in xenophobia. This sort of anti-immigrant sentiment isn’t unique to India. Think back to the discussions around Brexit when some people argued that foreigners were taking away local jobs. The reality was much different. Foreign workers actually contributed to the local economy.

The policies for local adopted by Indian states are unconstitutional. Once again, let’s look at the Haryana situation. When the policy was announced, there was immediate chatter about its legality and constitutionality. A High Court bench stated the law violates constitutional morality since it made people not belonging to Haryana second-class citizens. They, too, have the fundamental right to livelihood. The policies by Haryana and other states are merely a symptom of deep-rooted unemployment and underemployment issues.

These types of policies highlight the constant interference of states in economic matters. It’s also not popular among industries. One of the petitioners against the Haryana law was the Faridabad Industries Association. To hire the best, they need a large talent pool, not one that’s restrictive. They’ll just move to another state.

Reference Links:

  • Labour in post-pandemic India – The Economic Times
  • Employment jumped post-Covid but 2 in 5 young graduates still have no jobs – Business Standard
  • Is India Facing a Post-pandemic Employment Crisis? – NewsClick
  • States rush in to reserve jobs for ‘locals’ and prevent inter-state migration of labour – National Herald
  • Explained: Haryana’s domicile reservation law in private sector jobs, and High Court’s decision – CNBC TV18
  • State after state is passing or proposing job reservation for locals. But do such quotas fix the unemployment problem or drive business away? – Times of India
  • Reservation For Locals: Whither jobs, economic freedoms, and economic unity? – Moneycontrol

What is your opinion on this?
(Only subscribers can participate in polls)

a) States should mandate job reservations for locals.

b) States shouldn’t mandate job reservations for locals.


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