How to be a tiger: Seize historic opportunity for labour reform: We must leap forward, not back
Abstract:
A key feature of China, South Korea, Taiwan, Singapore and Hong Kong during their decades of miracle level growth was their high level of labour market flexibility. Once these economies opened to global markets, their enterprises could take full advantage of this flexibility, grow larger, produce at lower costs and rapidly expand the exports of labour intensive products such as apparel, footwear, furniture and other light manufactures.
In the process, they also created jobs for masses that paid decent and rising wages. The end result was elimination of abject poverty within a matter of two to three decades.
Though India too has opened its economy following the launch of economic reforms in 1991, inflexible labour markets have proved a serious hurdle to the emergence of large enterprises in labour intensive sectors. As a result, the economy has been slow to create well-paid jobs for the masses. Successful sectors such as information technology, pharmaceuticals, machinery, auto and petroleum refining have been capital- or skilled-labour intensive.