The central government reviewed the existing labor laws and brought in four new labor codes. These include the Wages Code, 2019; Social Security Code, 2020; Industrial Relations Code, 2020; and Occupational Safety, Health and Working Conditions Code, 2020. These codes came into effect from the 21st of this month. With their implementation, 29 previous labor laws were integrated. The new regime is expected to accord more protection to the workers with an increment in various benefits and better working conditions. It would also facilitate clearer labor and employment policies.
Introduction Background and Need for Change
Most of the labor laws in operation today were written between 1930 and 1950. Many of these do not match contemporary working conditions, especially with expanding technology and the growth of the digital and gig sectors. Businesses have struggled to comply with laws written for older conditions while workers faced gaps in security and welfare. The central government expects the new labor codes to address these long-standing issues and bring uniformity in its wake.
Impact on Labor-Intensive Sectors
Stock market analysts anticipate increased labor cost in some sectors with the new codes. Chemicals, paints, oil, automobiles and auto parts, and pharmaceuticals--which are labor-intensive industries--would be among the worst hit in terms of increased costs. Improvement in productivity is likely, according to analysts, as better working conditions can help workers produce more in less time.
Possible Impact on Company Shares
Some market experts say share prices of labor-intensive firms may face short-term pressure due to this wage hike and are closely watching how these stocks react at the opening of the week's trade. The companies that would be eyed include Asian Paints, Hero MotoCorp, Bajaj Auto, L&T, Cipla, Dr. Reddy's, Aurobindo Pharma, Tata Steel, JSW Steel, and Reliance Industries.
Industry Response R. Sivaprasad Reddy, CII-Telangana Chairman, elaborated that the four new labor codes would facilitate higher productivity, greater competitiveness, and more employment generation. He termed this reform a major milestone. He added that integrating 29 laws into four codes will increase workers' wages, enhance social security, and bring in better workplace safety. He also said the conditions of labor and industry across the country should improve in the coming future under the new regime.
