Why is it in the news?

• The Punjab and Haryana High Court has recently invalidated a 2020 law enacted by the Haryana government which mandated the reservation of 75% of private-sector jobs exclusively for residents of the state.

Background

• The Haryana State Employment of Local Candidates Act, 2020 mandated that companies with 10 or more employees reserve 75% of jobs paying less than Rs. 30,000 per month for candidates from the state of Haryana.
• The primary aim of this law was to provide employment opportunities specifically to residents of Haryana.

Reasons for Invalidation

• The Punjab and Haryana High Court invalidated the law, citing constitutional violations.
• It was argued that the law violated Article 16 of the Indian Constitution, which guarantees equality of opportunity in matters of public employment. Reserving 75% of private-sector jobs for Haryana residents was seen as discriminatory based on residence.
• The Haryana government claimed authority under Article 16(4), which allows for exceptions to Article 16. However, the court found that this claim was unconstitutional.

Benefits of Local Reservation

• Supports Article 16 of the Indian Constitution, providing opportunities for locals.
• Aims to promote equality, particularly in low-strata jobs, in line with Article 14.
• Seen as a suitable solution for combating unemployment and slow job creation.
• Some states (e.g., Andhra Pradesh, Telangana) have specific constitutional provisions (Article 371 D and E) allowing for local job reservation.
• Helps empower local youth, discourages migration, and addresses agrarian crises and local unrest by reducing unemployment.
• Hiring local employees can reduce relocation costs, potentially leading to lower operational expenses and reduced prices for customers.
• Local employees are likely more familiar with the local language, culture, and business environment, enhancing their productivity and efficiency.
• Consistent with global practices where countries like the US (The US Civil Rights Act of 1964) and Canada (The Employment Equity Act) provide private job reservations.

Issues with Local Reservation

• Risk of domestic and multinational investors leaving, especially in sectors like auto and IT due to skilled manpower concerns, leading to a drop in investments.
• Restrictions on the free movement of manpower can adversely affect existing industries in the state.
• Reservations on gig and platform companies may result in a talent shortage, affecting the availability of skilled individuals.
• Argued that states lack the power to create domicile conditions for employment, as it’s reserved for public employment and requires parliamentary action under Article 16(3).
• Reserving 75% of jobs exceeds the constitutional reservation ceiling of 50%.
• Local reservation policies may undermine the unity in diversity principle, potentially creating divisions between locals and non-locals.
• Critics argue that these policies undermine the merit system, affect economic efficiency, and may lead to a shortage of qualified workers, impacting economic development.
• Local reservation policies may lead to vote bank politics among states as politicians compete to secure the interests of local constituents.

Conclusion

• The argument against local reservations in the private sector is that states should focus on skill training, economic recovery, and education to provide ample job opportunities, fostering competition in the free market.
• While local reservations may offer short-term gains and address certain local concerns, they could hinder long-term economic development and national unity by creating divisions and deterring investment.