Job Reservation in Private Sector

Job Reservation in Private Sector

Job reservation in the private sector has once again been brought to fore both at the Central and State levels. In fact, in Maharashta, a Bill has already been passed and a circular sent to many industries advising them to implement the provisions of the Bill.

Given below is FICCI’s perspective on the issue.

Skill Formation and Human Capital Upgradation

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The pathetic conditions in the area of human capital and skill development are reflected in the high school drop-out rates and low seat utilisation ratio in vocational training. Table-1 shows that the problem of drop-out is not only more serious among SCs and STs, but it gets worse at higher levels of schooling.

Table-1 Drop-Out Rates Amont SCs, STs and Total Population (1998-99)
Category	Classes (I-V) %	Classes (I-VIII) %	Classes (I-X) %
Total	39.74	56.82	67.44
SCs	44.27	63.58	76.63
STs	57.36	72.80	82.96

Source: Tenth Five Year Plan 2002-07

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Moreover, if we look at the SC/ST-participation rate in various streams of vocational training, the picture is equally dismal.

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Obviously, this requires radical improvement. The Government and private sector together need to draw up a definite plan on human capital upgradation for SCs and STs. Clearly, the medium-to-long term priority should be on raising the educational level – both at school and university levels, as well as skill development though effective vocational training among disadvantaged sections of the society. Through this, they would be able to equip themselves with right kind of education/sill, and thus keep pace with the changing need of employment market.

Table-2 Seat Utilisation Ratio for SCs and STs in vocational Training (%) (As of 30th June 2002)
	SCs		STs
	% of total availble seats	% of reserved category seats	% of total available seats	% of reserved category seats
Trade Apprentices	8.9	59.7	3.5	46.6
Graduate, Techincian, Technician (Vocational) Apprentices	3.0	19.7	0.4	5.4

Source: As computed from Ministry of Labour's Annual Report 2002-2003

Develop 'Entrepreneurship' Among the Vulnerables

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There is a need to have a well-defined affirmative action policy for financial institutions to supply adequate capital to such target groups for setting up businesses. Let us look at the global experience. US Government has several such schemes targeted towards minority businesses, for instance:

7(a) and 504 Loan Programmes that provide loan guarantees to small businesses;

Community Express Programme which combined small business loan guarantees with targeted leading by select banks; and

Capital Access Programme (CAP) which allows a leading bank to make slightly higher risk loans than conventional underwriting.

These schemes have proved very effective in improving the capital availability and accessibility for minority businesses in USA.

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To encourage entrepreneurship among disadvantaged groups, one option is awarding to Government licenses and contracts to them. In fact, instead of “price-preference” to public sector undertakings, preferential terms can be extended to SCs and STs, which would go a long way to promote entrepreneurship among them.

Complement Affirmative Actions with Incentivisation

As a complementary measure, FICCI suggests the following:

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Instead of forcing private sector units to compulsorily reserve jobs for the above target groups, Government can offer substantive incentives (for instance, tax-breaks, preference in Government procurement) to business enterprises that have certain prescribed degree of representation of the disadvantaged communities in their workforce.

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Here also, the US experience is quite useful. There are certain direct tax incentives available to US – employers for hiring the disabled and jobless people. Section 51 of the internal revenue code, 26 USC 51, provides for a Work Opportunity Tax Credit for employers who hire members of targeted groups having particularly high unemployment rate or other special employment need.

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It would be left to the companies to voluntarily decide if employing the designation percentage of SCs/STs is worth the incentives or not. Fiscal incentives have the advantage that they avoid the legislated interference and undue regulation any mandatory reservation would involve. From the efficiency point of view, incentives which are any day far better option than a quota reservation system, would not only be instrumental in achieving the socio-economic mobility of the target groups, but at the same time still leave the industry with enough room for flexibility and autonomy of business operations.