The prime minister’s upcoming visit to China in January may introduce his Delhi government officials to the hukou system, greatly to their taste. For the uninitiated, hukou is a household registration system that tightly controls internal migration according to place of residence. A worker, classified as rural under hukou, cannot normally seek employment in urban areas and assuming such employment occurs, has to return to rural areas to seek public services like access to health or education. In Chinese reforms, the hukou system was relaxed. Indeed, assertions that India needs to learn from flexibility in Chinese labour markets are overly simplistic.

After some initial ad hoc experimentation, de jure, contractual provisions were introduced in Chinese labour law through a 1994/1995 National Labour Law and rural hukou allowed to work in urban China. But beyond reforms in SOEs (state-owned enterprises) it is doubtful whether this flexibility really drove China’s labour cost advantages. Instead, there were de facto deviations from worker rights codified even in the 1994/1995 Law, especially for rural hukou workers, whose numbers are estimated to go up to even 150 million.

That is, more than hire and fire provisions (the counterpart of Chapter V-B of our Industrial Disputes Act), it was deviations from minimum wage and other social security norms, absence of unionisation, lack of inspection and lower procedural and compliance costs in general that drove growth. It is a separate matter that China has now (from January 1 2008) tightened up labour laws to grant workers more rights. Coincidentally, the PM returns from China on January 15, the day Delhi’s LG (lieutenant governor) originally proposed to introduce the mandatory requirement of carrying ID cards.

... contd.