International Labour Day

Syllabus: GS3/Economy

Context

• May 1 is observed as the International Workers’ Day, commonly known as Labour Day.

International Labour Day

• Also referred to as May Day, in some regions it is observed on the first Monday of May.
• The day serves to acknowledge the social and economic contributions of workers and to draw attention to the continuing fight for workers’ rights and fair labour conditions globally.
• The origins of International Labour Day date back to the late 19th-century labour movement in the United States. 
  • On May 1, 1886, workers across America launched a strike demanding an eight-hour workday, May 1 was chosen to commemorate the strike.
• In India, the first Labour Day celebration was held in Chennai (then Madras) in 1923 by the Labour Kisan Party of Hindustan.
• Canada’s first Labour Day celebration took place in 1872, nearly a decade before the United States officially recognised it.

Key Features of the Labour Market in India

• Dual Structure of the Economy: India’s labour market exhibits a dualistic nature, consisting of:
  • A formal sector, which offers job security, fixed wages, and legal protections.
  • An informal sector, which is largely unregulated and insecure.
• Dominance of the Informal Sector: Nearly 80–90% of the workforce is employed in informal jobs such as daily wage labour, small-scale agriculture, street vending, and domestic work.
• High Dependence on Agriculture: A significant portion of India’s workforce is still engaged in agriculture (around 40–45%).
  • However, agriculture contributes a much smaller share to GDP, indicating low productivity.
  • This leads to disguised unemployment, where more people are employed than actually required.
• Demographic Dividend: India has one of the youngest populations in the world, with a large proportion in the working-age group. This presents an opportunity for economic growth, provided that:
  • Adequate jobs are created;
  • The workforce is properly skilled and trained.
• Low Female Labour Force Participation: Female participation in the labour force remains significantly low compared to global standards. 

Major Challenges in India’s Labour Market

• Informalisation of Employment: Even within the formal sector, there is increasing use of contractual and temporary workers. This reduces job security and benefits.
• Jobless Growth: India has experienced a “jobless growth” phenomenon where high GDP expansion, often averaging over 6.5%, has not produced proportional employment for its growing workforce, leading to a decline in the worker-to-population ratio.
• Skill Mismatch: There is a significant gap between the skills possessed by workers and those demanded by industries. This leads to unemployment even among educated youth.
• Regional Imbalances and Migration: Economic opportunities are unevenly distributed across states. This results in large-scale migration from less developed regions to industrial hubs.
• Gender Inequality:  Women face lower participation rates, wage disparities and limited career advancement opportunities.

Labour Laws in India

• The Government of India has announced the implementation of the four Labour Codes with effect from 21st November 2025 rationalising 29 existing labour laws:
  • Code on Wages, 2019: Regulates wages, bonus payments, and equal remuneration.
  • Industrial Relations Code, 2020: Deals with trade unions, employment conditions, layoffs, and dispute resolution.
  • Code on Social Security, 2020: Merges laws on provident funds, pensions, insurance, maternity benefits, and gratuity.
  • Occupational Safety, Health and Working Conditions Code, 2020: Consolidates regulations on safety, working hours, health, and welfare.
• Labour laws in India apply to both organized and unorganized sectors, although enforcement in the unorganized sector remains a challenge.
• Enforcement agencies include the Ministry of Labour and Employment, state labour departments, and specific boards (e.g., EPFO, ESIC).

Conclusion

• India’s labour market presents a combination of structural challenges and emerging opportunities.
• The focus must be on creating inclusive, productive, and sustainable employment to fully utilise the country’s demographic advantage and ensure long-term economic growth.

Source: AIR