As far as labor issues in India are concerned, labor regulation is the hot favorite among academics. Some policy makers also talk about an impending skill shortage that requires urgent attention. But discussion of other issues—for example, lack of trust between employers and employees—is virtually non-existent.
So how do firms feel about the difficulty of finding a trustworthy employee compared to finding skilled workers or dealing with labor laws? Somewhat surprisingly, data from a survey of about 2000 firms conducted by Enterprise Surveys in 2005 suggests that in contracting labor, trust is the most common problem for firms, followed by skill shortage and then labor laws. Close to 34 percent of firms feel constrained in hiring workers because it takes too long to find a trustworthy employee, 24 percent report hiring problems because the type of skills needed are not available and 20 percent report hiring problems due to labor laws that include cost/restriction of dismissal, restrictions on hiring casual or temporary labor.
While these figures only tell us how often these issues come up and not their relative importance for affected firms, they do suggest that a more serious look at the somewhat neglected issue of finding trustworthy employees is needed.
Source: Enterprise Surveys (2005).
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