For more than half a century, the Kerala Shops & Establishments Act has regulated labor standards and restrictions for commercial establishments within the state of Kerala, India. In this state of nearly 35 million people, the law controls everything from which days and for how many hours a shop can operate to when women can work. Since its implementation in 1960, women have been prevented from working night shifts, contributing to an unemployment rate nearly five times that of men and limiting their income potential. To increase Kerala’s employment opportunities and correct the discrimination women face there, the Centre for Public Policy Research (CPPR) assembled a team to conduct research and educate the public on the costs of these restrictions.
CPPR’s work persuaded the government of Kerala to implement significant changes that include allowing shops to remain open 24/7, introducing shifts for employees, establishing an online business registration platform, and permitting women to work past 7:00 p.m. This represents a dramatic shift in the Communist-led state of Kerala toward improved working conditions, simplified requirements for entrepreneurs, and increased opportunities for employment—especially for women.
In 2016, the national government released a Model Shops and Establishment Act, giving all states the option to accept, reject, or modify the federal government’s recommendations. Soon after, CPPR began conducting research on the provisions of the act, forming a team of lawyers, sociologists, and public policy researchers.
CPPR’s preparatory work began in October of 2016 with research on the legislation, and their team of lawyers, economists, sociologists, and media professionals conducted meetings and interviews with female employees, shop visits, meetings with 200 individual entrepreneurs and with chambers of commerce throughout the state, meetings with the labor commission and with elected legislators, and interviews with labor inspectors. Through these interviews and focus groups, CPPR carefully documented the interests of all stakeholders and their grievances with the existing law. Alongside the stakeholder analysis, the team published corresponding research papers, hosted informational seminars, distributed fliers, and produced a documentary that highlighted the damaging effects of the existing law on real people, titled Changing Business Climate in Kerala: Women and Entrepreneurs Embracing Night Economy.
Their work was noticed by the government of Kerala, and the Labour Department Secretary called for a meeting to discuss the proposed draft bill. The outcome of that meeting empowered CPPR to continue their research, spearhead discussions across Kerala, and report back to the Labour Department Secretary. Having the support of the government allowed CPPR to expedite the project, and more rounds of discussions were held while they promoted their research findings.
"If you want to change harmful laws that are impoverishing a society, do your research on the effects of a change and find out who's going to be affected by the change," said Dr. Tom G. Palmer, executive vice president and George M. Yeager Chair for Advancing Liberty at Atlas Network. "CPPR offers us a textbook example of positive-sum reform. The CPPR team documented the harms created by restrictions on the freedom to work; estimated the potential benefits of shop hours liberalization; publicized their results—which led to many stakeholders realizing that they weren't alone in seeing those harms; and then worked with all the stakeholders to improve the law. They did what few thought could be done.”
After several rounds of discussions and listening to CPPR’s recommendations, the government of Kerala identified the areas to the Shops and Establishment Act that it planned to enact. Several of CPPR’s recommendations were immediately implemented, among them:
- Allowing shops to remain open for 24 hours a day, seven days a week, 365 days a year;
- Loosening restrictions on when women can work by extending work time for women from 7 p.m. to 9 p.m. while allowing work later than 9 p.m. under certain circumstances;
- Easing regulatory compliance on businesses with 10 or more employees to require inspections only if turn over reaches a certain threshold;
- Launching an online permit system for new shops to obtain their licenses in a streamlined manner that does not require traveling to an office and waiting in line.
These reforms promise to strongly improve the economic stability of Kerala while providing their citizens with expanded opportunities to work and operate businesses. CPPR’s innovative approach was successful in convincing a communist government to liberalize their labor market, and the team hopes to add additional amendments to the new act.
“With this project to liberalize night work for women, kick-started by an Atlas Network grant and came to fruition by the hard work of my dedicated team members and stakeholders, we have taken one step closer in liberalizing labor laws and creating a positive social impact in the State of Kerala,” said D Dhanuraj, chief executive and chairman of CPPR. “We, at CPPR, are earnestly grateful for being recognized for this prestigious award. It has set the stage for introducing more policy amendments in the future, initiate open dialogues and implement institutional transformation.”
CPPR is optimistic that the reforms will create badly needed job opportunities in Kerala, which has the highest unemployment rate of India’s states. The COVID-19 pandemic has made it more necessary than ever for shops to provide flexible hours to reduce crowding, and the impact of the new law has been widely understood to have been beneficial to public health. Encouragingly, there is potential for replication across several states in India. At present four states are undergoing such reform efforts and the Kerala reforms are being used as a model.
The Centre for Public Policy Research’s work to liberalize Kerala’s labor market is a finalist for the 2020 Templeton Freedom Award.
About Atlas Network’s 2020 Templeton Freedom Award:
Awarded annually since 2004, Atlas Network’s Templeton Freedom Award is named for the late investor and philanthropist Sir John Templeton. This prestigious prize honors Sir John’s legacy by recognizing Atlas Network’s partner organizations for exceptional and innovative contributions to the understanding of free enterprise and the advancement of public policies that encourage prosperity, innovation, and human fulfillment. The Templeton Freedom Award is generously supported by Templeton Religion Trust and will be presented during Atlas Network’s Freedom Dinner on Nov. 12. The winning organization will receive a $100,000 prize, and five additional finalists will receive $20,000 prizes. The finalists for the 2020 Templeton Freedom Award are:
- The Center for Indonesian Policy Studies, based in Jakarta, Indonesia, for their Affordable Food for the Poor project
- The Centre for Public Policy Research, based in Kochi, India, for their labor market liberalization project
- The Fraser Institute, based in Vancouver, Canada, for their Alberta Prosperity Initiative
- IDEAS Labs, based in San José, Costa Rica, for their “Ticos Con Coronas” campaign
- The Mercatus Center at George Mason University, based in Arlington, Va., for their Equity Initiative for American Healthcare
- The Property and Environment Research Center, based in Bozeman, Mont., for their Recovering Endangered Species project
The Templeton Freedom Award is generously sponsored by Templeton Religion Trust.