In Premature Imitation and India’s Flailing State, Shruti Rajagopalan and I discuss how India has essentially all of the laws of a developed country but at much lower state capacity–this mismatch creates what we call premature imitation, with a host of negative consequences. What is even more amazing, however, is when a country like India regulates beyond most developed countries. Anand, Chandra, and Pradeep provide a case in point at Prosperity Insights–India regulates labor hours more than Germany.
Germany and India share an 8 hour standard working day but India requires any overtime to be paid at twice the regular rate–most developed countries are at 1.5 and a few have no statutory cap at all. In fact, Germany has no statutory overtime rate–it can vary depending on bargaining. Germany is also more flexible than India on the number of overtime hours. India has a cap of 144 overtime hours a quarter. Technically, Germany doesn’t regulate overtime hours but it does cap total hours at 10 a day and 48 a week on average. The average is crucial. In Germany overtime hours can be moved between weeks within a 6 month period while India regulates each week. In other words, long weeks in Germany are legal as long as short weeks offset them before the period ends–while in India each week has a cap. The weekly cap and the double overtime pay make it very costly and difficult to meet rush or large seasonal orders.
Consider a hypothetical 500-worker electronics factory, working a...
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