A widely held belief is that India’s complex labour laws offer excessive protection to workers, making employment adjustments difficult for firms. The Organisation for Economic Co-operation and Development (OECD) and the World Bank have long categorised India’s labour law framework as one of the most rigid in the world. Yet the pressing question remains: how effective are these laws for vulnerable sections, particularly during periods of economic distress?We examine this question by situating the analysis within the context of economic crisis during COVID-19. The study uses nationally representative data on 42,890 individuals from the Centre for Monitoring Indian Economy (CMIE) and applies the OECD’s state-level index of labour law strictness. The results paint a grim picture of the effectiveness of labour laws, highlighting the need to strengthen their ground-level enforcement.Caste-wise job losses during Covid-19During the peak Covid-19 period (April 2020), the overall employment rate among individuals in the labour force fell by 28.12%. The extent of decline varied significantly across caste groups, exposing the vulnerabilities of marginalised castes, including Scheduled Castes, Scheduled Tribes, and Other Backward Classes. Marginalised castes experienced a 32.91% decline in employment, more than double the 16.05% reduction observed among upper castes.Among marginalised castes, individuals with below secondary education experienced the steepest employment decline of 40 percentage points, compared to 16.39 points for those with secondary education and 13.49 points for those with graduation and above. Among upper castes, employment declined by 24.35, 10.98, and 8 points for those with below-secondary, secondary, and higher education, respectively. Thus, caste-based disparities in employment effects of COVID-19 persisted even among groups with comparable levels of education. Buffer use of vulnerable groupsOur analysis further reveals that the disproportionate concentration of marginalised castes in temporary jobs makes them relatively more susceptible to being used as a buffer in absorbing market fluctuations. Our estimates show that only 18.87% of employed individuals from marginalised castes were engaged in regular employment compared to 47.48 % from Upper Castes, in the pre-Covid-19 period.Employers, facing uncertainty, release temporary workers first, among whom marginalised castes are disproportionately concentrated. During the Covid period, 74% of temporary workers lost jobs.Between December 2019 and April 2020, the employment rate of marginalised castes collapsed from 90% to 56%, a sharper fall than that of upper castes, whose employment declined from 86% to 71%.However, as the economy began to recover in May 2020, these very workers were the first to be rehired. The employment rate of marginalised castes rebounded by 10 percentage points to 66% in just a month, compared to a modest 5-point recovery (to 76%) among upper castes. Concentrated in regular jobs, upper castes experienced slower rehiring due to more formal recruitment processes.Myth of employment protectionDrawing on cross-state variation in labour regulations and employing the OECD Index of employment protection, we examine job loss rates in states with relatively stricter labour laws on paper and compare it with that of more flexible labour law regimes. Surprisingly, our findings reveal that job losses were actually higher in stricter labour law regimes (25.8%) than flexible regimes (23.7%).Moreover, marginalised caste groups experienced a steeper employment decline in stricter states (30.59%) compared to flexible states (26.98%). The findings hold even when we use alternative indices of labour laws.These patterns not only underscore the inability of existing employment protection laws to safeguard vulnerable workers but also challenge the prevailing view that India’s labour market is rigid. To understand the ineffectiveness of labour laws, it is essential to look beyond their design and examine how their enforcement has changed over time.Our analysis of labour inspection data from the Labour Bureau shows that the average number of labour inspections per 10,000 formal sector employees declined steeply from 510 in 2007 to 34 in 2021. Over the same period, the average number of labour inspectors per 10,000 employees registered a marginal decrease, from 2.5 to 2.4. These patterns indicate a weakening of the labour inspection system, which has serious implications for labour law enforcement.Moreover, the surge in temporary employment within the formal sector, from 20% in 1999–2000 to 40.7% in 2022–23, has further eroded the effectiveness of labour laws. However, the share of temporary workers in stricter labour law states was 5% lower than in flexible states.Policy implicationsSince 2014, India has adopted a risk-based randomised labour inspection system, which aims to enhance ease of doing business and compliance with labour laws. Under this system, establishments are now randomly selected for inspections. However, the randomisation is performed after classification of establishments based on risk-level and history of violations. Then, enterprises are selected from high-risk groups for labour inspections. The new labour code on Occupational Safety, introduced in 2019-2020, has formalised this approach.In principle, the randomised labour inspection system can bring transparency and reduce corruption. However, when the randomisation is accompanied by a significant reduction in the number of inspections, the probability of an enterprise to be inspected falls. This can undermine the deterrence effect of labour inspection system, thereby weakening the enforcement of laws.And when enforcement is weakened, it is the marginalised who bear the brunt. Therefore, policy makers should raise the intensity of labour inspections and strengthen the capacity of enforcement agencies, alongside promoting formal employment. This combination can ensure effective implementation of labour laws.Irfan Ahmad Sofi is In-Charge Head, Department of Economics, Islamic University of Science and Technology (IUST), Kashmir. Mir Audil Bashir is a research Scholar at IUST.