The role of labour and management under the change in the labour market and employment structure in India

C S Venkata Ratnam Professor, IMI, New Delhi & Director, GIFT, Visakhapatnam

The recent change in labour market 1990s and beyond

The size of regular workforce as a proportion of total workforce of over 400 million has shrunk about 8 to 7 % between 1983 and 2003 Negative growth in public sector employment and marginal growth in private sector organised sector Increasing incidence of casualisation and contractualisation

The recent change in labour market 1990s and beyond

Unorganized sector continues to be a major provider of jobs. 95% labour account for a little over 50% of GDP 70 % employed in agriculture account for 25% GDP Employment in manufacturing declining due to declining labour intensity. For example two successive changes in telecom technology manual mechanical to electrical mechanical to digital cellular - seem to have reduced employment intensity by a factor of 500. Erosion of job protection and past guarantees in employment. With rising unemployment in the efforts to make enterprises competitive, effective protection for labour is becoming lesser than what the law envisages.

The recent changes in labour market 1990s and beyond

The proportion of women in the labour force is increasing. Old skills/jobs/occupations declining and new /skills/jobs/occupations emerging. Earlier IT eliminated routine jobs of unskilled workers to middlemen roles of managers. Now the e-commerce - e-tailing to e-banking to e-training - is displacing even larger proportions of jobs in several sectors. Of course, a wide array of new jobs - teleworking and teleworkers - are already on the horizon . Tertiary sector emerging as a major provider of jobs. IT enabled services is emerging as a major engine of job creation. But there are concerns about new economic slavery.

The issues which labour and management are challenging?

Labour
Young workforce: job creation decent work Older workers: job protection, social security benefits Unions: protecting accumulated rights Skills training and real wage protection

Management
Flexible and adaptive workforce Enterprise restructuring
24 x 7 x 365 days 1/4 x 2 x 4 Cost cutting than value addition Denominator, not numerator management

Contracting out Parallel production in green field sites

The efforts made against these issues by labour and management

Labour
Dependence on government
Government not a trusted ally in market economy Some help for unorganised sector. Executive and judiciary not friendly to organised labour

Management
Dependence on government
Elusive changes in law But investor friendly attitude of executive and judiciary

Labour as Foe
Lockouts, closures and suspension of operations Substitute labour with technology

Management as Foe
Strikes and protests strike as a weapon is getting blunted Organising weak

Labour as friend
Japanese practices: communication and consultation Negotiated changes Concession bargaining

Management as friend
Working together negotiated changes Concession bargaining

Evaluation of increase in part-time, temporary or dispatched workers

Wage employment is 15 per cent. Here there is more casualisation and contractualisation In the other 85 % of labour market, there is underemployment Temporary and Contract labour increasing upto 30 per cent in orgnised sector. They get 8 times less wages and are 30 per cent more prone to accidents in some sectors Part time work still to become common in organised sector Government planning to operationalise 1984 amendment to law now permitting fixed term contracts for workers too

Evaluation of increase in part-time, temporary or dispatched workers

Existing protections to contract labour are expected to weaken. Already, Andhra Pradesh legislated changes and started implementation: contract labour permitted in non core areas. Government is planning to make it easy to employ contract labour if they are paid the same wages as regular wages, but no social security contributions. Umbrella legislation for unorganised sector is in the offing There is a gap between intent and action. Between legislation and its enforcement.

Have the unions succeeded in organising part-time, temporary despatched workers?

Traditional unions making efforts, but not quite successful: in these sectors 90% work and 10% result against 10% work and 90% result in organised sector Traditional unions successful in some cases in unionising despatched workers and securing them better wages SEWA in organising women workers was a better example than the effort of National Centre for Labour in organising construction and contract labour NGO initiatives are helping in some cases to secure them some benefits

Has regulatory reform been promoted ?

Labour law reform did not keep pace with economic reforms in India 2nd National Commission on Labour submitted report and several bills are prepared 5th Pay Commission recommended 30 per cent increase in pay and 30 per cent cut in employment. 40 per cent increase in pay was ordered in 1997, but not employment cut Now government is actively pursuing 30 per cent cut in government jobs and a plan to create 50 million jobs over next five years. The no. registered for jobs in employment exchanges (44 million) is about the same as child labour in India. If we solve child labour we will have solved adult unemployment

Is labour the problem?

No. Red tap and infrastructure (social and physical) are True, more than a million mandays are lost every day in India due to poor work ethic (not worker ethic) for which management too has the onus! Still, the three industries which did well in post-reform period are those which are labour intensive: garments, gems and jewelry and software

Do labour laws matter? Yes

Would stateways change folks ways?. Yes. They set the direction, if not pace. Do minimum wages matter. Those who cant wont pay. Those who can pay more than the minimum. But majority who fall in between automatically adjust their pay whenever there is a notification. Are labour laws the problem? No, they are a problem, not the problem.

Do labour laws matter? No!

Not, except to those who engage in legal minimalism India and Malaysia have different laws. Unlike India, Malaysian law regards right to hire, assign work, reward, transfer, promote and adjust workforce as managerial rights. Yet, workforce flexibility in Mumbai was the same as in Kualalumpur.

Do laws matter? No!

Laws being the same, attitude of judiciary and administration seem to make a difference in their application Judiciary looks at intent, not content of laws Administration is shifting focus from labour to product market In a market economy consumer rights are impacting the rights of labour

What kind of laws are we taking about?

HARD LAWS Core labour stndards/social clause/advocated by ILO/WTO/OECD/ICFTU State/intergovernmental institutions have less impact

SOFT LAWS voluntary codes by NGOs through interaction between market institutions and civil society institutions: social labeling, consumer boycots, SA 8000, Global Compact Limited coverage, but greater effect

Do we need labour law reforms?

YES they are long over due too many - need simplification, speed, accountability, etc Employers want rationalisation and exemptions

NO Laws many strict and too many, but Implementation is lax anyway We manage somehow unions want wider coverage and stricter implementation

What is the minimum agenda for labour law reform

In the past labour was protected in labour market and capital in product market. Now both feel unprotected Employers want too many things to change while unions want nothing to change (if it is dilution of existing protections). Respective viewpoints are too familiar to the audience

Minimum agenda for change

Trade union structures need change. Outsiders role inevitable but can be limited if there is strong internal consultation and workplace cooperation workplace institutions. Bipartite institutions at shopfloor/enterprise level to promote commonness for expanding the pie and collective bargaining to ensure fair sharing workforce adjustment a necessity (ILO Convention on Termination of Employment at the initiative of employer due to structural and other changes. Amendments of the kind proposed by Maharashtra seem adequate

Is it easy to reform labour laws?

Yes, in countries like China. But Indias problem is bureaucracy, not democracy Difficult in countries like S.Korea which tasted democracy More so in countries like India where thrice the government of the day fell when comprehensive reforms to labour laws was thought of Beware. Marco Biago, the architect of labour law reforms in Italy was assassinated in March 2002 In India, however, government is tenderminded. It acts when it makes up its mind, otherwise it blames lack of consensus among social partners

Are there prerequisites? Yes.

Need for credible systems of compensation: Formal sector is getting informalised. Reports on Employment, Expenditure control in government, railway and defence sector reforms threaten to knock out 4 to 5 million jobs in 2/3 of organised sector. Need for social safety nets/insurance Revamp of education, skills training and employment planning/services

Social dialogue key to successful reform

Ireland achieved tremendous progress through successful social dialogue So did, to an extent, Austria and Finland

Good governance is the issue

If there is trust, you can expand business globally, not otherwise (Economics of trust.. Francis Fukuyama) If investment is not socially responsible, you can produce for export markets, but you cannot export Good HR is good business. Best employers do more than what the laws ask of them.