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The role of labour and managementunder the change in the labour

market and employment structure inIndia

C S Venkata Ratnam

Professor, IMI, New Delhi &Director, GIFT, Visakhapatnam


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The recent change in labour market

1990s and beyond

The size of regular workforce as a proportionof 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


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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 over50% of GDP

70 % employed in agriculture account for 25% GDP

Employment in manufacturing declining due todeclining labour intensity. For example twosuccessive changes in telecom technology -manual mechanical to electrical mechanical to

digital cellular - seem to have reduced employmentintensity by a factor of 500.

Erosion of job protection and past guarantees inemployment. With rising unemployment in the

efforts to make enterprises competitive, effectiveprotection for labour is becoming lesser than whatthe law envisages.


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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 routinejobs 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 andteleworkers - are already on the horizon .

Tertiary sector emerging as a major provider of jobs. ITenabled services is emerging as a major engine of jobcreation. But there are concerns about new economic slavery.


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The issues which labour and

management are challenging?

Labour Young workforce: job

creation decent work

Older workers: jobprotection, social securitybenefits

Unions: protectingaccumulated rights

Skills training and realwage protection

Management Flexible and adaptive

workforce

Enterprise restructuring

24 x 7 x 365 days

1/4 x 2 x 4

Cost cutting than valueaddition

Denominator, notnumerator management

Contracting out

Parallel production ingreen field sites


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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 unorganisedsector.

Executive and judiciary notfriendly to organised labour

Management as Foe Strikes and protests

strike as a weapon isgetting blunted

Organising weak

Management as friend Working together

negotiated changes

Concession bargaining

Management

Dependence on government Elusive changes in law

But investor friendlyattitude of executive andjudiciary

Labour as Foe Lockouts, closures and

suspension of operations

Substitute labour withtechnology

Labour as friend Japanese practices:communication andconsultation

Negotiated changes

Concession bargaining


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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 30per cent in orgnised sector. They get 8 times lesswages and are 30 per cent more prone to accidentsin some sectors

Part time work still to become common in organisedsector

Government planning to operationalise 1984amendment to law now permitting fixed term

contracts for workers too


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Evaluation of increase in part-time,

temporary or dispatched workers

Existing protections to contract labour are expectedto weaken. Already, Andhra Pradesh legislatedchanges and started implementation: contract labourpermitted in non core areas. Government is planning

to make it easy to employ contract labour if they arepaid the same wages as regular wages, but no socialsecurity contributions.

Umbrella legislation for unorganised sector is in the

offing There is a gap between intent and action. Between

legislation and its enforcement.


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Have the unions succeeded in

organising part-time, temporarydespatched workers? Traditional unions making efforts, but not quite

successful: in these sectors 90% work and 10%result against 10% work and 90% result in organisedsector

Traditional unions successful in some cases inunionising despatched workers and securing thembetter wages

SEWA in organising women workers was a betterexample than the effort of National Centre for Labourin organising construction and contract labour

NGO initiatives are helping in some cases to securethem some benefits


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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 payand 30 per cent cut in employment. 40 per cent increase in paywas ordered in 1997, but not employment cut

Now government is actively pursuing 30 per cent cut ingovernment jobs and a plan to create 50 million jobs over nextfive years. The no. registered for jobs in employment exchanges

(44 million) is about the same as child labour in India. If wesolve child labour we will have solved adult unemployment


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Is labour the problem?

No. Red tap and infrastructure (social andphysical) are

True, more than a million mandays are lost

every day in India due to poor work ethic (notworker 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 andsoftware


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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 theminimum. 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.


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Do labour laws matter? No!

Not, except to those who engage in legalminimalism

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 sameas in Kualalumpur.


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Do laws matter? No!

Laws being the same, attitude of judiciary andadministration 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


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What kind of laws are we taking

about?

HARD LAWS

Core labour

stndards/social

clause/advocated by

ILO/WTO/OECD/ICFTU

State/inter-

governmental

institutions have lessimpact

SOFT LAWS

voluntary codes by

NGOs through

interaction between

market institutions andcivil society institutions:

social labeling,

consumer boycots, SA8000, Global Compact

Limited coverage, but

greater effect


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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


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What is the minimum agenda for

labour law reform

In the past labour was protected inlabour 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 existingprotections). Respective viewpoints are

too familiar to the audience


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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 commonnessfor expanding the pie and collective bargaining to

ensure fair sharing

workforce adjustment a necessity (ILO Convention onTermination of Employment at the initiative of

employer due to structural and other changes.

Amendments of the kind proposed by Maharashtraseem adequate


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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 blameslack of consensus among social partners


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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 sectorreforms 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


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Social dialogue key to successful

reform

Ireland achieved tremendous progressthrough successful social dialogue

So did, to an extent, Austria and Finland


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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, youcan produce for export markets, but you

cannot export

Good HR is good business. Best employersdo more than what the laws ask of them.

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