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3 reform & labor

  1. 1. Labour and Change: Essays on Globalisation, Technological Change and Labour in India Kuriakose Mamkoottam Chapter 3 STRUCTURAL CHANGES AND LABOUR IN INDIAIntroductionDuring the recent past economies across the world have experienced structural changes of differentdimensions. While some of these changes may have been proactive in nature, many others have beenreactive. In fact, it appears that we are now living through one of those infrequent periods in history whenhuman society undergoes profound changes, which are unprecedented in its direction, speed and intensity.New technologies in the form of Internet and digital networks have already made a major difference in notonly the way organisations work, but also the way we live. However, as Mamkoottam & Herbolzeihmer(1990 & 1991) found in the case of Spanish automobiles and textiles, the absence of a simultaneousapproach to restructure the larger economy, society and the workplace can delay, if not totally stop, theintroduction of new technology. Rapid technological developments and Globalisation left little choice tonations and economies across the world to compete in the emerging single (world) market. Restrictions,with few exceptions, on the movement of capital, goods and services were gradually lifted and globalstandards began to take control of quality, price and productivity. In order to take advantage ofglobalisation and technological changes structural adjustments and economic reforms were (and stillcontinue to be) introduced in the Indian industrial and financial sectors.The New Economic PolicyFor several decades after independence the government of India followed a path of industrial developmentwhich placed major emphasis on the state-owned public sector. The central and state governments in thepublic sector units had made huge investment of several millions, which controlled the major share inalmost every sphere of manufacturing goods and providing services. However, over the years most of thepublic sector enterprises became loss-making units and many were declared sick, though it must behastened to add that industrial sickness was by no means confined to the public sector alone. Ironicallyindustrial sickness was more pervasive in the private sector, particularly in the medium and small-scalesector, many of which had to be taken over by the Government. What is more worrying is the fact thatseveral million workers were/ are employed in these sick units. Critics attributed the deteriorating standardsperpetuated by the Indian industry to the unhealthy protectionism and its isolation from the global market.The Economist in 1990 used the metaphor of a caged tiger to describe the over-protected Indian economy.Direct state intervention and bureaucratic control had for long restrained and constricted the Indianindustry, be it through industrial licensing, import-export restriction, or labour legislation. Among themajor reasons for the existing non-competitive situation include technological obsolescence and inefficientdeployment of manpower with redundant skills.In the wake of a severe foreign exchange reserve crisis and the increasing impact of globalisation, theGovernment of India announced a new Industrial Policy in July 1991 with the major objective oftransforming and integrating the Indian industrial and financial sector with the global market. Severalmajor policy measures including privatisation of the public sector organisations, modernisation andtechnological change, manpower training and skill up-gradation, rehabilitation of the sick industrial units,and, above all, relaxation of the state control by introducing adequate legislative reforms were included inthe new policy package. In fact, an organised effort to tackle industrial sickness had commenced in 1987with the enactment of the Sick Industrial Companies (Special Provisions) Act, 1985, and the constitution ofthe Board of Industrial and Financial Reconstruction (BIFR). The BIFR - a quasi-judicial body - vestedwith wide ranging powers was to act as a single window for nursing sick units back to health or forrecommending their closure. Through an amendment, the Sick Industrial Companies Act, the jurisdictionof BIFR, which was till then confined to private sector units, was enlarged to cover sick public sector unitsas well for rehabilitation.
  2. 2. 2In countries where free competitive markets have been developed and nurtured over the years,unemployment benefits under an overall social security system are available to the labour force. In theabsence of any such meaningful social security system in India, a social safety net was created under theNational Renewal Fund (NRF) to re-train the employees and rehabilitate obsolete technology. The mainobjective of NRF was to ensure that technological change and modernisation of the production processesdid not adversely affect the workers. The Fund, while providing ameliorative measures to the affectedworkers, was also to re-train them so that they would be in a position to upgrade their skills to participateactively in the process of change. While bringing about restructuring, technological innovation ormodernisation, a variety of situations could arise and the NRF was constituted to deal with three kinds ofsituations. First, in cases of enterprises, which did not need any immediate restructuring but may require inthe foreseeable future, NRF would contribute so that adequate funds were available when need arose.Second, NRF would contribute to those units, which though intrinsically viable, need immediaterestructuring. Here, since there could be no opportunity to build up a corpus of funds, NRF could be usedfor technological up-gradation, restructuring and retraining of labour. However, the units receiving suchfunds from the NRF could be expected to undertake a suitable obligation to reimburse the amount, as theybecame viable units over a period of time. Thirdly, NRF would act as a social safety net to those units,which are already sick and can be referred to BIFR. The BIFR could either order closure or revival of theunit after its evaluation. In either case labour retrenchment is likely which can be funded by NRF withoutobligation of reimbursement. The NRF was appropriately structured with suitable mechanisms to deal withthese different situations, though it has not met with much success in achieving the intended objectives.As in the case of change anywhere, the path chosen through structural reforms of the economy and industryin India has not been easy to traverse. Structural reforms were introduced by the Indian Government amidsta great deal of scepticism among political parties, intellectuals, opinion makers and bureaucrats within thecountry. Opinions were divided even among the ministerial members of the government at the Centre.However, the much fragmented labour unions almost forgot their ideological and historical differences tocome to a common platform to oppose the steps taken by the government in 1991 to liberalise the economyand restructure the industry, particularly the public sector. In the absence of political consensus and facedwith widespread protests among the organised labour, the then government adopted a cautious and guardedapproach to reforms. It is noteworthy, however, that the economy and industry in the meantime began tolook up. Foreign investment started coming in and a gradual transformation of the Indian corporate sectorwas under way. Multinationals in the area of computer software, cosmetics, garments, heavy engineering,automobiles, air lines and cargo services, potable alcohol, footwear, food chains and serials and manyothers began to look at India as a profitable sourcing and production centre. After nearly a decade ofreforms, the Indian economy looks healthier at least in terms of foreign investment, especially ForeignDirect Investment (FDI) into India. Based on RBI sources the Economic Times (May 27, 2001) reportedthat foreign investments at May 18, 2001 stood at US $42.829 billion. A healthy proportion of FDI inflowsas compared to portfolio investments is considered to be a positive sign as the former is long-terminvestment. The industrial sector has not only shown a higher growth rate but had also become morecompetitive as reflected through growth in exports, a healthy foreign exchange reserve, and growth inemployment in the private sector.It is important to note that the Congress Party whose Government which initiated the process ofliberalisation in early 1991 was voted out of power in the subsequent general elections in 1996. Manycritics interpreted the result of the general election as an indication of the fact that the reform process was apolitical failure. However, all the subsequent governments, though belonging to different politicalideologies and their coalitions continued the process of deregulation, enlarged the areas of foreign andprivate investment, and partial privatisation (divestment) of the public sector. Important sectors like theinfrastructure, telecommunication, civil aviation, power and automobiles have been deregulated and openedto multinational players. Even in the face of nation-wide protests and agitation by the employees of thenationalised insurance sector, the Insurance Regulatory and Development Act (IRDA) was passed in the1999 winter session of parliament, opening up the insurance sector to private / foreign companies. In fact,the re-elected BJP-led coalition government has attached high priority to implement socio-economicreforms, by creating new groups comprising top industrialists to generate ideas and to implement speedilythe already formulated ideas. To monitor and facilitate the process of privatisation, a new department ofdis-investment headed by a minister has been created recently.
  3. 3. 3The public sector banks too have been identified to be restructured and gradually opened to divestment.The Ministry of Finance, (GOI) has directed the banks to draw up a voluntary retirement scheme for theemployees to make them more efficient. The banks have been asked to reduce the level of operations, andthe organisational restructuring is expected to result in major cost saving. In a recent study by theFederation of Indian Chambers of Commerce and Industry (FICCI), 22 percent of the staff in 16nationalised banks were found redundant, when benchmarked on the basis of Rs. 125 lakh business peremployee (BPE). The Government is talking about taking steps to make the public sector undertakingsmore accountable. According to a new plan drawn out by the Finance Ministry, all capital fusion forrestructuring plans would be subject to signing Memorandum of Understanding (MOU), in the form oftime-bound schedule for implementation. The schedule will be closely monitored by the Ministry to ensurethat the PSUs adhere to the conditionalities of the restructuring package. According to sources, thegovernment annually infuses about Rs.3000 crore in the restructuring plan of various PSUs in the form ofcash, loan write-off, interest subsidy etc. About one fourth of the 239 PSUs are sick, and about 40 PSUsbeing declared not revivable by BIFR.The liberalisation process and associated economic reforms in India have been constrained by the tradeunions and industrial relations in the country, while at the same time, the former has had their impact ontrade unions and industrial relations. As illustrated by John Dunlop (1958) the nature and climate ofindustrial relations can be seen as an outcome of the complex set of transactions that take place among themajor players such as the state, the employers, the employees and the trade unions in a given socio-economic context. Structural reforms and technological innovations directly and in important ways affectthe environment and thus industrial relations. Technological change and innovations, for example, cannotbe seen in isolation from the existing institutional arrangements governing industrial relations. It is theinteraction between (1) the changes made by the different players (government, employer, employee/union)in the existing human resource management/ industrial relations practices and (2) decisions abouttechnological change that will determine how the interests of employers, employees, unions and the widersociety will be affected when such technological changes are introduced. To appreciate the exact nature ofthis symbiotic relationship, we shall now examine the role played by the major players, namely, the state,the worker / trade unions, and the employer, in creating the kind of industrial relations scenario in India.Labour and Industrial Relations in IndiaIndustrial relations should be seen as dynamic in nature. Like most developing countries in the world,labour movement in India has had a shared history with the country’s independence movement. Not onlydid labour play an active part in the struggle for independence, but labour movement derived its vitalityfrom the independence movement and sought support from political leaders. In fact, trade unionscontinued to be closely linked with political parties in India. After independence, political parties used theorganised labour for political purposes, while trade unions found it difficult to sustain and succeed aseffective social partner without political patronage. Meanwhile, the fragmented structure of political partiespermeated the trade unions as well. Multiplicity of trade unions divided the labour force along affiliationto political parties; a fragmented trade union structure not only weakened the movement, but also madebilateral negotiation and collective settlements extremely difficult and rare.Independent India with her deliberately chosen philosophy of socialist democracy enacted a legislativeframework, which protected the interests of the workers and trade unions. Even day-to-day relationsbetween the employer and employee are bound by legislation and political parties took upon themselves thecause of the labour. During the 1950s to 1970s as the public sector expanded, trade unions not only grewin numbers but also became more and more powerful vis-à-vis employers and management, in particular.While the government heightened its focus on the nationalised sector, white-collar employees in the banks,insurance and government undertakings too became unionised. Often politicians, particularly those in theopposition, found unions an effective medium to demonstrate their strength and unions used the politicalsupport to achieve their immediate objectives. For fear of losing the support of the organised labour, moreoften than not the ruling party yielded to the demands of trade unions, some genuine, others not so.However, the mid 1970s witnessed the dark side of Indian democracy with the late Prime Minister IndiraGandhi declaring emergency, suspending fundamental rights including those of trade unions. But, soon
  4. 4. 4after the emergency was lifted in 1977, trade unions revived with renewed vigour and vitality. Tradeunionism grew vertically among the officers and managers of public sector undertakings, universityteachers, doctors & nurses in government hospitals, and lawyers in the courts. In most cases, theseorganisations popularly known as guilds and associations, came up as a reaction to the militant unionsamong the lower employees on the one hand, and the loss of power and decision making role experiencedby the professionals and lower/ middle level managers, on the other hand. In a nation-wide study ofofficers in the public sector, (Mamkoottam, 1990) found that the "powerless" and the voiceless officersorganised themselves into associations to protect their interests vis-à-vis the workers as well as the topmanagement. Gradually the (top) management, particularly in the public sector, became the weaker partnerin industrial relations. Strikes and industrial indiscipline increased with greater loss of man-days includingin essential services like hospitals, Railways, airways, telecommunications and postal services. Meanwhilethe declining productivity and poor performance of the organised sector including that of the government,became the target of public displeasure. There was a growing concern that India was lagging behind inproducing world class products and services, fast losing out in the increasingly globalised export sector,and a large part of the blame was put on trade unions. However, time and again trade unions expressedtheir opposition and resisted initiatives of economic reforms and structural adjustments including those oftechnological change and modernisation.In fact, a key feature of industrial relations in India has been the confrontational relationship between theemployer/ management and trade unions, and an overwhelmingly dominant role of the state through aplethora of labour laws. Many of these labour laws are not only archaic, but also have considerablyreduced and restricted labour flexibility. Flexibility is a key characteristic of modern business and industry.Flexibility is an all-pervasive concept covering product design and manufacturing, production process, andlabour. Labour flexibility refers to a variety of decisions affecting skills, geographical and occupationalchange of workers, recruitment, deployment and working hours, which would be essential to maintain costeffectiveness, productivity, quality, and market competitiveness. Flexibility enables a course of action tobe modified in accordance with an encountered situation, which may surprisingly deviate from prioranticipations. Central to the notion of flexibility is the capability of a system to generate a variety ofalternatives so that options are available to do things differently or do something else if the need arises. Thequalities of versatility, agility and resilience associated with flexibility have been noticeable by theirabsence in the Indian labour force. Indian employers and potential foreign investors in India have beenclamouring for radical changes in the existing labour legislation allowing greater freedom to recruit, deployand discipline labour. However, it should be mentioned here that no government has so far taken steps forinitiating reforms in labour legislation and industrial relations.Employer StrategiesDespite a rigid labour legislative environment and widespread protests by trade unions, in recent yearsmany employers have undertaken modernisation of the plant, restructuring of production processes andwork re-organisations. As tables-1 & 2 show, in some cases employers have laid off and retrenched labourforce. In a case of Associated Cement Company (ACC) versus an employees union in one of its plantslocated at Sevalia, the Gujarat High Court underlined the fact that under section 25-FF of the ID Act, acompany can shut down its plant or unit by transferring the title to another company. Another interestingcase is that of Hindustan Ciba-Geigy which implemented a successful VRS for its entire 907 strong workforce at its plant in Table - 1: NUMBER OF UNITS EFFECTING LAY OFF & WORKERS LAID OFF DURING 1990-98YEAR CENTRAL STATE TOTAL A B A B A B1990 56 13907 386 50173 442 640801991 46 10791 415 60269 461 710601992 101 47979 376 59633 477 1076121993 52 19212 373 46416 425 65628
  5. 5. 51994 60 17806 282 40261 342 580671995 21 8176 263 53810 284 619861996 54 14291 253 47046 307 613371997 52 21601 255 43564 307 651651998 49 7960 132 15848 181 23808(Jan-Sep)Source: Annual Report 1998-99, MOLA= number of units; B =Workers laid off;Bhandup in the suburbs of Bombay. The success of the Ciba scheme is attributed to its truly voluntarynature, and its ability to convince the union, which initially blamed the management for making the plantnon-viable through "mismanagement". The Bhandup plant, set up in early 1960s, was the "mother plant"of the Swiss multi-national till some years ago when it started making losses. The pharma divisionemployed 1,452, workers- more than three times the staff in the agrochem division, which employed 440.On a turnover of Rs.20 crore, the unit made a loss of Rs.7 crore. The wage bill alone was Rs.10 crore. Themanagement threw its books open to the union, took them into confidence and offered various options,including the possibility of selling the plant to a new owner under whom the employees could continue towork, an employees co-operative to operate the unit, and a VRS. The VRS provided for two options:One, monthly payment of full pension for 180 months from the date of accepting the scheme, or till 60years of age. Two, commutation of a part of the pension - not exceeding 33.33 per cent of the pension,which would be paid four weeks from retirement- with the balance being paid monthly over 180 months, ortill 60 years of age. The union after due evaluation of the various options accepted the voluntary retirementscheme. Table-2: NUMBER OF UNITS EFFECTING RETRENCHMENT & WORKERS RETRENCHED THEREIN DURING 1990-98YEAR CENTRAL STATE TOTAL A B A B A B1990 1 8 267 3029 268 30371991 2 54 233 4342 235 43961992 2 85 220 3751 222 38361993 3 178 186 2713 189 28911994 - - 135 2192 135 21921995 - - 94 1792 94 17921996 4 285 75 2087 79 23721997 10 526 151 2716 161 32421998 1 1 75 1067 76 1068(Jan-Sep)Source: Annual Report 1998-99, MOL; A= number of units; B =Workers laid offPublic sector units too have reduced manpower through VRS. In the Marxist ruled state of West Bengal,known for its militant trade unionism, workers of the Bengal Potteries en-masse accepted a VRS. MMTCand the State Trading Corporation reduced their manpower substantially through VRS. HindustanShipyard Limited, Delhi Transport Corporation, Bharat Gold Mine Limited are among other successfulcases of manpower reduction through VRS. In fact, it is reported that major restructuring efforts by way ofdownsizing have taken place during the past few years in the public sector in India. According to a report(Economic Times, 1 June 1999), through VRS 152 PSUs have shed as many as 1,20,000 employees since1993-94. These PSUs include those, which are sick as well as those, which are revivable. Some of theprominent companies which have separated large number of employees through VRS include NationalTextile Corporation (23,000 employees), Bharat Coking Coal (9,793), HMT (4,309), and EasternCoalfields (6,859).
  6. 6. 6But the indiscriminate introduction of VRS in the public sector units have raised anxiety due to the fact thatthe scheme has not only led to the loss of their best employees, but the enormous cash outflow could lead todisastrous consequences. Bharat Heavy Electrical Limited, which employed over 70,000 people, besidesindirectly providing work to another 30,000, withdrew the VRS package offered, when the managementdiscovered that many of the senior and best qualified workmen and officers were availing of the scheme tojoin the companys competitors in the private sector. The Indian Drugs and Pharmaceuticals Ltd, the largestpharmaceuticals company in the public sector, while spending an amount of RS. 12.5 crore lost 450employees, majority of whom were senior officers barring about 25 workers. A revival package renderingnearly 78,000 workmen surplus with the mills under the National Textile Corporation located in differentparts of the country was enthusiastically received in the initial stages. Although about 32,000 workers hadopted for the scheme involving an amount of Rs.245 crore, the younger workers became suspicious of thescheme and refused to accept it. According to a study conducted in 1993 by the All India ManagementAssociation (AIMA) on the human dimensions of liberalisation, more organisations were able to closedown parts of their business in post-July 1991 period than earlier. Based on a sample of chief executiveofficers (CEOs) of 71 organisations in the organised sector, the study showed that more than 75 per cent ofsample organisations had surplus labour. The study revealed that industry had consciously gone forreplacing labour with capital during the recent past, by judiciously bringing about technological automationand organisational restructuring. Interestingly, 52.4 per cent of the respondents in the study reportedlyfound no resistance from the trade unions and workers, but received positive response (Economic TimesDec.12, 1993).In a similar survey it was found that 64 per cent of the companies were going through process of re-structuring and 26 per cent were planning to do so in the near future. Marketing, organisational structure,quality, training and finance were among the top areas earmarked for restructuring (Business Today,January 7-21, 1994). The survey had covered a sample of 148 chief executives, directors, andvice-presidents of large, medium and small firms, spread out in the major industrial centres of the country.In other words, to face growing competitiveness and economic recession, companies in India have beendownsizing by shedding employees. Some others shut down operations first and later seek legal help. Asmentioned earlier, the process of legal closure is not easy and often not granted by the government. Tocircumvent the protracted process, employers have resorted to shutting down operations or separatingemployees through VRS. In recent past many companies like National Rayon Corporation and gas majorBOC stopped production in one of their Bombay units and sought permission to close down. To avoidlegal battle and to reduce worker protests, companies such as Philips, Siemens, and many others offeredattractive separation packages. Over the past few years, Philips in India reduced its original 10,000employees by half and Siemens by 20 percent by offering VRS. In sunset industries such as the compositetextile mills, the number of closed mills is increasing every season. According to an estimate, by the end ofMarch 1998, 93 of the 278 composite textile mills in the country had shut down production completely(Economic Times, Jan 20, 1999).While rationalisation of manpower often helps to improve operational efficiency and the health of theorganisation, without proportional rise in employment, unemployment is proving to be a difficult problemto grapple with. Declining employment rate along with a growing GDP has been a global phenomenon andit is projected to continue even in the developed world. Most developed economies have been experiencinga decline in full employment while marking the growth of part-time workers. According OECD sources, asmuch as 39 percent of total employment in Netherlands in 1996 has been part-time, while the figures forBritain was 22 percent, France and Germany 16 percent each, Japan 15 percent, Spain 9 percent and the US8 percent. As tables 3-4 show, during the past few years, employment in India has registered an over-allmarginal growth, but it has been negative in the public sector. Table 3: EMPLOYMENT IN THE ORGANISED SECTOR
  7. 7. 7In the end of (in lakhs) Total percentage change Over previous year Public Private Total Public Private Total1 2 3 4 5 6 7March 1997 195.59 86.85 282.45 0.67 2.03 1.09March 1996 194.29 85.12 279.41 -0.19 5.62 1.51March 1995 194.66 80.59 275.25 0.11 1.60 0.54March 1994 194.45 79.30 273.75 0.61 1.01 0.73Source: Annual Report 1998-99, M.O.L Table- 4: EMPLOYMENT BY BRANCHES OF PUBLIC SECTORBranches of Employment Percentage growthPublic Sector (in lakhs) over previous year March 1996 March 1997 1996/97Central Government 33.66 32.95 -2.11State Government 74.14 74.85 0.96Quasi Government (Central) 35.38 35.85 1.33Quasi Government (State) 29.20 29.50 1.03Local Bodies 21.92 22.44 2.37Source: Annual Report 1998-99, M.O.LLabour and Trade Union ResponseGlobal experiences show that workers response and trade union strategies towards technological changevary depending on the labour market conditions, the power structure in and around the trade unions and thelabour legislation operating in that environment. Based on three large scale surveys of around 2000 Britishwork places undertaken in 1980, 1984 and 1990 Daniel & Millward (1993) observe widespread support fortechnical changes, including advanced technical changes, among both manual and non-manual workers -and even stronger support from their trade union representatives. However, the same study pointed out thatorganisational changes provoked much more mixed reactions. Organisational change was resisted moreoften than it was supported among manual workers. Reactions to organisational change among officeworkers were fairly evenly balanced between favourable and the unfavourable, but they were much lesssupportive than they were towards technical change.According to Daniel and Millward, new technology represented progress and advance; the benefits of newmachines were concrete and demonstrable, and represented competitive advantage. Investment in newtechnology represented confidence in the future and improved long-term job prospects and security.Workers were familiar with many features of new technology and valued their benefits. Overall, theintroduction of new technology tended to be associated with success. Organisational change that wasintroduced independent of new equipment, on the contrary, tended to be more frequently associated withfailure. It was often seen as an admission of unproductive organisation in the past. It was more often
  8. 8. 8viewed with suspicion, as the benefits derived from different forms of organisation were often seen as amatter of judgement and not self-evident. Moreover, the idea of change is not often effectivelycommunicated to the lower levels in the organisation before it could be implemented.Muneto Ozaki (1992) suggested in an ILO study that workers have had limited influence on the process andpattern of technological change in most countries except in Sweden where they have played a direct role inthe planning of technological change. According to the study, unions and workers had little or no influenceon planning of technological change in Japan or in the machine tool industry in the U.S. In Sweden, semi-autonomous work groups, which are funded by public policy, play a direct role in the introduction oftechnological change and in the creation of new work roles. As Willman (1986) suggested the trade unionbehaviour in the face of technical change will depend upon changes in the political and economic climate,the incidence and impact of innovations, changes to union structure, and collective bargaining. Studies ontechnological change in the U.K. (Daniel 1987), Italy (Treu 1984), Australia (Deery 1986) and Spain (Finaand Hawksworth 1984; Mamkoottam & Herbolzeimer 1991) show that technological changes were mostlyintroduced unilaterally by the management but faced little resistance from the trade unions.Labour and trade unions nowhere in the world have keenly welcomed technological changes, and India isno exception. As mentioned earlier, the state has played a dominant role in Indian industrial relationsaffecting almost every possible dimension of industrial relations, which has considerably reduced andrestricted labour flexibility, and slowed down the introduction of new technologies. The 15th session of theIndian Labour Conference held in 1957, in principle, limited the possibilities of introducing technologicalchange, by adopting the “Model Agreement” which approved “no-retrenchment” clause on account oftechnological change. The employers were required to provide workers with suitable alternative jobs in thesame establishment or under the same employer. All along the Indian government has followed a cautiouspath to effect changes in labour laws relating to retrenchment of workers. A promised exit policyannounced in 1991had to be abandoned in the face of strong opposition from the trade unions of theorganised sector, including officers associations of the various public sector companies. Gradually thefocus shifted to an approach of what is called "structural reforms with a human face", by which changes inlabour laws would be introduced in phases.However, it should be appreciated that the trade unions find it difficult to accept technological changes asthere is fear in the minds of employees that the envisaged changes, if implemented, will adversely affect thelabour and employment situation in different ways. Major technological changes with the accompanyingstructural and organisational changes could affect the existing occupational structure, manpower skills,employment patterns and other related areas. Moreover, new technology has important implications for thestructure and strategy of trade unions. The evolution of technological changes has shaped and reshaped thelabour movement. As Gill (1987) suggests, perhaps it is in the history of the labour movement that thediscontinuous nature of technological change can be seen most clearly.Ranabir Samaddar (1995), based on a case study of newspaper industry, suggests that new technology is aweapon in the hands of the management to eliminate trade unions. On the other hand, Mamata Roy (1995)concludes from her study on the banking industry that the worker may become an eager supporter oftechnological change. Studies by K.B. Akhilesh et al (1989) show that mostly management has takenworkers for granted while introducing technological change. In general, the management tends to believethat workers (and union’s) resistance can be overcome by monetary rewards by way of ex-gratia benefits.These studies have noted that such efforts to introduce technological change for improving productivity andquality could not succeed unless accompanied by efforts in creating awareness about new technologiesamong the workers.In fact, it is worth noting that the workers (and unions) are not concerned about introduction oftechnological change per se; what they are concerned would be the shop floor reorganisation resulting fromsuch changes in terms of job loss, internal re-deployment, change in work methods etc. As noted byManik Kher (1997), although the workers and unions have been resisting shop floor changes directly andtechnological changes indirectly, companies in the private sector have been able to bring about majorchanges in the shop floor while introducing technological changes by incorporating counter demands in
  9. 9. 9wage settlements. In a recent ILO study by the present author (Mamkoottam 1998) on “ProductivityLinked Wages in South Asia, it was found that management has preserved the rights to introducetechnological changes and re-deploy workers to enhance productivity. Moreover, wage increases weremade often conditional to such changes in the negotiated agreements signed between the management andthe union(s).In a study of technological change in steel, textile and engineering sectors in India, Manik Kher (1997)observes variations, which may be explained by the nature of the production process, educationalqualifications of the workers, industrial relations environment, and the over-all economic development ofthe region. Although modernisation processes in steel, engineering and textile were intended to improvequality and reduce costs, the implementation of the modernisation programme varied in each case acrossthe public sector and the private sector. Public sector management with a remarkable exception of theGreenfield plant was found complacent, non-committed with a lower level of morale. Such workatmosphere affected quality of the decisions in terms of timeliness and reliability. In the private sector, onthe other hand, decision-making was quicker. The competitive spirit drove them towards greatercommitment and concerted efforts (Kher 1997:70).Since the time the new industrial policy was announced in 1991, the trade unions in India registered theirdisapproval in several ways including strikes on a few occasions. The trade unions in the banking,insurance, and other public sector units not only rejected the offer of discussion but also threatened toboycott and oppose the implementation of various measures announced by the government of India as apart of the package of structural reforms and economic liberalisation. In fact, the process of reformenvisaged in the financial, manufacturing and service sectors of the economy has been considerably sloweddown due to continuous resistance expressed by the organised labour trade unions. However, as we havediscussed in the earlier section, labour and trade unions would be co-operative to restructuring provided themanagement was willing and able to evolve a strategy of negotiation and dialogue. Recently, Escortsmanagement proposed to transfer 250 workers from the Rajdoot motorcycle factory to the groups tractorunits. Although initially reluctant, the unions finally agreed to the redeployment. Similarly, theBombay-based Philips Employees Union submitted a charter of demands, which were negotiated andsettled eight months in advance of the expiry of the existing agreement. Another example of the new trendis the militant Bata Mazdoor Union accepting a crucial productivity agreement linking wages toproductivity.Although unions have been coping with technological changes and shifting their focus of bargaining, therecent changes appear to be so swift and radical that they have nearly threatened the very foundation oftrade unions. Major aspects of new technology annul the very foundation of traditional trade unions.Flexibility, for example, questions the fixed rules and norms of work determination. Job demarcations andoccupational identities are increasingly being blurred and gradually disappearing. Decentralisationdisperses production/ service centres and reduces collective strength. Unskilled and semi-skilled workershave been the backbone of traditional trade union centres, and their gradual reduction and elimination andthe simultaneous trend in subcontracting are threatening the future of trade unions. More and moreorganisations are becoming smaller in size and flatter in structure with fewer unskilled and semi-skilledworkers. Above all, the new worker is better educated, well informed and professionally oriented. Hisaspirations, needs and problems are different from those of the traditional worker.Though gradually, both the state and the corporate sector, including the public sector, have introducedtechnological changes, work reorganisation, down sizing, de-layering, productivity improvementprogrammes etc. Developments in recent years in India indicate that unions are unable to stop the processof re-structuring, modernisation and other changes in the work place. In fact, the developments during thepast few years indicate that the organised labour is becoming weak. While trade unions worldwide aresuffering from decline in their membership rates, it may be difficult to prove that trade unions in India havedeclined in size. As table-5 indicates, although the total number of registered trade unions continued togrow, the total membership of trade unions submitting returns and their average membership have shown anoticeable decline since 1992. However, there is clear evidence to show that their bargaining power hasdeclined in
  10. 10. 10 Table-5: Trade Union MembershipYear No. of No. of Membership Average Percentage registered unions of unions submi- membership of women trade submitting tting returns of unions union returns (000) submitting returns1962 11,614 7087 3977 561 9.31966 14,686 7244 4392 606 7.11971 22,484 9029 5470 606 7.11977 30,810 9003 6034 670 8.11980 36,507 4432 3727 841 5.91985 45,067 7815 6433 823 9.41990 52,016 8828 7019 795 11.91992 55,680 9165 5746 627 10.41993 55,784 6806 3134 460 15.91994 56,044 6265 4093 652 --1995 57,611 6422 4253 660 --Source: Indian Labour Year Book, 1991 & 1996; Master Guide to Labour Statistics, 1989; Pocket Bookof Labour Stattistics,1998, MOL, Labour Bureau, GOI.the recent years. Tables 5 & 6 show that the strike propensity of trade unions and the number of workersinvolved in strikes have come down, while the managements propensity to lock out may have increased,which has been termed as "managerial militancy". National trade union centres appear to be losing theircontrol over local / enterprise unions. In a recent study of collective agreements chosen from the publicsector, private (domestic) sector and multinationals in India, it was found that unions agreed totechnological/ skill up-gradation, and organisational/ work place restructuring in return for linking wageswith productivity (Mamkoottam, 1997).A combination of several interrelated factors including globalisation of the economy (economic andstructural changes), technological change, attitudes of the state, employer and workers (towards unions),occupational structure and demographic shifts in worker profile may be contributing to the declining powerof the unions. In some ways India of the 1990s may be compared to the US of the 1970s when tradeunionism started its decline there. Increased price competition placed pressure on unionised employers tolower costs. Traditional collective bargaining contracts, which rigidify internal labour markets, becameless acceptable because they limit flexible resource allocation. Many employers located new production inlow wage (typically non-union) settings in the US and abroad. Unionised employers paying higher wagesfound it hard to compete against non-union firms, promoting widespread adoption of union avoidance andinvestment relocation strategies. According to Wever (1994), workers had fewer reasons to join unions, andin some cases saw reasons not to. Union jobs were increasingly associated with plant closings and jobinsecurity. Table-6: NUMBER OF STRIKES & LOCKOUTSYEAR PUBLIC PRIVATE STRIKE LOCKOUT TOTAL SECTOR SECTOR1989 615 1171 1397 389 17861990 628 1197 1459 366 18251991 653 1157 1278 532 18101992 617 1097 1011 703 17141993 359 1034 914 479 13931994 316 885 808 393 1201
  11. 11. 111995 343 723 732 334 10661996 381 785 763 403 11661997 448 857 793 512 13051998 283 814 665 432 10971999(P) 165 762 540 387 9272000(P) 91 565 350 306 656SOURCE: Annual Reports-1998-99 & 2000-2001, M.O.L.Though technological change, product innovation and customer orientation had not occupied a place in thepriority list of the employer or the government in India for many decades, international competition andshrinking export market in the late 1980s to early 1990s began to make a difference. Successivegovernments, including those political parties, which opposed liberalisation, have come to champion thecause of technological up-gradation and economic reforms. No political party except the left (CPI/CPM) isseen to take a strong position against technological change and economic reforms. The traditional allianceand nexus between political parties and the affiliated trade unions appear to be growing weak. As U.M.Purohit of BMS put it, "Earlier, when people were disenchanted with one governments policies, they couldteach a lesson to that political party by voting it out of power in the next elections. Now what happens isthat governments change but same economic policies remain in force" (Labour-2000, On-line Conference,September 22, 1999). A related and important reason is the growing public sentiments and mediacampaign against militant unionism, which display little concern for the customer or the hapless citizen. Itis perhaps most ironic but true that the striking doctor will condemn the militant banking union, while thebanking employee will have no sympathy for the vocal university teacher. Table-7: WORKERS INVOLVED IN STRIKES & LOCKOUTS (000)YEAR PUBLIC PRIVATE STRIKE LOCKOUT TOTAL SECTOR SECTOR1989 918 446 1158 206 13641990 884 424 1162 146 13081991 788 554 872 470 13421992 566 686 767 485 12521993 565 389 672 282 9541994 523 323 626 220 8461995 725 264 683 307 9901996 606 333 609 331 9391997 618 363 637 344 9811998 901 388 801 488 12891999(P) 553 758 1099 212 13112000(P) 466 223 385 305 690SOURCE: Annual Reports-1998-99 & 2000-2001, M.O.L.Employers and management have adopted a two-pronged strategy to bring the worker closer to theorganisation, while keeping the union away. Employers in recent years in India have shifted operationsfrom highly unionised regions, such as Kerala and West Bengal to less militant regions, or to free tradezones like the EPZ. Use of sophisticated technologies has not only reduced the size of the organisation, buthas also changed the type of worker employed. The profile of the labour is gradually changing from theuneducated, unskilled or semi-skilled to a multi-skilled, young, ambitious and career-minded worker. He ismore interested in safeguarding his own interests than becoming an active unionist to fight for largerinterests. Both in the UK and the US studies have shown that the young, educated worker engaged insmaller organisations and using high technologies, earning comparatively higher wages, is less inclined
  12. 12. 12towards trade unions (Hundley 1988; Disney, 1990; Ben-Israel & Fisher, 1994). Findings from Central andEastern Europe (CEE) also indicate that union membership had halved during early capitalisttransformation. According to Pollert (1999), trade unions have encountered structural, political andideological problems in CEE. Decline of trade unions has been attributed to worker apathy, anti-unionemployers, and the contraction of large state enterprises. Growth of small private firms and services alongwith self-employment, semi-informal micro-companies have further contributed to de-unionisation. Unionpresence is weaker among women who are concentrated in services and in small and medium-sizedenterprises, among white-collar workers, and among younger workers.Like elsewhere in the world, companies in India too have gradually shifted attention to develop innovativehuman resource policies, offering workers the kind of benefits traditionally unions have fought for, be itthrough welfare schemes, participatory forum or empowerment endeavours. In December 1996 the workersand the management at Eicher Tractors Plant (Alwar), a 9001 company, jointly decided to give up thetraditional bargaining for wage increase and settled for annual pay revision on the basis of productivity andperformance. The management also introduced other innovative schemes including the following:• Introduction of asset building loan up-to RS. 25,000/=. in every four years for personal acquisitions such as a house;• Hospitalisation scheme for those not covered under ESI;• Kin’s marriage gift upto Rs.3501/= (one time);• Additional Earned Leave bonus (for every 12 EL two more days of EL is given as bonus; for 13 EL-4 additional EL as bonus; for 14-15 another five additional EL given as bonus) in order to reduce absenteeism;• Recognition for outstanding contribution (RS. 250-5000 given quarterly and yearly);• Small Group Activity (SGA) teams consisting managers, supervisors and workers for solving various problems.At least some managers have undergone a change in their attitude towards workers and have come torealise that reduction of excess manpower alone will not bring in competitiveness. Along withtechnological and organisational changes, human resource management strategies are being changed.Employers realise that it is futile to fight the battle against labour in the domestic market while facingcompetition in the international economic market. The management has come to realise that reduction ofexcess manpower alone will not bring in competitiveness, enhanced productivity, quality and flexibility.Along with technological and organisational changes, human resource management strategies are beingchanged. Workers are no longer seen as liabilities, but key resources, which are to be carefully nurturedand constantly developed. A healthy work culture can be created through proactive human resource policiesand preventive measures can reduce conflict at the work place. The slogan of the 1980s -productivitythrough people- has caught the attention of the 1990s manager. Efforts are being made to integrate humanresource management and industrial relations policies with the larger corporate goals and the mission of theorganisation. Personnel management is no more seen as merely concerned with procedural matters ofrecruitment and salary administration, and industrial relations merely as a fire fighting system, but areviewed and restructured as integral parts of a holistic human resource management strategy evolved at thehighest level of the management. The thrust of the new human resources policy is to attract, retain anddevelop human resources on a continuous basis to attain corporate excellence and maintain organisationscompetitiveness. Professional skills are being employed to revamp the organisation to create a new workculture, which is inculcated with the values of quality, cost and customer satisfaction. Organisations arebeing restructured into flat and lean structures with reduced hierarchies and faster decision makingprocesses.Decentralised decision-making, developing teamwork and improving communication are occupying theattention of the top management today. Organisations are making focused efforts to understand the workerand his union. Managements have realised the importance of creating learning organisations throughtraining and re-training the employees. Managers are also learning to relate to workers by understandingand empathising with the workers. The importance of developing people management skills tocommunicate more effectively with the subordinate employees and their unions are receiving betterattention in Indian organisations today. A positively oriented professional approach is considered important
  13. 13. 13by the modern manager to manage employee grievances and to arrive at and implement negotiatedcollective settlements. In a large engineering concern, Larsen & Toubro, the management engaged in along drawn negotiation with the union to initiate TQM, Kaizen and Kanban. A 10 per cent increase inproductivity was achieved by reducing the working hours from 47 to 45 hours per week and increasingwages which amounted to Rs.5 crores per year. The employees and unions are not opposed to change perse; what they are opposed to is the manner in which change is often unilaterally introduced by themanagement.Modern management systems such as TQM, Kaizen and Kanban will be effective to achieve better quality,productivity and flexibility provided the employees are fully involved in the process. As Ray Marshalls(1992) has suggested, high-performance systems have high degree of employee involvement in what wouldhave been considered "management" functions in the traditional mass production systems. Moreover,quality, productivity, and flexibility are enhanced when production decisions are made as close to the pointof production as possible. Even in a traditionally labour militant state like West Bengal, the left-controlledCITU welcomed "participatory management". According to the CITU general secretary of the state, If theworkers are involved in the technological upgradation process, their resistance to modernisation will stop(Business Standard, Dec.22, 1994).Agenda for the UnionsUnions will have to come to terms with the changing occupational structure and employee profile engagedin a new work environment. The union will need to examine the workers indirect economic, psychologicaland social needs and find ways to fulfil them. Dissatisfied with the politicised and centralised structure ofthe national trade union centres, workers are keener to develop enterprise unions. Clearly, decentralisedunions and enterprise bargaining are seen as more market friendly in most part of the world. According toPollert (1999), in the CEE the general trend towards decentralisation in about 90 percent of unionsrepresentatives reporting local basic pay agreements. In a study of how unions in the Manufacturing,Science and Finance union (MSF), the general workers union (GMB), and the engineering and electricalunion (AEEU) respond to industrial restructuring in the South West of England, Upchurch et al (2000)found that unions have been on the defensive. According to the authors, individual cases membergrievance are abundant but a collective response to address the new politics of production was as yetlargely absent. They have argued that the control of the labour process has passed in recent times into thehands of management, while the work has become harder and with it employee discontent has increased aswell. A more interesting or disturbing observation is that meanwhile the ability of collectively organisesover pay has been severely weakened, as pay has become increasingly individualised and based onperformance. In fact, many steps such as performance based pay or flexible deployment of workers, whichare being initiated by management, may be seen to question the very existence of unions.Unions are examining the implications of work place changes. Some of the unions have even begun to talkabout a cultural change in their philosophy by shifting away from a defensive strategy towards alternateapproaches based on research and creative thinking. Structural and attitudinal changes of seriousdimensions are evident within the philosophy and strategies of unions in dealing with the new realities ofglobalisation and industrial restructuring in India. Employees often prefer enterprise unions, which focuson localised bargaining, rather than the traditional, politicised and centrally controlled unions. In the newcontext of reforms and restructuring at individual enterprise levels, workers find less relevance for theirunions being driven by guidelines issued by national centres, which are more often than not politicallymotivated. The new and younger worker and his union prefer to concentrate on specific issues andproblems reflecting his own immediate work environment, including restructuring. For example, the unionin TELCO signed an agreement in April 1992, which recognised the managements right to re-deploy andretrain to increase productivity, provided there was no retrenchment. In fact, there is a new fear among theunion leaders that workers may revolt against them if they did not protect his immediate interests. This isprecisely what happened with Kanoria Jute Mills near Calcutta, where the workers discarded the tradeunions and put up a new banner meant to take care of the workers interest. The workers in this case havedismissed directives of the union high command and tried to resume work in the mills (Mamkoottam,1994).
  14. 14. 14The workers, in general, have always been suspicious of strike as a useful weapon; but now they arebeginning to realise their ability to assert their will against those leaders who do not keep their interest inmind. There are indications that central trade unions are losing their ground, and that independententerprise unions would be the future. Substantial fall in the membership of unions which are affiliated tonational centres of trade unions are being reported while more and more unions prefer an independentstatus. Another interesting development of the recent years has been the acceptance, in principle at least,by leaders of all the national union centres that the multiplicity of unions has considerably reduced theirbargaining power. In fact, on several occasions during the post liberalised period, all the different unionshave come together on a common agenda to protest against the government taking steps towards economicliberalisation and industrial restructuring, and some unions have initiated serious discussion to evolve aunified front. However, the tone and tenacity of the unions are on the decline.In order to be relevant and meaningful in the new context, the unions may need to shift their exclusivefocus from traditional wage bargaining, which is characterised by quantitative post facto conflictualbargaining to an ante facto (proactive) bargaining and enlarge the union expertise into technological andorganisational matters. A new co-operative bargaining model based on continuous problem solvingapproach rather than the conflict model may be required in the context of the new technology. As in thecase of Scandinavian countries, much of the union activity in several parts of the world are alreadyconcerned with developing expertise within the union to understand technological developments, and theirimplications on health, environment, employee skills and their education and re-training.References:1. Ben-Israel & Hanna Fisher. 1994. "Organisational Strategies in a Changing Environment", In John Niland, Russel D. Lansbury & Chrissie Verevis (Eds) The Future of Industrial Relations, Sage Publications, London, pp. 135-1512. Bessant,John, Paul Levy, Clive Ley, Stuart Smith and David Tranfield. 1990. "Management and Organization for Computer Integrated Technologies", Centre for Business Research, Brighton Polytechnic,Brighton,3. Bessant, John. 1993. "Towards Factory 2000: Design Organizations for Computer- Integrated Technologies", In Jon Clark (ed.):Human Resource Management and Technological Change, London: Sage Publications,4. Braverman, H. 1974. Labour and Monopoly Capital, New York: Monthly Review,5. Daniel, W.W. & Neil Millward 1993. "Workplace Industrial Relations", In Jon Clark (ed.):Human Resource Management and Technical Change, London: Sage Publications,6. Disney, R. 1990. "Explanations of the decline in trade union density in Britain", British Journal of Industrial Relations, 28, 165-177.7. Dunlop, John, 1958. The Industrial Relations System, London: Holt.8. Ettlie, J. 1988. Taking Charge of Manufacturing, San Francisco: Jossey-Bass.9. Fleck, J. 1987. "Innofusion or diffusation?", Working Paper, University of Edinburgh, Deptt. of Business Studies,10. G.O.I. 1999. Annual Report, 1998-99, Ministry of Labour, Government of India11. G.O.I. 2001 Annual Report, 2000-2001, Ministry of Labour, Government of India
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