Globalise owner, worker alike
Bharat Jhunjhunwala advocates a world market-friendly industrial policy for India
I USED TO run a card board factory in a small town of Uttar Pradesh. The unit was established near a sugar factory to use bagasse as raw material. Workers of the card board factory soon made a trade union, influenced as they were by the goings on in the nearby sugar factory. Workers were paid minimum wages as per law. However, they were totally disinterested in the works. They would openly tell me, “Remove me if you wish, but I will work only as I do.” They knew that it was difficult, if not impossible, to dismiss a worker because of the labour laws. It became difficult for me to face competition from newer factories because they were not pulled down by such labour troubles. They were mostly employing casual labour, who were both cheaper and more alert towards their works. Ultimately I incurred losses. Expensive and inefficient workers led to closure of the factory in a competitive environment.
Similar pressures appear to be at work at the Maruti factory at Manesar. More than one-half of the profits of Suzuki Japan are earned in India. There was pressure on the India outfit to maintain, if not increase, these profits. Japanese nationals were given key positions in management considering the importance of the India operations. They did not understand the culture of Indian workers, it seems. They expected workers to be alert, fast and committed to the work. In contrast, the Indian workers mostly follow the ‘do as you please’ policy. Indian society believes in friction as regulator. Pressures of competition were operating at the same time. Competitor companies were bringing in new models. It was necessary for Maruti to keep its cost of production low to face this challenge. Maruti was using casual labour in large numbers to attain this objective. The company opposed formation of a trade union. It had bought off the union leader during the previous strike leaving the workers high and dry. The workers were stressed from all sides — wages were low, pressure of work was high, there was less communication with the management and the company was adept at buying out trade union leaders depriving the workers of any legitimate voice. A small argument between a worker and a supervisor got blown up and resulted in death of a manager due to this simmering tension.
One reason for the problem appears to be insensitiveness on part of the management. Workers do not usually resort to violence if they get love and respect. A strike had taken place in my card board factory. The striking workers forcibly entered the factory and beat up those who were working but they didn’t touch the managers. The present episode appears to be a result of disconnect between the workers and their Japanese managers. Two, companies have to continually strive to reduce the cost of production in a competitive environment. Managers try to pay less and extract more work. Companies that succumb to the pressure of trade unions have to often close down.
Globalisation has aggravated things even more. The casual labour system has been abolished in the country. Say, the government provided protection to the trade union at Maruti to secure the welfare of the workers. The cost of production of Maruti would increase and it would be forced to leave Haryana and move to a state where the government does not implement the labour laws. Or it may move to Bangladesh or Vietnam. This is being done by companies the world over. Caterpillar, the manufacturer of bulldozers, asked its employees at its London factory to accept wages of $16.50 per hour against $35 that was prevailing. The employees did not agree. So Caterpillar declared lockout at its London facility and moved production to its Indiana unit in the United States. American major General Electric has closed old units and moved production to newer factories where old agreements with labour are not applicable. A long and militant strike took place in the textile mills of Mumbai in the eighties under the leadership of Datta Samant. Today these factories have moved to Gujarat. This could happen because companies could move production to low wage states or countries. Implication is that the wages of all workers have to necessarily come down to the global minimum.
THERE HAS been a decline in the number of major strikes in the country in recent past. Four hundred and twenty five major strikes took place in 2000. This fell to less than 200 last year. Trade unions have learnt that militant action leads to closure of a factory. Perhaps this led the Maruti management to breathe easy. It was forgotten that this model did not remove the inner tension among the workers, which led to the spontaneous act of violence. Wipro chief Azim Premji has demanded ‘ruthless’ action against the workers. This will be counter-productive as supressing inner tension will inevitably lead to an explosion.
We will have to revisit the impact of globalisation on the common man. Globalisation opens up the global markets and increases demand for our labour. But it does the same for other low wage countries as well. This leads to the lower wage countries emerging ahead. We must accept globalisation only in such calibrated manner that it does not lead to decline in wages for our workers. We will have to impose import duties and provide export subsidies to enable our companies to pay higher wages and yet remain competitive in the global marketplace. Fruits of globalisation should accrue not only to the employers but also to the employees.
The best way to ensure welfare of our workers is to increase demand for labour. This can be done by providing tax breaks to companies using higher number of workers than the industry norm. Employment subsidies can be provided to smaller factories. Workers would have sought another employment instead of bearing the pressure at work and accepting low wages at Maruti had the job market been buoyant.
Labour laws may be simplified after the impact of these job-creating policies is clearly manifest in the economy and wages show a rising tendency. Employers may be given the right to hire and fire and to start or close down factories in that circumstance because the workers would easily get another job. Companies would be able to manage their work force as per requirements of the global market without adversely affecting the workers. Such a policy will be beneficial for both the employees and employers. However, multinational corporations are likely to oppose this as it will restrict their ability to make large profits from short-term employment of cheap labour.
Bharat Jhunjhunwala is a former economics professor at IIM Bengaluru. The opinions expressed are his own.