Industrial Relations in India: Structure, Trends & Developments
Debashish Bhattacherjee Professor, Indian Institute of Management Calcutta November 29-30, 2007
Presentation at the European Foundation for the Improvement of Living and Working Conditions Workshop, ILO, Geneva, November 29-30, 2007.
Evolution of Indian Economy & IR (briefly)
First Phase: (1947-66; 1st & 2nd five-year plans): 1. Import-Substitution Industrialization 2. National capitalism 3. Economy grows @ 2%-3%/year. 4. Formation of large employment-intensive public enterprises. 5. Largely centralized bargaining with static real wages. Relative industrial peace. 6. Growth of public sector unionism. 7. Government controlled & regulated IR.
2
Evolution of Indian Economy & IR (briefly)
Second Phase: (1967-80; 4th & 5th five-year plans): Economic stagnation (crisis of ISI policies?) 2. Economy grows at @ 2%/year ; two oil price shocks 3. Considerable slowdown in employment growth & declining real wages. 4. Crisis in IR system: massive strikes & industrial conflict, multiple unionism & decline in strength. 5. Government loosing control over the IR system.
1.
3
Evolution of Indian Economy & IR (briefly)
Third Phase: (1981-91; 6th & 7th five-year plans): 1. Initial domestic economic liberalization; economy grows @ 5.7%/year. 2. Regional variation in economic development increases. 3. Variation in wage growth: skilled versus unskilled, labour productivity increases, period of jobless growth. 4. Rise of independent enterprise unionism, several city/regional IR systems operating? 5. Government slowly withdrawing from IR system?
4
The Post-Reform Decade, 1992-2007: Economy & Labour
Stabilization & Structural Adjustment Reforms:
1. 2. 3. 4.
Economy grows @ 6.2%-6.5%; Last five years (200407) growing @ 7%-8%/year. Perhaps at 10% hence? Regional variation increases massively. Between 1999 & 2004: absolute number below poverty line falls for the first time since independence. Max growth in services: IT, IT-enabled services, hotels, trade & restaurants, but also in autos & ancillaries; more recently in overall manufacturing.
5
The Post-Reform Decade, 1992-2007: Economy & Labour
1.
2.
1. 2.
3.
Job losses during post-reform 1990s: About 15% of the workforce (=1.1 million) between 1995/96 & 2000-01. Reasons: natural attrition, hiring freezes, weakly enforced labour laws? Gloomy employment scenario in 1990s even though considerable growth in labour productivity, average worker earnings, & per capita income. Employment Turnaround in 2004-05?: Increase in both employment & participation rates for men/women in rural/urban, especially in urban areas. First time: employment growth outstrips population growth. BUT: share of both casual & regular employment declines; share of self-employment for all worker categories rise. More than 50% of work force self-employed (no direct employer). Decline of Agricultural Sector: employment absorption; farmer suicides.
6
Structure & Trends: Labour Force
1. 2.
1. 2.
3.
Size of Workforce (Census of India, 2001): 402 million; out of which only 7% (28.14 million) in the organized sector. 93% in the unorganized sector. Note: organized sector unionized sector (unionized sector very small subset of organized sector) Employment Status: 55% = self-employed, Regular workforce = 13%, & Casual workforce = 32%. Out of this 7%, 69% (=19.4 million) were in the public sector & 31% (= 8.7 million) in the private sector. Organized sector as % of total more or less varying between 7%-8% between 1973-2000.
7
Structure & Trends: Labour Force
Employment Structure (2001):
Sector Share in Employment & GDP (1983) Share in employment & GDP (2000)
Agriculture Manufacturing Tertiary
69% 13.8% 17.2%
38% 26% 36%
60.4% 16.8% 22.8%
25% 26% 49%
Employment Elasticities (2001): Agriculture (0.0), Manufacturing (.26), Wholesale & Retail Trade (.55), Transport, storage & construction (.69), Finance, real estate, insurance & business services (.73).
8
Structure & Trends: Trade Unions
1. 2.
3.
Union Density: Depends on what is in the denominator. If total workforce, UD=4%, if only non-agricultural workforce, UD=5.5% (was 6.5% in 1985), if only, wage & salary earners, UD max=25%. Very low relative to comparable economies, like Brazil, Argentina & Mexico. Collective bargaining coverage: around 2% of total workforce. Union Structure: enterprise-based, industry-wide, and national-level, most of which are affiliated (i.e., trade union federations) to parliamentary political parties (like Italy & France); non-affiliated unions are usually called independent unions (usually, enterprise-based).
9
Structure & Trends: Trade Unions
Union BMS Party BJP Membership: 1989 & 2002 3.11 m 6.22 m 2.7 m 3.89 m Percentage: 1989 & 2002 25.4% 25.2% 22% 15.8%
INTUC Congress CITU HMS CPI(M) Socialist
1.78 m 2.67 m 1.47 m 3.22 m 1.07 m 3.34 m
14.5% 10.8% 22% 13%
AITUC CPI
8.73% 13.5% 7.37% 21.7%
Therefore: Others (regional) + Independent(?)
10
Structure & Trends: Collective Bargaining & IR
Bargaining Structure:
1.
In the private sector: plant-level bargaining takes place with enterprise-based unions that may (or may not) be affiliated to parliamentary political parties. In public enterprises: centralized trade union federations that are affiliated to political parties negotiate with the state (as employer) at the industry and/or national-level. Central and state government employees: in the services sector (transportation, postal services, banking and insurance, etc.) have their (typically) politically affiliated unions lobbying at the national level prior to Pay Commissions determining their wage & working conditions.
11
2.
3.
Structure & Trends: Employer Organizations
(AIOE) All India Organization of Indian Employers: objective of educating employers, best IR practices (CIE) Council of Indian Employers: ensures cooperation & coordination between the AIOE, EFI (Employers Federation of India), & SCOPE (SCOPE) Standing Conference on Public Enterprises: organization representing public sector enterprises (FICCI): Federation of Indian Chamber of Commerce & Industry & (ASSOCHAM): Associated Chamber of Commerce Post-Liberalization: bigger say on economic matters than in the past, but not much on social & labour matters
12
Structure & Trends: IR & Industrial Conflict
1.
Industrial Conflict: Even though such low union density, India looses more days annually because of strikes (worker/union-led) & lockouts (employer-led) than most other economies.
Days Lost: S(%) & L(%) 57 42 23 77
Year Disputes: S(%) & L(%) Workers: S(%) & L(%) 1986 77 23 87 12 2001 55 44 71 29
2. Causes of Industrial Disputes (%):
Year 1990 1999 Wages 24.9 21.9 Bonus 4.1 9.0 Personnel & Retrenchment 16.4 14.9 Indiscipline & Violence 16.1 21.9
3. Days Lost due to Disputes (%): Public versus Private Sectors
Year 1990 1998 Public Sector 23.8 34.4 Private Sector 76.2 65.6
13
Structure & Trends: Labour Laws
1. 2.
Plethora of labour legislation (46 central & 200+ state labour laws!). Statutes vary by states. Continuous debates regarding the NEED FOR LABOUR LAW REFORM since 1991 but till date no consensus (opposing interests: unions, political parties, employer groups). Trade Unions Act, 1926: Till 2001, any 7 workers can form a union; amended in 2001: 10% or 100 workers in a unit, whichever is less, minimum still 7! Distinction between registration (with the government) & recognition (by the employer as bargaining agent); neither mandatory under this Act, (but some states have laws). Bargaining agent: secret ballot versus check off (government verifies membership). Hotly debated.
14
1.
2.
3.
Industrial Disputes Act, 1947
Objective: To settle industrial disputes & secure industrial peace. Problems: No procedures to determine the representative union within 1. a single bargaining unit. Employers not legally obliged to bargain with unions. 2. Thus, no incentives for either party to engage in collective 3. bargaining. Most contentious issue: (Chapter VB, Section 9A) Firm employing more than 100 (reduced from 300) will need 1. state governments prior permission before any proposed layoffs => labour market inflexibility. Since nearly impossible to downsize during downturns, firms 2. reluctant to hire permanent employees during upturns. These laws partly responsible for pushing newly created jobs 3. into low productivity small firms. Recent OECD computation (2007): Indias laws more 4. stringent than Brazil, China & all but two OECD countries. 15
Governments Views on Labour Law Reforms
Second National Labour Commission, 1999, (submitted in 2002): Mandate: to suggest rationalization of existing laws relating to labour in the organized sector and secondly, to suggest an umbrella legislation for ensuring minimum labour standards for workers in the unorganized sector . The Commission has made an earnest effort to balance the considerations of both efficiency & equity, & If the government acts on the recommendations, it will mark a serious beginning in aligning labour policies with industrial policies.
16
Governments Views on Labour Law Reforms
2nd NCLs Recommendations: Changes in trade union recognition for bargaining agent determination but still not clear regarding secret ballot versus check off. No craft and caste-based unions. Limiting the role of outsiders in union negotiations. Specific provision for unorganized sector workers to form unions Clear preference for plant/firm-level bargaining structure for enterprise efficiency. Downsizing: deletion of prior permission clause; two months prior notice &/or appropriate severance pay. 17
Governments Actions on Labour Reforms
What has the government done so far?
1.
No change in labour laws as yet (reforms taken the bite out of core labour laws?). But, states with pro-growth labour legislation forge ahead. For agriculture: National Rural Employment Guarantee Scheme. Recently extended to all rural districts. For unorganized sector: Extensive Life Insurance Scheme. Proposed: National Skills Development Mission (bill: 310 billion rupees); become a global reservoir of skilled person power; (examples: nursing, plumbing, accountancy, etc).
18
2.
3. 4.
Epilogue: Future of IR in India
For Unions: Organizing the unorganized? Not that easy. The question of unionizing IT-sector workers: hugely problematic. Opposing privatization: early 1990s yes (telecom, banks, airlines), but now, not that easy given that consumers have tasted more choices. Have to contend with consumer capitalism (choice, free press). Judicial activism (strikes OK but total shutdowns unconstitutional). For Employers: Fewer labour laws but better enforcement. Employers should have the right to adjust employment level to maintain & improve competitiveness (learn from China, Vietnam, etc). Present conditions not suitable to secret ballot (leads to IR conflict)
19
Epilogue: Future of IR in India
For Government: Balancing efficiency & equity: not easy Job reservation in the private sector: Effects on Labour Markets & IR? Any chance of comprehensive labour law reforms? Massively improving human capital formation (schooling & health care) How to deal with widening regional disparities in labour market & IR outcomes?
20
