The insiders' complaint

Govt must not ignore the message from trade unions

The general strike on Tuesday called by India’s largest trade unions was only a partial success. That should serve as a reminder of the limitations of a trade union movement that, in the end, represents only a small fraction of India’s workforce — those employed in the organised sector. The limited nature of this strike’s effect made that particularly obvious on this occasion, since all the 11 major national union groupings collaborated for the first time in recent times. Naturally, given the obstructive and backward-looking nature of much union activism, there is near-universal cynicism — not just about the methods that they use to press their demands, but about the demands themselves. Yet it will be a severe mistake for the government to totally ignore the unions’ complaints. In their memorandum of demands, the unions have said that their protests were to push for several things. Among the cornucopia of demands were an end to inflation; a demand that contract workers be regularised; that the Minimum Wages Act be amended to reflect cost-of-living increases; that union registration be made quicker and easier; that labour laws be harsher and enforced more often; that profitable public sector units not be privatised; and that workers in the unorganised sector receive social security.

Of course, many of these demands are contradictory, and most are self-serving. More than that, the basic principle that true security comes from a greater supply of jobs, and not from job-killing regulations, seems to have been ignored while drawing up this laundry list. How can the government pay out more to its employees or reduce its inflationary fiscal deficit, if it is to also deprive itself of all income from disinvestment? But these demands are nevertheless a warning to the United Progressive Alliance that its confused rhetoric over reform means that the crucial argument for looser labour laws – which will then create jobs in the organised sector – has not yet been won. This is partly because unreformed labour legislation has led to the explosion of contract labour and the insecurities that accompany such work. The government’s priority must be to create conditions through which employers rely less on contract labour and are willing to create more steady jobs. One way to achieve this will be to prevent employers from paying contract workers less than the compensation package fixed for the regular staff if both categories of employees perform similar functions.

Naturally, this will require that employers, when hiring someone, recognise that they will be able to terminate their employment too. Yet it is clear that labour insecurity must be addressed somehow. Methods of compulsory, state-administered unemployment benefits are prone to political manipulation — and can wind up being Ponzi schemes. There are, however, other tweaks that deserve scrutiny, which might allow the government to loosen labour laws so as to expand organised employment, as well as decrease the insecurity attendant upon the fear of being laid off from work. A hefty increase in mandatory retrenchment allowances is one possibility, and one which industry favours. Either way, it is clear that the government has failed to convince India’s organised workforce that it will not lose massively from reform that should, technically, benefit everybody. In the absence of an intelligent conversation about labour reform, the unions’ outdated economic arguments will go unanswered.