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Ajit Ranade: Labour and capital - An unequal tussle

Labour disputes are a manifestation of the global struggle of the working classes to gain a larger share of growth

Ajit Ranade 

Labour and capital - An unequal tussle

Maruti Suzuki is India’s largest automobile company. There are probably seven million Marutis on India’s roads today, and the company itself is seen as a poster child of India’s modern small car revolution. Its first car rolled out almost thirty years ago and since then the company signified many remarkable milestones for the entire industry. Totally indigenised production, the hub and spoke model of the vendor ecosystem, the extensive countrywide service sector network, extreme affordability (beaten later by the Tata Nano) and benchmark quality were some of the things that Maruti signified. But more than all this were its workplace practices that made it stand out. Continuous improvement, called “Kaizen” in Japanese, was adopted as a dharma. Every little innovative idea was welcome, be it from a shop floor worker or a senior manager, or even a vendor or a customer. There was a reward process institutionalised, in case the innovation was adopted into the final design. In a Maruti factory everyone wore the same uniform, and the day began with a common assembly and physical exercise. All this is a staple of Japanese-style management, and is perhaps now old hat to most of the industry. But the sense of worker pride and dignity that it instilled cannot be emphasised enough.

And yet this early pioneer of modernising Indian industrial relations has been in the news for nasty labour unrest. It has had protracted work stoppage in two of its plants in Haryana, and losses could be more than Rs 1,500 crores. The legal issues are yet to be untangled, and there is suspicion that the labour dispute is a proxy political struggle. The company has also admitted that it needs to better “understand young workers mindsets”. Some people are expressing that Japanese-style management is giving way to a more punishing Chinese-style work environment, and hence the workers are rebelling.

That’s the rub. The pressure of globalisation, unbridled competition, declining profit margins, slowing demand, rising domestic interest rates have led to increased stress in relations between labour and capital. The last couple of years have seen rising labour issues of varying severity across the country. Dunlop in West Bengal, Bosch in Karnataka, GM in Gujarat and Moser Baer in Noida in UP have all had labour issues. Independent of the merits of each case, the mere proliferation of these cases points to a tussle about the share of the cake, between labour and capital. The other parallel development has been the huge growth in contract labour, which presumably reflects a tendency to be outside the ambit of labour laws. Temporary workers make up one-fourth of industrial employment. It is not uncommon for companies to have up to half their workforce as contract labour, to avoid the risk of protracted litigation with permanent workers, arising out of inflexible labour laws.

Hence it may be tempting to ascribe souring labour relations to arcane and rigid labour laws alone. But this is a story that is not confined to India, the land of the rigid Industrial Disputes Act (IDA). Not doubt the IDA has contributed to stagnation in organised sector employment growth, But it alone cannot explain the broader phenomenon of the labour-capital tussle.

This tussle has a global dimension. In China, except for the recent past, real wage growth has been negligent for most of the past three decades. This was a period of extraordinary growth in national income and investments. But most of the gains from that growth went to corporations (i.e., capital), and not labour. Corporate savings rose spectacularly. Real wages stayed low, but employment growth was amazing. Labour laws were extremely employer-friendly in the special economic zones, which were powering China's GDP growth. The investment was attracted both by flexible labour laws, as well as low real wages. It is no wonder that consumer spending as a share of GDP steadily declined over these three decades, and is down to merely 38 per cent at present. Capital was expropriating most of the gains from growth.

Stagnation of real wages of industrial workers has been an issue in the USA too. Paul Krugman has pointed out that in the 25 years between 1980 and 2005, more than 80 per cent of the increase in national income accrued to the top one per cent income earners. These top bracket people were of course not blue collar workers or wage earners. During this entire period, productivity was rising, but those gains were not leading to rising real wages. Income inequality has been rising in the US since the early 1970s, and there is no consensus on its primary cause. Globalisation has caused blue collar wages to stagnate, but that's not the whole story. Neither does it suffice to blame the declining power of trade unions, or to increasing returns to special skills due to the technology boom. An additional factor has been that the supply of skills has not kept pace with demand. So school curricula do not adequately reflect what America’s globalised corporations want. Hence lack of education reform is also to be blamed for increase in labour capital inequality. Some have even blamed the government's anti-labour stance, and their anger is partly manifest in the current Occupy Wall Street movement.

In India, in contrast to the slow growth of real wages of industrial workers (weighted average of permanent and temporary), is the wage growth of rural workers. Thanks to the National Rural Employment Guarantee Scheme and the continuous hike in the Minimum Support Price for various crops, rural wages have been rising in both nominal and real terms. For the past two years rural wages have risen by almost 20 per cent per annum, and may be considered a contributory factor to stubbornly high food inflation. Interestingly, the tables have turned in favour of the rural (non-industrial) worker mostly because of political decisions (NREGS, MSP), not because of winning the labour-capital bargaining tussle. So also, the ongoing tussle between industrial labour and capital will need political intervention to restore a new equilibrium.

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First Published: Tue, October 25 2011. 00:42 IST