Trade Unions in India: Changing Role & Perspective

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J.S. Sodhi

Introduction

Unions in India have been preoccu- The paper presents trade unions’ pied with protecting the interests of the economic contribution in the con- workers. The government worked in tan- text of the strong historical dem with the unions in setting up labor legacy. The thrust of trade union standards. In the process unions became activities has been to engage in strong and began asserting themselves the traditional functions of wel- not by contributing to the economic per- fare and economic improvement formance but by organizing a large num- of workers; they do not take an ber of strikes at the national and the en- active role in improving produc- terprise levels. The globalization process, tivity and economic perfor- since 1991, has adversely affected la- mance. Unions, working in tan- bor. There has been jobless growth for dem with the government in the many years. Most of the additional em- first thirty years after indepen- ployment has been of an informal na- dence, ensured that workers ture, even in the formal sector. At the were well protected and given all enterprise level, management’s quest for the benefits. In view of the glo- a lean and mean organization has led to balization challenges, there is a a reduction in workforce, replacement gradual change and the man- of permanent workers with causal or agements and unions are enter- contract workers. The employer is also ing into collective bargaining merrily into union bashing or resisting the agreements with clauses of im- formation of unions and taking a tough provements in productivity of the posture in collective bargaining. Unions enterprise. are, therefore, up in arms against the inaction of the government and unfair practices of the management. However, they are operating from a weaker plat- J.S. Sodhi is Professor and Director. Shri Ram form and the management in tandem (de- Centre for Industrial Relations, Human Resources, facto)with the government is asserting Economic & Social Development, New Delhi. itself. E-mail:[email protected].

The Indian Journal of Industrial Relations, Vol. 49, No.2, October 2013 169 J.S. Sodhi

For a long time after 1947, neither ible; those that register but do not submit the government nor the management returns to the Registrar of Trade Unions; thought of the unions as a group who may and, those that register and submit returns contribute to the economic performance on membership figures (Venkataratnam, of the economy or the enterprise. Unions 1996). Recognition of trade unions is vol- too did not think of themselves in this role. untary except in states like Gujarat, This is now changing gradually. The Maharashtra, Rajasthan and Madhya unions and the management are entering Pradesh. In other states, it is governed by into agreements with bearing on produc- voluntary Code of Discipline and Inter tivity and growth of the enterprise. Union Code of Conduct. In practice, however, this voluntary recognition process leaves about half of the workmen without The unions and the management representation. are entering into agreements with bearing on productivity and growth Less than 2% of the workforce is of the enterprise. covered under collective bargaining although refusal to bargain by the employer Trade Unions in India as well as the trade unions in good faith is considered to be an unfair labor prac- Trade union membership data available tice in the Industrial Disputes Act, 1947 are somewhat outdated and ambiguous. as amended in 1982. Membership has remained very low although it increased marginally from 2.0 per In the first thirty years after indepen- cent in 1980 to 6.3 per cent in 2002. Most dence, there was greater emphasis on of the membership is in the formal sector centralized bargaining in view of the large although it is the informal sector employ- role of the State in labor market institu- ees who need to be unionized. While the tions. Centralized collective bargaining membership is low, the number of Trade had positive outcomes on wages Unions is very high since the Trade Union (D’Souza, 1998). It is also argued that Act, 1926, allows any seven persons to centralized bargaining took political over- form a union. The claims by unions of their tones as wages and working conditions membership are also flawed. This is evi- were being determined solely on such dent from the fact that the verified mem- considerations (Myers, 1958; Fonseca, bership of the unions was 24.48 million in 1964; Jackson, 1972). Collective bargain- 2002 although the central trade union or- ing in the private sector now usually takes ganizations claimed a membership of 41.18 place with the enterprise level unions. In million (Pong Sul Ahn, 2008). The ambigu- the public sector, it is with centralized ity in membership is further compounded trade union federations and politically by the fact that registration of unions is not affiliated trade unions at the national/or compulsory. As a result, there have been regional level (Jose, 2000). Most of the three types of unions in India; those that collective bargaining takes place in the do not register and are statistically invis- formal sector as over 94 per cent of the

170 The Indian Journal of Industrial Relations, Vol. 49, No. 2, October 2013 Trade Unions in India: Changing Role and Perspective workforce is in the unorganized sector downsizing; strong resistance to union in which the employer-employee rela- formation by the management at the en- tions are quite opaque in view of the near terprise level; and, an indifferent atti- absence of the principal employer. tude of the government towards the Venkataratnam’s (1999) study shows workers. The government has created that the institution and practices of col- Export Promotion Zones where labor lective bargaining have been on the de- laws are applicable but seldom enforced, cline over the years in view of: the shrink- largely due to the resistance from the ing size of the organized sector; capital employers. The government, though well intensiveness of industry; government aware of this fact, has not taken any granting permission to close enterprises action. Internally, the unions are con- and reduce employment through retrench- fronted with an indifferent attitude of ment and voluntary retirement schemes; workers; lack of internal democracy; promotion of export processing zones multiplicity of trade unions; weak orga- where labor rights exist only on paper; nization structure and financial position; acute need of the employers to meet fast emergence of independent unions; shift paced developments of the competitive of power from the federations to the scenario; and, government’s passive role enterprise level unions and their inabil- in cases of labor law violations and other ity to organize informal sector worker anti labor practices. (NCL, 1969; Industrial Relations Bill 1978 and 82; Standing Labor Confer- Employees’ voice in industrial com- ence in 1986; Trade Union and Indus- panies is further hushed up by the ab- trial Disputes Amendment Bill, 1988; sence of workers’ participation in man- Ramanujam Committee, 1992: NCL, agement despite the provision of Works 2002). Committees in the Industrial Disputes Act, 1947 in enterprises employing 100 Collective bargaining has been on or more workers. These committees ex- the decline. Pong Sul Ahn (2010) high- ist largely on paper only (Sodhi et al, lights some of the factors contributing 1996). to this are: absence of legal provisions for recognizing trade unions as a bar- Trade Unions today are besieged gaining agent; multiplicity of trade with problems due to the globalized en- unions in a single establishment and the vironment as well as their internal func- resultant lack of consensus of all the tioning. The former has resulted in sub- recognized trade unions; developments stitution of labor with capital by the man- in the field of management of human agement; changing forms of employment resources in a large number of enter- including the employment of contract la- prises which has taken over some of bor (almost 30% of the workforce in in- the functions of the trade unions; and, dustrial enterprises is contract labor with employment of flexible labor like the insignificant protection); management’s contract, casual, part time and contin- hostile attitude and their quest for gent work labor.

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Historical Perspective tution of India (Article 19) guarantees freedom to form unions and this is a fun- The deplorable conditions of work- damental right. The government enacted ers in the 19th century drew the attention the Industrial Disputes Act 1947, 1948 of a large number of social activists to Minimum Wages Act, Factories Act 1948, the plight of workers in the then indus- Industrial Employment (Standing Orders) tries like cotton, textile and jute. The first Act, 1948 and the Employees State In- strike occurred in 1877 followed by agi- surance Act 1948 during the early years tations and demonstrations in Bombay after Independence. The First Five Year (now Mumbai). The Bombay Mill Hands Plan (1951-56) highlighted that the Association was formed in 1890 and the worker is the principal instrument in the Printer’s Union of Calcutta and the fulfillment of the targets of the plan and Postal Union of Bombay were formed in in the achievement of economic progress 1905 and 1907 respectively. The first generally. The Second Five Year Plan trade union was established in 1918. (1956-61) reiterated that a strong trade Trade Union Act was enacted in 1926. union movement is necessary both for The conditions of workers, however, re- safeguarding the interests of the work- mained very poor. Whitley Commission ers and realizing the targets of produc- (1929-31) highlighted that the only effec- tion. Public sector was given pre-emi- tive safeguard against exploitation was nence in the economic policy framework. their power to combine. The first Indian Labor Conference, a tripartite body, was The government policy framework held in 1940 to discuss issues related to helped the workers in getting better work- wages, working conditions, etc. A tripar- ing conditions and participation in man- tite body called the Indian Labor Con- agement. The government encouraged ference (ILC) was formed in 1940. formation of unions in the public sector. It also set standards for minimum and fair working conditions and other benefits. After Independence the trade The ILC remained an important tripar- unions split on political lines and tite body dealing and debating issues re- today there are 11 Central Trade lated to labor. It met regularly on an an- Union Federations, besides a mul- nual basis initially. Central and industry titude of others, at the State and wise wage boards were set up which had the Industry levels. the involvement of the trade unions. The industrial policy of developing clusters After Independence the trade unions allowed large concentration of enter- split on political lines and today there are prises at one place thus helping the unions 11 Central Trade Union Federations, be- to form a base and increase its member- sides a multitude of others, at the State ship. Also, as these clusters developed, and the Industry levels. The government large trade unions were established be- of India adopted the socialistic economic cause workers could easily associate framework and accordingly, the Consti- themselves in these industrial zones

172 The Indian Journal of Industrial Relations, Vol. 49, No. 2, October 2013 Trade Unions in India: Changing Role and Perspective

(Pong Sul Ahn, 2010; Davala 1992). The health insurance and social security to government consulted unions and gave weaker sections of the society. However, due consideration to their views on im- the coverage of these schemes is small portant legislations and matters pertain- and not all workers are included in these ing to labour. schemes.

Political affiliations and the The government also took little government’s support to unions made the initiative to make the unions pro- unions a weapon for confronting the ductive partners in the enterprise. employers and developing supremacy over them. Indian National Trade Union The unions, however, remained mostly Congress, affiliated to Congress party occupied with their agenda of providing prospered under their prolonged rule. better wages and amenities caring the Similarly, the membership of Bhartiya least for the balance sheet or the produc- Mazdooor Sangh (affiliated to Bhartiya tivity of the enterprise. The government Janta Party, a major political party) in- also took little initiative to make the unions creased at a much faster rate during the productive partners in the enterprise. They time this political party and its allies were assumed that a well looked after worker in power. At the state level, unions with would itself contribute to the economic left ideology which ruled the state of West well being of the enterprise. The unions Bengal enjoyed tremendous power but lit- too did not directly take initiatives to edu- erally ransacked the industry for over cate their members to become productive three decades in the name of protecting partners or improve the work culture workers’ interests. Successive govern- (Rama Joshi, 1994). Researchers have ments in the state of Kerala, in collabo- also pointed out that the unions have not ration with the unions, empowered work- and will not be able to influence social ers and gave them all rights with high macro policy (Ramaswamy, 1989). The wages and social security. While the gov- social agenda has been and even today ernment provided labor rights and high being dictated by the Government of In- wages, the economic outcome was nega- dia and/or the employers. The former has tive. Higher wages led to high levels of introduced national schemes like the Ma- unemployment in Kerala. hatma Gandhi National Rural Employment Guarantee Scheme (MNREGA) guaran- Higher wages led to high levels of teeing 100 days of employment in a year unemployment in Kerala. to the unemployed; a health insurance scheme called Rashtriya Swasthya Bima Yojana (RSBY) wherein a health cover- The high pedestal of the unions age of Rs 30000 per annum is provided to since the 50s and their political affilia- the weaker sections of the society; the tions were also brewing a feeling of dis- Unorganized Sector Workers Social Se- contentment amongst the management, curity Act, 2008 to provide employment, both in the public and the private sec-

The Indian Journal of Industrial Relations, Vol. 49, No. 2, October 2013 173 J.S. Sodhi tors. This policy of labor protection by ers, during 1965-1975 (Vaid, 1974; the government, which helped in estab- Table 1). Industrial unrest continued to lishing the supremacy of the trade increase thereafter except for a brief unions, was being seen as an irritant period during emergency rule. The by the managements. Industrial unrest managements had to resort to lockouts took place across industries like the and their intensity increased tremen- banks, municipal workers, the central dously during 1982-88 (Sodhi & government employees, amongst oth- Ahluwalia, 1991; Table 1). Table 1 Number of Strikes, Lockouts, Workers Involved & Mandays Lost During 1947 - 2012

Year Number of Disputes Workers Involved (000) Mandays Lost (00000) Strikes Lockouts Total Strikes Lockouts Total Strikes Lockouts Total 12345678910 1947 .. .. 1811 .. .. 1841 .. .. 165.63 1950 .. .. 814 .. .. 720 .. .. 128.07 1955 .. .. 1166 .. .. 528 .. .. 56.98 1960 1464 119 1583 887 99 986 47.19 18.17 65.37 1965 1772 138 1910 927 102 1029 50.50 18.53 69.04 1970 2598 291 2889 1552 276 1828 147.49 58.14 205.63 1975 1644 299 1943 1033 111 1143 167.06 51.95 219.01 1980 2501 355 2856 1661 239 1900 120.79 99.07 219.25 1985 1355 400 1755 878 201 1079 114.87 177.53 292.40 1990 1459 366 1825 1162 146 1308 106.40 134.47 240.86 1995 732 334 1066 683 307 990 57.20 105.70 162.90 2000 426 345 771 1044 374 1418 119.59 168.04 287.63 2001 372 302 674 489 199 688 55.63 182.04 237.67 2002 295 284 579 900 179 1079 96.65 169.21 265.86 2003 255 297 552 1011 805 1816 32.10 270.50 302.56 2004 236 241 477 1903 169 2072 48.29 190.38 238.66 2005 227 229 456 2722 191 2914 108.01 188.64 296.65 2006 243 187 430 1712 98 1810 53.18 150.06 203.24 2007 210 179 389 606 118 725 150.56 121.11 271.67 2008 240 181 421 1514 66 1579 69.55 104.79 174.34 2009 167 178 345 1793 74 1867 80.75 95.47 176.22 2010(P) 267 182 449 989 86 1075 131.30 96.31 227.62 2011(P) 200 190 390 680 72 752 62.70 80.36 143.06 2012(P) 177 21 198 696 7 703 16.33 4.22 20.54 Jan. to Nov. Source: Office of Labor Bureau (Ministry of Labor & Employment), Shimla ..= Not available (P) = Provisional and based on the returns/clarifications received in the Bureau till 31st December 2012 The Indian government imposed a assumed a totalitarian role and all rights state of emergency in the nation for a of the citizens including the right to strike brief period of about 19 months during were prohibited. There were elections 1975-76. During this period, the State thereafter and the democratic govern-

174 The Indian Journal of Industrial Relations, Vol. 49, No. 2, October 2013 Trade Unions in India: Changing Role and Perspective ment which came to power restored recognized unions. In view of the militant “fundamental rights and bonus, removal nature of the strike, the government refused of all inhibiting orders and amendments to enter into negotiations. The strike fizzled to the laws, review and revision of wages out with no economic gains. The mill own- in most sectors of the economy like steel, ers closed their mills and many moved their cement, ports and docks, coal and so on” plants outside Bombay. The strike led to (NCL, 2002). huge economic losses and unemployment as the mill owners refused to take back Despite these positive efforts, high the workers in their new premises. During level of union-labour militancy continued the mid-eighties, the government started during the last three years of the 70s. The showing signs of tilting away from their number of strikes during 1977-80 rose to overarching pro-labor stance (VI Plan- over 2500 per annum compared to 1241 1986-91). They showed intent but did not in 1976. This crippled some industries finally change the IR laws regime. The and regions as well as bred an adversarial management, nonetheless, asserted back relationship between the management their supremacy. The number of lockouts and the unions. The managements were increased, particularly during 1982-1990 equally responsible for trying to make the (Mohan Kumar, 1989, Table 1). The man- unions ineffective and contributing to the agements subjected the unions with harsh unrest as they intensified labour un- measures and their genuine demands were friendly policies which involved even vio- ignored. The decade of eighties is usually lation of the labour laws. The impact of remembered as of ‘labor bites the dust’ union’s involvement on policy was despite the fact that the number of regis- marginalized in this decade in view of tered trade unions grew from 15,042 in 1981 their preoccupation with industrial unrest. to 53,535 in 1991 (IAMR, 2009). Industrial relations were deadlocked with the The decade of 80s began with an in- adversarial position taken by the employ- dustrial unrest of a different magnitude. ers/management and the unions (Sodhi & Strikes took place in both the public (Elec- Ahluwalia, 1992).This phase did not wit- tronics Corporation of India, Hindustan ness unions impacting the policy either at Machine Tools, Indian Telephone industries the macro or at the enterprise level. On and others) and the private sectors. This the other hand, adversarial relations and the was followed by the Bombay Textile Strike zero sum game both by the unions and the (Patnakar, 1981; Pandse, 1981; managements intensified. Since there was Bhattacharjee, 1988; Jose, 2000), which a very high level of mistrust between the lasted for over one year and 25 million management and unions, the latter’s eco- workers participated in it. The strike was nomic contribution was marginal. led by a militant trade union leader who demanded increase in wages, scrapping of Globalization & Trade Unions the Bombay Industrial Disputes Act, 1947 and his independent union to be given the New economic policies of the gov- status of representation along with the other ernment of India announced in 1991 saw

The Indian Journal of Industrial Relations, Vol. 49, No. 2, October 2013 175 J.S. Sodhi an ideological shift from a socialistic pete. Lay off, suspension and closure policy framework towards liberalization require government permission which is and globalization. The government did denied even for genuine purposes like not consult the unions when it announced worker’s inability to cope up with de- new the economic policies. Unions feared mands of the new technology, indiscipline that new economic paradigm would not and the ups and downs of business. No be in the interest of the workers. Trade attempt was made to reorient the IR and unions were, therefore, agitated and op- the labor laws (Sodhi, 1994). Third, col- posed these policies. Successive govern- lective bargaining began to attain distinc- ments thereafter set up various commit- tive contours at the behest of the man- tees with the involvement of unions but agement. These were: preference of did not address union’s concerns. management for enterprise level bargaining in the private sector; submission of management’s charter of demands upon Unions feared that new economic receiving the same from the unions and paradigm would not be in the in- their insistence on discussing them be- terest of the workers. fore taking up union’s demands. The management’s charter usually included Globalization policies had the follow- cost cutting, manpower rationalization, ing implication on industrial relations and productivity increases, pays for perfor- the unions. mance and technological up-gradation (Sodhi, 1994). Fourth, over the years, First, the new economic policies de- managements have pressurized workers manded that managements meet the chal- to form enterprise level unions with no lenge of the national and the international affiliation and outside leadership, some- competition, minimize redundancies, thing which is contrary to the law. In many move over to a capital intensive mode cases, the managements have also been and strive to have a lean and mean orga- resisting workers’ efforts to form a union. nization. They resorted to: transfer of jobs Fifth, managements reoriented their hu- from the domain of bargaining/sub-con- man resource policies making them look tracting; use of contract labor; changing after the interests of the workers which work norms; reducing jobs; and moving hitherto was in the domain of the unions towards a capital intensive growth model (Sodhi, 1999). Sixth, companies began to (Mahadevan, 2000). Second, IR laws, bring in latest technology which necessi- according to the management, are out- tated reduction in their workforce (Sodhi, dated and restrict firm’s ability to com- 1993). pete in the nationally and internationally competitive scenario. The Industrial Dis- The government has also been look- putes Act and other labor laws inhibit the ing the other way in the case of labor firm’s ability to adjust labor force or even law violations taking place at the level of make changes in the deployment of la- the enterprise. This has emboldened the bor thus restricting their ability to com- management’s to disregard various laws,

176 The Indian Journal of Industrial Relations, Vol. 49, No. 2, October 2013 Trade Unions in India: Changing Role and Perspective the unions as well as the needs of the On the positive side, trade unions workers. It is also important to note that have, during the last five years, entered there was a sharp fall in the representa- into agreements at the enterprise level tion of members with union background which they were opposing tooth and nail as elected/ nominated members of the earlier. These agreements are related to Indian Parliament, the supreme decision work organization and flexibility, substi- making body of the country. The propor- tution of labor with capital, rationalization of parliament members with union tion, shop floor level changes, eliminat- background decreased from 21% in 1971 ing/ changing and consolidating jobs, au- to 3.4% in 2004 (Sengupta, 2008). tomation, etc. Many other agreements have clauses on managerial discretion in setting up the production and productiv- The proportion of parliament mem- ity norms, linking dearness allowance (a bers with union background de- compensation for rise in prices) to pro- creased from 21% in 1971 to ductivity rather than to the cost of living, 3.4% in 2004. wage freeze, worker penalization if norms set by the management are not Two key features of unions have met, company recovering the cost of de- emerged during the last ten years. One, fective materials, negotiated flexibility, the national level federations and their redeployment, limiting the scope of issues leaders have not whole-heartedly ac- under collective bargaining, subcontract- cepted the globalization agenda of the ing, downsizing and reduction of leave. government and the resulting conse- As a result, the industrial relations sce- quences of casualization of the nario in a number of such enterprises has workforce. Two, the enterprise unions become somewhat free of industrial un- have come up without affiliation to the rest for some time. Unions have cooper- federations and most of them have coop- ated in maintaining this environment. This erated with the management and entered has helped the enterprises to grow in this into collective bargaining agreements with competitive environment (AOIE, 2005; clauses of increasing efficiency and pro- 2011). Unions have also taken a positive ductivity of the companies. The rank and stand on employment of contract labor file workers have also become somewhat in all jobs, provided that workers are paid disillusioned in view of unions’ inability to decent wages in relation to the perma- check the anti-labor policies of the man- nent workers doing the same job. It must agement (Shyam Sundar, 2008). A com- be mentioned that the Contract Labor prehensive exercise on industrial relations (Regulation and Abolition) Act, 1971 le- by the Second National Commission of galizes their deployment only in jobs Labor (NCL, 2002) made disparaging re- which are not of a perennial nature. marks on the role of trade unions. All this resulted in the decline of trade unions’ role However, despite these positive en- and importance (Sankaran, 2007; deavors of the unions, the managements’ Venkata Ratnam, 2007). aggressiveness towards them has in-

The Indian Journal of Industrial Relations, Vol. 49, No. 2, October 2013 177 J.S. Sodhi creased. They have been resisting formation of unions (Saini, 2009) at the en- The country has been witnessing terprise level and coercing the unions, severe industrial unrest both in wherever they exist, to terminate their the public and the private sectors political affiliation and not have outside over the last five years. leadership. Employment of contract labor has increased manifold and such ers to form unions in the enterprises but workers are paid less than half of the also have been acting as a force for work- wages compared to a permanent worker ers to achieve their rights. As a result, the doing the same job. Such workers do not country has been witnessing severe indus- have security of employment. Unioniza- trial unrest both in the public and the pri- tion of such workers is very rare and, vate sectors over the last five years. The therefore, they are subjected to all kinds brutal violence in June 2012 in Manesar- of harsh working conditions. Gurgaon unit of Maruti Suzuki India Lim- ited in which one management personnel A deeper analysis of the was burnt to death, several others severely management’s attitude brings home the assaulted and the factory premises were fact that a large number of prominent set on fire is a manifestation of the deep company managements have been writ- rooted hatred which exists between the ing the obituary of trade unions due to unions and the management (Ratna Sen, their belief that unions are redundant in 2011). This was not an isolated incident the present turbulent economic and busi- but a part of the phenomena occurring in ness environment. The Government of a large number of enterprises. Strikes India has also contributed to this belief. have taken place in some of the plants of It is the largest employer of contract la- best companies like Bosch Limited, bor and most of it is in contravention of Cummins India, Nokia, Hyundai, the Contract Labor and Abolition Act. It Mitsubishi Chemicals, Honda, Mico, Gen- has set up Export Promotion Zones eral Motors, Ford and some other compa- where labor laws are not being enforced. nies. Companies like MRF, Hindustan The position is similar in the IT sector National Glass and Hindalco had declared (Pandhe, 2005). State governments like lockouts in some of their plants. The Kerala and West Bengal have passed Hindalco lockout lasted for almost ten orders restricting the functioning of trade months. The CEO of Grazianio Transmis- unions. Haryana State Government had sion, an Indian unit of the Italian compo- passed a similar order preventing its em- nent maker, was assassinated ostensibly ployees from going on strike (Financial for firing some workers. In other such in- Express, 2000). cidents, a Vice-President of Pricol was beaten to death by agitating workers, an Indian trade unions obviously are not Assistant General Manager of Allied calling it a day and have not taken the Nippon was stoned to death by angry developments in their stride. They have workers and a Deputy General Manager not only been making efforts to help work- of Prowmex Steel, a Unit of Graphite In-

178 The Indian Journal of Industrial Relations, Vol. 49, No. 2, October 2013 Trade Unions in India: Changing Role and Perspective dia Ltd. was killed after his vehicle was set on fire by irate workers (Sen, 2011). A large number of studies have also found negative relationship For sometime after the violence in between unions and economic per- Maruti Suzuki Ltd., the government, em- formance. ployers, organizations, media and large sections of the society had turned against However, a large number of studies the unions despite the fact that unions had have also found negative relationship vehemently deplored the acts of physi- between unions and economic perfor- cal violence and arson. Yet, unions had mance. Hirsch (1997) concludes that the lost all support during that period. broad pattern highlights that unions sig- nificantly increase compensation for their Collective Bargaining, Productivity members but do not increase productiv- & Economic Performance ity sufficiently to offset the cost increases due to increased compensation. Shirk’s While unions, ideally, have the poten- study (2009) highlights that unions harm tial of contributing positively to the eco- the overall economy. The Economist nomic health of the companies, the em- (2007) reported that American teachers pirical evidence is mixed. In Japan, Swe- are generally believed to be the primary den and Israel, unions have risen to the obstacle to improving America’s appall- challenge of meeting the changing re- ing public schools. Yeddar & Gallaway quirements of the society (Nathanson et (2002) highlight that annual labor produc- al., 1999; Inoue S, 1999; Fahlbeck, 1999). tivity growth of 1.7% in the US was not Works Councils of Germany and some less than that of seven European coun- other European countries promote both tries of Belgium, France, Germany, Italy, the interests of the workers and the en- Netherlands, Spain and Sweden despite terprise (Rogers & Streeck, 1993) along a dramatic drop of unionization in the US with that of the enterprise and the and higher unionization and almost 80% economy. This study further adds that of the workers being covered by collec- regulated properly, unions contribute to tive bargaining in these European Coun- greater employee satisfaction, engage- tries. Freeman’s (1982; 2005) analysis ment, commitment as well as the effi- highlights that overall impact of collec- ciency of the workplace. Mishel’s (2007) tive bargaining has been largely on re- study highlights that in the European ducing wage inequality. countries like Belgium, France, Germany and Netherlands high productivity and In Britain, Aidt & Tzannatos (2008), union density are perfectly compatible. in their exhaustive review of literature on Doucouliagos & Laroche (2003) found a trade unions and macro-economic per- positive relationship between unions and formance, have found that high levels of productivity in the United States in gen- bargaining coverage tend to be associ- eral and for US manufacturing in particu- ated with poor economic performance. lar. Edward’s (2002) study highlights little or

The Indian Journal of Industrial Relations, Vol. 49, No. 2, October 2013 179 J.S. Sodhi no impact on economic performance in place in an atmosphere of mutual distrust UK. Similarly, Bryson et.el (2008) con- and, therefore, each party tries to “bar cludes that union bargaining has a detri- the gain” of the other. mental impact on economic performance in Britain. Unions in India did not come up to promote efficiency and productiv- In the Indian context, collective bar- ity. gaining has largely led to higher wages and benefits for workers in the public sector without any increase in produc- Traditionally, Unions in India did not tivity. In the private sector there is no come up to promote efficiency and pro- clear direction. In the first three decades ductivity. They were born, like in other after Independence, union’s attitude was countries, to check exploitation of labor. to demand increase in compensation and Unlike in other countries, however, nei- other benefits irrespective of the work- ther the Indian government because of ers contribution to productivity and other its socialistic orientations till 1991 nor the work norms of the enterprise. Jose private sector enterprises thought of (2000) highlights that trade unions in In- them as an instrument of increasing pro- dia have also performed roles in facili- ductivity of workers. The purpose of in- tating production; ensuring an equitable dustrial relations around which a large distribution of value added; providing a number of laws were formulated was voice to labor and society at large; pro- industrial peace. The Industrial Disputes moting solidarity among workers, provid- Act 1947, the most important Act pro- ing special services to members of the tecting the interests of the workers, does unions and serving as an anchor for broad not have any clause on productivity but based movements sharing similar values lays stress on employment, working con- and goals. The limited literature on the ditions and the machinery of settlement impact of trade unions also highlights a of industrial disputes. negative impact of trade unions on productivity (Sinhala & Shawnee, 1970; Conclusion Rajas, 1992; Jadish Chatter, 2009). Sodhi’s study (1996) found positive rela- Unions in India are today as relevant tion between collective bargaining and as they were in the early part of the last productivity in two public sector compa- century. The contours of challenges are nies. However, these companies were different and come about due to the in- making losses and had been declared sick ternal set of issues of trade unions as well as per the parameters of the Government as the globalization policies of the gov- of India. More union-management ernment. Internally, unions are not a agreements on increases in productivity united force and have been divided on have been signed during the last five political lines. A section of workers as years (AIOE, 2006-11) although collec- well as the managements do not see them tive bargaining negotiations mostly take as useful in view of their inability to pro-

180 The Indian Journal of Industrial Relations, Vol. 49, No. 2, October 2013 Trade Unions in India: Changing Role and Perspective tect worker’s rights and lack of initiative tivities. Specifically, the unions need to in enhancing economic performance of continue to deal with the newer issues the companies. Globalization policies of atypical employment and others cre- have led to outsourcing and emergence ated by the globalization process. It is, of atypical forms of employment in the however, equally relevant that unions form of contract and casual workers take up other development activities at even in the formal sector. Such workers the macro and the enterprise level. have little security of job and are paid NTUC, for example, runs cooperatives half or less than half compared to the (like the fair price shops) which provide permanent workers doing the same or subsidized food and groceries. In India similar job in an enterprise. The govern- the enterprise unions and the management has also set up export promotion ments have in some instances promoted zones where labor rights exist only on cooperatives at the enterprise level. paper. Also, it has allowed companies to Ironically one such very successful co- pursue voluntary retirement schemes operative was run in an organization under which a large number of perma- where a trade union leader had become nent workers have been retrenched. As the Chairman and Managing Director a result, the formal sector employment (Sodhi, 1999). has declined over the years. This is coupled with the lack of social protec- The Government too needs to play a tion, safety net and the required skills of catalytic role to increase the scope of the workers to attain gainful employment. union’s involvement through institutional forums of social dialogue. Works Coun- The present situation has, in a way, cils of Germany provide one such ex- forced unions’ preoccupation with the tra- ample. It also needs to be vigilant on the ditional functions. Unions’ economic con- labor law violations. tribution is growing very slowly at the enterprise level and this trend is likely to in- While other countries’ experiences crease as they are slowly accepting their do provide learning, the ultimate action economic role at the macro and enterprise agenda of the unions has to emerge from levels. There is, however, a need to study within, keeping the Indian perspective in this trend more systematically. mind, which would require the tripartite partners to create a framework of coop- The way forward for unions is to eration and a win-win situation for the adopt a common minimum agenda ac- unions and the management. ceptable to all the unions. The Swedish Trade Union Confederation (LO) pro- References vides an example of forming an umbrella organization of all the unions. NTUC in All India Organization of Employers-AIOE Singapore works with the government (2005-11),Submission by the Companies and is engaged in training for gainful for Consideration of the Annual IR Award, New Delhi employment besides a host of other ac-

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