Over the last few years, a few economists and policymakers have begun to say that labour laws don?t matter for job creation because entrepreneurs have figured out how to deal with them. I argue that the toxic transmission losses between how the law is written, interpreted, practised and enforced mean that 93% of our labour force works in informal employment and more than 30% are on fixed-term contracts. And informal and contract employment?particularly at these extreme levels?is not something we should accept or be proud of. It is a bug not a feature.
As the Maruti labour dispute drags on, it is important to remember that the issues are not decent wages, safe/fair working conditions, or social security. In any labour law reform debate, these three conditions should be non-negotiable. But these three do not apply to the Maruti debate because all workers get a salary of R13,500 per month, are covered by PF/ESI and work in the same conditions. But three issues under dispute at Maruti are politicisation/multiplicity of unions, employment contracts with expiry dates and the lack of equal pay for all workers. It would be unfair to pretend?like trade unions are currently doing?that these three issues are not complex, nuanced and philosophical. Let?s look at each one in more detail.
The politicisation and multiplicity of unions is the first issue. These two questions are related and rooted in the important philosophical question of how much influence outsiders should have in internal company affairs. As with any interest group?hat tip to Mancur Olson?s spectacular insight?their interests have diverged from the greatest good for the greatest number over time. Allowing non-employees to drive union leadership leads to part-time roles for professional politicians whose agenda of building political constituencies is unrelated to
workers? welfare. Trade unions must be workers? unions. The criminalisation of politics and the politicisation of trade unions is a toxic, combustible cocktail that we must fight.
Contract employment is the second issue. Trade unions?like the Indian labour laws they seem to have written?view an employment contract as immortal; once you sign it, you can never end it. The brutality and perpetuity of this contract?few of us would sign a house that we could never get out of?mean that few workers get hired with formal contracts and we breed informal employment. And the formal sector prefers to buy machines rather than hire people. More importantly, broader changes in the world of work?technology, globalisation, projects, etc?mean that employers and employees have moved from a lifetime employment relationship to a taxicab transaction that is short and intimate. The notion of William Whyte?s The Organization Man?loyal, obedient, male, etc, was modelled on IBM. Recent numbers from IBM suggest that 50% of their employees have been with them less than two years, 40% do not go to an IBM office every day and 30% are female. This diversity in employment contracts is sabotaged by Indian labour laws that are the equivalent of marriage without divorce. The exploding contract employment is a rational response from employers who understand that the future is uncertain and shareholders don?t pay salaries but customers do. Recognising and legitimising fixed-term employment is guaranteed to substantially reduce the 30-60% contract employment among large and formal employers.
Equality of wages is the third and most complex issue. The American car industry committed suicide by paying all workers above market wages purely based on seniority. It only avoided death by trade unions agreeing for differential wages?obviously they chose to punish young cohorts (by lowering entry wages and benefits) rather than sharing the burden (by older workers sacrificing above market wages and benefits). Contract workers at Maruti are not paid exploitative wages?R13,500 per month is a decent Indian wage. Saying that Maruti must pay all workers the same wages is not only unfair but like trying to treat obesity by mandating small sizes. As long as workers?whether contract or permanent?receive a multiple of minimum wages, employers should not be required or expected to equalise wages.
Without employers there are no employees. And India is already a hostile habitat for job creation; Maruti, like most employers, generates a lot of its own power, provides transport, digs for its own water and skills its own employees. Our national failure to reduce our low-productivity agriculture employment (54% of the labour force that generates 18% of GDP) is a child of our lack of formal employment in manufacturing and services. Our irrational labour laws have become weapons in the hands of politicised unions to coddle the 8% labour aristocracy. Amnesia is a dangerous thing; I recently went to Kanpur and this shining citadel of India?s textile power is now an open-air museum of tragedy with 5.5 million people, only 6 hours of power a day, and thousands of unemployed. Kolkata or Central Mumbai also testify that while the closure of factories may not have hurt employers in the long run, it is clear that workers suffered. Trade unions have a role to play in civilised society but their relevance will come from issues like employability, workplace safety, and worker retraining. Their current agenda of confrontation is bereft of imagination and does not represent the worries of unorganised labour, women or a young India. Converting Gurgaon to Kanpur or Kolkata may not be the goal of trade unions but it can surely be the outcome.
The author is chairman,
Teamlease Services
