FE Editorial : Labour aristocracy

Written by The Financial Express | Updated: Feb 28 2012, 07:15am hrs
Given today could be the first ever joint strike by all central trade unions, its not surprising the Prime Minister is going all out to try and stop it. He has called the Indian National Trade Union Congress president Sanjeeva Reddy and the PMO is holding talks with the labour secretary. For what its worth, West Bengal chief minister Mamata Banerjee has threatened employees in her state who want to go on strike by saying it will be considered a break in their servicetrade unions, on their part, have dismissed this as ridiculous since workers are entitled to take leave. Not surprisingly, in such situations, different unions are using the strike to push their own agendabank unions, for instance, are opposing bringing in new players though one of the public demands is to ensure banks do their best to recover bad loans. While the major demand of the trade unions is to prevent casualisation of the workforce, it is important to get some perspective on it.

For one, with trade union membership restricted to less than 2% of the 450-million strong workforce, trade unions are anxious to spread their wingswitness the wave of strikes, often violent, in areas that dont have much of a history of unionism and, like the auto industry, even pay good wages. While the unions have a legitimate right to want to expand membership, it needs to be kept in mind that labour policies are determined by trade, not government. If Chinese workers are more efficient than Indian ones, the only way to stop Chinese imports from flooding the market is to reduce wage levels in Indiasince wages of permanent employees, often union members, cant be reduced, the only way to do this is for India Inc to hire more temporary workers at lower salaries. This also gives firms the much-needed flexibility in organising production. Studies show that greater trade competition leads to increasing casualisation of the workforce and that states with more union-friendly policies tend to have the slowest employment growth. This is the choice before Indias workforcefalling for the rhetoric of the labour aristocracy or worrying about more employment for themselves. Given the last five years have seen the highest ever increases in real wages12.8% per year for salaried women workers in rural areas for instancethe choice before labour seems pretty clear.