EXECUTIVE SUMMARY
1.Introduction
2.Contrasting views on trade unions as institutions A comparative framework
3.The changing economic environment and its effects on organized labour in India
3.1The four phases of unionism: An evolutionary approach
3.1.1 The first phase of unionism (1950 to mid-1960s)
Commentary
3.1.2 The second phase of unionism (mid-1960s to 1979)
Commentary
3.1.3 The third phase of unionism (1980-1991)
Commentary
3.1.4 The fourth phase of unionism (1992-2000)
Commentary
3.2 The issues
3.2.1 Unionization and employment
3.2.2 Union structure and union density
3.2.3 Wages and working conditions
3.2.4 Collective bargaining
3.2.5 Industrial conflict
3.2.6 Labour management relations
3.2.7 Inter-state variations
3.2.8 Women workers and unionization
3.2.9 Changing public perception of trade unions
4.Future role of trade unions in India: Organizing the unorganized
4.1 The private corporate sector
4.2 Public sector enterprises
4.3The informal sector
References
APPENDIX: TABLES
Table 1. Employment in the organized sector (in 000,000s)
Table 2. Number of registered unions and membership of unions submitting returns
Table 3. Industrial conflict (1950-1997)
Table 4. Economic indicators
Table 5. Employment elasticities in major sectors
Table 6. Sectoral distribution of employment in the formal economy (in 000,000s)
Table 7. Sector-wise number and membership of trade unions submitting returns
Table 8. Index numbers of consumer prices (1960-61 to 1993-94)
Table 9. Index number of wage rates
Table 10. Real wages in organized manufacturing, 1960/61 - 1983/84
Table 11. State-wise number and membership of trade unions submitting returns
EXECUTIVE SUMMARY
This paper examines the role of organized labour in India in a structural and historical context.
It attempts to trace the economic, political and social effects of the trade union movement and its
strategies over time. These effects are felt at enterprise- and/or firm-level, industry-level, regional
and national level. First we consider the effect of changing economic conditions on the evolution
of trade unions and bargaining institutions in largely urban labour markets in the post-independence period (1947 onwards). Some contemporary issues affecting the organized labour
movement in India today are then discussed.
This essay has two main objectives: (a) to present a history of Indian industrial relations,
broadly understood as the changing relationships between workers, trade unions, employers, the
economy and the state; (b) to posit a political economy of trade unionism in India.
The evolution of trade unionism (and industrial relations in general) is described in terms of
the "four phases of unionism". This corresponds with structural changes in the economy and we
trace the effect of these changes on labour markets as well as on the (very broadly defined)
industrial relations arena. The first phase (1950 to mid-1960s) corresponds to an era of state
planning and import substitution, when public-sector employment and public-sector unionism rose
phenomenally. Unions and bargaining structures were highly centralized; the two main federations
were the nationalist Indian National Trade Union Congress and the communist All India Trade
Union Congress. State intervention in the determination of wages and working conditions was the
norm and "state-dominated pluralism" was the labour regime during this first phase.
The second phase (mid-1960s to 1979) is associated with a period of economic stagnation and
political turmoil. Employment slowed down, there were massive inter-union rivalries, and
industrial conflict increased. Centralized bargaining institutions now started feeling the pressure
of dissent from below, and both the Hind Mazdoor Sabha and the Centre of Indian Trade Unions
made significant progress in the labour movement. The crisis culminated in the May 1974 railway
strike that was followed by the 1975-77 Emergency Regime of Mrs. Gandhi. An "involuted"
pluralism dominated Indian labour relations during this second phase.
The third phase (1980-1991) corresponds to a period of segmented and uneven economic
development. Decentralized bargaining and independent trade unionism enter the stage in a
significant way. Two major strikes (the 1980/81 Bangalore public-sector strike and the 1982
Mumbai textile workers strike) marked this phase, and inter-state and inter-regional variations in
the nature of labour-management regimes became much wider. In the more profitable economic
sectors the unions gained, but in the unorganized and declining sector, workers lost out and unions
were left with few strategies.
Finally, the fourth phase of unionism (as yet incomplete, 1991-2000) represents the post-economic reform period. The stabilization and structural adjustment programmes led to demands
for increased labour market flexibility, especially employment flexibility. This has led to a
recruitment freeze in many public sector sites, and unions in these sectors now have to cope with
competition at local level. In non-viable public enterprises, unions are coming to terms with
"voluntary" retirement schemes. In the early years of economic reform there were sincere attempts
by all parties to engage in tripartite consultations, but there now seem to be several barriers to this
form of engagement.
The essay then gives a more detailed presentation of crucial issues which are particularly
relevant to the trade union movement in India today. These are: the relationship between
unionization and employment; union structure and union density; wages and working conditions;
the changing nature of collective bargaining; changing patterns of industrial conflict; the nature
of labour-management relations; the (extremely important) issue of inter-state and regional
variations in labour regimes; the question of women workers and unionization; and the changing
public perception of trade unions. The main findings are summarized below.
- In both the public and private sectors, employment in industry has substantially declined,
especially since the economic reforms; however, employment in public sector services has
increased since the third phase of unionism. The trend in most industries is to reduce
permanent employment and to use more contract, temporary and casual workers.
- Trade unions have performed well in profitable industries, mainly in private (often
multinational) enterprises, but also in some public sector firms with decentralized bargaining
structures. However, they lack new strategies in the older and declining sectors of
production where industry-wide bargaining structures are typically the norm. Whereas
workers and unions in non-viable public enterprises are facing closure and an uncertain
future, centralized unions representing employees in public services remain strong due to
the monopolistic nature of their product markets.
- The number of plant-based independent and unaffiliated trade unions has risen, which may
have caused a decline in the power of centralized affiliated unions, especially in the private
sector.
- Two critical changes in collective bargaining are the expansion of coverage and scope of
long-term agreements. Competitive market pressures, especially since the beginning of
economic reform, have forced bargaining outcomes to be decided at local level.
- The procedural environment required for competitive industrial pluralism to work at its best
is still absent from the Indian industrial relations system (absence of a secret ballot, absence
of a single bargaining agent, absence of third-party arbitration and strong restraints on
"legal" strikes). This makes the organized labour movement still very dependent on state
recognition and patronage. All parties recognize the urgent need for comprehensive labour
law reform.
- Modern human resources management has significantly altered labour-management relations
in the advanced sectors of production without necessarily leading to a decline in union
bargaining power.
- Inter-state and inter-city variations in labour-management relations have increased since the
mid-1980s, and in the absence of a concerted effort on the part of the central government
to reform labour laws, these variations are likely to be accentuated with the progress of
economic reform.
- Women workers are largely concentrated in the self-employed and unorganized sectors with
little representation in trade unions. Non-governmental organizations have made
considerable efforts to organize women in these vulnerable occupations.
The paper concludes with a discussion of the future role of trade unions, concentrating on the
unionization of informal sector workers. Given the low levels of unionization in India (relative
to comparable countries), and given that a large proportion of workers are employed in the
informal sector (a trend which is likely to intensify with the economic reforms currently
underway), the trade union movement has to make a determined effort to organize informal sector
workers. This calls for concerted action on the part of the centralized trade union federations in
alliance with other social movements and non-governmental organizations. It is only through this
kind of extensive mobilization that "public action" can be triggered to "level-up" the labour market
institutions of vulnerable sections of the workforce.
The organized labour movement will have to come to terms with global competition,
technology, new industrial organization and structural/demographic changes in the workforce. The
earlier, relatively insulated, systems for regulating employment will have to give way to more
market-sensitive and flexible systems, ultimately even in the public sphere. Unions, especially in
the service sector, will have to become sensitive to consumer needs. In the private sector, trade
unions have adapted their structures in response to the decentralization of industrial relations, but
these adjustments are painful and difficult in the public sector. There is no other way but to
increase membership, which means organizing vulnerable workers in the informal sector. This
is the most obvious way for unions to win broader community support. Finally, trade unions can
only gain by cooperating and working together. Perhaps the new millennium will witness a series
of mergers leading to a united and independent labour movement.
1. Introduction
This paper examines the role of organized labour in India in a structural and historical context,
tracing the economic, political, and social effects of the trade union movement over time. We look
at union strategies at the level of the enterprise and/or firm, the industry, the region and the nation.
The effect of changing economic conditions on the evolution of trade unions and bargaining
institutions are described in largely urban labour markets in the post-independence period (1947
onwards). Then we consider some contemporary issues affecting the organized labour movement
in India today.
The paper has two main objectives: a) to present a history of Indian industrial relations, broadly
understood as the changing relationships between workers, trade unions, employers, the economy
and the state; and b) to posit a political economy of trade unionism in India. The contrasting views
of Freeman and Medoff (1984) of trade unions as "monopoly" institutions, or as the "collective
voice" of workers serves as a theoretical framework here. From a policy perspective in democratic
and pluralistic societies, the objective must be to minimize the "monopoly" effects and to
strengthen the "collective voice" effects.
The position taken here is "that the evolution of labour institutions is determined by the
objective interests of social groups inherent in the logic of a modern industrial society" (Zeitlin,
1987, p. 163), and that these "interests" are inevitably "ambiguous and context dependent".
Consequently, it is difficult to establish mechanisms to ensure that labour institutions, such as
trade unions, collective bargaining and the state, continue to play the parts assigned to them. The
second proposition of this essay is that "no single approach to the study of labour organization is
at present adequate - which is to say that the study of these matters is usually informed from
several points of view" (Williamson, 1985, p. 241).
The organization of the paper is as follows. Section 2 provides a comparative framework by
examining some proposals regarding union behaviour, economic performance and industrial/labour
relations strategy. Section 3, on the changing economic environment and its effects on organized
labour in India, consists of two parts. The first part expounds the "four phases of unionism". The
second part deals with unionization and employment, union structure and density, wages and
working conditions, collective bargaining, industrial conflict, labour-management relations, inter-state variations, women workers and unionization, and the changing public perception of trade
unions. The concluding section comments on the future role of trade unions in India, with a focus
on organizing non-unionized workers.
2. Contrasting views on trade unions as institutions
Freeman and Medoff (1984) examined the impact of unionism on the employment relationship in
the US economy, contrasting the "two faces of unionism": the "monopoly" versus the "collective
voice" view. These lead to a completely divergent analysis of the union as an economic and
political institution; the policy implications of the two views are therefore fundamentally
incompatible.
The first view analyses unions as large monopolies in the labour market whose basic objective
is to increase their members' wages above the market level by restricting labour supply. This
"wage mark-up" leads to a misallocation of human and capital resources, and is therefore not only
economically suboptimal, but may also be socially undesirable in that it leads to greater
inequalities within the workforce. In addition, strikes of all kinds impose an easily measurable
loss on the economy. Finally, "union work rules", embedded in contract provisions often lower
the productivity of both labour and capital by creating inflexibilities at the workplace. While these
arguments typically emanate from free-market economists, social theorists who subscribe to this
view often characterize unions as undemocratic and crime-riddled institutions.
In sharp contrast, the collective voice view asserts that unions have positive economic, political
and social effects in pluralist democracies. The union's collective voice, determined by a "median
voter", provides management with information on workplace and shopfloor issues, acting as a
communication channel. This leads to the development and retention of specific skills, improves
worker morale, provides conditions that eliminate quitting, and enables the union to pressure
management to act fairly and efficiently in its daily operations. It is believed that unionized work
environments are more productive than comparable non-unionized environments. Finally, unions
are socially beneficial as they represent the interests of lower income groups and vulnerable
sections of society.
Using the above framework, Freeman and Medoff examine union effects on economic
efficiency and the distribution of income. They also examine the social nature of the union as an
institution of modern industrial society. Questions about economic efficiency usually relate to
whether unions enhance productivity through their collective voice or whether they block
technological change through "monopoly" routes, such as inflexible contract provisions. These
often compel employers to substitute capital for labour and to invest in better "quality" labour.
This leads to productivity growth only in the sectors concerned, at the cost of overall employment
growth in the economy. Questions relating to income distribution have to do with the effects of
unions on non-unionized and unorganized workers. That is, do unions have positive or negative
"spillover" effects on unorganized labour markets? Generally speaking, the higher the degree of
unionization in an economy, the greater are the positive spillover effects and the smaller the wage
inequalities within the workforce. Finally, the "monopoly" view holds that unions fight for their
own selfish interests at the expense of others, and blames their political lobbying for bureaucratic
and corrupt practices. The "collective voice" view sees unions as the economic and political
institutions of the weaker segments of society.
It is clear that the political charter of the "collective voice" is based on pluralistic democratic
principles, enlightened management and responsible trade unionism (Turnbull, 1991). The crucial
assumptions of the "collective voice" are the following: (a) political and industrial pluralism; (b)
interest group politics being played out in a multi-party regime of political liberalism; (c) a strong
belief in the efficiency and fairness of "regulated conflict"; (d) an efficient and fair procedural
environment, which implies the just implementation of unambiguous labour laws and a degree of
symmetry among adversaries' bargaining resources; and, finally (e) trust in neutral third-party
arbitration when confronted with a labour relations impasse. According to Williamson (1985, p.
241), "the institution of arbitration lies at the core of industrial pluralism". The basic premise of
pluralist bargaining is that interest group conflict approximates the public interest. This paper
explores the extent to which the assumptions and beliefs of pluralist industrial relations have
evolved in India as structural changes have taken place and the political economy has developed.
A comparative framework
It is now a truism that economic performance is related to the nature of labour market institutions
(see Horton et al., 1991; Nelson, 1991; Freeman, 1992; Buchele and Christiansen, 1992).
Economic performance here means controlling inflation and generating employment, which
implies productivity growth. In the world of unions and collective negotiations, the key variables
frequently cited as determining economic performance are: the level at which bargaining takes
place (plant, firm, industry/region, nation), and the nature of trade union structures.
Until at least the mid-1980s, the literature suggested that economies with a decentralized
bargaining structure (enterprise-based unions negotiating at plant and firm level, as in East Asian
countries, Japan and Switzerland) and economies with a centralized bargaining structure (national
agreements with centralized trade union federations, as in Austria, Norway and Sweden)
"performed" better than economies having industry-wide agreements with industry-wide unions,
as in the US and UK. Put another way, "collective voice" effects seem to be maximized in
centralized bargaining structures, whereas "monopoly" effects seem to be greatest at medium
levels of centralization. This is the famous "Calmfors-Driffil" relationship, based on the premise
that the extent of labour-management cooperation (or conflict) is determined by the degree of
centralization of the bargaining institutions. Its relevance to developing countries was examined
by Nelson (1991), the argument being that as centralized labour market institutions cannot easily
be replicated in these countries, decentralized labour institutions may be the most efficient
arrangement (see Horton et al., 1991). The whole debate on labour market flexibility and
globalization is concerned with the degree of decentralization of labour market institutions (see
for example, Katz, 1993).
While most commentators would agree that labour market flexibility is required for facilitating
economic restructuring, heated controversy surrounds the question of how this flexibility is to be
achieved. As transition will involve considerable social costs, what is to be the role of the state
and the trade union movement in managing this transition? The debate acquired particular
significance with the release of the World Bank World Development Report: Workers in an
integrating world (1995) and an ILO report: World Employment 1996-97 - National policies in
a global context.(Endnote 1) The World Bank Report hypothesizes increasing employment and labour
incomes with greater integration of nations into the global market, positing a reduced role of the
state in the labour market and expecting trade unions to be responsible and non-political. On the
other hand, the central message of the ILO Report is that state intervention with centralized
bargaining institutions can return economies to full employment policies, which it sees as the only
way to create jobs and better earnings opportunities (D' Souza, 1998).
Where does India fit in this comparative framework? The Indian economy represents a mix of
all three bargaining levels and a variety of union structures. In the private corporate sector, plant-level bargaining takes place with enterprise-based unions that may or may not be affiliated to
parliamentary political parties. In public-sector enterprises, centralized trade union federations
affiliated to political parties bargain with the state (as employer) at industry-and/or national-level.
Central and state government employees in the service sector (transport, postal services, banking
and insurance, police and firefighters, etc.) are usually represented by politically affiliated unions
bargaining at national and/or regional level. Most of these centralized bargaining and union
structures were stable during the period of planned industrialization while India pursued a policy
of import substitution. However, since the mid-1980s the economy has opened up to greater
domestic and international competition, and these structures have come under increasing pressure
to decentralize. These pressures have become stronger since the economic liberalization
programme was introduced in 1991, especially in the public sector. As in other countries, the state
has gradually retreated from its earlier role of creating permanent employment and regulating
union-management bargaining.
India has had mixed experience with creating labour institutions that are compatible with a
pluralist industrial relations model. In the early years, the government officially promoted
industrial pluralism and bilateral collective bargaining, but the institutions responsible for this
were largely controlled by the state. This "state-dominated" pluralism, coupled with ambiguous
labour laws regarding trade union recognition and "industrial disputes", eventually led to a
multiplicity of party-based trade unions. This considerably weakened the political power of the
organized labour movement as a whole, although in some strategic sites in the public sector
centralized unions had considerable bargaining strength. Although unions could impose severe
costs on key sectors of the economy, the organized labour movement as a whole was not strong
enough to impose a cooperative solution at national level. This is still true today.
With economic liberalization, competitive forces began to affect the structure of the union
movement. In several private enterprises, "independent" rank-and-file led unions came into
existence and engaged in informed and militant bargaining, often with multinational employers,
securing substantial wage and non-wage gains in the process. As these unions "traded off"
increased wages against employment growth, and as employers shifted to "outsourcing" from non-union sites, the traditional party-based unions found their potential recruitment terrain both
challenged and curtailed. More recently, since the liberalization process officially began in 1992,
many of these centralized party-based unions have united under a common front to resist
government attempts at privatization and decentralization in the public sector. However, the
organized labour movement as a comprehensive organization continues to face a fractured and
segmented constituency, divided by skill, region, industry and ethnicity. In addition, major labour
law reform continues as an unfinished (and forever postponed) agenda.
In terms of the "monopoly" versus the "collective voice" framework, the early years after
independence witnessed the state acting as the 'collective voice' of workers for the purpose of
rapid industrialization with minimum industrial strife. In so doing, the state minimized the
potential "monopoly" effects, wages and working conditions were administered rather than
decided through collective negotiations in the public sector. An implicit "incomes policy" kept
the "'union wage mark-up" in check. Over time, however, as both inter- and intra- industry
differentiation developed, especially within the private sector, other, more radical and militant,
union "voices" emerged that quite effectively began to challenge the state hold on the organized
labour movement. In the private sector, efficient productivity bargaining with informed unions
kept "monopoly" effects within the firm in check while "collective voice" effects increased.
However, in public sector enterprises and services, the union "voice" led to rigid and inflexible
contract provisions. With pay increases unrelated to improvements in productivity, union
"monopoly" effects intensified. There seems to be some agreement now among labour
commentators and researchers that (since at least the early 1980s) some segments of the organized
workforce made substantial wage and non-wage gains in the more profitable sectors of production.
The large majority of workers, however, continue to face increasing employment insecurity, if not
lower wage growth, both in declining industries in the formal sector and in the growing informal
sectors. With the onset of economic liberalization, these "negative union spillover" effects may
accentuate inequalities within the workforce. Clearly there is need for a concerted attempt by the
state and the organized labour movement to actively reverse these trends by levelling-up the labour
market institutions which affect the wages and working conditions of the unorganized.
3. The changing economic environment and its effects on organized labour in India
3. 1The four phases of unionism: An evolutionary approach
3.1.1 The first phase of unionism (1950 to mid-1960s)
The first phase of the (post-independence)(Endnote 2) Indian trade union movement generally corresponds
to the first three Five-Year Plans (1951-56, 1956-61, 1961-66), a period of "national capitalism".
A state-led industrialization policy with an import substitution strategy resulted in the formation
of large, employment-intensive public sector enterprises, mostly in the capital and intermediate
goods sectors. This massive development of the public sector aided the private corporate sector
in terms of supplying the necessary intermediate and capital goods (Desai, 1975). Between 1951
and 1965, industrial production increased at an average annual rate of 7.7 per cent, and
manufacturing output increased at the rate of 7.6 per cent (Nayyar, 1981). High growth rates were
sustained by public investment in capital and intermediate goods, while growth in consumer
durables slowed down. Rigid import-substitution policies guaranteed the domestic market and
stimulated private sector investment (Patnaik and Rao, 1977).
The expansion of large public enterprises led to employment growth in the formal economy,
mainly in such enterprises, but also in the private sector, notably in services, transport and
education. Average employment growth increased rapidly from around 0.4 per cent per annum
from 1951 to 1956 to around 2 per cent per annum from 1961 to 1966 (Papola, 1994). Public
sector employment quite naturally led to public sector unionism. The number of registered trade
unions increased from 4,623 in 1951/52 to 11,614 in 1961/62; membership in the registered unions
that submitted returns more than tripled during this period (Venkataratnam, 1996).(Endnote 3)
The communist-led All India Trade Union Congress (AITUC) had dominated the organized
labour movement since before independence (for example, in the textile and engineering industries
of Mumbai, Calcutta, Kanpur). The growing public sector now provided a new terrain for large-
scale unionization. It is here that the Congress Party-controlled Indian National Trade Union
Congress (INTUC) made early inroads. Unlike the AITUC, which rose from the rank and file, the
INTUC was imposed on the labour movement from the outside. There were no ambiguities in the
chain of command from party to union. As (the then) Prime Minister Nehru stated (Chatterjee,
1980, p. 152):
It goes without saying that the INTUC has been sponsored and nursed mostly by Congressmen and
derives its strength from the moral and other support of the Congress…….…it is imperative that in
all political matters all Congressmen working in the INTUC should treat the Congress as its
supreme body and abide by its code of conduct.
Myron Weiner's (1962, p. 78) observation of the INTUC leadership was succinct: "Their
loyalties are to the Congress Party, then to the present (Congress) government, to the nation and
last of all to the workers who belong to their unions." When confronted with a choice between
the patronage of the ruling party and genuine worker support, the INTUC usually opted for the
former (Chatterjee, 1980). Since chief ministers, labour commissioners, registrars of trade unions,
inspectors, conciliators, tribunal officials, magistrates, police officers and all other officials who
dealt with unions (during this first phase) were appointed by the Congress government,
management officials were often requested or pressured to assist INTUC unions to establish
themselves or defeat rival unions (Kennedy, 1966).
This relationship between the state (i.e. ruling government) and its affiliated trade union
federation during the first phase of unionism seems to have tied in neatly with the provisions of
the Industrial Disputes Act (IDA) of 1947 which, according to Datta Chaudhuri (1996, p. 12), is
"the single most important piece of legislation between the worker and his employer". The Act
makes no provision for procedures to determine the representative union in what would normally
be a single bargaining unit, and as employers were under no legal obligation to bargain with
unions, there were no built-in incentives for either party to engage in collective bargaining. Early
writings on Indian industrial relations consistently pointed to this aspect of the Industrial Disputes
Act and the way in which it impeded collective bargaining during this period (Kennedy, 1966;
Punekar, 1966). Coupled with this was the Indian Trade Union Act of 1926; the Act allowed any
seven workers to register their trade union, but made no provision for union recognition (e.g.
through a "secret ballot" procedure). While the opposition unions were for a "secret ballot" to
determine union strength, the INTUC was against it, favouring instead the "check-off" system of
membership receipts, a system that could easily be manipulated.(Endnote 4)
The Industrial Disputes Act also made it very difficult for the unions to call a "legal" strike.
Most disputes were first referred to conciliation, then to the labour commissioner. If this solution
failed, the dispute was usually settled in an industrial or labour court, or occasionally through
binding arbitration (Kennedy, 1966).
During the late 1950s, however, some attempts were made to introduce labour legislation
promoting genuine collective bargaining through voluntary arrangements such as the Code of
Discipline and the inter-union Code of Conduct (Venkataratnam, 1996). If these arrangements
were made legally binding on the parties, the question of determining the representative union in
a single bargaining unit might have been solved for good. Effective dispute resolution through
voluntary arbitration was also suggested. Various bills were drafted and debated at several
tripartite forums, but none were enacted (Kennedy, 1966). Further, the proposed Trade Unions
and Labour Relations Bills were ultimately vetoed by the executive branch of the government.
These are known as the "Giri Approach",(Endnote 5)
after the Labour Minister who resigned in protest, and
many commentators see this as a major setback to the development of a mature industrial relations
system (Ramaswamy, 1984). In more contemporary language, it may have been a strategic
mistake: one can only imagine how the industrial relations system would have developed if the
"Giri Approach" had been adopted.
State intervention in the determination of wages and working conditions was the norm during
the first phase; wages were determined by political and institutional considerations (Myers, 1958;
Fonseca, 1964; Jackson, 1972). The structure of bargaining was very centralized, usually at
national level, but at industry level in some regions (e.g. Mumbai textiles). In a few cases private-
sector bargaining was at enterprise level. Wage determination during this first phase was known
at the time as "tripartism" and "political bargaining".
In terms of the movement of real wages of industrial workers during this first phase, India was
held out as an example of the Lewis model of growth at work, with both product and consumption
wage growing slower than labour productivity (Jackson, 1972). Low unionization, inter-union
rivalries sharpened by political affiliation, excess supply of labour and state intervention of a
complex and peculiar type contributed to a wage lag (Deshpande, 1992). As the famous Report
of the National Commission on Labour (1969), examining the real wages of industrial workers for
the period 1951-64, stated: "increases in money wages of industrial workers since Independence
have not been associated with a rise in real wages nor have real wage increases been
commensurate with improvements in productivity". The labour relations regime promoted
"responsible unionism" subject to maintaining industrial peace (Johri, 1967). Both the number
of strikes and the number of workers involved in strikes during the first phase were significantly
lower than during the second phase and beyond (Johri, 1967; Sengupta, 1992). By the end of the
first phase of unionism, further splits had occurred in the labour movement: the Socialists broke
away from the Congress and formed their own trade union federation, the Hind Mazdoor Sabha
(HMS), and during the Indo-Chinese conflict, the radicals broke away from the Communist Party
of India and formed the Communist Party of India (Marxist) which generated its own trade union,
the Centre of Indian Trade Unions (CITU).
Commentary
The first phase of unionism represented a period of state-driven industrialization that possibly
required the government to guide or control the labour movement. At enterprise level, the capital-labour relationship was dominated by a paternalistic labour relations system based on the belief
that the state knew more about workers' needs than they did themselves. In this way, the state
appropriated the various "union voices" for the "collective" purpose of rapid industrialization with
minimum industrial strife. In public sector enterprises and services, internal labour markets(Endnote 6)
generated social harmony and a feeling of belonging.
Given the large number of statutes governing the terms and general conditions of employment(Endnote 7)
it is clear that the state attempted to execute the "idea of a national minimum". However, freedom
to contract between capital and labour was restricted and mediated through the state. In addition,
the idea of planned and rapid industrialization possibly excluded the basic premise of mature
industrial pluralism, i.e. the belief that "regulated conflict" can be both productive to the economy
and fair to the involved parties.
During this first phase of unionism, few strategic choices were open to unions or to employers
as labour relations outcomes were over-determined by the state. The institutional structures that
facilitate efficient collective bargaining remained underdeveloped. Government attempts at
developing participatory choices at the small group level, through its legislated Work Committees
(1947) and later through Joint Management Councils (1958), received at best a lukewarm response
from management and unions (Venkataratnam, 1996).
During this first phase, union "voice" effects were probably larger than "monopoly" effects,
as both unionization and employment in the organized sector increased significantly (see tables
1 and 2). In addition, given a phenomenal rise in the number of registered trade unions during this
phase, one could argue that there were positive union spillover effects to previously unorganized
sectors.
3.1.2 The second phase of unionism (mid-1960s to 1979)
The second phase of unionism more or less corresponds with the Annual Plans for 1967-69, the
Fourth (1969-74) and Fifth (1974-79) Five-Year Plans. "The rate of inflation rose above the
politically sensitive danger-mark of 10 per cent in 1966/67 and 1967/68, and food price inflation
was even higher (around 20 per cent)" (Joshi and Little, 1994, p. 48). Inflation worsened in
1973/74 and there were food riots in various states. The period is associated with industrial
stagnation (Nayyar, 1981). Thus, between 1965 and 1975, the average annual rate of growth in
total industrial production and in manufacturing output increased at only 3.6 per cent and 3.1 per
cent respectively (Nayyar, 1981). Political economists have posited various explanations for this
slowdown: the deceleration in public investment (Raj, 1976; Vaidyanathan, 1977; Patnaik and
Rao, 1977), the unequal terms of trade between agriculture and industry (Mitra, 1977), the
inefficiencies of state regulation in the public sector (Bhagwati and Srinivasan, 1975), and changes
in the structure of demand resulting from growing income inequalities (Nayyar, 1981).(Endnote 8)
In
addition, the economy suffered oil price shocks in 1973 and in 1978. During this phase, especially
during the Fourth and Fifth Five-Year Plans, actual growth rates for industrial production were far
below plan targets (Ahluwalia, 1991, p. 11). It is quite clear that the deceleration adversely
affected the level of employment in the economy as a whole.
Structural changes in the economy obviously had an effect on union activity, collective
bargaining practices, industrial labour markets, and labour relations in general. There was a
dramatic increase in the number of disputes (strikes and lockouts), the number of workers involved
and the number of workdays lost between 1966 and 1974 (Sengupta, 1992). New forms of
protest, such as the "hartal" (go-slow), often resulting in considerable violence, emerged during
this second phase. In certain regions, such as West Bengal, these were used quite frequently and
effectively, leading to a significant outflow of capital to other parts of the country.
Disillusionment with the INTUC's internal practices and its ineffectiveness at enterprise level
led to a proliferation of unions affiliated to other, more radical, political organizations during the
first part of this second phase. Workers sought more skilled politicians and negotiators to lead
their struggles. The relationship between the rank and file and outside leadership in the non-INTUC unions could be characterized, to use Holmstrom's (1984, p. 289) phrase, as "a transaction
between the membership and a politician known as a good negotiator". Two demographic factors
may be associated with this change in worker preferences: a) a growing proportion of workers
were young people who had not participated in the pre-independence labour struggles; and b)
(probably more important), the leaders of the radical unions at this time were mostly not party
politicians but committed lawyers and student activists well-versed in the bureaucratic rites of the
Indian industrial relations system (Chatterjee, 1980). An analysis of industrial disputes by "union-type" revealed that the number of disputes involving two or more central trade union federations
increased between 1966 and 1973 compared to the first phase (Bhattacherjee, 1987a, p. 57),
reflecting a period of intense inter-union rivalry. Uncertainties within the organized labour
movement finally culminated in the all-India May 1974 railway workers' strike that shook the
economy and the country.
During Mrs. Gandhi's Emergency Regime of 1975 to 1977 the right to strike was suspended,
and this is clearly reflected in time-series strike data (Sengupta, 1992). In addition, the emergency
regime pre-empted bargaining on key issues, froze wage increases, reduced the minimum annual
bonus from 8.3 per cent to 4 per cent, and transferred increments in the cost-of-living allowance
to a compulsory savings scheme (Rudolph and Rudolph, 1987). Two important interventions took
place during this regime. The first was an attempt by the government to establish the National
Apex Body, composed of 12 trade union federations and 11 employer representatives, in order to
encourage a bipartite approach to industrial relations (as opposed to the earlier tripartite approach).
On the surface this seemed more responsive to trade union preferences for voluntary collective
bargaining, but this was not the case.
The second intervention was the 1976 amendment to the Industrial Disputes Act, that arose
either from trade union pressure (unlikely during the Emergency!) or as a populist measure, which
led to employment inflexibility: firms employing more than 300 workers had to get (state)
government permission before they could lay off workers. Needless to say, government permission
was seldom forthcoming. However, this apparently pro-union measure had an unexpected (at the
time) effect: for the first time since independence, the number of workdays lost to lockouts
exceeded the number of days lost to strikes (Sengupta, 1992).
During the post-Emergency regime of the Janata government (1977-80),there was a qualitative
change in the political climate but not much rethinking in the industrial relations structure
(Sengupta, 1992). A government attempt to put forward an industrial relations bill banning strikes
and lockouts in essential industries and services met stiff opposition from most trade unions. The
bill was not passed (Sengupta, 1992). In 1977, the major central trade union organizations in
decreasing order of membership were the Indian National Trade Union Congress, the All India
Trade Union Congress, the Hind Mazdoor Sabha, and the Centre of Indian Trade Unions
(Bhattacherjee, 1987a).
The second phase of unionism saw significant changes in collective bargaining practices,. The
Industrial Disputes Act of 1947 did not provide for the compulsory recognition of a representative
union as the sole bargaining agent, nor did it encourage or compel parties to bargain in good faith;
more importantly, it gave no legal status to collective bargaining agreements. However, the 1965
amendment to the IDA gave a "higher legal footing" to agreements reached through conciliation
and adjudication. Patil (1982) describes how employers and unions have used the 1965
amendment to transform agreements into legal documents. First, there is a form of coalition
bargaining between multiple unions and employer in an enterprise so as to arrive at a satisfactory
settlement. Then conciliation is sought (not after the failure of direct negotiations as in the first
phase) in order to convert the agreement into a legally binding document. The terms of the
agreement are signed in the presence of the conciliation officer, making the contract legally
binding on all parties.
The states can add their own labour legislation to the central labour statutes, and in the early
1970s, Maharashtra, Gujerat, Rajasthan and Madhya Pradesh enacted laws on trade union
recognition. The Maharashtra Recognition of Trade Unions and Prevention of Unfair Labour
Practices Act became effective from 1975. Failure to bargain with the (now-defined)
representative union became an unfair labour practice under this Act. Its actual capacity to
penalize is, however, questionable (Deshpande, 1992).
In terms of wage dynamics in the urban labour markets, the second phase of unionism was
marked by significant changes as well. While the evidence suggested declining, or at best
stationary, real wages during the first phase of unionism, Madan (1977) pointed out that the data
used in earlier studies suffered from a serious downward-bias as they referred to a restricted
category of low-paid workers. Using wage data generated by the Annual Survey of Industries (all
workers) he found that the real wages of manufacturing workers had in fact increased since the
early 1970s; he also showed that the proportion of low-paid workers to all workers had declined
during the second phase. This hypothesis finds further support in the papers by Tulpule and Datta
(1988; 1989) who, using Annual Survey data for 1967-84, found evidence of substantial real wage
gains since the late 1970s, with substantial variations across industries.
It could be hypothesized that since the mid-1970s, segments within the union movement shifted
their goals from those of right to those of interest. This distinction roughly corresponds with the
value placed by unions on centralized lobbying (rights) vis-à-vis decentralized collective
bargaining (interests). Various factors conditioned such a shift and these became apparent during
the third phase of unionism; see below. Some of the key factors were: (a) uneven development
of firms within an industry, as well as increasing inter-industry differentiation, meant that some
sites were considerably more profitable than others. Unions in these sectors exploited the
increased "capacity to pay" during collective bargaining, while unions in the declining sectors had
no such opportunity; (b) workers and unions in the profitable sites were more aware of their firm's
financial performance through their informed bargaining practices and/or through management
willingness to share this information with unions, and (c) workers in these units realized that the
leaders of many traditional party-based unions were averse to intense decentralized bargaining,
because of their party commitments and their more national concerns.
These shifts and fractures within the organized labour movement had serious implications for
union strategies, especially in maintaining solidarity across the entire organized labour movement.
Specifically, it become increasingly difficult for the trade union movement in India to act as an "all
encompassing" organization, especially during the third phase of unionism. A rather pessimistic
variant of neo-institutional analysis of labour unions and collective action (Olson, 1971) can partly
explain the above difficulties. According to this "logic of collective action", the assumption of
rationality and self-interested behaviour on the part of individuals does not always lead to groups
acting in the (collective) interest. This is because of the "public goods" nature of this collective
interest: "though all of the members of the group therefore have a common interest in obtaining
this collective benefit, they have no common interest in paying the cost of providing that collective
good" (Olson, 1971, p. 21). In our context, the "cost" of obtaining collective benefits is different
for the various segments of the organized labour movement. To the extent that these "costs"
become similar across certain sectors with the onset of liberalization (especially in sectors facing
closure, privatization and restructuring), there will be fewer barriers to the trade union movement
acting as an all encompassing organization.
Commentary
The second phase reflected an objective crisis of accumulation in industry under the state-led
industrialization regime, and a subjective crisis of legitimacy of the "state pluralism" model in the
existing industrial relations system. This mode of regulation caused the organized labour
movement to split up. The unions of the left had alternate voices, and employers often found them
easier to deal with in spite of their greater militancy. The Emergency Regime represented a failed
attempt by the state to impose a Latin American-type of corporatism in labour-management
relations. Dissension occurred at the end of this second phase both within capital and labour. In
the growth sectors the labour-management relationship increasingly turned to an informed
decentralized bargaining mode, while in the declining sectors, the government and the large
centralized trade unions found themselves enmeshed in the "state pluralism" mode.
The analysis of Rudolph and Rudolph (1987, Ch. 10) illustrates the fact that "organized labour
has not been able to challenge India's centrist ideology and politics, that is, to mount or support
a left class party" (p. 259). These authors characterize the Indian industrial relations regime as one
of state domination and "involuted pluralism", using the term involution "as a metaphor for a
decline or loss of vigour that results from a replication of units whose increase in number is
accompanied by a decline in effectiveness" (p. 269). They refer to the multiplicity of trade unions:
in 1950/51 there were 2,002 registered trade unions, and in 1979 there were 10,021, while the
average size of unions increased only marginally (see table 2). According to Rudolph and
Rudolph, this "debilitating process" tends towards entropy, so that even though the number of
unions increases manifold, union density keeps falling.
One might argue that the silent changes that took place in collective bargaining practices in the
growth sectors of the economy represented attempts by both unions and capital to arrive at new
governance and institutional structures so as to minimize transaction costs. The fractionalization
of unions into smaller groups could then be interpreted as an efficient solution to organizing
workers in a changed economic environment. In the public sector sites, economic crises created
uncertainties in previously stable internal labour markets. In terms of industrial relations strategy,
employers and unions in a few sectors had some strategic choices at their disposal.
Towards the end of this phase it became apparent that there were troubling union "monopoly"
effects, especially in the public sector. Public sector and government employees received
considerable fringe benefits, whereas in the private sector, unions had to bargain hard for such
benefits in a competitive economic environment. Inflexible contract provisions, especially those
relating to deployment and retraining and to seniority rules, increased costs substantially in the
public sector. Overall, fractured union "voices" searched for a collective mode of expression as
this second phase of unionism witnessed more industrial strife than the other three phases both in
terms of the number of disputes and the number of workers involved (see table 3).
3.1.3 The third phase of unionism (1980-1991)
This phase corresponds to the Sixth (1980-85) and the Seventh (1985-90) Five-Year Plans, as well
as the two Annual Plans (1990-92). Average annual growth rates during this decade were about
5.7 per cent but employment grew at only around 1.8 per cent (Papola, 1994). Employment
elasticities in major sectors, especially in services, fell drastically during this time (Papola, 1994).
In terms of Joshi and Little's (1994) analysis, the third phase of unionism corresponds to two
distinct sub-periods: 1979/80 to 1984/85 and 1985/86 to 1990/91.(Endnote 9) During the first part, the
economy suffered from severe internal and external shocks: one of the worst droughts since
independence occurred in 1979, there was trouble in the northeast, an industrial recession in
1980/81, rising inflation and increasing oil bills. All this led to a balance of payments crisis and
then to a massive IMF loan. In May 1984, India terminated the programme after drawing SDR 3.9
billion (Joshi and Little, 1994, p. 60). This period was also turbulent on the political front with
Mrs. Gandhi's return to power in 1980, the assault on the Golden Temple in Amritsar, Mrs.
Ghandi's assassination in October 1984 and the landslide victory of the Congress Party with her
son Rajiv as Prime Minister.
The second part of this phase is associated with Rajiv Gandhi's economic liberalization
measures. The economy moved away from import substitution towards strategies that encouraged
export promotion and domestic competition. This was bought about by partial deregulation,
financial liberalization, exchange rate policy, taxation, and export incentives (Joshi and Little,
1994, p. 62).(Endnote 10) After 1988 the country experienced severe unrest. The 1990 Gulf crisis was
followed by economic recession and political turmoil.
India was now facing a full-scale macroeconomic crisis. "Agreement was reached with the IMF
in January 1991 on a loan of $1.8 billion, partly out of the Compensatory Financing Facility (to
offset increased oil imports) and partly as a first credit tranche standby" (Joshi and Little, 1994,
p. 66).
The macroeconomic changes during this phase had a profound effect on the political economy
of trade unionism and labour markets, as well as on the structure of industrial relations. On the
union front, this phase started with a massive public sector strike in Bangalore during 1980/81
which involved giant public enterprises such as Hindustan Machine Tools, Hindustan Aeronautics
Limited, Electronics Corporation of India, and Indian Telephone Industries.
The event that characterized the first part of this third phase was the famous, and much studied,
Mumbai textile strike of 1982 (see Patankar, 1981; Pendse, 1981; Bhattacherjee, 1988; 1989; Van
Wersch, 1992). This started as a wage and bonus issue in a few mills in late-1981, and soon
developed into an industry-wide stoppage that ultimately became the longest strike in post-independence labour history. The basic cause was disquiet among the rank and file about the 1947
Bombay Industrial Relations Act, which had imposed an industry-wide bargaining structure with
an unrepresentative union (affiliated to the Indian National Trade Union Congress) as the sole
bargaining agent of workers. As a result of the internal differentiation within the mills which took
place during the 1970s, workers wanted more control over their labour market- and industrial
relations outcomes at the level of the individual mill. They approached Dr. Datta Samant to lead
their struggle: his main project was to form and lead an "independent" trade union movement in
Western India.
The textile strike ended in a whimper late in 1983: many workers returned to their villages, their
lives ruined, employers restructured their mills in the advanced textile sector, and the credibility
of the government-installed union in the industry declined to levels from which it could never
recover (Bhattacherjee, 1988). Evidence from the immediate post-strike period seems to suggest
that workers and unions, at least in the profitable mills, negotiated their own decentralized
bargaining agreements (Bhattacherjee, 1989; Van Wersch, 1992). After Datta Samant formed the
Kamgar Aghadi Party and won a few seats in Parliament in 1984, many commentators felt that
this was a new and encouraging beginning for the organized labour movement in India.(Endnote 11)
Another important feature of this third phase was the proliferation of "independent" unions
operating in the major industrial centres and competing with the traditional party-affiliated trade
unions (both of the Congress and of the Left). In Mumbai, for example, the decline of the Left
unions is partly attributable to their general opposition to intense decentralized bargaining (Pendse,
1981). Segmented and uneven developments in the industrial sector tied workers' earnings to the
fortunes of the plant in which they were employed. An analysis of plant-level contracts from the
Greater Mumbai-Thane industrial corridor revealed that, ceteris paribus, the "independent" unions
delivered a higher wage and fringe package than did the affiliated unions at the beginning of this
third phase (Bhattacherjee, 1987b). In a number of multinationals, it was found that workers with
their "independent" unions exerted considerable control over the labour relations process, often
more than their counterparts in the host country (see the example of Phillips in Banaji and
Hensman, 1990).
In the late 1970s there was a phenomenal rise in the number of disputes led by unaffiliated
unions and the importance of politically affiliated unions declined (Bhattacherjee, 1987a, p. 57).
The ratio of registered unions that submit returns about their membership size to the total number
of registered unions fell sharply from 60 per cent in 1962 to 21 per cent in 1974 to 13 per cent in
1982 (Bhattacherjee and Datta Chaudhuri, 1994a, p. 70). This would support the hypothesis of the
rise of "independent" unionism, if the total number of registered unions that submit returns proxies
the traditional party-affiliated trade unions.(Endnote 12) By 1989 the Labour Ministry listed the following
union organizations in their registry: Indian National Trade Union Congress, All India Trade
Union Congress, Centre of Indian Trade Unions, Hind Mazdoor Singh, the Bharatiya Mazdoor
Sabha (BMS, affiliated to the BJP), the Hind Mazdoor Kamgar Party, United Trade Union
Congress (UTUC), United Trade Union Congress Lenin Sarani, National Labour Organization,
and a number of small independent unions.
Finally, this phase was marked by increasing inter-regional, inter-state, and inter-city variations
in the nature of labour-management relations.(Endnote 13)
In a study of Bombay, Calcutta, Madras and
Bangalore, Ramaswamy (1988) points to significant inter-city differences in the texture of labour-management relationships. He writes (1988, p.17): "The driving force of the Bombay labour
movement are union leaders who disclaim allegiance to political parties and their trade union
federations. What we find here is the most evolved Indian version of business trade unionism", and
"the city has witnessed the steady decline, if not eclipse into oblivion, of ideological trade
unionism". This clearly has something to do with the fact that private and multinational firms
dominate Mumbai's urban economy. As Ramaswamy puts it: "there is an organic linkage between
the buccaneering spirit of Mumbai unions and the eclecticism and adaptability of private
enterprise".
In sharp contrast is the case of Calcutta, where a highly politicized industrial relations regime
prevails with the dominant trade union federation (the CITU) under the close watch of the
dominant political party (the CPI-M). This has created considerable inflexibilities for management,
and has partly prohibited the growth of independent trade unionism. Bangalore, a city where both
private and public sector enterprises thrive, especially those in the information technology
industry, has witnessed the rise of plant and firm-based unions (as in Mumbai). Inter-city
differences, attributable no doubt to different political, social, and urban histories, emphatically
suggest the inherent difficulties in trying to generalize about an "Indian" labour relations system.
With the passing of time, especially with the onset of the fourth phase (see below), attempts at this
kind of generalization will become more and more difficult.
Changes in union structure, together with macroeconomic developments, considerably affected
both employment and the wage structure. Between 1980/81 and 1988/89, while employment
growth declined, the capital-labour ratio and labour productivity increased by 8 per cent and 7.5
per cent per year respectively (Ahluwalia, 1992). According to Ghose (1992, p. 95), "The most
striking fact is that the 80s have been the best decade in terms of economic growth but the worst
decade in terms of employment generation". Moreover, employment growth decelerated in all
sectors of the economy and open unemployment increased in the 1980s (Ghose, 1992). The search
for labour market flexibility in Indian manufacturing led labour-intensive firms and those engaged
in the production of consumer non-durables to subcontract and outsource their production to the
unorganized sectors (Ramaswamy, 1999).
Unions in the organized and more profitable sectors (often "independent" unions), managed
to secure part of these productivity increases through militant bargaining and/or through
productivity bargains that contained effective incentive structures. This resulted in slower
employment growth. In the relatively unorganized and less profitable sites, workers and unions
lost out. While formal sector employment as a percentage of total employment in manufacturing
fell from 24.5 per cent in 1972/73 to 17.4 per cent in 1987/88, real wages of workers and "other
employees" in organized manufacturing increased at a rate of 5.8 per cent and 4.1 per cent between
1983 and 1986 respectively, whereas low-paid workers suffered declining real wages (Ghose,
1992, p. 97). As the union wage effect increased significantly in the profitable sites (especially
in consumer non-durables) during this phase, employers cut back on hiring and started
retrenchment, increasing the capital-labour ratio which in turn increased labour productivity.
Thus, according to this scenario, the faster growth of real wages in the 1980s played a role in
slowing employment creation (Ahluwalia, 1992).
Bhattacherjee and Datta Chaudhuri (1994b) found that: (a) in the high-paid sector, real wages
increased after the late 1970s and there were wage returns from striking, (b) in the low-paid sector,
real wages declined after the early 1980s, and employers could lower wages by imposing lockouts;
and (c) in terms of union structure, low-paid workers gain as unions submitting returns (proxy for
traditional unions) increase their dominance within the union movement, whereas, high paid
workers gain as registered unions not submitting returns (proxy for plant-specific unions) increase
their dominance. The traditional unions predominant in the older industries provided overall
protection to their members as long as these industries grew. As they declined, and as plant-specific unions reaped returns in the high-paid sector, workers in the low-paid sector "became
more vulnerable to competitive forces and could no longer count on the traditional 'wage-welfare'
functions provided by the party-based unions. Workers in this segment will find it difficult to form
strong plant-specific unions due to increasing instability in their product markets" (Bhattacherjee
and Datta Chaudhuri, 1994b, p. 459).(Endnote 14)
Jose (1992) examined earnings, employment, and productivity trends for 19 industry groups for
the period 1970/71 to 1987/88. His findings were: (a) whereas the 1970s are associated with
employment growth in both high and low wage sectors and with stagnant and even declining
productivity levels, the 1980s are associated with slower employment growth with rising
productivity levels, especially in the high wage sectors; (b) higher productivity brought about the
(modest 2-3 per cent per year) increase in real earnings in the high-wage sectors. These findings
seem to fit with the characterization of different types of union dominating these two labour
markets since the early 1980s. Jose (1992) maintains that technological change led to the rise in
wages and productivity, whereas subsequent analysts inverted the hypothesis to argue that union
militancy and higher wages resulted in technological change that subsequently led to a decline in
employment.
Labour researchers towards the end of this third phase focused on employment inflexibilities
embedded in the Industrial Disputes Act (see Mathur, 1992). The 1982 amendment of the
Industrial Disputes Act provided that a firm employing more than 100 workers (reduced from
>300) needed permission from the state government to lay-off or retrench workers. Fallon and
Lucas (1991) showed how employment would have been higher in several sectors without the
1976 and 1982 amendments. Mathur (1992) recommended that the sections pertaining to
permission for lay-off, retrenchment or closure be deleted from the Act.
To remedy the limitations of the Industrial Disputes Act and the Trade Union Act, from both
the union and the employer point of view, a number of changes were proposed in the Trade Unions
and Industrial Disputes (Amendment) Bill, 1988 (Mathur, 1992). The proposed changes would
reduce the fragmentation and multiplicity of unions, clearly define the bargaining agent by
providing for a secret ballot, promote internal leadership, create state-level industrial tribunals,
force employers to set up comprehensive bargaining councils to facilitate internal grievance
settlement, and so on. After considerable debate however the bill was rejected because of
controversy over the definition of "industry" (Mathur, 1992, p. 50).
Commentary
The "independent" unions arose in Western India from within the rank and file, throwing up their
own shopfloor leaders, and initially encountering considerable hostility from management due to
their militant bargaining strategies.These unions arose primarily as a result of dissatisfaction with
the bargaining weakness of the traditional unions at enterprise level.
One way to distinguish between unions is to look at the arguments which they emphasize at
micro level (Bhattacherjee and Datta Chaudhuri, 1994b). Given the level of demand for organized
labour, unions, like employers, face a wage-employment trade-off during contract negotiations.
The situation that prevailed during the third phase, and continues to prevail, can be described in
the following way. There are two types of union: those that are "altruistic" and those that are
"selfish". Given a choice between wage increases and an increase in employment, the "altruistic"
unions choose the latter, as membership is the crucial argument to be maximized; consequently,
their bargaining strength is positively related to their size. The large and established national trade
union federations that are typically affiliated to political parties, display this type of union
behaviour. On the other hand, "selfish" unions are interested in maximizing the wages of those
already employed in a particular enterprise, and confronted with the trade-off, they opt for wage
increases. In this case, small is powerful. The so-called "independent" unions seem to
approximate the latter. It is clear why the "selfish" unions would be more likely to sign
productivity bargains than the "altruistic" unions; for the latter, productivity bargains cut at the
source of their strength, i.e., growing union membership. While at micro level, in profitable sites,
bilateral collective bargaining with "selfish" unions seems to have generated efficient and
cooperative outcomes, at macro level, the trade union "movement" in a democracy has to be an
all-encompassing organization. Here lies the difficulty in formulating a fair but efficient industrial
relations policy: what is efficient at the micro level is not fair at the macro level (Bhattacherjee,
1996).
In terms of the "monopoly versus collective voice" framework, labour market evidence from
the third phase of unionism seems to suggest that some monopoly effects dominated the collective
voice, and that the proliferation of "selfish" unions and their microeconomic success may have had
a negative effect on unorganized labour markets. In the private corporate sector, firms attempted
"efficiency wage" strategies, usually with the cooperation of unions, but often changing the nature
of plant or firm-level unions in the process. In public-sector internal labour markets, unions often
became involved in unproductive activities while managing these enterprises. The importance of
concepts such as internal governance structures of trade unions and their effects on efficiency and
fairness became increasingly relevant during this phase of unionism.
In terms of industrial relations strategy, the actors had more options than before and one could
even suggest that some segments operated their own strategy, insulated from outside forces. Thus,
effective "gainsharing" resulted from efficient bargaining in some sectors, whereas in the
unorganized sectors, a free market regime prevailed. Once more, attempts at serious reform of
industrial relations law came to a predictable grinding halt.(Endnote 15)
3.1.4 The fourth phase of unionism (1992-2000)
In June 1991, the ruling minority government decided to adopt the World Bank-IMF stabilization
and structural adjustment programme.(Endnote 16)
"In July 1991 the rupee was devalued twice, quotas on
the import of intermediate and capital goods were reduced, tariffs were brought down, the state
monopoly on exports and imports was ended and a statement on industrial policy was presented
along with the Union Budget, which was aimed at reducing the fiscal deficit by two and a half
percentage points" (Mathur, 1993, p. 333). The fourth phase of unionism more or less corresponds
to the Eighth (1992-97) and the Ninth (1997-2002) Five-Year Plans.
According to Nagaraj (1997, p. 2870) "On average, the Indian economy grew at 5.3 per cent
during the first five years of the reforms (1992-96), compared to 5.9 per cent during 1986-91".
The tertiary sector grew fastest in the 1990s, at about 6.8 per cent per year. The economy has
become considerably more "open" than ever before. There was some apprehension that
government expenditure in the social sector would decline significantly, but Nagaraj (1997) found
that social spending, averaged over four years since the reforms, did not suffer; most of the cuts
made in defense and economic services. Again, contrary to expectations, investment performance
in India actually improved after the reforms, with private corporate business emerging as the
economy's "leading sector". However, in terms of industrial growth performance, "the
manufacturing growth rate since the reforms is lower and its composition is uneven" (1997, p.
2875). Even though public investment had witnessed deep cuts since the reform, "public sector
output growth and profitability improved" suggesting better resource utilization. Nagaraj
concludes: "In sum, the good news (so far) is that there is no major, unqualified, bad news".
Transnational corporations, as expected, have reacted very favourably to the new economic
policy. Chaudhuri (1995) examines the mechanisms through which transnational corporations have
achieved entry and growth: through the ousting of Indian partners, through extensive mergers and
acquisitions, and through expansion and fresh entry. The gross inflow of foreign direct investment
rose from Rs.5.3 billion in 1991 to Rs.141.9 billion in 1994 (US$1 is approximately Rs.0.44), and
although Chaudhuri is sceptical about the prospects of this investment leading to export-oriented
growth in India, it is expected to generate some employment.
If the 1995-96 period was a slowdown, and 1996-97 was a year of "industrial recession and
political uncertainty", the year 1997-98 can be described as an "elusive economic recovery" with
a "hesitant government".(Endnote 17) A whole range of issues on the economic reform agenda remain
incomplete: infrastructure development, greater transparency in investment procedures, restoration
of business confidence, review of import duties, further banking sector reforms, and most
important, public sector and labour market reforms.
The available data seem to suggest that economic reform has led to an increase in rural poverty
and a decline in urban poverty; in fact, urban poverty was lower in 1993-94 than in any pre-reform
year (Sen, 1996). Deshpande and Deshpande (1996) found that although the initial stabilization
years "took some toll of organized manufacturing employment", subsequent structural adjustment
led to employment growth at around 2.3 per cent between 1992/93 and 1994/95. If this rate
continues for the next few years, "employment in the factory sector would be about 12 per cent
higher at the turn of the century than in 1990/91" (1996, p. 18). In terms of the structure of
employment, these authors found that in some sectors the employment share increased after the
reforms (textiles, transport equipment, chemicals, beverages, metal products) while in others the
employment share decreased (machinery).
Mundle (1992) presented employment and unemployment projections under "high" and "low"
growth scenarios taking into account employment elasticities and labour force participation rates.
Even under the most optimistic scenario in the private sector, given declining employment
elasticities in organized manufacturing and the unlikely expansion of employment in the public
sector, it is quite evident that a "large majority of the nearly 80 million persons who will join the
labour force during 1999-2000 will have to find work as self-employed or casual workers" (Visaria
and Minhas, 1991, p. 978). In terms of the impact of economic reforms on women workers,
Deshpande and Deshpande (1992) believe that female unemployment may go down but the
openings available will be low-wage jobs in secondary labour markets. In the light of the above,
it seems imperative to expand the existing public employment schemes. However, the most
appropriate strategy for a predominantly agrarian economy such as India must be to raise labour
force participation rates and shift the workforce away from agriculture into more productive
sectors so as to generate large economy-wide productivity gains (Bhaduri, 1993).
One of the main objectives of the economic reform package is the restructuring of unprofitable
public sector enterprises.(Endnote 18) These enterprises are free to reduce their workforce through voluntary
retirement schemes (VRS) assisted by the national renewal fund (NRF) instituted by the
government, and by amendments to the Sick Industrial Companies Act 1985. The strengthening
of the Board for Industrial and Financial Reconstruction considerably facilitated this process
(Mathur, 1993). The objectives of the NRF were to provide assistance to cover the costs of
retraining and redeployment made necessary by modernization, technological upgrading, industrial
restructuring, and possible closure. In 1993-94, Rupees 7 billion (US$1 = approx. Rs0.44) were
allocated to the VRS in the central public sector enterprises; nearly Rupees 4.9 billion was
allocated to the textile sector alone (Muralidhar, 1993).
While recruitment was all but frozen (especially at lower levels), the government also froze the
centralized wage bargaining process for a few years after 1992. It later opened the negotiation
process and attempted to decentralize bargaining by announcing that any wage increases would
have to be absorbed by the specific enterprise as these could no longer be passed on to the final
price. In other words, the new policy clearly stated that any additional wage burden would not
receive budgetary support (Venkataratnam, 1996).
The need for tripartite consultation was clearly felt during the early years and many meetings
took place. Mathur (1993) documents the experience of consultation during the early phase of
structural adjustment in India (1990-92), and suggests that although the government partly diffused
possible tension through its consultative approach, unions had "serious misgivings about the
adequacy of consultation at (the) industrial or enterprise level" (p. 344).
Labour commentators have found that the centralized and traditional union structures often fall
short of worker expectations, and in many instances, they are giving way to independent and
decentralized union structures (Davala, 1992; Muralidhar, 1994). However, this (current) fourth
phase has witnessed the growth of the Bharatiya Mazdoor Sangh, affiliated to the Bharatiya Janata
Party. In the state of Maharashtra, the trade union movement has become quite volatile since the
locally based Shiv Sena party and its affiliated union, the Bharatiya Mazdoor Sena, made deep
inroads.
During this phase the public has become acutely aware (largely through the print and visual
media) that trade unions represent a declining "sectional interest group". Bhaduri and Nayyar
(1996, p. 139) point this out in no uncertain terms: "The government also needs to protect
consumers against sectional interests of many unrepresentative trade unions. While the trade
union rights of workers must also be respected in any democracy, the government must also
ensure, perhaps through secret ballot, that no unrepresentative union harasses ordinary
consumers". They go on to add: "…recognition of workers' rights must go with appropriate
regulations for recognizing these rights. All such rules of the game need to be set transparently,
and without partisanship".
On 10 January 1999 the government announced the second National Labour Commission (the
first NLC was set up 30 years ago). The terms of reference lay down that the commission should
suggest rationalization of existing labour laws in the organized sector and recommend umbrella
legislation to ensure minimum protection for unorganized workers. The commission has a two-year term and is made up of representatives from government, trade unions and industry. Trade
unions feel that workers have little protection from the whims of errant management, and that any
alteration in the law would only add to managerial power. For example, the proposal to relax the
law on contract labour in order to generate more jobs on contract for the unorganized sector is
interpreted by the unions as a move to undercut permanent unionized jobs. More recently,
proposed changes in the Industrial Disputes Act will make it difficult for trade unions to call
wildcat strikes and the amendments will dilute the need for employers to have government
approval for a lockout. On the other hand, they give the tribunals more power to penalize errant
employers.
The present government dissolved the National Renewal Fund and entrusted the corpus to the
Ministry of Industry. The money in the fund will now be given to public sector enterprises directly
by the Ministry. The government hopes to monitor the use of funds more effectively by not
involving the administrative departments that control these enterprises. More recently, the
government has announced that it will develop a comprehensive strategy to deal with unprofitable
public enterprises and "hammer out a mechanism which makes it easier to close chronically sick
units". Officials in the Ministry of Finance announced that more funds have to be pumped into
the voluntary retirement schemes so that workers can be retrained and redeployed in viable public
sector units.(Endnote 19)
Commentary
In terms of labour market and industrial relations reforms, the continuation of economic
liberalization would undoubtedly lead to more employment flexibility, greater decentralization in
bargaining structures (especially in public enterprises) and hence less government intervention in
the bargaining process, fewer strikes, and a possible halt to the fragmentation of the union
movement. On the positive side, this could mean more employment and a more effective union
voice at both micro- and macro-level, with industrial pluralism being strengthened. On the
negative side, the proposed reforms could increase managerial power and accelerate the growth
of the non-union sector, leading to a decline in the power of organized labour. At microeconomic
level, unions of all political hues are cooperating with management in the restructuring process
(often because they have no choice). However, at the macro-level, the organized labour movement
is generally extremely critical of globalization and reform. From a strategic viewpoint, trade union
federations of different political affiliations will have to forge a united front at the macro-level to
ensure their continuing growth as "all-encompassing" organizations. This means organizing non-union workers.
Differences within the centralized trade unions, political parties, and state governments have
indefinitely delayed the passage of industrial relations reforms. The lack of consensus and
political instability at the centre since 1992 (several coalition governments have failed to complete
their full term), mean a lack of political will to carry out these reforms. A worrying consequence
of the inability to reach a national consensus on labour market reform is the future effect on
regional labour markets and labour relations in general of heightened inter-state competition to
attract foreign and local capital. In the absence of national reforms, various states may attempt to
level down their labour market institutions by offering incentives to investment. The latter will
have a profound effect on regional variations in labour standards. As these divergent trends will
make it increasingly difficult for the centralized trade union federations to act at national level, it
is in their immediate interest to press for industrial relations reform.
3.2 The issues
The above discussion on the four phases of Indian trade unionism sketched out the interaction
between changes in the overall economy and their effects on the labour market and on industrial
relations. In this section we examine several issues that arise from the discussion and speculate
on trends in the near future. These issues are: unionization and employment; union structure and
union density; wages and working conditions; collective bargaining; industrial conflict; labour-management relations; inter-state variations; unionization and women workers; and the changing
public perception of trade unions.
3.2.1 Unionization and employment
Declining employment elasticities imply that more output is attained with less employment. This
could be due to the fact that employers are investing in more capital-intensive technologies, and
that there has been a considerable amount of labour shedding in the private and public-sector
enterprises since the mid-1980s. Unions can affect these employment elasticities by resisting
technological change that increases the possibility of substituting between capital and labour and
by limiting the availability of goods and services that compete with the output of unionized firms.
In addition, union bargaining power varies indirectly with labour's share in total costs: unions are
more powerful in relatively more capital-intensive firms and industries, as the demand for labour
is relatively inelastic compared to labour-intensive sectors. Employers in capital-intensive firms
find it much easier to meet union wage demands compared to employers in labour-intensive firms.
Finally, it is in the interest of unions to raise the price of other inputs, particularly non-union
labour, as this increases the cost of switching from union to non-union labour (see Borjas, 1996,
pp. 126-127).
To illustrate the usefulness of the above, consider the following. In the current scenario, labour
and unions in the more labour-intensive sectors in India face considerably more uncertain and
insecure times than their counterparts in more capital-intensive sectors. Several firms in the textile
and jute industries are near closure. On the other hand, the majority of plant-based "independent"
unions are located in more capital-intensive industries, and union bargaining power in several
public sector sites (such as transportation and banking) is high due to its specific market
characteristics defined by state monopoly. In some states, such as in Kerala and West Bengal,
progressive unions in conjunction with their state governments have improved the wages and
working conditions of agricultural and unorganized workers, thereby curtailing the growth of
income inequalities within the workforce as a whole.
Over time, average annual growth rates in GDP have outstripped average annual growth rates
in employment (table 4) and employment elasticities in major sectors have fallen (table 5). Table
1 shows the level of employment in the private and public sectors over the "four phases of
unionism". This table clearly shows the following: in the first phase, public sector employment
increased sharply and private sector employment increased marginally; during the second phase,
public sector employment increased rapidly, whereas private sector employment remained
sluggish; during the third phase, employment growth in both sectors sharply tapered off; and
during the first few years of the fourth phase, growth in both sectors remained nearly static.
Table 6 presents a sectoral distribution of employment in the formal economy. We note two
trends: since the third phase, growth in employment in manufacturing, both in the public and
private sectors, has remained virtually stagnant; however, during the third phase, employment
increased in public services. We also observe the phenomenal growth in employment in services
(especially in the public sector) relative to manufacturing. Finally, except in manufacturing, the
public sector continued to be the dominant employer in the organized economy. Table 7 shows
a sector-wise ranking of the number and membership of trade unions that register and submit
returns over the four phases of unionism. We observe that: (a) manufacturing leads in the number
of unions and membership size; (b) construction lags behind most other sectors.
Given that the macro data on employment and unionization in India are riddled with problems
and contain errors of omission, detailed case studies of specific industries and regions have
revealed significantly different trends. The Friedrich Ebert Stiftung study (Davala, 1992) is an
example. It covers tea plantations and the jute industry in West Bengal, the coal sector, ports and
docks, the engineering industries of Andhra Pradesh and West Bengal, the power sector in Andhra
Pradesh, and the chemical and pharmaceutical industry in Maharashtra. Although the study shows
a fair number of inter-industry and regional variations, there were some striking similarities. The
trend everywhere was a downsizing of permanent employment and the proliferation of contract,
temporary, and casual jobs. There were very low rates of unionization of contract and casual
labour, with the unions being more sensitive to the plight of such workers in the newer industries.(Endnote 20)
In the state of Maharashtra, permanent workers and their unions in the chemical and
pharmaceutical industries have realized that their well-being is ultimately tied to their fellow
workers in the "reserve army of labour". The study found that unions organize on an industry-
and/or region-wide basis in the older industrial sectors, but the enterprise becomes the unit of
organization in the newer industries. This pattern corresponds with the prevalent bargaining
structure (i.e., industry- and region-wide in the older industries, and plant-level in the newer
industries). As Ramaswamy concludes in this study (Davala, 1992, p. 231):
The common thread running through most of these variations is the desire of workers to
gain greater control over their unions. This might well be the case in the older industries
as well, but the structure of trade unionism does not permit much scope for the expression
of these aspirations. In the newer industries, on the other hand, trade union structure itself
appears to have been influenced by this fundamental force.
The "market friendly" views of the relationship between unionization and employment in India,
especially during the third and fourth phase, was elaborated earlier, but needs to be emphasized
in this section as well. The "monopoly effects" of trade unions, together with inflexible labour
laws, have enabled employers to move up their demand curves and have practically frozen
employment growth in permanent unionized jobs. Due to union wage mark-ups, employers have
increased the capital intensity of production, thereby raising productivity. But this route can only
lead to jobless growth, clearly a sub-optimal outcome in a labour surplus economy. Those who
oppose this view point out that wage increases took place not because of union power but largely
because of an intensification of the labour process resulting from a decline in union power. A
disaggregated analysis probably comes closest to reality: in the more prosperous sectors, with low
elasticities of labour demand, "selfish" plant-specific unions managed to extract generous wage
increases; in the less prosperous sectors, largely in the public sector, "altruistic" unions affiliated
to political parties have had little success with centralized bargaining procedures in unstable
product markets.
In the buoyant sectors of production, even before 1991, employers have managed to execute
viable exit policies through generous Voluntary Retirement Schemes, with the cooperation of
enterprise-based unions. In these largely private sector sites, "bringing the union in" has clearly
paid dividends in terms of generating "strongly efficient contracts" (that is, when the labour
contract leads a unionized firm to hire the competitive level of employment). In the public sector,
however, exit schemes (available through the National Renewal Fund) have few individual takers
or else they face union resistance at national level. The general secretary of the All India Bank
Employees' Association says, "We will resist any attempt to introduce a VRS. As far as we are
concerned, job security is more important than wage revision".(Endnote 21)
The practice of "featherbedding"
(employing more people than required) in a whole range of public enterprises is no longer
financially viable. The union movement as a whole, especially the large centralized and industry-wide public sector unions, may benefit more from unionizing the unorganized than from
attempting to preserve unproductive jobs.
3.2.2 Union structure and union density
The number of registered unions increased from 3,766 in 1950/51 to 55,784 in 1993, whereas the
average size of those that submitted returns decreased from 577 to 460 during the same period (see
table 2). As stated earlier, not all registered trade unions submit returns on their membership. If
we assume that the registered unions which submit returns are the large, established politically-affiliated unions with the organizational resources to engage in this process, whereas the registered
unions that do not submit returns are the plant-based independent unions, then movements in the
fifth column of table 2 (percentage of unions submitting returns to total registered unions) makes
for an interesting interpretation. It appears that the centralized unions dominated during the first
phase, lost ground during the second phase, and then sharply declined during the third phase,
dropping to an all-time low of only 12 per cent in 1993. Although this is only one possible reading
of the data, several detailed case studies have also pointed to these movements in union structure
(Ramswamy, 1988; Davala, 1992).
To illustrate the above with some region-specific examples, consider the following: (a) in the
jute industry in and around Calcutta, union membership for each of the major unions declined with
a fall in the proportion of permanent workers, even though "a large number of small, ultra-left and
even unaffiliated unions have emerged during the last decade" (Sen, 1992, p. 48); (b) in the coal
mines in Eastern India, the independent unions represent more than a quarter of the total workforce
(Sen, 1992, p. 71); (c) in the state of Andhra Pradesh, "the emergence and growth of non-affiliated
unions is perhaps one of the most striking features of the trade union scenario in the engineering
industry during the last decade" (Guptan, 1992, p. 124); and (d) more than 50 per cent of the
unions in the chemical and pharmaceutical industries in the state of Maharashtra are unaffiliated
independent unions (Davala, 1992, p. 210). The fourth phase is also associated with the sudden
rise of the Bharatiya Mazdoor Sabham, especially in those states governed by the Bharatiya Janata
Party.
The decentralized independent unions have in some instances attempted to generate firm-wide
agreements but they have been unsuccessful because of considerable employer resistance at firm
level. Some recent commentators have suggested that these unions have been on the defensive ever
since the reforms. This is partly because they lost staff through voluntary retirement schemes; it
was also due to the strategies of multinationals which severely cut back on permanent unionized
employment. Other factors were the setting up of non-union facilities at new sites and the practice
of subcontracting work to the informal sector (Banaji and Hensman, 1995; Noronha, 1996).
3.2.3 Wages and working conditions
Table 8 provides data on the movement of the consumer price index for industrial workers and
urban non-manual employees across the four phases of unionism. Tables 9 and 10 provide some
data on the movement of nominal (a general index for 12 industries) and real wage rates (in
organized manufacturing).
Standard neoclassical economic theory would argue that increased global trade raises the
earnings of unskilled workers relative to those of skilled workers in a country such as India, which
has unlimited supplies of the former. This implies that India's exports are largely unskilled labour-intensive products. Nambiar et al. (1999) found that wage disparity for the period 1980/81 to
1992/93 increased but only marginally. In addition, they found that the disparity rises from less
skill-intensive to more skill-intensive sectors. To the extent that the union voice reduces earnings
inequality within the unionized workforce, employers, especially in the private sector, have
"manufactured consent" with the unions in setting up ingenious pay incentive systems.
Wage determination in the organized economy varies significantly between the private and the
public sector (Datta Chaudhuri, 1996; Anant and Sundaram, 1998). In the private corporate sector,
where collective bargaining largely takes place at enterprise level, unions that are willing to accept
some risk have benefited from a form of gainsharing by agreeing to tie a significant part of the
monthly pay to incentives. The incentive structures are designed to generate cooperative
behaviour at the departmental, plant and firm level. Risk-averse unions, usually more concerned
with employment growth than with members' wages have resisted management attempts to impose
such systems.
In many of the older sectors, such as tea plantations and jute in Eastern India and textiles in
Western India, industry-wide bargaining is the institutional norm. With the advent of economic
liberalization, this bargaining structure will be under pressure to decentralize some of the
outcomes as inter-plant and inter-firm differences become wider (see 3.2.4 below). Similar
decentralizing pressures will be felt increasingly in public sector industries, even though the
Bureau of Public Enterprises "sends guidelines for wage settlement to all administrative ministries,
setting down norms to be followed in determining basic salaries and the various categories of
benefits for different classes of employees" (Datta Chaudhuri, 1996, p. 18). In Coal India, for
example, employees in the better-off units feel that their earnings could increase substantially if
they were linked more closely to productivity at the unit level. Centralized public sector unions
will have to come to terms with these decentralized union "voices".
Salaries and benefits for central government employees in public administration, academic
institutions, posts and telegraph, etc., are determined in detail by the Pay Commissions which are
periodically set up by the government.(Endnote 22) As Datta Chaudhuri (1996, p. 18) puts it: "The award of
the Pay Commission for the Central Government employees becomes the reference point for wage
determination in the rest of the public sector." The Pay Commission is the object of considerable
lobbying by various unions and employees' associations prior to and during the deliberations.
The recommendations of the Fifth Central Pay Commission have been implemented and
employees in the central and state governments have seen their incomes rise substantially. If it is
true that the disparity between the average salary of government employees and per capita income
is far higher in India than in most other countries,(Endnote 23) the public clearly need to see vast
improvements in productivity in this sector given the fairly high additional cost involved in
delivering the pay recommendations (Joseph, 1997). The All India Federation of College
Teachers' Organizations could, for example, take a lead in self-monitoring their constituency so
as to impose work norms and discipline. There are already many rules to deal with employees who
do not work and/or who are late; applying these rules occasionally will send strong signals to both
employees and to the public (Joseph, 1997).
Industrial accident rates in India, both fatal and non-fatal, are extremely high compared to most
countries. While it is true that the occupational health and safety monitoring agencies are weak,
it is also the case that unions can intervene significantly more in this area than they are presently
doing. Often, workers demand higher wages for increased safety measures during contract
deliberations.(Endnote 24) But there are other examples where unions have been closely involved in
occupational health and safety matters. One such case is the Occupational Health and Safety
Centre that operates out of two union offices in Central Mumbai and was set up largely due to the
inefficiencies of the Employees' State Insurance (ESI) Scheme. Among its many achievements,
the Centre was able to get the ESI medical board to recognize and compensate mill workers
suffering from occupational bysinosis in 1994.
The linking of minimum labour standards and trade agreements, i.e. the "social clause", has
generated considerable debate and discussion among trade unions and labour commentators (FES-IIRA, 1996; Hensman, 1996; Bhattacherjee, 1997). There are various economic arguments in
favour of the imposition of international labour standards (ILS). To the extent that labour markets
in developing countries are beset with imperfect and asymmetric information (for example relating
to industrial safety), ILS may level up labour market institutions to correct for market failures of
this type. ILS can be used as a redistributive mechanism if the government feels that the market-
determined income distribution profile is skewed towards the more skilled workers in relatively
protected environments. Trade unions in India interpret this imposed link as a disguised form of
protectionism (for the various trade union views, see FES-IIRA, 1996, and Hensman, 1996). This
argument leads to the same outcome as those put forward by the 'comparative advantage' trade
theorists that the imposition of ILS will lead to a reduction in the net gains from trade, and
therefore individual countries should decide on their own labour standards. But surely one has to
question this simple view. Why is it that countries with relatively abundant and cheap labour find
it difficult to compete in international markets, except in those sectors that have (relatively) lower
labour standards? Clearly, this kind of participation in global trade, where inferior labour
standards are the "comparative advantage" is unlikely to lead to social progress. Since it is not
enough to wait for sustained economic growth to upgrade domestic labour standards, the unions
need to forcefully generate demands, both from above and below, for improvements in working
conditions. Hensman (1996) spells out an agenda for trade unionists and NGOs that strongly
believe that labour standards in India have to be substantially improved, perhaps even through
trade links and other forms of international pressure.
3.2.4 Collective bargaining
Two critical aspects of the collective bargaining system are an expansion of the coverage and
scope of long-term agreements and the increasing pressure for decentralized bargaining. These
tendencies originated during the third phase of unionism and became acute during the post-reform
fourth phase. The restructuring agreements cover (among other things): ban on recruitment, job
transfers to non-bargainable category, introduction of parallel production, automation and
flexibility, transfer of production to subcontracted units, introduction of voluntary retirement
schemes, transfer of permanent jobs to contract/temporary workers, merger of units, and a host of
other shopfloor restructuring provisions (Venkataratnam, 1996). Concession bargaining in several
units has led to job and wage cuts, a freeze on cost-of-living allowances, and suspension of
industrial action for a period of five years. While the above suggests that management has had the
upper hand in recent years, Venkataratnam (1996) also lists some "unusual" clauses that suggest
a positive union "collective voice" effect: linking allowances such as house rent and children's
education to attendance, permitting pregnant women to refuse to work on computer terminals,
voluntary retirement schemes for contract labour, and so on.
We have already mentioned government attempts during the post-reform period to decentralize
bargaining in public sector units by tying unit-level wage increases to productivity increases
(rather than passing them on as price increases), and by consistently announcing its refusal to
provide budgetary support to these wage increases. The central trade unions are uniting to pre-empt a government attempt to switch to a 10-year wage settlement in public sector units instead
of the present 5-year duration. Union leaders say the move will affect the pay revision prospects
of about 2 million workers in the public sector. Private employers have been lobbying for some
time to increase the duration of contracts in public sector units so as to prevent disruptions arising
from frequent industrial disputes, the costs of which they have to often bear. Unions, especially
the All India Trade Union Congress and the Indian National Trade Union Congress, are strongly
against such a move.
Even outside the public sector, pressures for decentralized bargaining are emanating from both
workers and employers. What happened in the textile industry is now being repeated in the jute
industry in and around Calcutta. Due to the uneven development of textile firms in Mumbai in the
early 1980s, and due to the undemocratic nature of union representation in the industry, both
employers and unions in the more profitable mills wanted to break away from the industry-wide
agreement in force and set up their own mill-level agreements (Bhattacherjee, 1988; 1989).
Recently, employers in two jute mills defied the industry-wide agreement between the Indian Jute
Mills Association and the many unions by offering a higher cost-of-living allowance to avert mill-level strikes. The central trade unions are in a dilemma for the first time in the jute industry: on
the face of it, they oppose any kind of bipartite settlement by insisting on an industry-wide
agreement at tripartite level. But by encouraging strikes at individual mills, they are indirectly
opening up routes for direct negotiation between management and mill-level unions. The trend
towards decentralization is reflected in the rising number of unions which have signed the
industry-wide agreement: in 1972, there were only four signatories, in 1979 there were 11, and in
1992 there were 16 (Sen, 1997, p. 104).
By decentralizing bargaining structures and expanding the scope and duration of labour
contracts, employers and the government are trying to minimize the "monopoly effects" of union
work rules embedded in contract provisions that lead to considerable labour market inflexibilities,
especially at micro-level. The determinant of public sector negotiations has been pay parity, and
as a result there are few incentive structures in this system. Centralized public sector unions will
have to come to terms with the microeconomic requirements of productivity growth and increased
competition. They can learn from union responses to restructuring programmes in Europe.(Endnote 25)
3.2.5 Industrial conflict
Even though union density is very low by international standards, India loses more days every year
as a result of strikes and lockouts than almost any other country (ILO, 1997/98, pp. 253-254).
However, the number of workers involved in strikes and lockouts is considerably lower in India
than in Brazil, Italy or Spain (pp. 251-252). This raises the classic question of whether conflict
reflects union power or union weakness? It certainly indicates that the basic premise of industrial
pluralism, the regulation of conflict, has not been achieved.
The answer to this question in India depends on whether workers resist strikes or whether
employers are on the offensive during lockouts. Table 3 presents some time series conflict data.
We note that during the third and fourth phase, the number of lockouts rose whereas the number
of strikes decreased. The same applies to the number of workdays lost and the number of workers
involved. Until 1989 industrial conflict occurred mainly in the private sector in terms of number
of disputes, workdays and wages lost, and lost production, although the actual number of workers
involved in disputes was higher in the public sector in the early 1980s. Since 1990, however,
industrial disputes in both sectors have increased significantly (Venkataratnam, 1996).
Since the economic reforms of 1991, successive national governments have had to deal with
considerable industrial conflict in the public sector, especially in banking, insurance, and transport.
At regional level, some state governments have had to contend with continuing inter-union and
inter-party rivalries, leading to the disruption of public life. Of late, the government has followed
a tough line on striking public sector unions, as demonstrated in the dismissals and criminal
proceedings against air traffic controllers. There is an imperative need for industrial relations
reform in dispute settlement as the average consumer and voter has increasingly come to be a key
actor and end-user of the industrial relations system. There are significant differences between
the main trade union federations on the issues of secret strike ballot, prior notice to striking and
the period of notification, lay-off provisions, the role of voluntary arbitration, multiple union
situations, etc. The cou
