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Changing Labour Institutions

Changing Labour Institutions Negotiated Change: Collective Bargaining, Liberalisation and Restructuring in India by C S Venkata Ratnam; Response Books, a division of Sage Publications, New Delhi/Thousand Oaks/London, 2003; pp 384 (hardcover), Rs 395.


two parts: Part I contains eight chapters and Part II documents 10 unique collec-

Changing Labour

tive agreements. The author has adopted content analysis and supplemented it with personal interviews and study of press


Negotiated Change: Collective Bargaining, Liberalisation and Restructuring in India

by C S Venkata Ratnam; Response Books, a division of Sage Publications, New Delhi/Thousand Oaks/London, 2003; pp 384 (hardcover), Rs 395.


n recent times we hear one widely held view that collective labour institutions such as trade unions and collective bargaining have been weakened owing to the play of several factors. The basic environmental force hurting the progress, even life of trade unions, has been the increasing competitive and global economy. Apart from this, a number of other factors have had a significant impact on the unions and collective bargaining; viz, structural factors such as shift from manufacturing to services, labour market practices such as increased use of labour flexibility measures, employers’ institutional response like use of human resource management policies and other personnel practices to either displace or avoid unions, neo-liberal policies followed by many countries to tackle the economic crises, and the evergrowing influence of multinational corporations and international financial and trade institutions such as IMF, World Bank, WTO.

The trade unions have also been responsible for their decline – an unwillingness to accept change and face the new order, a tardy response to the new realities, a clinging to the philosophy of adversarialism, and failure to widen the membership base, were some of the institutional failures from the union side. The neoliberal thinkers emphasised the virtues of individual bargaining and pointed out the drawbacks of collective bargaining. Collective bargaining standardises wages and reduces (even eliminates) the crucial factor of wage differences; it is the latter that induces efficiency. Individual bargaining enables the individual employee to bargain terms and conditions suiting his/her endowments; workers here can act like capitalists. Strikes are inevitable if collective bargaining is the preferred social mechanism to determine rules. The collective redressal option of “voice” is held to be costly. Individual bargaining is a healthy complement to market process. But it is often forgotten that the real world situation differs much from textbook image of perfect competition. In this imperfect system individual bargaining leads to suboptimal outcomes. It is collective bargaining that leads to outcomes that would have prevailed had the market been perfectly competitive. The crisis fortunately prompted the trade unions to set their house in order. There have been several tales of union efforts at renewal and revival. Either as a corollary to or as a result of the above-mentioned developments, firms and academics pushed industrial relations (IR) aside and gave place of prominence to human resource management (HRM).

It is in these contexts that we have to consider the book under review. It is a bold attempt by the author to consider the relevance of and contribution made by the classic collective institution of collective bargaining to bring about order and stability in the industrial relations system. The simple and bold message of the book is that trade unions and collective bargaining institutions do matter, are adaptable and useful in shaping new work arrangements and are better equipped to face changing field realities. As the title indicates it seeks to discuss how collective bargaining negotiated change in the wake of liberalisation of the Indian economy and the efforts of the employers to restructure firms and industries. This book is based on close and careful analysis of 215 (or is it 234, see page 6) collective agreements signed in the period April 1991 to December 2001. The book is divided into clippings and periodicals published by the organisations of employers and workers. The agreements relate to large organisations in public sector (62 agreements) and private sector (153 agreements).

Collective Bargaining vs Compulsory Adjudication

The debate “collective bargaining versus compulsory adjudication” raged in the period immediately after the independence on the design of labour policy and the institutional framework of the industrial relations system. Two principal factors, viz, the undeveloped and weak union movement and the exigencies of planned economic development prompted the government to give place of prominence to compulsory adjudication. The best compromise position that was taken was that collective bargaining would be complementary to compulsory adjudication and would in future replace adjudication as the principal rule making institution. The legal system was designed based on these principles. The Indian government has not (so far) ratified the ILO Conventions 87 and 98 dealing with freedom of association and collective bargaining. The defence is that the Constitution and the laws provide for the same and encourage the growth of such institutions. Barring a few state legislations, the principal central labour law has not legislated the principles to determine the bargaining agent. The conciliated settlement is placed on a higher footing than the collectively bargained one. This legal system has managed to remain in tact till date. But then the working of the legal system and the dynamism of the actors combined together have slowly but surely changed the direction of the rule determination process. Collective bargaining, despite the legal impediments, began to grow. Law is a poor mechanism to make sound and sensible rules of work. It is at best a corrective to the wrong use of the voluntary rule making process. The huge share of the unorganised sector in the system and the dominant share of government

Economic and Political Weekly January 21, 2006

sector in the total organised sector means that the collective bargaining coverage in India is a poor single digit, that too less than 3 per cent. This macro statistics presents a dismal picture of the presence and growth of collective bargaining, but what is relevant and important is the dynamics of processes and institutions in the bargained zone.

The neo-liberal critics accuse trade unions of many things: that they resist introduction of technological changes, stall efforts to introduce flexibility measures, obstruct introduction of productivity enhancing measures, fight strongly against rational market solutions, etc. Venkata Ratnam provides a number of instances that would rebut these allegations. The 10 unique collective agreements discussed in the introductory chapter clearly show that trade unions show cooperation where it is justified and is called for. Trade unions are cooperative when firms are in crisis; they cooperate if the crisis is due to external factors, but they refuse to cooperate if the management is the cause of crisis. Trade unions usually make good agreements; but owing to union rivalries, these agreements are not implemented – see his discussion of 10 unique agreements in the introductory chapter.

Labour Market Flexibility

The plea for labour market flexibility has been made loud and clear by the employers and some social scientists. They hold that the labour market rigidity causes ultimately job loss which should worry any labourfriendly person, whereas, some hold that employers enjoy enough flexibility and they reduce labour via backdoor policies (such as voluntary retirement schemes) or open downsizing policies. (Incidentally why does the author not quote the well known detailed studies of L K Deshpande on this theme and quote others?) The author discusses many types of flexibility such as wages, working hours, work organisation, concession bargaining in sick firms, etc. These discussions amply demonstrate that the trade unions have not been opposing every bit of flexibility action by employers; they agree to most if found acceptable to the rationality of unions. Take wages. Unions have agreed to (a) managerial discretion in setting new norms of production,

  • (b) proportionate deductions in wages if standard output is not achieved, (c) wage cuts or wage freeze in sick companies,
  • (d) linking of dearness allowances with productivity and not with a price index, etc.
  • Unions have agreed to rationalisation of work and workforce, substitution of labour with machinery, modernisation and computerisation programmes, giving fullest freedom and flexibility with regard to work allocation, positioning and transfer of workers, subcontracting and outsourcing of work. Let me quote a clause in agreement in Roplas India, Pune: “The company shall be entitled to eliminate/change/consolidate jobs and responsibility in the interest of better efficiency and expediency of work. The company shall be entitled to transfer an employee from one work centre/section to another or to deploy him as per the needs of production” (p 34). Unions also have agreed to redeployment (with or without training and with retrenchment) and voluntary retirement. The most significant aspect of adjustment is the development of concession bargaining by which the trade unions in sick companies voluntarily agree to hardship clauses and agree to the repeal of workers’ rights such as strike rights. Flexibility bargaining has become popular and many agreements bearing flexibility clauses are being fashioned in India. But as the author points out it is now pro-employer. It has to become a win-win arrangement for both the parties for it to become a meaningful exercise. Flexibility leading to mutual gains should be the principle.

    Productivity Bargaining

    The author’s discussion of productivity bargaining makes interesting reading. He rightly notes at the beginning that productivity is usually seen only in terms of labour productivity. He neatly observes that productivity means working smarter rather than harder. What is productivity bargaining? Employers grant pay increases in return for commitment from workers to measures designed to increase productivity. The general idea is that wage increases under productivity bargaining should be selffinancing, in that they should be paid for out of productivity improvements. The actual distribution of savings made through improvements in productivity is seen by trade unions as a legitimate area for bargaining. Most productivity agreements aim at increasing production without effecting job loss; but there are some agreements which provide for reduction of manpower in the attempt to increase productivity. Unions block productivity enhancing plans because it has often been used by employers to reduce manpower.

    Venkata Ratnam finds three types of productivity agreements: one, increasing productivity with the existing workforce; two, productivity programmes accompanied by a reduction in manpower; three, productivity agreements providing for an increase in manpower. Productivity agreements generally provide for modernisation, rationalisation, quality improvement, elimination of wasteful or restrictive practices, fixation of norms to improve efficiency, insertion of disciplinary clauses for failing to meet contractual obligations, etc. The most important prerequisite for the success of productivity bargaining is cooperation from workers and unions and provision of incentives by employers. Several productivity agreements especially ones in the public sector carry what the author calls as “honeymoon clauses”, i e, stress the importance of productivity, but no commitment to specific tasks and plans. In view of the uncertainties and the risks involved in productivity deals, the author suggests a two-stage implementation: the first stage is the trial run to assess whether the agreed norms are achievable; in the second stage review the deal and rework the norms suitably. According to the author the best way to make productivity deals is to integrate the concerns of both parties and strive to expand the “pie” and share the spoils. Mutual trust, transparency, twoway information sharing, and communication are essential for the productivity deals to take roots.

    The author feels decentralised bargaining is conducive to productivity enhancement efforts. From the above quick and brief narration it is clear that unions are not by definition an “obstacle” to flexibility and productivity deals; employers should play the game fair and square, place all the cards on the table and take union into confidence. The success stories narrated in this book embody these aspects of high trust relationship. But productivity bargaining has been criticised which the author unfortunately does not note. Changes in the work practices often mean not work enrichment. It poses a threat to jobs, earnings and above all to the unions inside the factory. It is seen as a major offensive by radicals to shift the balance of power permanently in favour of employers. Techniques such as time and motion studies are often aimed at disciplining workers and undermining the position of shop stewards. The galling aspect of productivity bargain is that employers have full access to information, facts, counsel, but unions have

    Economic and Political Weekly January 21, 2006 none. Productivity deals are always “doubted” for hidden clauses.

    The author argues that information sharing, communication, prior consultation, continued dialogue, mutual concern for each other’s welfare, presence of a strong union representative are some of the determinants of cooperation. Information sharing and communication have helped a firm (BOC India) implement harsher decisions reducing manpower and trebling output over a seven-year period. He shows that trade unions cooperated with management to overcome economic crisis especially in sick firms, to reduce surplus manpower (via either redeployment or voluntary retirements), to make adjustments to change easier, to contribute to increases in productivity, to overcome legal rigidities (such as section 9-a of the Industrial Disputes Act) and so on. There are discussions on public sector bargaining and agreements on social security benefits which are as informative as the earlier chapters are.

    Though this book is concerned only with what is happening to dealings in the organised sector of the workforce, they are important because what happens in the public sector affects the terms and conditions set in private organised sector and what happens there has a bearing on what would happen in the unorganised sector. Post-liberalisation, competition having become tight, both the actors have become wiser, shed their adversarial approaches and sat at the negotiating table to make some sound collective agreements. The management is currently enjoying the balance of power advantage but should not drive the unions to walls. Cooperation is vital in this age of competition. Trade unions should realise that members’ interests lie more in change than in non-change. Trade unions are damned if they don’t cooperate and damned if they do also. This paradoxical plight should keep them on razor’s edge. The state should no longer avoid ratifying the ILO basic conventions (87 and 98). The author cautions that sooner it does, the better it is. The role of the state should be to maintain the balance of power between labour and management and not appropriate power to itself. These are the counsels with which the author closes his well-researched and informative book. But reading this book is not a pleasant exercise owing to the presence of more than permissible errors in the text: faulty and mixed-up sentences, spelling errors, incomplete references, missing reference for tables and repetitions of ideas. This book is an excellent addition to industrial relations literature and a timely reminder that industrial relations still matters! Researchers, students, teachers, union leaders, and even employers would find this book a useful read.

    The reviewer wishes to place two suggestions to the author who in his capacities as an executive office-bearer of the Indian Society of Labour Economics and the Indian Industrial Relations Association could strive to do so – publish important collective agreements and court judgments annually either as a feature in the journals or as a separate priced publication; insert articles of “annual reviews” of happenings in the labour market and industrial relations system in India (and if possible some comparative reviews of experiences of other countries) in the journals of the two societies.



    PRE-PUBLICATION ANNOUNCEMENT Comintern and the Destiny of Communism in India: 1919-1943 Dialectics of Real and a Possible History By Sobhanlal Datta Gupta (Expected to be published in the middle of 2006 by ‘SERIBAAN’ from Calcutta, Rs. 695/-) The book is the culmination of the author’s research for more than a decade on one of the most debatable and sensitive issues concerning the history of the Left and communist movement in India. Based on materials from comintern archives, Moscow; the CPGB archives, UK and the new materials on Comintern (in Russian, German and English) which have appeared abroad in recent years. The book provides for the first time an entirely new analysis of Comintern’s impact on the shaping of Indian communism and argues about the alternative possibilities of the Left and communist movement in India in the light of documents which were suppressed or unknown till now. The book has the following chapters: Chapter I : Comintern : The new historiography; Chapter II : The colonial question and India in the Lenin era: 1919-1923; Chapter III : India and the East in the period of ‘Bolshevization’ and ‘Third Period’: 1924-1934; Chapter IV : India and the colonial question in the era of United Front and War: 1935-1943; Chapter V: Comintern and the Indian revolutionaries in Russia; Chapter VI : Indian communism: Dialectics of real and a possible history. Pre-publication Price: Rs. 500/-(up to 28th February 2006) All payments should be in favour of “SREEJONI”. Please add Rs 45/- for cheques not payable at par in Calcutta. All books are to be mailed BY REGISTERED BOOK-POST to eliminate any chance of books going astray while in transit.
    Distributor: PRE-PUBLICATION OFFER: SREEJONI Also available from 6/2H Naktala Road, Kolkata - 700 047, INDIA Kolkata Book Fair Tel.: +91-33-2411-5988, Mobile: 98309-49783, Fax: +91-33-2471-3250 ‘SERIBAAN’ E-mail: · Web: Stall No. 529

    Economic and Political Weekly January 21, 2006

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