MacroScan (Printable Version) - The Right to Strike and Labour Repression in India

For some time now, it has been evident that the stance of the Central government – in terms of the executive authority and policy makers – has been anti-labour. It is now apparent that the same tendency is also increasingly prevalent among the judiciary, which has been delivering a series of judgements which effectively operate to reduce the bargaining power and rights of workers.

The recent Supreme Court judgement on the right of public employees to go on strike, the arbitrary decision of a Kolkata High Court judge to ban rallies on weekdays (which then was reversed); the Supreme Court's reversal of its own previous judgement regarding the right to regular employment of contract workers employed for prolonged periods – all these are indications of a much broader and more dangerous socio-economic process.

There is an underlying economic paradigm in all this, which essentially is the neo-liberal market-oriented framework. This argues that labour market "flexibility" is crucial for increasing investment and therefore employment, and also for ensuring external competitiveness in a difficult international environment. In this perception, legal protection afforded to workers, in the form of curbs on employers' ability to hire and fire workers at will, minimum wages or granting freedom to engage in collective action such as the right to strike, all actually operate to reduce employment.

In addition, in India there is a further argument, which is frequently accepted even by well-meaning people with a concern for the poor. This relates to the argument that the dualism in the labour market in India means that there is a conflict between organised workers and those in the unorganised sector.

It is often argued that the recognised trade unions ignore the problems of the workers in the informal sector; that protection given to organised workers actually allows or even militates against the improvement of conditions of unorganised workers, who are anyway much worse off. This perception then leads even some progressive people to accept that the "privileges" extended to organised sector workers can be withdrawn, since they are anyway so much better off than most other workers in the economy.

This argument is based on poor politics and even worse economics. The politics is wrong because in fact any struggle over workers' rights necessarily affects all workers, even if this is not immediately evident to particular categories of workers. It is amply clear even from the Indian experience, that every attack on organised workers has also reduced the bargaining power of unorganised workers, that periods of repression of organised labour have also been periods when informal sector workers find themselves even more exploited.

The neo-liberal economic argument is that these rules which restrict hiring and firing put undue pressure on larger employers and prevent smaller firms from expanding even when the economics of their situation otherwise warrants it. This creates a dualistic set-up in which the organised or formal sector necessarily remains limited in terms of aggregate employment and most workers, who remain in the unorganised sector, are therefore denied the benefits of any protection at all.

The resulting dualism is characterised by an organised (or larger scale) sector, which has relatively low employment, and an unorganised (or smaller scale) sector, which has low investment. If aggregate economic activity is to break out of this dualism and marry the advantages of both sectors, the argument goes, it is necessary to get rid of the constraints put on large employers in the matter of labour relations. The purpose of various recent interventions - the recommendations of the Second National Labour Commission, the recent Court judgement, the attempts to create more "flexible" and less protective labour legislation – is to supposedly get rid of these constraints on employers.

The belief is obviously that reducing such "rigidities" and curbing the power of organised labour will increase private investment, increase economic activity and improve productivity. All these in turn will improve external competitiveness, which is considered to be so important these days.

The chief problem with this argument is that it completely ignores the major forces affecting investment, economic activity and therefore employment. It is now accepted across the world that aggregate investment does not respond to changes in the wage rate, but to broader macroeconomic conditions such as the level of demand, the amount of public investment, the expectation of external markets, and so on.

Labour costs are never viewed in isolation, but only in relation to labour productivity, which in turn is affected not only by the level of well-being, skill and education of the workers themselves, but also by infrastructure conditions, the technology used in production, and so on. In such a context, greater "flexibility" in labour markets might simply mean the perpetuation of low wage-low productivity practices by employers, rather than more economic growth.

While there is a formidable array of rights accepted by the Indian Constitution for workers, and protective legislation as well, the problem is that they are rarely achieved or enforced. Typically they can only be even minimally enforced in the organised sector.

It is currently being argued by neo-liberal economists and others, that these laws, which restrict employers' rights to dismiss workers at will and stipulate some degree of permanency of employment, act as a major drag on the profitability of the organised sector and on its ability to compete with more flexible labour relations elsewhere. In this perception, a shift towards a more universal contract-based system of labour relations, with no assumptions of permanency of employment, is required to ensure economic progress based on private enterprise within the current context.

But it can be argued in response to this, that labour laws are far less significant as factors in affecting private investment, and therefore employment, than more standard macroeconomic variables and profitability indicators. Thus, the condition and cost of physical infrastructure, the efficiency of workers as determined by social infrastructure, and the policies which determine access to credit for fixed and working capital as well as other forms of access to capital, all play more important roles in determining overall investment and its allocation across sectors. Expectations of demand and the extent of the market determine the volume of investment.

Indeed, it is also clear that in the recent past in India, strikes have been far less relevant in disrupting production in the Indian economy, than lockouts by employers. Chart 1 shows the actual number of strikes and lockouts in India over the period 1999-2002. While both have been coming down over this period, the decrease in the number of strikes has been more dramatic, and in 2002, the number of lockouts was actually higher.



Chart 2 provides information on the number of workers involved in strikes and lockouts - here, the evidence is that strikes have involved a greater number of workers than lockouts. However, obviously strikes have been of shorter duration and therefore less disruptive of production and economic activity, as shown by the actual working days lost, in Chart 3. The persondays lost to lockouts has been consistently higher than the loss due to strikes, and was nearly double in 2002.





It is also likely that workers' discipline has improved in general, as absenteeism rates among regular workers seem to have come down quite drastically in the recent past, as indicated in Chart 4. Similarly, labour costs per personday worked (Chart 5) have been broadly flat, despite large increases in labour productivity, so that obviously workers have not garnered any advantage from technological progress, the gain from which have accrued to employers instead.





It is in this context that the right to strike must be considered in India. Obviously, strikes are ultimate weapons, which are only resorted to by workers when all other means of struggle and negotiation have been exhausted. In recent Indian experience, the working class as whole has been relatively responsible and only used strikes in extreme cases when negotiations have failed completely or when employers have appeared to be completely insensitive to genuine demands of labour.

Denial of this right would lead to a massive deterioration of the bargaining power of workers, which has already been weakened by various macroeconomic processes such a global integration and the withdrawal of the state from important areas of regulation and provision. In any society, the socio-economic rights of all citizens, including workers, have never really been freely gifted by the state or employers; their recognition and implementation have always been the result of prolonged struggle on the part of workers and other groups.

Changing the conditions of such struggle amounts to changing the possibility of ensuring these basic rights, which are even recognised in the Constitution of India. Therefore, the right to strike for workers remains an important instrument for ensuring the basic economic rights of all citizens.



Themes > Features	05.02.2004


The Right to Strike and Labour Repression in India

For some time now, it has been evident that the stance of the Central government – in terms of the executive authority and policy makers – has been anti-labour. It is now apparent that the same tendency is also increasingly prevalent among the judiciary, which has been delivering a series of judgements which effectively operate to reduce the bargaining power and rights of workers. The recent Supreme Court judgement on the right of public employees to go on strike, the arbitrary decision of a Kolkata High Court judge to ban rallies on weekdays (which then was reversed); the Supreme Court's reversal of its own previous judgement regarding the right to regular employment of contract workers employed for prolonged periods – all these are indications of a much broader and more dangerous socio-economic process. There is an underlying economic paradigm in all this, which essentially is the neo-liberal market-oriented framework. This argues that labour market "flexibility" is crucial for increasing investment and therefore employment, and also for ensuring external competitiveness in a difficult international environment. In this perception, legal protection afforded to workers, in the form of curbs on employers' ability to hire and fire workers at will, minimum wages or granting freedom to engage in collective action such as the right to strike, all actually operate to reduce employment. In addition, in India there is a further argument, which is frequently accepted even by well-meaning people with a concern for the poor. This relates to the argument that the dualism in the labour market in India means that there is a conflict between organised workers and those in the unorganised sector. It is often argued that the recognised trade unions ignore the problems of the workers in the informal sector; that protection given to organised workers actually allows or even militates against the improvement of conditions of unorganised workers, who are anyway much worse off. This perception then leads even some progressive people to accept that the "privileges" extended to organised sector workers can be withdrawn, since they are anyway so much better off than most other workers in the economy. This argument is based on poor politics and even worse economics. The politics is wrong because in fact any struggle over workers' rights necessarily affects all workers, even if this is not immediately evident to particular categories of workers. It is amply clear even from the Indian experience, that every attack on organised workers has also reduced the bargaining power of unorganised workers, that periods of repression of organised labour have also been periods when informal sector workers find themselves even more exploited. The neo-liberal economic argument is that these rules which restrict hiring and firing put undue pressure on larger employers and prevent smaller firms from expanding even when the economics of their situation otherwise warrants it. This creates a dualistic set-up in which the organised or formal sector necessarily remains limited in terms of aggregate employment and most workers, who remain in the unorganised sector, are therefore denied the benefits of any protection at all. The resulting dualism is characterised by an organised (or larger scale) sector, which has relatively low employment, and an unorganised (or smaller scale) sector, which has low investment. If aggregate economic activity is to break out of this dualism and marry the advantages of both sectors, the argument goes, it is necessary to get rid of the constraints put on large employers in the matter of labour relations. The purpose of various recent interventions - the recommendations of the Second National Labour Commission, the recent Court judgement, the attempts to create more "flexible" and less protective labour legislation – is to supposedly get rid of these constraints on employers. The belief is obviously that reducing such "rigidities" and curbing the power of organised labour will increase private investment, increase economic activity and improve productivity. All these in turn will improve external competitiveness, which is considered to be so important these days. The chief problem with this argument is that it completely ignores the major forces affecting investment, economic activity and therefore employment. It is now accepted across the world that aggregate investment does not respond to changes in the wage rate, but to broader macroeconomic conditions such as the level of demand, the amount of public investment, the expectation of external markets, and so on. Labour costs are never viewed in isolation, but only in relation to labour productivity, which in turn is affected not only by the level of well-being, skill and education of the workers themselves, but also by infrastructure conditions, the technology used in production, and so on. In such a context, greater "flexibility" in labour markets might simply mean the perpetuation of low wage-low productivity practices by employers, rather than more economic growth. While there is a formidable array of rights accepted by the Indian Constitution for workers, and protective legislation as well, the problem is that they are rarely achieved or enforced. Typically they can only be even minimally enforced in the organised sector. It is currently being argued by neo-liberal economists and others, that these laws, which restrict employers' rights to dismiss workers at will and stipulate some degree of permanency of employment, act as a major drag on the profitability of the organised sector and on its ability to compete with more flexible labour relations elsewhere. In this perception, a shift towards a more universal contract-based system of labour relations, with no assumptions of permanency of employment, is required to ensure economic progress based on private enterprise within the current context. But it can be argued in response to this, that labour laws are far less significant as factors in affecting private investment, and therefore employment, than more standard macroeconomic variables and profitability indicators. Thus, the condition and cost of physical infrastructure, the efficiency of workers as determined by social infrastructure, and the policies which determine access to credit for fixed and working capital as well as other forms of access to capital, all play more important roles in determining overall investment and its allocation across sectors. Expectations of demand and the extent of the market determine the volume of investment. Indeed, it is also clear that in the recent past in India, strikes have been far less relevant in disrupting production in the Indian economy, than lockouts by employers. Chart 1 shows the actual number of strikes and lockouts in India over the period 1999-2002. While both have been coming down over this period, the decrease in the number of strikes has been more dramatic, and in 2002, the number of lockouts was actually higher. Chart 2 provides information on the number of workers involved in strikes and lockouts - here, the evidence is that strikes have involved a greater number of workers than lockouts. However, obviously strikes have been of shorter duration and therefore less disruptive of production and economic activity, as shown by the actual working days lost, in Chart 3. The persondays lost to lockouts has been consistently higher than the loss due to strikes, and was nearly double in 2002. It is also likely that workers' discipline has improved in general, as absenteeism rates among regular workers seem to have come down quite drastically in the recent past, as indicated in Chart 4. Similarly, labour costs per personday worked (Chart 5) have been broadly flat, despite large increases in labour productivity, so that obviously workers have not garnered any advantage from technological progress, the gain from which have accrued to employers instead. It is in this context that the right to strike must be considered in India. Obviously, strikes are ultimate weapons, which are only resorted to by workers when all other means of struggle and negotiation have been exhausted. In recent Indian experience, the working class as whole has been relatively responsible and only used strikes in extreme cases when negotiations have failed completely or when employers have appeared to be completely insensitive to genuine demands of labour. Denial of this right would lead to a massive deterioration of the bargaining power of workers, which has already been weakened by various macroeconomic processes such a global integration and the withdrawal of the state from important areas of regulation and provision. In any society, the socio-economic rights of all citizens, including workers, have never really been freely gifted by the state or employers; their recognition and implementation have always been the result of prolonged struggle on the part of workers and other groups. Changing the conditions of such struggle amounts to changing the possibility of ensuring these basic rights, which are even recognised in the Constitution of India. Therefore, the right to strike for workers remains an important instrument for ensuring the basic economic rights of all citizens.



© MACROSCAN 2004